Business review continued
Financial performance summary continued Following the acquisition of IPM, goodwill and intangible assets were recognised amounting to £68.6m and £92.6m respectively. Management is required to recognise all assets and liabilities at fair value, giving rise to a fair value adjustment on the level of deferred revenue acquired of £12.1m. This has resulted in a downward adjustment to the book value of IPM’s deferred revenues reflecting the fair value of service still to be delivered. If the fair value adjustment had not applied, revenue would be £4.4m higher for the 12 months ended 31 May 2022. On this basis, management has set out below unaudited proforma information to show the consequential impact on the Group results for the year ended 31 May 2022. This unaudited proforma information will not be applicable for 2023 and forthcoming financial years. It is consistent with the way that financial performance is measured by management and reported to the Board, the basis of financial measures for senior management’s compensation schemes and financial covenants. We consider these proforma measures reflect the potential revenue performance of the Group once a full 12 month period has been completed post acquisition and this information is relevant for use by investors, securities analysts and other interested parties as supplemental measures of future potential revenue performance. In the future periods there would also be some associated costs and therefore impact on future gross margin and other metrics. However, since statutory measures can differ significantly from the proforma measures we encourage you to consider these figures together with statutory reporting measures noted. This information is disclosed below and reconciled to profit after taxation:
2022
2022 unaudited proforma 4
2021
Central and head office £m
Software Resilience revenue adjustment £m
Central and head office £m
Group unaudited proforma £m
Software Resilience £m
Software Resilience £m
Assurance £m
Group £m
Assurance £m
Group £m
Revenue
258.5 56.3
– 314.8 – (182.2)
4.4
319.2
233.9 36.6
– 270.5 – (159.9)
(166.2)
(16.0)
– (182.2)
Cost of sales
(149.5)
(10.4)
Gross profit
92.3 40.3
– 132.6
4.4
137.0
84.4 26.2
– 110.6
35.7% 71.6% – 42.1% 100.0% 42.9%
Gross margin %
36.1% 71.6% – 40.9%
(53.2)
(17.5)
(2.7)
(73.4)
–
(73.4)
Administrative expenses 2
(45.4)
(9.5)
(3.2)
(58.1)
39.1 22.8 (2.7)
59.2
4.4
63.6
Adjusted EBITDA 1
39.0 16.7 (3.2)
52.5
(7.2)
(0.8)
(3.1)
(11.1)
–
(11.1)
Depreciation and amortisation 3 Adjusted operating profit 1 Adjusted operating margin % Individually Significant Items
(9.4)
(0.7)
(3.2)
(13.3)
31.9 22.0 (5.8)
48.1
4.4
52.5
29.6 16.0 (6.4)
39.2
12.3% 39.1% n/a 15.3% 100.0% 16.4%
12.7% 43.7% n/a 14.5%
– (0.9)
–
(0.9)
–
(0.9)
– (7.6)
(5.1)
(12.7)
Amortisation of acquired intangibles Share-based payments
(0.9) (2.1)
(4.8) (0.3)
(2.9) (1.5)
(8.6) (3.9)
– –
(8.6) (3.9)
(1.3) (1.5)
– (5.1)
(6.4) (2.8)
(0.1)
(1.2)
Operating profit/(loss)
28.9 16.0 (10.2)
34.7
4.4
39.1
26.8
8.3 (17.8)
17.3
11.2% 28.5% n/a 11.0% 100.0% 12.2%
Operating margin %
11.5% 22.7% n/a 6.4%
(3.7)
–
(3.7)
Finance costs
(2.5)
Profit before taxation
31.0
4.4
35.4
14.8
(8.0)
(1.1)
(9.1)
Taxation
(4.8)
Profit after taxation
23.0
3.3
26.3
10.0
EPS Basic EPS
7.4p
1.1p
8.5p
3.6p 9.5p
10.8p
1.1p 11.9p
Adjusted EPS
Footnotes 1 S ee Note 3 for an explanation of Alternative Performance Measures (APMs) and adjusting items. Further information is also contained within the Chief Financial Officer’s Review and the Glossary of terms. 2 Administrative expenses excluding depreciation and amortisation, Individually Significant Items, amortisation of acquired intangibles and share-based payments. 3 Depreciation and amortisation excludes amortisation of acquired intangibles. 4 This represents unaudited proforma results. Securing Growth Together (SGT) Over the last three years the business has implemented the SGT programme which has now finished and has provided the foundations for future growth and the systems to allow timely information and control. As previously noted, the programme incurred cost overruns and the Group is now focused on the next phase of system optimisation to support future revenue growth and profitability.
10
NCC Group plc — Annual report and accounts for the year ended 31 May 2022
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