Computer says 'no' at NCC

published 31 May 2012

Computer security and software escrow firm NCC's full year results will be dented by a one-off charge relating to teething problems with a new information technology (IT) solution.

The company said the problems have not had any impact on trading, but will result in the company taking an exceptional charge, mostly non-cash, of £6.9m in respect of the financial year to the end of May.

Brokers covering the company currently expect the firm to deliver underlying profit before tax of £21.44m for fiscal 2011/12.

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The company's new IT system, which was installed in the UK software escrow business and in the finance department in March 2012 following a period of protracted testing period, has been playing up something rotten. Some might see this as an ironic turn of events for a company which provides its clients with services that ensure the continued support of mission critical software even if the software developers go out of business,

This has caused "significant disruption across the whole group that unless addressed, was going to impair business efficiency despite comprehensive efforts to make the solution work," the group's statement said.

Worse still, there is now no prospect of an integrated solution being delivered for the Assurance division to meet its essential resource scheduling requirements.

Pro temps, the group has reverted to its previous IT system while it determines whether the problems with the new system can be remedied. In any case, the company has decided to write off the cost of the new system; the £6.9m write-down will include a £0.9m estimated cash cost of reverting to the old system over the next three months.

"This is a very frustrating position to be in - we have invested considerable amounts of time and resource into the new system but have had to take the hard decision to revert to our old system as the new simply wasn't measuring up to our needs," said Rob Cotton, Group Chief Executive of NCC.

"This decision has no bearing on our day to day trading; indeed we are on course to close the year today absolutely in line with our expectations, as stated in our IMS [interim management statement]," Cotton added.

In that statement, the company said its revenues in the first 10 months of the financial year were 25% ahead of the corresponding period of the previous year. The market is expecting NCC's full year revenues to rise to £87.94m from £71.00m the year before.