Half Yearly Report

RNS Number : 5137M
NCC Group PLC
21 January 2016
 

21 January 2016

 

NCC Group plc

 

Continued strong revenue growth drives profits up 26% - dividend up 15% 

 

NCC Group plc (LSE: NCC, "NCC Group" or "the Group"), NCC Group, a global expert in cyber security and risk mitigation, has reported its half year results for the six months to 30 November 2015.

 

Highlights

 

·      Revenue increased 50% to £93.5m (£62.3m in 2014)

o   Organic growth of 17% (11% in 2014)

·      Adjusted operating profit* up 26% to £15.7m (£12.4m in 2014)

·      Reported operating profit £8.6m (£11.1m in 2014)

·      Adjusted pre-tax profit** increased 24% to £14.9m (£12.1m in 2014)

·      Adjusted fully diluted earnings** per share increased 11% to 5.00p (4.50p in 2014)

·      Interim dividend up 15% to 1.50p (1.30p in 2014)

·      Underlying cash conversion ratio 116% of operating profit (105% in 2014)

·      Integration of Accumuli plc, acquired on 30 April 2015, completed

·      Acquisition of Fox-IT for £92.6m on 27 November 2015

 

Outlook

 

·      Orders and renewals up 32% totalling £75.7m (£57.2m in November 2014) for the current financial year

 

* Adjusted for amortisation of acquired intangibles, exceptional items and share based payment charges.

 

** Adjusted for the items above and the unwinding of the discount on contingent consideration. 

 

Rob Cotton, Group Chief Executive, commented:

 

"We have delivered another strong set of results with Group organic revenue growth increasing by 17%. We are in an excellent position to continue to grow the Group organically as well as benefiting from the recent acquisitions of Accumuli and Fox-IT going forwards. 

 

"With over 600 cyber security consultants around the world and our increasing range of capabilities, we are well positioned to meet our aspirations to become the leading player in the expanding global cyber security market.

 

"The numerous publicly reported cyber-attacks over the last few months, clearly demonstrate that the rate and complexity of cyber-crime has grown at a faster rate than anyone expected. For example, our managed security scanning and monitoring service identifies over 10,000 incidents a day - twice as high as this time last year.

 

"Six years ago, we stated that cyber-crime is an arms race and it remains so to this day. In a digital age, cyber-crime is the single biggest threat to corporates and individuals around the world.

 

"Cyber security and the associated risk mitigation is a Board's responsibility. Directors must be fully accountable and a lack of understanding or knowledge is not an acceptable excuse.

 

"Boards that are not addressing cyber security with the same vigour and transparency as they do audit, remuneration, health & safety and CSR, are putting the operational and financial viability of their business at considerable risk, as well as its reputation."

 

Enquiries:

 

NCC Group (www.nccgroup.trust)

0161 209 5432

Rob Cotton, Chief Executive

 

Atul Patel, Group Finance Director

 

 

 

Instinctif Partners

020 7457 2020

Adrian Duffield / Lauren Foster

 

 

 

     

 

Overview

 

The Group had a notably strong six months to 30 November 2015. Continued strong organic and acquisitive growth, allied to a successful fund raising and acquisition, has seen NCC Group enter the FTSE 250. The Group now operates globally from 32 offices, with over 1,800 employees.  

 

Group revenue increased by 50% to £93.5m (£62.3m in 2014), with very strong growth coming from both the Assurance and Escrow divisions. Organic growth across the Group was 17% after taking account of the effects of the acquisitions of Accumuli and Open Registry in the previous financial year.

 

International revenue, which is mostly derived from the US, grew strongly by 17% to £34m. Following the acquisition of the UK-based Accumuli, international revenue now represents 36% (47% in 2014) of total Group revenue.

 

Group adjusted operating profit increased by 26% to £15.7m (£12.4m in 2014). Escrow operating profit grew by 4% to £9.2m (£8.9m in 2014) and Assurance by 33% to £10.3m (£7.7m in 2014). With revenue increased and good operational cost control, Domain Services losses were reduced to £1.0m (£1.9m loss in 2014).

 

Group adjusted diluted earnings per share improved 11% to 5.00p (4.50p in 2014).

 

The Group continues to be highly cash generative with the ratio of operating cash flow before interest and tax being 116% of operating profits (105% in 2014) after adjusting for exceptional Accumuli working capital movements associated with acquisition related payments.

 

On 27 November 2015, the Group completed the acquisition of Fox-IT, the 250 employee, Netherlands-based, threat intelligence and security business, for £92.6m. This was financed by a £126.3m fund raising, alongside a new multi bank five year revolving credit facility, term loan and overdraft.

 

Net debt at the end of the period, post the acquisition of Fox-IT but before the placing and open offer, was £73.1m (£31.3m in 2014) against the new facilities of £110m.

 

The Board has continued its progressive dividend policy, increasing the interim dividend by 15% to 1.50p (1.30p in 2014).

 

 

Current trading & outlook

 

The Group remains focused on delivering client peace of mind and risk mitigation. It provides a complementary range of services with the breadth and depth to provide multinational clients with a total solution to their information security issues and needs.

 

The Group's approach across its three Divisions remains unchanged; to develop the business by a combination of acquisitions of earnings enhancing, high quality businesses, with strong organic growth all focused away from areas of discretionary expenditure.

 

The Escrow business expects annual renewals to be £19.3m (£18.3m at November 2014) in this financial year, based on termination rates at 11%. The Escrow verification testing worldwide order book stands at £2.3m (£2.3m at November 2014).

 

Assurance order books have improved to £41.0m (£29.8m at November 2014) and have £7.0m of monitoring renewals forecast for the current financial year (£6.8m at November 2014) and £6.1m of Accumuli renewals.

 

In total, the Group's orders and renewals for the current financial year have increased by 32% to £75.7m (£57.2m at November 2014), excluding the newly acquired Fox-IT business.

 

The Group's revenue has always been biased towards the second half of the financial year. This is expected to continue this year.

 

The expansion of NCC Group's offerings through the acquisition of Fox-IT within Assurance, substantially increases the Group's ability to provide an international end-to-end service to customers. Over the next 12 months, the Group will begin to integrate the business within Assurance to exploit the operational synergies and global market opportunities.

 

The Group is operating in rapidly growing markets around the world and expects this trading environment to continue to develop strongly. It further expects that the enhanced Domain Services division will continue to see revenue growth, despite the slow ICANN processes and the lack of market awareness of the changes in the domain world. 

 

The Board remains very confident of a strong second half performance in the current financial year and expects to meet market expectations for the full year.

 

 

Financial review

 

Revenue

 

Group revenue was £93.5m (£62.3m in 2014) and following the acquisition of the UK-based Accumuli, international revenues now make up 36% (47% in 2014) of total revenue. Escrow accounted for 18% of NCC Group's total revenue (25% in 2014) with Assurance representing 79% (75% in 2014).

 

The movements in the global currency markets had a small positive impact on the Group, which if a constant currency basis had been used, would have seen a 48% increase in Group revenue (reported: 50%).

 

The table below summarises revenue by division, including their key business areas.

 

 

 

 

2015

Six months

ended

30 November

£'000

2014

Six months

ended

30 November

£'000

%

Change

Revenue by business

Segment

 

 

 

Escrow UK

12,077

11,314

7

Escrow Europe

1,597

1,553

3

Escrow USA

2,772

2,520

10

Total Escrow

16,446

15,387

7

 

 

 

 

Security Consulting

59,625

36,155

65

Web Performance & Software Testing

14,128

10,783

31

Total Assurance 

73,753

46,938

57

 

 

 

 

Domain Services

3,309

-

-

 

 

 

 

Total Revenue

93,508

62,325

50

 

The table below provides a geographical analysis of the Group's revenue based on where the customer is located. It highlights the significant increase in the scale of the US operations that make up the majority of the rest of the world revenue.

 

 

 

2015

Six months

ended

30 November

£'000

2014

Six months

ended

30 November

£'000

%

Change

Revenue by geographical destination

 

 

 

UK

59,467

33,309

79

Rest of Europe

8,764

6,328

38

Rest of the World

25,277

22,688

11

Total Revenue

93,508

62,325

50

 

Profitability

 

Group adjusted operating profit, before amortisation of acquired intangible assets, exceptional items and share based payments, increased by 26% to £15.7m (£12.4m in 2014).

 

Group adjusted operating profit has been calculated after £1.0m (£1.9m in 2014) was expensed in respect of the continued investment in Domain Services. Excluding these costs, Group adjusted operating profit increased by 17% to £16.7m (£14.3m in 2014).

 

The Group adjusted operating profit margin was 17% (20% in 2014). This is lower as a result of the impact of the expensed Domain Services, the investments made by Escrow and also the acquisition of Accumuli, which has lower margins than the rest of Assurance due to its product sales.

 

Assurance and Escrow operating margins were 14% (17% in 2014) and 56% (58% in 2014) respectively. Overall, the Group expects these margins to strengthen in the medium term.

 

 

 

2015

Six months

ended

30 November

£'000

2014

Six months

 ended

30 November

£'000

 

Operating profit by business segment

 

 

Group Escrow

9,198

8,889

Assurance Testing

10,320

7,747

Domain Services

(1,029)

(1,887)

Segment operating profit

18,489

14,749

Head office costs

(2,775)

(2,300)

Operating profit before amortisation of acquired intangibles, charges for share based payments and exceptional items

15,714

12,449

Amortisation of intangible assets Group Escrow

(353)

(420)

Amortisation of intangible assets Assurance

(1,682)

(464)

Amortisation of intangible assets Domain Services

(216)

-

Share based payments

(696)

(338)

Operating profit before exceptional items

12,767

11,227

Exceptional items

(4,174)

(158)

Operating profit

8,593

11,069

 

 

Exceptional items

 

The exceptional items are as follows:

 

 

2015

Six months

ended

30 November

£'000

2014

Six months

ended

30 November

£'000

2015

Year

ended

31 May

£000

Exceptional items

 

 

 

Acquisition related costs

(2,583)

-

(2,387)

Revision to estimates of contingent consideration

2,992

-

-

Intangible asset write down

(4,086)

-

-

Restructuring costs

(497)

-

-

IT claim net (costs) / income

-

(158)

1,799

Total

(4,174)

(158)

(588)

 

Acquisition related costs in the year of £2.6m (nil in 2014) consist of fees incurred in relation to the acquisition of Fox-IT on 27 November 2015.

 

The fair value of contingent consideration in respect of business acquisitions has been reassessed, resulting in a net gain of £3.0m (nil in 2014). The release primarily relates to Open Registry following the continued delays in both the roll-out of branded domains and the launch of ICANN's second round of new top level domain names.

 

With the acquisitions of Accumuli and Fox-IT, the Group has consolidated and rationalised its scanning services and has consolidated both the operation and development onto one product set and platform. As a result, the redundant technology in both companies has been written off, resulting in a non-cash charge of £4.1m.

 

Following the acquisition of Accumuli, the Group incurred £0.5m of restructuring costs (nil in 2014).

 

The Group's reported pre-tax profit was £7.5m (£10.6m in 2014) after including the unwinding of the discount on contingent consideration, amortisation of acquired intangible assets, share based payments and exceptional items.

 

Taxation 

 

The tax rate for the six months ended 30 November 2015 is 20% (21% in 2014), based upon the expected tax rate for the full year. The expected rate reflects the continued reduction in the UK corporate tax rates and the US tax treatment of Domain Services development costs.

 

Earnings per share

 

The adjusted basic earnings per share increased by 11% to 5.1p (4.6p in 2014) and reported basic earnings per share from operations were 2.6p (4.0p in 2014).

 

The table below analyses the effect on the Group's basic earnings per share of the amortisation of acquired intangibles, unwinding of the discount on contingent consideration for acquisitions, the effect of the exceptional items and share based payments.

 

 

 

2015

Six months

ended

30 November

 

2014

Six months

ended

30 November

 

Basic EPS

 

 

 

Group earnings per share - unadjusted

 

2.6p

4.0p

Amortisation of acquired intangibles

 

0.8p

0.4p

Exceptional items

 

1.4p

0.1p

Unwinding of the discount on the

contingent consideration of the

acquisitions

 

0.1p

0.0p

Share based payments

 

0.2p

0.1p

Adjusted basic EPS

 

5.1p

4.6p

 

 

Dividends

 

In line with a continuing progressive dividend policy, the Board is paying an interim dividend of 1.50p (1.30p in 2014), an increase of 15%. This will be paid on 26 February 2016 to shareholders on the register at the close of business on 29 January 2016, with an ex-dividend date of 28 January 2016.

 

This represents cover of 1.7 times (3.1 times in 2014) based on basic earnings, due to the exceptional items and cover of 3.4 times on an adjusted basic earnings basis (3.5 times in 2014).

 

Cash & funding

 

Underlying operating cash flow before interest and tax, as a ratio to operating profits of £8.6m, remained strong at 116% (105% in 2014). The Group remains committed to strong balance sheet management and borrowing only for affordable value enhancing acquisitions and the expansion of suitably considered service lines.

 

On 20 November 2015, the Group increased its banking facilities to £110m with a £5m overdraft.  The new five year multi-currency syndicated bank facility comprises a £80m revolving credit facility and a £30m five year term loan.  

 

On 25 November 2015, the Group completed a firm placing for £63.1m and on 18 December 2015 a placing and open offer for a further £63.2m.

 

On 27 November 2015, the Group completed the acquisition of Fox-IT for £92.6m (€133.25m) of which £76.6m (€108.3m) was paid on completion.

 

The Group had net debt of £73.1m (£31.3m in 2014) at the period end, post the acquisition of Fox-IT but before the £63.2m placing and open offer.

 

A final deferred consideration payment of £1.7m for FortConsult will be paid in June 2016.

 

Capital expenditure decreased to £5.5m (£9.7m in 2014) of which £1.9m (£4.1m in 2014) relates to Domain Services. The Group also continued its investment in Group offices, operational IT systems, infrastructure and product upgrades £3.6m (£5.6m in 2014).

 

Operational review

 

Group Escrow

 

Escrow continues to be the cornerstone of the Group's profitability and cash generation. All of the businesses offer substantial margins, a high degree of recurring revenue due to the contract renewal rates, as well as notably strong cash conversion characteristics.

 

Group Escrow revenue increased by 7% (4% in 2014) to £16.4m (£15.4m in 2014) and recurring revenues through the renewals process will grow to £19.3m this financial year, up from £18.5m.

 

Group Escrow operating profitability grew by 4% (6% in 2014) to £9.2m (£8.9m in 2014).

 

In November 2015, Escrow prices were increased globally, slightly ahead of inflation. This will impact on renewals from January 2016.

 

Escrow UK. The first half of the financial year saw a very good performance in the traditionally quieter period. UK revenue grew 7% (5% in 2014) to £12.1m (£11.3m in 2014).

 

The underlying termination rate remained at about 11% (11% in 2014), with no discernible change in the reasons for termination.

 

Escrow USA & Escrow Europe. Escrow USA revenue increased by 10% (7% in 2014) to £2.8m with strong performances achieved in both Atlanta and San Francisco.

 

Escrow Europe revenues grew by 3% to £1.6m (£1.6m in 2014), which reflects the strength and stability of the new team.

 

Assurance Division

 

The Assurance Division revenue grew by 57% to £73.8m (£46.9m in 2014) reflecting strong organic growth in all areas including a contribution of £18.7m from Accumuli. Organic revenue grew by 17% to £55.1m (£46.9m in 2014) and US revenue grew 21% to £15.6m (£12.9m in 2014).

 

During the first half, operating profits increased 33% to £10.3m (£7.7m in 2014). The benefits from the operational efficiencies gained by the Accumuli integration have started to filter through. However, some of Accumuli's businesses have lower margins. Overall Assurance's margin was 14% (17% in 2014), although the Group is confident that the Division will reach the Group's 20% target in the medium term.

 

Within the Assurance division, staff retention and recruitment is the most significant issue and treating it as such ensures that the Group's exemplary reputation remains intact. Indeed the importance the Group places on recruitment and retention is one of the reasons why employees choose to join NCC Group. The Division now employs over 1,000 people globally and has one of the largest multinational accredited teams of security consultants in the industry.

 

Carefully balancing paid-for utilisation, quality of deliverable work and research ensures that employee churn in the delivery teams is less than the 10% staff separation target. This is significantly less than the 30% market norm in high skilled IT environments.

 

The Group's world-class reputation for security research continues with ground breaking work being published in the automotive and maritime sectors. In the last 12 months, Group employees produced 38 whitepapers and 95 new blog posts on major areas of security and spoke at numerous industry events and forums. The Group actively promotes a responsible disclosure policy for both paid for and self-funded vulnerability research.

 

Accumuli has performed strongly since its acquisition. The integration is now complete, ahead of plan, reflecting the strength and adaptability of the company. Significant investment has been made in the business, with a notable investment in new talent and a new consolidated office opened in Leeds. The facility features a state of the art Security Operations Centre (SOC), which not only meets customer demand but also provides a facility from which the Group will ultimately provide Fox-IT services in the UK.

 

The web monitoring, performance and load testing business continued to perform strongly. It achieved a recurring revenue rate above 90% (91% in 2014) as businesses continue to recognise the importance of their website to their business prospects.

 

Domain Services

 

The Group has made considerable progress in the last six months despite being compromised by the speed of take-up of new domains as well as slow decision making by ICANN and brand owners.

 

The Group provides a complete end-to-end secure domain service covering every aspect of a company's domain strategy from a trusted secure domain environment, a backend operator (registry), a managed service scanning provider, a corporate registrar, domain consultancy, third party data escrow and anti-abuse monitoring as required by ICANN.

 

The take up of new domains has been considerably slower than anticipated. As a result, both consumers and corporates are still largely unaware of the impact of the increase in new domains and the threats they pose. This has had a direct impact on organisations joining the .trust secure community.

 

The delays with branded domains have also been a source of frustration as they represent a primary way of communicating the changes in the domain world as well as being significant targets for the Division. The vast majority of brand domains are yet to be delegated.

 

Separating monitoring sales away from .trust and enabling the domains to be purchased as a placeholder has been beneficial. It allows companies to gain peace of mind over securing their domain and work towards their security policies whilst benefiting from the Group's state of the art managed security scanning and monitoring capabilities. 

 

The managed security scanning and monitoring service provided by Domain Services, currently run over 6,000 application, infrastructure and monitoring scans per month. This equates to monitoring over 100,000 live IP addresses monthly or over six million live and non-live IP addresses annually. Currently this service is identifying over 320,000 incidents a month, which is twice as high as this time last year.

 

With the acquisition of Accumuli and latterly Fox-IT, the Group has consolidated and rationalised its scanning services and has consolidated both the operation and development on to one product set and platform.

 

At 30 November, the Group has capitalised £6.7m of development costs which covers the .trust domain, product and infrastructure construction, know-how and filing of patents.

 

With revenue increased to £3.3m and tight operational cost control, losses almost halved to £1.0m (£1.9m in 2014).

 

 

"We have a right to security"

 

The growth of the information security marketplace is a direct consequence of the ever-increasing levels of cyber-crime. As data breaches proliferate, reports of corporate breaches hit the headlines on an almost daily basis. Defending against the damage and disruption is expensive, time consuming and can paralyse organisations, whilst permanently damaging brand value and investor and consumer confidence.

 

Despite this, in the UK, the public is still largely in the dark about what data of theirs has been compromised or how poor companies are at safeguarding their data.

 

According to our recent Trust in the Internet Survey, almost two-thirds of consumers believe an online data breach will compromise their financial information within the next year.

 

Indeed some 60% of consumers are more worried than ever before about protecting their personal and financial information online.

 

Individuals should have the right to expect their data to be protected to the highest standards and if it is not, they should be made aware of what has happened to it. Neither of which is the case today.

 

Cyber security and the associated risk mitigation is a Board's responsibility. Directors must be fully accountable and a lack of understanding or knowledge is not an acceptable excuse. While the measure and assessment of cyber risk can be contracted out to third parties, the determination of what is an acceptable level of risk and what appropriate mitigations can be used to reduce or minimise that risk, cannot be outsourced.

 

Currently companies do not have any responsibility to report on cyber breaches or the costs spent mitigating or remediating after a breach has occurred. Boards fully discuss and become expert on accounting policies, health and safety, CSR and executive remuneration and report on them in detail in their Annual Report and Accounts. This is not the case with a company's most valuable assets - its data and information.

 

Cultural change is needed. The majority of Boards do not have executives with the necessary IT skills, let alone an understanding of cyber security. Most board directors who have extensive operational and financial expertise in their industries and the corporate world have minimal, if any, formal education in IT. As directors undergo training for anti-bribery or health and safety, they should also undertake training for cyber security, as without it they will not be able to judge or score the threat on the corporate risk register.

 

It is no longer acceptable for cyber security to be passed down to an IT director or risk manager. It is the responsibility of the main board as it is the most significant issue facing businesses today.

 

It is reasonable that individuals have the right to know if their data has been hacked and the UK needs to lead in how cyber security risk is reported and handled before European legislation is adopted in the next few years.

 

The European Council is aiming for the General Data Protection Regulation (GDPR) to be adopted in early 2016 and new rules being made applicable to business two years after that. The legislation will mean that individuals will gain the right to know when their data has been hacked and companies and organisations will be required to notify the national supervisory authority of serious data breaches as soon as possible.

 

On average it takes almost 120 days for an organisation to find out that it has been compromised. The suggested timeframe for notification is within 72 hours from the breach being uncovered, which is cold comfort to those compromised individuals.

 

Any breach of the new data protection rules will be punished with fines of up to four per cent of global turnover with the prospect of significant financial fines for non-compliance as an additional incentive to focus the minds at Board level. The legislation will therefore have a high financial inducement for Boards to adopt a more proactive strategy towards cyber security risk.

 

Closely following will be the Network and Information Security Directive (NISD) agreement, which is hailed as a significant breakthrough for the European Community's ambition to develop a common cyber security framework and improve cooperation across borders on the issue.

 

The backdrop of falling consumer confidence and weakening defences is an ideal market for both the Assurance Division and Domain Services Division to thrive in.

 

Group IT Systems

 

The Group's replacement IT system is now largely operational although it will take a further 12 months to roll out the project to all of the Group's international offices.

 

Principal risks & uncertainties

 

The Group faces operational risks and uncertainties, which the Directors take all reasonable steps possible to mitigate, however, the Directors recognise that they can never be eliminated completely.

 

The principal operational risks and uncertainties the Group faces include those in relation to; the recruitment of additional staff to meet the Group's ambitious growth plans; the occurrence of unforeseen difficulties in the integration of current or future acquisitions; the protection of critical assets and information against the threat of cyber-crime; the impact of a successful cyber-attack on company reputation, share price and customer confidence; the dependence on key executives and senior managers; and the speed of adoption of new gTLD's by customers and consumers globally.

 

There are no persons with whom the Company has contractual or other arrangements that are deemed to be essential to the Group.

 

 

INDEPENDENT REVIEW REPORT TO NCC GROUP PLC 

 

Introduction 

 

We have been engaged by the company to review the condensed set of financial statements in the half-year financial report for the six months ended 30 November 2015 which comprises group condensed income statement, the group condensed statement of comprehensive income, the group condensed statement of financial position, the group condensed statement of changes in equity, the group condensed statement of cash flows and the related explanatory notes. We have read the other information contained in the half-year financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements. 

 

This report is made solely to the company in accordance with the terms of our engagement to assist the company in meeting the requirements of the Disclosure and Transparency Rules ("the DTR") of the UK's Financial Conduct Authority ("the UK FCA").  Our review has been undertaken so that we might state to the company those matters we are required to state to it in this report and for no other purpose.  To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company for our review work, for this report, or for the conclusions we have reached. 

 

Directors' responsibilities 

 

The half-year financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-year financial report in accordance with the DTR of the UK FCA. 

 

As disclosed in note 1, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the EU. The condensed set of financial statements included in this half-year financial report has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU

 

Our responsibility 

 

Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-year financial report based on our review. 

 

Scope of review 

 

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in the UK. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. 

 

Conclusion 

 

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-year financial report for the six months ended 30 November 2015 is not prepared, in all material respects, in accordance with IAS 34 as adopted by the EU and the DTR of the UK FCA. 

 

 

Stuart Burdass

for and on behalf of KPMG LLP 

Chartered Accountants 

1 St Peter's Square

Manchester

M2 3AE

21 January 2016

 

 

Group condensed income statement

 

 

 

 

 

 

 

Notes

 

2015

six months

ended

30 November

2014

six months

ended

30 November

 

2015

year

ended

 31 May

 

 

 

£'000

£'000

£'000

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

2

93,508

62,325

133,696

Cost of sales

 

(68,716)

(42,779)

(92,828)

Gross profit

 

24,792

19,546

40,868

 

 

 

 

 

Administrative expenses before amortisation of acquired intangible assets, share based payments and exceptional items

 

(9,078)

(7,097)

(14,473)

Operating profit before amortisation, share based payments and exceptional items

 

15,714

12,449

26,395

Amortisation of acquired intangible assets

 

(2,251)

(884)

(2,207)

Share based payments

 

(696)

(338)

(991)

Exceptional items

3

(4,174)

(158)

(588)

Total administrative expenses

 

(16,199)

(8,477)

(18,259)

 

 

 

 

 

Operating profit

2

8,593

11,069

22,609

 

 

 

 

 

Financial income

 

3

-

10

Finance expense excluding unwinding of discount

 

(828)

(395)

(936)

Net finance expense excluding unwinding of discount

 

(825)

(395)

(926)

Unwinding of discount effect relating to deferred consideration on business combinations

 

(230)

(65)

(262)

Financial expenses

 

(1,058)

(460)

(1,198)

Net financing costs

 

(1,055)

(460)

(1,188)

 

 

 

 

 

Profit before taxation

 

7,538

10,609

21,421

Taxation

4

(1,528)

(2,243)

(4,633)

Profit for the period

 

6,010

8,366

16,788

 

 

 

 

 

Attributable to equity holders of the parent company

 

6,010

8,366

16,788

 

 

 

 

 

Earnings per share from continuing operations

5

 

 

 

Basic earnings per share

 

2.6p

4.0p

8.0p

Diluted earnings per share

 

2.6p

4.0p

7.8p

 

 

 

 

 

 

Group condensed statement of comprehensive income

 

 

 

 

 

 

 

 

 

2015

six months

ended

30 November

 

2014

six months

ended

30 November

 

2015

year

ended

 31 May

 

 

 

£'000

£'000

£'000

 

 

 

 

 

Profit for the period

 

6,010

8,366

16,788

 

 

 

 

 

Other comprehensive income

 

 

 

 

Foreign exchange translation differences

 

260

1,171

(388)

Total comprehensive income for the period

 

6,270

9,537

16,400

 

 

 

 

 

Attributable to:

 

 

 

 

Equity holders of the parent

 

6,270

9,537

16,400

 

 

 

 

 

           

 

Group condensed statement of financial position

 

 

 

 

Notes

2015

30 November

 

2014

30 November

 

2015

31 May

 

 

 

£'000

£'000

£'000

 

 

 

 

 

Non-current assets

 

 

 

 

Intangible assets

7

292,458

118,478

204,936

Plant and equipment

 

11,167

8,045

9,376

Investments

 

271

-

553

Deferred tax assets

 

4,704

3,098

4,318

Total non-current assets

 

308,600

129,621

219,183

 

 

 

 

 

Current assets

 

 

 

 

Trade and other receivables               

9

57,833

30,513

44,429

Inventory

12

372

-

-

Cash and cash equivalents

 

22,221

6,987

16,353

Total current assets

 

80,426

37,500

60,782

Total assets

 

389,026

167,121

279,965

 

 

 

 

 

Equity

 

 

 

 

Issued capital

15

2,528

2,088

2,293

Share premium

15

86,145

23,935

23,964

Merger reserve

 

42,308

-

42,308

Reserve for own shares

 

(230)

(51)

(464)

Retained earnings

 

65,371

58,652

65,064

Currency translation reserve

 

(1,179)

120

(1,439)

Total equity attributable to equity holders of the parent

 

194,943

84,744

131,726

 

 

 

 

 

Non-current liabilities

 

 

 

 

Interest bearing loans

11

95,311

38,290

57,155

Other financial liabilities                       

 

631

438

392

Finance Leases

 

-

-

64

Deferred tax liability

 

9,259

3,387

10,119

Consideration on acquisitions

 

17,652

1,024

7,434

Total non-current liabilities

 

122,853

43,139

75,164

 

 

 

 

 

Current liabilities

 

 

 

 

Trade and other payables                     

10

33,985

16,757

27,972

Consideration on acquisitions

 

3,496

745

-

Deferred revenue                                  

 

32,351

17,690

31,861

Interest bearing loans

 

-

-

9,750

Current tax payable

 

1,398

4,046

3,492

Total current liabilities

 

71,230

39,238

73,075

Total liabilities

 

194,083

82,377

148,239

Total liabilities and equity

 

389,026

167,121

279,965

 

 

Group condensed statement of cash flows

 

 

 

 

 

 

 

2015

six months

ended

30 November

 

2014

six months

ended

30 November

 

2015

year

ended

31 May

 

 

 

£'000

£'000

£'000

Cash inflow from operating activities

 

 

 

Profit for the period

 

6,010

8,366

16,788

Adjustments for:

 

 

 

 

Depreciation charge

 

1,569

1,182

2,623

Share based charges

 

696

294

885

Amortisation of intangible assets

 

2,743

1,125

2,723

Net financing costs

 

1,055

460

1,188

Profit on sale of plant and equipment

 

-

(33)

(43)

Intangible asset write down

 

4,086

 

 

Adjustments to contingent consideration

 

(2,992)

-

-

Income tax expense

 

1,528

2,243

4,633

Cash inflow for the period before changes in working capital

 

14,695

13,637

28,797

Increase in trade and other receivables

 

(5,880)

(1,790)

(511)

Increase/(decrease) in trade and other payables

 

1,145

(164)

(4,000)

(Decrease)/increase in exceptional Accumuli payables

 

(2,079)

-

-

Cash generated from operating activities before interest and tax

7,881

11,683

24,286

Interest paid

 

(1,054)

(417)

(1,072)

Income tax paid

 

(3,425)

(715)

(3,417)

Net cash generated from operating activities

 

3,402

10,551

19,797

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

Interest received

 

3

-

10

Purchase of plant and equipment

 

(1,132)

(2,732)

(4,788)

Development expenditure

 

(4,329)

(6,993)

(8,175)

Acquisition of businesses

 

(77,959)

(2,260)

(19,831)

Cash acquired with subsidiaries

 

1,769

-

5,676

Net cash used in investing activities

 

(81,648)
 

(11,985)
 

(27,108)

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

Proceeds from the issue of ordinary share capital

 

62,416

304

429

Purchase of own shares

 

(97)

-

(414)

Draw down of borrowings

 

27,954

2,087

20,443

Equity dividends paid

 

(6,145)

(4,919)

(7,634)

Net cash from financing activities

 

84,128

(2,528)

12,824

 

 

 

 

 

Net increase/(decrease) in cash and cash equivalents

 

5,882

(3,962)

5,513

 

 

 

 

 

Cash and cash equivalents at beginning of period

 

16,353

11,212

11,212

Effect of exchange rate fluctuations

 

(14)

(263)

(372)

Cash and cash equivalents at end of period

 

22,221

6,987

16,353

 

 

 

 

 

 

Group condensed statement of changes in equity

 

 

Share capital

Share premium

Merger reserve

Currency Translation reserve

Reserve for own shares

Retained earnings

Total

 

£'000

£'000

£'000

£'000

£'000

£'000

£'000

Balance at 1 June 2014

2,085

23,634

-

(1,051)

(1,075)

56,003

79,596

Profit for the period

-

-

-

-

-

8,366

8,366

Foreign currency translation differences

-

-

-

1,171

-

-

1,171

Total comprehensive income for the period

-

-

-

1,171

-

8,366

9,537

 

 

 

 

 

 

 

 

Transactions with owners recorded directly in equity

 

 

 

 

 

 

Dividends to equity shareholders

-

-

-

-

-

(4,919)

(4,919)

Share based payment transactions

-

-

-

-

-

294

294

Current and deferred tax

-

-

-

-

-

(68)

(68)

Shares issued

3

301

-

-

1,024

(1,024)

304

Total contributions by & distributions to owners

3

301

-

-

1,024

(5,717)

(4,389)

 

 

 

 

 

 

 

 

Balance at 30 November 2014

2,088

23,935

-

120

(51)

58,652

84,744

 

 

 

 

 

 

 

 

 

 

Share capital

Share premium

Merger reserve

Currency Translation reserve

Reserve for own shares

Retained earnings

Total

 

£'000

£'000

£'000

£'000

£'000

£'000

£'000

Balance at 1 June 2014

2,085

23,634

-

(1,051)

(1,075)

56,003

79,596

Profit for the period

-

-

-

-

-

16,788

16,788

Foreign currency translation differences

-

-

-

(388)

-

-

(388)

Total comprehensive income for the period

-

-

-

(388)

-

16,788

16,400

 

 

 

 

 

 

 

 

Dividends to equity shareholders

-

-

-

-

-

(7,634)

(7,634)

Share based payment transactions

-

-

-

-

-

885

885

Current and deferred tax

-

-

-

-

-

47

47

Shares issued

208

330

42,308

-

-

-

42,846

Purchase of own shares

-

-

-

-

611

(1,025)

(414)

Total contributions by & distributions to owners

208

330

42,308

-

611

(7,727)

35,730

 

 

 

 

 

 

 

 

Balance at 31 May 2015

2,293

23,964

42,308

(1,439)

(464)

65,064

131,726

 

 

 

 

 

 

 

 


 

 

Share capital

Share premium

Merger reserve

Currency Translation reserve

Reserve for own shares

Retained earnings

Total

 

£'000

£'000

£'000

£'000

£'000

£'000

£'000

Balance at 1 June 2015

2,293

23,964

42,308

(1,439)

(464)

65,064

131,726

Profit for the period

-

-

-

-

-

6,010

6,010

Foreign currency translation differences

-

-

-

260

-

-

260

Total comprehensive income for the period

-

-

-

260

-

6,010

6,270

 

 

 

 

 

 

 

 

Transactions with owners recorded directly in equity

 

 

 

 

 

 

Dividends to equity shareholders

-

-

-

-

-

(6,145)

(6,145)

Share based payment transactions

-

-

-

-

-

696

696

Current and deferred tax

-

-

-

-

-

77

77

Shares issued

235

62,181

-

-

-

-

62,416

Purchase of own shares

-

-

-

-

234

(331)

(97)

Total contributions by & distributions to owners

235

62,181

-

-

234

(5,703)

56,947

 

 

 

 

 

 

 

 

Balance at 30 November 2015

2,528

86,145

42,308

(1,179)

(230)

65,371

194,943

 

 

Notes to the half year report

 

1 Accounting policies

 

Basis of preparation

The Group condensed half-year financial statements for the six months ended 30 November 2015 have been prepared in accordance with IAS 34, "Interim Financial Reporting" as adopted by the EU.

 

As required by the Disclosure and Transparency Rules of the Financial Services Authority the financial information contained in this report has been prepared using the accounting policies applied for the year ended 31 May 2015. They do not contain all the information required for full annual financial statements and should be read in conjunction with the annual financial statements for the year ended 31 May 2015.

 

The financial statements of the Group for the year ended 31 May 2015 are available from the Company's registered office, or from the website www.nccgroup.trust.

 

The comparative figures for the financial year ended 31 May 2015 are not the company's statutory accounts for that financial year. Those accounts, which were prepared under IFRS as adopted by the EU ("adopted IFRS"), have been reported on by the company's auditors and delivered to the registrar of Companies. The report of the auditors was (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 498(2) or (3) of the Companies Act 2006.

 

NCC Group plc ("the Company") is a company incorporated in the UK.

 

Significant accounting policies

 

The accounting policies applied by the Group in these consolidated half-year financial statements are the same as those applied by the Group in its consolidated financial statements as at and for the year ended 31 May 2015.

 

There are no IFRS or IFRIC interpretations effective for the first time in this financial period which are relevant that have had a material impact on the Group.

 

Going concern

 

The Group's activities, together with the factors likely to affect its future development, performance and position are set out in the financial and operational reviews.

 

The directors have reviewed the trading and cashflow forecasts as part of their going concern assessment, together with the available facilities at 30 November 2015, (see note 11), including reasonable downside sensitivities which take into account the uncertainties in the current operating environment.

 

Taking into account the above uncertainties and circumstances, the directors formed a judgement that there is a reasonable expectation that the group has adequate resources to continue in operational existence for the foreseeable future. 

 

Accordingly they continue to adopt the going concern basis in preparing the group's condensed half-year financial statements for the period ended 30 November 2015.

 

Use of estimates and judgements

 

The preparation of the consolidated half-year financial statements in conformity with IFRSs requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses.  Actual results may differ from these estimates.

 

In preparing the consolidated half-year financial statements, the significant judgements made by management in applying the Group's accounting policies and key sources of estimated uncertainty were the same as those applied to the consolidated financial statements for the year ended 31 May 2015.

 

2 Segmental information

 

The Group is organised into three operating segments (30 November 2014: three): Group Escrow, Assurance and Domain Services each of which is separately reported.   

 

Whilst revenue and profitability are monitored by individual business units within these operational segments it is only at the operating level that resource allocation decisions are made. 

 

Performance is measured based on segment profit, which comprises segment operating profit excluding amortisation of acquired intangible assets, share based payment charges and exceptional items.  Interest and tax are not allocated to business segments and there are no intra-segment sales.

 

The Group's revenue has always been biased towards the second half of the financial year. This is expected to continue this year.

 

 

 

2015

Six months

ended

30 November

 

2014

Six months

ended

30 November

 

2015

Year

ended

31 May

 

 

Revenue by business segment

£'000

£'000

£'000

Escrow UK

12,077

11,314

23,729

Escrow Europe

1,597

1,553

3,152

Escrow USA

2,772

2,520

5,151

Total Group Escrow

16,446

15,387

32,032

 

 

 

 

Security Consulting

59,625

36,155

74,381

Web Performance and Software Testing

14,128

10,783

22,582

Total Assurance

73,753

46,938

96,963

 

 

 

 

Domain Services

3,309

-

4,701

Total Revenue

93,508

62,325

133,696

 


 

2 Segmental information (continued)

 

 

2015

Six months

ended

30 November

 

2014

Six months

ended

30 November

 

2015

Year

ended

31 May

 

 

Operating profit by business segment

£'000

£'000

£'000

Group Escrow           

9,198

8,889

18,891

Assurance  

10,320

7,747

16,990

Domain Services

(1,029)

(1,887)

(4,913)

Segment operating profit      

18,489

14,749

30,968

Head office costs

(2,775)

(2,300)

(4,573)

Operating profit before amortisation, share based payments and exceptional items

15,714

12,449

26,395

Amortisation of acquired intangible assets Group Escrow  

(353)

(420)

(722)

Amortisation of acquired intangible assets Assurance 

(1,682)

(464)

(1,257)

Amortisation of acquired intangible assets Domain Services

(216)

-

(228)

Share based payments

(696)

(338)

(991)

Operating profit before exceptional items  

12,767

11,227

23,197

Exceptional items  

(4,174)

(158)

(588)

Operating profit   

8,593

11,069

22,609

 

 

The table below provides an analysis of the Group's revenue by geographical market where the customer is based.

 

 

2015

Six months

ended

30 November

2014

Six months

ended

30 November

2015

Year

ended

31 May

 

£'000

£'000

£'000

Revenue by geographical destination

 

 

 

UK

59,467

33,309

72,121

Rest of Europe

8,764

6,328

13,503

Rest of the World

25,277

22,688

48,072

Total Revenue

93,508

62,325

133,696

 

3 Exceptional items

 

The Group identifies separately items as "exceptional".  These are items which in the management's judgement, need to be disclosed by virtue of their size or incidence in order for the user to obtain a proper understanding of the financial information.

 

3 Exceptional items (continued)

 

 

2015

Six months

ended

30 November

£'000

2014

Six months

ended

30 November

£'000

2015

Year

ended

31 May

£'000

Exceptional items

 

 

 

Acquisition related costs

(2,583)

-

(2,387)

Revision to estimates of contingent consideration

2,992

-

-

Intangible asset write down

(4,086)

-

-

Restructuring costs

(497)

-

-

IT claim net (costs) / income

-

(158)

1,799

Total

(4,174)

(158)

(588)

 

Acquisition related costs in the period of £2,583,000 (nil in 2014) consist of fees incurred in relation to the acquisition of Fox-IT on 27 November 2015 (note 12).

 

The fair value of contingent consideration in respect of business acquisitions has been reassessed, resulting in a net gain of £2,992,000 (nil in 2014). The release primarily relates to Open Registry following the continued delays in both the roll-out of branded domains and the launch of ICANN's second round of new top level domain names.

 

With the acquisitions of Accumuli and Fox-IT, the Group has consolidated and rationalised its scanning services and has consolidated both the operation and development onto one product set and platform. As a result the redundant technology in both companies has been written off creating a non-cash charge of £4,086,000.

 

Following the acquisition of Accumuli, the Group has incurred £497,000 of restructuring costs (nil in 2014).

 

In the prior year, the Group received a settlement of £2,000,000 in respect of a claim to recover costs incurred on an IT system termination in May 2012. Associated legal costs amounting to £201,000 were incurred in the same financial year, of which £158,000 had been incurred at 30 November 2014.

 

4 Taxation

The Group tax charge represents the estimated annual effective rate of 20% (30 November 2014: 21%) applied to the profit before tax for the period.

 

5 Earnings per share

 

The calculation of earnings per share is based on the following:

 

 

2015

Six months

ended

30 November

£'000

2014

Six months

ended

30 November

£'000

2015

Year

ended

31 May

£'000

Profit for the period from continuing operations used for earnings per share

6,010

8,366

16,788

Amortisation of acquired intangible assets

2,251

884

2,207

Exceptional items

4,174

158

588

Unwinding of discount

230

65

262

Share based payments

696

338

991

Tax arising on the above items

(1,538)

(301)

(818)

Adjusted profit from continuing operations used for adjusted earnings per share

11,823

9,510

20,018

 

 

 

 

           

 

 

 

Number of

shares

000's

Number of

shares

000's

Number of

shares

000's

 

 

 

 

Basic weighted average number of shares in issue

233,355

208,811

210,421

Dilutive effect of share options

3,217

3,619

3,601

Diluted weighted average shares in issue

236,572

212,430

214,022

 

6 Dividends

 

 

2015

Six months

ended

30 November

£'000

2014

Six months

ended

30 November

£'000

2015

Year

ended

31 May

 

£'000

 

 

 

 

Dividends paid and recognised in the period

6,145

4,919

7,634

Dividends proposed but not recognised in the period

4,135

2,715

6,147

 

 

Dividends per share paid and recognised in the Period

3.66p

Dividends per share proposed but not recognised in the period

1.50p

1.30p

2.68p

 

 

 

7 Intangible assets

 

 

Software

                 Development costs

Customer  contracts and relationships

Goodwill

Fox-IT Goodwill

Total

 

£'000

£'000

£'000

£'000

£'000

£'000

Net book value:

 

 

 

 

 

 

At 1 June 2014

5,787

4,974

7,652

91,651

-

110,064

Additions

2,863

4,130

-

-

-

6,993

 

Effects of movements in exchange rates

-

448

335

1,793

-

2,576

Amortisation in the period

(271)

-

(884)

-

-

(1,155)

At 30 November 2014

8,379

9,552

7,103

93,444

-

118,478

Acquisitions through business combinations

340

-

24,581

62,680

-

87,601

Additions

2,212

(1,030)

-

-

-

1,182

Effects of movements in exchange rates

-

219

(78)

(604)

-

(463)

Amortisation in the period

(245)

-

(1,617)

-

-

(1,862)

At 31 May 2015

10,686

8,741

29,989

155,520

-

204,936

Acquisitions through business combinations

1,832

-

-

-

87,908

89,740

Additions

2,434

(2,191)

-

-

-

243

Effects of movements in exchange rates

-

194

(10)

98

-

282

Amortisation in the period

(492)

-

(2,251)

-

-

(2,743)

At 30 November 2015

14,460

6,744

27,728

155,618

87,908

292,458

 

The Group acquired Fox-IT Holdings BV on 27 November 2015 (Note 12). The goodwill on acquisition of £87.9m and the software intangible asset acquired of £1.8m are provisional values with amounts yet to be allocated to the separate intangibles acquired. The goodwill has been shown separately in the note.

 

8 Capital expenditure

 

Additions to plant and equipment during the period ended 30 November 2015 amounted to £1,132,000 (30 November 2014: £2,732,000) and depreciation charged in the period amounted to £1,569,000 (30 November 2014: £1,182,000).

 

 

9 Trade and other receivables

 

 

2015

Six months

ended

30 November

 

2014

Six months

ended

30 November

 

2015

Year

ended

31 May

 

 

£'000

£'000

£'000

 

 

 

 

Trade receivables

34,474

20,763

26,002

Prepayments and accrued income

23,359

9,750

18,427

 

 

57,833

30,513

44,429

 

 

10 Trade and other payables

 

 

2015

Six months

ended

30 November

 

2014

Six months

ended

30 November

 

2015

Year

ended

31 May

 

 

£'000

£'000

£'000

 

 

 

 

Trade payables

6,322

3,652

9,039

Non trade payables

8,497

4,588

5,729

Finance leases

139

-

111

Accruals

19,027

8,517

13,093

 

33,985

16,757

27,972

 

 

 

11 Interest bearing loans

 

 

2015

Six months

ended

30 November

 

2014

Six months

ended

30 November

 

2015

Year

ended

31 May

 

 

£'000

£'000

£'000

 

 

 

 

Secured bank loan

95,311

38,290

66,905

 

 

 

 

Analysed as:

 

 

 

Current

-

-

 

9,750

Non-current

95,311

38,290

57,155

 

95,311

38,290

66,905

 

In November 2015, the group re-financed its external borrowings through a new facility agreement with a syndicate of banks. The Group has agreed a multi-currency revolving credit facility of £80m (30 November 2014: £40m), a £30m multi-currency term loan (30 November 2014: £nil) and an overdraft facility of £5m (30 November 2014: £5m). The effective interest payable on drawn down funds as at 30 November 2015 was 2.0% above LIBOR (2014: 1.6%).

 

 

12 Acquisitions

 

Fox-IT Holdings BV

 

NCC Group (Solutions) Limited acquired Fox-IT Holdings BV, a company based in the Netherlands, on 27 November 2015. Fox-IT has a leading market position in Europe for high-end Cyber Security solutions and is a leading European provider of Advanced Incident Response Services. Fox-IT's activities of Advanced Threat Protection, Threat Intelligence and Web/Mobile Event Analytics, High Assurance and Secure Infrastructure, provide further depth to NCC Group's cyber and assurance services and growth opportunities from new markets.

 

The consideration for the acquisition of Fox-IT was €108,250,000 initial cash, with deferred payments due on each of the first and second anniversaries of completion comprising: €10,000,000 cash and €2,500,000 newly issued NCC Group plc shares each.

 

The acquisition had the following effect on the Group's assets and liabilities:

 

 

 

 

Fair values

 

 

£'000

£'000

Acquiree's identifiable net assets at the acquisition date:

 

 

 

Plant and equipment

 

 

1,898

Intangible assets - software

 

 

1,832

Trade and other receivables

 

 

7,605

Inventory

 

 

372

Deferred tax asset

 

 

1,084

Cash

 

 

1,769

Creditors & accruals

 

 

(7,434)

Deferred revenue

 

 

(2,429)

Net identifiable assets

 

 

4,697

Goodwill* on acquisition

 

 

87,908

Total consideration

 

 

92,605

Satisfied by: Initial cash consideration

 

76,583

 

                      Deferred cash consideration

 

14,149

 

                      Deferred issue of equity shares consideration

 

3,537

 

                      Finance discount on deferred consideration

 

(1,664)

 

 

 

92,605

 

Net cash outflow

 

 

76,583

Cash acquired

 

 

(1,769)

Net cash outflow excluding cash acquired

 

 

74,814

 

*The "goodwill" value presented in the table above is provisional since a review to allocate fair values to the intangible assets of the business has not yet been performed. An intangible asset allocation exercise and the associated deferred tax impact will be performed during H2 and the allocation will be accounted for and presented in the Group consolidated accounts at 31 May 2016.

 

Acquisition costs relating to professional fees totalling £1.9m were incurred and are recognised as exceptional costs in the income statement account (note 3).

 

Accumuli plc

 

On 30 April 2015, the Group acquired 100% of the share capital of Accumuli plc for consideration of £52.5m in a share for share exchange plus cash consideration agreement. NCC Group plc issued 20,389,472 new ordinary shares of 1 pence with a closing share price of 208.5p amounting to a share issue valuation of £42.5m. £10.0m cash consideration was paid on a pro-rata basis to the Accumuli shareholders under the Scheme of Arrangement.

 

Accumuli is a leading, rapidly growing, UK based independent specialist in IT security and risk management, providing industry leading solutions and services. The Group's business activities are in the Assurance business segment.

 

An adjustment of £1.1m is included in exceptional income statement items which relates to a re-assessment of the fair value of contingent consideration relating to a previously acquired subsidiary of Accumuli plc.

 

Open Registry Group

 

On 20 January 2015, the Group acquired the entire share capital of Open Registry S.A (Luxembourg), CHIP S.A. (Luxembourg), Nexperteam C.V.B.A (Belgium) and Sensirius C.V.B.A (Belgium) for total consideration of €19.5m. Of this amount, €10.3m was paid in cash. Contingent consideration of €9.2m is payable in cash depending on specific profit based performance targets on the second and third year anniversaries of the completion date.

 

Open Registry S.A. (Open Registry) is the leading European Registry Service Provider for global brands in terms of brand TLD applications under management. Clearinghouse for Intellectual Property S.A. (CHIP) is one of three key service providers that form the consortium that has been authorised by ICANN to operate the Trademark Clearinghouse (TMCH). Nexperteam CVBA (Nexperteam) is an accredited registrar for several TLDs managing over 8,000 domain names. Nexperteam provides domain registrar services ranging from domain name registration, name serving to email and web hosting. 

 

The Directors of the Group have re-assessed the fair value of the contingent consideration at 30 November 2015 and reduced the liability by £4.1m due to the continued delays in both brand top level domain name roll out and launch of ICANN's second round of new top level domain names. 

The credit adjustment is included in exceptional items (note 3).

 

13 Related party transactions

 

The Group's key management personnel comprise the Directors of the Group.

 

NCC Group's Non-Executive Chairman Paul Mitchell is a director of Rickitt Mitchell & Partners Limited (Rickitt Mitchell) with whom the Group conducted business to the value of £787,500 (30 November 2014: £37,500).  Rickitt Mitchell provides the services of the Non-Executive Chairman and an outsourced acquisition service, which facilitates the delivery of acquisition targets, which have been identified and approved by the Board.

 

 

14 Post balance sheet events

 

On 18 December 2015, the Group issued a further 22,986,307 of new ordinary shares as a result of the successful placing and Open Offer of shares. This resulted in NCC Group plc receiving gross cash proceeds of £63.2m.

 

 

 

15 Called up share capital

 

Number of shares

2015

Six months

ended

30 November

 

2014

Six months ended

30 November

 

2015

Year ended

31 May

 

 

 

£'000

£'000

£'000

Allotted, called up and fully paid

 

 

 

 

Ordinary shares of 1p each at the beginning of the period

229,316,313

2,293

2,085

2,085

Ordinary shares of 1p each issued in the period

23,496,743

235

3

208

Ordinary shares of 1p each at the end of the period

252,813,056

2,528

2,088

2,293

 

On 27 November 2015, NCC Group plc issued 22,949,986 new ordinary shares of 1 pence in connection with the acquisition of Fox-IT Holding B.V. for a price of £229,500 par value of shares and £62,181,000 addition to the share premium account.  The remaining share capital issued is in respect of share based payment transactions.

 

As at 30 November 2015, 116,714 shares were held in treasury (30 November 2014: 28,186). The total consideration paid for the shares was £230,000 (30 November 2014: £51,000), which has been deducted from equity in the period. These shares are held with the sole purpose of the settling any future share based basement obligations.

 

 

Responsibility statement of the Directors in respect of the half year report

 

We confirm that to the best of our knowledge:

 

-      The condensed set of consolidated financial statements has been prepared in accordance with IAS 34, "Interim Financial Reporting" as adopted by the EU;

 

-      The half-year management report includes a fair review of the information required by:

 

(a)  DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of the important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements and a description of the principal risks and uncertainties for the remaining six months of the year; and

 

(b)  DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period and any changes in the related party transactions described in the last annual report that could do so.

 

Rob Cotton      

Chief Executive                          

On behalf of the Board

21 January 2016

 


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