Ncc Group Plc · LSE:NCC
Ncc — H1 2005 Earnings Presentation
27 slides from Ncc's earnings presentation, March 2005
Slide 1: NCC Group plc Interim results for six months ended 30 November 2004
NCC Group plc Interim results for six months ended 30 November 2004 March 2005 1
Slide 2: NCC Group
NCC Group Background to NCC Group Highlights Divisional Reviews Financial Summary Outlook and Current Trading 2
Slide 3: Our history and financials
Our history and financials 1999 2000 2001 2002 2003 2004 2005 First MBO MBO Group focuses Admission to AIM Interim Results on Escrow Paul Edwards 12 July at 170p 25th January Solutions Escrow Solutions appointed FD becomes motor for Rob Cotton revenue and profit appointed growth 15.00 13.00 Turnover
Slide 4: Highlights
Highlights Interim statement A very strong performance Operating profit up 21% to £2.8m Underlying pre-tax profit up 100% to £2.7m Adjusted EPS up 16% to 5.58p First interim dividend of 0.75p Net debt sharply down to £3.1m Escrow solutions prices increased by 8% Increase in headcount to172 employees
Slide 5: Integrated Divisions
Integrated Divisions Escrow Testing Solutions Consultancy Escrow Verification Specialist Testing Penetration Information IT Solutions Services Services Testing Services Security Consultancy Assuring your Verifying your Assuring your Securing Protecting A partnership business systems are systems’ you
Slide 6: Escrow Solutions
Escrow Solutions Sales £3.9m +21% Contribution £2.3m +27% 8% price implemented in Nov 04 Better levels of service delivered Doubling of liability of Escrow contracts to £1m Recruitment of account manager key focus – currently 47 FTEs Termination rates down to 11% - 1% better than expected Agreement
Slide 7: Testing Solutions
Testing Solutions Sales £2.0m +25% Contribution £0.4m +14% Verification Testing - Specialist Testing - Penetration Testing Turnover up 25% Operating profits up 14% to £0.43m Verifications - record 114 delivered in the period - up 36% Over 133 Penetration Tests carried out in first 6 months - up 43%
Slide 8: Consultancy
Consultancy Sales £2.6m +24% Contribution £0.4m -6% IT Consultancy - IS Consultancy Turnover increase by 24% Now 27 chargeable staff Client base unchanged as independence continues to be key Relationships with key law firms for outsourcing paying dividends Profitable IS in start up phase – benefitin
Slide 9: Group Financial Performance
Group Financial Performance Six months to 30 Nov 2004 2003 % £m £m change Turnover Escrow Solutions 4.3 3.6 21.3% Testing Solutions 2.0 1.6 24.6% Consultancy 2.6 2.1 23.5% Deferred income (0.4) (0.4) Total Turnover 8.5 6.9 22.7% Operating profit Escrow Solutions 2.3 1.8 26.5% Testing Solutions 0.4 0
Slide 10: Group Financial Performance
Group Financial Performance Six months to 30 Nov 2004 2003 % £m £m change Operating profits * 2.8 2.3 21% Amortisation (0.8) (0.8) - Exceptional (0.9) - - Interest (0.3) (0.9) (67%) Pre tax profits 0.8 0.6 41% Adjusted EPS (p) 5.58p 4.80p 16% Underlying pre tax profits* 2.7 1.3 100% Dividend per sha
Slide 11: Group Financial Performance
Group Financial Performance Cash flow six months to 2004 £'000 Net cash inflow from operating activities 3,034 Returns on investments and servicing of finance (14) Taxation (284) Capital expenditure and financial investment (360) Cash inflow before financing 2,376 Financing (300) Increase in cash in
Slide 12: Current Trading and Outlook
Current Trading and Outlook Recruitment remains biggest challenge Escrow price rises will improve margins in second half Escrow renewals at record £5.7m for year - 3.6% ahead of forecast Testing Solutions order book at record £1.7m Consultancy order book at record £1.6m Confident of prospects for st
Slide 13: Appendices
assure -secure - advise Appendices
Slide 14: Group Financial Performance
Group Financial Performance Year to 31 May 2002 2003 2004 2 Year £'000 £'000 £'000 CAGR Turnover Escrow Solutions 5,123 5,946 7,546 21% Testing Solutions 1,862 2,874 3,413 35% Consultancy 3,392 3,471 4,357 13% Less: deferred income (667) (464) (797) Total Turnover 9,710 11,827 14,519 22% Turnover gr
Slide 15: Group Financial Performance
Group Financial Performance Year to 31 May 2002 2003 2004 2 Year £’000 £’000 £’000 CAGR Operating profit * Escrow Solutions 2,627 2,735 3,760 20% Testing Solutions (305) 711 884 - Consultancy 584 447 900 24% Less: head office costs (592) (577) (743) 12% Total 2,314 3,316 4,801 44% Operating profit g
Slide 16: Escrow Solutions
Escrow Solutions Cornerstone of NCC Group in profit Agreements automatically and turnover renew annually Only significant European provider Agreements sold globally Provides service to over 10,300 beneficiaries New Copyright Escrow Protection Service to be launched 91 of FTSE 100 have All code is in
Slide 17: Escrow Solutions: What is an Escrow Solution?
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 maintenance Demo
Slide 18: Escrow Solutions
Escrow Solutions Deposit of source code Licensor Sale of business critical software Licensee Annual recurring fee “High value low cost concept” 18
Slide 19: Escrow Solutions: Market potential
Escrow Solutions Market potential Addressable UK market estimated at £65m - £85m* Most companies do not have sufficient protection Existing customers are a significant growth opportunity Customers average now c.1.7 agreements NCC Group is the market leader * * Source : Gartner Consulting 2004 19
Slide 20: Escrow Solutions: NCC Group market position
Escrow Solutions NCC Group market position Competition Barriers to entry Over 20 years experience Independence Integrity testing and legal documentation Sales model Low cost high volume business model Beneficiary base with low churn 20
Slide 21: Testing Solutions
Testing Solutions Verification Services confirmation code held under an escrow In the testing market for over 20 years agreement works Specialist Testing proves systems robustness & performance Depth of expertise capabilities and knowledge Penetration Testing uncovers security weakness by controlled
Slide 22: Testing Solutions: Verification Testing
Testing Solutions Verification Testing Sold by Escrow Solutions sales team – high growth area Delivered by Testing Solutions technical resources Three levels of service Integrity Plus – collection and securing code Full Verification – assurance over code compilation Escrow Complete – disaster recove
Slide 23: Testing Solutions: Specialist Testing
Testing Solutions Specialist Testing Performance and robustness testing of mobile data infrastructure Interoperability testing for handsets, MMS and video streaming Performance testing of web applications Definition of test strategies and regimes Consultants have highly specialist skills 23
Slide 24: Testing Solutions: Penetration Testing
Testing Solutions Penetration Testing A leading UK provider of penetration testing services Ethically hack networks and web sites Five expert CHECK accredited team leaders - only c.80 in the UK Consultant rather than tool led – 35 man years of experience 24
Slide 25: Consultancy
Consultancy Reputation for technical excellence in public and private sectors Completely independent More than 75% of revenues in 2003/04 from existing clients – “Trusted Advisor” Only use expert, qualified and experienced consultants Greenhouse environment - two business units developed from consul
Slide 26: Consultancy: IT Consultancy
Consultancy IT Consultancy Help clients maximise value from their IT Independence from hardware and solution providers is key strength Consultants for over 30 years on whole IT lifecycle Over 75% of 2003/04 revenue came from existing clients 26
Slide 27: Consultancy: Information Security Consultancy
Consultancy Information Security Consultancy Sound governance and regulatory requirements forcing compliance – market spent £1.25bn in 2003 Ensure clients information and infrastructure are safe, secure and compliant Grown out of IT Consultancy to allow focused growth Independence has proved key to