FTSE 250 shares round-up: Syncona, NCC, XPS Pensions

A move to maximise shareholder returns today made Syncona Ord (LSE:SYNC) one of the few bright spots in a bruising FTSE 250 session that included weakness for NCC Group (LSE:NCC) and XPS Pensions Group (LSE:XPS).

The profit warning by Hays (LSE:HAS) and selling of PageGroup (LSE:PAGE) shares drove the underperformance of the mid-cap benchmark, which reached mid-afternoon 140 points lower at 21,147.

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The economic headwinds facing the recruitment sector have also been felt in cybersecurity after NCC today highlighted the impact of longer sales cycles and intense competition.

Revenues fell 6% and adjusted earnings by 15.7% to £21.5 million in today’s half-year results, with the cybersecurity division set for a full-year revenues fall of 5% as NCC repositions towards longer-term strategic relationships.

Shares declined 18p to 147p, reversing all this year’s gains after interest in the sector was fuelled by recent high-profile ransomware attacks.

Chief executive Mike Maddison said today: “Demand for cybersecurity services has never been clearer, reflected in strong pipeline growth particularly in solutions related to our investment areas.”

NCC’s other division is Escode, which protects businesses from unforeseen disruptions and ensures their software applications and source code are safe and always available.

A potential sale of the division is being considered, which will mean a return of significant capital to shareholders and further investment in the cybersecurity business.

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Shore Capital has previously said that Escode could be worth between £210 million and £300 million, which compares with NCCs market value of £520 million and would leave the cybersecurity business on a multiple of 12 times forecast earnings.

The bank said: “We think a mid-teen multiple for cyber is justifiable looking across the peer group of IT Services companies and considering NCC’s historical trading ranges.”

Counterparts at Investec added: “Macro is holding back the full benefits of the operational and strategic changes made, but material value remains.”. It has a price target of 190p, which compared with Shore Capital at 163p and Peel Hunt’s 200p.

The shares of XPS Pensions also unwound some of their recent gains, despite the company reporting another year of double-digit growth on key metrics as market and regulatory changes continue to drive demand for its consulting and administration services.

A final dividend of 8.2p lifted the total for the year by 19% to 11.9p, highlighting the company’s confidence in the outlook.

It said: “While we do not take the opportunities in front of us for granted, we know that by continuing to execute well and work hard for our clients, we have a strategy and platform in place that have a long and growing track record of delivery.”

The shares fell 26.4p to 349.6p, which compares with Canaccord Genuity’s new price target of 459p. It said the recently tabled Pension Schemes Bill should add to the already significant revenue-generating opportunities for XPS in its core market for years to come.

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In addition, the broker notes that the recent diversification into insurance consulting had bolstered the total addressable market from £2.5 billion to £4 billion combined.

Syncona shares led the FTSE 250 index after the life science portfolio business said it was exploring options to provide shareholders with accelerated cash returns.

The review of its investment strategy follows a period of underperformance for the biotech sector, with market conditions particularly challenging for early stage life science companies.

Today’s annual results showed the year-end value of Syncona’s 14-strong portfolio at £765.4 million, a negative return of 17%.

Shares have been impacted as a result of the challenging conditions, with the price moving from a premium to a 48% discount to net asset value over the last three years.

They rose 4.6p to 93.6p in today’s session after the board said it planned to accelerate returns to shareholders through an orderly realisation of its portfolio assets, with the aim of achieving a balance between returning cash and maximising value.