Ncc Group Plc · LSE:NCC
Ncc — FY2018 Earnings Presentation
35 slides from Ncc's earnings presentation, Jul 17, 2018
Slide 1: NCC Group plc Full Year Results
NCC Group plc Full Year Results for the year ended 31 May 2018 17 July 2018 Confidentiality Notice: This presentation is confidential and contains proprietary information and intellectual property of NCC Group plc. None of the information contained herein may be reproduced or disclosed under any circu
Slide 2: Agenda
Agenda Adam Palser CEO overview Chief Executive Officer Brian Tenner Financial performance Chief Financial Officer Adam Palser Strategy update Chief Executive Officer Adam Palser Current trading & outlook Chief Executive Officer Q&A Appendices 2
Slide 3: CEO Overview
CEO Overview • Attractive market place, excellent client base Strong • Full range service offering Foundations • Highly skilled and dedicated people • Double digit growth maintained Good • Reversed GM% compression from prior years Progress • Significant improvement in free cash flow • Highly transac
Slide 4: Financial highlights – continuing operations
Financial highlights – continuing operations Revenue (£m) Adjusted EBIT (£m) Free Cash Flow (£m) (2017: £215.3m) (2017: £25.5m) (2017: £13.7m) £233.2m £31.0m £20.4m Assurance organic growth*1 Assurance GM% Cash conversion ratio (%) (2017: £167.3m) (2017: 28.9%) (2017: 87%) +13.8% +5.3%pts 90% Escrow
Slide 5: Agenda
Agenda Adam Palser CEO Overview Chief Executive Officer Brian Tenner Financial performance Chief Financial Officer Adam Palser Strategy update Chief Executive Officer Adam Palser Current trading & outlook Chief Executive Officer Q&A Appendices 5
Slide 6: Financial Performance: Income Statement
Financial Performance: Income Statement Continuing operations 2018 2017 (£m) (£m) Revenue 233.2 215.3 • Revenue growth mainly organically driven Cost of Sales (137.1) (137.1) across all Assurance Division geographies Gross Margin 96.1 78.2 • GM% recovered strongly in all business units Gross Margin
Slide 7: Financial performance: Revenue bridge
Financial performance: Revenue bridge £m 250.0 240.0 230.0 29.2 244.5 23.1 220.0 233.2 210.0 8.6 2.0 2.6 4.0 206.7 200.0 2017 Disc Ops Re-sell Re-base 2017 FX Acquisitions Escrow Assurance 2018 • Assurance division delivered strong organic growth across all territories (+13.8%) • Escrow growth inclu
Slide 8: Financial performance: Adjusted EBIT bridge
Financial performance: Adjusted EBIT bridge £m 45 40 8.4 10.8 35 4.0 30 6.0 2.0 1.5 25 0.4 31.0 27.5 25.5 20 2017 Disc Ops Re-base 2017 FX Acquisitions Growth GM% Gains G&A D&A 2018 • Impact of Growth on EBIT is based on organic growth x PY Gross Margin% • GM% up 4.9% points, reversing a trend of se
Slide 9: Financial performance: Assurance performance
Financial performance: Assurance performance 250 Revenue - continuing (£m) • Sales growth in all territories – 9.2% on a reported basis, 13.8% on an organic basis (see over) 200 194.4 • GM% grew by 5.3% pts – high incremental margin 150 178.2 delivered by improved utilisation 138.9 100 • Overhead in
Slide 10: Assurance organic revenue growth rates 2018
Assurance organic revenue growth rates 2018 Territories listed by size of revenue • Professional Services (PS) businesses growing UK PS 14.5% well in all territories, UK, US, Fox and Fort • UK benefit from 26.2% growth in higher value added Risk Management & Governance NA PS 15.9% • Strong customer
Slide 11: Financial performance: Escrow performance
Financial performance: Escrow performance Reported revenue (£m) • Growth flattered by one off reduction in 2017 from 40 revenue recognition correction – now normalised 38.8 37.2 35.3 30 32.0 • Organic growth 2.7% with US flat excluding weaker 28.5 FX rates (reported revenue down 5.1%) 20 • Renewal r
Slide 12: Financial performance: Individually significant items
Financial performance: Individually significant items Charges (continuing operations) 2018 2017 • Much lower charges for Individually (£m) (£m) Significant Items in the current year • Provision in Fox for loss making contract - Loss making contract 2.5 - £1.5m utilised this year Deferred/contingent
Slide 13: Financial performance: Tax and dividends
Financial performance: Tax and dividends 30% Adjusted tax rate (%) 29.3% • Effective adjusted tax rate 22.4% • Partial benefit from US Federal rate cut from 35% 20% 22.0% 22.0% 22.0% 22.1% to 21% on 1 January 2018 • US R&D tax credit £2.5m cash benefit in short term 10% – benefit excluded from Adjus
Slide 14: Financial performance: Cash flow and net debt
Financial performance: Cash flow and net debt • Gains from improved EBITDA and some early Whole Group 2018 2017 (includes discontinued operations) (£m) (£m) initial gains on working capital Cash flow before working capital 40.0 33.8 • Working capital: Movement in working capital (0.5) (2.1) o Faster
Slide 15: Agenda
Agenda Adam Palser CEO Overview Chief Executive Officer Brian Tenner Financial performance Chief Financial Officer Adam Palser Strategy update Chief Executive Officer Adam Palser Current trading & outlook Chief Executive Officer Q&A Appendices 15
Slide 16: Strong foundations
Strong foundations Offerings Clients • Escrow • >50% of FTSE 350 • M&A Cyber DD • Tech titans • Board coaching • Banking giants • Risk & compliance • Governments • Cyber resilience • SMEs • Software evaluation • Hardware testing Talented people • >1600 people across 34 offices in 13 countries Multip
Slide 17: Our Markets
Our Markets Connected environment Society’s Agility and dependence pace of the on connected threat environment Regulatory environment Market dynamics continue to benefit NCC 17
Slide 18: Market and Legacy Challenges
Market and Legacy Challenges Our markets Heavily invested Competition for talent Our results Revenue v margin Cashflow Our processes Complex processes Old systems 18
Slide 19: From Today to the Future
From Today to the Future May 2018 May 2021 From: Recent Past Enablers Enablersof of Change Change To: Future State 19
Slide 20: Building on strong foundations
Building on strong foundations The leading cyber security advisor globally. Trusted to protect our customers’ critical assets. Sought-after for our complete people-led, technology enabled cyber security solutions that enable individuals, businesses & society to thrive. Our heart is in our space. Rew
Slide 21: Our self-help programme: Securing Growth Together
Our self-help programme: Securing Growth Together • Designed to increase the quality and quantity of orders • Skills development: Value-selling; sales academy underway Win Business • Sector focus: becoming expert in the world of our clients • Investment in research & innovation to lead the market •
Slide 22: Strengthening the Leadership
Strengthening the Leadership New appointments: • Tim Kowalski appointed as CFO: starting 23rd July • Global Operations Director: started 2nd March • New MD of Fox-IT: appointed 1st June (internal appointment) • Group Sales & Marketing Director: started 1st July • North American HR VP: started 16th J
Slide 23: Strategy Update: Assurance
Strategy Update: Assurance “The leading cyber security advisor globally. Sought-after for our complete people-led, technology enabled cyber security solutions that enable individuals, businesses & society to thrive.” Our goal: continued double-digit growth, steady margin improvement, improved cashfl
Slide 24: Strategy Update: Escrow
Strategy Update: Escrow “Trusted to protect our customers’ critical assets.” Our goal: To return Escrow to confident growth ( > GDP growth). • Closer co-ordination with Assurance to share leads and opportunity • Significant investments in USA – experienced and capable UK sales and delivery people se
Slide 25: Strategy summary
Strategy summary • Strategic alignment process building on last year’s strategic review • Shaping the firm to focus on capturing and delivering value for clients • Closer working between Escrow and Assurance divisions • Launch of co-ordinated global Managed Detection and Response business • Securing
Slide 26: Agenda
Agenda Adam Palser CEO Overview Chief Executive Officer Brian Tenner Financial performance Chief Financial Officer Adam Palser Strategy update Chief Executive Officer Adam Palser Current trading & outlook Chief Executive Officer Q&A Appendices 26
Slide 27: Summary and outlook
Summary and outlook • Markets continue to grow and provide opportunity for continued double digit revenue growth in Assurance • Intent to grow EBIT% by around 1% pt per year over the next two years • 2019 & 2020 Opex dilution from investments of £3-4 million required in • ‘Securing Growth Together’
Slide 28: Agenda
Agenda Adam Palser Overview Chief Executive Officer Brian Tenner Financial performance Chief Financial Officer Adam Palser Strategy update Chief Executive Officer Adam Palser Current trading & outlook Chief Executive Officer Q&A Appendices 28
Slide 29: Q&A
Q&A nccgroup”
Slide 30: Agenda
Agenda Adam Palser Overview Chief Executive Officer Brian Tenner Financial performance Chief Financial Officer Adam Palser Strategy update Chief Executive Officer Adam Palser Summary Chief Executive Officer Q&A Appendices 30
Slide 31: Financial Performance: Impact of IFRS 15
Financial Performance: Impact of IFRS 15 Revenue impact • Group revenue derives from two principle sources: ≈ 1. Professional services (74% 2018 revenue) (£0.2m) Each Statement of Work already treated as a separate performance obligation (no unbundling) (0.09%) Revenue already recognised on work
Slide 32: Financial performance: Non-GAAP Reconciliation
Financial performance: Non-GAAP Reconciliation Continuing operations only 2018 2017 (£m) (£m) Adjusted EBITDA 42.5 33.0 Depreciation of tangibles (6.2) (4.9) Amortisation of intangibles (5.3) (2.6) Adjusted EBIT 31.0 25.5 Share based payments (0.3) (0.5) Amortisation acquired intangibles (9.4) (10.3
Slide 33: Financial performance: Balance sheet
Financial performance: Balance sheet 2018 2017 (£m) (£m) • Fall in intangibles from disposals (£15.6m) and amortisation charges (£14.9m) offset Intangible assets 240.0 267.6 in part by additions of £5.0m PPE 19.4 18.3 • Net working capital small increase Investments 0.4 0.4 o Underlying revenue grow
Slide 34: Foreign exchange rates
Foreign exchange rates FX rates 1.45 1.40 Columns show WAER 1.35 at each half year end 1.30 1.25 1.20 1.15 1.10 1.05 USD EUR 1.00 • Compared to PY, average FX rates: US$ weakened by 6.1% whereas the €uro appreciated by 3.2% • Chart shows the month end rates in each case (used to create the weighted
Slide 35: Disclaimer
Disclaimer This presentation, including a hard copy of these slides, the talks given by the presenters, the information communicated during any delivery of the presentation and any question and answer session and any document or material distributed at or in connection with the presentation (togethe