Ncc Regulatory News (NCC)

9 October 2014

NCC Group plc

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 8 October 2014, covering the trading period from 1 June to 30 September 2014.

In the first four months of the financial year, Group revenue is £39.5m (September 2013: £35.6m), 13% ahead (September 2013: 20%) of the same period last year on a constant currency basis or 11% reported.

NCC Group's international operations now account for over 40% of Group revenue, following a strong growth by these units. Both reported and constant currency numbers are being reported in this statement in order to show clearly the performance of the Group's US and mainland Europe businesses.

Rob Cotton, Group Chief Executive, comments:

"We have performed well in our traditionally quietest period with strong recurring revenues and good forward visibility. Even though it is still early in the year, we are confident that we will maintain our double digit growth, strong cash generation and will meet our expectations for the financial year to 31 May 2015.

"The rollout of our Domain Services has been held back by delays in the assignment process for .trust. We now expect this unique service providing organisations with safer Internet to go live early in the new calendar year."

Group Escrow has performed in line with expectations with solid performances from the international businesses. Revenue grew by 6% (September 2013: 8%) on a constant currency basis and by 4% reported. Renewals are forecast to be £18.3m for the current financial year (September 2013: £18.1m).

The global verification order book continues to be strong, with good prospects coming through in the US and stands at £2.7m (October 2013: £2.6m).

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

Escrow UK has seen revenue growth in line with expectations at 5% (September 2013: 6%). In mainland Europe, the smallest part of the Escrow Division, revenue was flat (September 2013: 8%) on a constant currency basis and down 8% reported. In North America revenue grew by 12% (September 2013: 14%) on a constant currency basis and by 4% reported.

The Assurance division continues to perform strongly, up 16% (September 2013: 26%) on a constant currency basis and by 14% reported. The rate of growth was held back by the decision to relinquish a number of low margin software testing contracts.

The Group's Security Consultancy revenue grew overall by 31% on a constant currency basis and by 27% reported. The UK and Europe grew by 24% whilst North America increased revenue by 42% on a constant currency basis, 32% reported.

The constant challenge for the Assurance division is recruitment and retention of the highest quality testers and consultants. The retention rate has continued to be strong and remains over the Group's target rate of 90% (September 2013: 90%).

The Assurance Division's overall combined order book and renewals base currently stands at £32.8m (October 2013: £30.4m). The renewals base is valued at £6.8m for the year ended 31 May 2015 (September 2013: £6.6m) with renewal rates of better than 90%.

NCC Group Domain Services is creating a universal environment for companies to offer improved security to enable their end users and customers to interact safely with them over the Internet in a secure gated community by using the domain .trust.

The process of assignment of .trust has taken longer and has been more complicated than anticipated. This has resulted in numerous delays. It is currently expected that the assignment, and the various predefined testing phases that need to be completed before any domain can become active, will be finished before the end of February 2015.

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

Advanced discussions continue with a number of customers and the Group's approach will be to offer a carefully managed migration of the domains to .trust.

The Group has invested £1.4m in the project during the current financial year, (total capital expenditure to date £6.4m). It remains the Board's view that the Division is expected to become profitable in financial year 2015/16, as it achieves a critical mass of customers.

The Group's net debt was, as expected, £37.1m (October 2013: £28.8m), reflecting final earn-out payments made. The Group has a revolving credit facility of £40.0m and additional £5.0m overdraft facility.

The Group expects to report its half year results for the six months to 30 November 2014 on Thursday, 22 January 2015.

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