Ncc Group Plc · LSE:NCC
Ncc — H1 2020 Earnings Presentation
33 slides from Ncc's earnings presentation, Jan 23, 2020
Slide 1: Interim Results for the six months ended 30 November 2019
Interim Results for the six months ended 30 November 2019 23 January 2020
Slide 2: Overview
Overview Adam Palser CEO necgroup™
Slide 3: Sales order momentum and continued growth during positive transformation
Overview*1 Sales order momentum and continued growth during positive transformation • H1 2020 Group revenue increased 5.3% to £132.7m (H1 2019: £126.0m) • Assurance revenue up 6.7% to £114.3m (H1 2019: £107.1m); Escrow revenue decrease of 2.6% to Trading £18.4m (H1 2019: £18.9m) • Gross margin at 39
Slide 4: Strategy
Strategy Adam Palser CEO nccgroup™
Slide 5: Our strategic priorities
Our strategic priorities The leading cyber security advisor globally in our chosen markets. Trusted to protect and secure our customers’ critical assets. Sought-after for our complete people-led, technology-enabled cyber security solutions that enable individuals, businesses and society to thrive. F
Slide 6: At the forefront of the cyber security industry
Lead the Market At the forefront of the cyber security industry • Underpinning our enduring business model by staying at the forefront of cyber knowledge through cost- effective research • World leading research published with 1,012 days of vulnerability research (H1 2019: 807) • 1,653 days of threa
Slide 7: Accelerating growth across the period
Win Business*3 and Deliver Excellence Accelerating growth across the period Sales orders: increasing 3 year trajectory (£m’s) H1 2020 H1 2019 Growth (%) Group Sales Orders £149.2m £116.0m 28.6 160 +28.6% Assurance Sales £135.9m £101.1m 34.4 Orders 140 +18.5% MDR Orders £30.1m n/a*4 n/a 120 Average O
Slide 8: Delivering on our promise to be the global hub for cyber talent
Develop our People Delivering on our promise to be the global hub for cyber talent +59 7.0% 9.3% 4.3% Net increase in technical Technical specialists Global voluntary attrition rate Global headcount specialists attrition rate H1 2019: 8.4% growth (+10.2% increase in H1 2020) H1 2019: 9.4% • 80%+ “Be
Slide 9: Assurance: Sustainably growing & increasingly profitable business
Assurance Sustainably growing & increasingly profitable business • At the forefront of the cyber security industry through our thought Lead the Market leadership, industry content and research Win Business • Increase the quality and quantity of sales orders through better client relationships Delive
Slide 10: Growing an increasingly profitable business around our diamond-core
Assurance (continued) Growing an increasingly profitable business around our “diamond-core” Technical Security Consulting Risk Management Consulting H1 2020 Assurance revenue by • -13.0% decrease (H1 2019: £17.7m) • +15% growth (H1 2019: £67.4m) service line (£m's)*6 : • Revenue increase in North Am
Slide 11: Escrow: Re-positioning as a sustainable software resilience service
Escrow Re-positioning as a sustainable software resilience service • Extending legacy Escrow proposition into IOT, transport and growing connected environments Lead the Market • Continued development of our cloud proposition • Positioning Escrow as part of a broader software resilience service • Dir
Slide 12: Growing interest in EaaS
Escrow (continued) Growing interest in EaaS H1 2020 Escrow revenue by service line (£m's)*6 : EaaS Orders & Revenue billed Trend 12.8 -3.8% 18.4 5.6 0.0% • Stabilise contract revenue base with ongoing focus on sales team effectiveness • Strong traction across H1 in EaaS, with high profile client win
Slide 13: Financial Review
Financial Review Tim Kowalski CFO
Slide 14: Robust trading & cash conversion during positive transformation
Financial summary*1 Robust trading & cash conversion during positive transformation Revenue EBIT*2 EBIT Margin % (H1 2019: £126.0m) (H1 2019: £14.8m) (H1 2019: 11.7%) £132.7m £16.5m 12.4% Gross Margin % Assurance GM% Escrow GM% (H1 2019: 40.2%) (H1 2019: 34.3%) (H1 2019: 73.5%) 39.2% 33.7% 73.4% Cas
Slide 15: Continued trading growth with momentum
Financial performance - Group income statement Continued trading growth with momentum Continuing operations H1 2020 H1 2019 % change • Continued revenue increase as well as strong sales (£m) (£m) order growth: • Assurance growth of 6.7% was Q2-weighted Revenue 132.7 126.0 5.3% after a slower Q1; str
Slide 16: Strong growth while investing for the future
Financial performance - Group EBIT Strong growth while investing for the future Relative size by EBIT (£m’s) and H1 2019 - H1 2020 % change by segment: • EBIT up 11.5% to £16.5m (H1 2019: £14.8m) 0.0% • Assurance growing as the major contributor of EBIT (4.7) Corporate representing 61.8%*11 for the
Slide 17: Strengthening Q2 globally, providing momentum into H2
Financial performance - Assurance Strengthening Q2 globally, providing momentum into H2 • Growth in performance across territories: Assurance revenue trend (£m’s) • Continuing at double digit rate in North America in spite of slower Q1; +10.6% to £41.7m • UK returns to growth after flat year benefit
Slide 18: H1 decline amplified by timing of big verification deals
Financial performance - Escrow H1 decline amplified by timing of big verification deals • Revenue decline of 2.6% with: Escrow revenue trend (£m’s) • Contract revenues of £12.8m were -3.8% lower to H1 2019 although EaaS gaining momentum with sales orders of £0.7m and revenue of £0.2m in H1 2020 • Ve
Slide 19: Net debt more than halved compared to H1 2019
Financial performance - Cash Net debt more than halved compared to H1 2019 H1 2020 H1 2019 Net debt at end of period (£m’s) 50.0 (£m) (£m) FY20 FY19 45.0 Cash flow before working 20.6 20.3 40.0 capital 35.0 Movement in working capital (4.5) (8.7) 30.0 25.0 Operating cash pre interest / tax 16.1 11.6
Slide 20: Systems on time with further incremental investment planned
Securing Growth Together Systems on time with further incremental investment planned Milestones • At the midpoint of the programme, Workday Human Capital (HCM), Salesforce and UK payroll achieved implemented on schedule. The remainder of the global Workday programme as well as other systems schedule
Slide 21: Summary and outlook
Summary and outlook Adam Palser CEO
Slide 22: Good momentum going into H2 2020
Momentum Good momentum going into H2 2020 Group revenue by quarter H1 2019 and H1 2020 (£m’s): +11.4% +6.6% Assurance Escrow • Sales orders growth of 34.4% from H1 2019 • Positive H2 impact expected from investment in new senior executive & sales leadership • MDR sales orders in H1 2020 at 60.3% of
Slide 23: Summary and outlook
Summary and outlook*1 Sales order momentum and continued growth during positive transformation • Robust trading and continued growth during transformation which is delivering operational benefits Summary • EBIT*2 up 11.5% to £16.5m with EBIT margin improved to 12.4% (H1 2019: 11.7%) • Strong cash di
Slide 24: Q&A
Q&A nccgroup*
Slide 25: Appendices
Appendices nccgroup*
Slide 26: Financial performance - IFRS 16 reconciliation
Financial performance - IFRS 16 reconciliation H1 2020 H1 2020 H1 2020 H1 2020 IFRS H1 2020 IFRS H1 2020 after before IFRS 16 IFRS 16 16 adjustment 16 adjustment IFRS 16 IFRS 16 adjustment to adjustment to rent to depreciation adjustment adjustment Finance costs to tax (£m) (£m) (£m) (£m) (£m) (£m)
Slide 27: Income statement - constant currency
Income statement - constant currency Group - at constant currency HY 2020 HY 2019 Variance (FY20 actual rates) (£m) (£m) % Revenue 132.7 127.3 4.2% Cost of Sales (80.7) (76.2) 5.9% Gross profit 52.0 51.1 1.8% Overheads (30.4) (30.8) (1.3%) Depreciation & amortisation (5.1) (5.2) (1.9%) EBIT 16.5 15.
Slide 28: Financial performance - income statement
Financial performance - income statement HY2020 HY 2019 Continuing operations (£m) (£m) Revenue 132.7 126.0 Cost of Sales (80.7) (75.4) Gross Profit 52.0 50.6 Gross Margin % 39.2% 40.2% G&A before adjusting items (35.5) (35.8) EBIT 16.5 14.8 EBIT Margin % 12.4% 11.7% Adjusting items (6.2) (5.3) Repo
Slide 29: Financial performance - statutory balance sheet (IFRS 16)
Financial performance - statutory balance sheet (IFRS 16) H1 2020 (£m) FY 2019 (£m) H1 2019 (£m) Non-current assets Intangible assets 226.8 231.2 239.3 Plant and equipment 14.7 16.9 18.1 Right of use assets 21.7 - - Investments 0.3 0.3 0.3 Deferred tax assets 7.2 1.1 1.5 Total non-current assets 270
Slide 30: Financial performance - statutory cash flow statement (IFRS 16)
Financial performance – statutory cash flow statement (IFRS 16) H1 2020 H1 2019 H1 2020 H1 2019 Cash flow statement (£m) (£m) Cash flow statement (continued) (£m) (£m) Profit for the period 6.6 6.8 Cash flows from investing activities Adjustments for: Purchase of plant and equipment (0.7) (1.8) Depr
Slide 31: Financial performance - tax & dividends
Financial performance - tax & dividends Tax Effective tax rate 25.0% • Adjusted effective tax rate attributable to continuing operations is 23.7% (H1 2019: 22.9%) 20.0% • Movement in the adjusted effective tax rate 15.0% increase reflects that the origin of a reasonable proportion of the Group’s pro
Slide 32: Notations
Notations Page 3 *1 The figures presented throughout this document are on a like-for-like basis when compared to prior year, they do not include any IFRS 16 adjustments. See appendix for a reconciliation to the IFRS 16 adjusted numbers *2 EBIT and EBITDA in this presentation refers to Adjusted EBIT
Slide 33: 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