NCC Group plc. Preliminary Annual Results for the year ended 31 May 2009

Transcription

1 NCC Group plc Preliminary Annual Results for the year ended 31 May 2009 July 2009

2 AGENDA Agenda Highlights Track record Group structure Group financials Group strategy Group sector concentrations Group Escrow Escrow UK Escrow Europe & US Assurance Division Secure Test & NGS Site Confidence & 365 secure Consultancy Current trading & outlook Appendix 2

3 solid, consistent growth Revenue up 31% to 46.8m Operating profits up 19% to 12.7m Group Escrow up 15% to 11.7m - UK Escrow up 10% to 10.3m Assurance Testing up 67% to 2.8m Consultancy up 4% to 0.8m Adjusted diluted EPS up 17% to 26.1p Final dividend up to 6.25p up 32% Cash conversion improved to 140% of operating profits Acquisition of NGS & Escrow Europe Switzerland Assurance Testing now UK s largest independent Information Security business 3

4 Growth track record Revenue ( m) Operating profit ( m) Full year Fully diluted adjusted EPS (p) Dividend (p) Interim

5 Group structure Three divisions down to two - reflects market changes & opportunities Group Escrow Assurance Testing Consultancy Revenue: 21.0m Contribution: 11.7m Revenue: 19.1m Contribution: 2.8m Revenue: 6.7m Contribution: 0.8m Escrow UK Escrow Europe Escrow US Secure Test Site Confidence NGS 365 secure Information Security Information Technology 5

6 Group structure from June 09 Now two strategic Group divisions Recognises the way we manage the business to exploit market opportunities Better for brand development Group Escrow Revenue: 21.0m Contribution: 11.7m Escrow UK Revenue: 16.6m Escrow Europe Revenue: 2.4m Escrow US Revenue: 2.0m Assurance Division Revenue: 25.8m Contribution: 3.6m Secure Test Rev: 10.1m Site Confidence Rev: 5.6m Consultancy IS Rev: 3.0m NGS Rev: 3.5m 365 secure Accreditation Consultancy IT Rev: 3.7m 6

7 Group revenues 31 May 2009 m 2008 m % Growth % Organic Growth Revenue Escrow UK % 6% Escrow Europe % 38% Escrow US % 70% Group Escrow % 13% Assurance Testing % 22% Consultancy % 36% Total Revenue % 19% 7

8 Group operating profits 31 May 2009 m 2008 m % Growth % Organic Growth Contribution Escrow UK % 10% Escrow Europe % 13% Escrow US % 36% Group Escrow % 11% Assurance Testing % 38% Consultancy % 4% Corporate (2.5) (1.9) 30% - Adjusted operating profit % 11% Adjusted operating profit margin 27% 30% 8

9 Group financial performance 31 May 2009 m 2008 m % Change Adjusted operating profit * % Amortisation (1.2) (0.7) 67% Exceptional items Full List - (0.7) - Interest (0.4) (0.2) 131% Unwind of the discount (0.2) (0.3) (47%) Pre tax profits % Adjusted pre tax profits % Adjusted full diluted EPS (p) 26.1p 22.4p 17% Dividend/share (p) 9.25p 7.00p 32% * Non cash share based charges 1.0m ( 0.7m in 2008) Non cash share based charges for 2010 expected to be 1.4m 9

10 Group balance sheet Cash conversion improved to 140% (122% in 2008) of operating profits Group 5.6m net debt ( 3.4m net debt in May 2008) - Expected debt free by August 2010 excluding further acquisitions Committed multi option credit facility of 15m 2010 capital commitment expected to be 1.8m higher - New Group wide IT system one off cost Group deferred income 12.4m ( 11.0m in 2008) 10

11 Group cash flow 31 May 2009 m 2008 m Cash generated from operations Net interest paid (0.4) (0.2) Income taxes paid (1.8) (2.7) Acquisition of property, plant and equipment (1.4) (1.4) Acquisition of business * (11.4) (10.4) Cash (inflow/outflow) before financing activities 1.1 (3.5) Receipt/(payment) of bank loans Proceeds for issue of Ordinary Share capital Purchase of own shares (0.7) (0.5) Dividends paid (2.6) (1.8) Increase (decrease) in cash in the year 2.3 (3.2) 11 * Acquisition of NGS 5.0m, Escrow Europe Switzerland 0.5m & deferred consideration on Escrow Europe, Site Confidence & Secure Test 5.9m

12 Group strategy The challenge remains the same regardless of climate Focus on next 12 months economy still in deep recession Keep on doing what we have always been doing - Solid organic growth in growing markets - Margin protection & improvement - Strong cost control & balance sheet management - Effective recruitment & retention key to keeping costs in control - Research new products & innovative services to launch Concentrate on solely non discretionary spend areas Develop NGS & invest in its tools and product Develop Group forensic offerings & capability Opportunistic acquisitions complementary businesses 12

13 Group sector concentrations Sell a lot, to many No one sector reliance 4% 4% 3% 18% Banks & Insurance 5% Software & Computer Services Other 5% General Retailers Fixed & Mobile Telecommunications 6% 15% Local Government Central Government Housing 8% Travel & Leisure Support Services Healthcare Equipment & Services 9% 10% 13% Education See appendix for more detail 13

14 Group Escrow Global Revenue 21m Contribution 11.7m Headcount 166 FTE Escrow UK Revenue 16.6m Headcount 135 FTE Escrow Germany Revenue 0.5m Headcount 2 FTE Escrow USA Revenue 2.0m Headcount 16 FTE Escrow Europe Netherlands Revenue 1.9m Headcount 12 FTE Escrow Switzerland Revenue - Headcount 1 FTE 14

15 Escrow UK Revenue Contribution 16.6m 6% 10.3m 10% H2 much stronger 12% growth year on year H2 was 10% better than H1 H1growth was only 1% Verifications sales strategy successful in H2 strong recovery Contract termination rates 11.5% but underlying rates are normal - Knee jerk terminations appear to have stopped Price increase of 2.5% - 3.0% planned October 2009 UK annual renewals for m, up from 10.9m this year UK market potential remains strong no change in assumptions 15

16 Escrow Europe & US Revenue - Europe 2.4m 121% 2.8m Contribution 0.8m 113% 0.9m Revenue - US 2.0m 70% $3.2m Contribution 0.5m 36% $0.8m Total non UK renewals base worth 3.4m ( 2.8m 2009) Verifications & secure discovery increasingly important in gaining traction in US US management team stable, European management team refreshed Escrow Switzerland acquired already adding value to client base Acquisition opportunities exist but price dependent weak $ to doesn t help 16

17 Assurance Division Information security threats still increasing it s an arms race IT security landscape threat remains unchanged but increasing rapidly in scale Organised crime Malicious employees Incompetents (government data losses) User stupidity (social networking) Corporate espionage Vulnerability to cyber attack shown by a Botnet that hijacked 1.9m PCs Infiltrated 77 government departments & hundreds of large organisations New Cyber Security Operations Centre (CSOC) recruited former hackers to defend national security the lunatics have finally taken over the asylum Site Confidence survey showed 88% of online transactions suffered availability problems Availability & an efficient user experience are the primary concerns 17

18 Assurance Division Revenues Contribution 19.1m 49% 2.8m 67% New Group MD running integrated Division Solid growth throughout the year Acquisition & integration of NGS Margin improvements are expected to continue currently 15% ( %) Approved CTAS & Catalist provider major success Best of breed techniques are being turned into automated tools Area for further market consolidation Acquisitions to complement growth Recurring revenues are key feature 79% of Divisional total revenues Employees 237 FTE 18

19 Assurance Division Secure Test revenue 10.1m 31% Team of 94 including accredited 54 testers & growing Market appetite undimmed despite economic downturn Efficiencies being gained by multi site 21% organic revenue growth NGSS revenue 3.5m Premium brand seen as the market experts Reputation for technical excellence Best of breed security testing software Team of 45 including accredited 31 testers & growing 19

20 Assurance Division Site Confidence revenue 5.6m 9% Performance & Load Testing renewals still at 90% despite customers & cost pressures Recurring revenues for 2010 of 4.1m renewal rate of 90% continues Market place remains unchanged Case more compelling as websites reach critical commercial importance 365 secure - certification Wrapper for all Assurance products succeeds 24/7 & works! Managed service & accreditation Three customers signed up Full launch activity July September

21 Assurance Division Consultancy revenue Consultancy contribution 6.7m 36% 0.8m 4% Independent trusted advisor status remains key to credibility Demand for Information Security remains key Government data losses & compliance issues continue Almost 50% of revenue from Information Security - Total revenue includes 700k of no/low margin contractor business Utilisation rates 70% (67% in 2008) Business has retained firm control of cost base Tremendous opportunities for cross selling Information Security Major benefits expected from being a Catalist supplier 21

22 Current trading & outlook Global recession dominates but Group is very well protected - proven Strategy is more of the same - focus on core strengths & opportunities Well priced acquisitions are a real possibility Group orders & renewals at 30.3m for 2009/10 ( 26.8m in May 2008) Group Escrow orders & recurring income of 16.9m ( 15.6m May 2008) - Group renewals 14.9m ( 13.6m: 2008) - Verification order book 2.0m ( 2.0m May 2008) Assurance Testing orders & recurring revenues 13.5m ( 10.9 May 2008) - Testing order book 6.5m ( 4.6m May 2008) - Monitoring & load testing renewals 4.1m ( 3.8m May 2008) - Consultancy order book 2.9m ( 2.5m May 2008) Confident about delivering yet another year of strong & consistent growth 22

23 23 Appendix

24 Group Escrow 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 - 8% fail first time Escrow Verification Testing confirms code held is useable Agreements automatically renew annually Provides service to over 26,000 parties globally 94 of FTSE 100 have NCC Group Escrow 14.9m forecast renewals

25 Escrow Agreements High value & low cost concept What is an Escrow Agreement? 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 25

26 Group Escrow sector concentrations No major sector reliance 5% 4% 3% 2% 23% Banks & Insurance Fixed & Mobile Telecommunications 5% Other Software & Computer Services 6% Local Govt Healthcare Equipment & Services 7% General Retailers 18% Support Services Central Govt 12% Travel & Leisure Education 15% 26

27 Assurance Division Security Testing Uncovers security weakness by controlled invasion of a network or website Forensic services specialising in technically complex computer & digital evidence Performance & Load Testing Provides assurance over robustness & performance of websites Provides assurance over website load & capacity Consultancy Ensure customers manage information assets securely Ensure customers are fully protected by planning & implementing appropriate strategies & ensuring sound governance In the testing marketing for over 25 years NGS the recognised industry experts Secure Test is market name of choice Site Confidence are UK market leaders NCC Group Consultancy reputation sells us 27

28 Assurance Division sector concentrations No major sector reliance 4% 4% 3% 2% 2% 22% Software & Computer Services Banks & Insurance 5% General Retailers Other Travel & Leisure 10% Central Govt 11% 20% Local Govt Support Services Fixed & Mobile Telecommunications Education Healthcare Equipment & Services 17% 28

29 Consultancy Division sector concentrations Housing was biggest sector, although includes 700,000 no margin work 1% 1% 4% 4% 3% 2% 2% 29% Housing Local Govt Central Govt Other 9% Education Software & Computer Services General Retailers Travel & Leisure 10% Support Services Healthcare Equipment & Services 19% Banks & Insurance 15% Fixed & Mobile Telecommunications 29

30 Wide range of blue chip customers Finance & Professional Services Technology Retail & Leisure Health & Education Government Utilities 30