Ncc Group Plc · LSE:NCC
Ncc — FY2013 Earnings Presentation
30 slides from Ncc's earnings presentation, Jul 4, 2013
Slide 1: Full year Results
Full year Results for the 12 months ended 31 May 2013 July 2013
Slide 2: Agenda
Agenda • Highlights • Financial performance & balance sheet • Cash flow • Escrow • Assurance • Artemis & .secure • Current trading & outlook • Appendix 2
Slide 3: Highlights
Highlights Group Assurance revenue up revenue up 13% to 18% to £70.7m £99.2m Group Escrow Assurance revenue up 2% organic to £28.5m revenue growth 10% Group Escrow Assurance operating operating profits up 3% profits up to £16.7m 17% to £12.0m Adjusted Two diluted EPS acquisitions up 8% to 8.4p incre
Slide 4: Revenues
Revenues 2013 2012 Growth Organic (£m) (£m) (%) Growth (%) Revenue Escrow UK 20.9 20.3 3% 3% Escrow Europe 3.2 3.2 (1%) (1%) Escrow US 4.4 4.4 1% 1% Group Escrow 28.5 27.9 2% 2% Security Testing 61.9 51.8 20% 11% Web Performance 8.8 8.0 9% 9% Assurance 70.7 59.8 18% 10% Total revenue 99.2 87.7 13% 8
Slide 5: Operating profitability
Operating profitability Margin 2013 2012 Growth (%) (£m) (£m) (%) Contribution Group Escrow 59% 16.7 16.3 3% Assurance 17% 12.0 10.3 17% Operating contribution 29% 28.7 26.6 10% Artemis (1.2) Corporate - (3.6) (3.2) (15)% Adjusted operating profit 24% 23.9 23.4 2% Adjusted pre tax profits 23.0 22.6
Slide 6: Reconciliation of adjustments
Reconciliation of adjustments 2013 2012 (£m) (£m) Adjusted operating profit 23.9 23.4 Exceptional costs (0.9) (0.5) Release of deferred consideration 1.2 0.3 Amortisation (3.6) (3.7) Share based payments (0.8) (1.0) Impairment loss & remedial costs 0.0 (7.0) Reported operating profit 19.8 11.6 Inter
Slide 7: Cash flow
Cash flow 2013 2012 (£m) (£m) Cash generated from operations 23.0 24.6 Net interest paid (0.8) (0.7) Income taxes paid (3.0) (5.4) Acquisition of capital assets (4.9) (7.3) Acquisition of businesses (10.5) (7.5) Cash inflow before financing activities 3.8 3.7 Receipt of bank loans 1.2 2.4 Proceeds f
Slide 8: Cash, capital & banking
Cash, capital & banking • Cash conversion 116% of operating profits (131% in 2012) • Net debt £25.3m (£22.7m at May 2012) • Renewed facility on improved terms to July 2016 • £40m RCF plus £5m overdraft • Capital expenditure in the year £4.9m (2012: £7.3m) • Office refurbishment & expansion - £0.7m •
Slide 9: IT systems
IT systems Reversion • Reversion complete & operating satisfactorily • Process was tougher & more expensive than expected Legal claim • Basis of claim against implementers, Ciber UK, remains sound • Progress to mediation by end of year – notified of failure June 2012 • Committed to robustly pursuing
Slide 10: Group Escrow division
Group Escrow division Group Escrow Revenue £28.5m Contribution £16.7m Headcount 143 FTE Escrow UK Escrow Revenue £20.9m Switzerland Headcount 88 FTE Headcount 1 FTE Escrow US Revenue £4.4m Headcount 38 FTE Escrow US Escrow Europe Revenue £4.4m Revenue £3.2m Headcount Escrow 38 FTE Germany Netherland
Slide 11: Group Escrow & UK
Group Escrow & UK 2013 2012 Growth (£m) (£m) (%) Group Escrow revenue 28.5 27.9 2% Escrow UK revenue 20.9 20.3 3% Group Escrow contribution 16.7 16.3 3% Group Escrow • Escrow revenues increased by 2% • Escrow profits increased by 3% • Renewals up 2% to £17.7m (2012: £17.3m) UK Escrow • IT & software
Slide 12: Group Escrow - Europe & US
Group Escrow - Europe & US 2013 2012 Growth (£m) (£m) (%) Escrow US revenue 4.4 4.4 1% Escrow Europe revenue 3.2 3.2 (1)% • Significant management changes in North America & Netherlands • New teams & structures in place • Europe has seen a strong H2 - 6% growth • Leadership & management issues in No
Slide 13: Assurance division
Assurance division Group Assurance Revenue £70.7m Contribution £12.0m Headcount 540 FTE New York UK Seattle 38 FTE 403 FTE 18 FTE Chicago 16 FTE Australia San Francisco 53 FTE Headcount Austin 5 FTE 7 FTE 13
Slide 14: Assurance
Assurance 2013 2012 Growth (£m) (£m) (%) Assurance revenue 70.7 59.8 18% Assurance contribution 12.0 10.3 17% • Revenues growth of 18% • Solid organic growth of 10% • Margin currently at 17% (2012: 17%) - target still 20% • 725 including 185 associates • Integration of new businesses is completed –
Slide 15: Assurance
Assurance 2013 2012 Growth (£m) (£m) (%) STAC 61.9 51.8 20% Security Testing, Audit & Compliance (STAC) • Largest part of the Group • STAC revenues grew by 20% or 11% organically • US & UK are working effectively for international clients • US sales team in place & performing • Stable management tea
Slide 16: Assurance
Assurance 2013 2012 Growth (£m) (£m) (%) Web Performance 8.8 8.0 9% Web performance • Strong new business & renewal rates - 91% • Renewals growing by 11% to £6.3m (2012: £5.7m) • Services being sold in Australia, considering North America • New products in development continues to enhance service fu
Slide 17: .secure – making the internet safer
.secure – making the internet safer Artemis - .secure • Application for generic Top Level Domain (gTLD) to offer a new & unique secure domain experience • Amazon also applied for .secure • Both applications have passed ICANN initial approved stage • Next stage is contention resolution – ICANN • Now
Slide 18: .secure – progress
.secure – progress • Expect to announce early adopters at the interims • Target live date still by end of Q1 2014 – maybe with brand applicants • Can provide service for .com customers who sign for .secure • Staged investment - expected cost of delivery c.£8m - £9m • Capitalise c.£5m - other costs w
Slide 19: Indicative timeline reliant on ICANN deadlines
Indicative timeline reliant on ICANN deadlines .Secure progress • 30 signed pioneers plus 10 more potential • Major financial institutions • Tech leaders • Social networks • Consumer products • Entertainment 2013 2014 .Secure launch Pioneers Artemis Two customer Contention Product Pre-sales Policies
Slide 20: Current trading & outlook
Current trading & outlook • Return to more normal Escrow growth patterns • Overseas escrow businesses continuing to improve • Assurance • Security threat landscape is ideal market place - “Top companies lack vigilance in preventing threat of cyber crime” - FT - 1 July 2013 • Scale & international re
Slide 21: Appendix
& Appendix necour 21
Slide 22: About NCC Group
About NCC Group A global information assurance specialist with an unrivalled breadth & depth of services, providing organisations worldwide with: • Freedom from doubt that their business critical material is protected - through escrow & verification • Freedom from doubt that their information is sec
Slide 23: Growth track record
Growth track record Revenue (£m) - CAGR 29% Operating profit (£m) - CAGR 19% 120 30 100 25 80 20 60 15 40 10 20 5 0 0 05 06 07 08 09 10 11 12 13 05 06 07 08 09 10 11 12 13 Full year Fully diluted adjusted EPS (p) - CAGR 19% Dividend (p) - CAGR 29% Interim 10.00 3.50 3.00 8.00 2.50 6.00 2.00 4.00 1.5
Slide 24: Our services
Our services Physical & IS Making sure that it complies Escrow Ethical security Capability contracts & Testing to make & operational sure that it works verifications response Keeping IPR, Performance Making sure it is knowledge & Ensuring it secure & action data safe performs & is when it’s not capa
Slide 25: Sector revenue concentrations
Sector revenue concentrations Other 8% General retailers Fixed & mobile communications 5% 9% Central government 4% Manufacturing 3% Travel & leisure Software & computer 5% services 30% Education 1% Support services 5% Healthcare 2% Banks & insurance 28% 25
Slide 26: International mix of business
International mix of business 2013 2012 Rest of World Rest of World 24% 29% Rest of Europe 7% Rest of Europe 7% UK 64% UK 69% 26
Slide 27: Escrow agreements explained
Escrow agreements explained • Escrow is a legal contract between Licensor three parties • licensor (or owner) • licensee Deposit of • an independent trusted third party source code • Holds software source code or Sale of business critical material business • Provides protection from key supplier cri
Slide 28: Escrow revenue concentrations
Escrow revenue concentrations Other 9% General retailers 4% Fixed & mobile communications Software & computer 22% services 17% Central government 3% Local government 4% Travel & leisure 4% Education 3% Support services Banks & insurance 4% 24% Healthcare equipment & services 6% 28
Slide 29: Assurance sector concentrations
Assurance sector concentrations Banks & Insurance Software & Computer 30% Services 34% Other Support Services 3% 4% Education 1% Central Government 5% Fixed & Mobile Telecommunications General Retailers 7% 6% Travel & Leisure Manufacturing 5% 5% 29
Slide 30: UK, North American and Australian offices
UK offices North American offices Australian offices Manchester - head office Atlanta Sydney Cheltenham Austin Edinburgh Chicago Leatherhead Mountain View London New York Milton Keynes Seattle San Francisco European offices Amsterdam - Netherlands Munich - Germany Zug - Switzerland 31