Ncc Group Plc · LSE:NCC
Ncc — H1 2008 Earnings Presentation
28 slides from Ncc's earnings presentation, January 2008
Slide 1: NCC Group plc Interim Results
NCC Group plc Interim Results for the six months ended 30 November 2007 NCC Group plc Manchester Technology Centre Oxford Road Manchester M1 7EF www.nccgroup.com January 2008
Slide 2: Agenda
Agenda Highlights Acquisition – EscrowEurope Group financial summaries Group strategy Online retail performance Divisional reviews 9 Escrow Solutions UK 9 Escrow Solutions Worldwide 9 Assurance Testing 9 Consultancy Current trading & outlook Commercial in Confidence - © Copyright 2008
Slide 3: Highlights
Highlights Revenue up 42% to £16.4m Operating profits up 41% to £4.7m 9 Group Escrow Solutions up 26% to £4.6m 9 UK Escrow Solutions up 18% to £4.5m 9 Assurance Testing up 898% to £0.8m 9 Consultancy down £73k to £0.1m Adjusted diluted EPS up 44% to 9.8p Interim dividend up to 2.25p – up 50%
Slide 4: NCC Group plc
NCC Group plc Three complementary divisions 9 Escrow UK 9 Information 9 Ethical Security Testing 9 Escrow Europe Technology 9 Performance & Load 9 Escrow US Testing 9 Information Security 9 Verification Testing Assurance Testing Escrow Solutions Assurance Testing Consultancy Revenue: £8.4m Revenue:
Slide 5: Acquisition – Escrow Europe
Acquisition – Escrow Europe Escrow solutions & escrow verification testing 9 Over 10,000 clients including retailers, financial services & government 9 Over1,000 existing contracts Experienced & capable operational management team 9 Head office in Amsterdam, Netherlands with subsidiary in Munich
Slide 6: Group revenues
Group revenues 30 November 2007 2006 % % Organic £m £m Growth Growth Revenue Escrow Solutions UK 7.8 6.7 15% 15% Escrow Solutions Germany 0.1 0.1 42% 42% Escrow Solutions US 0.5 0.5 9% 9% Total Escrow 8.4 7.3 15% 15% Assurance Testing 5.8 2.0 193% 42% Consultancy 2.1 2.2 (5%) (5%) Total revenue 16.4
Slide 7: Group operating profits
Group operating profits 30 November 2007 2006 % % Organic £m £m Growth Growth Revenue Escrow Solutions UK 4.5 3.8 18% 18% Escrow Solutions Germany 4k (192k) - - Escrow Solutions US 132k 69k 91% 91% Total Escrow 4.6 3.7 26% 26% Assurance Testing 0.8 0.1 898% 40% Consultancy 0.1 0.2 (37%) 37% Corporat
Slide 8: Group financial performance
Group financial performance 30 November 2007 2006 % £m £m change Adjusted Operating Profit 4.7 3.3 41% Exceptional item - move to full list (0.5) Amortisation (0.3) (0.1) (67%) Interest (0.2) - - Pre tax profits 3.7 3.2 15% Adjusted Pretax profits 4.6 3.3 41% Adjusted fully diluted EPS (p) 9.8p 6.8p
Slide 9: Balance Sheet
Balance Sheet Cash conversion at 118% of operating profits Group £0.2m net debt (£1.6m net funds in 2006) SecureTest acquisition paid £2.5m from cash Revolving credit facility of £10m in place Group deferred income £9.2m (2006: £6.6m) Commercial in Confidence - © Copyright 2008 NCC Group -
Slide 10: Group strategy
Group strategy Continued focus on organic growth across the Group Integration of EscrowEurope Further recruitment of Southern & Northern based escrow account managers Continue to develop Assurance Testing division and services Continued recruitment of ethical security testers to meet busin
Slide 11: Escrow Solutions UK
Escrow Solutions UK Sales £7.8m +15% Contribution £4.5m +18% 88 account managers (74 in 2006) – Manchester & Dorking Contracts at 7,844 (7,440 in May 2007) Beneficiaries at 15,262 (14,432 in May 2007) – annualised increase of 13% excluding minimum annual fees Contract termination rates still
Slide 12: Escrow Solutions US
Escrow Solutions US Sales $1.1m 19% Sales £0.5m 9% Contribution $0.3m 114% Contribution £0.1m 91% Total US renewals base now worth $1.6m Continued investment in operational management Testing sales are gaining traction – new products being developed to meet local market requirements EscrowLi
Slide 13: Assurance Testing - Markets
Assurance Testing - Markets Online shopping growing significantly: 9 UK annual online sales £53bn in 2007 – up 75% on 2006 9 Online sales could take 50% of £300bn annual retail spend by 2018 9 17% of retail, leisure & travel spending now online 9 4.4m UK users bought online on Christmas Day 2007 –
Slide 14: Assurance Testing
Assurance Testing Sales £5.8m 193% Contribution £0.8m 898% Ethical Security Testing Organic revenue growth up 42% (41% in 2006) 9 Integration of SecureTest increased strength and capacity 9 Largest test team in UK with c.45 experienced testers Performance and Load Testing 9 Monitoring and load
Slide 15: Consultancy
Consultancy Sales £2.1m (5%) Contribution £0.1m (37%) Independent trusted advisor status remains key to credibility Demand for Information Security remains key – Government data losses 35% of revenue now generated by Information Security Business has retained firm control of cost base Orde
Slide 16: Current trading and outlook
Current trading and outlook Continue focus on generating strong organic growth and identifying further value-creating acquisitions Leverage strengths from complementary products sets in Assurance Testing – 24/7 security monitoring Current day-rate market difficult yet competitive Group order
Slide 17: Appendices
Appendices Commercial in Confidence - © Copyright 2008 NCC Group - all rights reserved 17
Slide 18: Escrow Solutions
Escrow Solutions Cornerstone of NCC Group in profit Agreements automatically and revenue renew annually World’s largest escrow provider Agreements sold globally Provides service to over 19,000 beneficiaries Escrow Live customer portal provides secure online depositing and account management
Slide 19: 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 failure of maintenance
Slide 20: Escrow Solutions
Escrow Solutions Licensor Deposit of source code Sale of business critical software Licensee Annual recurring fee “High value low cost concept” Commercial in Confidence - © Copyright 2008 NCC Group - all rights reserved 20
Slide 21: Escrow Solutions
Escrow Solutions UK market potential Market leaders – competition consists of smaller providers winning business on price – rare though! Demand grows in tougher economic climate Existing customers are significant growth opportunity: 9 Most businesses have insufficient protection 9 Customers av
Slide 22: Escrow Solutions
Escrow Solutions US market potential Market more mature but much larger than UK 9 Owner led 9 No basic testing 9 No Verification Testing UK style account management model modified and now working Significant opportunities evident for Verification Testing Investing in marketing and awareness
Slide 23: Escrow Solutions
Escrow Solutions NCC Group market position Barriers to entry Sales model 9 Over 20 years’ experience Low cost high volume business 9 Independence model 9 Integrity testing and legal Beneficiary base with low churn documentation Commercial in Confidence - © Copyright 2008 NCC Group - all righ
Slide 24: Assurance Testing
Assurance Testing Ethical Security Testing uncovers In the testing market security weakness by controlled for over 25 years invasion of a network or web site or ‘social engineering’ of the human element of risk Depth of expertise and knowledge Performance and Load Testing provides assurance over
Slide 25: Assurance Testing
Assurance Testing Ethical Security Testing A leading UK provider of Consultant rather than tool led Ethical Security Testing services – c.200 man years of Ethically hack networks and experience web sites c40 expert testers - one of the Now a major player combined with SecureTest and going
Slide 26: Assurance Testing
Assurance Testing Performance and Load Testing Leading provider of web Independent, reliable, real-time monitoring services – Site Confidence is a key brand performance information around the clock Excellent custom-developed technical infrastructure and Early detection of performance testing
Slide 27: Consultancy
Consultancy Reputation for technical excellence Completely independent in public and private sectors Continued strength in information security consulting with real knowledge of PCI and extensive Only use expert, qualified experience of implementing and experienced consultants standards PCI se
Slide 28: 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 (68% of 2006/07 revenue from Independence from hardware existing