25th Jan 2005 07:00
NCC Group PLC25 January 2005 STRONG ORGANIC GROWTH DRIVING PROFITABILITY AND CASH GENERATION NCC Group plc, a well-established provider of Escrow Solutions, TestingSolutions and Consultancy, operating predominately in the UK and Europe,published interims results today. The Escrow Solutions are provided globally. • Group turnover up by 23% to £8.5m (£6.9m in 2003) • Group operating profits* up by 21% to £2.8m (£2.3m in 2003) • Underlying group pre tax profits** up by 100% to £2.7m (£1.35m in 2003) • Group pre tax profits up by 41% to £0.84m (£0.59m in 2003) • Adjusted earnings per share*** up by 16% to 5.58p (4.80p in 2003) • Initial interim dividend declared at 0.75p • Cash inflows from operating activities up by 11% to £3.0m (£2.7m in 2003) * Before goodwill amortisation. ** Before goodwill amortisation, exceptionalitems and non recurring interest charges. *** Before goodwill amortisation,exceptional items, non recurring interest charges and fully diluted Rob Cotton, NCC Group Chief Executive, said: "We are delighted to present our first set of results since the admission of thecompany to AIM on 12 July 2004 and are pleased to report that the Group hascontinued to make good progress. "We will continue to focus our efforts on profits and cash generation whilstmaking the right investments in the infrastructure and the management team tohelp ensure future growth. The Board remains confident of a strong second halfto the year." 25 January 2005 Enquiries:NCC Group (www.nccgroup.com) 0161 209 5432 Rob Cotton, Chief Executive Paul Edwards, Group Finance DirectorCollege Hill Adrian Duffield/Clare Warren 020 7457 2815/2055 Chief Executive's Review Trading results During the first six months of the financial year to 30 November 2004, NCC Grouphas seen strong growth in revenue across all its divisions. Group turnoverafter deferred income increased by 23% to £8.5m (£6.9m in 2003) and operatingprofits, before goodwill amortisation, grew by 21% to £2.8m (£2.3m in 2003).Operating profits increased by 31% to £2.0m (£1.5m in 2003.) Group operating margins, before goodwill amortisation, were broadly consistentin the first six months at 32.4% (32.9% in 2003) although we expect them tostrengthen slightly in the second half of the year as is normal. This is due tothe impact of Escrow Solutions price increases in the second half of the year.However, our continued investments in new staff at a senior level to manage andgrow the business and additional staff to deliver our products and services,will, as anticipated, hold back the growth in margins. Underlying Group pre tax profits, before goodwill amortisation, were £2.7m forthe six months, up 100%. Exceptional finance costs of £0.86m were written offto the profit and loss account when the debt financing was repaid and anon-recurring interest charge of £0.24m is included within interest payable.Group pre tax profits increased by 41% to £0.84m (£0.59m in 2003). Adjusted diluted earnings per share, before amortisation of goodwill andexceptional items, grew by 16% to 5.58p (4.80p in 2003), the increase wassuppressed by the lower number of shares in issues prior to admission. We will pay a progressive dividend after consideration of other calls on cash,such as acquisitions, earnings increasing investments and operationalrequirements. Accordingly, the Board is pleased to announce the Group's firstinterim dividend of 0.75p per share, which will be paid on 4 March 2005 toshareholders on the register at the close of business on 4 February 2005. Following admission, the Group repaid its bank loans and loan notes in full andrevised the capital structure leaving £5.2m of net debt in the new structure.Our business is very cash generative with cash inflows from our operatingactivities up by 11% to £3.0m (£2.7m in 2003) in the period. The Group's netdebt reduced from £5.2m to £3.1m at 30 November 2004 and we expect that we willbe almost debt free at the year end. Review of business divisional performances Along with delivering the strong results, attention has also been focused ondeveloping new products, services and marketing initiatives and strengtheningthe management team in each division. This will allow them ultimately tooperate as autonomous businesses within the Group. Escrow Solutions has seen a strong overall performance with a 21% growth inturnover to £3.9m (£3.2m in 2003) and a 27% increase in operating profits to£2.3m (£1.8m in 2003). The overall price increase, effective from November2004, was 8%, with our customers benefiting from even better service levels anda doubling of the limit of our liability to Escrow contracts to £1m. Escrow Solutions is currently experiencing an agreement termination rate of 11%,which is better than we anticipated by 1%. There are now over 10,300beneficiaries to our Escrow agreements. Nonetheless, recruiting high quality account managers to market, manage and sellour Escrow Solutions is our biggest challenge and is therefore critical to ourambitious growth plans. This has been the most difficult part of our businessin the first half of the year and recruitment to add to our existing 47 salesstaff remains a priority. It is not the Group's philosophy to compromise thestandard of employees recruited. Our rigorous HR policies and procedures willcontinue to maintain that stance, so that, we will aim to employ only thehighest calibre account managers. Later this year, we plan to launch our new and unique Copyright ProtectionEscrow service. It will offer for the first time a proposition that will bothprotect and ensure the security of intellectual property for both the public andprivate sectors. Testing Solutions has seen a 25% increase in turnover to £2.0m (£1.6m in 2003)and a 14% increase in operating profits to £0.43m (£0.37m in 2003).Verification Testing and Penetration Testing have grown substantially and itcontinues to be our objective to become the market leading provider in bothareas. We have carried out a record 114 Verifications in the first half of theyear, an increase of 30%, and 133 Penetration Tests, an increase of 43%. Therehas been, a small decline in levels of Specialist Testing services provided, butit remains the standard bearer for our technical excellence in the testingarena. Consultancy continues to deliver the highest levels of service to our clientsand has seen a strengthening in our relationships with them, resulting in a 24%increase in turnover to £2.6m (£2.1m in 2003.) The 6% decline in operatingprofits to £0.44m (£0.47m in 2003) reflects the fact that the InformationSecurity consultancy is still in its start up phase. Accordingly we areinvesting in it to establish a significant independent Information Securityconsultancy business. In the next six months, we anticipate that the take up of Information Securityconsultancy will accelerate, as formal risk assessment processes become moreimportant to both the public and private sectors. The provision of fully independent IT consultancy services, the other unit ofour Consultancy division, is even more highly valued by our customers whobenefit from having advice provided to them by individuals who are both expertin knowledge and experience and fully independent of any provision of hardware,software or implementation service offerings. Current trading and outlook These half year results represent a satisfactory start to life as a publiccompany following the transition from a venture capital environment. We willcontinue to focus our efforts on profits and cash generation whilst making theright investments in the infrastructure and the management team to help ensurefuture growth. The Consultancy and Testing Solutions order books have increased and now standat £1.6m and £1.7m respectively (up from £1.4m and £1.2m in October). Theimprovement in agreement termination rates means that we now expect annualrenewals to be £5.7m in this financial year. The Board remains confident of astrong second half to the year. ----------- Group profit and loss account 2004 2003 2004 six months six months year Notes ended ended ended 30 November 30 November 31 May (unaudited) (unaudited) (audited) £000 £000 £000 Turnover before movement in deferred income 8,925 7,336 15,316Deferred income (412) (400) (797) Turnover 2 8,513 6,936 14,519Cost of sales (4,455) (3,779) (7,634) Gross profit 4,058 3,157 6,885 Administrative expenses (2,051) (1,624) (3,584) Operating profit before amortisation of goodwill 2,759 2,285 4,806 Amortisation of goodwill (752) (752) (1,505) Operating profit 2 2,007 1,533 3,301 Interest payable and similar charges (365) (990) (2,002)Interest receivable 55 50 104Other charges - exceptional finance costs 3 (861) - - Net interest payable and similar charges (1,171) (940) (1,898) Profit on ordinary activities before taxation 836 593 1,403Tax on profit on ordinary activities (500) (413) (893) Profit on ordinary activities after taxation 336 180 510 Dividends 4 (245) - (4) Retained profit for the financial period 91 180 506 Earnings per share 5Basic 1.12p 0.93p 2.61pDiluted 1.11p 0.93p 2.61p Adjusted earnings per share before goodwillamortisation and exceptional itemsBasic 5.61p 4.80p 10.31pDiluted 5.58p 4.80p 10.31p There are no recognised gains or losses in the period other than the profit foreach period. Group balance sheet Notes 2004 2003 2004 30 November 30 November 31 May (unaudited) (unaudited) (audited) £000 £000 £000 £000 £000 £000Fixed assetsIntangible assets 26,650 28,153 27,401Tangible assets 761 571 546 27,411 28,724 27,947Current assetsDebtors 6 3,886 3,275 3,524 Cash at bank and in hand 2,581 3,504 4,278 6,467 6,779 7,802Creditors: amounts falling due 7 (4,227) (4,442) (4,328)within one year Net current assets 2,240 2,337 3,474 Total assets less current liabilities 29,651 31,061 31,421 Deferred income (4,428) (3,597) (4,033) Creditors: amounts falling dueafter more than one year (4,478) (27,191) (26,566) Net assets 20,745 273 822 Capital and reservesCalled up share capital 326 98 100Share premium account 19,824 - 219Profit and loss account 618 199 526 Shareholders' funds 20,768 297 845 Minority interest (23) (24) (23) 20,745 273 822 Shareholders' funds analysed asEquity 20,768 228 776Non-equity - 69 69 10 20,768 297 845 Group cash flow statement 2004 2003 2004 six months six months year ended ended ended 30 November 30 November 31 May Notes (unaudited) (unaudited) (audited) £000 £000 £000 Cash inflow from operating activities 8 3,034 2,736 5,218 Returns on investments and servicing of financeInterest received 55 50 104Interest paid (855) (622) (1,297)Exceptional finance costs 3 (35) - -Preference dividend paid (4) - - Net cash outflow from returns on investment andservicing of finance (839) (572) (1,193) TaxationUK Corporation tax paid (284) (418) (924) Capital expenditure and financial investmentPurchase of tangible fixed assets (367) (96) (203)Sale of tangible fixed assets 7 50 55Net cash outflow from capital expenditure andfinancial investment (360) (46) (148) Net cash inflow before financing 1,551 1,700 2,953 FinancingIssue of share capital 19,831 2 223Repayment of loan notes (16,779) (1,363) (1,363)Repayment of bank loan (12,275) (700) (1,400)Receipt of bank loan 5,975 - - Net cash outflow from financing (3,248) (2,061) (2,540) (Decrease) / increase in cash for the period/year 9 (1,697) (361) 413 Notes to the interim statement 1 Basis of preparation The interim statement comprises the unaudited consolidated accounts of NCC Groupplc for the six months ended 30 November 2004. The interim statements have beenreviewed by the auditors. The report of the auditors to the directors is setout on page 6. The basis of preparation and the prior year comparatives are derived fromaudited financial information for The NCC Group (Holdings) Limited (renamed NCCGroup plc) and are as set out in the Annual Report for the year ended 31 May2004. The comparative figures for the financial year ended 31 May 2004 are not thecompany's statutory accounts for that financial year. Those accounts have beenreported on by the company's auditors and delivered to the registrar ofcompanies. The report of the auditors was unqualified. 2 Segmental information 2004 2003 2004 30 November 30 November 31 May £000 £000 £000Turnover by geographical segmentUK 7,504 5,792 12,452Rest of Europe 522 582 1,011Rest of the World 487 562 1,056 Total turnover 8,513 6,936 14,519 Turnover by business segmentEscrow Solutions 3,902 3,217 6,721Consultancy 2,583 2,091 4,357Testing Solutions 2,028 1,628 3,441 Total turnover 8,513 6,936 14,519 Operating profit by business segmentEscrow Solutions 2,318 1,832 3,760Consultancy 440 470 900Testing Solutions 427 373 884 Segment operating profit 3,185 2,675 5,544 Head office costs (426) (390) (738)Goodwill amortisation and exceptional items (752) (752) (1,505) Operating profit 2,007 1,533 3,301 Net assets / (liabilities) by businesssegmentEscrow Solutions (3,437) (2,868) (3,003)Consultancy 816 462 453Testing Solutions 123 2 150Unallocated net assets 23,243 2,677 3,222 Total net assets 20,745 273 822 Unallocated net assets consist of goodwill, cash, tax payable and othercentrally held assets and liabilities. 3 Exceptional items During the 6 months ended 30 November 2004, exceptional finance costs of £861K(2003: nil) were written off to the profit and loss account when the debtfinancing was repaid on 17 July 2004 following the Group's listing on AIM. Only£35K had a cash impact in the 6 month period as the rest were paid in priorperiods. 4 Dividends 2004 2003 2004 30 November 30 November £000 31 May £000 £000 Interim dividend (0.75p (2003: 0p) per share) 245 - -Preferred ordinary dividend (£Nil (2003: £Nil)) - - 4Dividends 245 - 4 5 Earnings per share The calculation of earnings per share is based on the following: 2004 2003 2004 30 November 30 November 31 May £000 £000 £000 Profit for the period 91 180 506Dividends 245 - 4 Earnings used in basic and diluted earnings per share 336 180 510Amortisation and exceptional item net of tax 1,346 752 1,505 Adjusted Earnings used in basic and diluted 1,682 932 2,015 earnings per share Number of Number of Number of Shares Shares Shares 000's 000's 000'sBasic weighted average number of sharesin issue 29,987 19,415 19,545Dilutive effect of share options 170 - - Diluted weighted average shares in issue 30,157 19,415 19,545 6 Debtors 2004 2003 2004 30 November 30 November 31 May £000 £000 £000 Trade debtors 2,666 2,265 2,407Prepayments and accrued income 71 71 71Deferred tax 1,149 939 1,046 3,886 3,275 3,524 7 Creditors: amounts falling due within one year 2004 2003 2004 30 November 30 November 31 May £000 £000 £000 Trade creditors 308 160 365Corporation tax 507 316 290Other taxation and social security 759 1,317 701Other creditors 56 60 56Accruals 1,152 1,231 1,550Dividends payable 245 - 4Bank loan 1,200 1,358 1,362 4,227 4,442 4,328 8 Reconciliation of operating profit to operating cash flows 2004 2003 2004 30 November 30 November 31 May £000 £000 £000 Operating profit 2,007 1,533 3,301Depreciation charge 150 132 262Amortisation of goodwill 752 752 1,505Profit on sale of fixed assets (5) (9) (12)Increase in debtors (362) (275) (524)Increase in creditors 492 603 686Cash inflow from operating activities 3,034 2,736 5,218 9 Reconciliation of net cash flow to movement in net debt 2004 2003 2004 30 November 30 November 31 May £000 £000 £000 (Decrease) / increase in cash in the period (1,697) (361) 413Cash outflow from movement in loans and loan 23,079 2,063 2,763Non cash items (829) (103) (182) Movement in net debt in the period 20,553 1,599 2,994 Net debt at beginning of period (23,650) (26,644) (26,644) Net debt at end of period (3,097) (25,045) (23,650) Analysis of net debt At beginning Cashflow Non cash At end of of items period year £000 £000 £000 £000 Cash in hand and at bank 4,278 (1,697) - 2,581 Loan and loan notes (27,928) 23,079 (829) (5,678) Total (23,650) 21,382 (829) (3,097) 10 Reconciliation of movements in shareholders' funds 2004 2003 2004 30 November 30 November 31 May £000 £000 £000 Profit for the financial period 336 180 510Dividends (245) - (4) 91 180 506 Issue of share capital 226 2Share premium 19,605 -Currency translation gain / (loss) 1 (2) (1) Net addition to shareholders' funds 19,923 180 728Opening shareholders' funds 845 117 117 Closing shareholders' funds 20,768 297 845 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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