NCC Group plc. Preliminary Annual Results for the year ended 31 May 2010 July 2010

Transcription

1 NCC Group plc Preliminary Annual Results for the year ended 31 May 2010 July 2010

2 Agenda Highlights Growth track record Group structure Group financials Group strategy Group sector concentrations Acquisitions Group Escrow Division Escrow UK Escrow Europe & US Assurance Division NGS Secure Site Confidence Current trading & outlook Appendix

3 Highlights: solid, consistent growth Revenue up 15% to 53.7m Operating profits up 16% to 14.8m Group Escrow up 9% to 23.0m UK Escrow up 8% to 17.9m Group Escrow operating profits up 14% to 13.3m Assurance up 19% to 30.8m Assurance operating profits up 13% to 4.0m Adjusted diluted EPS up 14% to 29.7p Final dividend up to 7.25p - up 16% Acquisition of Meridian & SDLC Cash conversion at 139% of operating profits Group Escrow is the world s largest provider Assurance has the UK s largest independent information security business

4 Growth track record Revenue ( m) Operating profit ( m) CAGR 20.6% Full year Interim 35 Fully diluted adjusted EPS (p) CAGR 21.9% 12 Dividend (p) CAGR 33.9%

5 Group structure Two divisions - Group Escrow & Assurance Escrow has two brands - NCC Group Escrow & Escrow Europe Assurance brands are NGS Secure, SDLC, Site Confidence, NCC Group IS&A Group Escrow Escrow UK Escrow Europe Escrow US Assurance NGS Secure SDLC IS&A Site Confidence Revenue: 23.0m Revenue: 30.8m Contribution: 13.3m Revenue: 17.9m Revenue: 2.9m Revenue: 2.2m Contribution: 4.0m Revenue: 24.4m Revenue: 6.3m

6 Group revenues Revenue 2010 ( m) 2009 ( m) % Growth Escrow UK % Escrow Europe % Escrow US % Total Group Escrow % Assurance delivery % Performance & load testing % Total Assurance % Total Revenue %

7 Group operating profits Contribution 2010 ( m) 2009 ( m) % Growth Group Escrow % Assurance % Operating contribution % Corporate (2.6) (2.5) - Adjusted operating profit % Adjusted operating profit margin 28% 27% -

8 Group financial performance 2010 ( m) 2009 ( m) % Change Adjusted operating profit* % Exceptional non cash FX gain Exceptional lease exit costs (0.3) - - Amortisation (1.6) (1.2) 26% Interest (0.3) (0.4) (36)% Unwind of the discount (0.1) (0.2) - Pre tax profits % Adjusted pre tax profits % Adjusted full diluted EPS (p) 29.7p 26.1 p 14% Dividend/share (p) 10.75p 9.25 p 16% * Non cash share based charges included 0.9m ( 1.0m in 2009). Non cash share based charges for 2011 expected to be 1.1m

9 Group balance sheet Cash conversion strong at 139% (140% in 2009) of operating profits Group net debt at 11.9m ( 5.6m net debt in May 2009) New 3 year multi option credit facility of 25m + 2m overdraft in place 2011 capital expenditure expected to be 1.7m from 2.6m this year New Group wide IT system completing January 2011 Group deferred income 12.9m ( 12.4m in 2009)

10 Group cash flow 2010 ( m) 2009 ( m) Cash generated from operations Net interest paid (0.3) (0.4) Income taxes paid (3.9) (1.8) Acquisition of property, plant & equipment (2.6) (1.4) Acquisition of businesses* (13.4) (11.4) Cash (outflow)/inflow before financing activities (1.4) 1.1 Receipt of bank loans Proceeds from issue of shares Purchase of own shares (1.1) (0.7) Dividends paid (3.3) (2.6) Increase in cash in the year *Acquisition of SDLC 8.3m, Meridian 1.0m & deferred consideration on NGS 3.8m & Escrow Europe 0.3m

11 Group strategy Integration of acquisitions is key Opportunity to increase scale of customer delivery Complementary services - start from any point European & US reach will become important Escrow: Contracts & verifications Keeping IPR, knowledge & data safe Product offerings NGS Secure: Ethical security & forensics Making sure it is secure & preventing breaches Meridian: Physical Making sure that it complies IS&A: Procedural Making sure that it complies SDLC: Testing to make sure that it works Site Confidence: Ensuring it performs & is capable Client opportunity

12 Group strategy Group - Organic growth & extracting additional benefits from the acquisitions Group - Cross selling for key accounts - more products to each customer Escrow UK - further development of account managers UK - roll out of SaaS & data propositions Europe - headcount increase now base is settled Europe - increase verification penetration & repeat rates USA - additional focus on Secure Discovery opportunities Assurance NGS Secure - leverage off the brand reputation NGS Secure - intensive recruitment, training & development NGS Secure - Research & Development to be the leading market broadcaster SDLC - integration to overlay security proposition in to testing delivery Meridian & IS&A - push further PCI & physical audit capabilities

13 Group - sector concentrations No one sector revenue reliance - exposure to discretionary expenditure limited 4% 7% 8% 9% 3% 2% Banks & Insurance 19% 3% 3% Software & Computer Services Other General Retailers Fixed & Mobile Communications Central Government Local Government 18% Travel & Leisure Education Support Services Healthcare Equipment & Services Housing 9% 14%

14 Acquisitions Acquired two Assurance businesses - SDLC & Meridian in 2010 Integration well on track - Meridian completed end of June SDLC - historical revenue of 12m (April year end) Widens the Group s assurance capabilities Provides a complementary range of software testing services Comprehensive service offering - business, network & application performance analysis & software & systems testing Mutually complementary client base - tremendous cross sell opportunities - security services Meridian - historical revenue of 1.8m (March year end) Complementary services to PCI & ethical security testing - will become part of IS&A Specialises in conducting payment scheme logical & physical security audits as well as PCI Future acquisitions focused on international expansion

15 Group Escrow Division Group Escrow Revenue 23.0m Contribution 13.3m Headcount 151 FTE Escrow UK Revenue 17.9m Headcount 113 FTE Escrow Germany Headcount 5 FTE Escrow USA Revenue 2.2m Headcount 19 FTE Escrow Europe Total revenue 2.9m Escrow Netherlands Headcount 13 FTE Escrow Switzerland Headcount 1 FTE

16 Group Escrow Division & UK 2010 ( m) 2009 ( m) Group Escrow revenue Group Escrow contribution Escrow UK revenue % Growth 9% 14% 8% Group Escrow Escrow Revenues increased by 9% Escrow Profits increased by 14% Renewals up to 15.2m (2009: 14.5m) Group Managing Director joining Q2 UK Escrow Solid performance - H2 12% improvement on H1 with no price increases Price increases planned for November 2010 at RPI + Careful attention to public sector - pricing & sales strategy Verification performance strong in year - 8% growth despite market pressure Sales team stable & growing

17 Escrow Europe & US 2010 ( m) 2009 ( m) Escrow Europe revenue % Growth 19% Escrow US revenue % Total non UK renewals base 3.7m ( 3.4m 2009) Verifications & secure discovery increasingly important to both businesses European management team stable - actively recruiting Germany performance encouraging but still subscale Escrow US actively recruiting more account managers

18 Assurance Division Information security threats still increasing - it s an arms race IT security landscape threat remains unchanged but increasing rapidly in scale CEO of major international security plc suffered card fraud Forensics is an area of huge growth potential Legal Support Services (E-Discovery, computer misuse investigations, expert witness) Security Incident Response Services (breach investigation/malware investigation) Credit Card Fraud Services (PCI-related) Forensic Readiness Review - framework agreement Forensics is not analysing hard discs - leave that area to ex police contractors Research & Development is key to staying one step ahead - newsworthy

19 Assurance Division 2010 ( m) 2009 ( m) Assurance revenue Assurance contribution % Growth 19% 13% Assurance Solid growth throughout the year Recurring revenues are key feature - 75% of Divisional total revenues 317 FTE + 92 associates NGS Secure Integration key to staff development, recruitment & retention New regional structure - office opening in Cheltenham Margin improvements will continue - currently 13% ( %) Automated tools offer a competitive advantage - automated testing through Minerva Area for further global market consolidation Site Confidence Strong new business & renewal rates at 89%

20 Current trading & outlook Government cuts will hurt many but Group is very well placed - proven Strategy to focus on core strengths & opportunities - acquisitions will help develop larger opportunities Acquisitions overseas are being seriously considered Group orders & renewals at 35.7m for 2010/11 ( 30.3m in May 2009) Group Escrow orders & recurring income of 17.4m ( 16.9m May 2009) Group renewals 15.2m ( 14.5m: 2009) Verification order book 2.2m ( 2.0m May 2009) Assurance orders & recurring revenues 18.3m ( 13.5m May 2009) Assurance delivery order book 14.0m ( 9.4m May 2009) Performance & load testing renewals 4.3m ( 4.1m May 2009) Confident about delivering yet another year of strong & consistent growth

21 Appendix

22 Group Escrow Division Cornerstone of NCC Group in profit & revenue World s largest Escrow provider Agreements sold globally Escrow Live customer portal provides secure online depositing & account management All code integrity tested - more than storage - 9% fail first time Agreements automatically renew annually Provides service to over 33,000 parties globally 94 of FTSE 100 have NCC Group Escrow 15.2m forecast renewals 2010 Escrow Verification Testing confirms code held is useable

23 Escrow Agreements - High value & low cost concept Escrow is a legal contract between three parties licensor (or owner) licensee an independent trusted third party Holds software source code or business critical material Provides protection from key supplier failure or failure of maintenance Demonstrates supplier s commitment to client care Key part of disaster recovery & business continuity planning

24 Group Escrow - sector concentrations No major sector revenue reliance 6% 7% 5% 11% 5% 3% 3% 2% 25% 17% Banks & Insurance Fixed & Mobile Communications Other Software & Computer Services Local Government General Retailers Healthcare Equipment & Services Support Services Central Government Travel & Leisure Education 15%

25 Assurance Division Security Testing Uncovers security weakness by controlled invasion of networks or websites Forensic services specialising in technically complex computer & digital evidence SDLC Provision of expert resource to meet all software & systems testing needs Performance & Load Testing Provides assurance over robustness & performance of websites as well as load & capacity Information Security & Advisory Ensures customers manage information assets securely Ensures customers are logically & physically secure & audited In the testing marketing for over 30 years NGS Secure the recognised industry experts SDLC are highest quality providers of all testing services Site Confidence are UK market leaders Meridian & IS&A sell on their best in class reputation

26 Assurance - sector concentrations No major sector revenue reliance 3% 2% 2% 4% 4% 24% Software & Computer Services Banks & Insurance 4% Other Central Government 7% General Retailers Local Government Travel & Leisure Housing 11% 15% Fixed & Mobile Telecommunications Education Support Services 12% 14% Healthcare Equipment & Services

27 Wide range of blue chip customers Finance & Professional Services Technology Retail & Leisure Health & Education Government Utilities