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Company profile
NCC GROUP – ABOUT US
NCC Group is the UK’s leading independent provider
of IT Assurance, Security and Consultancy services.
NCC Group works with over 10,000 public and
private sector organisations to help them manage
the risks associated with the increased reliance on IT.
As IT becomes an increasingly fundamental part
of any organisation’s strategy, the effective use of
information and technology is even more crucial.
NCC Group helps clients realise the full benefits
and maximise their potential whilst managing
the numerous risks through the following portfolio
of services;
■ ESCROW SOLUTIONS: Ensuring business critical
material or code is protected and accessible
should anything happen to your key supplier
or developer.
■ VERIFICATION SERVICES: Confirming the material
held under an Escrow Solution is properly protected
by verifying that it can be reconstituted from its
components.
■ SPECIALIST TESTING: Testing relevant aspects of
your system’s performance, including testing of
new technologies, to ensure your system is effective,
robust and can deliver optimum performance.
■ PENETRATION TESTING: Expert testing on networks
and applications to ensure organisations are safe
from the ever increasing threat of unauthorised
internal and external network penetration.
■ INFORMATION SECURITY: Creating a secure
environment for your organisation by considering
every aspect of your business from a security
perspective including business continuity plans,
disaster recovery and regulatory compliance.
■ IT CONSULTANCY: Providing advice at all levels
to help organisations improve their performance
through the effective use of information and
technology.
Based in Manchester with offices in London and
Germany, NCC Group employs 158 members of staff.
With over 20 years of history, NCC Group’s
reputation is well established and well respected.
Crucial to NCC Group’s success is its complete
independence from any hardware or software
provider. This independence ensures all clients
receive impartial advice, confirming NCC Group’s
position as a ‘trusted advisor’ committed to building
long term client relationships.
The company is committed to quality having
achieved ISO 9001 certification and is a preferred
supplier of services to the UK government participating
in both S-CAT and G-CAT schemes. NCC Group also
holds the security CESG (CLAS) and CHECK
accreditations to the highest level. The company
actively encourages staff to qualify for appropriate
industry accreditations.
NCC Group has grown at an impressive rate since
the initial management buyout in 1999, establishing
itself as a market leader for Escrow Solutions and as
a key player in the market for its consultancy and
testing services.
A second management buyout led by Rob Cotton
was undertaken in 2003 which saw the previous
investors and management team exit, with backing
provided by Barclays Private Equity.
43
Left to right: Paul Edwards, Finance Director; Rob Cotton,
Chief Executive; Paul Mitchell, Chairman
65
HighlightsJo
n L
eig
h
Felic
ity B
ran
dw
oo
d
NCC GROUP
■ Year of healthy growth and progress
■ Firmly recognised as a leading independent provider
■ 46% increase in operating profits before interest
and goodwill amortisation to £4.8m. Turnover growth
of 23% to £14.5m.
Escrow Solutions
Turnover up by 23% with profitability growing by 38%
to £3.8m.
Verification Services
Turnover growth of 58% to £0.5m.
Specialist Testing
Delivered very similar profitability to last year despite
a 9.2% decline in turnover.
Penetration Testing
Turnover increased by 30% to £1.0m.
IT Consultancy
Turnover increased by 13% to £3.9m, while profitability
more than doubled to £1.0m in the year.
Information Security
Established quickly with revenues of £0.4m in the first
six months.
Corporate governance
We have for some years run the group broadly as
if it was a listed plc and to that end have taken
the matter of corporate governance and internal
control very seriously. The rigour and requirement
of good governance contributes to improved
profitability; we have considered the spirit and
applied where practical the relevant features of the
Combined Code and best practice to the running
of the group.
With the arrival of the additional two independent
non-executive directors to The NCC Group (Holdings)
Limited, we will affect changes to the construction
and make up of the remuneration committee and we
will formalise the audit and nominations committees.
Outlook and future prospects
Despite this year’s excellent results, now is not the
time to become complacent. However we are
confident that we will be able to deliver another
strong year of growth.
We continue to be innovators and this will be key to
our success. Approaching the market with the right
set of products, services and skills is essential for any
business, but particularly to a fast growing business
like NCC Group. We constantly seek to improve on
what we do, for whom and how often; repeat and
renewable business is a critical component of our
growth enhanced by evolution where appropriate.
Escrow is expected to grow as market awareness
and our expert account management team continue
to make the case for what should be a compulsory
purchase with every business critical application.
Consultancy will continue to develop its role
as a truly independent trusted advisor as more of
our clients experience the benefits from truly
independent consulting.
Testing will benefit from the need to secure and
confirm assurance over IT networks. Not only is IT
security a pressing issue but also the performance
and robustness of systems and networks will continue
to require third party testing.
In summary we see a year of strong growth in a
cautious but improving market. We are competitive,
we continue to win new assignments and to secure
high levels of repeat income and as a Board we
see a growing place for an independent provider of
IT assurance, security and advice.
Paul Mitchell
Chairman
The NCC Group (Holdings) Limited
Rob Cotton
Chief Executive
The NCC Group (Holdings) Limited
The NCC Group Limited
87
“Duis autem veleum iriure dolor inhendrerit in vulputate velit essemolestie conse qua vel illum”
Review of the yearWe are proud to announce the NCC Group’sstrongest ever performance delivered in thefirst full year since the management buyout.
In the year to 31 May 2004, turnover grew by 23% up
from £11.8m to £14.5m.
The operating profit of the group before exceptional
items and goodwill amortisation was £4.8m against
£3.3m last year, an increase of 46%. After goodwill
amortisation and exceptional items it was £4.6m
against £1.5m last year. The operating margins
before exceptional costs and goodwill amortisation
grew to 33% from 28% and after exceptional items
and goodwill amortisation it grew to 32% from 12%.
Investing in growth
Our strategy remains to develop complementary
activities within existing business units, allowing them
to form their own profit centres as they achieve scale.
This enables us to benefit from new trends and
products whilst maintaining close management
focus on our existing activities.
In November 2003 we devolved the Information
Security Consultancy from our IT Consultancy business
and have seen its revenues grow to £0.4m in its first 6
months as it benefited from the increase in corporate
importance placed on managing IT security and risk.
We will continue with this strategy and anticipate being
able to grow all business areas strongly in the coming year.
Delivering the results
All three of the business units delivered strong growth
as each took up the challenge to improve on last
year’s performance. The strongest performance
came from Consultancy services which saw profits
double to £0.9m which was an excellent result.
Escrow Solutions delivered a 38% increase in
profitability to £3.8m with Testing Solutions increasing
its profitability by 24% to £0.9m. Overall it has been
an outstanding year.
The development of the senior management team
is a key reason for the group’s success this year. Each
of the business unit directors and heads of each
business area are committed to the group’s growth
strategy and have worked tirelessly to deliver it.
It is also testimony to the dedication of NCC Group’s
staff and their commitment to our clients that we have
achieved so much in the short time since last year’s
MBO. We would like to extend our thanks to all NCC
Group staff for their endeavours in the last twelve months.
Part of the change this year has been the clear
understanding of the services and products we
deliver. We are a leading independent IT assurance
provider. We offer IT assurance, IT security and IT
advice to our portfolio of public and private sector
clients. We are independent of software and
hardware suppliers and have a background of IT
service provision that goes back over 20 years which
gives us the right to be trusted advisors.
Board changes
We are delighted to announce that we are to be
joined by James Wallace and Eurfyl ap Gwilym as
independent non-executive directors on the Board
of The NCC Group (Holdings) Limited, the ultimate
holding company of The NCC Group Limited, on
14 June 2004. James will bring with him a wealth of
experience from the manufacturing and industrial
sectors as well as considerable city and plc
experience. Eurfyl will bring considerable experience
of the software and IT services sectors along with his
non-executive experience.
We believe that these appointments are right for
the group at this stage and we are looking forward
to the contributions that each will bring. Pau
l Mitc
he
ll
IT Consultancy has had a very strong year – overall the
business unit has grown turnover from £3.5m to £4.4m
in 2004 with an increase of over 100% in profitability to
£0.9m for the year.
Employees, recruitment and retentionRecruitment and staff retention is the most important
challenge that we face as a group. The employment
market is as strong as it has ever been and therefore it
is important that we reflect this in our remuneration
packages and in our approach to training and
development. At the end of the financial year we had
158 employees and we continue to align our skill base
to ensure it matches the demand of the business and
the market.
Operational managementThe ability to accurately forecast and to react quickly
to changes in the market is an important part of
the group’s management strategy. Forecasting is
conducted on a daily, weekly, monthly and quarterly
basis and allows the management of each business
unit to focus on the key issues.
Forecasts need to be more than planning meetings
and following them through with strong operational
action is an essential part of business control and good
business management. In the last 14 months since the
buyout, this has become the chief characteristic of the
group’s success.
The way forwardGeneral market commentary suggests that expenditure
in the IT Project Services market is forecast to continue
to grow. This will enable NCC Group to continue its
impressive growth record, but it is important that we
focus on customers to ensure that we provide the best
value for them so that they continue to choose us as their
advisors even in times of reduced budgets. Simply put,
we want to be their independent trusted advisor for all
of their IT assurance, security and advisory needs.
Following our customers’ lead, we hope that the public
and private sectors will become more discerning and
considered with their IT spend and choose more of their
IT services from fully independent providers. Escrow
services cannot be properly performed by any party
with a vested interest in the source code. IT consultancy
and security services offered by a provider with
allegiance to a third party supplier, software provider
or implementer cannot be provided objectively, yet
the vast majority of the £7bn plus IT Project Service
2002 market will have been taken by parties with
those allegiances.
Over the next 12 months we will focus on continuing to
develop strong customer relationships. We will continue
to develop each of the business units independently
and we will retain our focus on growing our renewable
income base.
Our day rate businesses are built on long term
relationships rather than single project engagements
and we will continue to focus on this model for
organic growth. We intend to continue punching
above our weight and converting customers to our
independent philosophy.
For our Escrow Solutions business we will continue to
work at increasing the awareness and penetration
within customers, firstly to get them to the level of
protection they feel they already have, but do not in
practice, and then through to the level of protection
they actually need.
Current trading and prospectsThis will undoubtedly be another year of change and
development for NCC Group but that epitomises the
IT services market. We enter the new financial year as
we left the old one, committed to deliver strong levels
of growth both in turnover and profitability.
Rob Cotton
Chief Executive
The NCC Group (Holdings) Limited
The NCC Group Limited
109
Chief Executive’s report
Performance overview
The year to 31 May 2004 was one of healthy growth
and progress for NCC Group. Turnover has grown to
£14.5m and we are now firmly recognised as a leading
independent provider of IT assurance through our
Escrow Solutions, Testing Solutions and Consultancy
services to both the public and private sectors.
Currently we have 89 out of the FTSE 100 companies
as customers and over ten thousand other
organisations worldwide use our services. Our profitability
has continued to grow and operating profit before
exceptional items and goodwill amortisation has
advanced to £4.8m from £3.3m in 2003, an increase
of 46%. Operating profit after exceptional items
and goodwill amortisation has advanced to £4.6m
from £1.5m in 2003.
Our business model and sales strategy is not based
on price competition, but on the better delivery of
client solutions; we are not a body shop and do not
implement business systems. We firmly believe it is our
independence that has been the key to our success
and we consistently hold to our principles of providing
services that represent best value for our clients.
NCC Group’s approach –independent trusted advisor
Throughout NCC Group, our underlying objective is
to provide the best value solution to our customers
at all times. Our aim is to provide IT assurance to not
only help mitigate risk but to provide the right solution
in the face of increasingly complex situations.
To do this effectively, there can be no blurring of roles.
We advise on an IT solution, we do not implement it.
We protect business critical software with Escrow, we
do not develop software. We test the performance
and robustness of complex applications, we do not
sell them. Our aim is to stand with the client when they
have an IT or assurance need and work with them to
determine the right strategy or solution for their
situation. Our independence is the cornerstone of our
business model.
Business unit performance
The business operates three main business units;
Escrow Solutions, Testing Solutions and Consultancy.
Testing is split into three business areas and
Consultancy two.
Escrow Solutions. We are firmly placed to continue
as the UK market leader. We believe the market to
be growing substantially and are gearing up to meet
the challenge. Escrow Solutions grew turnover by 23%
in the year to 31 May 2004 and saw profitability grow
by 38% to £3.8m. Our biggest challenge will be to
grow the account management team quickly but in
a controlled fashion to deliver an even stronger 2005.
Testing Solutions. Overall the business unit has had a
very good year with turnover increasing by 19% and
profitability growing by 24%. Verification Testing has
seen turnover grow by 58% as customers realise the true
value of fully verifying a source code deposit under an
Escrow agreement. This is an area for significant growth
and the sales strategy is focusing strongly on this area.
Specialist Testing has had a good year in the
circumstances. Competing in a difficult part of the IT
market, telecoms, we saw the business deliver a result
very similar to last year in terms of profitability despite
a 9% decline in turnover. Penetration Testing has grown
strongly with an increase of £0.2m in turnover to £1.0m
in the year. This area is expected to continue to
grow rapidly and our commitment to its success is
demonstrated by our recruitment and training policy
that ensures that we have more CHECK accredited
resource than any other provider.
Consultancy has already developed and spun out
a highly successful Information Security consultancy
and it demonstrates our adaptability in meeting market
demand for delivering world class solutions.
Ro
b C
ott
on
increased to reflect the value of the products and
services provided and to correct anomalies in the
pricing structure. The day rate businesses have
continued to deliver exceptional levels of utilisation
confirming the benefit of our policy of recruiting the
right people.
The group has maintained a good level of sales per
account manager for Escrow Solutions and the move
away from associate resource in the day rate businesses
in addition to the cost control has helped lead to a
46% growth in operating profits to £4.8m in 2004 from
£3.3m in 2003 before exceptional costs and goodwill
amortisation, and 215% increase in operating profits after
exceptional costs and goodwill amortisation.
Half year performance
The first half of the year generated 47.8% of turnover
with 52.2% in the second half. This is in line with 2003
when the split was 47.2% : 52.8%. The second half is
expected to continue to be stronger due to the timing
of price increases and the growing revenue base.
Dividends
The company declared an ordinary dividend in the
year of £3m (2003 £ nil).
Balance sheet
The group’s balance sheet is predominantly made up
of three main areas; debtors, cash and deferred
income. Trade debtors remain firmly in control despite
the fact that we raise in excess of 15,400 invoices each
year, with an average value of less than £1,000.
Debtor days have fallen further to 57 days (69 days:
2003) which is a good performance as Escrow
renewal invoices have to be sent 6 weeks in
advance of the anniversary of the commencement
of the agreement date.
Deferred income in the main represents the unexpired
duration of Escrow agreements, to be released on a
straight line basis over their remaining period and has
increased to £4.0m at the end of 2004 from £3.2m at
the end of 2003. The release of deferred income will
provide income into the next financial year.
Cash and treasury
The group has continued to generate a very strong
cash flow, with exceptionally high cash conversion
ratios. The group’s cash collection is not seasonal and
reflects the profile of operating profits in the year. At
an operating level, the cash in-flow for the year was
£6.0m (2003: £3.2m) with a net increase in cash being
£2.0m (2003: £1.1m).
Tax payments amounted to £921,000 against £768,000
in 2003 and capital expenditure reduced to £203,000
against £425,000 in 2003 reflecting the nature of the
group which is not capital expenditure intensive.
However, the group has committed to £400,000 for the
refurbishment of its office premises in Manchester to
be completed in the first half of the next financial year.
Paul Edwards
Finance Director
The NCC Group (Holdings) Limited
The NCC Group Limited
1211
Financial review
Headline news
NCC Group has achieved another year of significant
growth. Turnover has grown by 23% to £14.5m from
£11.8m in 2003. The group has tightly controlled its
cost base and strengthened its margin such that
the increase in turnover has been converted into
operating profits. The group has seen a 46% increase
in operating profits before exceptional items
and goodwill amortisation as they have risen to
£4.8m from £3.3m in 2003. Operating profits after
exceptional items and goodwill amortisation have
risen to £4.6m from £1.5m in 2003.
The group has remained highly cash generative and
continues to manage its debt with £4.0m of cash
currently on deposit.
Turnover
The group has seen a strong increase in turnover in
each of its business areas. Overall growth of 23%
results from 26% growth in Consultancy, 23% in Escrow
Solutions and 19% in Testing Solutions.
Escrow Solutions saw turnover increase to £6.7m from
£5.5m in 2003. Escrow deferred income, the value of
income withheld to reflect the duration of an Escrow
agreement and released on a straight line basis,
increased to £4.0m in the year from £3.2m, reflecting
an increase in the completion of agreements.
Consultancy turnover grew from £3.5m in 2003
to £4.4m this year as a direct consequence of
changes in our sales strategy and the move away
from associate consultants to full time employed
consultants. The Information Security Consultancy
which evolved out of the IT Consultancy in
November 2003 contributed £0.4m of sales income
in its first six months of trading, which is a very
encouraging start.
Testing Solutions has had a strong year with the
turnover before deferred income growing to £3.4m
this year, an increase of 19% and Penetration testing
and Escrow verifications are expected to continue to
grow strongly.
Overall, the level of professional fee income from the
day rate businesses represents 53.7% of the total
turnover of the group, against 53.8% in 2003. All
professional fees are delivered on a time and
materials basis rather than a fixed fee and this
remains a core part of the group’s strategy.
Profitability
The group continued to apply a suitably firm policy of
expenditure and cost control. Prices in all business
areas have been reviewed and where necessary
Pau
l Ed
wa
rds
Jon LeighDirector of Escrow Solutions
Jon has been with NCC Group for more than 16
years. In 1997 he joined Escrow Solutions as Head of
Testing and has been responsible for all delivery
and product development since 2000. Jon was
appointed Director of Escrow Solutions in 2003.
John RedeyoffDirector of Consultancy
John is a highly skilled and experienced professional
having held a variety of positions in both the private
and public sectors. John was appointed Director of
Consultancy at NCC Group in 2003; his areas of
expertise include IT management, strategy, system
design, project management, IT integration and
implementation.
Jane PinkDirector of Testing Solutions
Jane has been with NCC Group for more than
20 years. Her areas of expertise span across
telecommunications, programming, system design,
mobile data, penetration testing and testing
strategies. Jane was appointed Director of Testing
Solutions in 2000.
Paul VlissidisHead of Penetration Testing
Paul was appointed as Head of Penetration Testing
in 1996. He is responsible for developing Penetration
Testing, advising both private and public sector
organisations on how to manage the threats to their
applications and networks. Paul Is CESG CHECK
accredited to Team Leader status.
Sean PreeceHead of Specialist Testing Services
Sean joined NCC Group in 1987. He is responsible
for commercial and technical development for
Testing Solutions. His areas of expertise include
programming, design and development.
Roger RawlinsonHead of Consultancy
Roger joined NCC Group in 1994 as a Senior
Consultant. He previously worked for Jodrell Bank as
an Electronics Design Engineer. Roger was appointed
Head of IT Consultancy for NCC Group in 2001 and
is responsible for the management of the business
unit in terms of its income, profitability and the quality
of assignments carried out for our clients.
1413
Directors’ & senior managers’ biographies
Paul MitchellNon-Executive Chairman
Paul Mitchell has been NCC Group’s Chairman since
the first management buy-out in 1999. He is Managing
Director of Rickitt Mitchell & Partners Limited, a
corporate financial advisory firm based in Manchester
and is also a non-executive director for Hollins
Murray Group Limited, a property investment
company. Paul qualified as a Chartered Accountant
with Coopers & Lybrand.
Rob CottonChief Executive
Rob joined NCC Group as Group Finance Director
in March 2000. He introduced new financial controls
and management information systems, and then took
over as Managing Director for Escrow Solutions in July
2000. Under his direction, Escrow income increased
by 172% between July 2000 and October 2002.
In April 2003, Rob led the buyout process which saw
the sale of the group to Barclays Private Equity and
the management team for £30m. He became
Chief Executive in April 2003. Rob is a qualified
Chartered Accountant and has previously worked as
a consultant for Coopers & Lybrand, as Finance
Director for Evans Halshaw plc and for the
Caudwell Group.
Paul EdwardsGroup Finance Director
Paul joined NCC Group in 2000 as Group Financial
Controller. Following the secondary management
buy-out in April 2003, he was appointed Group
Finance Director. Paul previously worked for TDG
plc as Divisional Finance Manager and prior
to that was Financial Controller in part of the
Caudwell Group. He qualified as a Management
Accountant in 1994.
Felicity BrandwoodGroup Company Secretary and Solicitor
Felicity joined NCC Group in 1984 and was
appointed Group Company Secretary in 1999.
Felicity is responsible for all company secretarial,
legal, contractual and HR matters. Felicity qualified
as a Solicitor in 1982 and previously worked for
Eversheds before joining NCC Group.
Joh
n R
ed
eyo
ff
Jan
e P
ink
Disabled employees
The group gives full consideration to applications for
employment from disabled persons where the
requirements of the job can be adequately fulfilled by
a handicapped or a disabled person.
Should an existing employee become disabled, it is
the group’s policy wherever practicable to provide
continuing employment under normal terms and
conditions and to provide training and career
development and promotion to disabled employees
wherever possible.
Employee involvement
During the year, the policy of providing employees
with information about the group has continued
through the group’s intranet, the quarterly all employee
updates and divisional meetings. Employees are
actively encouraged to present their suggestions
and views on the group’s performance. A free flow
of information between the directors, managers and
employees ensures that every person has an
opportunity to contribute ideas to the group.
Health and safety
The group strives to provide and maintain a safe
environment for all employees, customers and visitors
to its premises and comply with the relevant health
and safety legislation. The group is committed to the
well-being of its employees and actively promotes
best practice in the work place.
The environment
The group recognises that it is part of the wider
community of employees, customers and suppliers
amongst others and recognises that it has a
responsibility to act in a way that respects the
environment. The group actively encourages staff to
act in an environmentally responsible manner,
particularly in the development of recycling and
energy conservation policies to ensure finite resources
are not dissipated.
Political and charitablecontributions
No political or charitable contributions were made
during the year.
Auditors
KPMG LLP has expressed its willingness to continue in
office. Accordingly, in accordance with Section 384
of the Companies Act 1985, a resolution to reappoint
KPMG LLP as the group’s auditor and authorising the
Directors to fix the remuneration of the auditor will
be put to the forthcoming Annual General Meeting.
By order of the Board
Rob Cotton
Chief Executive
The NCC Group (Holdings) Limited
The NCC Group Limited
1615
Directors’ reportThe directors present their annual report andthe audited financial statements for the yearended 31 May 2004.
Principal activity and review of the business
The principal activity of the group is the independent
provision of IT assurance through Escrow Solutions,
Consultancy and Testing Services to both the public
and private sectors. A review of the group’s activities
and development is provided in the Review of the year,
the Chief Executive’s report and the Financial review.
The financial results of the group are shown in the profit
and loss account on page 22.
Dividends
An interim ordinary dividend of £3,000,000 was paid
during the year. The directors do not recommend
payment of a final dividend to the ordinary or
preferred ordinary shareholders.
Share capital
Details of the movements of the authorised and called
up share capital of the company are set out in note
17 to the financial statements.
Directors and directors’ interests
The directors who held office during the year were
as follows:
Rob Cotton – Chief Executive
Paul Edwards – Finance Director
John Walker – Non-Executive Director
(appointed 22 October 2003)
The directors’ share interests and changes in the year
are shown in the Directors’ report of The NCC Group
(Holdings) Limited, the ultimate parent company of
The NCC Group Limited.
The NCC Group Employees’ Share Trust
The NCC Group Employees’ Trustees Limited was
established to encourage and facilitate the
acquisition and holding of shares in the company by
and for the benefit of employees of the group.
The NCC Group Employees’ Trustees Limited is a
wholly owned subsidiary of the company.
On 26 November 2003 employee loan notes were
redeemed and payments totalling £1.4m were
made to all employees who were employed by the
group on 11 April 2003.
No contributions to The NCC Group Employees’ Trustees
Limited were made in the year ended 31 May 2004.
Policy and practice on paymentof creditors
The group’s policy is to pay suppliers in accordance
with terms and conditions agreed when orders
are placed. Although the group does not follow
any code or standard on payment policy, where
terms have not been specifically agreed, invoices
dated in one calendar month are paid close to the
end of the following month.
Joh
n W
alk
er
Audit Committee
The Board had historically requested an annual
presentation from the group’s auditors following
the year end, but so as to meet the corporate
governance standards an Audit Committee will be
formed on 15 July 2004.
The Audit Committee will be chaired by James
Wallace. It will comprise the non-executive directors
and will meet three times a year.
The Chief Executive, Finance Director and external
auditors will also attend these meetings as required
by the Committee. The purpose of the Committee is
to assist the Board in the discharge of its responsibilities
for financial reporting and corporate control and to
provide a forum for reporting by the external auditors.
Remuneration Committee
The Remuneration Committee of the group was
chaired by Paul Mitchell and comprised the non-
executive director and CEO. The committee has
met twice during the year ended 31 May 2004
and is responsible for reviewing remuneration
arrangements for members of the Board and
Operating Board and for providing general
guidance on aspects of the remuneration policy
throughout the group.
From 15 July 2004 Paul Mitchell will relinquish the
role of Chairman of the Remuneration Committee
and will be succeeded by Dr Eurfyl ap Gwilym. It will
comprise the non-executive directors and meet
three times a year.
Nominations Committee
The Nominations Committee of the group will be
formed on 15 July 2004 and will be chaired by
Paul Mitchell and comprise the non-executive
directors. The Committee is responsible for proposing
candidates to the Board.
Internal control
The Board is responsible for establishing and
maintaining the group’s system of internal control.
Internal control systems are designed to meet the
particular needs of the group and the risks to which
it is exposed. By their nature however, internal
control systems are designed to manage rather than
eliminate the risk of failure to achieve business
objectives and can provide only reasonable and not
absolute assurance against material misstatement
or loss.
Key elements of the internal control system are
described below, all of which have been in place
throughout the year under review and up to the date
of this report:
• Clearly defined management structure and
delegation of authority to committees of the
Board, Operating Board and Business Units;
1817
Corporate governance
NCC Group is committed to high standardsof corporate governance and the Directorsconfirm that during the year ended 31 May2004, the group considered the spirit and complied with the provisions of theCombined Code where practicable.
This statement describes how principles of corporate
governance are applied to the group.
The Board
The Board of The NCC Group Limited comprises two
executive directors and a non-executive director.
The Board of The NCC Group (Holdings) Limited
comprises two executive directors, a non-executive
director and a non-executive chairman who meet
on a monthly basis. To strengthen The NCC Group
(Holdings) Limited Board two more independent
non-executive directors have been appointed. They
are James Wallace, who will become the senior
independent non-executive director, and Dr Eurfyl
ap Gwilym.
The Board of The NCC Group (Holdings) Limited
is responsible to shareholders for the proper
management of the group and for the group’s
system of corporate governance. It reviews trading
performance, forecasts and strategy, agrees future
plans and has a schedule of matters specifically
reserved for its decision.
The non-executive chairman of The NCC Group
(Holdings) Limited, Paul Mitchell, is responsible for the
running of the Board. Executive responsibility for the
running of the company’s business rests with the two
executive directors, Rob Cotton and Paul Edwards.
The Board believes that the size, structure and
composition of the Board is appropriate given the
group’s size and stage of development.
Operational management of the group is currently
delegated to the Operating Board of The NCC Group
Limited. This is comprised of Rob Cotton and Paul
Edwards as well as the divisional directors of the group.
All directors are able to seek independent legal
advice in respect of their duties at the company’s
expense where the circumstances are appropriate. All
directors have access to the Company Secretary for
her advice and services.
We intend to constitute the following committees to
deal with specific aspects of the group’s affairs. The
responsibilities and terms of reference for the Audit
and Nominations committees are being formally
agreed and when approved will then be subject to
annual review.
Pau
l Vlis
sidis
Ro
ge
r Ra
wlin
son
Company law requires the directors to prepare
financial statements for each financial year, which
give a true and fair view of the state of affairs of the
group and of the profit, or loss for that period. In
preparing those financial statements, the directors are
required to:
• select suitable accounting policies and then apply
them consistently;
• make judgements and estimates that are
reasonable and prudent;
• state whether applicable accounting standards
have been followed, subject to any material
departures disclosed and explained in the financial
statements; and
• prepare the financial statements on the going
concern basis unless it is inappropriate to presume
that the company will continue in business.
The directors are responsible for keeping proper
accounting records which disclose with reasonable
accuracy at any time the financial position of the
company and to enable them to ensure that the
financial statements comply with the Companies Act
1985. They have general responsibility for taking such
steps as are reasonably open to them to safeguard
the assets of the group and to prevent and detect
fraud and other irregularities.
2019
Corporate governance– continued
Statement of directors’responsibilities
• Clearly documented internal procedures set out in
the group’s ISO 9001 accredited quality manual;
• High recruitment standards and formal career
development and training to ensure the integrity
and competence of staff;
• Regular and comprehensive information provided
to management, covering financial performance
and key performance indicators, including non-
financial measures;
• A detailed planning process where business units
prepare budgets for the coming years and rolling
three year strategic plans, which are approved by
the Board;
• Procedures for the approval of capital expenditure
and investment;
• Monthly monitoring and re-forecasting of results
against the Annual Operating Plan, with major
variances followed up and management action
taken where appropriate; and
• Regular internal audits of key processes under
the group’s ISO 9001 accredited quality assurance
process.
The group does not have a dedicated internal
financial audit function, although internal audits are
conducted under the group’s ISO 9001 accredited
quality assurance process. Quality Audits are carried
out by an Independent consultant to the company
and are again covered by LRQA as part of their
ongoing review of our accreditation.
The Board has considered the need for an internal
financial audit function and believes that current
arrangements are adequate at this stage of the
group’s development.
Auditor independence
The Board has not formally reviewed Auditor
independence, but this will form part of the remit of
the Audit Committee and a formal policy on Auditor
independence and objectivity will be implemented.
The group has not traditionally assigned non-financial
or consultancy contracts to the external auditors. The
external auditors may be considered for consultancy
work but only after rigorous checks to confirm they
are the best provider, including where appropriate
competitive tender.
Going concern
The Board is satisfied that the group has adequate
resources to continue in operational existence for
the foreseeable future, a period of not less than 12
months from the date of this report. For this reason,
it continues to adopt the going concern basis in
preparing the financial statements.
Jaso
n S
ou
the
rn
2221
Report of the independent auditorsReport of the independent auditors to themembers of The NCC Group Limited
We have audited the financial statements on pages
22 to 36.
This report is made solely to the company’s members,
as a body, in accordance with section 235 of
the Companies Act 1985. Our audit work has been
undertaken so that we might state to the company’s
members those matters we are required to state to
them in an auditor’s report and for no other purpose.
To the fullest extent permitted by law, we do not
accept or assume responsibility to anyone other than
the company and the company’s members as a
body, for our audit work, for this report, or for the
opinions we have formed.
Respective responsibilities of directors and auditors
The directors are responsible for preparing the
directors’ report and as described on page 20 the
financial statements in accordance with applicable
United Kingdom law and accounting standards.
Our responsibilities, as independent auditors, are
established in the United Kingdom by statute, the
Auditing Practices Board and by our profession’s
ethical guidance.
We report to you our opinion as to whether the
financial statements give a true and fair view and
are properly prepared in accordance with the
Companies Act 1985. We also report to you if, in our
opinion, the directors’ report is not consistent with the
financial statements, if the company has not kept
proper accounting records, if we have not received
all the information and explanations we require for our
audit, or if information specified by law regarding
directors’ remuneration and transactions with the
group is not disclosed.
Basis of audit opinion
We conducted our audit in accordance with Auditing
Standards issued by the Auditing Practices Board.
An audit includes examination, on a test basis, of
evidence relevant to the amounts and disclosures in
the financial statements. It also includes an assessment
of the significant estimates and judgements made by
the directors in the preparation of the financial
statements, and of whether the accounting policies
are appropriate to the group’s circumstances,
consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain
all the information and explanations which we
considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that
the financial statements are free from material
misstatement, whether caused by fraud or other
irregularity or error. In forming our opinion we also
evaluated the overall adequacy of the presentation
of information in the financial statements.
Opinion
In our opinion the financial statements give a true and
fair view of the state of affairs of the company and
the group as at 31 May 2004 and of the profit of
the group for the year then ended and have
been properly prepared in accordance with the
Companies Act 1985.
KPMG LLP
Chartered Accountants
Registered Auditor
Consolidated profitand loss accountfor the year ended 31 May 2004
Note 2004 2004 2004 2003 2003 2003Before Goodwill Total Before Goodwill Total
goodwill amortisation exceptional amortisationamortisation items and and
amortisation exceptional of goodwill items
(see note 3)
£000 £000 £000 £000 £000 £000Turnover before movement in deferred income 15,316 - 15,316 12,291 - 12,291Deferred income (797) - (797) (464) - (464)
Turnover from continuing operations 2 14,519 - 14,519 11,827 - 11,827Cost of sales 4 (7,641) - (7,641) (6,654) (1,511) (8,165)
Gross profit 6,878 - 6,878 5,173 (1,511) 3,662Administrative expenses 4 (2,077) (233) (2,310) (1,857) (355) (2,212)
Operating profit from continuing operations 4,801 (233) 4,568 3,316 (1,866) 1,450
Net interest receivable 7 79 11
Profit on ordinary activities before taxation 4 4,647 1,461Tax on profit on ordinary activities 8 (794) (870)
Profit on ordinary activities after taxation 3,853 591Dividends 9 (3,000) (23)
Retained profit for the year 853 568
Reconciliation of movements in shareholders’ fundsfor the year ended 31 May 2004 Group Company
2004 2003 2004 2003£000 £000 £000 £000
Profit/(loss) for the financial year 3,853 591 (114) (251)Dividends (3,000) (23) - (23)
853 568 (114) (274)
Repayment of preference share capital - (1,094) - (1,094)New share capital subscribed - 15 - 15Charge in relation to share related awards - 1,363 - 1,363Currency translation (1) (3) - -
Net addition to/(reduction in) shareholders’ funds 852 849 (114) 10Opening shareholders’ funds 4,217 3,368 1,747 1,737
Closing shareholders’ funds 5,069 4,217 1,633 1,747
St James’ Square, Manchester M2 6DS, United Kingdom
Company balance sheetat 31 May 2004
2423
Consolidated balance sheetat 31 May 2004
Note 2004 2003£000 £000 £000 £000
Fixed assetsIntangible assets 10 3,491 3,724Tangible assets 11 546 648
4,037 4,372
Current assetsDebtors 13 3,523 3,106Cash at bank and in hand 3,970 1,959
7,493 5,065
Creditors: amounts falling due within one year 14 (2,451) (2,083)
Net current assets 5,042 2,982
Total assets less current liabilities 9,079 7,354
Deferred income 15 (4,033) (3,160)
Net assets 5,046 4,194
Capital and reservesCalled up share capital 17 300 300Capital redemption reserve 18 1,396 1,396Profit and loss account 18 3,373 2,521
Shareholders’ funds 5,069 4,217
Minority interest 19 (23) (23)
5,046 4,194
These financial statements were approved by the Board of directors
on 23 June 2004 and were signed on its behalf by:
Rob Cotton
Chief Executive
The NCC Group (Holdings) Limited
The NCC Group Limited
Note 2004 2003£000 £000 £000 £000
Fixed assetsIntangible assets 10 1,712 1,826Investments 12 1,426 1,426
3,138 3,252
Current assetsCash at bank and in hand 24 24
24 24
Creditors: amounts falling due within one year 14 (1,529) (1,529)
Net current (liabilities) (1,505) (1,505)
Net assets 1,633 1,747
Capital and reservesCalled up share capital 17 300 300Capital redemption reserve 18 1,396 1,396Profit and loss account 18 (63) 51
Shareholders’ funds 1,633 1,747
These financial statements were approved by the Board of directors
on 23 June 2004 and were signed on its behalf by:
Rob Cotton
Chief Executive
The NCC Group (Holdings) Limited
The NCC Group Limited
2625
Consolidated statement of total recognised gains and losses for the year ended 31 May 2004
2004 2003£000 £000
Retained profit for the financial year 853 568
Currency translation (loss) (1) (3)
Total recognised gains for the year 852 565
Consolidated cash flow statementfor the year ended 31 May 2004
Note 2004 2003£000 £000
Net cash inflow from operating activities a 6,001 3,183Returns on investments and servicing of finance b (2,921) (12)Taxation (921) (768)Capital expenditure and financial investment b (148) (244)
Cash inflow before financing 2,011 2,159
Financing b - (1,086)
Increase in cash in the year 2,011 1,073
Reconciliation of net cash flow to movement in net debtfor the year ended 31 May 2004
Note 2004 2003£000 £000
Increase in cash in the year 2,011 1,073Cash inflow from decrease in finance leases and hire purchase contracts - 7
Movement in net debt in the year c 2,011 1,080Net debt at beginning of the year c 1,959 879
Net debt at end of the year c 3,970 1,959
Consolidated cash flow notes
a) Reconciliation of operating profit to net cash flows from operating activitiesfor the year ended 31 May 2004
2004 2003£000 £000
Operating profit 4,568 1,450Depreciation charge 262 311Amortisation of goodwill 233 233(Profit) on the sale of fixed assets (12) (25)(Increase) in debtors (434) (626)Increase in creditors 1,384 477Charge in relation to share related awards - 1,363
Net cash inflow from operating activities 6,001 3,183
b) Analysis of cash flows2004 2003£000 £000
Returns on investments and servicing of financeInterest received 80 11Interest paid (1) -Dividend paid (3,000) (23)
Net cash outflow from returns on investment and servicing of finance (2,921) (12)
Capital expenditure and financial investmentPurchase of tangible fixed assets (203) (425)Sale of tangible fixed assets 55 181
Net cash outflow from capital expenditure and financial investment (148) (244)
FinancingCapital element of finance lease and hire purchase payments - (7)Issue of ordinary share capital - 15Repayment of preference share capital - (1,094)
Net cash outflow from financing - (1,086)
c) Analysis of net debtAt beginning Cash At end
of year flow of year£000 £000 £000
Cash in hand and at bank 1,959 2,011 3,970
Total 1,959 2,011 3,970
Consolidated cash flow statementfor the year ended 31 May 2004
Notes to thecash flow statementfor the year ended 31 May 2004
completion basis by including the profit or loss earned
on work completed to the balance sheet date.
Provisions are made for any losses on uncompleted
contracts expected to be incurred after the balance
sheet date. Maintenance and Escrow Solution
agreement revenue is recognised on a straight-line
basis over the life of the related agreement.
Foreign currencies
Transactions in foreign currencies are recorded using
the rate of exchange ruling at the date of the
transaction. Monetary assets and liabilities denominated
in foreign currencies are translated using the rate of
exchange ruling at the balance sheet date and the
gains or losses on translation are included in the profit
and loss account.
The assets and liabilities and profit and loss accounts
of overseas subsidiary undertakings are translated
at the closing exchange rates. Gains and losses
arising on these transactions are taken to reserves,
net of exchange differences arising on related
foreign currency borrowings.
Leases
Operating lease rentals are charged to the profit and
loss account on a straight-line basis over the period of
the lease.
Post retirement benefits
The group operates a defined contribution pension
scheme. The assets of the scheme are kept separately
from those of the group in an independently
administered fund. The amount charged against
profits represents the contributions payable to the
scheme in respect of the accounting period.
Taxation
The charge for taxation is based on the profit for
the year and takes into account taxation deferred
because of timing differences between the
treatment of certain items for taxation and
accounting purposes. Deferred tax is recognised
without discounting in respect of all timing
differences between the treatment of certain items
for taxation and accounting purposes which have
arisen but not reversed at the balance sheet date
except as otherwise required by FRS 19.
Cash
Cash, for the purpose of the cash flow statement,
comprises cash in hand and deposits repayable on
demand, less overdrafts payable on demand.
2827
Notes (forming part of the financial statements)
1 Accounting policies
The following accounting policies have been applied
consistently in dealing with items which are considered
material in relation to the group’s financial statements.
Basis of preparation
The financial statements have been prepared in
accordance with applicable accounting standards
and under the historical cost accounting rules.
Basis of consolidation
The consolidated financial statements include the
financial statements of the company and its subsidiary
undertakings made up to 31 May 2004. The acquisition
method of accounting has been adopted. Under
this method the results of subsidiary undertakings
acquired or disposed of in the year are included in the
consolidated profit and loss account from the date
of acquisition or up to the date of disposal.
Under section 230(4) of the Companies Act 1985 the
company is exempt from the requirement to present
its own profit and loss account.
Goodwill
Purchased goodwill (representing the fair value of
the consideration given over the fair value of the
separable net assets acquired) arising on consolidation
is capitalised. Positive goodwill is amortised to nil
by equal annual instalments over its estimated
useful life of 20 years.
Related party transactions
Details of related party transactions are set out in note
23 to these financial statements.
Tangible fixed assets and depreciation
Depreciation is provided to write off the cost less
the estimated residual value of tangible fixed assets
by equal instalments over their estimated useful
economic lives as follows:
Computer equipment – 20% to 33%
Plant and equipment – 20%
Fixtures and fittings – 20%
Motor vehicles – 25%
Revenue recognition
Turnover represents the invoiced value of goods and
services provided during the period, excluding VAT
and after deferred income. The results of partially
completed contracts whether fixed price or on a time
and materials basis are dealt with on a percentage
3029
Notescontinued
2 Segmental informationTotal Total2004 2003
a) Turnover by geographical segment £000 £000
UK 12,452 9,698Rest of Europe 1,011 828Rest of World 1,056 1,301
Total Turnover 14,519 11,827
Total Total2004 2003
b) Turnover by business segment £000 £000
Escrow Solutions 6,721 5,460Consultancy 4,357 3,471Testing Solutions 3,441 2,896
Total Turnover 14,519 11,827
Operating profit by business segmentEscrow Solutions 3,760 2,735Consultancy 900 447Testing Solutions 884 711
Segment operating profit 5,544 3,893
Head office costs (743) (577)Goodwill amortisation (233) (233)
Operating profit 4,568 3,083
Net assets / (liabilities) by business segmentEscrow Solutions (2,981) (2,112)Consultancy 473 129Testing Solutions 161 504Unallocated net assets 7,393 5,673
Total net assets 5,046 4,194
Unallocated net assets consist of cash, tax payable and other centrally held assets and liabilities.
3 Exceptional costs
Included within cost of sales is £Nil of exceptional costs (2003: £1,511,000). The costs in 2003 were the charges inrelation to share related rewards of £1,363,000 and associated costs of £148,000 in connection with the changeof ownership which occurred during that year.
Included within administrative expenses is £Nil of exceptional costs (2003: £122,000). The costs in 2003 related todeal costs arising from the change of ownership.
4 Profit on ordinary activities before taxation2004 2003£000 £000
Profit on ordinary activities before taxation is stated after charging/(crediting):Auditors’ remuneration:Audit 17 17Non audit 38 78
Depreciation and other amounts written off tangible and intangible fixed assets:Owned 262 311Amortisation of goodwill 233 233
Operating lease rentals charged:Hire of plant and equipment 236 189Other operating leases 169 157(Profit) on disposal of fixed assets (12) (25)
5 Remuneration of directors2004 2003£000 £000
Directors’ emoluments 465 770Company contributions to defined contribution pension schemes 13 28Amounts paid to third parties in respect of directors’ services 45 28
523 826
Number of directors2004 2003
Retirement benefits are accruing to the following number of directors under:
Defined contribution scheme 2 2
The number of directors who exercised share options was:
Exercise of share options - 2
The emoluments of the highest paid director were:2004 2003£000 £000
Salary and bonus 336 295Benefits in kind 26 22Company contributions to defined contribution scheme 9 7
371 324
3231
Notescontinued
6 Staff numbers and costs
The average number of persons employed by the group during the year, including directors is analysed by category as follows:
Number of employees2004 2003
Operational 50 40Administration, sales and marketing 101 100
151 140
The aggregate payroll costs of these persons were as follows:2004 2003£000 £000
Wages and salaries 5,816 4,954Social security costs 704 554Other pension costs (note 22) 167 169
6,687 5,677
7 Net interest receivable/(payable)2004 2003£000 £000
Interest receivable and similar income 80 11
Interest payable and similar chargesOther interest payable (1) -
Net interest receivable 79 11
8 Taxation
Analysis of charge in year 2004 2003£000 £000
UK corporation taxCurrent tax on income for the year 893 903Adjustments in respect of prior periods (100) (29)
Total current tax 793 874Deferred tax (note 16) 1 (4)
Tax on profit on ordinary activities 794 870
8 Taxation (continued)
Factors affecting the tax charge for the current yearThe current tax charge for the period is lower (2003: higher) than the standard rate of corporation tax in the UK 30% (2003: 30%).The differences are explained below:
2004 2003£000 £000
Current tax reconciliationProfit on ordinary activities before taxation 4,647 1,461
Current tax at 30% (2003: 30%) 1,394 438
Effects of:Expenses not deductible for tax purposes 88 577Capital allowances in excess of depreciation and amortisation 1 (8)Short-term timing differences 2 (25)Utilised losses - (14)Group relief (592) (65)Adjustments in respect of prior periods (100) (29)
Total current tax charge for year (see above) 793 874
Factors that may affect future tax chargesThe company envisages that its effective rate of tax will remain consistent with prior periods.
9 Dividends2004 2003£000 £000
Paid£1 A Preference shares - 23£1 Ordinary shares 3,000 -
Total dividend paid 3,000 23
10 Intangible fixed assetsGroup Company
£000 £000Goodwill
CostAt beginning and end of year 4,655 2,282
AmortisationAt beginning of year 931 456Charge for year 233 114
At end of year 1,164 570
Net book value at 31 May 2004 3,491 1,712
At 31 May 2003 3,724 1,826
3433
Notescontinued
11 Tangible fixed assetsComputer Plant and Fixtures Motor Total
equipment equipment and fittings vehiclesGroup £000 £000 £000 £000 £000
CostAt beginning of year 1,145 107 106 193 1,551Additions 146 10 20 27 203Disposals (42) - - (90) (132)
At end of year 1,249 117 126 130 1,622
DepreciationAt beginning of year 730 75 36 62 903Charge for year 186 13 23 40 262On disposals (38) - - (51) (89)
At end of year 878 88 59 51 1,076
Net book valueAt 31 May 2004 371 29 67 79 546
At 31 May 2003 415 32 70 131 648
CompanyThe company does not have any tangible fixed assets.
12 Fixed asset investmentsShares in group undertakings
Company £000
CostAt beginning and end of year 2,659
ProvisionsAt beginning and end of year 1,233
Net book value as at 31 May 2004 and 31 May 2003 1,426
The cost represents the cost of acquiring the whole of the issued share capital of the company’s subsidiaryundertakings. Fixed asset investments are recognised at cost.
Listed below are the subsidiary undertakings of The NCC Group Limited at 31 May 2004.
Subsidiary undertakings Country Principal Class and percentageof incorporation activity of shares held
NCC Services Limited England and Wales Escrow Solutions 100% ordinary shares& Consultancy services
NCC Escrow International GmbH Germany Escrow Solutions 80% ordinary sharesNCC Escrow International Limited England and Wales Dormant 100% ordinary sharesNCC Services Inc USA Dormant 100% ordinary sharesNCC Services (Africa) (Pty) Limited Botswana Dormant 100% ordinary sharesNCC Group Employee’s Trustees Limited England and Wales Employment Benefit Trust 100% ordinary shares
The NCC Group Employee’s Trustees Limited has not been included in the consolidation as the group does nothave control of the company. The aggregate capital and reserves of this company at 31 May 2004 was £2,129(2003: £1,470,732). The company had a loss after tax amounting to £1,468,603 for the year ended 31 May 2004(2003: Profit £1,434,633).
13 DebtorsGroup Company
2004 2003 2004 2003£000 £000 £000 £000
Trade debtors 2,407 2,318 - -Amounts owed by group undertakings - 16 - -Deferred tax (note 16) 71 72 - -Prepayments and accrued income 1,045 700 - -
At end of year 3,523 3,106 - -
All debtors fall due within one year.
14 Creditors: amounts falling due within one yearGroup Company
2004 2003 2004 2003£000 £000 £000 £000
Trade creditors 365 308 - -Amounts owed to group undertakings 131 - 1,529 1,391Corporation tax 290 422 - -Other taxation and social security 677 571 - -Other creditors 24 - - -Accruals 964 782 - 138
2,451 2,083 1,529 1,529
15 Deferred incomeGroup Company
2004 2003 2004 2003£000 £000 £000 £000
Deferred income 4,033 3,160 - -
Deferred income of £4,033,000 (2003: £3,160,000) consists of Escrow Solutions agreement revenue andmaintenance revenue that has been deferred to be released to the profit and loss account over the contractterm on a pro-rata basis.
16 Provisions for liabilities and charges £000
At beginning of year 72Charge for year (1)
Deferred tax asset 71
The elements of deferred taxation are as follows:
Group 2004 2003£000 £000
Difference between accumulated depreciation and capital allowances 64 63Short term timing differences 7 9
Deferred tax asset 71 72
CompanyThe company has no deferred tax balances.
3635
Notescontinued
17 Called up share capitalNumber of shares 2004 2003
£000 £000
AuthorisedOrdinary shares of £1 each 210,000 210 210Preferred ordinary shares £1 90,000 90 90A Preference shares £1 1,250,000 1,250 1,250B Preference shares 10p 1,460,000 146 146
1,696 1,696
Allotted, called up and fully paid
Ordinary shares of £1 each 210,000 210 210Preferred ordinary shares £1 each 90,000 90 90
300 300
Voting rightsThe preferred ordinary shares and ordinary shares carry voting rights at one vote per share.
Dividend rightsBoth the preferred ordinary shares and the ordinary shares have no rights to a dividend.
Rights on winding upThe ranking of shares in the instance of the winding up of The NCC Group Limited is as follows:• Preferred ordinary shares• Ordinary shares
18 Share premium and reservesCapital redemption reserve Profit and loss account
£000 £000GroupAt beginning of year 1,396 2,521Retained profit for the year - 853Currency translation adjustment - (1)
At end of year 1,396 3,373
Capital redemption reserve Profit and loss account£000 £000
CompanyAt beginning of year 1,396 51Retained loss for the year - (114)
At end of year 1,396 (63)
The cumulative amount of positive goodwill resulting from acquisitions in earlier financial years, which has beenwritten off, is £1,164,000 (2003: £931,000), including £353,000 (2003: £282,000) in relation to subsidiary undertakings.
19 Minority interests2004 2003£000 £000
At beginning of year (23) (23)
Equity (3) (3)
Non-equity (20) (20)
(23) (23)
20 Contingent liabilities
Each group company is party to a group banking facility under which it has guaranteed the bank borrowings,performance bonds and guarantees of its fellow group companies. The drawings under this group facility were£11,975,000 as at 31 May 2004 (2003: £13,375,000).
21 Other financial commitments
a) Capital commitments at the end of the financial year, for which no provision has been made, are as follows:
Group 2004 Group 2003 Company 2004 Company 2003£000 £000 £000 £000
Contracted 400 - - -
b) Annual commitments under non-cancellable operating leases are as follows:
2004 2003Land and Buildings Other Land and Buildings Other
£000 £000 £000 £000GroupOperating leases which expire:Within 1 year - 5 - 8In second to fifth year inclusive 173 227 24 180Over 5 years 154 - 135 60
327 232 159 248
22 Pension scheme
The group operates a defined contribution pension scheme that is open to all eligible employees. The pensioncost charge for the period represents contributions payable by the group to the fund and amounted to £167,000(2003: £169,000).
23 Related party transactions
The group conducted business to the value of £20,000 (2003: £1,667) at arms length with Barclays Private EquityLimited. Barclays Private Equity Limited was a shareholder of The NCC Group (Holdings) Limited during the yearthat supplied the services of a non-executive director.
24 Ultimate and immediate controlling party
The company is a wholly owned subsidiary undertaking of The NCC Group (Holdings) Limited. The largest groupin which the results of the company are consolidated is that headed by The NCC Group (Holdings) Limited,incorporated in the UK. The consolidated financial statements of this company are available to the public andmay be obtained from The Registrar of Companies, Companies House, Cardiff, CF4 3UZ.
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