Ncc Group Plc · LSE:NCC
Ncc — H1 2006/07 Earnings Presentation
36 slides from Ncc's earnings presentation, January 2007
Slide 1: NCC Group plc Interim Results
NCC Group plc Interim Results for the six months ended 30 November 2006 NCC Group plc Manchester Technology Centre Oxford Road Manchester M1 7EF www.nccgroup.com January 2007
Slide 2: Agenda
Agenda Highlights Acquisition – Site Confidence Group financial summaries Group strategy Security awareness campaign Divisional reviews 9 Escrow Solutions UK 9 Escrow Solutions Worldwide 9 Testing Solutions 9 Consultancy Current trading & outlook Commercial in Confidence - © Copyright
Slide 3: Highlights
Highlights Revenue up 17% to £11.5m Operating profits up 23% to £3.2m 9 Group Escrow Solutions up 20% to £3.1m 9 UK Escrow Solutions up 20% to £3.3m 9 Testing Solutions down 8% to £0.5m 9 Consultancy returned to profitability at £0.2m Basic EPS up 24% to 6.8p Interim dividend up to 1.50p – u
Slide 4: Acquisition - Site Confidence
Acquisition - Site Confidence Web assurance testing – load & performance 9 Over 400 blue chip clients Very experienced & capable management team 9 34 employees based in Dorking, Surrey Turnover in excess of £4m Profitable contribution expected £0.8m in first full year Earnings enhancing, c
Slide 5: Integrated divisions
Integrated divisions UK 6 5.5 5 Escrow Solutions 4 - assuring business 3.2 Germany 3 survival 2.2 2 US 1 0.1 0.5 o ns- Co 0 lut i - pa nsulta g Revenue (£m) So ur i n UK g tin g & s ce e c rtne ncy 3.5 Te s rs on hip b 3.3 ssur i n r m a n trus uilt 3 - a perfo t 2.5 2 Germany 1.5 231 employees worl
Slide 6: Group revenues
Group revenues 30 November 2006 2005 % £m £m change Revenue Escrow Solutions UK 5.5 4.7 17% Escrow Solutions Germany 0.1 0.1 - Escrow Solutions US 0.5 - - Total Escrow 6.1 4.8 27% Testing Solutions 3.2 2.7 18% Consultancy 2.2 2.3 (3%) Total revenue 11.5 9.8 17% UK 9.0 8.6 6% Europe 1.0 0.6 54%
Slide 7: Group operating profits
Group operating profits 30 November 2006 2005 % £m £m change Operating profit Escrow Solutions 3.3 2.8 20% Escrow Solutions Germany (0.2) (0.1) 100% Escrow Solutions US - - - Total Escrow 3.1 2.6 20% Testing Solutions 0.5 0.6 (8%) Consultancy 0.2 - - Corporate (0.6) (0.5) 24% Total operating profit
Slide 8: Group financial performance
Group financial performance 30 November 2006 2005 % £m £m change EBITA 3.3 2.6 25% Amortisation (0.1) - - Interest - - - Pre tax profits 3.2 2.6 23% Basic EPS (p) 6.8p 5.5p 24% Total dividend/share (p) 1.5p 1.0p 50% Commercial in Confidence - © Copyright 2007 NCC Group - all rights reserved 8
Slide 9: Balance Sheet
Balance Sheet Cash conversion at 108% of operating profits Group £1.6m net cash positive (2005: £1.5m) Revolving credit facility of £10m in place Source Harbor acquisition paid £0.9m from cash Group Escrow deferred income increased by 27% to £6.6m (2005: £5.2m) Escrow deferred income UK
Slide 10: Group strategy
Group strategy Continued focus on organic growth across the Group Set up of South of England base for Escrow sales & Penetration Testing Drive recruitment of Southern based Escrow account managers in Q4 Grow Assurance Testing margins by reduction of low margin niche activities and assignment
Slide 11: Security Awareness Campaign
Security Awareness Campaign Targeted 500 FDs from UK plcs with anonymous party invitation RSVP required via unidentified USB memory stick No NCC Group or any other branding on invitation, memory stick or envelope 47% of FDs responded 9 45% of FTSE 100 companies 9 41% financial services compa
Slide 12: Security Awareness Campaign
Security Awareness Campaign Commercial in Confidence - © Copyright 2007 NCC Group - all rights reserved 12
Slide 13: Escrow Solutions UK
Escrow Solutions UK Sales £5.5m +17% Contribution £3.3m +20% 77 Escrow Solutions account managers (2005: 63) – headway at last Contracts up 9% to 7,203 (2005: 6,630) beneficiaries up 8% to over 14,020 (2005: 12,943) Contract termination rates still below 11% Price increase 6% implemented – n
Slide 14: Escrow Solutions US
Escrow Solutions US Sales £0.5m Contribution £0.0m Total US renewals base now worth £0.8k ($1.6m) Account management model developed – sales team of 8 (2006: 6) Infrastructure, IT investment and processes implemented Sales approach now successfully modified Testing sales are gaining tracti
Slide 15: Escrow Solutions Germany
Escrow Solutions Germany Sales £0.1m 0% Contribution (£0.2m) (100%) Market awareness remain unacceptably low Sales model has not been successful Cost base paired down to minimum Still strategically important to European expansion – lower priority Renewal base of c.£130k will remain Possi
Slide 16: Testing Solutions
Testing Solutions Sales £3.2m 18% Contribution £0.5m (8%) Verification Testing - 169 delivered in period - up 14% Penetration Testing - 467 delivered in period – up 31% almost 50% of client tests are repeated successful recruitment 17 UK base testers Other testing – streamlining of offerin
Slide 17: Testing Solutions
Testing Solutions Number of Tests 2006/7 2005/6 2004/5 H1 H2 H1 H2 H1 Verification Tests Performed 169 124 148 110 119 Year on year growth 14% 13% 25% - - Penetration Tests Performed 467 410 331 294 226 Year on year growth 31% 39% 47% - - Commercial in Confidence - © Copyright 2007 NCC Group - all r
Slide 18: Consultancy
Consultancy Sales £2.2m (3%) Contribution £0.2m N/a Independent trusted advisor status remains key to credibility Demand for Information Security will drive H2 demand PCI standards are mandatory by June 2007 Penetration into new sectors increasing, reduced reliance on poor spending public se
Slide 19: Consultancy
Consultancy Income Split 2003/04 2004/05 2005/06 2006/07* % % % % Africa 0 0 0 2 Association/Charity 7 10 7 4 Commercial 5 9 8 19 Education 0 3 11 2 Government 13 16 7 8 Health 1 2 0 6 Housing 8 16 15 24 Local government 61 42 45 29 Police/Fire 1 3 2 3 Universities 5 1 4 3 *projected Commercial in C
Slide 20: Current trading and outlook
Current trading and outlook Continue focus on generating strong organic growth Acquisitions are bedded in well Site Confidence acquisition provides an exciting opportunity to develop further Assurance Testing products & services Active recruitment in South of England to remove bottlenecks to
Slide 21: Appendices
Appendices Commercial in Confidence - © Copyright 2007 NCC Group - all rights reserved 21
Slide 22: Escrow Solutions
Escrow Solutions Agreements automatically Cornerstone of NCC Group in profit renew annually and revenue Only significant European provider Provides service to over 14,000 beneficiaries Agreements sold globally Escrow Live customer portal now launched providing secure online 91 of FTSE 100 ha
Slide 23: 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 a failure of maintenanc
Slide 24: 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 2007 NCC Group - all rights reserved 24
Slide 25: Escrow Solutions - UK market potential
Escrow Solutions UK market potential Market leaders – competition consists of smaller providers winning business on price – rare though! Existing customers are significant growth opportunity: 9 Most businesses have insufficient protection 9 Customers average just c.2.0 agreements - need over 19
Slide 26: Escrow Solutions - UK market potential
Escrow Solutions UK market potential Sales force focused on developing existing accounts, increase penetration of agreements Continued investment into direct marketing and educational campaign – focus on owners for 2006/07 Continued investment in CRM database to improve client handling techniq
Slide 27: UK Escrow beneficiaries
UK Escrow beneficiaries No Minimum Date No of Contracts No of beneficiaries Annual Fee Inc. min annual Inc. min fee charges annual fee charges January 05 5,901 11,384 10,399 985 May 05 6,154 11,911 10,961 950 July 05 6,236 12,060 11,115 945 October 05 6,414 12,554 11,597 957 November 05 6,498 12,679
Slide 28: Escrow Solutions - US market potential
Escrow Solutions US market potential Market more mature but much larger than UK 9 Owner led 9 No basic testing 9 No Verification Testing Acquired operational teams, recruited account managers, relocated and invested in business infrastructure and IT UK style account management model set up – t
Slide 29: Escrow Solutions - NCC Group market position
Escrow Solutions NCC Group market position Barriers to entry Sales model • Over 20 years’ experience Low cost high volume • Independence business model • Integrity testing and legal Beneficiary base with low documentation churn Commercial in Confidence - © Copyright 2007 NCC Group - all righ
Slide 30: Assurance Testing
Assurance Testing Verification Services confirmation In the testing market code held under an Escrow for over 20 years agreement is useable Penetration Testing uncovers security weakness by controlled Depth of expertise and knowledge invasion of a network or web site Specialist Testing proves
Slide 31: Assurance Testing - Verification Testing
Assurance Testing Verification Testing Four levels of service Sold by Escrow Solutions sales • Integrity Plus – collection team – high growth area and securing code • Full Verification – assurance Delivered by Testing Solutions over code compilation technical resources • Escrow Now – independe
Slide 32: Assurance Testing - Penetration Testing
Assurance Testing Penetration Testing A leading UK provider of Consultant rather than tool led Penetration Testing services – 75 man years of experience Ethically hack networks and web sites 17 expert testers - one of the UK’s largest teams Expert CHECK accredited and team leaders - only c
Slide 33: Site Confidence - Web Assurance Testing
Site Confidence Web Assurance Testing Leading provider of web Independent, reliable, real-time monitoring services performance information Excellent custom-developed around the clock technical infrastructure and testing tools Early detection of performance problems - preventing future slowdo
Slide 34: Assurance Testing - Specialist Testing
Assurance Testing Specialist Testing Performance and robustness Definition of test strategies and testing of mobile data infrastructure regimes Interoperability testing for Consultants have highly handsets, MMS and video specialist skills streaming Performance testing of web applications C
Slide 35: Consultancy
Consultancy Reputation for technical excellence Completely independent in public and private sectors Greenhouse environment – new service offerings developed to meet client/market needs Only use expert, qualified and experienced consultants Payment Card Industry (PCI) security standards provid
Slide 36: 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 (60% of 2005/06 revenue from Independence from hardware existing