Notes to the Financial Statements continued for the year ended 30 September 2025
1 Material accounting policies continued Revenue recognition continued Detailed policies The following table provides information about the nature and timing of the satisfaction of performance obligations in contracts with customers by reportable segment, including significant payment terms, and the related revenue recognition policies.
Timing of satisfaction of performance obligations and significant payment terms
Revenue recognition policies, including determination of transaction price and rationale
Revenue stream
Nature
Cyber Security Managed Services (MS)
These services provide operational cyber defence, scanning, simulation and managed security operations centres (SOCs). Services are typically for an extended delivery duration, with contract lengths varying up to a maximum of five years. The proposition often provides the customer with the software licence(s) to enable these services to occur. On this basis, the Group operates two types of contracts: • A Managed Service Provider (MSP) model whereby the customer is supplied with one complete integrated service including the software licence(s) • A reseller model whereby the Group sources the software licence(s) on behalf of the customer and provides the Managed Detection and Response services These services will also include set-up fees. Set-up fees represent workshops, design and configuration to create a “connection” between systems. The Group also provides a certain level of professional service consultancy days (including post-go-live fees) based on day rates.
The amount of revenue recognised in relation to the software licence(s) depends on whether the Group acts as an agent or as a principal. The Group acts as principal when the Group controls the specified software licence or service prior to transfer (MSP model). When the Group acts as a principal the revenue recorded is the gross amount billed. The transaction price is determined by a contract price (cost plus mark-up). The transaction price for the overall service is outlined within the customer contract. In certain scenarios, the contract will outline the price for each performance obligation, which is considered to be the standalone selling price of the services/goods, and the transaction price is allocated to each performance obligation on this basis. Where the contract does not stipulate the price per performance obligation, management determines the relative standalone selling price for each performance obligation based on the residual approach. This is assessed by reference to the total transaction price less the sum of the observable standalone selling prices of the other services promised in the contract. The contract transaction price is allocated to each performance obligation in proportion to those standalone selling prices. Under a reseller model, the Group’s responsibility is to arrange for a third party to provide a specified software licence(s) to the customer. In these cases, the Group is acting as an agent, and the Group does not control the relevant licence(s) before it is transferred to the customer. In particular, the Group does not have inventory risk, have access to its source code or hold the IP rights. When the Group is acting as an agent, the revenue is recorded at the net amount retained (commission) at a point in time as the customer receives immediate benefit from access to the licence and the Group does not have any further obligations in relation to the provision of the licence. The commission transaction value represents the mark-up on the licence provided. The majority of set-up fees relate to the MSP model. Set-up fees are recognised over time of the set-up. The set-up activities are completed by a separate deployment team that typically spans a period of one to four months. The set-up activities do not customise the licence provided by the third party but only allow a link between the client’s infrastructure and the software to allow monitoring services to be provided by the Group once the set-up process is completed. On this basis, the client can benefit from each of the goods and services either on their own or together with the other goods and services that are readily available and the promise to transfer the goods or service is distinct.
The customer will benefit from the services over the period of the contract. However, the type of contract will depend on how the customer benefits from the software licence(s). Where an MSP model is selected by the customer, the Group generally recognises three performance obligations: • Set-up fees • Combined monitoring cyber and licence service • Post-go-live fees Where the licence and monitoring services terms are not coterminous, they are treated as separate performance obligations. The MSP model is considered to be under a principal arrangement whereby the Group controls the service prior to transfer. Where a reseller model is selected by the customer, the Group recognises four performance obligations: • Sourced software licence(s) • Set-up fees • Monitoring cyber service • Post-go-live fees The reseller model is considered to be under an agency arrangement whereby the customer receives the benefit and control of the licence on delivery. Invoices are raised based on an agreed invoicing profile with the customer. Invoices are usually payable within 30 days. Where the Group provides professional services, the timing of satisfaction of performance obligations (including payment terms) is the same as described within the TAS and C&I revenue recognition policy.
NCC Group plc — Annual report and accounts for the year ended 30 September 2025 116
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