8th May 2007 07:02
NCC Group PLC08 May 2007 8 May 2007 NCC GROUP Transfer to full listing and year end trading update NCC Group plc (AIM: NCC), a leading independent provider of IT assurance,security and consultancy services, announced today that it intends to transferits listing from AIM to the Official List in July 2007. The Group is alsoproviding a trading update covering the period since publication of its interimresults on 23 January 2007. The Group's year end is 31 May 2007. NCC Group was admitted to AIM on 14 July 2004 with a market capitalisation of£55m and a share price of 170p. At the same time the Group raised £38.1m offunds, part of which was to support its growth strategy. Since then the Grouphas made three complementary acquisitions in the UK and US. The share price hasincreased by 109% to 356p at the close of the market on 4 May 2007. The Boardnow believes that by moving up to the Official List, the Group will have accessto a wider pool of institutional and other investors, which should increase theliquidity of its shares. The Group's overall trading performance is expected to be in line with theBoard's expectations during the second half of the year and has continued toshow good organic growth in revenues and profits across each division. Whilsttrading conditions over the Easter period proved to be slightly more difficultthan anticipated, the H1:H2 split of operating profits is likely to be 40:60 asanticipated at the last update. The integration of Site Confidence, a leadingUK web site monitoring and performance company acquired in January 2007, is alsoprogressing well. The Group continues to have high rates of cash generation at over 100% ofoperating profits. The Board expects the Group to be cash positive at the endof the financial year, even after accounting for the cost of the Site Confidenceand US acquisitions. There are no significant changes to the competitive landscape in which each ofthe divisions operate. For Escrow Solutions the challenge remains to raisecustomer awareness, whilst the day rate businesses have experienced normalcommercially competitive pressures. Escrow Solutions The Escrow Solutions division now includes the Verification Testing businesswith all income streams continuing to show steady growth. The combined revenuesnow make NCC Group the largest provider of Escrow Solutions worldwide. Annual Group escrow renewals for the 2006/07 financial year are expected to be£9.4m, up from £8.1m for the year to 31 May 2006. Currently there are 14,312beneficiaries (14,020 in January 2007) of the 7,377 UK escrow agreements,including 923 minimum annual fees. Worldwide, there are now over 17,500beneficiaries of over 9,200 escrow agreements. The Board's expectations forcontract terminations continue to be below the planning level of 11%. Verification Testing has seen good growth, with more source code verificationsbeing carried out than ever before. Revenues are 23% ahead of last year and theorder book is at £1.1m (£0.6m in May 2006). The US Escrow Solutions business continues to perform in line with expectationwith good growth opportunities being evidenced as NCC Group continues to buildits brand and presence. Losses in Germany have, as expected, been stemmed. Thecurtailment process is complete with all costs incurred and recognised. Thebusiness will be operated at break even in 2007/2008 and no more material costswill be incurred. Assurance Testing The Assurance Testing division now compromises the Group's Ethical SecurityTesting business, Penetration Testing, along with the Monitoring and PerformanceTesting business, including the newly acquired Site Confidence. EthicalSecurity Testing revenues are 42% ahead of last year and are expected to exceed£3.1m for the year. The Ethical Security Testing order book currently standsat a record £1.3m. The integration of Site Confidence is progressing well. The business is meetingthe Board's expectations, with revenues in the period from acquisition to theGroup's year end likely to be £1.5m and approximately £5.0m for the Group'sfinancial year to 31 May 2008. The business is expected to contribute a smallprofit for the period from acquisition to the Group's year end. Approximately 75% of Site Confidence's revenues are annually recurring webmonitoring contracts with a current renewal rate of 90%, ahead of the Board'sexpectation of 85%, giving a renewals base for monitoring services of over £3.0mfor the financial year to 31 May 2008. Already the Board has seen the joining up of sales opportunities withinAssurance Testing and this will continue to be strongly encouraged. NCC Groupis confident of establishing a sales team and a testing team to deliver EthicalSecurity Testing from its Southern facility in Dorking, Surrey, with recruitmentwell under way. Overall, the Assurance Testing Division's order book continues to develop andnow stands at £1.9m (£1.6m in May 2006) which is in line with the Board'sexpectations. As highlighted at the time of the acquisition of Site Confidence, the Group hascarried out a thorough review of Site Confidence's accounting policies to bringthem in line with those of the Group. The fair value review carried out inaccordance with IFRS, has initially shown that Site Confidence has intangibleassets of £1.5m which will be amortised over a five year period. This givesrise to a total charge of £0.3m for the period of the earn out or £0.1m to theyear ended 31 May 2007, subject to audit. The Group will also report a notional interest charge of £0.1m on the contingentcash consideration which the Board believes is likely to be payable as part ofthe earn out consideration for Site Confidence. The amount of the considerationunder earn out is £4.8m, £1.0m of which is payable in July 2007 and £3.8m inJuly 2008 and gives rise to a total notional interest charge of £0.3m. Consultancy The Consultancy division has performed as expected in the second half andcontinues to be a source of good opportunity to the Group, particularly as thepayment card industry (PCI) data security standards continue to be adopted byorganisations taking payments by credit cards and audited by Qualified SecurityAssessors. To help with this, NCC Group has been accredited by the PCIStandards Council as a Qualified Security Assessor. The Consultancy order book continues to develop and now stands at £1.8m (£1.4min May 2006.) The first four months of the Group's financial year aretraditionally the quietest for this part of the business. The Group expects to report its preliminary results for the year to 31 May 2007in the first week of July 2007. Enquiries: NCC Group (www.nccgroup.com) 0161 209 5432 Rob Cotton, Chief Executive Paul Edwards, Group Finance Director College Hill Adrian Duffield/Corinna Dorward 020 7457 2020 Dresdner Kleinwort Charles Batten 020 7475 5799 Note to editors A software escrow agreement is a contract made between three parties: thesoftware vendor (the licensor), the software customer (the licensee) and anindependent third party (the escrow agent, such as NCC Group). Under the termsof the agreement, the licensor agrees to send a copy of the source code to theescrow agent and the escrow agent agrees to hold the source code securely, andto release it to the licensee only in the event of certain predefined triggerevents. These include the insolvency of the licensor or its failure to providesupport services as defined in the software license agreement. Contract - represents an escrow agreement to provide escrow services for anowner of the software on behalf of licensees who have signed to the agreement. Beneficiary - represents licensees who have signed to the contract and whoreceive the benefits of escrow as set out in the contract. Minimum annual fee - a charge is levied on the owner of the software under amultiple agreement where there are fewer than two beneficiaries to the contract.Once two or more beneficiaries are signed to the agreement the minimum fee isno longer charged. The fee is charged at the end of the year. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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