Interim Management Statement

RNS Number : 6204C

NCC Group PLC

18 April 2013

 



18 April 2013

NCC Group

Interim Management Statement

NCC Group plc (LSE: NCC or "the Group"), the international, independent provider of Escrow and Assurance, is today publishing its Interim Management Statement to 17 April 2013.

The Group continues to grow well across most of its operating units and remains extremely profitable and cash generative.  However, in aggregate a number of small, unrelated factors have held back the Group's overall rate of expected growth over the last four months.

The Board now expects Group revenues for the financial year to 31 May 2013 to be not less than £99.0m (2012: £87.7m) and adjusted profits before tax will be not less than £23.0m (2012: £22.6m), which is some 3% and 4% respectively below current market expectations.

In the first 10 months of the financial year, Group revenues are 12% ahead of the same period last year at £80.4m (March 2012: £72.0m), which reflects 7% organic growth.

The Group's balance sheet remains strong with net debt currently £30.7m (March 2012: £25.4m) against the new £40m three-year revolving credit facility signed in April 2013, and an additional £5m overdraft facility. 

Group Escrow

The market for Escrow, as reported at the half-year results, continues to be challenging as customers have continued to delay spending on new applications or upgrades of business critical applications.

Group Escrow is performing largely as seen in the first half of the year.  Overall revenue growth to date has been 2% (March 2012: 14%, organic growth:  7%). 

Escrow UK, the cornerstone of NCC Group, has seen 3% revenue growth (March 2012: 7%).

Escrow Europe saw a positive performance after a period of decline.  Despite the 4% decline in revenues to date, it is expected that the revenues will, as previously anticipated, achieve that of last year by 31 May 2013.

The Escrow North American businesses' combined rate of growth is 3%.  There was a 15% revenue growth in Atlanta but a 6% decline in San Francisco.  The Group expects this performance to improve with the appointment of a new US General Manager. 

Group Escrow renewals are now forecast to be £17.8m for the current financial year (March 2012:  £17.3m.)  The global verification order book continues to be solid and is at £2.1m (March 2012: £1.8m).  Group Escrow termination rates remain below 12% for contracts (March 2012: 12%).

Assurance

The global security market has continued to grow strongly.  Recent attacks and initiatives further confirm that expenditure in this area will continue to increase. 

The Assurance division continues to benefit from the heightened awareness of cyber-crime as more and more high profile organisations fall foul of significant attack or data loss.  Although the division operated satisfactorily overall, delivering 16% year on year growth (9% organic growth), parts of the US business have disappointed by failing to deliver the expected levels of revenue.

The stable UK Assurance business delivered good results with 17% growth in Security Testing and 11% in Web Performance Testing.  Web Performance Testing continues to achieve monitoring renewal rates of better than 90%. 

The iSEC business, which saw the conclusion of its earn-out in August 2012, was unable to fill the void quickly enough caused by the departure of its founding commercial partner in 2012 with an account management team.  This issue has now been largely addressed by secondment of UK staff to North America, alongside successful local recruitment.  Accordingly it experienced three months of low staff utilisation.

The integration of the New York based Intrepidus, a security research and testing services provider primarily focused in the mobile telecommunications sector, has not proved as successful to date as the other 14 acquisitions completed by the Group.  Major client sales were slower than expected and then were not fully capitalised on.  As a consequence no earn-out will be payable in the first year of ownership of the company.  The business has been reorganised and it is expected a stronger performance will be seen in the second year of the earn-out.

Matasano, which joined the Group at the same time as Intrepidus, has delivered the results expected of it.

The Assurance division's overall combined order book and renewals base currently stands at £29.7m (March 2012: £24.7m).  The Group's testing businesses have a combined order book of £23.6m (March 2012: £19.1m).  The Web Performance renewals base is valued at £6.1m for the year ended 31 May 2013 (March 2012: £5.6m). Security based testing orders are more than 23% greater than last year as market demand continues to increase.

Artemis

The Group's major new internet security initiative, Artemis, continues to develop successfully its .secure proposition to develop a safe and secure gTLD.  This project is on schedule and its operating expenses have been less than expected. Artemis will incur £1.2m of expenditure in the year-end 31 May 2013.  The pioneer programme has also been extremely successful with nearly all places now taken by major global corporations.

Rob Cotton, Group Chief Executive, comments:

"We have continued to grow the business and generate cash, albeit slightly below our initial expectations for the year - the first time in 10 years.

 "Our growth prospects continue to remain extremely sound - businesses need to have software and other IP assurance systems in place through our software escrow services, whilst the demand for information security continues to be very strong internationally."

The Group expects to report its year-end results for the 12 months to 31 May 2013 on Thursday 4 July 2013.

Enquiries:

NCC Group  (www.nccgroup.com)	0161 209 5432
Rob Cotton, Chief Executive
Atul Patel, Group Finance Director
College Hill
Adrian Duffield/Rozi Morris	020 7457 2020

 

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