Ncc Regulatory News (NCC)

17 April 2014

NCC Group

Interim Management Statement

NCC Group plc (LSE: NCC or "the Group"), the international, independent provider of Escrow, Assurance and Domain Services, is today publishing its Interim Management Statement to 16 April 2014, covering the trading period from 1 June 2013 to 31 March 2014.

In the first 10 months of the financial year, Group revenues are 12% (March 2013: 12%) ahead of the same period last year at £90.4m (March 2013: £80.4m.) Over 38% of the Group's revenues are now outside the UK with the majority in North America. Organic growth in the period has been 10% (March 2013: 7%).

The Group's net debt has continued to reduce, as expected, to £27.3m (March 2013: £31.0m) against the revolving credit facility of £40.0m and additional £5.0m overdraft facility.

Rob Cotton, Group Chief Executive, comments:

"We have delivered another period of consistent growth, mainly organic, in revenue and profitability across the Group and remain on course to meet our expectations for the financial year to 31 May 2014.

"The development of our new division, NCC Group Domain Services, remains on track. We expect to launch our new service using the safer internet domain .trust, in effect an online secure gated community, in the next financial year.

"Our solid performance in the current financial year in growing markets positions us well for next year. With strong recurring revenues and good forward visibility, we are confident that we will maintain our double digit organic growth and strong cash generation."

The Escrow division has performed strongly. Organic revenue grew by 6% (March 2013: 2%) and renewals are now forecast to be £18.0m for the current financial year (March 2013: £17.8m).

The global verification order book continues to be solid, with good prospects coming through in the US. It now stands at £2.9m (March 2013: £2.1m).

Group Escrow termination rates continue to remain below 12% for contracts (March 2013: 12%).

The UK, the cornerstone of NCC Group Escrow, has seen revenue growth in line with expectations at 6% (March 2013: 3%). In North America revenue grew by 4% (March 2013: 3%) and in continental Europe, the smallest part of the Escrow Division, revenue grew by 2% (March 2013: decline 4%).

The Assurance division continues to perform strongly with a 15% increase in revenue (March 2013: 16%), of which 12% was organic growth (March 2013: 9%).

The challenge for the whole of the Assurance division remains the recruitment and retention of the highest quality testers. The number of testers in the Assurance division has grown in the period with the Group's retention rate running at close to 90%.

The Group's load and performance testing unit saw a 6% growth in contract revenues and continues to achieve monitoring renewal rates of better than 90%. The renewals base is valued at £6.5m for the year ended 31 May 2014 (March 2013: £6.1m).

The Assurance division's overall combined order book and renewals base currently stands at £30.6m (March 2013: £29.7m) including the testing businesses combined order book of £24.1m (March 2013: £23.6m).

In January the newly formed third business unit, NCC Group Domain Services (formerly Artemis Inc.), confirmed its acquisition of .trust. This will be the first domain to be operated by the Group to provide a safer Internet for its clients.

NCC Group is creating a universal environment, a secure gated community, for companies to offer improved security to enable their end users and customers to interact with them over the Internet safely and securely.

The process of assignment of .trust by ICANN is in progress and it is likely to take until the end of June to complete. ICANN also has various predefined testing phases that need to be completed before any domain can become active.

The project remains on time, subject to ICANN variations, with the development of systems, processes and environments required to run the .trust community nearing completion.

The recent meetings with potential customers in San Francisco confirmed that the Group's approach was in line with this Pioneer community's view and requirements. Advanced discussions continue with a number of them to formally sign up to the service. This will be slowly and carefully managed as will customers' migration of their domains to .trust.

Domains will be available from the start of September for Pioneers, early adopters and trademark claims, before being made generally available during November 2014.

The Group has invested a total of £4.0m in the project during the year to date, (total Investment to date £6.3m) of which £1.5m has been expensed in the current financial year. The Group's decision to become a fully operational Domain Registrar will cost an additional £0.7m in capital and operating expenditure in the current financial year.

In the next financial year to 31 May 2015, most of the costs incurred will be operational, as development of the product suite will be largely completed. The Board expects this Division to become profitable in financial year 2015/16, as it achieves a critical mass of customers.

The Group will be launching .trust in conjunction with the ICANN London conference on 20 June 2014, where Pioneers, customers and investors will be able to see in detail how the service operates and how it is being delivered.

The Group remains committed to gaining the rights to the domain .secure, although the ICANN run auction process will now not take place until January 2015 at the earliest.

The Group expects to report its full year results for the 12 months to 31 May 2014 on Thursday, 3 July 2014.

Enquiries:

Kathy Gordon