REG - NCC Group PLC - Unaudited results for the 12 months to 31 May 2024
01/08/2024 07:15
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RNS Number : 7529Y NCC Group PLC 01 August 2024
1 August
2024
NCC Group plc
Unaudited results for the 12 months to 31 May 2024
Improvement in Adjusted EBITDA (1, 2) during transformation journey
NCC Group plc (LSE: NCC, "NCC Group" or "the Group"), a people-powered,
tech-enabled global cyber security and software escrow business, reports its
12 months results to 31 May 2024 ("2024", "the period").
Highlights
· Adjusted EBITDA (1,2) ahead of the market's profitability
expectations, as our transformation journey starts to deliver.
· Cyber Security returned to growth in H2 2024 (the 6-months ended
31 May 2024) compared to H2 2023 with an improvement in gross profit margin as
a result of stronger utilisation, service mix and operational efficiencies. As
expected, revenues slightly declined year-on-year (the comparison between the
12 months ending 31 May 2024 and the 12 months to 31 May 2023) on a constant
currency (1) basis.
· Technical Assurance Services declined with the recovery in demand
less consistent than expected.
· Managed Services growth continued to accelerate in H2 2024 driven
by its UK performance, and now represents 26.0% of total Cyber Security
revenue as compared to 2023 of 18.5%.
· Digital Forensics and Incident Response increased year-on-year
reflecting strong demand for support following Ransomware incidents.
· Consulting and Implementation experienced low single digit
decline as we enhance our proposition.
· Escode has now delivered seven consecutive quarters of
year-on-year revenue growth.
· Trading for the four-month period ending 30 September 2024 to
remain in line with our previous guidance.
12 months to 31 May 2024 2023 Change at actual rates Change at constant currency (1)
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 -
Net debt excluding lease liabilities (£m) (1) (38.5) (49.6) 22.4%
12-month dividend (pence) 3.15p 3.15p -
Change at constant currency (1)
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
-
Net debt excluding lease liabilities (£m) (1)
(38.5)
(49.6)
22.4%
12-month dividend (pence)
3.15p
3.15p
-
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 1 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:
"As noted in June, we delivered on our expected second six-month performance
and the Group also continues to trade for the four-month period to our new
financial year end of 30 September 2024, in line with our previous guidance.
The Group's transformation journey is progressing well and is already
delivering results; however, work continues. We have enhanced our capabilities
in Cyber and diversified our routes to market, developed differentiated brands
and implemented a global resourcing and scheduling model enabled by a new
delivery and operating centre. We have made this strategic progress whilst
successfully reducing our operating costs and improving our gross margin. In
addition, we have delivered continued quarter-on-quarter growth of Escode.
This could not have been achieved without the focus and resilience of our
excellent management team and all our dedicated colleagues".
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:
A live webcast for investors and analysts will be held today at 09:00 GMT.
To access the live webcast, please register in advance:
https://www.lsegissuerservices.com/spark/NCCGroup/events/15777d10-1bbf-4ab7-a644-80ff5cd405ef
(https://www.lsegissuerservices.com/spark/NCCGroup/events/15777d10-1bbf-4ab7-a644-80ff5cd405ef)
For analysts who would like to join the Q&A session, please register in
advance:
https://ncc-results-august-2024.open-exchange.net/registration
(https://ncc-results-august-2024.open-exchange.net/registration)
The slides for this presentation can be downloaded from NCC Group's
website: www.nccgoupplc.com (https://www.nccgroupplc.com/) and a recording of
the presentation will be uploaded later today.
Audited results
As previously announced, the audited results for the 16 months ending 30
September 2024 will be presented on 10 December 2024, in line with the change
of NCC Group's financial year end from 31 May to 30 September.
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.
Chief Executive Officer's business review
Improved Adjusted EBITDA (1,2) and our transformation journey
We have delivered Adjusted EBITDA in H2 2024 ahead of market expectations and
have made good progress on our transformational journey, however work
continues. The strategy and the way we measure our success has not changed as
we continue to focus on our clients, our capabilities, enabling our global
delivery model and simplifying the business.
I'd like to thank every NCC Group colleague and the management team for their
commitment and focus during this 12-month period (the period from 1 June 2023
to 31 May 2024).
Business performance
Revenue slightly declined year-on-year at 0.8% on a constant currency basis
(actual rates: -3.2%) with Cyber Security Revenue declining 2.2% on a constant
currency basis (actual rates: -4.5%) and Escode growing by 5.4% on a constant
currency basis (actual rates: +2.5%).
Our H2 2024 performance demonstrated good momentum, with Cyber Security
revenue increasing year-on-year by 6.0% on a constant currency basis (1)
(Actual rates: +4.7%) driven by our UK Managed Service performance, following
a decline of 9.6% (Actual rates: -12.6%) in H1 2024 (the six months ended 30
November 2023). Managed Services growth continued to accelerate in H2 2024,
increasing by 36.0% on a constant currency basis (1) (Actual rates: +34.3%).
Technical Assurance Services declined year-on-year by 22.8% on a constant
currency basis (1) (Actual rates: -25.1%) with the recovery in demand less
consistent than expected, albeit the H2 2024's decline year-on-year was 15.0%
(Actual rates: -16.0%) compared to a decline in H1 2024 year-on-year of 28.6%
(Actual rates: -31.7%).
Escode revenue increased by 5.4% on a constant currency basis (1) (Actual
rates: +2.5%) having now delivered seven consecutive quarters of year-on-year
growth. Contract and verification revenues both grew during the period, with
client retention rates remaining strong at 95% and consistent with long term
trends and the number of client beneficiaries equating to 45,599 (H1 2024:
47,297).
It is pleasing to see an improvement in Cyber Security gross profit margin
performance by 2.4% pts year-on-year, with an 8.9% pts improvement in H2 2024
year-on-year. In addition to a change in service mix, whereby managed services
are becoming a greater proportion of overall revenue at higher margins, our
utilisation has improved since the start of the period and, whilst we still
have further gains to make, mainly in North America, our overall trajectory is
encouraging.
Adjusted Operating profit (1) amounted to £20.0m (2023 restated (2): £16.6m)
under the new adjusted operating profit (1) measure. Based on the previous
measure (2) this would equate to £31.1m (2023: £28.8m) and was ahead of
expectations. Adjusted EBITDA (1) increased by 7.4% to £42.1m. We generated
an operating loss of £21.5m (2023: operating profit of £1.9m) following
individual significant items of £41.5m which relate to various elements of
our transformation and non-cash items including an impairment of our North
American Cyber Security Business due its historical performance, as the
recovery in demand is less consistent than expected.
Net debt (1) (excluding lease liabilities) was better than market expectations
at £38.5m, after consistent strong cash conversion (1) and disposal gross
proceeds of c.€9.5m (£8.2m) from the DetACT non-core disposal as disclosed
in December 2023. Our leverage (excluding IFRS 16) as at 31 May 2024 was 1.0x
(2023: 1.4x) Adjusted EBITDA (excluding IFRS 16). We are also maintaining a
12-month dividend of 3.15p per ordinary share.
Market trends, threat landscape and continued regulation
Reflecting on the 12-month period, market trends previously outlined continue,
with clients looking for higher levels of assurance following greater scrutiny
and oversight during their procurement processes. Equally, certain clients
still require volume assurance activities testing infrastructure and
applications at the appropriate price points.
From a Cyber threat landscape perspective, as expected, Ransomware activity
continues to increase, and there is a verifiable increase in cyber risk as a
result of generative AI, with the Industrial sector remaining a prime target.
Our recent Digital Dawn report
(https://www.nccgroup.com/uk/strategic-guidance-for-cyber-policy-in-the-wake-of-political-change-2024/)
has found that 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 now 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'). These measures range from building and managing
disclosure programs for software vulnerabilities, making patches easier to
install by customers, tracking intrusions by hackers, mitigating flaws across
common areas in software design, reducing the use of default passwords and
enabling multifactor authentication across products as standard. In the UK,
the Government has announced a new Code of Practice for software vendors
(https://www.nccgroup.com/us/newsroom/ncc-group-pivotal-in-the-development-of-new-uk-code-of-practice-for-software-vendors/)
and an AI Cyber Security Code of Practice
(https://www.gov.uk/government/calls-for-evidence/call-for-views-on-the-cyber-security-of-ai/call-for-views-on-the-cyber-security-of-ai)
(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's Product Security and
Telecommunications Infrastructure (Product Security) 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 NIS2 Directive 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 you need to adhere to,
making it crucial to review and update your security programmes to
future-proof your investments.
Our clients and end-to-end capabilities
During H1 2024, we took the next steps in the evolution to be more client
centric with the formal creation of a vertically integrated sales organisation
in the UK and North America (for example: verticals such as TMT, public
sector, financial services and insurance etc), and expanding our routes to
market with alliances with Transunion and Tanium, as well as securing a global
partnership with global enterprise software company Splunk. This has now
led to us being awarded in Q4 2024 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.
Technical Assurance Services where we experienced a significant drop off of
demand in H2 2023, is not rebounding to the levels we have historically
experienced. In particular, the North America recovery in demand is less
consistent than we had expected. We are constantly reviewing the way we
compete in this service line.
The demand for Cyber Security services in other areas remains strong, most
notably in Managed Services, and whilst competition in this specialised area
is high, we have increased UK revenues which includes a significant contract
with TikTok. This contract centres around the Group providing independent
checks and monitoring of TikTok's European data security measures and
independently assessing its data controls and protections, monitoring data
flows, providing independent verification and reporting any incidents. In
addition, NCC is also providing ongoing managed security services for TikTok's
security gateways, performing real-time monitoring to identify and responding
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.
With the introduction of our unified cyber platform and potential inorganic
growth, we continue to expect Managed Services to be an area of growth and
increasing annual recurring revenues as outlined in the Capital Markets Day in
June 2024.
Global delivery model
Our new Manila office continues to grow in line with expectations with c.80
colleagues operational in delivery and enabling functions as at 31 May 2024.
In addition, our new scheduling system (Kantata) is now live in North America,
UK and Manila with the aim to onboard Europe and APAC by the end of the
calendar year. We continue to see the opportunity with global resourcing
allowing us to put the right people on the right projects regardless of
location. A critical success factor will be the way we continue to engage with
our existing and prospective clients on proposals and pricing, and in turn
maintaining and improving utilisation and gross margin. Examples of this
were a Global FMCG business and UK Airline taking combined capabilities or new
services around supply chain assurance.
Escode
During the period, revenue growth quarter on quarter (being successive
quarterly segments of the 12-month period ended 31 May 2024) has continued,
which is pleasing. 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 further valuing our customer proposition, expansion into additional
verticals (for example: Critical Infrastructure) and geographies (North
America and Australia), increasing awareness and education, working with
regulators to influence regulation globally, and continuing to build out our
product offering.
Simplifying the business
We have continued to focus also on simplification, in the way we operate and
what core services we provide. This has seen us fundamentally rationalise our
property estate to reflect the way the world operates in a hybrid manner, and
also dispose of a non-core element of the Group.
In December 2023 we agreed a successful disposal of our standalone fraud
offering DetACT in the Netherlands for total gross consideration of €9.5m
(£8.2m) (inclusive of a final working capital adjustment), with completion
occurring in April 2024 giving rise to a profit on disposal of £1.4m.
This disposal has been part of the overall strategy to ensure the Group
focuses on core Cyber capabilities and our separate Escode re-branded
business. Both of our businesses provide the benefit of portfolio effect to
the overall Group performance however with clear future growth opportunities
to enhance shareholder value.
Moving into the next phase of our transformation
We remain confident on the Group's outlook and for current trading for the
four-month period to 30 September 2024 to be in line with our previous
guidance. We are clear on what we need to do in each of our divisions and we
will continue to simplify our business with profitable growth, and sustainable
gross margins and align to our clients' needs, a strategy which has proven
beneficial to us through the transformation plan to date.
We have declared a second interim dividend of 3.15p (2023: 3.15p) per ordinary
share, unchanged from the prior 12-month period, and the Group remains
confident on our medium-term financial goals.
Footnotes:
1: Revenue at constant currency, Adjusted EBITDA, Adjusted Operating profit
and Net debt excluding lease liabilities are Alternative Performance Measures
(APMs) and not IFRS measures. See unaudited appendix 1 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 and previous
measures.
Financial review
Highlights - financial framework
Reviewing our financial framework for the 12-month period to 31 May 2024 set
out at the start of the period, it is encouraging to see we have delivered on
all metrics. The key points to note are as follows:
· Sustainable revenue growth
o Returning Cyber Security to growth in H2 2024 - When comparing
year-on-year, revenue has declined by 2.2% on a constant currency basis.
However, H2 2024 revenue is ahead of H2 2023 on constant currency (1) by 6.0%
(at actual rates 4.7%) and by 3.9% at actual rates when comparing H2 2024 to
H1 2024.
o Accelerating growth in our recurring Managed Services - H2 2024 revenue
ahead of H2 2023 on constant currency (1) by 53.1% (at actual rates +51.9%)
and by 42.1% at actual rates when comparing H2 2024 to H1 2024.
o Maintaining momentum of quarterly growth in Escode - now delivered seven
consecutive quarters of year-on-year growth.
· Improved gross margin
o Improved utilisation - Technical Assurance Services (TAS) & Consulting
and Implementation (C&I) average utilisation for all locations improved to
68% contributing to improved gross margin following low performance in H2 2023
of 58%
o Globalised technical resource footprint - from a global delivery
perspective as at 31 May 2024, the Group continues to invest in its Manila
office with a team of c.80 colleagues operational.
· Efficient cost base
o Delivering £5m efficiencies in FY24 within gross margin and overheads in
Cyber Security (annualised £10m from FY25) - reduction in cost of sales by
6.4% (£13.0m) and administrative expenses (exc. Share based payments,
Depreciation and Amortisation and ISIs) remaining flat after managing
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 in the period.
· Balance sheet resilience
o Strong cash conversion (1) - historic cash conversion consistently greater
than 85% target, with 2024 amounting to 90.7%.
o Reducing net debt (1) - net debt effectively managed to £38.5m, decrease
of £11.1m.
o Maintaining dividend - 12-month dividend maintained at 3.15p.
Overview of financial performance
The following table summarises the Group's overall performance:
2024
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 258.5 65.9 - 324.4 270.8 64.3 - 335.1
Cost of sales (170.2) (19.9) - (190.1) (184.7) (18.4) - (203.1)
Gross profit 88.3 46.0 - 134.3 86.1 45.9 - 132.0
Gross margin % 34.2% 69.8% - 41.4% 31.8% 71.4% - 39.4%
Administrative expenses (70.4) (17.5) (2.7) (90.6) (70.7) (14.7) (5.2) (90.6)
Share-based payments (0.3) (0.2) (1.1) (1.6) (1.6) (0.1) (0.5) (2.2)
Adjusted EBITDA (1, 2) 17.6 28.3 (3.8) 42.1 13.8 31.1 (5.7) 39.2
Depreciation and amortisation (8.5) (0.4) (3.7) (12.6) (8.5) (0.6) (3.5) (12.6)
Amortisation of acquired intangibles (1.0) (5.5) (3.0) (9.5) (1.2) (5.8) (3.0) (10.0)
Adjusted Operating profit (1, 2) 8.1 22.4 (10.5) 20.0 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 (33.3) 22.3 (10.5) (21.5) (8.2) 22.3 (12.2) 1.9
Operating margin % (12.9%) 33.8% n/a (6.6%) (3.0%) 34.7% n/a 0.6%
Finance costs (6.2) (6.2)
Loss before taxation (27.7) (4.3)
Taxation 2.8 (0.3)
Loss after taxation (24.9) (4.6)
EPS
Basic EPS (8.0p) (1.5p)
Adjusted basic EPS (1, 2) 3.5p 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 1 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.
Revenue slightly declined year-on-year at 0.8% on a constant currency basis
(Actual rates: -3.2%) with Cyber Security Revenue declining 2.2% on a constant
currency basis (Actual rates: -4.5%) and Escode growing by 5.4% on a constant
currency basis (Actual rates: +2.5%).
As you look at our revenue trajectory in Cyber Security, our second half
performance saw Cyber Security revenue increase year-on-year by 6.0% on a
constant currency basis (1) (Actual rates: +4.7%) driven by our UK Managed
Service performance, following a decline of 9.6% (Actual rates: -12.6%) in H1
2024. Managed Services growth has continued to accelerate in H2 2024,
increasing by 36.0% on a constant currency basis (1) (Actual rates: +34.3%).
Technical Assurance Services has declined year-on-year by 22.8% on a constant
currency basis (1) (Actual rates: -25.1%) with the recovery in demand less
consistent than expected, albeit H2 2024 decline year-on-year was 15.0%
(Actual rates: -16.0%) compared to a decline in H1 2024 year-on-year of 28.6%
(Actual rates: -31.7%).
Escode revenue increased by 5.4% on a constant currency basis (1) (Actual
rates: +2.5%) now delivering seven consecutive quarters of year-on-year
growth. Contract and verification revenues both grew during the period.
Gross profit increased by 1.7% to £134.3m (2023: £132.0) with gross margin
percentage increasing to 41.4% (2023: 39.4%. The 2.0% pts gross margin (%)
increase is mainly 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.
Administrative expenses remained flat at £90.6m 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 of £24.9m 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),
this gave rise to a basic and diluted EPS of (8.0p) (2023: basic and diluted
(£1.5p)). Adjusted basic EPS (1) amounted to 3.5p (2023 restated (2): 2.8p).
On 31 May 2024, our cash conversion (1) was 90.7% (2023 restated (2): 108.7%).
Net debt excluding lease liabilities (1) amount to £38.5m (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 declaring a maintained 12-month dividend of 3.15p per ordinary
share (2023: 3.15p). This represents a dividend equal to that paid in the
prior period as the Board is conscious of the need to invest in the strategy.
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 2024 2023 Change
(restated) (2)
Adjusted EBITDA - previously (£m) 43.7 41.4 5.6%
Share based payments (£m) (1.6) (2.2) (27.3%)
Adjusted EBITDA - revised (£m) 42.1 39.2 7.4%
Adjusted Operating profit - previously (£m) 31.1 28.8 8.0%
Share based payments (£m) (1.6) (2.2) (27.3%)
Amortisation of acquired intangibles (£m) (9.5) (10.0) (5.0%)
Adjusted Operating profit - revised (£m) 20.0 16.6 20.5%
Adjusted profit for the period - previously (£m) 19.0 18.9 0.5%
Share based payments (£m) (1.6) (2.2) (27.3%)
Amortisation of acquired intangibles (£m) (9.5) (10.0) (5.0%)
Tax effect of above items (£m) 2.9 2.1 38.1%
Adjusted profit for the period - revised (£m) 10.8 8.8 22.7%
Adjusted basic EPS - previously (pence) 6.1 6.1 -
Effect of share-based payments (pence) (0.5) (0.7) (28.6%)
Effect amortisation of acquired intangibles (pence) (3.0) (3.3) (9.1%)
Tax effect of above items (pence) 0.9 0.7 28.6%
Adjusted basic EPS - revised (pence) 3.5 2.8 25.0%
Cash conversion - previously (%) 87.4% 102.9% (15.5% pts)
Effect of share-based payments (%) 3.3% 5.8% (2.5% pts)
Cash conversion - revised (%) 90.7% 108.7% (18.0% pts)
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 to 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:
2024 2023 (restated) (2) £m
£m
Operating (loss)/profit (21.5) 1.9
Depreciation and amortisation 12.6 12.6
Amortisation of acquired intangibles (Note 8) 9.5 10.0
Individually Significant Items (Note 4) 41.5 14.7
Adjusted EBITDA (1) 42.1 39.2
Depreciation and amortisation and amortisation charge on acquired intangibles (22.1) (22.6)
Adjusted operating profit - revised (1, 2) 20.0 16.6
Previously these adjusted measures would have been calculated as follows:
2024 2023
£m £m
Operating (loss)/profit (21.5) 1.9
Depreciation and amortisation 12.6 12.6
Amortisation of acquired intangibles 9.5 10.0
Individually Significant Items (Note 4) 41.5 14.7
Share-based payments 1.6 2.2
Adjusted EBITDA - previously (1, 2) 43.7 41.4
Depreciation and amortisation (excluding amortisation charge on acquired (12.6) (12.6)
intangibles)
Adjusted operating profit - previously (1, 2) 31.1 28.8
1: See above for an explanation of Alternative Performance Measures (APMs) and
adjusting items. See unaudited appendix 1 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) 2023 %
change at actual rates £m change at constant currency (1)
2024 2023 2024
£m £m £m
Cyber Security revenue 258.5 270.8 (4.5%) 258.5 264.4 (2.2%)
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%)
Divisional performance
Cyber Security
The Cyber Security division accounts for 79.7% of Group revenue (2023: 80.8%)
and 65.7% of Group gross profit (2023: 65.2%).
Cyber Security revenue analysis - by originating country:
% Constant Currency (1) 2023 %
change at actual rates £m change at constant currency (1)
2024 2023 2024
£m £m £m
UK & APAC 129.8 118.4 9.6% 129.8 117.7 10.3%
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%) 258.5 264.4 (2.2%)
Cyber Security revenue decreased by -2.2% on a constant currency basis (1) and
at -4.5% at actual rates. UK & APAC increased by +10.3% on a constant
currency basis (1) (+9.6% at actual rates) driven mainly by Managed Services.
North America declined by -26.8% on a constant currency basis (1) (-30.5% at
actual rates) as Technical Assurance Services declined with the recovery in
demand less consistent than expected, whilst Europe experienced an increase of
+13.7% on a constant currency basis (1) (+12.4% at actual rates) due to an
increase in Managed Services, Digital Forensics and Incident Response and
other services.
From a Cyber Security revenue trajectory perspective, the following tables
compare half on half (being the half year results relating to the 12 months
ending 31 May 2024 and the 12 months to 31 May 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 & APAC 60.8 61.6 (1.3%) 60.8 61.1 (0.5%)
North America 37.6 59.2 (36.5%) 37.6 55.2 (31.9%)
Europe 28.4 24.2 17.4% 28.4 23.9 18.8%
Total Cyber Security revenue 126.8 145.0 (12.6%) 126.8 140.2 (9.6%)
% Constant Currency (1) H2 2023 %
change at actual rates £m change at constant currency (1)
H2 2024 H2 2023 H2 2024
£m £m £m
UK & APAC 69.0 56.8 21.5% 69.0 56.6 21.9%
North America 31.4 40.1 (21.7%) 31.4 39.0 (19.5%)
Europe 31.3 28.9 8.3% 31.3 28.6 9.4%
Total Cyber Security revenue 131.7 125.8 4.7% 131.7 124.2 6.0%
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 & APAC 69.0 60.8 13.5%
North America 31.4 37.6 (16.5%)
Europe 31.3 28.4 10.2%
Total Cyber Security revenue 131.7 126.8 3.9%
Following the implementation of our strategy, Cyber Security revenue is now
analysed in more detail by type of service and capability, including half on
half performance:
% Constant Currency (1) %
change 2023 change at constant currency (1)
at actual rates
2024 2023 2024 £m
£m £m £m
Technical Assurance Services (TAS) 107.0 142.9 (25.1%) 107.0 138.6 (22.8%)
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%) 258.5 264.4 (2.2%)
% Constant Currency (1) %
change H1 2023 £m change at constant currency (1)
at actual rates
H1 2024 H1 2023 H1 2024
£m £m £m
Technical Assurance Services (TAS) 56.6 82.9 (31.7%) 56.6 79.3 (28.6%)
Consulting and Implementation (C&I) 22.0 22.4 (1.8%) 22.0 21.8 0.9%
Managed Services (MS) 27.8 24.1 15.4% 27.8 23.7 17.3%
Digital Forensics and Incident Response (DFIR) 8.5 6.4 32.8% 8.5 6.4 32.8%
Other services 11.9 9.2 29.3% 11.9 9.0 32.2%
Total Cyber Security revenue 126.8 145.0 (12.6%) 126.8 140.2 (9.6%)
% Constant Currency (1) %
change H2 2023 £m change at constant currency (1)
at actual rates
H2 2024 H2 2023 H2 2024
£m £m £m
Technical Assurance Services (TAS) 50.4 60.0 (16.0%) 50.4 59.3 (15.0%)
Consulting and Implementation (C&I) 20.8 22.3 (6.7%) 20.8 22.2 (6.3%)
Managed Services (MS) 39.5 26.0 51.9% 39.5 25.8 53.1%
Digital Forensics and Incident Response (DFIR) 7.9 7.1 11.3% 7.9 7.1 11.3%
Other services 13.1 10.4 26.0% 13.1 9.8 33.7%
Total Cyber Security revenue 131.7 125.8 4.7% 131.7 124.2 6.0%
H2 2024 H1 2024 % change at actual rates
£m £m
Technical Assurance Services (TAS) 50.4 56.6 (11.0%)
Consulting and Implementation (C&I) 20.8 22.0 (5.5%)
Managed Services (MS) 39.5 27.8 42.1%
Digital Forensics and Incident Response (DFIR) 7.9 8.5 (7.1%)
Other services 13.1 11.9 10.1%
Total Cyber Security revenue 131.7 126.8 3.9%
MS now represents 26.0% of total Cyber Security revenue as compared to 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
from all locations improved to 68% (from 58% in H2 2023), whilst we have 132
clients with sales orders > £250k, of which 73% take multiple
capabilities. The number of recurring clients over £250k amounts to 197.
Cyber Security gross profit is analysed as follows:
2024 2024 2023 2023
£m
£m % margin % margin % pts change
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
Gross margins increased overall by +2.4% pts, driven by UK managed services
within UK & APAC, this was offset by North America experiencing lower
utilisation in Q1 2024 and a decline in Europe. In Europe, the margin
decreased by 5.8% pts due to the recognition of historic one-off project cost
compensation of £1.5m in H1 2023. Excluding this item, the margin would have
decreased 3.0% driven by inflationary pressures.
From a Cyber Security gross margin trajectory perspective, the following
tables compare half on half performance:
H1 2024 H1 2024 H1 2023 H1 2023
£m
£m % margin % margin % pts change
UK & APAC 22.3 36.7% 22.9 37.2% (0.5% pts)
North America 7.6 20.2% 16.6 28.0% (7.8% pts)
Europe 8.1 28.5% 9.7 40.1% (11.6% pts)
Cyber Security gross profit and % margin 38.0 30.0% 49.2 33.9% (3.9% pts)
H2 2024 H2 2024 H2 2023 H2 2023
£m
£m % margin % margin % pts change
UK & APAC 33.1 48.0% 17.4 30.6% 17.4% pts
North America 6.6 21.0% 9.5 23.7% (2.7% pts)
Europe 10.6 33.9% 10.0 34.6% (0.7% pts)
Cyber Security gross profit and % margin 50.3 38.2% 36.9 29.3% 8.9% pts
The following table shows the current trajectory of gross margin during the
12-month period:
H2 2024 H2 2024 H1 2024 H1 2024
£m
£m % margin % margin % pts change
UK & APAC 33.1 48.0% 22.3 36.7% 11.3% pts
North America 6.6 21.0% 7.6 20.2% 0.8% pts
Europe 10.6 33.9% 8.1 28.5% 5.4% pts
Cyber Security gross profit and % margin 50.3 38.2% 38.0 30.0% 8.2% pts
Escode
The Escode division accounts for 20.3% of Group revenues (2023: 19.2%) and
34.3% of Group gross profit (2023: 34.8%).
Escode 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 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%
From a Escode revenue trajectory perspective, the following tables compare
half on half performance by geography:
% 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 13.4 12.3 8.9% 13.4 12.3 8.9%
North America 16.9 17.3 (2.3%) 16.9 16.2 4.3%
Europe 2.1 2.0 5.0% 2.1 2.0 5.0%
Total Escode revenue 32.4 31.6 2.5% 32.4 30.5 6.2%
% Constant Currency (1) H2 2023 %
change at actual rates £m change at constant currency (1)
H2 2024 H2 2023 H2 2024
£m £m £m
UK 13.9 13.5 3.0% 13.9 13.4 3.7%
North America 17.5 17.2 1.7% 17.5 16.6 5.4%
Europe 2.1 2.0 5.0% 2.1 2.0 5.0%
Total Escode revenue 33.5 32.7 2.4% 33.5 32.0 4.7%
H2 2024 H1 2024 %
£m
£m change at actual rates
UK 13.9 13.4 3.7%
North America 17.5 16.9 3.6%
Europe 2.1 2.1 -
Total Escode revenue 33.5 32.4 3.4%
Escode 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 43.3 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%
From a Escode revenue trajectory perspective, the following tables compare
half on half performance by service line:
% 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 21.8 21.3 2.3% 21.8 20.5 6.3%
Verification services 10.6 10.3 2.9% 10.6 10.0 6.0%
Total Escode revenue 32.4 31.6 2.5% 32.4 30.5 6.2%
% 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 21.5 21.5 - 21.5 21.0 2.4%
Verification services 12.0 11.2 7.1% 12.0 11.1 8.1%
Total Escode revenue 33.5 32.7 2.4% 33.5 32.1 4.4%
%
change at actual rates
H2 2024 H1 2024
£m £m
Escrow contracts 21.5 21.8 (1.4%)
Verification services 12.0 10.6 13.2%
Total Escode revenue 33.5 32.4 3.4%
Gross margin is analysed as follows:
2024 2024 2023 2023
£m % margin £m % 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)
Escode gross profit decreased by -1.6% pts with UK and North America
decreasing by -2.4% pts and -0.4% pts respectively due to continued investment
to enable Escode to achieve sustainable revenue growth.
From an Escode gross margin trajectory perspective, the following tables
compare half on half performance by geography:
H1 2024 H1 2024 H1 2023 H1 2023
£m % margin £m % margin % pts change
UK 8.9 66.4% 8.4 68.3% (1.9% pts)
North America 12.1 71.6% 12.6 72.8% (1.2% pts)
Europe 1.4 66.7% 1.3 65.0% 1.7% pts
Escode gross profit and % margin 22.4 69.1% 22.3 70.6% (1.5% pts)
H2 2024 H2 2024 H2 2023 H2 2023
£m % margin £m % margin % pts change
UK 9.7 69.8% 9.8 72.6% (2.8% pts)
North America 12.7 72.6% 12.4 72.1% 0.5% pts
Europe 1.2 57.1% 1.4 70.0% (12.9% pts)
Escode gross profit and % margin 23.6 70.4% 23.6 72.2% (1.8% pts)
H2 2024 H2 2024 H1 2024 H1 2024
£m % margin £m % margin % pts change
UK 9.7 69.8% 8.9 66.4% 3.4% pts
North America 12.7 72.6% 12.1 71.6% 1.0% pts
Europe 1.2 57.1% 1.4 66.7% (9.6% pts)
Escode gross profit and % margin 23.6 70.4% 22.4 69.1% 1.3% pts
Individually Significant Items
During the period, the Group has incurred £41.5m in individually Significant
Items (ISIs) (2023: £14.7m) as follows:
2024
2023
£m £m
North America Cyber Security goodwill impairment 31.9 9.8
Fundamental re-organisation costs 10.2 4.2
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 (0.7) (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 less consistent than expected, and £10.2m (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 period were £6.2m (2023: £6.2m). Finance costs include
lease financing costs of £1.3m (2023: £1.1m).
Taxation
The Group's effective statutory tax rate is 10.1% (2023: (7.0)%). The change
in tax rate from 2023 to 2024 is due to a number of factors including the
impact of goodwill impairment, which is non-deductible. See note 4 for further
details. The Group's adjusted tax rate is 21.7% (2023 restated: 15.4%). The
increase in the adjusted tax rate from 2023 to 2024 is due to a combination of
factors including an increase in the UK statutory tax rate, lower US R&D
tax credit claims and increased tax losses not recognised as deferred tax
assets.
Earnings per share (EPS)
2024 2023
(restated) (2)
Statutory
Basic EPS (8.0p) (1.5p)
Diluted EPS (8.0p) (1.5p)
Adjusted (1)
Basic EPS 3.5p 2.8p
Diluted EPS 3.5p 2.8p
Weighted average number of shares (million)
Basic 310.9 310.5
Diluted 311.6 311.2
Adjusted basic EPS (1) is reconciled as follows:
2024 2023 (restated) (2)
£m £m
Statutory loss for the period (24.9) (4.6)
Individually Significant items (Note 4) 41.5 14.7
Tax effect of above items (5.8) (2.8)
Adjusted profit for the period 10.8 7.3
Group 2024
pence 2023 (restated) (2)
pence
Adjusted earnings per ordinary share (1)
Basic 3.5 2.8
Diluted 3.5 2.8
1: Adjusted EPS is an Alternative Performance Measures (APMs) and not IFRS
measures. See unaudited appendix 1 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):
2024 2023
£m £m
Operating cash inflow before movements in working capital 38.9 38.7
Movement in working capital (0.7) 3.9
Cash generated from operating activities before interest and taxation 38.2 42.6
Interest element of lease payments (1.3) (1.1)
Finance interest paid (4.6) (4.0)
Taxation paid (5.0) (5.4)
Net cash generated from operating activities 27.3 32.1
Purchase of property, plant and equipment (5.0) (3.9)
Software and development expenditure (2.3) (3.4)
Acquisition of trade and assets as part of a business combination (1.0) (1.0)
Sale proceeds from business disposals 12.0 2.0
Equity dividends paid (14.5) (14.5)
Repayment of lease liabilities (principal amount) (6.9) (6.1)
Purchase of own shares - (0.5)
Proceeds from the issue of ordinary share capital 0.3 0.1
Net movement 9.9 4.8
Opening net debt (excluding lease liabilities) (1) (49.6) (52.4)
Non-cash movements (release of deferred issue costs) (0.4) (0.8)
Foreign exchange movement 1.6 (1.2)
Closing net debt excluding lease liabilities (1) (38.5) (49.6)
Lease liabilities (30.8) (30.0)
Closing net debt (1) (69.3) (79.6)
Net debt (1) can be reconciled as follows:
2024 2023
£m £m
Cash and cash equivalents 18.0 34.1
Bank overdraft (4.0) (1.8)
Borrowings (net of deferred issue costs) (52.5) (81.9)
Net debt excluding lease liabilities (1) (38.5) (49.6)
Lease liabilities (30.8) (30.0)
Net debt (1) (69.3) (79.6)
Reconciliation of net change in cash and cash equivalents to movement in net
debt (1)
2024 2023
£m £m
Net decrease in cash and cash equivalents (inc. bank overdraft) (18.3) (41.5)
Change in net debt (1) resulting from cash flows (net of deferred issue costs) 28.3 44.8
Interest incurred on borrowings 4.6 4.0
Interest paid on borrowings (4.6) (4.0)
Release of deferred issue costs (0.4) (1.0)
Issue costs related to borrowings (non-cash) - 1.7
Effect of foreign currency on cash flows - 0.6
Foreign currency translation differences on borrowings 1.5 (1.8)
Change in net debt (1) during the period 11.1 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 (38.5) (49.6)
Lease liabilities (30.8) (30.0)
Net debt (1) at end of period (69.3) (79.6)
1: Net debt is an Alternative Performance Measures (APMs) and not an IFRS
measure. See unaudited appendix 1 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:
2024 2023 (restated) (2) % change/
£m £m % pts
Operating cash flow before interest and taxation 38.2 42.6 (10.3%)
Adjusted EBITDA (1, 2) 42.1 39.2 7.4%
Cash conversion ratio (1, 2) (%) 90.7% 108.7% (18.0% pts)
1: See Financial review for an explanation of Alternative Performance Measures
(APMs) and adjusting items. See unaudited appendix 1 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 £7.3m (2023: £7.3m) which
includes tangible asset expenditure of £5.0m (2023: £3.9m) and capitalised
software and development costs of £2.3m (2023: £3.4m). The increase in
tangible capital expenditure was due to 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 and full
payment of £8.2m for the DetACT business disposed in April 2024. 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
Total dividends of £14.5m were paid in the period (2023: £14.5m). The Board
is declaring a 12-month dividend of 3.15p per ordinary share. This represents
a dividend equal to that paid in the prior period and will amount to c.£10m
being paid on 4 October 2024, to shareholders on the register at the close of
business on 6 September 2024. The ex-dividend date will be 5 September 2024.
It is the Board's intention to propose a final dividend for the 16-month
period ending 30 September 2024 of 1.50p per ordinary share in December 2024,
which will require shareholder approval at the AGM in 2025. This amount is
equivalent to the interim dividend previously paid albeit for the final
4-month period ending 30 September 2024.
Following the change in year end, the Group will then move to a dividend
cadence of an interim dividend for the 6-month period to 31 March payable in
July and a final dividend for the year to 30 September payable in
February/March.
Principal risks and uncertainties
The Board held a risk workshop and reconsidered the principal risks and
uncertainties published at the period ended 31 May 2024. The following risks
and uncertainties have changed since the 31 May 2023 and are outlined below.
These represent the risks and uncertainties that the Directors believe could
have the most significant impact on the Group's business:
· Strategy - overarching strategic risk
o Inability to execute the Group's strategy
o Poor adoption of change management mechanisms
o Over-reliance on market sector, region, product/service or client
o Technology changes renders services obsolete / Technology disruption
impacts pace of change
o Unable to meet the service and resource needs of our clients
· Cyber and information security
o Cyber attack
o Significant business systems failure
o Loss of client/colleague data
o Insufficient quality, integrity and availability of management information
· Innovation and service development
o Intellectual property theft or exposure
o Ineffective service management
o Lack of innovation
· People
o Insufficient workforce resilience
o Inability to retain/recruit colleagues to meet the resource needs of the
business
· Market and competition
o Failure to capture on partnership ecosystem
o Geopolitical risk
o Lack of market strength versus competitors
· Brand and reputation
o Lack of visibility in the marketplace
o Adverse publicity in news and social media
o Undertaking work with disreputable clients or in sanctioned/undesirable
jurisdictions
· Quality and delivery
o Service delivery does not achieve established quality standards
o Loss of internationally recognised quality and security standards
· Legal, regulatory compliance and governance
o Criminal and civil corporate legal action resulting in fines and
incarceration
o Inability to identify and adopt emerging regulations in a timely manner
Directors' responsibility statement
The directors confirm that these condensed interim financial statements have
been prepared in accordance with UK adopted International Accounting Standard
34, 'Interim Financial Reporting' and the Disclosure Guidance and Transparency
Rules sourcebook of the United Kingdom's Financial Conduct Authority and that
the interim management report includes a fair review of the information
required by DTR 4.2.7 and DTR 4.2.8, namely:
• an indication of important events that have occurred during the first
twelve months and their impact on the condensed set of financial statements,
and a description of the principal risks and uncertainties for the remaining
four months of the financial year; and
• material related-party transactions in the first twelve months and any
material changes in the related-party transactions described in the last
annual report.
The period-end report is approved and authorised on behalf of the Board on 1
August 2024 by:
Mike Maddison Guy Ellis
Chief Executive Officer Chief Financial Officer
Condensed consolidated income statement
For the period ended 31 May 2024
Notes 12-month Year
period ended
ended 2023
2024 £m
£m
Revenue 3 324.4 335.1
Cost of sales 3 (190.1) (203.1)
Gross profit 3 134.3 132.0
Administrative expenses
Individually Significant Items 4 (41.5) (14.7)
Depreciation and amortisation (22.1) (22.6)
Credit (losses)/gains recognised on financial assets (1.2) 1.5
Impairment of non-current assets - (1.1)
Other administrative expenses (91.0) (93.2)
Total administrative expenses (155.8) (130.1)
Operating (loss)/profit 3 (21.5) 1.9
Finance costs (6.2) (6.2)
Loss before taxation (27.7) (4.3)
Taxation 5 2.8 (0.3)
Loss for the period attributable to the owners of the Group (24.9) (4.6)
Loss per ordinary share 7
Basic EPS (8.0)p (1.5)p
Diluted EPS (8.0)p (1.5)p
Condensed consolidated statement of comprehensive income
For the period ended 31 May 2024
12-month Year
period ended
ended 2023
2024 £m
£m
Loss for the period attributable to the owners of the Group (24.9) (4.6)
Other comprehensive (loss)/income
Items that may be reclassified subsequently to profit or loss (net of tax)
Foreign exchange translation differences (5.4) 2.4
Total other comprehensive (loss)/income (5.4) 2.4
Total comprehensive loss for the period (net of tax) attributable to the (30.3) (2.2)
owners of the Group
Condensed consolidated balance sheet
For the period ended 31 May 2024
Notes
31 31
May May
2024 2023
£m £m
Non-current assets
Goodwill 8 214.0 255.8
Intangible assets 8 96.5 110.9
Property, plant and equipment 12.9 12.5
Right-of-use assets 16.3 18.6
Investments 0.3 0.3
Deferred tax asset 8.6 2.9
Total non-current assets 348.6 401.0
Current assets
Inventories 0.6 0.8
Trade and other receivables 40.3 41.0
Contract assets 21.0 17.1
Contingent consideration receivable 9 - 3.8
Current tax receivable 4.8 3.6
Cash and cash equivalents 18.0 34.1
Total current assets 84.7 100.4
Total assets 433.3 501.4
Current liabilities
Trade and other payables 44.7 44.7
Bank overdraft 4.0 1.8
Lease liabilities 7.2 6.0
Current tax payable 3.2 4.2
Derivative financial instruments 0.1 0.6
Contingent consideration payable - 1.0
Provisions 1.5 1.2
Contract liabilities - deferred revenue 53.0 51.6
Total current liabilities 113.7 111.1
Non-current liabilities
Borrowings 52.5 81.9
Lease liabilities 23.6 24.0
Deferred tax liabilities 0.7 1.4
Provisions 1.8 1.5
Contract liabilities - deferred revenue 6.0 3.3
Total non-current liabilities 84.6 112.1
Total liabilities 198.3 223.2
Net assets 235.0 278.2
Equity
Share capital 3.1 3.1
Share premium 224.4 224.1
Merger reserve 42.3 42.3
Currency translation reserve 32.1 37.5
Retained earnings (66.9) (28.8)
Total equity attributable to equity holders of the parent 235.0 278.2
These financial statements were approved and authorised on behalf of the Board
on 1 August 2024 and were signed on its behalf by:
Mike Maddison Guy Ellis
Chief Executive
Officer
Chief Financial Officer
Condensed consolidated cash flow statement
For the period ended 31 May 2024
Cash flow from operating activities Notes 2024 2023
£m £m
Loss for the period (24.9) (4.6)
Adjustments for:
Depreciation of property, plant and equipment 3.7 4.5
Depreciation of right of use assets 6.3 5.7
Share-based payments 1.6 2.2
Amortisation of customer contracts and relationships 8 9.5 10.0
Amortisation of software and development costs 8 2.6 2.4
Impairment of goodwill 8 31.9 12.8
Impairment of non-current assets 4 4.6 1.1
Lease financing costs 1.3 1.1
Other financing costs 5.0 5.1
Foreign exchange loss 1.1 0.6
Disposal of business - transaction costs - (0.1)
Individually significant items (non-cash impact) - 3.5
Profit on disposal of right-of-use assets - (0.7)
Loss on disposal of fixed assets 0.4 -
Profit on disposal of businesses 9 (1.4) (4.7)
Income tax credit (2.8) (0.2)
Cash inflow for the period before changes in working capital 38.9 38.7
(Increase)/decrease in trade and other receivables (2.1) 15.0
(Increase)/decrease in contract assets (3.9) 4.7
Decrease in inventories 0.2 0.1
Increase/(decrease) in trade and other payables and contract liabilities 4.8 (15.1)
Increase/(decrease) in provisions 0.3 (0.8)
Cash generated from operating activities before interest and taxation 38.2 42.6
Interest element of lease payments (1.3) (1.1)
Other interest paid (4.6) (4.0)
Taxation paid (5.0) (5.4)
Net cash generated from operating activities 27.3 32.1
Cash flows from investing activities
Acquisition of trade and assets as part of a business combination (1.0) (1.0)
Purchase of property, plant and equipment (5.0) (3.9)
Software and development expenditure (2.3) (3.4)
Sales proceeds from business disposals 9 12.0 2.0
Net cash generated from/(used in) investing activities 3.7 (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)
Principal element of lease payments (6.9) (6.1)
Drawdown of borrowings (net of deferred issue costs) 34.5 70.8
Issue costs related to borrowings - (1.5)
Repayment of borrowings (62.8) (115.6)
Equity dividends paid 6 (14.5) (14.5)
Net cash used in financing activities (49.4) (67.3)
Net decrease in cash and cash equivalents (inc. bank overdraft) (18.3) (41.5)
Cash and cash equivalents (inc. bank overdraft) at beginning of period 32.3 73.2
Effect of foreign currency exchange rate changes - 0.6
Cash and cash equivalents (inc. bank overdraft) at end of the period 14.0 32.3
Condensed consolidated statement of changes in equity
For the period ended 31 May 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 (0.5) (0.5)
shares
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 - - - - (24.9) (24.9)
Foreign currency translation differences - - - (5.4) - (5.4)
Total comprehensive loss for the period - - - (5.4) (24.9) (30.3)
Transactions with owners recorded directly in equity
Dividends to equity shareholders 6 - - - - (14.5) (14.5)
Share-based payments - - - - 1.6 1.6
Tax on share-based payments - - - - (0.3) (0.3)
Shares issued - 0.3 - - - 0.3
Total contributions by and distributions to owners - 0.3 - - (13.2) (12.9)
Balance at 31 May 2024 3.1 224.4 42.3 32.1 (66.9) 235.0
Notes to the unaudited condensed interim consolidated financial statements
1 Accounting policies
Basis of preparation
NCC Group plc (the Company) is a company incorporated in the UK, with its
registered office at XYZ Building, 2 Hardman Boulevard, Manchester, M3 3AQ.
The Group's unaudited condensed interim 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 Escode
services.
The Group's unaudited condensed interim consolidated financial statements for
the twelve months ended 31 May 2024, have been prepared on the going concern
basis in accordance with IAS 34 'Interim Financial Reporting' as adopted for
use in the UK. The unaudited condensed interim consolidated financial
statements have been prepared on the historical cost basis, except for
consideration payable on acquisitions that is measured at fair value. The
condensed interim consolidated financial statements are presented in Pound
Sterling (£m) because that is the currency of the principal economic
environment in which the Group operates. The unaudited condensed interim
consolidated financial statements were approved by the Directors on 1 August
2024 and were independently reviewed by the Group's auditors.
Following the change in year end from May to September 2024, the consolidated
financial statements of the Group for the 16-month period ended 30 September
2024 will be prepared in accordance with International Financial Reporting
Standards (IFRSs) as adopted for use in the UK, in accordance with
international accounting standards and the requirements of the Companies Act
2006.
As required by the Disclosure Guidance and Transparency Rules of the Financial
Conduct Authority the condensed set of interim financial statements has been
prepared applying the accounting policies and presentation that were applied
in the Group'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 and should be read in conjunction with the annual financial
statements for the year ended 31 May 2023.
The financial statements of the Group for the year ended 31 May 2023 are
available from the Group's registered office, or from the website
www.nccgroup.com (http://www.nccgroup.com) .
The comparative figures for the financial year ended 31 May 2023 are not the
Group's statutory accounts for that financial year but are derived from those
accounts. Those accounts have been reported on by the Group's prior auditor
and delivered to the registrar of companies. The report of the auditor 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.
Contract assets
Contract assets of £21.0m (2023: £17.1m) have been re-classified from Trade
and other receivables.
Climate change
The Directors have reviewed the potential impact of Climate change and the
TCFD on the unaudited condensed interim financial statements. Our overall
exposure to physical and transitional climate change is considered low due to
the nature of the business and cyber resilience industry.
Going concern
The Directors have acknowledged guidance published in relation to going
concern assessments. 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 their 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 unaudited consolidated Financial
Statements.
As of 31 May 2024, net debt (excluding lease liabilities)(1) amounted to
£38.5m which comprised cash of £18.0m, a bank overdraft of £4.0m, a drawn
revolving credit facility of £52.5m, leaving £110.0m 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. As of
31 May 2024, leverage(1) amounted to 1.0x and net interest cover(1) amounted
to 7.6 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 31 May 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. The Directors have prepared severe but plausible scenarios to the
base case going concern assessment, showing that the Group is able to operate
within its available committed banking facilities and meet its liabilities as
they fall due for that period.
Having reviewed the current trading performance, forecasts, debt servicing
requirements, total facilities and risks, the Directors are confident that 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
condensed interim 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 condensed interim
consolidated Financial Statements for the period ended 31 May 2024.
There are no post-Balance Sheet events which the Directors believe will
negatively impact the going concern assessment.
Footnotes:
1: Revenue at constant currency, Adjusted EBITDA and Net debt excluding lease
liabilities are Alternative Performance Measures (APMs) and not IFRS measures.
See appendix 1 for an explanation of APMs and adjusting items, including a
reconciliation to statutory information.
Individually Significant Items
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
reporting period(s) the total project size and nature are considered in
totality. Individually Significant Items typically comprise
costs/profits/losses on material acquisitions/disposals/business exits,
fundamental reorganisation/restructuring programmes and other significant
one-off events (including material impairments). Individually Significant
Items 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 condensed interim 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 Statement of Financial Position. 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.
2.1 Critical accounting judgements
There have been no changes in critical accounting judgements since the year
ended 31 May 2023.
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 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.
Impairment of goodwill
The Group has significant balances relating to goodwill at 31 May 2024 as a
result of acquisitions of businesses in previous years. The carrying value of
goodwill at 31 May 2024 is £214.0m (2023: £255.8m). Goodwill balances are
tested annually for impairment. The Group allocated goodwill to
cash-generating units (CGUs) which represents the lowest level of asset
groupings that generate separately identifiable cash inflows that are not
dependent on other CGUs.
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 has been calculated by assessing the value of
each standalone CGU calculated using an Adjusted EBITDA(1) multiple based on
estimated sustainable earnings adjusted for specific items where relevant.
Estimated sustainable earnings has been determined taking into account past
experience and includes expectations based on a market participant view of
sustainable performance of the business based on market volatility and
uncertainty.
The sustainable earnings figures used in this calculation include key
assumptions regarding sustainable revenues and costs for the business. If the
assumptions and estimates used in this valuation prove to be incorrect, the
carrying value of goodwill may be overstated.
3 Segmental information
The Group is organised into the following two (2023: two) reportable segments:
Cyber Security and Escode (previously known as Software Resilience). The two
reporting segments provide distinct types of service. Within each of the
reporting segments the operating segments provide a homogeneous group of
services. 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, which
comprises Adjusted operating profit 1. Finance costs and tax are not
allocated to business segments and there are no intra-segment sales.
Segmental analysis 2024 Cyber Security Escode Central and Group
£m £m head office £m
£m
Revenue 258.5 65.9 - 324.4
Cost of sales (170.2) (19.9) - (190.1)
Gross profit 88.3 46.0 - 134.3
Gross margin % 34.2% 69.8% - 41.4%
Administrative expenses (70.4) (17.5) (2.7) (90.6)
Share-based payments (0.3) (0.2) (1.1) (1.6)
Depreciation and amortisation (8.5) (0.4) (3.7) (12.6)
Amortisation of acquired intangibles (1.0) (5.5) (3.0) (9.5)
Individually Significant Items (Note 4) (41.4) (0.1) - (41.5)
Operating (loss)/profit (33.3) 22.3 (10.5) (21.5)
Finance costs (6.2)
Loss before taxation (27.7)
Taxation 2.8
Loss for the period (24.9)
Segmental analysis 2023 Cyber Security Escode Central and Group
£m £m head office £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 period (4.6)
1: Adjusted EBITDA and Adjusted Operating profit are Alternative Performance
Measures (APMs) and not IFRS measures. See Note 3 for an explanation of APMs
and adjusting items, including a reconciliation to statutory information.
Revenue is disaggregated by primary geographical market, by category and
timing of revenue recognition as follows:
Revenue by originating country Cyber Security Escode 2024 Cyber Security Escode 2023
Total Total
£m £m £m £m £m £m
UK & APAC 129.8 27.3 157.1 118.4 25.8 144.2
North America 69.0 34.4 103.4 99.3 34.5 133.8
Europe 59.7 4.2 63.9 53.1 4.0 57.1
Total revenue 258.5 65.9 324.4 270.8 64.3 335.1
Cyber Security Escode 2024 Cyber Security Escode 2023
Total Total
Revenue by category
£m £m £m £m £m £m
Services 254.2 65.9 320.1 267.1 64.3 331.4
Products 4.3 - 4.3 3.7 - 3.7
Total revenue 258.5 65.9 324.4 270.8 64.3 335.1
( )
Timing of revenue recognition Cyber Security Escode 2024 Cyber Security Escode 2023
Total Total
£m £m £m £m £m £m
Services and products transferred over time 241.9 43.3 285.2 252.9 42.8 295.7
Services and products transferred at a point in time 16.6 22.6 39.2 17.9 21.5 39.4
Total revenue 258.5 65.9 324.4 270.8 64.3 335.1
Following the implementation of our strategy, Cyber Security revenue is now
analysed in more detail by type of service and capability:
% Constant Currency (1) %
change 2023 change at constant currency (1)
at actual rates
2024 2023 2024 £m
£m £m £m
Technical Assurance Services (TAS) 107.0 142.9 (25.1%) 107.0 138.6 (22.8%)
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%) 258.5 264.4 (2.2%)
TAS, C&I and DFIR were formerly included within the 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:
% Constant Currency (1) %
change at actual rates 2023 change at constant currency (1)
2024 2023 2024 £m
£m £m £m
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%
There have been no changes in the manner in which Escrow contracts or
verification services are reported.
4. Individually Significant Items (ISIs)
The Group separately identifies items as Individually Significant Items
(ISIs). 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 the financial review).
2024
2023
Reference £m £m
North America Cyber Security goodwill impairment a 31.9 9.8
Fundamental re-organisation costs b 10.2 4.2
Costs associated with strategic review of Escode business c 0.1 3.0
NCC Group A/S goodwill impairment d - 3.0
IPM Escode business deferred income adjustment e - (0.6)
Profit on disposal f (0.7) (4.7)
Total ISIs 41.5 14.7
(a) North America Cyber Security goodwill impairment
Following the impairment review of Goodwill, a further impairment in North
America Cyber Security has been recognised, amounting to £31.9m (2023:
£9.8m). For further details, please see note 8.
(b) Fundamental re-organisation costs
In order to implement 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 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 off-shore
operations and delivery centre in Manila
• Phase 3 (October 2023 - May 2025) - finalisation of the Group's operating
model.
Costs of £10.2m (2023: £4.2m) and cash outflow of £10.2m (2023: £3.4m)
have been incurred in relation to the implementation of this re-organisation
and are made up of severance costs, associated taxes and professional fees for
advisory and legal services totalling £5.6m. These re-organisation costs also
include £4.6m of property impairment and associated costs, resulting from the
group's reduction in global headcount which led to a drop-off in office
utilisation and associated re-evaluation of the Group's global property
portfolio. It is expected that costs will also be incurred for the year ended
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
considering 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) Costs associated with strategic review of the Escode business
During February 2023, the Group announced its ongoing strategic review of
Escode business. During the year ended 31 May 2024, additional professional
advisory fees totalling £0.1m (2023: £3.0m) have been incurred. 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 stopped the strategic review of the Escode business in June
2023.
(d) 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: £3.0m) 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.
(e) IPM Escode business deferred income adjustment
This represents an adjustment to the opening deferred income balance in
respect of the IPM acquisition in June 2021. During FY24, opening deferred
income 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.
(f) Profit on disposal
On 30 April 2024, the Group disposed of its DetACT business for cash
consideration of £8.2m. The profit of £1.4m (2023: £nil) is directly
attributable to the disposal of the DetACT business. Please see note 9 for
further details.
On 31 December 2022, the Group disposed of its DDI business for cash
consideration of £5.8m. The profit of £nil (2023: £4.7m) is directly
attributable to the disposal of the DDI business. Please see Note 9 for
further details.
5. Taxation
Reconciliation of taxation
2024 2023
£m £m
Loss before taxation (27.7) (4.3)
Current tax using the UK effective corporation tax rate of 25% (2023: 20%) (6.9) (0.9)
Effects of:
Items not deductible for tax purposes 5.0 2.6
Adjustment to tax charge in respect of prior periods - (1.1)
Impact of prior year US R&D tax credits (1.1) (1.4)
Impact of current year US R&D tax credits (0.1) (0.3)
Differences between overseas tax rates (0.6) 1.0
Movements in temporary differences not recognised 0.9 0.6
Movement in tax rate - (0.2)
Total tax (credit)/expense (2.8) 0.3
6. Dividends
2024 2023
Dividends recognised in the period (£m) 14.5 14.5
Dividends per share proposed but not recognised in the period (pence) 3.15p 3.15p
Total dividends of £14.5m were paid in the period (2023: £14.5m). The Board
is declaring a 12-month dividend of 3.15p per ordinary share. This represents
a dividend equal to that paid in the prior period and will amount to c.£10m
being paid on 4 October 2024, to shareholders on the register at the close of
business on 6 September 2024. The ex-dividend date will be 5 September 2024.
It is the Board's intention to propose a final dividend for the 16-month
period ending 30 September 2024 of 1.50p per ordinary share in December 2024,
which will require shareholder approval at the AGM in 2025. This amount is
equivalent to the interim dividend previously paid albeit for the final
4-month period ending 30 September 2024.
Following the change in year end, the Group will then move to a dividend
schedule of paying an interim dividend for the 6-month period to 31 March,
payable in July and a final dividend for the year to 30 September payable in
February/March.
7. Loss per ordinary share
Loss per ordinary share are shown below:
2024 2023
£m £m
Statutory loss for the period (24.9) (4.6)
Number Number
of shares of shares
m m
Weighted average number of shares in issue 311.6 311.1
Less: Weighted Average Holdings by Group ESOT (0.7) (0.7)
Basic weighted average number of shares in issue 310.9 310.4
Dilutive effect of share options 0.7 0.8
Diluted weighted average shares in issue 311.6 311.2
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.
Group 2024 2023
pence pence
Loss per ordinary share
Basic (8.0) (1.5)
Diluted (8.0) (1.5)
8. Goodwill and intangible assets
Goodwill Software Development costs Customer contracts and relationships Intangibles sub-total Total
£m £m £m £m £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 - 1.0 1.3 - 2.3 2.3
Disposals (5.9) (0.7) (3.5) - (4.2) (10.1)
Effects of movements in exchange rates (4.3) (0.1) (0.2) (3.4) (3.7) (8.0)
At 31 May 2024 314.4 21.4 11.4 175.8 208.6 523.0
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 period - (1.5) (1.1) (9.5) (12.1) (12.1)
Impairment (31.9) - - - - (31.9)
Disposals - - 2.5 - 2.5 2.5
Effects of movements in exchange rates 0.3 0.1 0.1 0.6 0.8 1.1
At 31 May 2024 (100.4) (15.9) (9.6) (86.6) (112.1) (212.5)
Net book value:
At 31 May 2023 255.8 6.7 2.7 101.5 110.9 366.7
At 31 May 2024 214.0 5.5 1.8 89.2 96.5 310.5
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 and the allocation of goodwill to those CGUs are shown below:
Cash generating units 2024 2023
£m £m
UK Escode 22.9 22.9
North America Escode 85.1 87.2
Europe Escode 7.2 7.4
Total Escode 115.2 117.5
UK and APAC Cyber Security 44.3 44.3
North America Cyber Security - 31.6
Europe Cyber Security 54.5 62.4
Total Cyber Security 98.8 138.3
Total Group 214.0 255.8
Impairment review
Goodwill is tested for impairment annually at the level of the CGU to which it
is allocated. At 31 May 2024, an assessment has been made as to whether there
is any indication that a CGU may be impaired. With respect to the North
America Cyber Security CGU, such an indicator has been identified and as such
a full review of the carrying value of assets associated with this CGU has
been performed. No other indicators of impairment have been identified.
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.
The Directors have considered the impact of climate change on this review,
with no material impact identified.
Fair value less costs to sell
The recoverable amount of the North America Cyber Security CGU 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 has been calculated by assessing the value of the
standalone CGU calculated using an Adjusted EBITDA 1 multiple based on
estimated sustainable earnings adjusted for specific items where relevant.
Estimated sustainable earnings have been determined considering past
experience and include expectations based on a market participant view of
sustainable performance of the business based on market volatility and
uncertainty at the assessment 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 EBITDA 1 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 and precedent transactions that
is risk adjusted to take into account of current technology market conditions
and business performance. 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 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 due its
historical performance, 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
The key inputs used in the FVLCTS calculation are the Adjusted EBITDA (1) used
and the multiple applied to those sustainable earnings. Specifically, the key
assumptions to the Adjusted EBITDA (1) are considered to be the expected
revenue and gross margin percentage that have been used to calculate
sustainable earnings.
The table below shows the sensitivity of headroom to reasonably possible
changes in the key assumptions, after the £31.9m impairment in the North
America Cyber Security CGU during the period ended 31 May 2024.
Sensitivities: implied impairment arising
CGU Decrease in gross margin of 0.5 percentage points
£m
North America Cyber Security (3) (2.9)
(3 Sensitivities shown for North America Cyber Security are in addition to the
£31.9m impairment recognised in the year ended 31 May 2024.)
If the gross margin used in calculating sustainable earnings for North America
Cyber Security (1) was increased by 0.5 percentage points, then the impairment
associated with this CGU would be £29.0m rather than £31.9m. No other
reasonably possible changes in key inputs including the multiple could give
rise to an impairment or further material impairment of other assets in the
CGU.
(
) 9. Disposals
Current year disclosures
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 income (2.8)
Deferred tax liability (0.3)
Net assets disposed of 5.6
Consideration 8.2
Transaction costs (1.2)
Gain on disposal - recognised as an individual significant item (note 4) 1.4
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, was contingent
on novation of certain customer contracts. This was received during FY24.
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 - recognised as an individual significant item (note 4) 4.7
Satisfied by:
Cash and cash equivalents 2.0
Contingent consideration 3.8
Total consideration 5.8
Appendix 1 - Unaudited APM's/non-statutory measures reconciliation to IFRS
measures
As referenced in the financial review, 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.
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. These APMs are defined below (alongside being reconciled to
IFRS 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. associated tax effect.
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.
Adjusted EBITDA is disclosed as this is a measure widely used by various
stakeholders and used by the Group to measure the cash conversion ratio.
Adjusted Statutory basic EPS before Individually Significant Items and the tax effect Represents basic EPS before amortisation of acquired intangibles, share-based
basic EPS
thereon payments and Individually Significant Items.
Statutory basic EPS
(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.
See further details above in relation to amortisation of acquired intangibles
and share-based payments.
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 for continued and discontinued activities.
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 Financial Review for full reconciliations.
Independent review report to NCC Group plc
Report on the condensed consolidated interim financial statements
Our conclusion
We have reviewed NCC Group plc's condensed consolidated interim financial
statements (the "interim financial statements") in the Unaudited results of
NCC Group plc for the 12 month period ended 31 May 2024 (the "period").
Based on our review, nothing has come to our attention that causes us to
believe that the interim financial statements are not prepared, in all
material respects, in accordance with UK adopted International Accounting
Standard 34, 'Interim Financial Reporting' and the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial Conduct
Authority.
The interim financial statements comprise:
· the Condensed consolidated balance sheet as at 31 May 2024;
· the Condensed consolidated income statement and Condensed
consolidated statement of comprehensive income for the period then ended;
· the Condensed consolidated cash flow statement for the period
then ended;
· the Condensed consolidated statement of changes in equity for the
period then ended; and
· the explanatory notes to the interim financial statements.
The interim financial statements included in the Unaudited results of NCC
Group plc have been prepared in accordance with UK adopted International
Accounting Standard 34, 'Interim Financial Reporting' and the Disclosure
Guidance and Transparency Rules sourcebook of the United Kingdom's Financial
Conduct Authority.
Basis for conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410, 'Review of Interim Financial Information Performed by
the Independent Auditor of the Entity' issued by the Financial Reporting
Council for use in the United Kingdom ("ISRE (UK) 2410"). A review of interim
financial information consists of making enquiries, primarily of persons
responsible for financial and accounting matters, and applying analytical and
other review procedures.
A review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (UK) and, consequently, does not
enable us to obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do not express
an audit opinion.
We have read the other information contained in the Unaudited results and
considered whether it contains any apparent misstatements or material
inconsistencies with the information in the interim financial statements.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for conclusion section of this report,
nothing has come to our attention to suggest that the directors have
inappropriately adopted the going concern basis of accounting or that the
directors have identified material uncertainties relating to going concern
that are not appropriately disclosed. This conclusion is based on the review
procedures performed in accordance with ISRE (UK) 2410. However, future events
or conditions may cause the group to cease to continue as a going concern.
Responsibilities for the interim financial statements and the review
Our responsibilities and those of the directors
The Unaudited results, including the interim financial statements, is the
responsibility of, and has been approved by the directors. The directors are
responsible for preparing the Unaudited results in accordance with the
Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's
Financial Conduct Authority. In preparing the Unaudited results, including the
interim financial statements, the directors are responsible for assessing the
group's ability to continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the group or to
cease operations, or have no realistic alternative but to do so.
Our responsibility is to express a conclusion on the interim financial
statements in the Unaudited results based on our review. Our conclusion,
including our Conclusions relating to going concern, is based on procedures
that are less extensive than audit procedures, as described in the Basis for
conclusion paragraph of this report. This report, including the conclusion,
has been prepared for and only for the company for the purpose of complying
with the Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority and for no other purpose. We do not, in
giving this conclusion, accept or assume responsibility for any other purpose
or to any other person to whom this report is shown or into whose hands it may
come save where expressly agreed by our prior consent in writing.
PricewaterhouseCoopers LLP
Chartered Accountants
Manchester
1 August 2024
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