NCC Group plc Interim results for the period ended 30 November 2005

Transcription

1 NCC Group plc Interim results for the period ended 30 November 2005 January

2 NCC Group Highlights Financial summary Divisional reviews Expansion and strategy Outlook and current trading 2

3 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 progressing well US escrow business acquired December 2005 *before the impact of employee share schemes and the investment in the new German operation 3

4 Our History and Financials MBO Admission to AIM at 170p Interim Results Interim Dividend 0.75p Final Dividend 1.75p Preliminary Results & Announcement of European Expansion Plans Acquisition of US Escrow Business Interim Results Interim Dividend 1.0p (3 March) Revenue* ( m) Oper ati ng Pr of i t** ( m) May-03 Nov-03 May-04 Nov-04 May-05 Nov-05 *Revenue after deferred income **Underlying operating profit before UK GAAP and IFRS 4

5 Integrated Divisions Escrow Solutions Testing Solutions Consultancy Escrow Solutions UK Germany US Verification Services Specialist Testing Services Penetration Testing Services Consultancy Assuring your business survival Verifying your systems are protected Assuring your systems performance Securing your future A partnership built on trust Escrow Solutions Revenue Escrow Solutions Operating Profit 4.7 Escrow Germany 0.1 Testing Solutions 2.7 m after deferred income Consultancy 2.3 Interims 2005/ Escrow Germany (0.1) Testing Solutions Consultancy

6 Group Financial Performance 30 November % m m change Revenue Escrow Solutions Escrow Germany Testing Solutions Consultancy (10) Total revenue Operating profit Escrow Solutions Escrow Germany (0.1) Testing Solutions Consultancy (110) Head office costs (0.6) (0.5) (13) Total Operating margin 27.0% 30.8% 6

7 Group Financial Performance Year to 30 November % m m change Underlying operating profit* 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 Basic EPS Interim dividend per share 1.0p 0.75p 33 *before the impact of employee share schemes and the investment in the new German operation 7

8 Group Financial Performance Cash flow 6 months to 30 November Cash generated from operations* Net Interest paid Income taxes paid Acquisition of property, plant and equipment Cash inflow before financing activities Payment of bank loans Proceeds for issue of ordinary share capital Payment for shares in minority interest Equity dividends paid Net increase in cash and cash equivalents 2005 '000 3,124 (44) (761) (366) 1,953 (600) 94 (18) (571) 858 *Ratio of cash generated from operating activities before interest and tax to operating profit = 118% (2004:116%) 8

9 International Financial Reporting Standards Reconciliation between IFRS and UK GAAP November 2005 IFRS 2005 '000 IFRS 2 Share based charges '000 IFRS 3 Goodwill '000 SIC 15 Leasehold Incentives '000 UK GAAP 2005 '000 Revenue 9, ,807 Cost of sales (5,424) (5,216) Administrative expenses (1,738) - (752) 8 (2,482) Operating profit 2, (752) 8 2,109 Finance costs (39) (39) Profit before taxation 2, (752) 8 2,070 Taxation (829) (62) - (3) (894) Profit for the period after taxation 1, (752) 5 1,176 9

10 Escrow Solutions Revenue Contribution 4.7m +22% 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) Contract termination rates down to 9.5% and 10.8% beneficiaries Annual renewals forecast 7.0m (October 2005: 6.8m ) Deferred income up to 5.2m (May 2005: 4.9m) 10

11 Testing Solutions Revenue Contribution 2.7m +34% 0.6m +48% Verification Testing - Specialist Testing - Penetration Testing Revenue up 34% and contribution by 48% Verifications delivered in the period - up 31% (Nov 2004: 114) Penetration Testing 195 delivered in the period up 47% (Nov 2004: 133) Specialist significant growth in revenue, utilisation and client base Testing Solutions order book up to 2.0m (May 2005: 1.5m) Widening base and quality of clients Recruitment key in all areas good successes to date 11

12 Consultancy Revenue Contribution 2.3m (10)% 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 Cost base carefully managed Now 23 chargeable staff (May 2005: 30) Expect a positive contribution in the second half of the year 12

13 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 0.5m in 2005/06 ( 0.2m Nov 2005) Expected to be profitable next financial year 13

14 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 Easier law No testing No verification Continued focus on potential acquisitions 14

15 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 Continue seeking value enhancing acquisitions 15

16 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 indications are good US acquisition will be bedded in quickly Good acquisition targets identified 16

17 Appendices 17

18 Escrow Solutions Cornerstone of NCC Group in profit and revenue Agreements automatically renew annually Only significant European provider Agreements sold globally Dual and electronic deposit service now launched All code is integrity tested - more than storage 10% fail first time Provides service to over 11,800 beneficiaries 91 of FTSE 100 have NCC Group Escrow 63 dedicated Account Managers 18

19 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 Demonstrates supplier s commitment to client care Key part of disaster recovery and business continuity planning Represents over 45% of Group revenue and over 83% of EBITA year to 31 May

20 Escrow Solutions Licensor Deposit of source code Sale of business critical software Licensee Annual recurring fee High value low cost concept 20

21 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

22 Escrow Solutions NCC Group market position 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 22

23 Testing Solutions Verification Services confirmation code held under an Escrow agreement is useable Specialist Testing proves systems robustness & performance capabilities of a system or website Penetration Testing uncovers security weakness by controlled invasion of a network or Web site In the testing market for over 20 years Depth of expertise and knowledge Working with latest technologies and clients Verification is the most complete form of escrow 23

24 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 recovery 24

25 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 25

26 Testing Solutions Penetration Testing A leading UK provider of Penetration Testing services Ethically hack networks and Web sites Expert CHECK accredited and team leaders - only c.80 in the UK Consultant rather than tool led nearly 50 man years of experience 26

27 Consultancy Reputation for technical excellence in public and private sectors More than 75% of revenue in 2004/05 from existing clients Trusted Advisor Greenhouse environment new service offerings developed to meet client/market needs Completely independent Only use expert, qualified and experienced consultants Have maintained long term client partnerships Driven by market demand for risk management 27

28 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 (over 75% of 2004/05 revenue from existing clients) 28