Cyber security business still on line to soar

CYBER security specialist

ECSC has had a difficult year. Having floated on the stock market in December 2016, the first few months went well. Midas recommended the shares in May when they were 396p.

The stock shot up to above 500p but then more than halved in value following a profit warning in June. The interim results in September delivered further bad news and the stock is now trading at 142½p, a terrible disappointment.

ECSC’s problems have largely been caused by overexpansion. Staff numbers almost doubled in the first few months following the flotation, in the hope that new employees would turbocharge growth. But promising leads failed to convert to actual contracts and chief executive Ian Mann was forced to admit in September that the group had made a loss in the half-year, while full year results would be lower than expected.

The company has cut costs aggressively and there are high hopes that new business will pick up in 2018. Cyber security is a clear issue for companies and legislation coming into force in May next year will impose severe penalties on firms that suffer cyber breaches if they have failed to protect themselves. Midas verdict: ECSC has had a rollercoaster ride as a listed company and Midas investors have lost out. Now is not the time to sell, however. Mann has a track record of success, cyber security is a growing market and the company should do significantly better in 2018 and beyond.