Ncc Regulatory News (NCC)

20 January 2015

NCC Group plc

Acquisition of European domain services businesses for up to £14.9m

NCC Group plc (LSE: NCC, "NCC Group" or "the Group"), the international, independent provider of Escrow, Assurance and Domain Services, has acquired the Belgium and Luxembourg based Open Registry group of companies ("Open Registry Group" or "OR") for a maximum consideration of £14.9m (€19.5m) in cash.

Open Registry Group is an independent group of domain service companies providing backend registry operations to brand customers, registrar and trademark validation services.

This acquisition will enable the Group to offer a one stop shop providing secure domain services to corporate customers globally, including both registry and registrar services, whilst ensuring that their brands are properly protected in the domain world.

Highlights

· Open Registry Group is a leading ICANN approved provider with many complimentary European blue chip clients

· Open Registry Group increases NCC Group's presence in mainland Europe, within the ICANN community and the domain services market

· The Open Registry Group comprises:

o Open Registry S.A. ("Open Registry") is a leading European Registry Service Provider for global brands and globally is ranked number six in terms of brand Top Level Domains (TLD) applications under management.

o Clearinghouse for Intellectual Property S.A. ("CHIP") is one of three key service providers authorised by ICANN to operate the Trademark Clearinghouse (TMCH). TMCH is the most important rights protection mechanism built into ICANN's gTLD program and provides a centralised database of over 33,000 verified trademarks, which are connected to every new TLD.

o Nexperteam CVBA ("Nexperteam") is an accredited registrar for several TLDs managing over 8,000 domain names. The Company provides domain registrar services ranging from domain name registration, name serving to email and web hosting.

· Cash consideration of £14.9m, initially £7.9m (€10.3m), two further payments of up to £7.0m (€9.2m) in total over the next 36 months against performance related targets

· The acquisition is expected to be earnings neutral initially before becoming earnings enhancing in year two

· Year to 31 December 2014, Open Registry Group generated audited EBITDA €15,000 on revenue of €3.7m with much of future revenues derived from recurring contracts with blue chip corporations

· Financed from NCC Group's existing debt facilities and internally generated cash flow

Rob Cotton, NCC Group Chief Executive, said:

"The addition of registry, registrar and trademark protection services to our own web security capabilities, in our Domain Services division, will provide us with a considerable competitive advantage in this fast growing and extremely dynamic market.

"With the introduction of thousands of new gTLDS - 22 to over 1,400 in the next year alone, corporates are looking to outsource the registration, brand protection and management of their web presence securely.

"The business is a highly respected ICANN and industry player. It significantly increases our presence and profile in the domain services sector and mainland Europe, as well as bringing a number of leading blue chip technology customers to the Group.

"We are delighted that OR's very experienced management team is staying with us and look forward to working with them as we together enhance the business' reputation as it benefits from the Group's scale, reach, security expertise and experience in growing multi-national services businesses."

Enquiries:

NCC Group 0161 209 5200

Rob Cotton, Chief Executive

Atul Patel, Finance Director

Instinctif Partners 020 7457 2020

Adrian Duffield/Chantal Woolcock

There will be an analyst conference call at 8.30am - please contact Hannah Franklin at hannah.franklin@instinctif.com or on telephone 020 7457 2020 for details.

Acquisition of Open Registry Group

Domain Services - strategy update

Over the last three years the Group has been developing a position, based around its security expertise, in the domain services sector. Starting with an application for a domain, the Group has gone on to become an ICANN accredited and established data Escrow provider for both Registrars and Registries, a leading provider of an anti abuse tool to protect domains, as well as providing a unique secure gated domain community utilising the Group's own domain .trust.

The Group has always intended to provide corporate customers with a complete secure end to end solution that allows them to have all of their domain requirements managed by one organisation. To that end the Group sought to either develop or buy suitable technology and know-how to further this ambition.

Due to the proliferation of TLDs that is taking place and planned by ICANN, it is essential that organisations can use a single brand friendly secure trusted adviser and operator to provide the best solution to manage their web presence, whilst ensuring that the highest cyber security considerations are built in to requirements.

Moving to .trust immediately is a significant step for organisations to take. Internally there are multiple stakeholders to persuade and convince. Currently the Group is engaged in detailed discussions with approximately 30 organisations including a number from the original Pioneer Group about joining the community.

From these, it has become apparent that the decision-making process is considerably slower and more involved than was first thought which will impact the speed with which the Group will generate revenue through the Domain Services division in the short term.

The Group has therefore responded to customers by introducing more steps to allow organisations to get the full benefit of .trust in component stages, including enabling customers to secure their own .trust domain for a fee as a placeholder and then look at all of the next stages without committing immediately to joining the community.

Furthermore, a number of customers are looking to use the unique security monitoring service against their existing estate, whilst they formulate their domain strategy. This approach is being equally applied to brands' who have applied or secured their one domains.

A number of the Group's customers also want to be prepared for the next gTLD application process and will want to apply for their own domain names, as well as having their entire domain services requirements looked after by a single entity.

With the addition of OR, NCC Group is now in a position to be able to offer a complete package of registry and registrar services to customers securely whilst ensuring that their brands are properly protected in the domain world. In addition, the acquisition will enable NCC Group to offer its clients a wider geographical coverage, particularly in continental Europe and offer Open Registry Group clients an expanded service offering.

Open Registry Group

The Open Registry Group consists of three businesses; Open Registry, CHIP and Nexperteam. The companies are operated by a common management team, who are headquartered in Belgium and Luxembourg. It employs eight full time staff.

Open Registry S.A.(Open Registry) is the leading European Registry Service Provider for global brands and globally is ranked number six in terms of brand TLD applications under management.

The Company offers an integrated and comprehensive suite of software solutions and services that enable organisations to register, manage and operate their own brand or community TLDs in compliance with the rigorous regulatory standards set out by ICANN.

Open Registry has developed a best-of-breed registry platform offering unparalleled levels of scalability and flexibility. Built specifically for the new TLDs, the platform offers flexible modular development that can be tailored to meet the complexities of a low-volume brand TLD or community with a million members.

The integrated suite of registry solutions provides an end-to-end service offering, ranging from consulting on the application for new gTLDs through to operating a new gTLD on behalf of a brand or community, leveraging its proprietary technology and resilient infrastructure.

The Company's product offering comprises three key service lines, Technical Operations, Post Launch Management and Application Consultancy.

Technical Operations provides the cutting-edge registry system with its highly scalable back-end infrastructure, which enables customers to operate their TLDs at the performance and security levels required by ICANN.

Post Launch Management provides a fullrange of post launch services such as marketing, brand protection and security consultancy.

Application Consultancy offers value-added consultancy services in combination with the Company's legal and financial partners to facilitate the application process for new gTLDs. The application process for new gTLDs is expected to start again in 2017.

Open Registry's portfolio of uncontested gTLD applications includes over 23 TLDs, comprising a range of brand TLDs, geographic TLDs, ccTLDs and 2nd level TLDs.

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).

TMCH is the most important rights protection mechanism built into ICANN's gTLD program and provides a centralised database of over 33,000 verified trademarks, which are connected to every new TLD. The consortium is the only designated provider authorised to offer these services.

CHIP's partners in the project, include IBM and Deloitte. CHIP provides the software, billing and support for TMCH whilst Deloitte is responsible for verification services and IBM is the database provider. CHIP contracts directly with brand owners or any of the 180 accredited sales agents who then submit their trademark data to TMCH.

Once verified, brand owners receive a unique authentication key enabling them to pre-register their domain name during the 'Sunrise' period of any of the new TLDs.

After the Sunrise period, anyone attempting to register a domain name that matches a trademark record is immediately informed of the potential rights violation. If the applicant continues with the registration, the brand owner of the trademark is informed, so they can evaluate the infringement and take appropriate legal action.

Nexperteam CVBA (Nexperteam)is an accredited registrar for several TLDs managing over 8,000 domain names. The Company provides domain registrar services ranging from domain name registration, name serving to email and web hosting.

In addition, it offers infrastructure services to ensure the optimal configuration and installation of infrastructure as well as providing maintenance and support.

With the benefit of its accreditation as a Local Internet Registry, Nexperteam has its own IP range and can provide clients with ISP independent connections to the Internet. Clients include enterprises, such as Wolters Kluwer, IBM, and DKV as well as local government and law enforcement agencies.

Financing

The initial consideration payable is £7.9m in cash, subject to balance sheet adjustments, with two further cash payments of up to £7.0m in total against performance related targets over the next 36 months. The first period is to 31 December 2016 and the final period is to 31 December 2017.

Open Registry Group has net liabilities of £0.18m and has gross assets of £6.1m. The Group will be providing Open Registry Group with £0.27m of working capital facilities and investing a further £0.57m in operational expenditure. Transaction costs, which are expensed, will be up to an additional £0.4m.

The acquisition will be financed from NCC Group's existing debt facilities and internally generated cash flow. The Group has taken this opportunity to increase its revolving credit facility from £40m to £55m, with a £5m overdraft facility, in consideration of future acquisition opportunities.

NCC Group will publish its Half Year Results on 22 January 2015.

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