Chief Financial Officer’s review continued
Divisional performance continued Software Resilience The Software Resilience division accounts for 13.5% of Group revenues (2020: 14.2%) and 23.7% of Group gross profit (2020: 26.3%). Software Resilience revenue analysis – by originating country: 2021 £m 2020 £m % change UK 25.2 25.9 (2.7%) North America 7.3 7.8 (6.4%) Europe 4.1 3.8 7.9% Total Software Resilience revenue 36.6 37.5 (2.4%) In Software Resilience, we experienced a disappointing overall revenue decline of 2.4%. This decline was mainly a result of execution challenges in a remote environment together with recruiting sufficient sales resource to enable a return to contract growth. The UK experienced a decline of 2.7% exacerbated by recruitment challenges in a pandemic market. North America declined 6.4% albeit 2.9% on a constant currency basis due to a decrease in on-premise testing. Europe, as a relatively new market, continued to progress positively during the year mainly due to increased testing revenues. Renewal rates improved to 89.2% (2020: 87.0%) and remain within our expected range. Software Resilience revenues analysed by service line:
2021 £m 24.0 12.6
2020
Software Resilience services revenue
£m % change
Software Resilience contracts
25.8 (7.0%)
Verification services
11.7
7.7%
Total Software Resilience revenue
36.6
37.5 (2.4%)
Our contract revenue was impacted by the pandemic and sales recruitment challenges. Our future expectation is that our nascent channel sales model will contribute to revenue going forward. Verification services grew 7.7% to £12.6m owing to the success of EaaS (£0.8m). Gross margin is analysed as follows: 2021 £m 2021 % margin 2020 £m 2020 % margin % pts change UK 18.4 73.0% 19.5 75.3% (2.3% pts) North America 4.9 67.1% 5.3 67.9% (0.8% pts) Europe 2.9 70.7% 2.7 71.1% (0.4% pts) Software Resilience gross profit and % margin 26.2 71.6% 27.5 73.3% (1.7% pts)
Gross profit has declined due to the challenges noted above and as we started to make investments in our channel proposition and cloud infrastructure to underpin sustainable growth.
Individually Significant Items During the period, the Group has incurred £12.7m of Individually Significant Items (ISIs) (2020: restated £7.9m 3 ). These items relate to the acquisition of the IPM business (£7.6m) and cloud configuration and customisation costs associated with the Group’s transformation programme SGT (£5.1m, 2020: restated £7.9m 3 ). These costs are considered material and are in accordance with the Group’s policy on identification of certain costs that distort the underlying performance of the Group. For further detail, please refer to Note 5 to the consolidated Financial Statements.
36
NCC Group plc — Annual report and accounts for the year ended 31 May 2021
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