3rd Jul 2014 12:27
LONDON (Alliance News) - NCC Group PLC Thursday raised its total dividend, and expressed confidence for the year ahead as it ramps up its recently established Domain Services division with the launch of its new .trust domain, as it posted a higher pretax profit in its financial year to end-May.
The IT assurance company proposed a total dividend of 3.5 pence, up 13% from 3.1 pence in the previous year.
NCC posted a pretax profit of GBP23.2 million, up from GBP18.8 million in the previous year, as revenue rose to GBP110.7 million from GBP99.2 million, although this was damped slightly by costs of GBP2.1 million relating to the development of its Domain Services division.
Revenues from its Escrow division rose to GBP30.5 million from GBP28.5 million, driven by contract growth and, to a smaller extent, price increases. As a result, the division posted a profit of GBP18.1 million, up from GBP16.7 million.
In Assurance, revenue rose to GBP80.2 million from GBP70.7 million, driving a rise in profit to GBP14.0 million from GBP12.0 million, boosted by strong growth in cyber security consultancy and testing revenues.
Concerns about cyber security are escalating quickly, and media coverage of high scale data breaches such as the hacking of US retail giant Target Corp at the end of last year, has helped increased awareness amongst both consumers and businesses.
"A big transition we've seen is that it is not only the large corporations concerned about this; increasingly smaller organisations are very focused on security. Even a small retailer who may only have a few hundred cards on their website," Chief Executive Rob Cotton told Alliance News.
Smaller companies can be easier targets for hackers, because larger businesses have higher levels of security already in place.
However, as more and more consumer are comfortable with shopping and putting their financial information on line, there's an increasing need for businesses to put an emphasis on keeping that information safe.
The company has established a third segment to its business, Domain Services, after it applied the the generic top level domain .secure in May 2012. It acquired the rights to the generic top level domain .trust during the year in order to provide a platform to launch its new service. It plans to launch this in the first-half of the new year, subject to delays that might occur.
However, .secure remains in contention with Amazon.com Inc.
"We found .trust, and we've actually realised in hindsight its a far better name," Cotton said. "The whole proposition is about consumers, what sounds better to a consumer, the word trust or secure? Secure is a more of a technical word, while .trust is an emotional word."
If NCC is successful in winning the .secure domain, then it has a number of potential options for the way it uses its two domains, such as potentially segmenting customers depending on industry, size or scale, or offering slightly different services.
NCC's chances depend somewhat on Amazon's plans for the domain, as Amazon has applied for a number of other domains, and Cotton said that were it to become a bidding war Amazon would likely win as it has more resources.
The aim of the new division is to create a safer internet community, in which users applying for the .trust domain will be required to verify their identity and ensure their organisation is secure by complying to security policies. This is intended to make sure that customers can identify secure sites by the domain name in what the company calls a "gated community."
"I do not believe anybody else is copying our idea," Cotton said. Whilst Amazon might be in contention for .secure, and also appealed for the similar .safe, Cotton believes these are primarily related to Amazon's own existing customer base, as opposed to the wider market like .trust.
NCC expects there to be at least 20 customers signed up for the new service by the end of fiscal 2015 and 70 by the fiscal 2016. It expects the division to post revenue of GBP1.0 million in the current year, rising to GBP5.0 million in the year after.
As a result, it expects the division to make an operating loss of around GBP4.3 million in the current year but move to a positive contribution in fiscal 2016.
The proliferation of new top level generic domains means that many companies are looking to pick up domains, however, NCC's new division is not likely to join in the race to buy up these names.
"I think we wouldn't be looking for anything beyond .secure," Cotton said. "We would still have use for .secure, but we're not not going to be going into the market trying to get new top level domains, the whole concept will be not to dilute it. We wouldn't want to get into too many otherwise you start confusing the consumer."
Broker Liberum retained its Buy rating for the company, sayings its two core businesses of Escrow and Assurance "have an impressive track record of profitable growth."
".trust, which is an internally funded start-up, has significant potential but as with all start-ups there are risks involved," Liberum said.
Shares in NCC were trading up 2.7% at 197.25 pence Thursday afternoon.
By Hana Stewart-Smith; [email protected]; @HanaSSAllNews
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