Ncc Group Plc · LSE:NCC
Ncc — FY2006 Earnings Presentation
32 slides from Ncc's earnings presentation, July 2006
Slide 1: NCC Group plc Preliminary Results
NCC Group plc Preliminary Results for the year ended 31 May 2006 July 2006 1
Slide 2: Agenda
Agenda Highlights Group financial summaries IFRS impact Group strategy Divisional reviews Escrow Solutions UK Escrow Solutions US Escrow Solutions Germany Testing Solutions Consultancy Current trading and outlook 2
Slide 3: Highlights
Highlights Revenue up 15% to £20.7m Operating profits up 15% to £6.6m – IFRS Group Escrow Solutions up 19% to £5.8m Escrow Solutions up 27% to £6.1m Testing Solutions up 34% to £1.3m Consultancy return to profit second half, FY 2006 £0.6m Underlying profits up 23% to £7.5m – UK GAAP, e
Slide 4: Underlying operating profits
Underlying operating profits 2006 2005 % £m £m Revenue 20.7 18.0 15 IFRS operating profit 6.6 5.8 15 Share option charge 0.5 0.3 58 Amortisation - US 0.1 - - Operating profits - UK GAAP 7.2 6.1 17 US acquisition (0.2) - - Germany investment 0.5 - - Underlying operating profit 7.5 6.1 23 Margin 37% 3
Slide 5: Integrated divisions
Integrated divisions Escrow Solutions Testing Solutions Consultancy Escrow UK Verification Specialist Testing Penetration IT/IS Solutions Germany Services Services Testing Services Consultancy US Assuring your Verifying your Assuring your Securing A partnership business systems are systems’ your bui
Slide 6: Group revenues
Group revenues Year to 31 May 2006 2006 2005 % £m £m change Revenue Escrow Solutions UK 9.8 8.1 21 Escrow Solutions Germany 0.2 0.1 31 Escrow Solutions US 0.4 - - Total Escrow 10.4 8.2 26 Testing Solutions 5.7 4.4 31 Consultancy 4.7 5.4 (13) Total Turnover 20.8 18.0 15 UK 17.7 15.8 12 Europe 1.3
Slide 7: Group operating profits
Group operating profits Year to 31 May 2006 2006 2005 % £m £m change Operating profit Escrow Solutions 6.1 4.8 27 Escrow Solutions Germany (0.4) 0.1 - Escrow Solutions US 0.1 - - Total Escrow 5.8 4.9 19 Testing Solutions 1.3 1.0 34 Consultancy 0.6 1.0 (36) Corporate (1.1) (1.0) 7 Total operating pro
Slide 8: Group financial performance
Group financial performance Year to 31 May 2006 2006 2005 % £m £m change Operating profits 6.7 5.8 15 Amortisation (0.05) - - Exceptional - (0.8) - Interest (0.1) (0.4) 75 Pre tax profits 6.6 4.6 44 Basic EPS (p) 14.0 10.2 37 Total dividend per share (p) 3.5 2.5 40 8
Slide 9: Balance sheet and cash
Balance sheet and cash Cash conversion at 110% of operating profits Group £1.3m net cash positive (2005: £0.0m) First acquisition paid £3.7m ($5.0m) from cash Cash on balance sheet £5.2m (2005: £5.1m) Group debt at £3.9m (2005: £5.1m) Deferred income £6.0m Capital expenditure of £800k
Slide 10: IFRS impact
IFRS impact First company to be IFRS compliant on Aim Adoption two years ahead of time – year end 31 May 2008 Charge for share option schemes £468k (2005: £297k) 2006/2007 LTIP expected to increase charge by c.£200k Goodwill not impaired – no charge to P&L required (2005:£0m) Intangible
Slide 11: Group strategy
Group strategy Continued focus on organic growth across the Group Self funded investment in Germany- 2006/07 target of profitability Self funded investment in US – 2006/07 target to retain current profitability US Escrow Solutions providers continue to be acquisition targets Continued recr
Slide 12: Escrow Solutions UK
Escrow Solutions UK Sales £9.8m +21% Contribution £6.1m +27% 69 Escrow Solutions account managers (2005: 62) Contracts up 13% to over 7,000 (2005: 6,200) Agreement beneficiaries up 12% to over13,500 (2005: 12,000) Contract termination rates down to <10% and <11% beneficiaries Safe planning
Slide 13: Escrow Solutions US
Escrow Solutions US Sales £0.4m Contribution £0.1m Performance in first 5 months on track Total US renewals base worth £620k ($1.1m) Account management model developed – sales team of 6 Infrastructure, IT investment and processes implemented Excellent market potential – no Verification Tes
Slide 14: Escrow Solutions Germany
Escrow Solutions Germany Sales £0.2m Contribution (£0.4m) Market worth £88 -£102m from Gartner Consulting research 8 account managers now selling – variant of UK model Sales teams supported by UK operational & testing teams Expected to be profitable within financial year 2006/07 Renewals w
Slide 15: Testing Solutions
Testing Solutions Sales £5.7m +31% Contribution £1.3m +34% Verifications Testing - record 320 delivered in the year - up 34% 1 in 10 new agreements are fully verified at least 40% of verifications are repeated Penetration Testing - record 750 delivered in the year – up 43% almost 40% of cl
Slide 16: Consultancy
Consultancy Sales £4.7m (13%) Contribution £0.6m (36%) Independent trusted advisor status is still the key Order book much stronger entering new FY at £1.7m July 2005 (£1.3m) Last 5 months were tightly controlled & very successful loss completely stemmed - H1 £(42k) : H2 £658k good use of fl
Slide 17: Current trading and outlook
Current trading and outlook Continue to generate strong organic growth to compliment potential acquisition targets Acquisitions & investments are bedding in well and are well placed for success Recruitment remains challenging – but very positive signs - additional location being considered C
Slide 18: Appendices
Appendices 18
Slide 19: Escrow Solutions
Escrow Solutions Cornerstone of NCC Group in profit Agreements automatically and revenue renew annually Only significant European provider Agreements sold globally Provides service to over 13,500 beneficiaries Dual and electronic deposit service now launched 91 of FTSE 100 have All code is
Slide 20: Escrow Solutions
Escrow Solutions What is an Escrow Solution? Escrow is a legal contract between three parties - licensor (or owner), licensee and an independent trusted third party Holds software source code or business critical material Provides protection from key supplier failure or a failure of maintenanc
Slide 21: Escrow Solutions
Escrow Solutions Licensor Deposit of source code Sale of business critical software Annual recurring Licensee fee “High value low cost concept” 21
Slide 22: Escrow Solutions: UK market potential
Escrow Solutions UK market potential Market leaders – competition consists of smaller providers winning business on price – rare though! Existing customers are significant growth opportunity: Most businesses have insufficient protection Customers average just c.2.0 agreements - may need over
Slide 23: Escrow Solutions: UK market potential
Escrow Solutions UK market potential Sales force focused on developing existing accounts, increase penetration of agreements New investment into direct marketing and educational campaign Continued investment in CRM database to improve client handling techniques Working on increasing effectiv
Slide 24: Escrow Solutions: German market potential
Escrow Solutions German market potential Market research into German market suggests worth £88m - £102m* No plans to move into rest of Europe in the near future IT infrastructure and new office in place Operational procedures now implemented Regional marketing and PR plans now in place L
Slide 25: Escrow Solutions: US market potential
Escrow Solutions US market potential Market more mature but much larger than UK Owner led Less complex law No basic testing No Verification Testing Acquired operational teams, recruited account managers, relocated and invested in business infrastructure and IT UK style account manageme
Slide 26: Escrow Solutions: NCC Group market position
Escrow Solutions NCC Group market position Barriers to entry Sales model • Over 20 years’ experience Low cost high volume • Independence business model • Integrity testing and legal Beneficiary base with low documentation churn 26
Slide 27: Testing Solutions
Testing Solutions Verification Services confirmation code held under an Escrow In the testing market for over 20 years agreement is useable Specialist Testing proves systems robustness & performance Depth of expertise capabilities of a system or web site and knowledge Penetration Testing uncov
Slide 28: Testing Solutions: Verification Testing
Testing Solutions Verification Testing Three levels of service Sold by Escrow Solutions sales • Integrity Plus – collection team – high growth area and securing code • Full Verification – assurance Delivered by Testing Solutions over code compilation technical resources • Escrow Complete – dis
Slide 29: Testing Solutions: Specialist Testing
Testing Solutions Specialist Testing Performance and robustness Definition of test strategies and testing of mobile data infrastructure regimes Interoperability testing for Consultants have highly handsets, MMS and video specialist skills streaming Performance testing of web applications 2
Slide 30: Testing Solutions: Penetration Testing
Testing Solutions Penetration Testing A leading UK provider of Consultant rather than tool led – Penetration Testing services nearly 50 man years of Ethically hack networks and experience web sites Expert CHECK accredited and team leaders - only c.80 in the UK 30
Slide 31: Consultancy
Consultancy Reputation for technical excellence in public and private sectors Completely independent 60% of revenue in 2005/06 from existing clients – “Trusted Advisor” Greenhouse environment – new Only use expert, qualified and experienced consultants service offerings developed to meet clien
Slide 32: Consultancy
Consultancy Consultancy Help clients maximise value Consultants for over 30 years on from their IT and ensure clients information and infrastructure whole IT lifecycle are safe, secure and compliant Strong client relationships (60% of 2005/06 revenue from existing Independence from hardware