Interim results for the period ended 30 November 2021

NCC Group plc (LSE: NCC, “NCC Group” or “the Group”), a leading independent global cyber security and resilience adviser, reports its interim results for the 6 months to 30 November 2021 (“the half year”, “HY”, “H1 2022”, “the period”).

Highlights

• Revenue grew +14.2% at constant currency 1 (+10.7% actual rates), driven materially by the acquisition of IPM.
• Revenues excluding the recent IPM acquisition grew +7.2% on a constancy currency 1 (+3.8% actual rates):
  • Good revenue growth in Assurance of +8.8% at constant currency 1 (+5.2% actual rates).
  • Software Resilience (exc. IPM) declined -3.3% at constant currency 1 (-4.9% actual rates); sale capability now back at full strength and expect return to growth in H2.
• IPM integration progressing to plan and business performing in line with expectations.
• Gross margin (%) increased 2.3% pts mainly due to the IPM acquisition, Assurance gross margin up +1.2% pts.
• Free cashflow prior to acquisition costs of £6.4m is £20.0m, compared to £15.1m in the prior period delivering cash flow conversion before acquisition costs of 99.2%.

Good assurance revenue growth at improved gross margin

• Growth in all Assurance geographies despite FX headwinds
  • North America grew +8.9% at constant currency 1 (+2.3% actual rates)
  • Europe grew +11.8% at constant currency 1 (+6.0% actual rates).
  • UK & APAC grew +7.5% at constant currency 1 (+7.3% actual rates).
• Gross margin improved with increased utilisation, pricing and global resourcing offsetting increased costs
• Net increase of 152 technical heads (+12%) despite slight increase in annualised technical attrition from 17.0% last year to 21.6% this year.
• 37-fold increase on prior period in our key Sentinel and Remediation propositions to £5.5m in H1 2022
• Temporary slowdown in Global Managed Services (GMS) growth +6.8% at constant currency (+3.3% actual rates). We have the orders pipeline to drive a return to double digit growth in H2.

Software Resilience transformed by IPM acquisition

• Headline growth supercharged by $220m acquisition of IPM completed on 7 June 2021, transforming our global Software Resilience business.
• Software Resilience (exc. IPM) revenues declined -3.3% at constant currency (-4.9% actual rates).
• Gross margin (%) declined -1.8% pts following investment to enable Software Resilience to achieve sustainable revenue growth, partially offset by IPM’s higher gross margin percentage
• Escrow-as-a-Service sales orders grew a further 54% YoY to £1.2m

Outlook and interim dividend

• H2 2022 trading to date is currently in line with expectations following sales order momentum in December and January, with Software Resilience returning to revenue growth against H2 2021.
• The balance of H2 2022 requires further revenue acceleration, which we expect to occur as our global markets recover from pandemic disruption and for which we have recruited the global delivery capacity.
• Consequently, we anticipate a strong H2 2022 leading to our full-year outturn to be in line with management expectations.
• Unchanged interim dividend of 1.50p (H1 2021: 1.50p) per ordinary share, with dividend policy remaining under review.

Adam Palser, Chief Executive Officer, commented

“The strength of NCC Group stems from the quality of our people. I am delighted that, in these times of unprecedented demand for cyber and IT talent, we have significantly increased our technical headcount, produced more impactful research than ever before and delivered more value for our customers.

As a result, the strong underlying growth from our Assurance business, coupled with the successful integration and positive trading of the IPM business acquired in June 2021, led to an excellent financial performance with double-digit revenue growth in the first half. We are particularly encouraged by the strong Assurance gross margin performance in the half, as it demonstrates our ability to use utilisation, pricing and global resourcing as levers to manage our way through the higher costs we expect to incur as we compete for talent.

Accelerated digitisation, the rapid growth and sophistication of ransomware attacks and the implications of the largescale adoption of hybrid and remote working globally continue to provide fertile growth opportunities for our comprehensive cyber resilience services. With more software being deployed than ever before by a growing ecosystem of dynamic software companies, we continue to see great promise for our Software Resilience portfolio.

We enter the second half of our financial year with a pipeline of opportunities and talent that leads us to expect further growth in the impact we have to our customers, the experiences we provide our people and, of course, our financial metrics”.

Original RNS

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Analyst presentation briefing and Q & A session

A pre-recorded Analyst presentation briefing will be available from the Group's website at 8am on 27 January
2022 via the following link: https://www.nccgroupplc.com/in...

A Q & A session will be held remotely at 9am on 27 January 2022.

About NCC Group plc
NCC Group exists to make the world safer and more secure.

Our vision is to be the leading cyber resilience provider globally, trusted to protect and secure our customers’ critical assets and sought-after for our complete people-led, technology-enabled cyber resilience solutions that enable our customers to thrive.

Our three values are: Work Together; Be Brilliantly Creative; and Embrace Difference.

As global experts in cyber security and risk mitigation, NCC Group is trusted by over 14,000 customers worldwide to protect their most critical assets from the ever-changing threat landscape. With the company’s knowledge, experience and global footprint, it is best placed to help organisations assess, develop and manage their cyber resilience posture. To support its mission, NCC Group continually invests in research and innovation, and is passionate about developing the next generation of cyber scientists. With over 2,100 colleagues in 12 countries, NCC Group has a significant market presence in North America, Europe and the UK, and a rapidly growing footprint in Asia Pacific with offices in Australia, Japan and Singapore.

Cautionary note regarding forward-looking statement

This announcement includes statements that are forward-looking in nature. Forward-looking statements involve known and unknown risks, assumptions, uncertainties and other factors which may cause the actual results, performance or achievements of the Group to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Except as required by the Listing Rules, Disclosure and Transparency Rules and applicable law, the Group undertakes no
obligation to update, revise or change any forward-looking statements to reflect events or developments occurring on or after the date such statements are published.