REG - NCC Group PLC - Preliminary audited results -16 months to 30/9/24
10/12/2024 07:00
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RNS Number : 4544P NCC Group PLC 10 December 2024
10 December
2024
NCC Group plc
Preliminary audited results for the 16 months to 30 September 2024
Transforming gross margin and Adjusted EBITDA
NCC Group plc (LSE: NCC, "NCC Group" or "the Group"), a people-powered,
tech-enabled global cyber security and software escrow business, reports its
16 months to 30 September 2024 ("2024", "the 16-month period"), following a
change to the Group's financial year end.
Highlights
· Strategic execution is transforming the business, with improved
gross margins and Adjusted EBITDA (1,2) margins
o Group gross margin improved +2.0% pts to 41.4% in 12 months to 31 May 2024
and +6.5% pts to 42.2% in the four-month period to 30 September 2024
§ Cyber Security gross margin improved +2.4% pts to 34.2% in the 12 months to
31 May 2024 and 9.5% pts to 35.5% in the four-month period to 30 September
2024 compared to the four-month period to 30 September 2023 driven by
continued efficiencies
§ Escode gross margin declined 1.6% pts to 69.8% in the 12 months to 31 May
2024 and 3.1% pts to 68.4% in the four-month period to 30 September 2024 due
to investment in the sales team for future growth
o Group Adjusted EBITDA (1,2) margin improved +1.3% pts to 13.0% in the 12
months to 31 May 2024 and +7.1% pts to 9.0% in the four-month period to 30
September 2024
o Unaudited proforma 12 months trading to 30 September 2024 (including
non-core disposals) shows similar improvements in Cyber Security gross margins
and Group Adjusted EBITDA (1,2)
§ Cyber Security gross margin in H2 September 2024 improved +9.2% pts to
37.5%
§ Group Adjusted EBITDA (1,2) margin improved +5.5% pts to 15.1% (£49.7m)
· Cyber Security returned to constant currency (1) revenue growth
of +6.0% in the six months ended 31 May 2024 (actual rates +4.7%) against the
comparable prior period (six months to 31 May 2023). Cyber Security revenue at
constant currency (1) declined for the 12 months ended 31 May 2024 by 2.2%
(actual rates (4.5%)). The four-month period to 30 September 2024 experienced
revenue growth of +7.6% at constant currency (1) (actual rates +6.0%)
· Escode has now delivered sustained revenue growth through seven
quarters and the four-month period to September 2024
· The Group has a strong pipeline of opportunities, and management
is pleased with the foundations put in place through strategic actions taken
in the period. In line with the wider market, the Group has recently seen a
lengthening of sales cycles, in particular across the Cyber business, compared
to H2 to May 2024 and also the four-month period to September 2024. In spite
of this, management expects to deliver profitable growth across both
businesses in the current financial year to 30 September 2025, with flat to
low single digit revenue growth and modest Group Adjusted EBITDA gains (after
adjustment for the non-core disposals and share-based payments) and remains
confident in delivering the Group's medium-term financial goals.
Audited period end results
Audited 16 months to 30 September 2024
Change at actual Change at constant currency (1)
12 months to 31 rates
May 2023
Revenue (£m) (1) 429.5 335.1 28.2% 31.3%
Cyber Security (£m) 342.1 270.8 26.3% 29.3%
Escode (£m) 87.4 64.3 35.9% 39.8%
Gross margin (%) 41.6% 39.4% +2.2% pts
Cyber Security (%) 34.5% 31.8% +2.7% pts
Escode (%) 69.5% 71.4% (1.9% pts)
Adjusted EBITDA (£m) (restated) (1, 2) 51.6 39.2 +31.6%
Operating (loss)/profit (19.2) 1.9 n/a
Net debt excluding lease liabilities (£m) (1) (45.3) (49.6) +8.7%
Final dividend (pence) 1.50p 3.15p n/a
Unaudited results for the 12 months ended 31 May 2024 and 2023
Unaudited 12 months to 31
May 2024
Change at actual Change at constant currency (1)
12 months to 31 May 2023 rates
Revenue (£m) (1) 324.4 335.1 (3.2%) (0.8%)
Cyber Security (£m) 258.5 270.8 (4.5%) (2.2%)
Escode (£m) 65.9 64.3 2.5% 5.4%
Gross margin (%) 41.4% 39.4% +2.0% pts
Cyber Security (%) 34.2% 31.8% +2.4% pts
Escode (%) 69.8% 71.4% (1.6% pts)
Adjusted EBITDA (£m) (restated) (1, 2) 42.1 39.2 +7.4%
Operating (loss)/profit (21.5) 1.9 n/a
Net debt excluding lease liabilities (£m) (1) (38.5) (49.6) +22.4%
12-month dividend (pence) 3.15p 3.15p -
Unaudited results for the four months ended 30 September 2024 and 2023
Unaudited 4 months to 30 September 2024 Change at actual Change at constant currency (1)
rates
4 months to 30 September 2023
Revenue (£m) (1) 105.1 100.3 4.8% 6.6%
Cyber Security (£m) 83.6 78.9 6.0% 7.6%
Escode (£m) 21.5 21.4 0.5% 2.9%
Gross margin (%) 42.2% 35.7% +6.5% pts
Cyber Security (%) 35.5% 26.0% +9.5% pts
Escode (%) 68.4% 71.5% (3.1% pts)
Adjusted EBITDA (£m) (restated) (1, 2) 9.5 1.9 +400.0%
Operating profit/(loss) 2.3 (7.7) n/a
Unaudited results for the 12 months ended 30 September 2024 and 2023
Unaudited 12 months to 30 September 2024
Change at actual Change at constant currency (1)
12 months to 30 September 2023 rates
Revenue (£m) (1) 329.2 323.8 +1.7% +3.5%
Cyber Security (£m) 263.2 258.4 +1.9% +3.7%
Escode (£m) 66.0 65.4 +0.9% +2.8%
Gross margin (%) 43.6% 38.9% +4.7% pts
Cyber Security (%) 37.0% 30.5% +6.5% pts
Escode (%) 68.8% 71.9% (3.1% pts)
Adjusted EBITDA (£m) (restated) (1, 2) 49.7 31.2 +59.3%
Operating loss (11.5) (8.9) +29.2%
Net debt excluding lease liabilities (£m) (1) (45.3) (67.5) +32.9%
Footnotes:
1: Revenue at constant currency, Adjusted EBITDA and Net debt excluding lease
liabilities are Alternative Performance Measures (APMs) and not IFRS measures.
See unaudited appendix 2 for an explanation of APMs and adjusting items,
including a reconciliation to statutory information.
2. After reconsidering FRC best practice guidance around the disclosure of
adjusting items and APM's, the Group has reduced the number of adjusted
measures and items. The Group now only has one adjusted item 'Individual
Significant Items'. Previous adjusted items of Amortisation of acquisition
intangibles and share based payments are no longer disclosed as an adjusted
item. Accordingly, comparative numbers have been restated. For further detail,
please refer to the Financial Review for an explanation of APMs and adjusting
items, including a reconciliation to statutory information.
Mike Maddison, Chief Executive Officer, commented:
"We have made great progress over the past 18 months, transforming the
business by focusing on client needs while building the Group's resilience.
Our more focused Cyber Security business returned to growth in the second half
to May 2024, with improved sources of recurring revenue with Managed Services
performing well, and our Escode business building a track record of growth. We
are pleased to see this strategic progress coming through in improved gross
margin and Adjusted EBITDA - a key priority for the Group.
We continue to focus on our client-centric strategy and notwithstanding
macroeconomic factors outside of our control, we expect to grow in the current
financial year and remain confident in delivering our medium-term financial
goals. An ever-increasing threat landscape, rapidly evolving technology such
as AI, digital adoption and a rise in regulation across the world creates
multiple growth drivers for both our Escode and Cyber businesses, and we
continue to enhance our capabilities and improve our routes to market to
ensure we are the go-to choice for organisations and governments as they build
and enhance their cyber resilience."
Contact information
Investor enquiries:
Yvonne Harley Tel: +44(0)7824 412405
Director of Investor Relations & Sustainability Email: Investor_Relations@nccgroup.com
(mailto:Investor_Relations@nccgroup.com)
Media enquiries:
H/Advisors Maitland Tel: +44(0)20 379 5151
Sam Cartwright/Genevieve Ryan Email: NCCGroup-maitland@h-advisors.global
(mailto:NCCGroup-maitland@h-advisors.global)
Presentation of results - live webcast and conference call details:
An in-person analyst and investor event hosted by Mike Maddison, CEO and Guy
Ellis, CFO will take place at the London Stock Exchange,10 Paternoster
Sq., London EC4M 7LS, at 9:00am GMT today, Tuesday 10 December 2024. To
register your interest, please contact NCCGroup-maitland@h-advisors.global
(mailto:NCCGroup-maitland@h-advisors.global) .
The event will also be streamed virtually via webcast and Zoom. Please
register for the webcast via the link on the LSEG website (SparkLive Webcast
(https://sparklive.lseg.com/NCCGroup/events/8b2d9a50-74a8-4222-b707-bac7632ef562/trading-update)
). If you would like to ask a question, please join the Zoom registration via
this link (SparkLive Zoom Registration
(https://ncc-results-dec2024.open-exchange.net/registration) ).
A recording of the webcast will be made available on NCC's Plc website
(https://www.nccgroupplc.com/ (https://www.nccgroupplc.com/) ) as soon as
possible following the presentation.
About NCC Group plc
NCC Group is a people-powered, tech-enabled global cyber security and software escrow business.
Driven by a collective purpose to create a more secure digital future, c. 2,200 colleagues across Europe, North America, and Asia Pacific harness their collective insight, intelligence, and innovation to deliver cyber resilience solutions for both public and private sector clients globally.
With decades of experience and a rich heritage, NCC Group is committed to developing sustainable solutions that continue to meet client's current and future cyber security challenges.
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.
CEO review
Focusing on client needs while building the Group's resilience
I'd like to start my review of the past 18 months with a tribute to NCC
Group's colleagues around the world. The depth of technical expertise in this
business continues to be truly inspiring and I know it's valued by our clients
too. As we continue to go through, significant change, against a backdrop of
an ever-evolving macro political and economic environment, and the focus and
determination to succeed of all our colleagues is really at the heart of our
progress.
I'm pleased our strategy to transform the business to make it simpler and more
agile is beginning to pay off. We are laser focused on our clients, helping to
create a more secure digital future through the work we do across our cyber
and software escrow businesses. Our clients trust NCC Group with their
critical digital assets, and it's something we will never be complacent about.
As a result of greater commerciality within the organisation and our
increasingly global ways of operating, we achieved the goals we set out in the
financial framework at the start of the period, delivering greater value at
improved price points for our clients. We delivered £10m of annualised
savings, improved our net debt position by divesting non-core assets in our
Dutch cyber business (with completion expected early in the new calendar year)
and finished the 16-month financial year with a strong balance sheet - paving
the way for future inorganic growth investment when the right opportunity
presents itself.
Market economics
Reflecting on our overall growth in the past financial period we continue to
focus on our client-centric strategy and notwithstanding macroeconomic factors
outside of our control, we remain confident in delivering our medium-term
financial goals. As a proof point of the early part of our transformation
activities, our efforts to move from a group of disparate international
businesses delivering locally to clients into a global operating model have
driven efficiencies and importantly sustainable gross margin improvement.
The successful implementation of our office in Manila and our ability to
attract and onboard fantastic talent there, has enabled us to expand our
global capability and offer more options to our clients, and as a result, we
are winning work we wouldn't have been able to bid on previously.
All of this is critical to create a more resilient business particularly given
the lengthening of sales cycles we are currently experiencing, in line with
the wider market.
Other market factors impacting revenue growth include:
· Clients are looking for higher levels of assurance during their
procurement processes, which have greater scrutiny and oversight from within
organisations. Equally, certain clients still require volume assurance
activities, testing infrastructure and applications at the appropriate price
points.
· As we move the balance of our business to higher value, longer
term contracts such as those in Managed Services, there is typically a longer
buying cycle than a standalone service such as testing, which is more
transactional in nature.
· While spending has not stopped, we are seeing security leaders
compete for budget with other spending priorities in their organisations and
cyber security is not immune from the cost pressures experienced by other
departments. Equally when business projects are suspended the security
component is impacted so the economic cycle remains important in terms of
demand drivers.
In the UK, for example, with a general election and then the narrative
relating to the new government's budget, we have seen a relative cooling in
buying activity, and a resulting pause in spend. In North America, Technology
sector spending has not returned to the levels seen during or immediately
after the Covid-19 pandemic, however while we are making progress into other
verticals which are at a lower spending scale than the tech sector.
Market dynamics
In the past five years we have seen people continually look to technology to
detect and respond to cyber threats, with an increasingly competitive market
of providers for managed services. In talking to clients, it's becoming
increasingly apparent that tech or AI-only fatigue is setting in, and what
they want is a proven solution and access to experts - this we believe is an
opportunity for NCC Group as we go forward into 2025.
As revealed in our Digital Dawn report, governments around the world are
shifting responsibility for Cyber Security away from end users onto the
providers of the technology, infrastructure and services that we all rely on.
In particular, the US National Cybersecurity Strategy has given rise to the
commitment from 183 companies, including tech giants Microsoft, AWS and Cisco,
to build stronger security into their software from the start of development
(secure-by-design).
In the UK, the government has announced a new Code of Practice for software
vendors and an AI Cyber Security Code of Practice (in consultation), developed
in conjunction with industry experts like NCC Group, that will help to ensure
secure-by-design principles are embedded in software and AI from the outset.
Looking ahead, the EU's Cyber Resilience Act (CRA) is poised for adoption. The
CRA will be more ambitious than the recent UK Product Security and
Telecommunications Infrastructure Regime (PSTI), introducing Cyber Security
requirements for a substantial portion of hardware and software sold within
the EU. This includes risk assessments, vulnerability handling processes and
incident reporting.
Countries in the EU are also implementing the Network and Information Security
Directive (NIS2) into national laws, which will require more critical
infrastructure sectors to comply with strengthened cyber security and incident
reporting requirements. In addition, the US and Australia are taking similar
approaches, underscoring the international commitment to safeguarding
consumers from modern cyber risks.
What is key from all these developments is that whether you are manufacturing
or producing technology, including emerging technologies such as AI, or owning
and operating an increasing spectrum of critical infrastructure, governments
have strengthened the cyber security requirements companies need to adhere to,
making it crucial to review and update security programmes to future-proof
investments.
Securing the digital future through our clients
In terms of how this plays out against our cyber proposition, while Technical
Assurance demand changes with less demand for volume assurance, this is being
replaced by requirements for specialist skills such as Regulatory Testing or
AI assurance as well as growth in our other capabilities that we've
strategically invested in to create a full cycle offering for clients. The
stand-out is Managed Services, which we detailed at our Capital Markets event
in June 2024, with Identity and Access Management (IDAM) and Operational
Technology demand increasing. IDAM underpins digital transformation and early
signals are positive - with the rail sector being a particularly strong sector
for these services.
We continue to work with TikTok as their independent third-party security
provider of ongoing managed security services for TikTok's security gateways,
performing real-time monitoring to identify and respond to anomalous activity
and helping to ensure the continuous integrity of its security controls
operations. This again demonstrates how the Group can provide end-to-end
capabilities across the whole of the cyber lifecycle.
We've also expanded our routes to market through our partner and alliance
ecosystem, including SAFE Security, Cycognito and Microsoft, as well as
securing a global partnership with global enterprise software company
Splunk. This led to us being awarded the 2024 Splunk Global Services Market
Partner of the Year award as well as the EMEA 2024 Regional Services Partner
of the Year award for exceptional performance and commitment to the Splunk
partnership.
Our software escrow business, which we rebranded to Escode earlier this
period, is less impacted by the market economics affecting cyber. Contract
sizes have always been much smaller, although we have focused on addressing
the lack of historical pricing management, and while there is improvement in
revenue as a result of this, the growth is also driven through increased
verification services.
As outlined at the Escode Capital Markets event in April 2024, our Escode
investment case is clear and as a leading global player in software escrow,
the business is well positioned for growth. The growth levers include adding
further value to our customer proposition, expanding into additional verticals
(for example critical infrastructure) and geographies (Australia), increasing
awareness and education, working with regulators to influence regulation
globally and continuing to build out our product offering.
Business performance
Our statutory results compare a 16-month period to a 12-month period following
our change in year end and further details of this performance can be found
within the Financial Review.
If I turn to our recent trajectory and our unaudited four-month and 12-month
periods to 30 September 2024, these show encouraging results and demonstrate
Escode revenue momentum and a return to Cyber Security revenue growth. We
have improved our Cyber gross margins while experiencing a reduction in Escode
gross margins due to investment in the sales team for future growth. All of
this has translated to improved Group Adjusted EBITDA margins, with the 12
months to 30 September 2024 obtaining mid teen group margin (+15.1%) in line
with our medium-term ambitions set out 18 months ago.
Moving into the next phase of our transformation
We are clear on what we need to do in each of our divisions as we continue to
simplify our business enabling us to deliver profitable growth and sustainable
gross margin improvement.
Outlook
The Group has a strong pipeline of opportunities, and management is pleased
with the foundations put in place through strategic actions taken in the
period. In line with the wider market, the Group has recently seen a
lengthening of sales cycles, in particular across the Cyber business, compared
to H2 to May 2024 and also the four-month period to September 2024. In spite
of this, management expects to deliver profitable growth across both
businesses in the current financial year to 30 September 2025, with flat to
low single digit revenue growth and modest Group Adjusted EBITDA gains (after
adjustment for the non-core disposals and share-based payments) and remains
confident in delivering the Group's medium-term financial goals.
Financial review
Delivering on our financial framework
Highlights - financial framework
Reviewing our financial framework for the 16-month period to 30 September 2024
set out at the start of the period, it is encouraging to see that we continue
to deliver.
The key points to note are as follows:
· Sustainable revenue growth
o Returning Cyber Security to growth in second half of the unaudited period
ended 31 May 2024 and in the unaudited four-month period ending 30 September
2024. Second half of the 12 months ended 31 May 2024 revenue was ahead of
the comparative period on constant currency (1) by 6.0% (at actual rates
4.7%). Momentum continued during the four-month stub period, giving rise to
constant currency growth of 7.6% (at actual rates 6.0%).
o Accelerating growth in our recurring Managed Services - revenue
momentum continued during the 12-month period ended 31 May 2024 and the
four-month stub period, giving rise to constant current (1) growth in the
four-month stub period of 45.0% (at actual rates 43.3%).
o Maintaining momentum of growth in Escode - sustained growth through the
past seven quarters and four-month period leading to +2.9% constant currency
growth (+0.5% actual rates)
· Improved gross margin
o Improved utilisation - Technical Assurance Services (TAS) and, Consulting
and Implementation (C&I) average utilisation for all locations improved to
c.66% for the four-month period ending 30 September 2024 contributing to Cyber
Security gross margin improvement of 9.5% in the four-month stub period
following low performance in H2 of the year ended 31 May 2023 of c.58%.
Utilisation for the 12-month period to 31 May 2024 amounted to c.68%.
o Globalised technical resource footprint - from a global delivery
perspective the Group continues to invest in its Manila office
· Efficient cost base
o Delivering efficiencies - Cyber Security gross margin improved from 31.8%
for the year ended 31 May 2023 to 34.5% for the 16-month period ended 30
September 2024. Overheads have also been effectively managed after
considering inflationary pressures.
o Annualising Escode efficiencies delivered in FY23 - our work carried out
in FY23 enabled us to invest in our sales and support team to lay the
foundations for further revenue growth, with the benefits beginning to come to
fruition.
· Balance sheet resilience
o Strong cash conversion (1) - strong historic cash conversion, with the 12
months to 30 September 2024 amounting to 96.6%
o Reducing net debt (1) - net debt effectively managed to £45.3m, reduction
of £4.3m. Following the non-core disposal announcement on 1 August 2024 of
our European Crypto business for initial net proceeds of c.€74m (c.£66m),
net debt will be cleared early in the new calendar year following standard
regulatory approvals, this will facilitate organic and inorganic growth in the
Group's Cyber Security business
o Maintaining dividend - 12-month dividend maintained at 3.15p and final
dividend for the four-month period proposed of 1.5p which is in line with the
historic six-month interim period dividends previously paid.
Overview of financial performance
Change in year end
The following table summarises the Group's overall audited performance the
Group for the 16-month period ended 30 September 2024 following our unaudited
results for the 12 months to 31 May 2024 announced on the 1 August 2024.
Following the change in financial year end, contained within Appendix 1 to the
consolidated financial statements are unaudited 12-month pro forma results for
the period ending 30 September 2024 compared to the previous unaudited
12-month period ending 30 September 2023 to aid comparability of the new year
end performance and importantly the current trajectory of the Group.
16-month period ended 30 September 2024
Year ended 31 May 2023
Cyber Escode Central Group Cyber Security Escode Central Group
Security
£m and head office £m £m £m and head office £m
£m
£m £m
Revenue 342.1 87.4 - 429.5 270.8 64.3 - 335.1
Cost of sales (224.1) (26.7) - (250.8) (184.7) (18.4) - (203.1)
Gross profit 118.0 60.7 - 178.7 86.1 45.9 - 132.0
Gross margin % 34.5% 69.5% - 41.6% 31.8% 71.4% - 39.4%
Administrative expenses (97.3) (24.1) (3.4) (124.8) (70.7) (14.7) (5.2) (90.6)
Share-based payments (0.1) (0.2) (2.0) (2.3) (1.6) (0.1) (0.5) (2.2)
Adjusted EBITDA (1, 2) 20.6 36.4 (5.4) 51.6 13.8 31.1 (5.7) 39.2
Depreciation and amortisation (10.9) (0.6) (5.3) (16.8) (8.5) (0.6) (3.5) (12.6)
Amortisation of acquired intangibles (1.4) (7.1) (4.0) (12.5) (1.2) (5.8) (3.0) (10.0)
Adjusted Operating profit (1, 2) 8.3 28.7 (14.7) 22.3 4.1 24.7 (12.2) 16.6
Individually Significant Items (41.4) (0.1) - (41.5) (12.3) (2.4) - (14.7)
Operating (loss)/profit (33.1) 28.6 (14.7) (19.2) (8.2) 22.3 (12.2) 1.9
Operating margin % (9.7%) 32.7% n/a (4.5%) (3.0%) 34.7% n/a 0.6%
Finance costs (8.3) (6.2)
Loss before taxation (27.5) (4.3)
Taxation (5.0) (0.3)
Loss after taxation (32.5) (4.6)
EPS
Basic EPS (10.4p) (1.5p)
Adjusted basic EPS (1, 2) 3.4p 2.8p
Footnotes:
1: Adjusted EBITDA, Adjusted Operating profit and Adjusted basic EPS are
Alternative Performance Measures (APMs) and not IFRS measures. See unaudited
appendix 2 for an explanation of APMs and adjusting items, including a
reconciliation to statutory information.
2: After reconsidering FRC best practice guidance around the disclosure of
adjusting items and APM's, the Group has reduced the number of adjusted
measures and items. The Group now only has one adjusted item 'Individual
Significant Items'. Previous adjusted items of Amortisation of acquisition
intangibles and share based payments are no longer disclosed as an adjusted
item. Accordingly, comparative numbers have been restated. For further detail,
please refer to the Financial Review for an explanation of APMs and adjusting
items, including a reconciliation to statutory information.
16-month period ended 30 September 2024 (audited)
On the basis we are comparing a 16-month period to a 12-month period. Revenue
increased by 31.3% on a constant currency basis (Actual rates 28.2%), with
Cyber Security Revenue increasing 29.3% on a constant currency basis (Actual
rates: 26.3%) and Escode growing by 39.8% on a constant currency basis (Actual
rates: 35.9%).
Encouragingly, when you directly compare our gross margins, we have improved
since the second half of the year ended 31 May 2023 with gross margin
percentage increasing to 41.6% (2023: 39.4%). The 2.2% pts gross margin (%)
increase is due to improved utilisation and operational efficiencies within
Cyber Security, alongside a change in the service mix whereby managed services
are becoming a greater proportion of overall revenue at a higher margin. This
is offset by a decline in Escode gross margin due to continued investment in
the sales team for future growth.
Administrative expenses increased from £90.6m to £124.8m following the
management of inflationary pressures with a decrease in non-client travel and
training offset by strategic investments (including investment in our Manila
office) and foreign exchange.
A loss before taxation of £27.5m for the period was recognised after
incurring £41.5m of Individual Significant Items (including the North America
Cyber Security impairment, fundamental re-organisation costs and the profit on
disposal of non-core operations), this gave rise to a basic and diluted EPS of
(10.4p) (2023: basic and diluted (1.5p)). Adjusted basic EPS (1) amounted to
3.4p (2023 restated (2): 2.8p).
Net debt excluding lease liabilities (1) amount to £45.3m (2023: £49.6m).
Our Balance Sheet remains strong following our refinancing in December 2022.
Our facilities include a four-year £162.5m multi-currency revolving credit
facility and additional £75m uncommitted accordion option.
The Board is proposing a final four-month dividend of 1.5p per ordinary share
(2023: 3.15p). This is equivalent to the interim dividend previously paid
albeit for the final 4-month period ending 30 September 2024 rather than
six-months.
4-month pro forma results for the period ending 30 September 2024 (Unaudited)
The following table summarises the pro forma results of the period ending 30
September 2024
4-month period ended 30 September 2024 (unaudited)
4-month period ended 30 September 2023 (unaudited)
Cyber Escode Central Group Cyber Security Escode Central Group
Security
£m and head office £m £m £m and head office £m
£m
£m £m
Revenue 83.6 21.5 - 105.1 78.9 21.4 - 100.3
Cost of sales (53.9) (6.8) - (60.7) (58.4) (6.1) - (64.5)
Gross profit 29.7 14.7 - 44.4 20.5 15.3 - 35.8
Gross margin % 35.5% 68.4% - 42.2% 26.0% 71.5% - 35.7%
Administrative expenses (26.9) (6.6) (0.7) (34.2) (26.0) (7.2) (0.2) (33.4)
Share-based payments 0.2 - (0.9) (0.7) - (0.1) (0.4) (0.5)
Adjusted EBITDA (1, 2) 3.0 8.1 (1.6) 9.5 (5.5) 8.0 (0.6) 1.9
Depreciation and amortisation (2.4) (0.2) (1.6) (4.2) (2.3) (0.1) (1.6) (4.0)
Amortisation of acquired intangibles (0.4) (1.6) (1.0) (3.0) (0.3) (1.8) (1.0) (3.1)
Adjusted Operating profit (1, 2) 0.2 6.3 (4.2) 2.3 (8.1) 6.1 (3.2) (5.2)
Individually Significant Items - - - - (2.5) - - (2.5)
Operating profit/(loss) 0.2 6.3 (4.2) 2.3 (10.6) 6.1 (3.2) (7.7)
Operating margin % 0.2% 29.3% n/a 2.2% (13.4%) 28.5% n/a (7.7%)
Finance costs (2.1) (1.9)
Profit/(loss) before taxation 0.2 (9.6)
Revenue increased by 6.6% on a constant currency basis (Actual rates 4.8%),
with Cyber Security Revenue increasing 7.6% on a constant currency basis
(Actual rates: 6.0%) and Escode growing by 2.9% on a constant currency basis
(Actual rates: 0.5%).
As you look at our revenue trajectory in Cyber Security for the final four
months of the period compared to the similar prior period to 30 September
2023, we have experienced continued growth in our UK Managed Service
performance whilst our North America rate of decline has eased to 5.7% on a
constant currency basis (actual rates (8.4%)). Technical Assurance Services
has declined by 3.6% on a constant currency basis (1) (Actual rates: 5.5%)
with the recovery in demand still less consistent than expected against a
backdrop of the current macro uncertainty within North America and UK.
Gross profit increased by 24.0% to £44.4m with gross margin percentage
increasing to 42.2% (2023: 35.7%). The overall 6.5% pts gross margin increase
is due to improved utilisation and operational efficiencies within Cyber
Security, alongside a change in the service mix whereby managed services are
becoming a greater proportion of overall revenue at a higher margin. This is
offset by a decline in Escode gross margin due to continued investment in the
sales team for future growth.
Adjusted EBITDA has improved by £7.6m when compared to the similar prior
period driven by Cyber Security gross margin improvements noted above which
have been slightly offset by 7.5% increase in administrative expenses
(excluding share-based payments) driven by investment and inflationary
pressures.
12-month pro forma results for the period ending 30 September 2024 (Unaudited)
The following table summarises the pro forma results for the 12-month period
ending 30 September 2024:
12-month period ended 30 September 2024
(unaudited)
12-month period ended 30 September 2023
(unaudited)
Cyber Escode Central Group Cyber Security Escode Central Group
Security
£m and head office £m £m £m and head office £m
£m
£m £m
Revenue 263.2 66.0 - 329.2 258.4 65.4 - 323.8
Cost of sales (165.7) (20.6) - (186.3) (179.6) (18.4) - (198.0)
Gross profit 97.5 45.4 - 142.9 78.8 47.0 - 125.8
Gross margin % 37.0% 68.8% - 43.4% 30.5% 71.9% - 38.9%
Administrative expenses (71.3) (16.9) (3.2) (91.4) (69.6) (16.6) (6.4) (92.6)
Share-based payments (0.1) (0.1) (1.6) (1.8) (1.2) (0.1) (0.7) (2.0)
Adjusted EBITDA (1, 2) 26.1 28.4 (4.8) 49.7 8.0 30.3 (7.1) 31.2
Depreciation and amortisation (8.6) (0.5) (3.7) (12.8) (8.4) (0.5) (3.6) (12.5)
Amortisation of acquired intangibles (1.1) (5.3) (3.0) (9.4) (1.1) (5.6) (2.9) (9.6)
Adjusted Operating profit (1, 2) 16.4 22.6 (11.5) 27.5 (1.5) 24.2 (13.6) 9.1
Individually Significant Items (38.9) (0.1) - (39.0) (15.6) (2.4) - (18.0)
Operating (loss)/profit (22.5) 22.5 (11.5) (11.5) (17.1) 21.8 (13.6) (8.9)
Operating margin % (8.5%) 34.1% n/a (3.5%) (6.6%) 33.3% n/a (2.7%)
Finance costs (6.3) (6.9)
Loss before taxation (17.8) (15.8)
Taxation (7.3) 0.4
Loss after taxation (25.1) (15.4)
EPS
Basic EPS (8.1p) (5.0p)
Adjusted basic EPS (1, 2) 5.2p 0.6p
Revenue increased by 3.5% on a constant currency basis (Actual rates +1.7%),
with Cyber Security Revenue increasing 3.7% on a constant currency basis
(Actual rates: 1.9%) and Escode growing by 2.8% on a constant currency basis
(Actual rates: 0.9%).
Turning to Cyber Security revenue trajectory during this 12-month pro forma
period, UK & APAC grew by +15.1% at constant currency (Actual rates:
+14.6%) driven by the TikTok contract, North America declined by 18.1% (Actual
rates (21.0%)) whereas Europe grew by 11.8% (Actual rates: +9.6%). We have
experienced continued growth in our UK Managed Service performance whilst
North America's rate of decline has eased to (3.7%) on a constant currency
basis (Actual rates (6.1%)) in the second half of this proforma period.
Technical Assurance Services declined by (0.2%) on a constant currency basis
(1) (Actual rates: (1.3%)) in the second half of this proforma period, with
the recovery in demand still less consistent than expected against a backdrop
of the current macro conditions within North America and UK.
Gross profit increased by 13.6% to £142.9m with gross margin percentage
increasing to 43.4% (Sept 2023: 38.9%). The overall 4.5% pts gross margin (%)
increase is due to improved utilisation and operational efficiencies within
Cyber Security, alongside a change in the service mix whereby Managed Services
is becoming a greater proportion of overall revenue at a higher margin. Cyber
Security gross margin now equates to 37.0% compared to 30.5% as at 30
September 2023. This is offset by a decline in Escode gross margin by 3.1%
pts due to continued investment in the sales team for future growth.
Adjusted Operating profit (1,2) has improved by £18.4m when compared to the
similar 12-month proforma prior period driven by gross margin improvements
noted above and well controlled overheads.
For the 12-month period ending 30 September 2024, our cash conversion (1) was
96.6% (May 2023 restated (2): 108.7%).
Further analysis on our performance for the 12-month period ending 30
September 2024 can be found within the unaudited Appendix 1 of the financial
statements.
Alternative Performance Measures (APMs)
Throughout this Financial Review, certain APMs are presented. The APMs used by
the Group are not defined terms under IFRS and therefore may not be comparable
with similarly titled measures reported by other companies. They are not
intended to be a substitute for, or superior to, IFRS measures. This
presentation is also consistent with the way that financial performance is
measured by management and reported to the Board, and the basis of financial
measures for senior management's compensation scheme and provides
supplementary information that assists the user in understanding the financial
performance, position and trends of the Group.
We believe these APMs provide readers with important additional information on
our business and this information is relevant for use by investors, securities
analysts and other interested parties as supplemental measures of future
potential performance. However, since statutory measures can differ
significantly from the APMs and may be assessed differently by the reader, we
encourage you to consider these figures together with statutory reporting
measures noted. Specifically, we would note that APMs may not be comparable
across different companies and that certain profit related APMs may exclude
recurring business transactions (e.g. acquisition related costs) that impact
financial performance and cash flows.
After reconsidering FRC best practice guidance around the disclosure of
adjusting items and APM's, the Group has reduced the number of adjusted
measures and items within the period. The Group now only has one adjusted item
'Individually Significant Items'. Previous adjusted items of amortisation of
acquisition intangibles and share based payments are no longer disclosed as an
adjusted item. Accordingly, comparative numbers have been restated.
The following tables reconciles how these changes have affected the historic
measures of Adjusted EBITDA, Adjusted Operating profit, Adjusted profit for
the period, Adjusted basic EPS and cash conversion, which includes Adjusted
EBITDA:
(2)
Adjusted measure 16-month period ended 30 September 2024 Year ended 31 May 2023
(restated) (2)
Adjusted EBITDA - previously (£m) 53.9 41.4
Share based payments (£m) (2.3) (2.2)
Adjusted EBITDA - revised (£m) 51.6 39.2
Adjusted Operating profit - previously (£m) 37.1 28.8
Share based payments (£m) (2.3) (2.2)
Amortisation of acquired intangibles (£m) (12.5) (10.0)
Adjusted Operating profit - revised (£m) 22.3 16.6
Adjusted profit for the period - previously (£m) 21.3 18.9
Share based payments (£m) (2.3) (2.2)
Amortisation of acquired intangibles (£m) (12.5) (10.0)
Tax effect of above items (£m) 4.1 2.1
Adjusted profit for the period - revised (£m) 10.6 8.8
Adjusted basic EPS - previously (pence) 6.8 6.1
Effect of share-based payments (pence) (0.7) (0.7)
Effect amortisation of acquired intangibles (pence) (4.0) (3.3)
Tax effect of above items (pence) 1.3 0.7
Adjusted basic EPS - revised (pence) 3.4 2.8
Cash conversion - previously (%) 71.2% 102.9%
Effect of share-based payments (%) 3.2% 5.8%
Cash conversion - revised (%) 74.4% 108.7%
The Group now has the following APMs/non-statutory measures:
· Adjusted EBITDA (reconciled below)
· Adjusted Operating profit (reconciled below)
· Adjusted basic EPS (pence) (reconciled below)
· Adjusted profit for the period (reconciled below)
· Net debt excluding lease liabilities (reconciled below)
· Net debt (reconciled below)
· Cash conversion which includes Adjusted EBITDA (reconciled below)
· Constant currency revenue (reconciled below)
Apart from the changes noted above, the above APM's are consistent with those
reported for the year ended 31 May 2023.
The Group also reports certain geographic regions and service capabilities on
a constant currency basis to reflect the underlying performance considering
constant foreign exchange rates period on period. This involves translating
comparative numbers at current period rates for comparability to enable a
growth factor to be calculated. As these measures are not statutory revenue
numbers, management considers these to be APMs; see unaudited appendix 1 for
further details.
Adjusted EBITDA (1) and Adjusted Operating profit (1)
Following the changes noted above to the number of adjusting items, the
revised calculation of Adjusted EBITDA (1) is set out below:
16-month period ended 30 September 2024
£m Year ended 31 May 2023
(restated) (2) £m
Operating (loss)/profit (19.2) 1.9
Depreciation and amortisation 16.8 12.6
Amortisation of acquired intangibles (Note 8) 12.5 10.0
Individually Significant Items (Note 4) 41.5 14.7
Adjusted EBITDA (1) 51.6 39.2
Depreciation and amortisation and amortisation of acquired intangibles (29.3) (22.6)
Adjusted Operating profit - revised (1, 2) 22.3 16.6
Previously these adjusted measures would have been calculated as follows:
16-month period
ended 30 September Year ended 31 May 2023
2024 (restated) (2) £m
£m
Operating (loss)/profit (19.2) 1.9
Depreciation and amortisation 16.8 12.6
Amortisation of acquired intangibles 12.5 10.0
Individually Significant Items (Note 4) 41.5 14.7
Share-based payments 2.3 2.2
Adjusted EBITDA - previously (1, 2) 53.9 41.4
Depreciation and amortisation (excluding amortisation of acquired intangibles) (16.8) (12.6)
Adjusted Operating profit - previously (1, 2) 37.1 28.8
1: See above for an explanation of Alternative Performance Measures (APMs) and
adjusting items. See unaudited appendix 2 for an explanation of APMs and
adjusting items, including a reconciliation to statutory information.
2: After reconsidering FRC best practice guidance around the disclosure of
adjusting items and APM's, the Group has reduced the number of adjusted
measures and items. The Group now only has one adjusted item 'Individual
Significant Items'. Previous adjusted items of Amortisation of acquisition
intangibles and share based payments are no longer disclosed as an adjusted
item. Accordingly, comparative numbers have been restated. For further detail,
please refer to the Financial Review and above for an explanation of APMs and
adjusting items, including a reconciliation to statutory information.
Revenue summary:
Constant Currency(1)
16-month period 16-month period ( )
ended 30 September ended 30 September Year
2024 Year ended 31 May 2023 % 2024 ended 31 May 2023 %
£m
£m £m change at actual rates £m change at constant currency (1)
Cyber Security revenue 342.1 270.8 26.3% 342.1 264.5 29.3%
Escode 87.4 64.3 35.9% 87.4 62.5 39.8%
Total revenue 429.5 335.1 28.2% 429.5 327.0 31.3%
Constant Currency(1)
12-month period ended 31 May 2024 12-month period ended 31 May 2024 ( )
£m £m Year ended 31 May 2023
Year ended 31 May 2023 % £m %
£m change at actual rates change at constant currency (1)
Cyber Security revenue 258.5 270.8 (4.5%) 258.5 264.5 (2.3%)
Escode 65.9 64.3 2.5% 65.9 62.5 5.4%
Total revenue 324.4 335.1 (3.2%) 324.4 327.0 (0.8%)
Constant Currency(1)
( )
4-month period ended 30 September 2023
4-month period ended 30 September 2024 4-month period ended 30 September 2023 4-month period ended 30 September 2024 £m
£m £m £m
% %
change at actual rates change at constant currency (1)
Cyber Security revenue 83.6 78.9 6.0% 83.6 77.7 7.6%
Escode 21.5 21.4 0.5% 21.5 20.9 2.9%
Total revenue 105.1 100.3 4.8% 105.1 98.6 6.6%
1: Revenue at constant currency is an unaudited Alternative Performance
Measures (APMs) and not IFRS measures. See unaudited appendix 2 for an
explanation of APMs and adjusting items, including a reconciliation to
statutory information.
Divisional performance
The following sections summarises the Group's divisional performance for the
16-month period ended 30 September 2024 following our unaudited results for
the 12-month period to 31 May 2024 announced on the 1 August 2024. This
section also includes the unaudited results for the remaining four months to
30 September 2024 compared to the previous unaudited four-month period ending
30 September 2023 to aid comparability and importantly the current trajectory
of the Group.
Cyber Security
The Cyber Security division accounts for 79.7% of Group revenue (2023: 80.8%)
and 66.0% of Group gross profit (2023: 65.2%).
Cyber Security revenue analysis - by originating region:
Audited 16-month period 16-month period Constant Currency(1
) Year ended 31 May 2023
ended 30 September % ended 30 September
%
£m
2024 Year ended 31 May 2023 change at actual rates 2024 change at constant currency (1)
£m £m £m
UK & APAC 173.3 118.4 46.4% 173.3 117.8 47.1%
North America 90.7 99.3 (8.7%) 90.7 94.2 (3.7%)
Europe 78.1 53.1 47.1% 78.1 52.5 48.8%
Total Cyber Security revenue 342.1 270.8 26.3% 342.1 264.5 29.3%
Unaudited
12-month period ended 31 May 2024 Constant Currency(1)
12-month period ended 31 May 2024 % £m Year ended 31 May 2023
£m Year ended 31 May 2023 change at actual rates £m %
£m change at constant currency (1)
UK & APAC 129.8 118.4 9.6% 129.8 117.8 10.2%
North America 69.0 99.3 (30.5%) 69.0 94.2 (26.8%)
Europe 59.7 53.1 12.4% 59.7 52.5 13.7%
Total Cyber Security revenue 258.5 270.8 (4.5%) 258.5 264.5 (2.3%)
Constant Currency(1) (
) 4-month
period
4-month 4-month period ended 30 September 2023 4-month
ended 30 September 2023
period £m % period
£m
ended 30 September change at actual rates ended 30 September %
2024 2024 change at constant currency (1)
£m £m
Unaudited
UK & APAC 43.5 37.7 15.4% 43.5 37.6 15.7%
North America 21.7 23.7 (8.4%) 21.7 23.0 (5.7%)
Europe 18.4 17.5 5.1% 18.4 17.1 7.6%
Total Cyber Security revenue 83.6 78.9 6.0% 83.6 77.7 7.6%
1: Revenue at constant currency is an unaudited Alternative Performance
Measures (APMs) and not IFRS measures. See unaudited appendix 2 for an
explanation of APMs and adjusting items, including a reconciliation to
statutory information.
Cyber Security revenue analysis - by type of service and capability:
Constant Currency (1)
16-month period 16-month period Year ended 31 May 2023
ended 30 September % ended 30 September £m %
2024 Year ended 31 May 2023 change 2024 change at constant currency (1)
at actual rates
£m £m £m
Audited
Technical Assurance Services (TAS) 141.4 142.9 (1.0%) 141.4 138.7 1.9%
Consulting and Implementation (C&I) 55.2 44.7 23.5% 55.2 44.0 25.5%
Managed Services (MS) 91.8 50.1 83.2% 91.8 49.5 85.5%
Digital Forensics and Incident Response (DFIR) 20.6 13.5 52.6% 20.6 13.5 52.6%
Other services 33.1 19.6 68.9% 33.1 18.8 76.1%
Total Cyber Security revenue 342.1 270.8 26.3% 342.1 264.5 29.3%
Constant Currency(1)
12-month period ended 31 May 2024 12-month period ended 31 May 2024 Year ended 31 May 2023 %
£m
%
Year ended 31 May 2023
£m £m change at constant currency (1)
change
£m
at actual rates
Unaudited
Technical Assurance Services (TAS) 107.0 142.9 (25.1%) 107.0 138.7 (22.9%)
Consulting and Implementation (C&I) 42.8 44.7 (4.3%) 42.8 44.0 (2.7%)
Managed Services (MS) 67.3 50.1 34.3% 67.3 49.5 36.0%
Digital Forensics and Incident Response (DFIR) 16.4 13.5 21.5% 16.4 13.5 21.5%
Other services 25.0 19.6 27.6% 25.0 18.8 33.0%
Total Cyber Security revenue 258.5 270.8 (4.5%) 258.5 264.5 (2.3%)
Constant Currency(1)
4-month period ended 30 September 2023
4-month 4-month period ended 30 September 2023 4-month £m
£m
period % period %
ended 30 September 2024 change ended 30 September 2024 change at constant currency (1)
at actual rates
£m £m
Unaudited
Technical Assurance Services (TAS) 34.4 36.4 (5.5%) 34.4 35.7 (3.6%)
Consulting and Implementation (C&I) 12.4 13.1 (5.3%) 12.4 13.0 (4.6%)
Managed Services (MS) 24.5 17.1 43.3% 24.5 16.9 45.0%
Digital Forensics and Incident Response (DFIR) 4.2 5.5 (23.6%) 4.2 5.5 (23.6%)
Other services 8.1 6.8 19.1% 8.1 6.6 22.7%
Total Cyber Security revenue 83.6 78.9 6.0% 83.6 77.7 7.6%
Cyber Security revenue increased by +29.3% on a constant currency basis (1)
and at +26.3% at actual rates when comparing the 16-month period to the year
ended 31 May 2023. UK & APAC increased due to Managed Services, and North
America decline has slowed since the decline in the unaudited 12 months period
to 31 May 2024, while Technical Assurance Services declined with the recovery
in demand still less consistent than expected within the UK and North America.
In relation to the unaudited four-month period to 30 September 2024, C&I
declined across all regions and the DFIR decline arose from the UK.
Managed Services revenue for the 16-month period 30 September 2024, now
represents 26.8% of total Cyber Security revenue as compared to the year ended
31 May 2023 of 18.5%, demonstrating the change in service mix to more annual
recurring revenues. Looking at other KPIs, our TAS and C&I average
utilisation has improved to 66% in the second six-month period to 30 September
2024 (from 57% in the second six-month period to 30 September 2023), while we
have 178 clients with sales orders > £250k, of which 73% take multiple
capabilities. The number of recurring clients over £250k amounts to 133 in
the second six-month period to 30 September 2024.
Cyber Security gross profit is analysed as follows: % pts change
16-month period 16-month period
ended 30 September ended 30 September
2024 2024 Year ended 31 May Year ended 31 May
£m % margin 2023 2023
£m % margin
Audited
UK & APAC 72.5 41.8% 40.3 34.0% 7.8% pts
North America 18.4 20.3% 26.1 26.3% (6.0% pts)
Europe 27.1 34.7% 19.7 37.1% (2.4% pts)
Cyber Security gross profit and % margin 118.0 34.5% 86.1 31.8% 2.7% pts
Gross margins increased overall by +2.7% pts, driven by UK managed services
within UK & APAC, this was offset by North America. In Europe, the margin
decreased by 2.4% pts due to the recognition of historic one-off project cost
compensation of £1.5m in H1 of the year ended 31 May 2023. Excluding this
item, the margin would have remained flat.
12-month period ended 31 May 2024 % pts change
£m
12-month period ended 31 May 2024 Year ended 31 May Year ended 31 May
% margin 2023 2023
£m
% margin
Unaudited
UK & APAC 55.4 42.7% 40.3 34.0% 8.7% pts
North America 14.2 20.6% 26.1 26.3% (5.7% pts)
Europe 18.7 31.3% 19.7 37.1% (5.8% pts)
Cyber Security gross profit and % margin 88.3 34.2% 86.1 31.8% 2.4% pts
4-month period ended 30 September 2024 4-month period 4-month period 4-month period
£m ended 30 September ended 30 September ended 30 September % pts change
2024 2023 2023
% margin £m % margin
Unaudited
UK & APAC 17.1 39.3% 11.2 29.7% 9.6% pts
North America 4.2 19.4% 3.6 15.2% 4.2% pts
Europe 8.4 45.7% 5.7 32.6% 13.1% pts
Cyber Security gross profit and % margin 29.7 35.5% 20.5 26.0% 9.5% pts
Escode
The Escode division accounts for 20.3% of Group revenues (2023: 19.2%) and
34.0% of Group gross profit (2023: 34.8%).
Escode revenue analysis - by originating region:
%
change at actual rates Constant Currency(1)
Year ended 31 May 2023
16-month period Year ended 31 May 2023 16-month period
£m
ended 30 September £m ended 30 September
2024 2024 %
£m £m change at constant currency (1)
Audited
UK 36.5 25.8 41.5% 36.5 25.7 42.0%
North America 45.5 34.5 31.9% 45.5 32.8 38.7%
Europe 5.4 4.0 35.0% 5.4 4.0 35.0%
Total Escode revenue 87.4 64.3 35.9% 87.4 62.5 39.8%
% Constant Currency(1)
change at actual rates
Year ended 31 May 2023
12-month period to 31 May 2024 Year ended 31 May 2023 £m
£m £m 12-month period to 31 May 2024 %
£m change at constant currency (1)
Unaudited
UK 27.3 25.8 5.8% 27.3 25.7 6.2%
North America 34.4 34.5 (0.3%) 34.4 32.8 4.9%
Europe 4.2 4.0 5.0% 4.2 4.0 5.0%
Total Escode revenue 65.9 64.3 2.5% 65.9 62.5 5.4%
%
change at actual rates Constant Currency(1)
4-month 4-month period ended 30 September 2023
£m
4-month period ended 30 September 2024 4-month period ended 30 September 2023 period
£m £m ended 30 September %
2024 change at constant currency (1)
£m
Unaudited
UK 9.2 8.5 8.2% 9.2 8.5 8.2%
North America 11.1 11.5 (3.5%) 11.1 11.1 0.0%
Europe 1.2 1.4 (14.3%) 1.2 1.3 (7.7%)
Total Escode revenue 21.5 21.4 0.5% 21.5 20.9 2.9%
Escode revenues analysed by service line:
%
change at actual rates Constant Currency(1)
16-month period 16-month period
ended 30 September ended 30 September Year ended 31 May 2023
2024 Year ended 31 May 2023 2024 £m %
£m £m £m change at constant currency (1)
Audited
Escrow contracts 57.2 42.8 33.6% 57.2 41.5 37.8%
Verification services 30.2 21.5 40.5% 30.2 21.0 43.8%
Total Escode revenue 87.4 64.3 35.9% 87.4 62.5 39.8%
%
change at actual rates
Constant Currency(1)
Year ended 31 May 2023
Unaudited £m
12-month period to 31 May 2024 Year ended 31 May 2023 12-month period to 31 May 2024 %
£m £m £m change at constant currency (1)
Escrow contracts 43.3 42.8 1.2% 43.3 41.5 4.3%
Verification services 22.6 21.5 5.1% 22.6 21.0 7.6%
Total Escode revenue 65.9 64.3 2.5% 65.9 62.5 5.4%
% Constant Currency(1)
change at actual rates
4-month
Unaudited 4-month period ended 30 September 2024 4-month 4-month period ended 30 September 2024 period
£m period £m ended 30 September 2023 %
ended 30 September 2023 £m change at constant currency (1)
£m
Escrow contracts 13.9 14.9 (6.7%) 13.9 14.5 (4.1%)
Verification services 7.6 6.5 16.9% 7.6 6.4 18.8%
Total Escode revenue 21.5 21.4 0.5% 21.5 20.9 2.9%
1: Revenue at constant currency is an unaudited Alternative Performance
Measures (APMs) and not IFRS measures. See unaudited appendix 2 for an
explanation of APMs and adjusting items, including a reconciliation to
statutory information.
Gross margin is analysed as follows:
Audited 16-month period 16-month period
ended 30 September ended 30 September
2024 2024 Year ended 31 May 2023 Year
£m % margin £m ended 31 May 2023
% margin
% pts change
UK 24.8 67.9% 18.2 70.5% (2.6% pts)
North America 32.6 71.6% 25.0 72.5% (0.9% pts)
Europe 3.3 61.1% 2.7 67.5% (6.4% pts)
Escode gross profit and % margin 60.7 69.5% 45.9 71.4% (1.9% pts)
Unaudited 12-month period to 31 May 2024 12-month period to 31 May 2024
£m % margin Year ended 31 May 2023 Year
£m ended 31 May 2023
% margin
% pts change
UK 18.6 68.1% 18.2 70.5% (2.4% pts)
North America 24.8 72.1% 25.0 72.5% (0.4% pts)
Europe 2.6 61.9% 2.7 67.5% (5.6% pts)
Escode gross profit and % margin 46.0 69.8% 45.9 71.4% (1.6% pts)
4-month period ended 30 September 2024 4-month period ended 30 September 2024 4-month period ended 30 September 2023 4-month period ended 30 September 2023
£m % margin £m % margin
Unaudited % pts change
UK 6.2 67.4% 5.8 68.2% (0.8% pts)
North America 7.8 70.3% 8.5 73.9% (3.6% pts)
Europe 0.7 58.3% 1.0 71.4% (13.1% pts)
Escode gross profit and % margin 14.7 68.4% 15.3 71.5% (3.1% pts)
Individually Significant Items
During the period, the Group has incurred £41.5m in individually Significant
Items (ISIs) (2023: £14.7m) as follows:
16-month period ended 30 September 2024
Year ended 31 May 2023
£m £m
North America Cyber Security goodwill impairment 31.9 9.8
Fundamental re-organisation costs 9.4 4.2
Transaction costs associated with disposal of Fox Crypto 1.6 -
Costs associated with strategic review of Escode business 0.1 3.0
NCC Group A/S goodwill impairment - 3.0
IPM Escode business deferred income adjustment - (0.6)
Profit on disposal of non-core operations (1.5) (4.7)
Total ISIs 41.5 14.7
Individually Significant Items incurred during the period of £41.5m are
represented mainly by an impairment in Goodwill of £31.9m (2023: £9.8m) for
the North America Cyber security business due to its historical performance,
as the recovery in demand is less consistent than expected, and £9.4m (2023:
£4.2m) in relation to fundamental reorganisation costs as we continue to
reshape the Group to implement the Group's strategy.
Finance costs
Finance costs for the 16-month period were £8.3m (2023: £6.2m). Finance
costs include lease financing costs of £1.7m (2023: £1.1m).
Taxation
The Group's effective statutory tax rate is (18.2%) (2023: (7.0)%). The change
in tax rate from 2023 to 2024 is due to a number of factors including an
increase in the UK corporate tax rate, the impact of non-deductible goodwill
and intangible assets impairment and the derecognition of deferred tax assets
in North America. The Group's adjusted tax rate is 24.3% (2023 restated:
15.4%). The increase in the adjusted tax rate from 2023 to 2024 is due
predominantly to an increase in the UK statutory tax rate and increased tax
losses not recognised as deferred tax assets.
(Loss)/earnings per share (EPS)
16-month Year ended 31 May
period ended 2023
(restated) (2) £m
30 September
2024
£m
Statutory
Statutory loss for the period (32.5) (4.6)
Basic loss per share (10.4p) (1.5p)
Diluted loss per share (10.4p) (1.5p)
Adjusted (1)
Adjusted profit for the period 10.6 7.3
Basic EPS 3.4p 2.8p
Diluted EPS 3.4p 2.8p
Weighted average number of shares (million)
Basic 311.7 310.4
Diluted 313.2 311.2
Adjusted basic EPS (1) is reconciled as follows:
16-month Year ended 31 May
period ended 2023
(restated) (2)
30 September
2024
Statutory loss for the period (32.5) (4.6)
Individually Significant items 41.5 14.7
Tax effect of Individually significant items (5.8) (2.8)
North America deferred tax Asset derecognition (adjusting item) 7.4 -
Adjusted profit for the period 10.6 7.3
1: Adjusted EPS is an Alternative Performance Measures (APMs) and not IFRS
measures. See unaudited appendix 2 for an explanation of APMs and adjusting
items, including a reconciliation to statutory information.
2: After reconsidering FRC best practice guidance around the disclosure of
adjusting items and APM's, the Group has reduced the number of adjusted
measures and items. The Group now only has one adjusted item 'Individual
Significant Items'. Previous adjusted items of Amortisation of acquisition
intangibles and share based payments are no longer disclosed as an adjusted
item. Accordingly, comparative numbers have been restated. For further detail,
please refer to the Financial Review and appendix 1 for an explanation of APMs
and adjusting items, including a reconciliation to statutory information.
Reconciliation of net debt (1)
The table below summarises the Group's cash flow and net debt (1):
30 September 2024 31 May 2023
£m £m
Operating cash inflow before movements in working capital 48.5 38.7
Movement in working capital and non-payables (10.1) 3.9
Cash generated from operating activities before interest and taxation 38.4 42.6
Interest element of lease payments (1.7) (1.1)
Finance interest paid (6.0) (4.0)
Taxation paid (4.3) (5.4)
Net cash generated from operating activities 26.4 32.1
Purchase of property, plant and equipment (6.2) (3.9)
Software and development expenditure (2.6) (3.4)
Acquisition of trade and assets as part of a business combination (1.0) (1.0)
Sale proceeds from business disposals 12.4 2.0
Equity dividends paid (14.5) (14.5)
Repayment of lease liabilities (principal amount) (10.2) (6.1)
Acquisition of treasury shares (5.8) -
Purchase of shares - (0.5)
Proceeds from the issue of ordinary share capital 0.3 0.1
Net movement (1.2) 4.8
Opening net debt (excluding lease liabilities) (1) (49.6) (52.4)
Non-cash movements (release of deferred issue costs) (0.6) (0.8)
Foreign exchange movement 6.1 (1.2)
Closing net debt excluding lease liabilities (1) (45.3) (49.6)
Lease liabilities (27.6) (30.0)
Closing net debt (1) (72.9) (79.6)
Net debt (1) can be reconciled as follows:
30 September 2024 31 May 2023
£m £m
Cash and cash equivalents 29.8 34.1
Bank overdraft (13.6) (1.8)
Borrowings (net of deferred issue costs) (61.5) (81.9)
Net debt excluding lease liabilities (1) (45.3) (49.6)
Lease liabilities (27.6) (30.0)
Net debt (1) (72.9) (79.6)
Reconciliation of net change in cash and cash equivalents to movement in net
debt (1)
30 September 2024 31 May
£m 2023
£m
Net decrease in cash and cash equivalents (inc. bank overdraft) (18.4) (41.5)
Change in net debt (1) resulting from cash flows (net of deferred issue costs) 17.2 44.8
Release of deferred issue costs (0.6) (1.0)
Issue costs related to borrowings (non-cash) - 1.7
Effect of foreign currency on cash flows 2.3 0.6
Foreign currency translation differences on borrowings 3.8 (1.8)
Change in net debt (1) during the period 4.3 2.8
Net debt (1) at start of period excluding lease liabilities (49.6) (52.4)
Net debt (1) at end of period excluding lease liabilities (45.3) (49.6)
Lease liabilities (27.6) (30.0)
Net debt (1) at end of period (72.9) (79.6)
1: Net debt is an Alternative Performance Measures (APMs) and not an IFRS
measure. See unaudited appendix 2 for an explanation of APMs and adjusting
items, including a reconciliation to statutory information.
The calculation of the cash conversion ratio (1) is set out below and is lower
due to the summer period:
30 September 2024 31 May % change/
2023 (restated) (2)
£m
% pts
£m
Operating cash flow before interest and taxation 38.4 42.6 (9.9%)
Adjusted EBITDA (1, 2) 51.6 39.2 31.6%
Cash conversion ratio (1, 2) (%) 74.4% 108.7% (34.3% pts)
1: See Financial review for an explanation of Alternative Performance Measures
(APMs) and adjusting items. See unaudited appendix 2 for an explanation of
APMs and adjusting items, including a reconciliation to statutory information.
2: After reconsidering FRC best practice guidance around the disclosure of
adjusting items and APM's, the Group has reduced the number of adjusted
measures and items. The Group now only has one adjusted item 'Individual
Significant Items'. Previous adjusted items of Amortisation of acquisition
intangibles and share based payments are no longer disclosed as an adjusted
item. Accordingly, comparative numbers have been restated. For further detail,
please refer to the Financial Review for an explanation of APMs and adjusting
items, including a reconciliation to statutory information.
Cash capital expenditure during the period was £8.8m (2023: £7.3m), which
includes tangible asset expenditure of £6.2m (2023: £3.9m) and capitalised
software and development costs of £2.6m (2023: £3.4m). The increase in
tangible capital expenditure includes the opening of our new Manila office.
Sale proceeds from disposals represent payment of contingent consideration in
relation to the disposal of the Group's DDI business of £3.8m, the full
payment of £8.2m for the DetACT business disposed in April 2024 and £0.4m
for disposal of a 3.35% shareholding in an unlisted investment. Acquisition of
trade and assets as part of a business combination of £1.0m relates to the
final consideration payable in relation to the Adelard acquisition.
Dividends
During the period total dividends of £14.5m were paid in the period (2023:
£14.5m). Additionally, a dividend of £9.8m was recognised but not yet paid
as of the period end. The Board is proposing a final dividend of 1.5p per
ordinary share. This is equivalent to the interim dividend previously paid
albeit for the final 4-month period ending 30 September 2024.
The final dividend of 1.5p per ordinary share, which, together with the
interim dividends of 3.15p and 1.5p per ordinary share paid on 4 October 2024
and 15 March 2024 respectively, makes a total dividend of 6.15p for the period
ended 30 September 2024.
The final dividend will be paid on 4 April 2025, subject to approval at the
AGM on 28 January 2025, to shareholders on the register at the close of
business on 21 February 2025. The ex-dividend date is 20 February 2025.
Our FY25 framework
Looking forward to FY25, we have set a framework to measure ourselves against
as follows:
· Sustainable revenue growth
o Deliver underlying growth in Cyber Security
o Increase Managed Services revenue as a proportion of total Cyber Security
o Maintain momentum in Escode
· Improved gross margin
o Maintain utilisation %
o Smart pricing and margin investment decision making
o Globalise technical resource footprint
· Efficiency for growth
o Simplify operating model to generate efficiencies
o Drive towards consistent profit conversion in every market
o Eliminate stranded costs resulting from non-core disposals
· Capital deployment supporting growth
o Strong cash conversion
o Ensure appropriate liquidity and debt facilities
o Maintain dividend
o Accretive acquisition opportunities
Condensed consolidated income statement
for the 16 month period ended 30 September 2024
Notes 16 months Year
period ended
ended 31 May
30 September 2023
2024 £m
£m
Revenue 3 429.5 335.1
Cost of sales 3 (250.8) (203.1)
Gross profit 3 178.7 132.0
Administrative expenses
Individually Significant Items 4 (41.5) (14.7)
Depreciation and amortisation (29.3) (22.6)
Other administrative expenses (127.1) (92.8)
Total administrative expenses (197.9) (130.1)
Operating (loss)/profit 3 (19.2) 1.9
Finance costs (8.3) (6.2)
Loss before taxation (27.5) (4.3)
Taxation 5 (5.0) (0.3)
Loss for the period/year attributable to owners of the Company (32.5) (4.6)
Loss per ordinary share 7
Basic EPS (10.4)p (1.5)p
Diluted EPS (10.4)p (1.5)p
Condensed consolidated statement of comprehensive income
for the 16 month period ended 30 September 2024
16 months Year
period ended
ended 2023
30 September £m
2024
£m
Loss for the period/year attributable to the owners of the Company (32.5) (4.6)
Other comprehensive (loss)/income
Items that may be reclassified subsequently to profit or loss (net of tax)
Foreign exchange translation differences (13.0) 2.4
Total other comprehensive (loss)/income (13.0) 2.4
Total comprehensive loss for the period/year (net of tax) attributable to the (45.5) (2.2)
owners of the Company
Condensed consolidated balance sheet
at 30 September 2024
Notes 30 September 31
2024 May
£m 2023
£m
Non-current assets
Goodwill 8 156.5 255.8
Intangible assets 8 89.2 110.9
Property, plant and equipment 11.6 12.5
Right-of-use assets 15.7 18.6
Investments - 0.3
Deferred tax asset 0.6 2.9
Total non-current assets 273.6 401.0
Current assets
Inventories - 0.8
Trade and other receivables 32.2 40.9
Contract assets 20.1 17.2
Contingent consideration receivable - 3.8
Current tax receivable 2.9 3.6
Cash and cash equivalents 29.8 34.1
Assets classified as held for sale 9 61.5 -
Total current assets 146.5 100.4
Total assets 420.1 501.4
Current liabilities
Trade and other payables 46.8 44.7
Bank overdraft 13.6 1.8
Lease liabilities 5.7 6.0
Current tax payable 1.6 4.2
Derivative financial instruments 0.8 0.6
Contingent consideration payable - 1.0
Provisions 1.4 1.2
Contract liabilities - deferred revenue 50.7 51.6
Liabilities directly associated with assets classified as held for sale 9 5.7 -
Total current liabilities 126.3 111.1
Non-current liabilities
Borrowings 61.5 81.9
Lease liabilities 21.9 24.0
Deferred tax liabilities 0.5 1.4
Provisions 1.9 1.5
Contract liabilities - deferred revenue 2.8 3.3
Total non-current liabilities 88.6 112.1
Total liabilities 214.9 223.2
Net assets 205.2 278.2
Equity
Share capital 3.1 3.1
Share premium 224.4 224.1
Merger reserve 42.3 42.3
Currency translation reserve 24.5 37.5
Retained earnings (89.1) (28.8)
Total equity 205.2 278.2
These Financial Statements were approved and authorised for issue by the Board
of Directors on 10 December 2024. They were signed on its behalf by:
Mike Maddison Guy Ellis
Chief Executive Officer Chief Financial Officer
10 December 2024 10 December 2024
Condensed consolidated cash flow statement
for the 16 month period ended 30 September 2024
Notes 16 months
period Year
ended ended
2024 2023
£m £m
Cash flows from operating activities
Loss for the year period/year (32.5) (4.6)
Adjustments for:
Depreciation of property, plant and equipment 5.4 4.5
Depreciation of right-of-use assets 8.1 5.7
Amortisation of customer contracts and relationships 8 12.5 10.0
Amortisation of software and development costs 8 3.3 2.4
Impairment of goodwill 4 31.9 12.8
Impairment of non-current assets included in ISIs 4 3.9 -
Impairment of non-current assets included in administrative costs 0.9 1.1
Impairment reversal of non-current assets included in ISIs 4 (0.8) -
Share-based payments 2.3 2.2
Lease financing costs 1.7 1.1
Other financing costs 6.6 5.1
Foreign exchange loss 1.9 0.6
Disposal of business - transaction costs - (0.1)
Non-cash impact from other Individually significant items - 3.5
Profit on disposal of right-of-use assets (0.1) (0.7)
Profit on disposal of businesses 11 (1.6) (4.7)
Profit on disposal of investment (0.1) -
Loss on disposal of fixed assets 0.1 -
Income tax expense/(credit) 5.0 (0.2)
Cash inflow for the year before changes in working capital 48.5 38.7
Decrease in trade and other receivables 1.3 15.0
(Increase)/decrease in contract assets (5.9) 4.7
Decrease in inventories 0.2 0.1
Decrease in trade and other payables (11.9) (7.7)
Increase/(decrease) in contract liabilities 5.5 (7.4)
Increase/(decrease) in provisions 0.7 (0.8)
Cash generated from operating activities before interest and taxation 38.4 42.6
Interest element of lease payments (1.7) (1.1)
Other interest paid (6.0) (4.0)
Taxation paid (4.3) (5.4)
Net cash generated from operating activities 26.4 32.1
Cash flows from investing activities
Acquisition of trade and assets as part of business combinations (1.0) (1.0)
Purchase of property, plant and equipment (6.2) (3.9)
Software, development and customer contracts expenditure (2.6) (3.4)
Sale proceeds of business disposals 11 12.4 2.0
Net cash generated from/(used in) in investing activities 2.6 (6.3)
Cash flows from financing activities
Proceeds from the issue of ordinary share capital 0.3 0.1
Purchase of own shares - (0.5)
Acquisition of treasury shares (5.8) -
Principal element of lease payments (10.2) (6.1)
Drawdown of borrowings (net of deferred issue costs) 57.8 70.8
Issue costs related to borrowings - (1.5)
Repayment of borrowings (75.0) (115.6)
Equity dividends paid 6 (14.5) (14.5)
Net cash used in financing activities (47.4) (67.3)
Net decrease in cash and cash equivalents (inc. bank overdraft) (18.4) (41.5)
Cash and cash equivalents (inc. bank overdraft) at beginning of period 32.3 73.2
Effect of foreign currency exchange rate changes 2.3 0.6
Cash and cash equivalents (inc. bank overdraft) at end of period/year 16.2 32.3
Condensed consolidated statement of changes in equity
for the 16 month period ended 30 September 2024
Notes Share Share Merger Currency Retained Total
capital premium reserve translation earnings £m
£m £m £m reserve £m
£m
Balance at 1 June 2022 3.1 224.0 42.3 35.1 (11.3) 293.2
Loss for the year - - - - (4.6) (4.6)
Foreign currency translation differences - - - 2.4 - 2.4
Total comprehensive income/(loss) for the year - - - 2.4 (4.6) (2.2)
Transactions with owners recorded directly in equity
Dividends to equity shareholders 6 - - - - (14.5) (14.5)
Share-based payments - - - - 2.2 2.2
Tax on share-based payments - - - - (0.1) (0.1)
Purchase of own shares - - - - (0.5) (0.5)
Shares issued - 0.1 - - - 0.1
Total contributions by and distributions to owners - 0.1 - - (12.9) (12.8)
Balance at 31 May 2023 3.1 224.1 42.3 37.5 (28.8) 278.2
Loss for the period - - - - (32.5) (32.5)
Foreign currency translation differences - - - (13.0) - (13.0)
Total comprehensive loss for the period - - - (13.0) (32.5) (45.5)
Transactions with owners recorded directly in equity
Dividends to equity shareholders 6 - - - - (24.3) (24.3)
Share-based payments - - - - 2.3 2.3
Acquisition of treasury shares - - - - (5.8) (5.8)
Shares issued - 0.3 - - - 0.3
Total contributions by and distributions to owners - 0.3 - - (27.8) (27.5)
Balance at 30 September 2024 3.1 224.4 42.3 24.5 (89.1) 205.2
Notes to the consolidated Financial Statements
for the 16 month period ended 30 September 2024
1 Accounting policies
Basis of preparation
NCC Group plc (the 'Company') is a public company incorporated in the UK, with
its registered office at XYZ Building, 2 Hardman Boulevard, Manchester M3 3AQ.
The Group Financial Statements consolidate those of the Company and its
subsidiaries (together referred to as the 'Group'). The principal activity of
the Group is the provision of independent advice and services to customers
through the supply of cyber security and Software Resilience services.
The condensed financial statements have been prepared on the historical cost
basis, except for consideration payable on acquisitions that is measured at
fair value at the date of the acquisition. The condensed financial statements
are presented in Sterling (£m) because that is the currency of the principal
economic environment in which the Company operates. The financial information
is derived from the Group's consolidated financial statements for the period
ended 30 September 2024, which have been prepared on the going concern basis
in accordance with UK-adopted international accounting standards ("UK-adopted
IFRS"). The financial information set out above does not constitute the
Company's statutory accounts for the 16-months period ended 30 September 2024
and the year ended 31 May 2023.
The financial information for the year ended 31 May 2023 is derived from the
statutory accounts for the year ended 31 May 2023 which have been delivered to
the registrar of companies. The previous auditor, KPMG LLP, has reported on
the 31 May 2023 accounts; their report was (i) unqualified, (ii) did not
include a reference to any matters to which the auditor drew attention by way
of emphasis without qualifying their report and (iii) did not contain a
statement under section 498 (2) or (3) of the Companies Act 2006.
The statutory accounts for the period ended 30 September 2024 have been
reported on by the Company's auditors, PricewaterhouseCoopers LLP., and will
be delivered to the registrar of companies in due course. The auditors have
reported on those statutory accounts; their report was (i) unqualified, (ii)
did not include a reference to any matters to which the auditors drew
attention by way of emphasis without qualifying their report and (iii) did not
contain a statement under Section 498 (2) or (3) of the Companies Act 2006.
As required by the Disclosure Guidance and Transparency Rules of the Financial
Conduct Authority the condensed set of financial statements has been prepared
applying the accounting policies and presentation that were applied in the
company's published consolidated financial statements for the year ended 31
May 2023, which were prepared in accordance with IFRSs as adopted for use in
the UK. They do not contain all the information required for full financial
statements.
Climate change
The Directors have reviewed the potential impact of climate change and the
Task Force on Climate-related Financial Disclosures (TCFD) on the consolidated
Financial Statements. Our overall exposure to physical and transitional
climate change is considered low in the short to medium term due to the nature
of the business and cyber assurance industry.
Going concern
At the time of approving the Financial Statements, the Board of Directors is
required to formally assess that the business has adequate resources to
continue in operational existence and as such can continue to adopt the "going
concern" basis of accounting. To support this assessment, the Board is
required to consider the Group's current financial position, its strategy, the
market outlook, and its principal risks.
The Group's business activities, together with the factors likely to affect
its future development, performance and position, are set out in the Business
Review and Financial Review. The Group's financial position, cash and
borrowing facilities are also described within these sections.
The Financial Statements have been prepared on a going concern basis which the
Directors consider to be appropriate for the following reasons.
The Directors have prepared cash flow and covenant compliance forecasts for 12
months from the date of approval of the Financial Statements which indicate
that, taking account of severe but plausible downsides on the operations of
the Group and its financial resources, the Group will have sufficient funds to
meet its liabilities as they fall due for that period.
The going concern period is required to cover a period of at least 12 months
from the date of approval of the Financial Statements and the Directors still
consider this 12 month period to be an appropriate assessment period due to
the Group's financial position and trading performance and that its borrowing
facilities do not expire until December 2026. The Directors have considered
whether there are any significant events beyond the 12 month period which
would suggest this period should be longer but have not identified any such
conditions or events.
The Group is financed primarily by a £162.5m multi-currency revolving credit
facility maturing in December 2026. Under these banking arrangements, the
Group can also request (seeking bank approval) an additional accordion
facility to increase the total size of the revolving credit facility by up to
£75m. This accordion facility has not been considered in the Group's going
concern assessment as it requires bank approval and is therefore uncommitted
as at the date of approval of these consolidated Financial Statements. As of
30 September 2024, net debt (excluding lease liabilities) 1 amounted to
£45.3m which comprised cash and cash equivalents of £29.8m, a bank overdraft
of £13.6m and a drawn revolving credit facility of £61.5m, leaving £101.0m
of undrawn facilities, excluding the uncommitted accordion facility of
£75.0m. The Group's day-to-day working capital requirements are met through
existing cash resources, the revolving credit facility and receipts from its
continuing business activities. The Group is required to comply with financial
covenants for leverage (net debt to Adjusted EBITDA) 1 and interest cover
(Adjusted EBITDA 1 to interest charge) that are tested bi-annually on 31
May and 30 November each year (following the change in the Group's financial
year end, these covenants will be tested bi-annually on 31 March and 30
September each year going forward).
As of 30 September 2024, leverage amounted to 1.0x and net interest cover
amounted to 8.8x compared to a maximum of 3.0x and a minimum of 3.5x
respectively. The terms and ratios are specifically defined in the Group's
banking documents (in line with normal commercial practice) and are materially
similar to amounts noted in these Financial Statements with the exceptions
being net debt excludes IFRS 16 lease liabilities and Adjusted EBITDA 1 .
The Group was in compliance with the terms of all its facilities during the
period, including the financial covenants on 30 September 2024, and, based on
forecasts, expects to remain in compliance over the going concern period. In
addition, the Group has not sought or is not planning to seek any waivers to
its financial covenants noted above.
Management has prepared a base case model derived from the FY25 board-approved
budget. In addition, management has produced forecasts that reflect severe yet
plausible downside scenarios, taking into account the principal risks faced by
the Group, including the loss of key customers and further reductions in the
North America 'TAS' business. These forecasts, which have been reviewed by the
Directors, lead them to believe that the Group can operate within its
available committed banking facilities and meet its liabilities as they fall
due during this period. The assumptions underpinning these forecasts (and
severe yet plausible downside scenarios) are set out in more detail in the
Viability Statement on page 39.
Having reviewed the current trading performance, forecasts, debt servicing
requirements, total facilities and risks, as well as factoring in the expected
proceeds from the sale of Fox Crypto B.V. (see Note 9), the Directors are
confident that the Group will have sufficient funds to meet its liabilities as
they fall due for a period of at least 12 months from the date of approval of
these consolidated Financial Statements. This period is referred to as the
going concern period. Accordingly, the Directors continue to adopt the going
concern basis of accounting in preparing the Group's consolidated Financial
Statements for the period ended 30 September 2024.
From a Company perspective, the Company places reliance on other Group trading
entities for financial support. The Company controls these Group entities and
therefore has the ability to direct the financial activities of the Group.
Having reviewed the current trading performance, forecasts, debt servicing
requirements, total facilities and risks, the Directors are confident that the
Company and the Group will have sufficient funds to continue to meet their
liabilities as they fall due for a period of at least 12 months from the date
of approval of these consolidated Financial Statements, which is determined as
the going concern period. Accordingly, the Directors continue to adopt the
going concern basis of accounting in preparing the Group's Financial
Statements for the period ended 30 September 2024.
There are no post-Balance Sheet events which the Directors believe will
negatively impact the going concern assessment.
1 Revenue at constant currency, Adjusted EBITDA and net debt excluding lease
liabilities are Alternative Performance Measures (APMs) and not IFRS measures.
See appendix 2 for an explanation of APMs and adjusting items, including a
reconciliation to statutory information.
Individually Significant Items (ISI)
Individually Significant Items are identified as those items or projects that
based on their size and nature and/or incidence are assessed to warrant
separate disclosure to provide supplementary information to support the
understanding of the Group's financial performance. Where a project spans a
reporting period(s) the total project size and nature are considered in
totality. ISIs typically comprise costs/profits/losses on material
acquisitions/disposals/business exits, fundamental
reorganisation/restructuring programmes and other significant one-off events
(including material impairments). ISIs are considered to require separate
presentation in the notes to the Financial Statements in order to fairly
present the financial performance of the Group. See Note 4 for further
information.
2 Critical accounting judgements and key sources of estimation uncertainty
The preparation of Financial Statements requires management to exercise
judgement in applying the Group's accounting policies. Different judgements
would have the potential to change the reported outcome of an accounting
transaction or Balance Sheet. It also requires the use of estimates that
affect the reported amounts of assets, liabilities, income and expenses.
Actual results may differ from these estimates. Estimates and underlying
assumptions are reviewed on an ongoing basis, with changes recognised in the
period in which the estimates are revised and in any future periods affected.
The table below shows the area of critical accounting judgement and estimation
that the Directors consider material and that could reasonable change
significantly in the next year.
Accounting judgement? Accounting estimate?
Accounting area
Carrying value of Goodwill No Yes
2.1 Critical accounting judgements
No critical accounting judgements have been made in applying accounting
policies that have the most significant effects on the amounts recognised in
the consolidated Financial Statements.
2.2 Key sources of estimation uncertainty
Information about estimation uncertainties that have a significant risk of
resulting in a material adjustment to the carrying values of assets and
liabilities within the next financial year is addressed below.
While every effort is made to ensure that such estimates and assumptions are
reasonable, by their nature they are uncertain, and as such changes in
estimates and assumptions may have a material impact. Estimates and
assumptions used in the preparation of the Financial Statements are
continually reviewed and revised as necessary as at each reporting date.
The Directors have considered the impact of climate change on the following
estimation uncertainties. Due to nature of the climate change impact on the
Group, no material impact has been identified.
Carrying value of goodwill
The Group has significant balances relating to goodwill as at 30 September
2024 as a result of acquisitions of businesses in previous years. The carrying
value of goodwill at 30 September 2024 is £156.5m (31 May 2023: £255.8m).
Goodwill balances are tested annually for impairment. The Group allocated
goodwill to cash-generating units (CGUs) which represent the lowest level of
asset groupings that generate separately identifiable cash inflows that are
not dependent on other CGUs.
Impairment of goodwill - North America Cyber Security
For the period ended 30 September 2024, tests for impairment are based on the
calculation of a fair value less costs to sell (FVLCTS) which has been used to
establish the recoverable amount of the CGU. The FVLCTS valuation for of each
standalone CGU has been calculated by determining sustainable earnings, which
are based on the Adjusted EBITDA 1 , and applying a reasonable market
multiple on the calculated sustainable earnings. The sustainable earnings
figures used in this calculation include a key assumption regarding a
sustainable gross margin percentage for the business. Reasonable changes in
the key assumptions used to determine the sustainable earnings can materially
impact the outcomes of the impairment reviews and the impairment charges
recognised.
An analysis of the Group's goodwill, the methodology used to test for
impairment and sensitivity analysis relating to the sustainable earnings are
set out in note 8.
Reallocation of goodwill - Europe Cyber Security
During June 2024, as part of the expected disposal of the Fox Crypto BV
entity, the Group re-organised its reporting structure to separate out the Fox
Crypto BV entity from the Europe Cyber Security CGU. On this basis the
Europe Cyber Security goodwill has been reallocated between the newly created
Fox Crypto CGU and the remaining Europe Cyber Security CGU. Goodwill has been
reallocated based on adjusted relative values of the two CGUs, whereby the
value of each CGU is based on FVLCTS. Goodwill allocated to the Fox Crypto CGU
has been re-classified to asset held for sale (see note 9).
See note 8 for sensitivity analysis in regard to the reallocation of goodwill
between Fox Crypto and Europe Cyber Security.
1: Revenue at constant currency, Adjusted EBITDA, and Net debt excluding lease
liabilities are Alternative Performance Measures (APMs) rather than IFRS
measures. For an explanation of APMs and adjusting items, including a
reference to the reconciliation with statutory information, please see
Appendix 2.
3 Segmental information
The Group is organised into the following two (2023: two) reportable segments:
Cyber Security and Escode. The two reporting segments provide distinct types
of service. Within each of the reporting segments the operating segments
provide a homogeneous group of services. These operating segments are deemed
to hold similar economic characteristics. The operating segments are grouped
into the reporting segments on the basis of how they are reported to the Chief
Operating Decision Maker (CODM) for the purposes of IFRS 8 'Operating
Segments', which is considered to be the Board of Directors of NCC Group plc.
Operating segments are aggregated into the two reportable segments based on
the types and delivery methods of services they provide, common management
structures, and their relatively homogeneous commercial and strategic market
environments. Performance is measured based on reporting segment profit, with
interest and tax not allocated to business segments. There are no
intra-segment sales.
Segmental analysis for the period ended 30 September 2024 Cyber Security Escode Central and Group
£m £m head £m
office
£m
Revenue 342.1 87.4 - 429.5
Cost of sales (224.1) (26.7) - (250.8)
Gross profit 118.0 60.7 - 178.7
Gross margin % 34.5% 69.5% - 41.6%
Administrative expenses (97.3) (24.1) (3.4) (124.8)
Share-based payments (0.1) (0.2) (2.0) (2.3)
Depreciation and amortisation (10.9) (0.6) (5.3) (16.8)
Amortisation of acquired intangibles (1.4) (7.1) (4.0) (12.5)
Individually Significant Items (Note 4) (41.4) (0.1) - (41.5)
Operating (loss)/profit (33.1) 28.6 (14.7) (19.2)
Finance costs (8.3)
Loss before taxation (27.5)
Taxation (5.0)
Loss for the period (32.5)
Segmental analysis for the year ended 31 May 2023 Cyber Security Escode
£m £m Central and
Head office
Group
£m
£m
Revenue 270.8 64.3 - 335.1
Cost of sales (184.7) (18.4) - (203.1)
Gross profit 86.1 45.9 - 132.0
Gross margin % 31.8% 71.4% - 39.4%
Administrative expenses (70.7) (14.7) (5.2) (90.6)
Share-based payments (1.6) (0.1) (0.5) (2.2)
Depreciation and amortisation (8.5) (0.6) (3.5) (12.6)
Amortisation of acquired intangibles (1.2) (5.8) (3.0) (10.0)
Individually Significant Items (Note 4) (12.3) (2.4) - (14.7)
Operating (loss)/profit (8.2) 22.3 (12.2) 1.9
Finance costs (6.2)
Loss before taxation (4.3)
Taxation (0.3)
Loss for the year (4.6)
Revenue is disaggregated by primary geographical market, by category and by
timing of revenue recognition as follows:
Cyber Escode 2024 Cyber Escode 2023
Security £m Total Security £m Total
£m £m £m £m
Revenue by originating country
UK 158.9 36.5 195.4 106.6 25.8 132.4
APAC 14.4 - 14.4 11.8 - 11.8
North America 90.7 45.5 136.2 99.3 34.5 133.8
Europe 78.1 5.4 83.5 53.1 4.0 57.1
Total revenue 342.1 87.4 429.5 270.8 64.3 335.1
Cyber Escode 2024 Escode 2023
Security £m Total Cyber £m Total
£m £m Security £m
£m
Revenue by category
Services 337.5 87.4 424.9 267.1 64.3 331.4
Products 4.6 - 4.6 3.7 - 3.7
Total revenue 342.1 87.4 429.5 270.8 64.3 335.1
Cyber Escode 2024 Escode 2023
Security £m Total Cyber £m Total
£m £m Security £m
£m
Timing of revenue recognition
Services and products transferred over time 322.1 57.9 380.0 252.9 42.8 295.7
Services and products transferred at a point in time 20.0 29.5 49.5 17.9 21.5 39.4
Total revenue 342.1 87.4 429.5 270.8 64.3 335.1
As part of the Group's ongoing transformation and the implementation of its
new strategy, Cyber Security revenue is now analysed in greater detail by
service type and capability. This change in analysis enables the Group to
better focus on existing customers, as well as on simplifying operations and
the core services provided. The analysis is as follows:
Restated*
2024 2023
£m £m
Technical Assurance Services (TAS) 141.4 142.9
Consulting and Implementation (C&I) 55.2 44.7
Managed Services (MS) 91.8 50.1
Digital Forensics and Incident Response (DFIR) 20.6 13.5
Other services 33.1 19.6
Total Cyber Security revenue 342.1 270.8
*TAS, C&I and DFIR were formerly included within Global Professional
Services (GPS as defined within the FY23 Annual Report) and Global Managed
Services (GMS as defined within the FY23 Annual Report) is now reported as MS.
Revenue is recognised on these capabilities as follows:
· TAS, C&I and DFIR consulting revenues are recognised on an
input method over time
· MS revenues (including recurring revenue elements of DFIR) are
bifurcated according to their separate performance obligations. The
recognition policy is consistent with that disclosed for GMS in the FY23
Annual Report
Escode revenues analysed by service line:
2024 2023
£m £m
Escrow contracts 57.2 42.8
Verification services 30.2 21.5
Total Escode revenue 87.4 64.3
1 Revenue at constant currency, Adjusted EBITDA and net debt excluding lease
liabilities are Alternative Performance Measures (APMs) and not IFRS measures.
See appendix 2 for an explanation of APMs and adjusting items, including a
reconciliation to statutory information.
4 Individually Significant Items (ISI)
The Group separately identifies items as Individually Significant Items. Each
of these is considered by the Directors to be sufficiently unusual in terms of
nature or scale so as not to form part of the underlying performance of the
business. They are therefore separately identified and excluded from adjusted
results (as explained in appendix 2).
Reference 2024 2023
£m £m
North America Cyber Security goodwill impairment a 31.9 9.8
Fundamental re-organisation costs b 9.4 4.2
Transaction costs associated with disposal of Fox Crypto c 1.6 -
Costs associated with strategic review of Escode business d 0.1 3.0
NCC Group A/S goodwill impairment e - 3.0
IPM Escode business deferred revenue adjustment f - (0.6)
Profit on disposal of non-core operations g (1.5) (4.7)
Total ISIs 41.5 14.7
(a) North America Cyber Security goodwill impairment
Following the impairment review of goodwill as at 31 May 2024, an impairment
of £31.9m (2023: £9.8m) has been recognised in North America Cyber Security.
For further details, please refer to Note 8.
(b) Fundamental re-organisation costs
In order to implement the next chapter of the Group's strategy to enhance
future growth, certain strategic actions are required including reshaping the
Group's global delivery and operational model. This reshaping is considered a
fundamental reorganisation and restructuring programme that will span
reporting periods, and the total project size and nature are considered in
totality. The programme commencement was accelerated following the Group
experiencing specific market conditions that validated the rationale of the
next chapter of the Group's strategy. The programme has three planned phases
as follows:
• Phase 1 (March-April 2023) - initial reduction
in global delivery and operational headcount; c.7% reduction of the Group's
global headcount.
• Phase 2 (June-September 2023) - a further
reduction in global delivery, operational and corporate functions headcount
prior to opening our offshore operations and delivery centre in Manila.
• Phase 3 (October 2023-December 2025) -
finalisation of the Group's operating model.
Costs of £9.4m (2023: £4.2m) and a cash outflow of £6.0m (2023: £3.4m)
have been incurred in relation to the implementation of this re-organisation.
These cash outflows consist of severance payments, associated taxes, and
professional fees for advisory and legal services.
The reorganisation costs include £3.4m related to property rationalisation.
This comprises £3.5m (2023: £Nil) in property closure impairment charges and
£0.4m (2023: £Nil) in fixed asset impairment charges, both relating to
non-current assets. Additionally, £0.7m (2023: £Nil) relates to non-rental
provision costs.
Offsetting these costs are £0.8m (2023: £Nil) in non-current asset
impairment reversals and £0.4m (2023: £Nil) in provision reversals. These
costs and reversals reflect the impact of a reduction in the Group's global
headcount, leading to decreased office utilisation and a re-evaluation of the
global property portfolio.
It is expected that costs will also be incurred for the year ending 30
September 2025 and the Group will have to exercise judgement in assessing
whether the restructuring items should be classified as ISI, this will involve
taking into account the nature of the item, cause of occurrence and scale of
the impact of those items on the reported performance, resultant benefits and
after considering the original reorganisation programme principles and plans.
(c) Transaction costs associated with the disposal of Fox Crypto
On 1 August 2024, the Group announced the disposal of Fox Crypto B.V. for
initial expected gross consideration of €77.3m to CR Group Nordic AB. As at
30 September 2024, the disposal was yet to be finalised, with completion
expected in early FY25.
As of 30 September 2024, transaction costs of £1.6m were incurred (2023:
£nil), which meet the Group's policy for ISIs as they relate to the disposal
of a non-core operation. The expected gain on this disposal will be included
within ISIs for the year ending 30 September 2025.
(d) Costs associated with strategic review of Escode business
During February 2023, the Group announced its ongoing strategic review of
Escode business and of other core and non-core assets. During the period ended
30 September 2024, a number of additional professional fees totalling £0.1m
(2023: £3.0m) have been incurred, mainly in respect of advisory services.
Such costs meet the Group's policy for ISIs as they have been incurred as part
of the wider re-structuring/re-organisation activities that are ongoing within
the Group. The Group has now stopped the strategic review of the Escode
business.
(e) NCC Group A/S goodwill impairment
On 1 June 2022, the Group made the decision to re-organise its Danish business
(NCC Group A/S) which had previously been a part of the EU Assurance CGU.
Following that re-organisation, the cash inflows associated with the Danish
business are separately identifiable and therefore the carrying value of the
CGU assets were assessed separately for impairment at 31 May 2023. The
charge of £nil (2023: £3.0) represented the impairment of goodwill
associated with the Danish business following completion of that review. Such
costs met the Group's policy for ISIs as this is a significant one-off event.
(f) IPM Software Resilience business deferred revenue adjustment
This represents an adjustment to the opening deferred revenue balance in
respect of the IPM acquisition in June 2021. During FY24, opening deferred
revenue balances on verification tests totalling £nil (2023: £0.6m) have
been identified for which the work has not been performed and the statute of
limitations has now expired. As the period of hindsight for adjusting goodwill
has now expired management has released these amounts to the income statement.
Given the nature of this release which would typically have been adjusted to
goodwill it is considered to meet the definition of an individually
significant item and has been classified as such.
(g) Profit on disposal of non-core operations
On 30 April 2024, the Group disposed of its DetACT business for cash
consideration of £8.2m. The profit of £1.6m (2023: £nil) is directly
attributable to the disposal of the DetACT business. Please see Note 11 for
further details.
On 31 December 2022, the Group disposed of its DDI business for a total
consideration of £5.8m, consisting of a cash payment of £2.0m and contingent
consideration of £3.8m. This disposal resulted in a profit of £nil (2023:
£4.7m), directly attributable to the DDI business sale. Further details are
available in Note 11. The Group classified these proceeds under ISIs due to
the material profit on disposal. During the period, the £3.8m contingent
consideration identified in 2023 was received, and a £0.1m reclassification
(2023: £nil) related to the final tranche payment was recorded.
5 Taxation
Reconciliation of taxation
2024 2023
£m £m
Loss before taxation (27.5) (4.3)
Current tax using the UK effective corporation tax rate of 25.0% (2023: 20%) (6.9) (0.9)
Effects of:
Items not deductible/(taxable) for tax purposes 5.0 2.6
Adjustment to tax charge in respect of prior periods 0.6 (1.1)
Impact of prior year US R&D tax credits (2.0) (1.4)
Impact of current year US R&D tax credits 0.3 (0.3)
Differences between overseas tax rates (0.6) 1.0
Movements in temporary differences not recognised 8.6 0.6
Movement in tax rate - (0.2)
Total tax expense 5.0 0.3
During the period, a deferred tax asset of £7.1m was generated in North
America, which has not been recognised. This reflects an assessment of the
recoverability of the Group's North American deferred tax assets, based on
latest available forecasts and expectations of future taxable profits in the
region. The decision to not to recognise these assets was made in accordance
with IAS 12 Income Taxes, which requires that deferred tax assets be
recognised only to the extent it is probable that sufficient taxable profits
will be available to utilise the deductible temporary differences. As of 30
September 2024, the criteria for recognition were not met.
As this derecognition relates to the historical performance of our North
American Cyber Security Business, where the recovery in demand has been less
consistent than expected, it is directly tied to the goodwill impairment of
£31.9m at 31 May 2024 (taken to ISIs, see note 4). The Group has included
this adjustment as an adjusted item within the taxation line in the income
statement. For reconciliation to statutory measures, please see page 21.
The UK government introduced legislation in the Finance Bill 2021 to increase
the main rate of UK corporation tax from 19% to 25% with effect from 1 April
2023. The legislation was substantively enacted on 24 May 2021 and therefore
UK deferred tax balances as at balance sheet date are generally measured at a
rate of 25%.
Tax uncertainties
The tax expense reported for the current year and prior year is affected by
certain positions taken by management where there may be uncertainty. The most
significant source of uncertainty arises from claims for US R&D tax
credits relating to the current and previous periods. Uncertainty relates to
the interpretation of US legislation applicable to periods where the statute
of limitations has not expired. As at 30 September 2024, the gross cumulative
amount of US R&D tax credits amounts to £9.5m (2023: £10.4m) of which a
cumulative tax benefit has been recognised of £6.7m (2023: £6.2m). The
unrecognised benefit is £2.8m (2023: £4.2m).
6 Dividends
2024 2023
£m £m
Dividends paid and recognised in the period/year 14.5 14.5
Dividends recognised but not paid in the period/year 9.8 -
Dividends per share paid and recognised in the period/year 4.65p 4.65p
Dividends per share recognised but not paid in the period/year 3.15p -
Dividends per share proposed but not recognised in the period/year 1.5p 3.15p
The interim dividend of £9.8m which was approved during the period ended 30
September 2024 was paid on 1 October 2024, and therefore included within
non-trade payables.
The proposed final dividend for the period ended 30 September 2024 of 1.5p per
ordinary share was recommended by the Board on 5 December 2024 and will be
paid on 4 April 2025, to shareholders on the register at the close of business
on 21 February 2025. The ex-dividend date is 20 February 2025. The dividend
will be recommended to shareholders at the AGM on 28 January 2025. The
dividend has not been included as a liability as at 30 September 2024. The
payment of this dividend will not have any tax consequences for the Group.
7 Loss per ordinary share
2024 2023
£m £m
Loss for the period/year attributable to owners of the Company (32.5) (4.6)
Number Number
of shares of shares
m m
Weighted average number of shares in issue 313.3 311.1
Less: weighted average holdings by Group ESOT (1.6) (0.7)
Basic weighted average number of shares in issue 311.7 310.4
Dilutive effect of share options 1.5 0.8
Diluted weighted average shares in issue 313.2 311.2
For the purposes of calculating the dilutive effect of share options, the
average market value is based on quoted market prices for the period during
which the options are outstanding. Given the Group reported a loss for the
period, the diluted EPS does not include the dilutive effect of share options.
2024 2023
Pence Pence
Loss per ordinary share
Basic (10.4) (1.5)
Diluted (10.4) (1.5)
8 Goodwill and intangible assets
Goodwill Software Development Customer Intangibles Total
£m £m costs contracts and sub-total £m
£m relationships £m
£m
Cost:
At 1 June 2022 322.1 18.7 12.9 176.8 208.4 530.5
Additions - 2.5 0.9 - 3.4 3.4
Disposals (1.0) - - - - (1.0)
Effects of movements in exchange rates 3.5 - - 2.4 2.4 5.9
At 31 May 2023 324.6 21.2 13.8 179.2 214.2 538.8
Additions - 1.4 1.0 0.2 2.6 2.6
Disposals (5.9) (0.6) (9.9) - (10.5) (16.4)
Assets classified as held for sale (51.9) - (2.5) - (2.5) (54.4)
Effects of movements in exchange rates (9.6) (0.2) (0.1) (9.4) (9.7) (19.3)
At 30 September 2024 257.2 21.8 2.3 170.0 194.1 451.3
Accumulated amortisation and impairment:
At 1 June 2022 (56.0) (12.7) (9.8) (67.3) (89.8) (145.8)
Charge for year - (1.2) (1.2) (10.0) (12.4) (12.4)
Impairment (12.8) (0.6) - - (0.6) (13.4)
Effects of movements in exchange rates - - (0.1) (0.4) (0.5) (0.5)
At 31 May 2023 (68.8) (14.5) (11.1) (77.7) (103.3) (172.1)
Charge for year - (2.0) (1.3) (12.5) (15.8) (15.8)
Impairment (31.9) - - - - (31.9)
Disposals - - 8.8 - 8.8 8.8
Assets classified as held for sale - - 2.4 - 2.4 2.4
Effects of movements in exchange rates - - 0.1 2.9 3.0 3.0
At 30 September 2024 (100.7) (16.5) (1.1) (87.3) (104.9) (205.6)
Net book value:
At 31 May 2023 255.8 6.7 2.7 101.5 110.9 366.7
At 30 September 2024 156.5 5.3 1.2 82.7 89.2 245.7
The impairment of software of £nil (2023: £0.6m) relates to a specific asset
under development which was no longer deemed to be economically viable and
therefore development was ceased.
Cash generating units (CGUs)
Goodwill and intangible assets are allocated to CGUs in order to be assessed
for potential impairment. CGUs are defined by accounting standards as the
lowest level of asset groupings that generate separately identifiable cash
inflows that are not dependent on other CGUs.
The CGUs presented are consistent with the year ended 31 May 2023, with the
exception of the re-organisation of the Europe Cyber Security CGU. Please
see further discussion below.
The CGUs and the allocation of goodwill to those CGUs are shown below:
Cash generating units Goodwill Goodwill
2024 2023
£m £m
UK Escode 22.8 22.9
North America Escode 80.1 87.2
Europe Escode 7.1 7.4
Total Escode 110.0 117.5
UK and APAC Cyber Security 44.3 44.3
North America Cyber Security - 31.6
Europe Cyber Security 2.2 62.4
Total Cyber Security 46.5 138.3
Total Group 156.5 255.8
Impairment review
Goodwill is tested for impairment annually at the level of the CGU to which it
is allocated. An impairment review was carried out as at 31 May 2023 and 31
May 2024. Following the Group's change in year end reporting date, the Group
has carried out a further review as at 30 September 2024 which is expected to
be applied consistently as the date for the annual impairment review going
forward. The recoverable amount of all CGUs was measured on a fair value
less costs to sell basis.
Capitalised development and software costs are included in the CGU asset bases
when performing the impairment review. Capitalised development projects and
software intangible assets are also considered, on an asset-by-asset basis,
for impairment where there are indicators of impairment.
Fair value less costs to sell
The methodology described below has been applied consistently for the
impairment reviews carried out as at 31 May 2024 and 30 September 2024.
The recoverable amount of all CGUs has been determined on a fair value less
costs to sell basis for the purposes of the impairment review.
The valuation under FVLCTS is expected to exceed the valuation under VIU
because uncommitted restructurings and resulting operating efficiencies are
not considered within in a VIU valuation in line with the requirements of IAS
36.
The FVLCTS valuation for of each standalone CGU has been calculated by
determining sustainable earnings, which are based on the Adjusted EBITDA 1 ,
and applying a reasonable market multiple on the calculated sustainable
earnings. Estimated sustainable earnings has been determined taking into
account board approved forecast which consider past performance. The
sustainable earnings used include expectations based on a market participant
view of sustainable performance of the business based on market volatility and
uncertainty as at the balance sheet date. The sustainable earnings input is a
level 3 measurement; level 3 measurements are inputs which are normally
unobservable to market participants.
The Group incurs certain overhead costs in respect of support services
provided centrally to the CGUs. Such support services include Finance, Human
Resources, Legal, Information Technology and additional central management
support in respect of stewardship and governance. In calculating sustainable
earnings these overhead costs have been allocated to the CGUs based on the
extent to which each CGU has benefitted from the services provided. Commonly
this is driven by time spent by the relevant central department in supporting
the CGU, informed by headcount or where possible specific cost allocations
have been made.
The Adjusted EBITDA1 multiple used in the calculations is based on an
independent third-party assessment of the implied enterprise value of each CGU
based on a population of comparable companies as at the balance sheet date.
The estimated cost to sell was based on other recent transactions that the
Group has undertaken.
Impairment
The Board has assessed the recoverable amount of the North America Cyber
Security CGU based on its FVLCTS as at 31 May 2024 as described above. Based
on that assessment, the carrying amount of this CGU exceeded its recoverable
amount and therefore an impairment loss of £31.9m has been recognised
reducing the value of goodwill allocated to this CGU to £nil.
This impairment relates to our North American Cyber Security Business, as the
recovery in demand is less consistent than expected.
This amount has been recognised as an individually significant item (see Note
4). The impairment charge recognised has resulted in a reduction in the
carrying value of goodwill only.
Sensitivity analysis - impairment
The key inputs used in the FVLCTS calculation are the Adjusted EBITDA1 used
and the multiple applied to those sustainable earnings. Specifically, the key
assumption to the Adjusted EBITDA1 for the North America Cyber Security CGU is
considered to be the expected gross margin percentage that has been used to
calculate sustainable earnings.
The table below shows the sensitivity of headroom to reasonably possible
changes in the key assumptions, by reflecting the additional impairment that
would be required from a decrease in gross margin of 0.5 percentage points.
This additional impairment would be after the £31.9m impairment in the North
America Cyber Security CGU during May 2024. As goodwill has been impaired to
£Nil, any further impairment would be applied to other assets allocated to
the CGU.
CGU Decrease in gross margin of 0.5 percentage points
£m
North America Cyber Security 2.9
As the goodwill in the North America Cyber Security CGU was fully impaired as
at 31 May 2024, no further sensitivity analysis is provided as at 30 September
2024.
With the exception of the North American Cyber Security CGU, the Board has not
identified reasonably possible changes in the key assumptions that would cause
the carrying values of the other CGUs to exceed their respective recoverable
amounts.
Goodwill reallocation
During June 2024, as part of the expected disposal of the Fox Crypto BV
entity, the Group re-organised its reporting structure to separate out the Fox
Crypto BV entity from the Europe Cyber Security CGU. On this basis the
Europe Cyber Security goodwill has been reallocated between the newly created
Fox Crypto CGU and the remaining Europe Cyber Security CGU.
Goodwill has been reallocated based on relative values of the two CGUs, but
having made adjustment to reflect that the Fox Crypto CGU is less asset
intensive than the remaining Europe Cyber Security CGU.
The value of each CGU is based on FVLCTS. For the Fox Crypto CGU the FVLCTS
is based on the expected consideration to be received on disposal (see note 9)
of this business less estimated selling costs. For the remaining Europe
Cyber Security CGU the fair value has been calculated using a methodology
consistent with that used in the goodwill impairment review and described
above.
Based on this assessment, goodwill of £51.9m has been reallocated to the Fox
Crypto CGU, leaving £2.2m as reallocated to the EU Cyber Security CGU.
Goodwill reallocated to the Fox Crypto CGU has been re-classified to asset
held for sale (see note 9).
Sensitivity analysis - goodwill reallocation
The key inputs used in the FVLCTS calculation for the Europe Cyber Security
CGU are the Adjusted EBITDA1 used and the multiple applied to those
sustainable earnings. Specifically, the key assumption to the Adjusted EBITDA1
for the Europe Cyber Security CGU is considered to be the forecast revenue
that has been used to calculate sustainable earnings.
The table below shows the sensitivity of the goodwill reallocation to
reasonably possible changes in the key assumptions, by reflecting the
additional goodwill that would be allocated to the Europe Cyber Security CGU
from an increase in revenue of 5% with no increased costs. This additional
goodwill would be after the allocation of £2.2m of goodwill to the Europe
Cyber Security CGU.
CGU 5% increase in revenue
£m
Europe Cyber Security 13.3
1: Revenue at constant currency, Adjusted EBITDA and Net debt excluding lease
liabilities are Alternative Performance Measures (APMs) and not IFRS measures.
See appendix 2 for an explanation of APMs and adjusting items, including a
reconciliation to statutory information.
9 Assets and liabilities held for sale
On 1 August 2024, the Group announced the disposal of Fox Crypto B.V. for an
initial expected gross consideration of €77.3m to CR Group Nordic AB. As at
30 September 2024, the disposal was yet to be finalised; however, the
transaction is expected to complete in January 2025.
On this basis, as at 30 September 2024, the sale of this business was
considered highly probable and therefore the following assets and liabilities
were reclassified as held for sale as at 30 September 2024:
30 September
2024
£m
Assets classified as held for sale:
Goodwill 51.9
Intangible fixed assets 0.1
Right-of-use assets 0.4
Property, plant and equipment 1.1
Inventories 0.6
Trade and other receivables 4.3
Contract assets 3.1
Total assets classified as held for sale 61.5
Liabilities associated with assets classified as held for sale:
Trade and other payables (1.4)
Deferred revenue (3.1)
Lease liabilities (0.4)
Provisions (0.8)
Total liabilities associated with assets classified as held for (5.7)
sale
10 Loans and borrowings
Group Group Company Company
2024 2023 2024 2023
£m £m £m £m
Non-current
Variable rate:
Revolving credit facility (61.5) (81.9) - -
Total loans and borrowings (excluding lease liabilities) (61.5) (81.9) - -
Current
Cash 29.8 34.1 9.8 15.0
Bank overdraft (13.6) (1.8) - -
Net (debt)/cash (excluding lease liabilities) 1 (45.3) (49.6) 9.8 15.0
Non-current
Lease liabilities (21.9) (24.0) - -
Current
Lease liabilities (5.7) (6.0) - -
Net (debt)/cash 1 (72.9) (79.6) 9.8 15.0
Lease liabilities of £0.4m classified as held for sale in Note 9 have been
excluded from the net debt calculation.
1 Revenue at constant currency, Adjusted EBITDA and net debt excluding lease
liabilities are Alternative Performance Measures (APMs) and not IFRS measures.
See appendix 2 for an explanation of APMs and adjusting items, including a
reconciliation to statutory information.
In December 2022, the Group entered into a four year £162.5m multi-currency
revolving credit facility replacing the previous £100m multi-currency
revolving credit facility and the remaining $46.7m of the original $70m term
loan that was maturing in June 2024. Key terms of the facility are:
• £162.5m multi-currency revolving credit facility maturing in
December 2026
• Additional £75m uncommitted accordion option, subject to bank
approval
• Increase to leverage covenant from 2.5x to 3.0x with an additional
acquisition spike to 3.5x for the first 12 months of any acquisition
• The bank margin is lower and payable on a ratchet mechanism, with
a margin payable above SONIA and SOFR in the range of 1.00% to 2.25% depending
on the level of the Group's leverage. The weighted average interest rate is
6.21% for the period ended 30 September 2024 (2023: 5.92%)
• The new facility was considered an extinguishment of the previous
RCF and Term Loan Facility Agreement and therefore remaining arrangement fees
of £0.6m were charged to the Income Statement during the year ended 31 May
2023. As at 31 May 2023, new arrangement fees of £1.7m will be amortised over
the new four-year term to December 2026. Arrangement fees of £0.6m (2023:
£0.4m) have been charged to the Income Statement in the period ended 30
September 2024
• Certain subsidiaries of the Group act as guarantors to the new
facility to provide coverage based on aggregate adjusted EBITDA 1 and gross
assets
As at 30 September 2024, the Group had committed bank facilities of £162.5m
(2023: £162.5m), of which £62.4m (2023: £83.4m) had been drawn, leaving
£100.1m (2023: £79.1m) of undrawn facilities. Unamortised arrangement fees
of £0.9m (2023: £1.5m) have been offset against the amounts drawn down,
resulting in a carrying value of borrowings at 30 September 2024 of £61.5m
(2023: £81.9m). The fair value of borrowings is not materially different to
its amortised cost.
1 Revenue at constant currency, Adjusted EBITDA and net debt excluding lease
liabilities are Alternative Performance Measures (APMs) and not IFRS measures.
See appendix 2 for an explanation of APMs and adjusting items, including a
reconciliation to statutory information.
Note 11 Disposals
Current year disposal of DetACT business
On 30 April 2024, the Group completed the planned disposal of its DetACT
business for a total cash consideration of £8.2m.
The assets and liabilities included as part of the disposal were as follows:
2024
£m
Attributable goodwill (5.9)
Intangible fixed assets (1.4)
Trade and other receivables (1.5)
Trade and other payables 0.1
Deferred revenue 2.8
Deferred tax liability 0.3
Net assets disposed of (5.6)
Consideration 8.2
Transaction costs (1.0)
Gain on disposal - recognised as an individual significant item (Note 4) 1.6
Satisfied by:
Cash and cash equivalents 8.2
Total consideration 8.2
Prior period disposal of DDI business
On 31 December 2022, the Group completed the planned disposal of its DDI
business for consideration of £5.8m. Of this amount, £3.8m, is contingent on
the novation of certain customer contracts, which has now been settled in
full. The assets and liabilities included as part of the disposal were as
follows:
2023
£m
Attributable goodwill (1.0)
Trade and other receivables (1.2)
Trade and other payables 1.2
Net assets disposed of (1.0)
Consideration 5.8
Transaction costs (0.1)
Gain on disposal 4.7
Satisfied by:
Cash and cash equivalents 2.0
Contingent consideration 3.8
Consideration 5.8
Appendix 1 - Unaudited 12-months pro-forma results
The following sections (pages • to • ) highlights the Group's overall
performance for the unaudited 12 month period ending 30 September 2024
("2024"), compared to the previous unaudited 12 month period ending 30
September 2023 ("2023").
The following table summarises the Group's unaudited overall performance by
division:
2024 2023
Cyber Security Escode Central and head office Group - continuing Crypto and DetACT Total Group Cyber Security Escode Central and head office Group - continuing Crypto and DetACT Total Group
£m £m £m £m £m £m £m £m £m £m £m £m
Revenue 239.2 66.0 - 305.2 24.0 329.2 238.9 65.4 - 304.3 19.5 323.8
Cost of sales (150.7) (20.6) - (171.3) (15.0) (186.3) (167.1) (18.4) - (185.5) (12.5) (198.0)
Gross profit 88.5 45.4 - 133.9 9.0 142.9 71.8 47.0 - 118.8 7.0 125.8
Gross margin % 37.0% 68.8% - 43.9% 37.5% 43.4% 30.1% 71.9% - 39.0% 35.9% 38.9%
Administrative expenses (69.9) (16.9) (3.2) (90.0) (1.4) (91.4) (68.8) (16.6) (6.4) (91.8) (0.8) (92.6)
Share-based payments (0.1) (0.1) (1.6) (1.8) - (1.8) (1.1) (0.1) (0.7) (1.9) (0.1) (2.0)
Adjusted EBITDA (1, 2) 18.5 28.4 (4.8) 42.1 7.6 49.7 1.9 30.3 (7.1) 25.1 6.1 31.2
Depreciation and amortisation (8.5) (0.5) (3.7) (12.7) (0.1) (12.8) (8.2) (0.5) (3.6) (12.3) (0.2) (12.5)
Amortisation of acquired intangibles (1.1) (5.3) (3.0) (9.4) - (9.4) (1.1) (5.6) (2.9) (9.6) - (9.6)
Adjusted operating profit (1, 2) 8.9 22.6 (11.5) 20.0 7.5 27.5 (7.4) 24.2 (13.6) 3.2 5.9 9.1
Individually Significant Items (38.9) (0.1) - (39.0) - (39.0) (15.6) (2.4) - (18.0) - (18.0)
Operating (loss)/profit (30.0) 22.5 (11.5) (19.0) 7.5 (11.5) (23.0) 21.8 (13.6) (14.8) 5.9 (8.9)
Finance costs (6.1) (0.2) (6.3) (6.9) - (6.9)
Loss before taxation (25.1) 7.3 (17.8) (21.7) 5.9 (15.8)
Taxation (5.4) (1.9) (7.3) 1.9 (1.5) 0.4
Loss after taxation (30.5) 5.4 (25.1) (19.8) 4.4 (15.4)
Earnings per share (9.8p) 1.7p (8.1p) (6.4p) 1.4p (5.0p)
- Basic
5.2p
0.6p
3.5p 1.7p (0.8p) 1.4p
-Adjusted basic
Footnotes:
1 Adjusted EBITDA and Adjusted operating profit are Alternative Performance
Measures (APMs) and not IFRS measures. See unaudited appendix 2 for an
explanation of APMs and adjusting items, including a reconciliation to
statutory information.
2 After reconsidering FRC best practice guidance around the disclosure of
adjusting items and APMs, the Group has reduced the number of adjusted
measures and items. The Group now only has one adjusted item, "Individual
Significant Items". Previous adjusted items of Amortisation of acquisition
intangibles and share-based payments are no longer disclosed as an adjusted
item. Accordingly, comparative numbers have been restated. See unaudited
appendix 2 for an explanation of APMs and adjusting items, including a
reconciliation to statutory information.
The following tables reconciles how these changes have affected the historic
measures of Adjusted EBITDA and Adjusted operating profit:
2024 2023
Cyber Security Escode Central and head office Group - continuing Crypto and DetACT Total Group Cyber Security Escode Central and head office Group - continuing Crypto and DetACT Total Group
£m £m £m £m £m £m £m £m £m £m £m £m
Adjusted EBITDA - previously 18.6 28.5 (3.2) 43.9 7.6 51.5 3.0 30.4 (6.4) 27.0 6.2 33.2
Share-based payments (0.1) (0.1) (1.6) (1.8) - (1.8) (1.1) (0.1) (0.7) (1.9) (0.1) (2.0)
Adjusted EBITDA - revised 18.5 28.4 (4.8) 42.1 7.6 49.7 1.9 30.3 (7.1) 25.1 6.1 31.2
Adjusted operating profit - previously 10.1 28.0 (6.9) 31.2 7.5 38.7 (5.2) 29.9 (10.0) 14.7 6.0 20.7
Share-based payments (0.1) (0.1) (1.6) (1.8) - (1.8) (1.1) (0.1) (0.7) (1.9) (0.1) (2.0)
Amortisation of acquired intangibles (1.1) (5.3) (3.0) (9.4) - (9.4) (1.1) (5.6) (2.9) (9.6) - (9.6)
Adjusted operating profit - revised 8.9 22.6 (11.5) 20.0 7.5 27.5 (7.4) 24.2 (13.6) 3.2 5.9 9.1
Unaudited revenue summary:
% Constant currency (1) 2023 %
change at actual rates £m change at constant currency (1)
2024 2023 2024
£m £m £m
Cyber Security revenue (excluding Crypto and DetACT) 239.2 238.9 0.1% 239.2 234.7 1.9%
Crypto and DetACT 24.0 19.5 23.1% 24.0 19.1 25.7%
Total Cyber Security revenue 263.2 258.4 1.9% 263.2 253.8 3.7%
Escode 66.0 65.4 0.9% 66.0 64.2 2.8%
Total revenue 329.2 323.8 1.7% 329.2 318.0 3.5%
1 Revenue growth at constant currency is an Alternative Performance Measure
(APM) and not an IFRS measure. See unaudited appendix 2 for an explanation of
APMs, including a reconciliation to statutory information.
Unaudited divisional performance - Cyber Security:
Cyber Security unaudited revenue analysis - by originating country:
%
%
Constant currency (1) 2023 change at constant currency (1)
change at actual rates
£m
2024
2023
2024
£m £m
£m
UK and APAC 135.5 118.2 14.6% 135.5 117.7 15.1%
North America 67.0 84.8 (21.0%) 67.0 81.8 (18.1%)
Europe 60.7 55.4 9.6% 60.7 54.3 11.8%
Total Cyber Security revenue 263.2 258.4 1.9% 263.2 253.8 3.7%
1 Revenue growth at constant currency is an Alternative Performance Measure
(APM) and not an IFRS measure. See unaudited appendix 2 for an explanation of
APMs, including a reconciliation to statutory information
From a total Cyber Security revenue trajectory perspective, the following
tables compare half on half (being the half-year results relating to the 12
months ending 30 September 2024 and the 12 months ending 30 September 2023)
performance:
% Constant currency (1) H1 2023 %
change at actual rates £m change at constant currency (1)
H1 2024 H1 2023 H1 2024
£m £m £m
UK and APAC 69.1 62.3 10.9% 69.1 62.9 9.9%
North America 33.4 49.0 (31.8%) 33.4 46.9 (28.8%)
Europe 31.4 27.6 13.8% 31.4 26.2 19.8%
Total Cyber Security revenue 133.9 138.9 (3.6%) 133.9 136.0 (1.5%)
% Constant currency (1) %
change at actual rates H2 2023 change at constant currency (1)
H2 2024 H2 2023 H2 2024 £m
£m £m £m
UK and APAC 66.4 55.9 18.8% 66.4 54.8 21.2%
North America 33.6 35.8 (6.1%) 33.6 34.9 (3.7%)
Europe 29.3 27.8 5.4% 29.3 28.1 4.3%
Total Cyber Security revenue 129.3 119.5 8.2% 129.3 117.8 9.7%
The following table shows the current trajectory of revenue during the 12
month period:
H2 2024 H1 2024 %
£m £m change
at actual rates
UK and APAC 66.4 69.1 (3.9%)
North America 33.6 33.4 0.6%
Europe 29.3 31.4 (6.7%)
Total Cyber Security revenue 129.3 133.9 (3.4%)
Following the implementation of our new strategy, Cyber Security revenue is
now analysed in more detail by type of service and capability. This is
summarised by the following unaudited revenue analysis:
% Constant currency (1) %
change 2023 change at constant currency (1)
at actual rates
2024 2023 2024 £m
£m £m £m
Technical Assurance Services (TAS) 105.6 126.9 (16.8%) 105.6 124.2 (15.0%)
Consulting and Implementation (C&I) 42.2 44.2 (4.5%) 42.2 43.7 (3.4%)
Managed Services (MS) 74.5 51.5 44.7% 74.5 50.8 46.7%
Digital Forensics and Incident Response (DFIR) 15.1 15.1 - 15.1 14.9 1.3%
Other services 25.8 20.7 24.6% 25.8 20.2 27.7%
Total Cyber Security revenue 263.2 258.4 1.9% 263.2 253.8 3.7%
1 Revenue growth at constant currency is an Alternative Performance Measure
(APM) and not an IFRS measure. See unaudited appendix 2 for an explanation of
APMs, including a reconciliation to statutory information
From a total Cyber Security revenue trajectory perspective in relation to
types of services, the following tables compare half on half (being the
half-year results relating to the 12 months ended 30 September 2024 and the 12
months to 30 September 2023) performance:
% Constant currency (1) %
change H1 2023 change at constant currency (1)
at actual rates
H1 2024 H1 2023 H1 2024 £m
£m £m £m
Technical Assurance Services (TAS) 52.9 73.4 (27.9%) 52.9 71.5 (26.0%)
Consulting and Implementation (C&I) 22.7 23.4 (3.0%) 22.7 23.0 (1.3%)
Managed Services (MS) 36.9 24.7 49.4% 36.9 24.3 51.9%
Digital Forensics and Incident Response (DFIR) 7.7 6.9 11.6% 7.7 6.8 13.2%
Other services 13.7 10.5 30.5% 13.7 10.4 31.7%
Total Cyber Security revenue 133.9 138.9 (3.6%) 133.9 136.0 (1.5%)
% Constant currency (1) %
change H2 2023 change at constant currency (1)
at actual rates
H2 2024 H2 2023 H2 2024 £m
£m £m £m
Technical Assurance Services (TAS) 52.8 53.5 (1.3%) 52.8 52.9 (0.2%)
Consulting and Implementation (C&I) 19.5 20.8 (6.3%) 19.5 20.7 (5.8%)
Managed Services (MS) 37.5 26.8 39.9% 37.5 26.5 41.5%
Digital Forensics and Incident Response (DFIR) 7.4 8.2 (9.8%) 7.4 8.0 (7.5%)
Other services 12.1 10.2 18.6% 12.1 9.8 23.5%
Total Cyber Security revenue 129.3 119.5 8.2% 129.3 117.9 9.7%
H2 2024 H1 2024 %
£m £m change
at actual rates
Technical Assurance Services (TAS) 52.8 52.9 (0.2%)
Consulting and Implementation (C&I) 19.5 22.7 (14.1%)
Managed Services (MS) 37.5 36.9 1.6%
Digital Forensics and Incident Response (DFIR) 7.4 7.7 (3.9%)
Other services 12.1 13.7 (11.7%)
Total Cyber Security revenue 129.3 133.9 (3.4%)
Cyber Security unaudited gross profit is analysed as follows:
2024 2024 2023 2023
£m
£m % margin % margin % pts change
UK and APAC 61.3 45.2% 40.6 34.3% 10.9% pts
North America 14.8 22.1% 20.0 23.6% (1.5% pts)
Europe 21.4 35.3% 18.2 32.9% 2.4% pts
Cyber Security gross profit and % margin 97.5 37.0% 78.8 30.5% 6.5% pts
Europe gross profit excluding Crypto and DetACT would have amounted to 33.8%
compared to the prior year of 31.2%.
From a total Cyber Security gross profit trajectory perspective, the following
tables compare half on half (being the half-year results relating to the 12
months ended 30 September 2024 and the 12 months to 30 September 2023)
performance:
H1 2024 H1 2024 H1 2023 H1 2023
£m
£m % margin % margin % pts change
UK and APAC 31.4 45.4% 23.0 36.9% 8.5% pts
North America 7.4 22.2% 12.0 24.5% (2.3% pts)
Europe 10.2 32.5% 10.0 36.2% (3.7% pts)
Cyber Security gross profit and % margin 49.0 36.6% 45.0 32.4% 4.2% pts
H2 2024 H2 2024 H2 2023 H2 2023
£m
£m % margin % margin % pts change
UK and APAC 29.9 45.0% 17.5 31.3% 13.7% pts
North America 7.4 22.0% 7.9 22.1% (0.1% pts)
Europe 11.2 38.2% 8.4 30.2% 8.0% pts
Cyber Security gross profit and % margin 48.5 37.5% 33.8 28.3% 9.2% pts
H2 2024 H2 2024 H1 2024 H1 2024
£m
£m % margin % margin % pts change
UK and APAC 29.9 45.0% 31.4 45.4% (0.4% pts)
North America 7.4 22.0% 7.4 22.2% (0.2% pts)
Europe 11.2 38.2% 10.2 32.5% 5.7% pts
Cyber Security gross profit and % margin 48.5 37.5% 49.0 36.6% 0.9% pts
Unaudited divisional performance - Escode:
Escode unaudited revenue analysis - by originating country:
%
change at actual rates Constant currency (1) %
2023 change at constant currency (1)
2024 2023 2024 £m
£m £m £m
UK 28.0 26.5 5.7% 28.0 26.5 5.7%
North America 33.9 34.7 (2.3%) 33.9 33.5 1.2%
Europe 4.1 4.2 (2.4%) 4.1 4.2 (2.4%)
Total Escode revenue 66.0 65.4 0.9% 66.0 64.2 2.8%
1 Revenue growth at constant currency is an Alternative Performance Measure
(APM) and not an IFRS measure. See unaudited appendix 2 for an explanation of
APMs, including a reconciliation to statutory information
Escode unaudited revenues analysed by service line:
% Constant currency (1) %
change at actual rates 2023 change at constant currency (1)
2024 2023 2024 £m
£m £m £m
Escrow contracts 43.0 43.6 1.4% 43.0 43.4 (0.9%)
Verification services 23.0 21.8 5.5% 23.0 20.8 10.6%
Total Escode revenue 66.0 65.4 0.9% 66.0 64.2 2.8%
1: Revenue growth at constant currency is an Alternative Performance Measure
(APM) and not an IFRS measure. See unaudited appendix 2 for an explanation of
APMs, including a reconciliation to statutory information
From a Escode revenue trajectory perspective, the following tables compare
half on half (being the half-year results relating to the 12 months ended 30
September 2024 and the 12 months to 30 September 2023) performance:
%
change at actual rates Constant currency (1) %
H1 2023 change at constant currency (1)
H1 2024 H1 2023 H1 2024 £m
£m £m £m
UK 14.0 12.6 11.1% 14.0 12.8 9.4%
North America 16.8 17.4 (3.4%) 16.8 17.3 (2.9%)
Europe 2.1 2.2 (4.5%) 2.1 2.2 (4.5%)
Total Escode revenue 32.9 32.2 2.2% 32.9 32.3 1.9%
%
change at actual rates Constant currency (1) %
H2 2023 change at constant currency (1)
H2 2024 H2 2023 H2 2024 £m
£m £m £m
UK 13.9 13.9 0.0% 13.9 13.7 1.5%
North America 17.2 17.3 (0.6%) 17.2 16.3 5.5%
Europe 2.0 2.0 (0.0%) 2.0 2.0 0.0%
Total Escode revenue 33.1 33.2 (0.3%) 33.1 32.0 3.4%
%
change at actual rates Constant currency (1) %
H1 2024 change at constant currency (1)
H2 2024 H1 2024 H2 2024 £m
£m £m £m
UK 13.9 14.0 (0.7%) 13.9 12.6 10.3%
North America 17.2 16.8 2.4% 17.2 16.6 3.6%
Europe 2.0 2.1 (4.8%) 2.0 2.1 (4.8%)
Total Escode revenue 33.1 32.9 0.6% 33.1 31.3 5.8%
% Constant currency (1) %
change at actual rates H1 2023 change at constant currency (1)
H1 2024 H1 2023 H1 2024 £m
£m £m £m
Escrow contracts 22.0 21.7 1.4% 22.0 22.4 (1.8%)
Verification services 10.9 10.5 3.8% 10.9 9.8 11.2%
Total Escode revenue 32.9 32.2 2.2% 32.9 32.2 2.2%
% Constant currency (1) %
change at actual rates H2 2023 change at constant currency (1)
H2 2024 H2 2023 H2 2024 £m
£m £m £m
Escrow contracts 21.0 21.9 (4.1%) 21.0 21.0 0.0%
Verification services 12.1 11.3 7.1% 12.1 11.0 10.0%
Total Escode revenue 33.1 33.2 (0.3%) 33.1 32.0 3.4%
% Constant currency (1) %
change at actual rates H1 2024 change at constant currency (1)
H2 2024 H1 2024 H2 2024 £m
£m £m £m
Escrow contracts 21.0 22.0 (4.5%) 21.0 21.1 (0.5%)
Verification services 12.1 10.9 11.0% 12.1 10.3 17.5%
Total Escode revenue 33.1 32.9 0.6% 33.1 31.4 5.4%
Escode unaudited gross profit is analysed as follows:
2024 2024 2023 2023
£m % margin £m % margin % pts change
UK 19.0 67.9% 18.3 69.1% (1.2% pts)
North America 24.1 71.1% 25.8 74.4% (3.3% pts)
Europe 2.3 56.1% 2.9 69.0% (12.9% pts)
Escode gross profit and % margin 45.4 68.8% 47.0 71.9% (3.1% pts)
From a Escode gross profit trajectory perspective, the following tables
compare half on half (being the half-year results relating to the 12 months
ended 30 September 2024 and the 12 months to 30 September 2023) performance:
H1 2024 H1 2024 H1 2023 H1 2023
£m % margin £m % margin % pts change
UK 9.5 67.9% 9.2 73.0% (5.1% pts)
North America 11.7 69.6% 12.8 73.6% (4.0% pts)
Europe 1.2 57.1% 1.4 63.6% (6.5% pts)
Escode gross profit and % margin 22.4 68.1% 23.4 72.7% (4.6% pts)
H2 2024 H2 2024 H2 2023 H2 2023
£m % margin £m % margin % pts change
UK 9.5 68.3% 9.1 65.5% 2.8% pts
North America 12.3 71.5% 13.0 75.1% (3.6% pts)
Europe 1.2 60.0% 1.5 75.0% (15.0% pts)
Escode gross profit and % margin 23.0 69.5% 23.6 71.1% (1.6% pts)
H2 2024 H2 2024 H1 2024 H1 2024
£m % margin £m % margin % pts change
UK 9.5 68.3% 9.5 67.9% 0.4% pts
North America 12.3 71.5% 11.7 69.6% 1.9% pts
Europe 1.2 60.0% 1.2 57.1% 2.9% pts
Escode gross profit and % margin 23.0 69.5% 22.4 68.1% 1.4% pts
The unaudited Consolidated Balance Sheet position as at 30 September 2023
compared to the audited Balance Sheet position as at 30 September 2024:
30 Unaudited
September 30
2024 September
£m 2023
£m
Non-current assets
Goodwill 156.5 257.9
Intangible assets 89.2 109.4
Property, plant and equipment 11.6 12.6
Right-of-use assets 15.7 18.0
Investments - 0.3
Deferred tax asset 0.6 2.9
Total non-current assets 273.6 401.1
Current assets
Inventories - 0.8
Trade and other receivables 32.2 58.9
Contract assets 20.1 20.5
Contingent consideration receivable - 1.8
Current tax receivable 2.9 3.6
Cash and cash equivalents 29.8 13.6
Assets classified as held for sale 61.5 -
Total current assets 146.5 99.2
Total assets 420.1 500.3
Current liabilities
Trade and other payables 46.8 47.1
Bank overdraft 13.6 3.1
Lease liabilities 5.7 6.1
Current tax payable 1.6 1.5
Derivative financial instruments 0.8 0.1
Provisions 1.4 1.6
Contract liabilities - deferred revenue 50.7 62.6
Liabilities directly associated with assets classified as held for sale 5.7 -
Total current liabilities 126.3 122.1
Non-current liabilities
Borrowings 61.5 78.0
Lease liabilities 21.9 22.8
Deferred tax liabilities 0.5 1.4
Provisions 1.9 1.4
Contract liabilities - deferred revenue 2.8 4.2
Total non-current liabilities 88.6 107.8
Total liabilities 214.9 229.9
Net assets 205.2 270.4
Equity
Share capital 3.1 3.1
Share premium 224.4 224.1
Merger reserve 42.3 42.3
Currency translation reserve 24.5 39.9
Retained earnings (89.1) (39.0)
Total equity attributable to equity holders of the Parent 205.2 270.4
The unaudited Cash Flow Statement for the 12 month period ended 30 September
2024:
Consolidated cash flow statement
for the 12 month period ended 30 September 2024
12 months
period
ended 30 September
2024
£m
Cash flows from operating activities
Loss for the period/year (25.1)
Adjustments for:
Depreciation of property, plant and equipment 4.3
Depreciation of right-of-use assets 6.6
Amortisation of customer contracts and relationships 9.4
Amortisation of software and development costs 2.6
Impairment of goodwill 31.9
Impairment of non-current assets included in ISIs 3.7
Share-based payments 1.8
Lease financing costs 1.6
Other financing costs 6.3
Foreign exchange loss 1.9
Profit on disposal of right-of-use assets (0.1)
Profit on disposal of businesses (1.6)
Profit on disposal of investment (0.1)
Loss on disposal of fixed assets 0.1
Income tax expense 7.3
Cash inflow for the year before changes in working capital 50.6
Decrease in trade and other receivables 19.3
Increase in contract assets (3.4)
Decrease in inventories 0.2
Decrease in trade and other payables (19.3)
Increase in provisions 0.6
Cash generated from operating activities before interest and taxation 48.0
Interest element of lease payments (1.6)
Other interest paid (5.9)
Taxation paid (2.1)
Net cash generated from operating activities 38.4
Cash flows from investing activities
Purchase of property, plant and equipment (4.3)
Software, development and customer contracts expenditure (1.3)
Sale proceeds of business disposals 10.4
Net cash generated from/(used in) in investing activities 4.8
Cash flows from financing activities
Proceeds from the issue of ordinary share capital 0.3
Acquisition of treasury shares (5.8)
Principal element of lease payments (7.9)
Drawdown of borrowings (net of deferred issue costs) 38.8
Repayment of borrowings (51.3)
Equity dividends paid (14.5)
Net cash used in financing activities (40.4)
Net decrease in cash and cash equivalents (inc. bank overdraft) 2.8
Cash and cash equivalents (inc. bank overdraft) at beginning of period 10.5
Effect of foreign currency exchange rate changes 2.9
Cash and cash equivalents (inc. bank overdraft) at end of year 16.2
Appendix 2 - Alternative Performance Measures (APMs) and adjusting items
The consolidated Financial Statements include APMs as well as statutory
measures. These APMs used by the Group are not defined terms under IFRS and
may therefore not be comparable with similarly titled measures reported by
other companies. They are not intended to be a substitute for, or superior to,
Generally Accepted Accounting Practice (GAAP) measures. All APMs relate to the
current year results and comparative periods where provided.
This presentation is also consistent with the way that financial performance
is measured by management and reported to the Board, and the basis of
financial measures for senior management's compensation schemes and provides
supplementary information that assists the user in understanding the financial
performance, position and trends of the Group. At all times, the Group aims to
ensure that the Annual Report and Accounts gives a fair, balanced and
understandable view of the Group's performance, cash flows and financial
position. IAS 1 'Presentation of Financial Statements' requires the separate
presentation of items that are material in nature or scale in order to allow
the user of the Financial Statements to understand underlying business
performance.
We believe these APMs provide readers with important additional information on
our business and this information is relevant for use by investors, securities
analysts and other interested parties as supplemental measures of future
potential performance. However, since statutory measures can differ
significantly from the APMs and may be assessed differently by the reader we
encourage you to consider these figures together with statutory reporting
measures noted. Specifically, we would note that APMs may not be comparable
across different companies and that certain profit related APMs may exclude
recurring business transactions (e.g. acquisition related costs and certain
share-based payment charges) that impact financial performance and cash flows.
As the Group manages internally its performance at an Adjusted operating
profit level (before Individually Significant Items, amortisation of acquired
intangibles and share-based payments), which management believes represents
the underlying trading of the business. This information is still disclosed as
an APM within this Annual Report. This APM is reconciled to statutory
operating profit, together with the consequently Adjusted basic EPS (before
amortisation of acquisition intangibles, share-based payments and Individually
Significant Items and tax effect thereon) to statutory basic EPS. Please see
page x of the Financial Review section.
The Group has the following APMs/non-statutory measures:
Income statement measures:
APM Closest equivalent IFRS measure Adjustments to reconcile to IFRS measure Definition, purpose and considerations
made by the Directors
Constant currency revenue Revenue growth rates at actual rates of currency exchange Retranslation of comparative numbers at current year exchange rates to provide The Group reports certain geographic regions and service capabilities on a
growth rates constant currency constant currency basis to reflect the underlying performance considering
constant foreign exchange rates year on year. This involves retranslating
comparative numbers at current year rates for comparability to enable a growth
factor to be calculated.
Adjusted operating Operating profit or loss Operating profit or loss before Individually Significant Items Represents operating profit before Individually Significant Items (the only
profit
adjusting item).
(Previously: Operating profit or loss before amortisation of acquired
intangibles, share-based payments and Individually Significant Items) This measure is to allow the user to understand the Group's underlying
financial performance as measured by management.
Individually Significant Items are items that are considered unusual by nature
or scale and are of such significance that separate disclosure is relevant to
understanding the Group's financial performance and therefore requires
separate presentation in the Financial Statements in order to fairly present
the financial performance of the Group.
Adjusted profit for the period Loss for the period Loss for the period before Individually Significant Items and associated tax Represents loss for the period before Individually Significant Items and their
effects and adjusted tax items. associated tax effect and adjusted tax items.
This measure is to allow the user to calculate the Group's adjusted earnings
per share.
Adjusted earnings Operating profit or loss Operating profit or loss, before adjusting item, depreciation and Represents operating profit before adjusting item, depreciation and
before interest, tax, depreciation and amortisation (Adjusted EBITDA) amortisation, finance costs and taxation amortisation to assist in the understanding of the Group's performance.
(Previously: before amortisation of acquired intangibles, share-based Adjusted EBITDA is disclosed as this is a measure widely used by various
payments, Individually Significant Items and the tax effect thereon) stakeholders and used by the Group to measure the cash conversion ratio.
Adjusted Statutory basic EPS Statutory basic EPS before Individually Significant Items and their associated Represents basic EPS before Individually Significant Items and their
basic EPS tax effect and adjusted tax items. associated tax effect and adjusted tax items.
(Previously: before amortisation of acquired intangibles, share-based This measure is to allow the user to understand the Group's underlying
payments, Individually Significant Items and the tax effect thereon) financial performance as measured by management, reported to the Board and
used as a financial measure in senior management's compensation schemes.
Balance Sheet measures:
APM Closest equivalent IFRS measure Adjustments to reconcile to IFRS measure Definition, purpose and considerations
made by the Directors
Net debt excluding lease Total borrowings (excluding lease liabilities) offset by cash and cash Represents total borrowings (excluding lease liabilities) offset by cash and
liabilities equivalents cash equivalents. It is a useful measure of the progress in generating cash,
strengthening of the Group Balance Sheet position, overall net indebtedness
and gearing on a like-for-like basis.
Net debt, when compared to available borrowing facilities, also gives an
indication of available financial resources to fund potential future business
investment decisions and/or potential acquisitions.
Net debt Total borrowings (including lease liabilities) offset by cash and cash Represents total borrowings (including lease liabilities) offset by cash and
equivalents cash equivalents. It is a useful measure of the progress in generating cash,
strengthening of the Group Balance Sheet position, overall net indebtedness
and gearing including lease liabilities.
Net debt, when compared to available borrowing facilities, also gives an
indication of available financial resources to fund potential future business
investment decisions and/or potential acquisitions.
Cash flow measures:
APM Closest equivalent IFRS measure Adjustments to reconcile to IFRS measure Definition, purpose and considerations
made by the Directors
Cash conversion ratio Ratio % of net cash flow from operating activities before interest and tax Ratio % of net cash flow from operating activities before interest and tax The cash conversion ratio is a measure of how effectively operating profit is
divided by operating profit divided by Adjusted EBITDA converted into cash and effectively highlights both non-cash accounting items
within operating profit and also movements in working capital.
It is calculated as net cash flow from operating activities before interest
and taxation (as disclosed on the face of the Cash Flow Statement) divided by
adjusted EBITDA.
The cash conversion ratio is a measure widely used by various stakeholders and
hence is disclosed to show the quality of cash generation and also to allow
comparison to other similar companies.
Please see the Financial Review for full reconciliations.
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