Ncc Group Plc · LSE:NCC
Ncc — FY2008 Earnings Presentation
34 slides from Ncc's earnings presentation, July 2008
Slide 1: NCC Group plc Preliminary Results
NCC Group plc Preliminary Results for the year ended 31 May 2008 July 2008 NCC Group plc Manchester Technology Centre Oxford Road Manchester M1 7EF www.nccgroup.com
Slide 2: Agenda
Agenda Group highlights Track record since float Group financial summaries Group strategy Divisional reviews 9 Escrow Solutions Worldwide 9 Escrow Solutions UK 9 Assurance Testing 9 Consultancy Current trading & outlook Commercial in Confidence - © Copyright 2008 NCC Group - all rights r
Slide 3: Highlights – maintaining momentum
Highlights – maintaining momentum Group revenue up 41% to £35.7m – 17% organic Operating profits up 30% to £10.7m 9 Group Escrow Solutions up 28% to £10.2m 9 UK Escrow Solutions up 15% to £9.4m 9 Assurance Testing up 127% to £1.7m 9 Consultancy maintained at £0.7m Adjusted diluted EPS up 33% t
Slide 4: Track record since float
Track record since float Revenue Operating profit 25% compound 22% compound £m £m Share Price FTSE Share and Computer Index NCC Group Total dividend Fully diluted adjusted EPS 41% compound 22% compound pence pence Commercial in Confidence - © Copyright 2008 NCC Group - all rights reserved 4
Slide 5: NCC Group plc
NCC Group plc Three complementary divisions 9 Escrow UK 9 Secure Test 9 Information Security 9 Escrow Europe 9 Site Confidence 9 Information 9 Escrow US 9 24/7 Assured Technology 9 Verification Testing Assurance Testing Escrow Solutions Assurance Testing Consultancy Revenue: £12.8m Revenue: £4.9m Re
Slide 6: Group revenues
Group revenues 31 May 2008 2007 % % Organic £m £m Growth Growth Revenue Escrow UK 15.7 13.8 14% 14% Escrow Europe - All 1.1 0.2 450% 21% Escrow US 1.2 1.0 16% 16% Total Escrow 18.0 15.0 20% 14% Assurance Testing 12.8 5.8 121% 30% Consultancy 4.9 4.6 7% 7% Total revenue 35.7 25.4 41% 17% UK 29.2 20
Slide 7: Group operating profits
Group operating profits 31 May 2008 2007 % % Organic £m £m Growth Growth Revenue Escrow UK 9.4 8.2 15% 15% Escrow Europe - All 0.4 (0.5) - - Escrow US 0.4 0.3 56% 56% Total Escrow 10.2 8.0 28% 23% Assurance Testing 1.7 0.7 127% 74% Consultancy 0.7 0.7 1% 1% Head Office & Central Overhead (1.9) (1.2)
Slide 8: Group financial performance
Group financial performance 31 May 2008 2007 % £m £m change Adjusted Operating Profit 10.7 8.2 30% Exceptional item - move to Official List (0.5) - - Exceptional item – re-organisation (0.2) - - Interest (0.2) - - Amortisation & unwinding of discount (1.1) (0.3) - Pre tax profits 8.7 7.8 12% Adjuste
Slide 9: Balance sheet
Balance sheet Cash conversion at 122% of operating profits (98% at 2007) Group £3.4m net debt (£0.9m net funds in 2007) Cash spent on acquisitions of £10.4m Revolving credit facility of £15m in place Group deferred income up 28% to £11.0m (2007: £8.6m) Cash generation £000 2005 2006 2007 2
Slide 10: Group strategy
Group strategy Aim to be market leaders in all of our niche markets Continue to operate in markets of non-discretionary spend Carefully targeted acquisitions to consolidate markets we’re in 9 Investment in Integration team 9 Investment in the cost of control Focus on organic growth through c
Slide 11: Group Escrow Solutions
Group Escrow Solutions The global market is limited mostly to a few smaller players UK & continental Europe US Tier 1: 10,000+ customers NCC Group Escrow NCC Group Escrow Iron Mountain Iron Mountain Tier 2: c1,000 customers LE & AS Escrow Associates Softcrow EscrowTech Innovasafe Lincoln P
Slide 12: Escrow UK
Escrow UK Sales £15.7m +14% Contribution £9.4m +15% 2005 2006 2007 2008 Sales Contribution Sales reorganisations completed 30 June 2008 Contracts have grown to 8,124 from 7,440 in 2007 Beneficiaries have grown to 15,102 (13,521 in 2007) net increase of 12% Contract & beneficiary termination
Slide 13: Escrow Europe
Escrow Europe Sales £1.1m Contribution £0.4m Branded as ‘NCC Group Escrow Europe’ Now fully integrated in to the Group Sales recruitment underway – target of 6 new FTE by January 09 Verification products well understood in the marketplace Both German businesses combined revenues £0.4m NC
Slide 14: Escrow US
Escrow US £ $ Sales £1.2m 16% 20% Contribution £0.4m 56% 61% Total US renewals base now worth $2.4m Continued investment in sales resources 9Account management model clearer 9New products for the local market - SAAS Strengthened local operational management Sales & Technical presence for Ass
Slide 15: Assurance Testing
Assurance Testing Sales £12.8m 121% Contribution £1.7m 127% 2005 2006 2007 2008 Secure Test – penetration & security testing Sales Contribution Organic revenue growth up 30% 9 Integration of Secure Test successfully completed 9 Largest test team in UK with 44 experienced testers Order book at
Slide 16: Assurance Testing - SecureTest
Assurance Testing - SecureTest 21 June 2008: 25 Ju ne 20 26 June 2008: Alert over security as 08: a h an dling researchers show Discs nt’s da t loss Gov er n m e q uate’ Oyster card can be 'entire d e ‘woefull y i n a cracked with laptop avoid ly able' 11 Ju 2 008: 2 5 Ju n e ne 20 12 June 2008: 08:
Slide 17: Assurance Testing – Secure Test
Assurance Testing – Secure Test Recent projects include: BT: we highlighted a vulnerability which left thousands of BT Broadband customers at risk from hacking due to the use of unsecure technology and failure to inform of known security issue – reported in the Mail on Sunday & Daily Telegraph H
Slide 18: Assurance Testing - Site Confidence
Assurance Testing - Site Confidence The market trends: Credit card verification online via third party sites Decreasing user tolerance of poor performance 9 42% of users will switch to competitor sites if experience problems (source: Harris Interactive) 9 Online shoppers now have a 4 second atte
Slide 19: Assurance Testing - Site Confidence
Assurance Testing -Site Confidence The competitive marketplace… Name Location Employees Status Financials Keynote Inc US/California 270 Listed – Nasdaq Forecast 08: $75m revenue $1m profit Gomez Inc US/Boston 240 IPO summer 2008 IPO c$200m $33m revenue 07 $2m loss 07 HP Mercury US/California N/a Acq
Slide 20: Assurance Testing – 24/7 Assured
Assurance Testing – 24/7 Assured Only combined managed security & performance monitoring service on market 9 gold standard product Includes accreditation scheme 9 logo on clients’ sites demonstrates commitment to safe & positive user experience Joined-up offering from SecureTest, Site Confiden
Slide 21: Consultancy
Consultancy Sales £4.9m 7% Contribution £0.7m 1% 2005 2006 2007 2008 Sales Contribution Independent trusted advisor status still the key Demand for Information Security is now very real True synergy with Assurance Testing 9over 40% of revenue now generated by Information Security Business ha
Slide 22: Current trading and outlook
Current trading and outlook Continue generating strong organic growth Capacity to absorb further value-creating acquisitions Escrow Europe offers substantial international potential 24/7 Assured security product due Day rate market buoyant Group orders & renewals at £26.9m for 2008/09 (£
Slide 23: Appendices
Appendices Commercial in Confidence - © Copyright 2008 NCC Group - all rights reserved 23
Slide 24: Escrow Solutions
Escrow Solutions Cornerstone of the Group Agreements automatically World’s largest escrow provider renew annually Agreements sold globally Escrow Live portal provides secure Bases in US, UK, online depositing & account Germany & Netherlands management All code integrity tested - more than
Slide 25: 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 failure of maintenance
Slide 26: 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 2008 NCC Group - all rights reserved 26
Slide 27: Escrow Solutions
Escrow Solutions UK market potential Market worth £65 -£85m before Verification Testing - Gartner Consulting research (2004) Market leaders – competition from smaller providers winning business on price – rare though! Demand grows in tougher economic climate 9 50% of the UK’s top software comp
Slide 28: Escrow Solutions
Escrow Solutions European market potential Market worth £88 -£102m from Gartner Consulting research (2005) NCC Group Escrow Europe only significant European provider Now operating as ‘NCC Group Escrow’ throughout continental Europe Regional operations offering global escrow solutions with lo
Slide 29: Escrow Solutions
Escrow Solutions US market potential No formal market research conducted Market more mature but much larger than UK 9 Owner led 9 No basic testing 9 No Verification Testing UK style account management model modified and now working Significant opportunities evident for Verification Testing
Slide 30: Assurance Testing
Assurance Testing Secure Test uncovers security In the testing market weakness by controlled invasion of for over 25 years a network or web site or ‘social engineering’ of the human element of risk Depth of expertise and knowledge Site Confidence provides assurance over robustness and performanc
Slide 31: Assurance Testing
Assurance Testing Secure Test A leading UK provider of Consultant rather than tool led Ethical Security Testing services – c.250 man years of Ethically hack networks and experience web sites 44 expert testers - one of the Now a major player combined with SecureTest and going UK’s largest t
Slide 32: Assurance Testing
Assurance Testing Site Confidence Leading provider of web Independent, reliable, real time monitoring services performance information Excellent custom-developed provided around the clock technical infrastructure and testing tools Early detection of performance Extensive blue chip client b
Slide 33: Consultancy
Consultancy Information Security Growth in private sector markets Completely independent with significant new client wins Extensive knowledge & experience of implementing standards Only use expert, qualified and experienced consultants PCI security standards providing good opportunities Clos
Slide 34: 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 Independence from hardware Non-discretionary areas of and solution provide