Ncc Regulatory News (NCC)

6 May 2015

NCC Group

Trading update

NCC Group plc (LSE: NCC or "the Group"), the international, independent provider of Escrow, Assurance and Domain Services, is today publishing a trading update, covering the 11 months from 1 June 2014 to 30 April 2015.

Group revenues are 15% (April 2014: 12%) ahead of last year at £115.3m (April 2014: £100.0m.) Organic growth in the period has been 14% (April 2014: 12%.) Over 50% of the Group's revenues are now outside the UK with the majority in North America.

The Group's net debt has increased as expected to £37.5m (April 2014: £29.6m) against a total debt facility of £80m. The increase reflects the initial consideration paid for the acquisition of Open Registry group of companies on 20 January 2015 and some of the fees paid for the acquisition of Accumuli plc, which completed on 30 April 2015.

Rob Cotton, Group Chief Executive, comments:

"This has been an exciting period of controlled growth for us, on top of the addition of two exceptional businesses Open Registry and Accumuli.

"We again have delivered strong consistent growth in revenue and profitability and remain on course to meet our expectations for the financial year to 31 May 2015.

"The controlled integration of Accumuli has begun and will see the two organisations working together even more closely on projects, as well as looking to gain operational synergies.

"Domain Services remains on target. The .trust service to create a safer internet domain, in effect an online secure gated community, is now live with customers reviewing the various opportunities available to them in the rapidly developing and dynamic domain space.

"With the integrations of the new acquisitions under way and with our solid performance in the current financial year, we are exceptionally well positioned in growing markets.

"We are confident that we will maintain our double digit organic growth and strong cash generation for future years to come."

The Escrow Division continued to perform strongly. Revenue grew by 5% (April 2014: 6%) and renewals are now forecast to be £18.4m for the current financial year (April 2014: £18.0m.)

The global verification order book continues to be solid, with good prospects coming through in the US. It now stands at £3.0m (April 2014: £2.9m).

Group Escrow termination rates are11% for contracts (April 2014: 12%).

In the UK, the cornerstone of NCC Group Escrow, has seen revenue growth in line with expectations at 5% (April 2014: 7%). In North America revenue grew by 10% (April 2013: 3%) and in mainland Europe, the smallest part of the Escrow Division, revenue declined mostly due to currency fluctuations, by 3% (April 2014: grew 2%).

The Assurance Division continues to perform strongly with an 18% increase in revenue (April 2014: 16%).

The number of Security Consultants within the Assurance Division has grown in the period and will continue to do so, with over another 30 new Consultants due to start in North America alone. As importantly the Group's retention rate continues to run at close to 90%.

The Assurance Division's overall combined order book and renewals base currently stands at £36.3m (March 2014: £30.6m), excluding the recent acquisition of Accumuli. This includes the security consulting and testing businesses combined order book of £29.5m (March 2014: £24.1m). The load and performance testing unit's renewals base is £6.8m for the year ended 31 May 2015 (March 2014: £6.5m).

The Domain Services Division remains on track. This Division provides an end-to-end solution for all of an organisation's domain requirements and a unique secure gated community for companies to offer improved security enabling their end users and customers to interact with them, over the Internet, safely and securely.

The Group has been successful at providing its data escrow services and domain abuse monitoring services, Domain Secure, to customers and is already seeing the benefits of the acquisition of Open Registry.

The Group is firmly committed to providing a secure security solution to those brands and organisations looking to exploit the opportunity for more secure communications with their customer base. It is helping a number of companies look at their longer term domain strategy, which ultimately will result in them applying for their own domain when ICANN open the next generic top level domain ("gTLD"), application process.

This consultancy process involves determining the suitability and capability of organisations to join the .trust community, which became live in March. A number of corporates are in advanced discussions with the Group. However, the process of migration to .trust, or any new domain, is very time consuming and needs to be carefully planned and managed.

The development of the infrastructure and tooling required to operate the secure environment remains on plan, with the systems, processes and environments required to run the .trust community nearing completion. As anticipated the development of the product suite will be completed by the end of the first quarter of the next financial year to 31 May 2016.

The Board expects this Division to be close to break even in financial year 2015/16, as it achieves a critical mass of customers buying different services as well as joining the .trust community.

The Group has invested a total of £9.8m in the project during the year to date, (total investment to date £18.1m) of which £3.9m has been expensed in the current financial year. The current year's capital investment will be reduced by £3.0m after accounting for the compensation for the Group's withdrawal of its application for a new gTLD.

The Group expects to report its full year results, including one month from Accumuli, for the 12 months to 31 May 2015 on Thursday, 9 July 2015.

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