full year results - ncc group · • group wide it & operational systems, infrastructure &...
TRANSCRIPT
Full year results for the 12 months ended 31 May 2015 July 2015
Agenda
• Highlights
• Growth track record
• Group financial performance
• Escrow
• Assurance
• Domain Services
• Current trading & outlook
• Appendix
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21%
Group revenue up 21% to £133.7m
5% Escrow operating profits up 5% to
£18.9m
1% Adjusted Group
operating profit after Domain Services up
1% to £26.4m
30 Offices
worldwide
21% Assurance revenue up 21% to £97.0m
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Highlights
9.4p Adjusted fully
diluted earnings per share
5% Escrow revenue up 5% to £32.0m
1,388 Employees worldwide
21% Assurance
operating profits up 21% to £17.0m
2 Acquisitions Open
Registry & Accumuli
14% Total dividend up
14% to 3.98p
11% Adjusted Group
operating profit before Domain Services up
11% to £31.3m
Revenue (£m) - CAGR 27% Adjusted operating profit (£m) - CAGR 16%
Full year
Interim
15 consecutive years of record growth
020406080
100120140160
05 06 07 08 09 10 11 12 13 14 150
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10
15
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25
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05 06 07 08 09 10 11 12 13 14 15
0.00
2.00
4.00
6.00
8.00
10.00
05 06 07 08 09 10 11 12 13 14 15
Fully diluted adjusted EPS (p) - CAGR 16%
0.00
1.00
2.00
3.00
4.00
5.00
05 06 07 08 09 10 11 12 13 14 15
Dividend (p) - CAGR 25%
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2015 (£m)
2014 (£m)
Growth Organic
Escrow UK 23.7 22.5 5% 5%
Escrow Europe 3.2 3.3 (4%) (4%)
Escrow US 5.1 4.7 11% 11%
Escrow 32.0 30.5 5% 5% Security Consulting 72.1 57.5 25% 25%
Software Testing & Web Performance 22.6 22.7 (1%) (1%)
Accumuli 2.3 - - -
Assurance 97.0 80.2 21% 18% Domain Services 4.7 - - - Total revenue 133.7 110.7 21% 18%
Revenues
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2015
6
International mix of revenue
UK
36% £48.1m
Rest of world
10% £13.5m
Europe
54% £72.1m
UK
31% £33.8m
Rest of world
9% £10.5m
Europe
60% £66.4m
2014
Operating profits Margin
(%) 2015 (£m)
2014 (£m)
Growth (%)
Contribution
Escrow 59% 18.9 18.1 5
Assurance 18% 17.0 14.0 21
Corporate - (4.6) (4.0) 16
Adjusted operating profit pre Domain Services
24% 31.3 28.1 11
Domain Services - (4.9) (2.1) 131
Adjusted operating profit 20% 26.4 26.0 1
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Earnings per share & dividends Margin
2015 (£m)
2014 (£m)
Growth
Adjusted operating profit pre Domain Services
24% 31.3 28.1 11%
Adjusted operating profit 20% 26.4 26.0 1%
Adjusted pre tax profits - 25.5 25.3 1%
Adjusted fully diluted EPS - 9.4p 9.3p -
Fully Diluted Shares (m) - 214.0 211.4 1%
Dividend per share - 3.98p 3.5p 14%
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Reconciliation to pre-tax profits
Net IT
claim
Acquisition related costs
Amortisation of acquired intangibles
Share based
payments
Adjusted operating
profit
Reported operating
profit
(2.4)
(2.2)
(1.0)
26.4
22.6
£m
32
29
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23
20
(1.2) 21.4
31.3 – 11% year on year growth
(4.9)
Pre Domain Services
Domain Services
expenditure
Interest and unwinding of
discount
Pre-tax profit
1.8
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Cashflow 2015 (£m)
2014 (£m)
Cash generated from operations 24.3 28.9 Net interest paid (1.1) (0.8) Income taxes paid (3.4) (4.5) Capital expenditure (13.0) (10.8) Acquisition of businesses (19.8) (4.3) Cash balances from acquisition 5.7 - Dividends paid (7.6) (6.8) Cash (outflow)/inflow before financing activities (14.9) 1.7 Receipt of bank loans 20.4 6.8 Proceeds from issue of shares 0.4 0.6 Purchase of own shares (0.4) (2.1) Increase in cash in the year 5.5 7.0
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Cash, capital & banking • Continued strong cash conversion at 107% of operating profits (120% in 2014) • Net debt £50.6m (£23.6m at May 2014) • Facility increased to £78m RCF plus £2m overdraft to July 2016 • Capital expenditure £13.0m (2014 in £10.8m)
• Domain Services development costs - £3.1m • Tangible assets including office expansion - £4.8m • Group wide IT & operational systems, infrastructure & product upgrades - £5.1m
• Future maximum deferred consideration due £7.4m - all profit based earnouts • FortConsult - £1.6m - June 2016 • Open Registry - £5.8m - 2 payments of £2.9m - 2017/2018
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Escrow Escrow Revenue £32.0m Contribution £18.9m Margin 59% Headcount 145 FTE
Revenue : £23.7m Headcount : 99 FTE
UK
Revenue : £5.1m Headcount : 32 FTE
US
Revenue : £3.2m Headcount : 14 FTE
Europe
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Escrow UK
Escrow • Continued solid performance • ICANN performance strong – over 40% of new gTLDs • Renewals up 3% to £18.5m (2014: £18.0m) Escrow UK
• Prices increased in 2014 – small increase planned for 2015 • Verification performance growth continues • Terminations unchanged at less than 11%
2015 (£m)
2014 (£m)
Growth
Escrow revenue 32.0 30.5 5%
Escrow UK revenue 23.7 22.5 5%
Escrow contribution 18.9 18.1 5%
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Escrow - Europe & US
Overseas • Single global Escrow brand – NCC Group • Solid performance from US team • Excellent performance from Europe – constant currency 5% growth • Global account management stronger & performing well
2015 (£m)
2014 (£m)
Growth
Escrow US revenue 5.1 4.7 11%
Escrow Europe revenue 3.2 3.3 (4%)
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Assurance
Headcount : 188 FTE
US
Headcount : 31 FTE
Europe
Headcount : 10 FTE
Australia
Headcount : 700 FTE
UK
Assurance Revenue £97.0m Contribution £17.0m Margin 18% Headcount 929 FTE
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Assurance
• Revenue growth of 21% • Excellent organic growth of 18% • Margin 18% including Accumuli (2014: 18%) - target still 20% • Global offering - compelling, competitive proposition • Continued staff development, recruitment & retention remains primary focus • Globally recognised reputation for responsible, credible research
2015 (£m)
2014 (£m)
Growth
Assurance revenue 97.0 80.2 21%
Assurance contribution 17.0 14.0 21%
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Assurance
Security Consulting • Revenues grew by 25% • US & UK are working effectively for international clients • Stable management teams Software Testing & Web Performance • Web Performance renewal rates 91% • Renewals £6.8m (2014: £6.8m) Accumuli • First month has shown encouraging signs
2015 (£m)
2014 (£m)
Growth
Security Consulting 72.1 57.5 25%
Software Testing & Web Performance 22.6 22.7 (1%)
Accumuli 2.3 - -
1.2 BILLION web pages
monitored last year
TECHNICAL CONSULTING DAYS SOLD
110k 75k
Total Assurance
In the UK
929 FTE
6 MILLION IPs scanned
last year
900k LIVE
IPs scanned last year
Assurance – international scale
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Arms race – unstoppable pace
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Domain Services – transformational year
• Own TLD .trust launched – gated community • Resolved contention over former domain application • Built Domain Assured – ICANN anti abuse product • Grown Escrow service now over 40% market share • Open Registry - world class back end operator, registrar & CHIP - acquired • Moved NCC Group onto .trust (350+ assets) • Build of Continual Monitoring Service (CMS) almost complete • Active discussions with FTSE 350 & Fortune 500 client base
2015 (£m)
2014 (£m)
Domain Services revenue 4.7 -
Domain Services operating loss (4.9) (2.1)
Something has to change
Source: Trust in the New Internet Survey 2015, NCC Group plc
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What ingredients are needed?
Verification – users need to be sure who they are interacting with online Security – users want to know that the highest standards are being applied Assurance – users want the comfort that vigilance is high
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• Changes are coming from Europe • Globally consumers becoming increasingly wary of the Internet • Punitive fines will impact organisations – Target • Open generic domains already riddled with bad actors – many will fail • New domains do not protect consumers or business – confusion • Branded closed generics will provide the new world of safe homesteads • Only 18 of FTSE 350 & 26 of Fortune 500 applied for .brand TLDs • Next application process starts in 24 months
Domain Services – market backdrop
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Domain Services – capabilities
FY 2015/2016
Evolving service
• .trust
• Brand Estate Review • Domain Registration Monitoring • Domain Portfolio Monitoring • Brand TLD Management • Trademark Clearinghouse • Domain Assured • Managed Service Scanning • Continual Monitoring Service • .trust
Opportunity • Group set to lead this area with unique end to end solution • In discussions with a number of brands to define domain strategy • New services that the market needs • Branded TLDs are the future of the Internet
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Current trading & outlook • Continued strong, solid growth across Escrow • Assurance
• Security Consulting is now a global force • Service offerings further expanded by Accumuli • Strong organic growth set to continue
• Domain Services • Full unique end to end solution established • Positioned well for significant market upheaval
• Group orders & renewals £62.7m • Group Escrow orders & recurring income of £20.9m (2014 at £20.9m) • Assurance orders & recurring revenues £41.8m (2014 at £32.1m)
• Confident about delivering another year of strong & consistent growth
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Appendix
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About NCC Group A global information assurance specialist with an unrivalled breadth & depth of services, providing organisations worldwide with freedom from doubt that: • Business critical material is protected – through escrow & verification • Information is secure & operations are compliant – through security testing,
audit & compliance • Websites deliver optimum performance, maximising revenues & protecting
reputation – through website performance • Infrastructure & software works as it should, maximising efficiency & return on
investment – through software testing • Brand, reputation & sensitive customer information is protected with the
highest level of security & reliability – through domain services
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Our services
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Group sector revenue analysis
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Escrow sector revenue analysis
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Assurance sector revenue analysis
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Escrow agreements explained • 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
Licensor
Sale of business critical
software
Licensee
Annual recurring fee
Deposit of source code
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Domain Services – Open Registry businesses • Open Registry acquisition
• Registry, registrar & trademark validation services
• Independent group of domain service companies
• Highly respected ICANN & industry player
• Complementary to .trust suite of services
• Open Registry S.A. – backend registry operator • Full suite of registry services - application consultancy, technical operations
& post-launch management
• CHIP – service provision - trademarks • Provides software, billing and support for Trademark Clearinghouse (TMCH)
• Contracts directly with brand owners that submit trademark data to TMCH
• TMCH provides a centralised database of over 33,000 verified trademarks - connected to every new TLD
• Nexperteam – B2B Registrar
• Managing over 8,000 domain names for large base of customers
• Domain registrar services - domain name registration, name serving to email and web hosting
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Domain Services Internet history & development
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Domain Services - .trust gated community • A safe gated community - all .trust domains will:
• Be physically verified as rightful owners • Operate on secure registrar & DNS infrastructure • Commit & actively work to comply with a high-bar of security set
within the .trust policies
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Domain Services - .trust Technical Policy
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Domain Services - Continual Monitoring Service
• Assessment is performed using a full suite of automated security & custom tools combined with penetration testing
• Network, web application, malware tools are used to detect easily identifiable vulnerabilities
• Penetration testing & custom tools are used when automated tools are inaccurate, non-existent or could harm production systems
• Full Security Operations Centre support
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Why change? • Security breaches have far reaching consequences impacting reputation,
customer confidence, data protection & the future of the organisation • The Target breach in November 2013 is having repercussions to this day • $20m Mastercard fine
December 2013
May 2015
Locations
Europe Manchester - Head Office Amsterdam Antwerp Basingstoke Brussels Cambridge Copenhagen Cheltenham Edinburgh Glasgow Leatherhead Leeds London Luxembourg Madrid Malmö Milton Keynes Munich Vilnius Wetherby Zurich
Australia Sydney
North America Atlanta Austin Chicago New York San Francisco Seattle Sunnyvale
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