Ncc Group Plc · LSE:NCC
Ncc — H1 2011 Earnings Presentation
27 slides from Ncc's earnings presentation, January 2011
Slide 1: NCC Group plc Interim Results
NCC Group G plc l Interim Results for the six months ended 30 November 2010 January 2011
Slide 2: Agenda
Agenda • Highlights & track record • Financials • Structure, S market k & strategy • Group Escrow performance • Assurance performance • Current trading & outlook • Appendix
Slide 3: Highlights: strong, consistent growth
Highlights: strong, consistent growth Group p Escrow Acquisition is the world’s Revenue Adjusted largest of US based up 49% diluted EPS provider iSEC to £33.0m £33 0m Group Escrow up 25% 5% up 10% to 15.2p to £11.9m Assurance Operating up p 86% Leading global profits to £21.1m independent up 27% Cas
Slide 4: Growth track record
Growth track record Revenue (£m) Operating profit (£m) 50 16 14 40 12 30 10 8 20 6 4 10 2 Full year 0 0 2006 2007 2008 2009 2010 2011 2006 2007 2008 2009 2010 2011 Interim Fully diluted adjusted EPS (p) Dividend (p) 35 12 30 10 25 8 20 6 15 4 10 5 2 0 0 2006 2007 2008 2009 2010 2011 2006 2007 2008 2
Slide 5: Group revenues
Group revenues 2010 2009 % (£m) (restated) Growth (£m) Revenue Escrow UK 9.2 8.5 9% Escrow Europe 1.5 1.4 11% Escrow US 1.2 1.0 19% Total Group Escrow 11.9 10.8 10% Assurance 17.7 8.2 114% Web Performance Testing 3.4 3.1 11% Total Assurance 21.1 11.3 86% Total Revenue 33.0 22.1 49%
Slide 6: Group operating profits
Group operating profits 2010 2009 % (£m) (restated) Growth (£m) Contribution Group p Escrow 6.7 6.0 12% Assurance 2.4 1.3 83% Operating contribution 91 9.1 73 7.3 25% Corporate (1.4) (1.2) 11% Adjusted operating profit 7.7 6.1 27% Adjusted operating profit margin 23% 27% ‐
Slide 7: Group financial performance
Group financial performance 2010 2009 % (£m) (restated) Change (£m) Adjusted operating profit* 7.7 6.1 27% Amortisation ((1.4)) ((0.7)) 100% Interest (0.3) (0.2) 50% Exceptional items (0.7) ‐ ‐ Pre tax profits 5.3 5.2 3% Tax rate 33% 28% ‐ Adjusted fully diluted EPS (p) 15.2p 12.2 p 25% Interim divi
Slide 8: Discontinued activities & exceptional items
Discontinued activities & exceptional i l items i • Discontinued activities ‐ £1.1m post tax loss (£0.2m post tax profit in 2009) • Curtailment of general IT Consultancy ‐ October 2010 • Exit of congested, overheated & overpopulated space • Too close to discretionary expenditure & management distrac
Slide 9: Group balance sheet
Group balance sheet • Cash conversion remains strong at 141% (133% in 2009) of operating profits • Group net debt at £20.3m (£8.6m in 2009) • Bank facility of three year RCF of £35m + £2m overdraft • No further consideration due in FY 2011 • Contingent consideration due £7.9m (£0.7m in 2009) • Furth
Slide 10: Group cash flow
Group cash flow 2010 2009 (£m) (£m) C h generated Cash t d from f operations ti 79 7.9 71 7.1 Net interest paid (0.3) (0.1) Income taxes paid (1 9) (1.9) (1 7) (1.7) Acquisition of property, plant & equipment (1.9) (1.5) Acquisition of iSEC (9.4) (3.7) Cash (outflow)/inflow before financing activiti
Slide 11: Structure
Structure • Two divisions ‐ Group Escrow & Assurance • Escrow has two brands ‐ NCC Group Escrow & Escrow Europe • Assurance brands are NGS Secure, iSEC, SDLC & Site Confidence Group Escrow UK Escrow Escrow US Assurance Assurance Web Europe Performance Escrow Testing Revenue: Revenue: £11.9m £21.1m R
Slide 12: Structure
Structure UK 5 offices Revenue £26.1m USA Headcount 470 FTE 4 offices Associates 100 Revenue £4.2m Headcount 44 FTE Germany Revenue £0.3m Headcount 3 FTE Rest of World Revenue £0.4m Switzerland Headcount 5 FTE Revenue £0.1m Headcount 2 FTE Netherlands Revenue £1.1m Headcount 8 FTE
Slide 13: Marketplace
Marketplace • The Group is not reliant on one sector 2% 2% 2% 3% 3% Software & Computer Services 4% 31% Banks & Insurance General Retailers 6% Fixed & Mobile Communications Other Local Government 8% Central Government Travel & Leisure Education 10% Support Services Healthcare Equipment & Services 30
Slide 14: Marketplace
Marketplace Financial Times ‐ 17 January 2011: Governments warned on cyber crime Sundayy Times ‐ 9 Januaryy 2011: Gangs g that hijack j yyour PC The Times ‐ 20 December 2010: Hackers leak e‐mail account details of government & defense staff The Guardian ‐ 11 December 2010: WikiLeaks backlash: The fi
Slide 15: Strategy - Assurance
Strategy Assurance • Security threat is at the highest level ever • Market awareness growing rapidly • Leaders in service delivery in UK & Europe • USA development key to joined up client opportunities • National Security & Homeland Security opportunities • How Government will direct £650m expenditu
Slide 16: Strategy - Escrow
Strategy Escrow • Growth to come from acquisitions & organic development • Continues to focus on deeper customer penetration • Evolution of SaaS Escrow Solutions • Closer ties to Assurance & development of testing opportunities • Close Cl monitoring it i off acquisition i iti opportunities t iti
Slide 17: Strategy - acquisitions
Strategy ‐ acquisitions • Acquire complementary prestige leading companies • All deals are earn‐out earn out based to ensure focus • Integration is key to maximising value & opportunities • Typically two per financial year from carefully constructed target list • iSEC acquired in October 2010 • Cali
Slide 18: Group Escrow
Group Escrow 2010 (£m) 2009 (£m) % Growth Group Escrow revenue 11.9 10.8 10% Group p Escrow contribution 6.7 6.0 12% Escrow UK revenue 9.2 8.5 9% G Group EEscrow • Renewals up to £15.2m (£14.4m in 2009) • Margin increased to 56% (55% in 2009) • Group Managing Director joined Q2 UK Escrow • Solid per
Slide 19: Group Escrow
Group Escrow 2010 (£m) 2009 (£m) % Growth Escrow Europe revenue 1.5 1.4 11% Escrow US revenue 1.2 1.0 19% • Total non UK renewals base £3.5m (£3.2m in 2009) • Verifications & Secure Discovery increasingly important to both businesses • European management team now stable ‐ actively recruiting • Escr
Slide 20: Assurance
Assurance 2010 (£m) 2009 (£m) % Growth Assurance revenue 21.1 11.3 86% Assurance contribution 2.4 1.3 83% • Acquisition & organic growth • Margin improvements will come ‐ currently 12% (12% in 2009) NGS Secure • Staff turnover stemmed ‐ 7% from high of over 30% • New regional structure ‐ office open
Slide 21: Current trading & outlook
Current trading & outlook • Group Escrow growth continues to provide the cornerstone • Worldwide cyber risk awareness is rapidly growing ‐ Group ideally placed to capitalise • Staff development development, retention & recruitment going well in all areas • Further acquisitions are being seriously co
Slide 22: Appendix
Appendix neogroup
Slide 23: Group Escrow
Group Escrow • Cornerstone of NCC Group in profit & revenue Group Escrow ‐ Improvements with renewals & Verifications • World’s largest Escrow provider ‐ 18,000 parties globally Escrow UK ‐ Enhanced sales process • Agreements sold globally ‐ automatic annual renewal ‐ £15.2m forecast renewals Escrow
Slide 24: Escrow Agreements - High value & low cost concept
Escrow Agreements ‐ High Hi h value l & llow cost concept • Escrow is a legal contract between three parties • Licensor (or owner) • Licensee • An independent trusted third party • Holds software source code or business critical material • Provides p protection from keyy supplier pp failure or failu
Slide 25: Group Escrow - sector concentrations
Group Escrow ‐ sector concentrations • No major sector revenue reliance 2% 2% 2% 3% 3% 6% Banks & Insurance 31% Fixed & Mobile Communications Software & Computer Services Other 7% Local Government Healthcare Equipment & Services Support Services 9% Travel & Leisure General Retailers Central Governme
Slide 26: Assurance
Assurance Security Testing NGS Secure ‐ Recognised industry • In the testing market for over 30 years experts with the world’s largest • 135 Testers, Forensic & Security experts & Researchers single Penetration Testing team worldwide ld id • Uncover security weakness by controlled invasion iSEC Part
Slide 27: Assurance - sector concentrations
Assurance ‐ sector concentrations • No major sector revenue reliance 2% 1% 1% 1% 3% 3% 5% Software & Computer Services Banks & Insurance 40% General Retailers Other 14% C Central lGGovernment Travel & Leisure Local Government Education Support Services Healthcare Equipment & Services 30%