Ncc Group Plc · LSE:NCC
Ncc — H1 2019 Earnings Presentation
30 slides from Ncc's earnings presentation, Jan 24, 2019
Slide 1: NCC Group plc Interim Results
NCC Group plc Interim Results for the six months ended 30 November 2018 24 January 2019 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 und
Slide 2: Agenda
Agenda Adam Palser Overview Chief Executive Officer Tim Kowalski Financial performance Chief Financial Officer Adam Palser Business review Chief Executive Officer Adam Palser Summary and outlook Chief Executive Officer Q&A Appendix 2
Slide 3: Overview
Overview • Solid revenue growth at a time of operational transformation • Assurance revenue grew by double digits; Escrow slightly down Financial highlights • Gross Margin improved; Adjusted EBIT margin down like-for-like • Temporary spike in working capital to reverse by year end Strong growth in
Slide 4: Demand continues to grow
Demand continues to grow Key Themes* Increasing demand for 30% of organisations expect to increase • Cyber risk services demand growing with security services spend to access more managed, hosted and cloud- based security services skills and capacity increasing threat and consequent impact of histor
Slide 5: Cyber landscape
Cyber landscape • Busy fragmented market • Confusing for some clients • Competition for talent Source: https://momentumcyber.com/docs/CYBERscape.pdf 5
Slide 6: Our Transformation: Securing Growth Together
Our Transformation: Securing Growth Together 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. Trusted to protect our customers’ critical assets • Higher value re
Slide 7: Agenda
Agenda Adam Palser Overview Chief Executive Officer Tim Kowalski Financial performance Chief Financial Officer Adam Palser Business review Chief Executive Officer Adam Palser Summary and outlook Chief Executive Officer Q&A Appendix 7
Slide 8: Financial highlights – continuing operations
Financial highlights – continuing operations Revenue*1 (£m) Adjusted EBIT*1*2 (£m) Operating profit*1 (£m) (H1 2018: £116.8m) (H1 2018: £13.8m) (H1 2018: £6.3m) £126.0m £14.8m £9.5m Gross Margin% Assurance GM% Escrow GM% 40.2% (H1 2018: 39.6%) 34.3% (H1 2018: 32.2%) 74.1% (H1 2018: 77.1%) +0.6%pt +2
Slide 9: Financial performance: income statement
Financial performance: income statement Continuing operations HY2019 HY 2018* (£m) (£m) Revenue 126.0 116.8 • Strong revenue growth in US for both Assurance Cost of Sales (75.4) (70.6) and Escrow Gross Margin 50.6 46.2 • Challenges within UK Assurance and UK Escrow Gross Margin % 40.2% 39.6% • GM% g
Slide 10: Financial performance: group revenue bridge
Financial performance: group revenue bridge * Solid growth primarily in Assurance of 9.7% * References to the Group’s results, unless stated to the contrary, are to continuing operations only and exclude the performance of businesses sold or discontinued in the prior year (principally Web Performanc
Slide 11: Financial performance: Assurance
Financial performance: Assurance £m • Sales growth in all territories • Particularly strong in US: +20.4% • Weaker in UK +1.1% (around +6% excluding reselling) • Europe & APAC: +11.8% • GM% grew by +2.1% pts – combination of mix and utilisation • Utilisation of technical consulting increased from 78
Slide 12: Financial performance: Escrow
Financial performance: Escrow £m • Good growth in US revenue +10.5% (2018 : -5%) as we increase our presence there • UK disappointing with revenue contraction of -4.4% as a result of operational challenges • Decline in new UK on-premise agreements in a mature market largely offset by increasing veri
Slide 13: Financial performance: tax and dividends
Financial performance: tax and dividends Tax • Effective tax rate attributable to adjusted profits and continuing operations is 22.9% (H1 2018: 28.8%) • Fall in effective tax rate attributable to the decrease in US federal tax rate from 35% to 21%, effective 1 January 2018 Dividends • HY dividend in
Slide 14: Financial performance: cash flow and net debt
Financial performance: cash flow and net debt HY2019 HY2018 (£m) (£m) Cash flow before working capital 20.3 18.5 • Temporary increase in working capital Movement in working capital (8.7) (0.7) • Acquisitions relates to final deferred Operating cash pre interest / tax 11.6 17.8 consideration for Fox
Slide 15: Financial performance: working capital
Financial performance: working capital HY2019 HY2018 (£m) (£m) Increase in Trade/other debtors (4.1) (1.1) Decrease in Trade/other creditors (4.6) 0.4 (8.7) (0.7) Issues Action Trade Debtors - Legacy systems hard to use - New Sidetrade system implemented - Improved processes rolled out and taking ef
Slide 16: Financial performance: Securing Growth Together programme
Financial performance: Securing Growth Together programme SGT programme FY19 FY20 FY21 FY22 Total (£m) (£m) (£m) (£m) Operating expense 0.8 0.3 0.2 - 1.3 • Notable benefits of the programme: (Opex) Capital expense 4.3 6.7 4.0 2.0 17.0 • Global visibility and coordination of (Capex) consulting resour
Slide 17: Agenda
Agenda Adam Palser Overview Chief Executive Officer Tim Kowalski Financial performance Chief Financial Officer Adam Palser Business review Chief Executive Officer Adam Palser Summary and outlook Chief Executive Officer Q&A Appendix I: Half Year Appendix II: About NCC Group 17
Slide 18: Assurance
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 globally, steady margin improvement, improved cash flow Regi
Slide 19: Escrow
Escrow “Trusted to protect our customers’ critical assets.” Our goal: to return Escrow to confident growth ( > GDP growth) Region Dynamics Actioned Ongoing action • Initial operational review • Investment to boost sales UK • Sales team churn completed team Revenue • Smaller sales team (-4.4%) • Focu
Slide 20: Our transformation
Our transformation • Lead the market through our thought leadership, industry content and Lead the Market research • Promote NCC Group as employer of choice • Increase the quality and quantity of orders through better client Win Business relationships • Value selling; sales skills development • Leve
Slide 21: Unified systems (48 to 10)
Unified systems (48 to 10) New Old 21
Slide 22: Agenda
Agenda Adam Palser Overview Chief Executive Officer Tim Kowalski Financial performance Chief Financial Officer Adam Palser Business review Chief Executive Officer Adam Palser Summary and outlook Chief Executive Officer Q&A Appendix 22
Slide 23: Summary and outlook
Summary and outlook Summary • Excellent US performance in our core markets of cyber security and risk • Weaker than expected UK growth • Accelerating transformation programme towards unified global business Outlook • Grow Assurance revenue at double digits • Generate growth in Escrow this year and c
Slide 24: Agenda
Agenda Adam Palser Overview Chief Executive Officer Tim Kowalski Financial performance Chief Financial Officer Adam Palser Business review Chief Executive Officer Adam Palser Summary and outlook Chief Executive Officer Q&A Appendix 24
Slide 25: Q&A
Q&A nccgrour®
Slide 26: Agenda
Agenda Adam Palser Overview Chief Executive Officer Tim Kowalski Financial performance Chief Financial Officer Adam Palser Business review Chief Executive Officer Adam Palser Summary and outlook Chief Executive Officer Q&A Appendix 26
Slide 27: Financial performance: individually significant items
Financial performance: individually significant items (“ISI’s”) Charges (continuing operations) HY2019 HY2018 (£m) (£m) Deferred/contingent consideration - (0.6) • HY2019 is £nil albeit adjustments to deferred and contingent consideration Restructuring costs - (1.1) were in respect of FX movements a
Slide 28: Financial performance: balance sheet
Financial performance: balance sheet HY2019 HY2018 (£m) (£m) Intangible assets 239.3 247.8 • Fall in intangibles mainly from amortisation PPE 18.1 20.3 charges of £6.7m offset by additions of £2.4m Investments 0.3 0.4 • Net working capital increase from short Net assets in business for sale - 10.7 t
Slide 29: Financial performance: non-GAAP reconciliation
Financial performance: non-GAAP reconciliation non-GAAP reconciliation* HY2019 HY2018 (£m) (£m) Adjusted EBITDA 20.0 19.6 Depreciation of tangibles (3.0) (3.0) Amortisation of intangibles (2.2) (2.8) Adjusted EBIT 14.8 13.8 Share based payments (0.9) - Amortisation acquired intangibles (4.5) (4.9) P
Slide 30: 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