Ncc Regulatory News (NCC)

15 October 2015

NCC Group

Trading update

NCC Group plc (LSE: NCC or "the Group"), the international, independent provider of Escrow, Assurance and Domain Services, has published a trading update, covering the four months from 1 June 2015 to 30 September 2015.

Group revenues increased by 48% (September 2014: 13%) to £58.5m (September 2014: £39.5m) with organic growth up 17% (September 2014: 13%). Both the Escrow and Assurance Divisions showed strong organic revenue growth for this period, up 8% and 19% respectively.

The integration of Accumuli is now largely completed, ahead of schedule, with the Group already benefitting both operationally and financially.

Domain Services recorded a 60% increase in organic revenue from a low base, driven by its managed service capabilities. This will now be the Group's core focus given the continuing well documented delays in the development of the domain services markets.

Rob Cotton, Group Chief Executive, comments:

"Our cash generative Escrow business saw a notably strong first four months, traditionally its weakest trading period, whilst the Assurance Division continued to show impressive double digit organic growth, driven by a growing market and our increasing capabilities.

"The integration of Accumuli, acquired in May 2015, is almost complete with the Group gaining both operational and financial synergies.

"The delays in the domain services markets are frustrating but our strategy remains sound. In only a few years there will be thousands of new domains, which brand owners and corporate entities as well as government bodies will need to manage - we have all the capabilities to address all of their requirements.

"We remain on course to sustain our double digit organic growth and strong cash generation and are set to meet our expectations for the financial year to 31 May 2016."

The Escrow Division continued to perform strongly. Revenue grew by 8% (September 2014: 5%) to £10.5m (September 2014: £9.7m) and renewals are now forecast to be £19.0m for the current financial year (September 2014: £18.3m.)

The global verification order book continues to be solid, with good prospects throughout. It now stands at £2.7m (September 2014: £2.7m).

Group Escrow termination rates continue to be around 11% for contracts (September 2014: 12%).

In the UK, the cornerstone of the Division, revenue grew by 8% (September 2014: 5%). In North America revenue grew by 9% (September 2014: 4%) and in mainland Europe, the smallest part of the Escrow Division, revenue grew by 7% (September 2014: decline of 8%).

The Assurance Division continues to perform strongly with a 57% increase in revenue (September 2014: 14%) to £46.0m (September 2014: £29.2m). Excluding Accumuli, organic growth has been 19% (September 2014: 14%).

Importantly, the Group's security consultancy retention rate continues to run close to 90%.

The Division has seen its early investments over the last nine months in Threat Analytics, Cyber Defence Operations and Red Teaming all paying dividends. These emerging areas are of real importance. The Group will continue to recruit in these specialties, as they are expected to become important revenue streams.

Accumuli has been largely integrated into the Group, with natural homes being found for all the component parts and with some of its management taking senior roles in the combined organisation. The Group as a whole is already seeing both operational and financial benefits from this acquisition.

The Assurance Division's combined order book and renewals base currently stands at £50.2m or £42.4m excluding Accumuli (September 2014: £30.4m). This includes web performance renewals of £7.0m for the year ended 31 May 2015 (September 2014: £6.8m) and £6.1m of Accumuli renewals and maintenance.

The Domain Services division continues to evolve and develop rapidly. Revenue jumped to £2.1m (September 2014: £0.6m), an increase of 60% on an organic basis.

The Division provides an end-to-end solution for all of an organisation's domain requirements. Apart from the complete, unique, .trust secure community that the Group offers for organisations' web estates, NCC Group also offers managed services which actively monitor an organisation's existing web perimeter, as well as full registry, registrar services along with total compliance with ICANN requirements.

The Division has been impacted by delays in the development of the domain services markets, particularly the roll out of the branded top-level domains. The delays, part ICANN enforced, are mostly due to brand owners not knowing how best to use their domains, waiting for the competition or suffering from a lack of understanding of the security benefits that branded domains can offer.

Consequently Open Registry and trust revenues have not met the Group's initial expectations. However, the managed security services have continued to develop successfully and have been further enhanced with the addition of Accumuli managed services platform and portal to its product set.

In the short term the Group is now more focussed on providing a managed security solution in the domain services sector and is slowing the rate of investment into the new infrastructure and gTLD opportunities until the market is further advanced.

The Board expects this Division to continue growing as it expands the managed service offerings and whilst revenues will be lower than anticipated the cost base will also be correspondingly reduced.

The Group's net debt increased, as expected, to £65.3m (September 2014: £37.1m) against a total debt facility of £80.0m. This reflects the acquisition of Open Registry and Accumuli in the second half of last financial year.

The Group expects to report its half-year results, for the six months to 31 November 2015 on Thursday, 21 January 2016.

Enquiries:

Lauren Foster