Ncc Group Plc · LSE:NCC
Ncc — H1 2006 Earnings Presentation
28 slides from Ncc's earnings presentation, January 2006
Slide 1: NCC Group plc Interim results
NCC Group plc Interim results for the period ended 30 November 2005 January 2006 1
Slide 2: NCC Group
NCC Group Highlights Financial summary Divisional reviews Expansion and strategy Outlook and current trading 2
Slide 3: Highlights
Highlights Strong performances from Escrow and Testing Solutions Revenue up 15% to £9.8m Underlying operating profit* up 10% to £3.0m Basic EPS up 67% to 5.5p Interim dividend up 33% to 1.0p from 0.75p in 2004 Net cash £1.5m – up from net debt free at 31 May 2005 Expansion into Europe
Slide 4: Our History and Financials
Our History and Financials 2003 2004 2005 2006 Interim Interim Final Dividend MBO Dividend Dividend Acquisition Admission 1.0p 0.75p 1.75p of US to AIM (3 March) at 170p Escrow Interim Preliminary Results & Business Interim Announcement of Results Results European Expansion Plans 20.00 Rev enue* (£m
Slide 5: Integrated Divisions
Integrated Divisions Escrow Solutions Testing Solutions Consultancy Escrow UK Verification Specialist Testing Penetration Consultancy Solutions Germany Services Services Testing Services US Assuring your Verifying your Assuring your Securing A partnership business systems are systems’ your built sur
Slide 6: Group Financial Performance
Group Financial Performance 30 November 2005 2004 % £m £m change Revenue Escrow Solutions 4.7 3.8 22 Escrow Germany 0.1 0.1 8 Testing Solutions 2.7 2.0 34 Consultancy 2.3 2.6 (10) Total revenue 9.8 8.5 15 Operating profit Escrow Solutions 2.8 2.3 22 Escrow Germany (0.1) 0.0 - Testing Solutions 0.6 0
Slide 7: Group Financial Performance
Group Financial Performance Year to 30 November 2005 2004 % £m £m change Underlying operating profit* 3.0 2.7 10 Employee share scheme (0.2) (0.1) 62 Investment in Germany (0.1) - - Float related finance costs - (0.9) - Interest (0.1) (0.3) (87) Pre tax profit 2.6 1.5 80 Basic EPS 5.5 3.3 67 Interim
Slide 8: Group Financial Performance
Group Financial Performance Cash flow 6 months to 30 November 2005 £'000 Cash generated from operations* 3,124 Net Interest paid (44) Income taxes paid (761) Acquisition of property, plant and equipment (366) Cash inflow before financing activities 1,953 Payment of bank loans (600) Proceeds for issu
Slide 9: International Financial Reporting Standards
International Financial Reporting Standards Reconciliation between IFRS and UK GAAP – November 2005 IFRS 2 SIC 15 IFRS Share based IFRS 3 Leasehold UK GAAP 2005 charges Goodwill Incentives 2005 £'000 £'000 £'000 £'000 £'000 Revenue 9,807 - - - 9,807 Cost of sales (5,424) 208 - - (5,216) Administrati
Slide 10: Escrow Solutions
Escrow Solutions Revenue £4.7m +22% Contribution £2.8m +22% Escrow Solutions 8% price increase implemented in November 2005 Dual and electronic deposits starting – new vault secured 63 sales account managers (May 2005: 62) Agreement beneficiaries over 12,800 (May 2005: over 11,000) Contrac
Slide 11: Testing Solutions
Testing Solutions Revenue £2.7m +34% Contribution £0.6m +48% Verification Testing - Specialist Testing - Penetration Testing Revenue up 34% and contribution by 48% Verifications - 148 delivered in the period - up 31% (Nov 2004: 114) Penetration Testing – 195 delivered in the period – up 47% (N
Slide 12: Consultancy
Consultancy Revenue £2.3m (10)% Contribution £0.0m (110)% Consultancy Market confidence very low from May to December 2005 Intense market as less opportunities existed, resulting in; •Competition from big firms •Rate based rather than quality •Buying forums/frameworks agreements slowing process
Slide 13: European Expansion
European Expansion Research into German & Dutch markets Predicts German available market worth £88m - £102m No plans to move into Netherlands in near future German five person account management team now selling Web site now live and marketing collateral produced Investment not to exceed
Slide 14: North American Expansion
North American Expansion Acquisition has provided renewals base of $1.1m Established management and operational team – 4 employees IT infrastructure and operational procedures being implemented Invest in UK selling and testing model Market more mature but much larger than UK • Owner led •
Slide 15: Group Strategy
Group Strategy Continued focus on organic growth across the Group • client numbers – repeat and new • range of products and services – constant evolution Continued investment in Germany Investment in the US to implement UK Escrow Solutions model Leveraging independence and reputation Conti
Slide 16: Current Trading and Outlook
Current Trading and Outlook Second half split approximately 41:59 (May 2005: 45:55) Escrow renewals at record £7.0m for year (October 2005: £6.8m) Testing Solutions order book at record £2.0m (May 2005: £1.5m) Consultancy order book at record £1.6m (May 2005: £1.3m) Germany early indicatio
Slide 17: Appendices
Appendices 17
Slide 18: Escrow Solutions
Escrow Solutions Cornerstone of NCC Group in profit Agreements automatically and revenue renew annually Only significant European provider Agreements sold globally Provides service to over 11,800 beneficiaries Dual and electronic deposit service now launched 91 of FTSE 100 have All code is
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 a failure of maintenanc
Slide 20: Escrow Solutions
Escrow Solutions Licensor Deposit of source code Sale of business critical software Annual recurring Licensee fee “High value low cost concept” 20
Slide 21: Escrow Solutions
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.1.8 agreements NCC Group is the market leader * * Source : Gartner Consulting 2
Slide 22: Escrow Solutions
Escrow Solutions NCC Group market position Barriers to entry • Over 20 years’ experience • Sales model • Independence • Low cost high volume • Integrity testing and legal business model documentation • Beneficiary base with low churn 22
Slide 23: Testing Solutions
Testing Solutions Verification Services confirmation code held under an Escrow In the testing market for over 20 years agreement is useable Specialist Testing proves systems robustness & performance Depth of expertise capabilities of a system or website and knowledge Penetration Testing uncove
Slide 24: Testing Solutions
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 – dis
Slide 25: Testing Solutions
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 2
Slide 26: Testing Solutions
Testing Solutions Penetration Testing A leading UK provider of Consultant rather than tool led – Penetration Testing services nearly 50 man years of Ethically hack networks and experience Web sites Expert CHECK accredited and team leaders - only c.80 in the UK 26
Slide 27: Consultancy
Consultancy Reputation for technical excellence in public and private sectors Completely independent More than 75% of revenue in 2004/05 from existing clients – “Trusted Advisor” Only use expert, qualified and experienced consultants Greenhouse environment – new service offerings developed to
Slide 28: Consultancy
Consultancy Consultancy Help clients maximise value from their IT and ensure clients information and infrastructure are safe, secure and compliant Independence from hardware and solution providers is key strength Consultants for over 30 years on whole IT lifecycle Strong client relationships