Escrow and Assurance provider NCC Group had already got the bad news out the way in April when management signalled a FY ‘miss’ (see NCC Group and its moving parts). The reported results came in within a whisker of revised guidance, with revenues for the year to 31st May rising by 13% (8% organic) to £99.2m, and ‘adjusted’ pre-tax profit at £23.0m (+2%). Under the covers, gross margins lost over two points to 36.1% (assume pricing and cost pressures), but underlying operating margins (excluding a £6.1m write-off for a botched SAP implementation) held just under steady at 20.0%.
Now to the moving parts. Though NCC presents itself as a business of two halves, each segment has multiple facets. For Escrow – which accounts for 29% of group revenues but 61% of segment operating profit – it’s geography. Escrow revenues grew by 2% mainly due to the legacy UK business (73% of Escrow). Europe shrunk and US barely grew, each for different reasons.
Assurance comprises Security Testing, Audit and Compliance services (62% of group revenues) and Web Performance (9% of group revenues), together 44% of segment operating profit. Again, different dynamics for different services in different geographies.
Then there’s the punt – Artemis. NCC established San Francisco-based subsidiary Artemis Internet last year as part of its bid for the .secure global top level domain (gTLD). NCC is on a shortlist of two bidders for .secure having spent £2.3m setting up a website and infrastructure. What would happen if ICANN decides to assign .secure to the other bidder? And for that matter, what would NCC actually do with it were they to own it? Perhaps I just don’t ‘get it’.
Tricky job to get all these parts moving in the same direction.