Companies: NCC    OPN    PNT   

Full year figures from AIM-listed IT services group NCC – a new entrant from July 2004 – were particularly strong, with sales climbing 24 per cent to £18 million and profits 143 per cent to £3.4 million during the 12 months to May. Most impressively of all, each of the company’s three businesses turned a profit and grew sales in excess of 20 per cent.

The safe side of IT
The significance of this performance is that NCC is, on paper, one of the most robust IT businesses around. As in previous years the group’s Escrow Solutions operation contributed the majority of revenue in 2004/05 – £8.2 million, up 23 per cent on the previous year. Because escrow contracts effectively provide a way for businesses of all sizes to insure the software underpinning their IT systems (NCC holds source codes in case the software vendor goes bust or withdraws support for a certain product), recurring revenue levels are high.

NCC now has some 6,200 contracts up and running and expects annual renewals to contribute £6.7 million of revenue this year, up from £5.8 million last year.
This provides a solid foundation upon which the company can build its other businesses – both of which generated a £1 million profit last year. The first of these, Testing Solutions, offers companies a means of assessing the security of their systems and the validity of their escrow agreements. The second provides more generalised IT consulting services.

With further strong growth expected across all three divisions and a move into the European escrow market underway, NCC is fast emerging as one of the brightest technology businesses on AIM. Unsurprisingly, this ascendance has not gone unnoticed and 12 months on from the company’s flotation its shares trade at a 50 per cent premium to their starting value. They remain an attractive investment proposition nonetheless. Broker Dresdner forecasts profits, before goodwill, of £7.2 million this year, while earnings of 14.9p are predicted. A prospective p/e of 17.1 times is not cheap, but it represents a fair price to pay for a quality IT business.

PlusNet goes from strength to strength
Internet service provider PlusNet floated on the same day as NCC (14 July 2004) and has, if anything, generated even more investor interest. In fact, since Growth Company Investor recommended the shares at 104.5p last August their value has soared by a staggering 148 per cent to 257.5p (for a market cap of £79.32 million).

July’s interims showed why. During the six months to June chief executive Lee Strafford and his team oversaw a 28 per cent rise in sales to £16.4 million, with pre-tax profits surging 66 per cent to £2.4 million. The key to this was a 68 per cent increase in broadband customer numbers to well over 110,000.

If you bought in last August, it is very tempting to book your profits. However, forecasts continue to predict rapid growth (house broker Baird reckons profits will top £5 million this year and £8.5 million in 2006).

IBS gets down to work
Although its share price performance has been far less spectacular than that of PlusNet, interims from local-government focused software vendor IBS Opensystems were equally encouraging.

IBS, which made its AIM debut in March through a £56 million Numis-backed accelerated IPO, grew profits 43 per cent to just over £2 million during the half year to June and is expected to increase this figure to £5.1 million over the course of the full year thanks, in part, to contract wins from Government departments in both Kensington & Chelsea and Wakefield

Despite currently trading at a slight premium to sector peers such as Civica and Comino, finance director Karl Potts informs me that ‘it’s a strong market out there and we’re in the right place at the moment.’ The shares are worth picking up on signs of weakness (current price 145p for a market cap of £58.2million).