NCC Group plc (NCC) Earnings Call Transcript & Summary

Good day, ladies and gentlemen, and welcome to NCC's unaudited results for the 12 months to 31st of May 2024. [Operator Instructions]. I would like to remind all participants that this call is being recorded. Questions will follow after the presentation. I will now hand over to Mike Maddison to start the presentation.

Good morning. Thank you very much for joining us for our 12-month results, which just, again, to recap are unaudited to the 31st of May. I'll say thank you, it has been quite a year. I would like to start to say we committed to do a lot this year, and we have done a considerable amount. And with that, I would like to emphasize my thanks to all of our colleagues in all of our operating markets for their focus, for their efforts and resilience through a considerable period of change. But we've achieved a lot this year, and what I'd like to do initially is just recap some of those headlines. We're committed to creating two businesses and focus on those, our Escode business, the escrow services that we provide, and, of course, our cybersecurity business. We've made really positive progress in seeing some of the areas, particularly in cybersecurity, grow substantially. Managed Services, which was a subject of a capital markets event, but also our digital forensic areas have really performed incredibly powerfully this year. We focus a lot of our time creating a global operating model and driving efficiencies as a result of implementing that. There's lots more to do, but we've made very positive progress. And you'll see some of that coming through in the conversation today. We continue to review our portfolio across the business and have made a disposal in a cybersecurity area to create a much more focused cybersecurity offering and also obviously strengthen our balance sheet. I think, overall, I would say we've made good progress in terms of our transformational journey. We've improved our profitability. And obviously, Guy will talk to that in some detail, but we are very conscious in terms of it is work that continues to deliver sort of the quality of earnings and shareholder value that we think is right to deliver. And with that, maybe just to highlight a couple of key points, gross margin is an area of significant focus for us across the business, and I'm very pleased to say we have seen some improvement. So this year, our gross margin is at 41.4%, so that's 2 percentage points increase year-on-year. And our adjusted EBITDA is 13%, so a 1.3 percent- percentage point year-on-year increase. This has come through a mixture of improved utilization, the mix of our services within the business and obviously some cost efficiencies. This is particularly true in cybersecurity, where actually most of the improvement has come through. So profitability continued to -- continues to improve and will be a continued area of focus on our transformation journey. We've talked a lot about our -- the pillars of our strategy implementation, and we've delivered on that strategy and the operational targets. And I'd just like to recap on some of those areas. Firstly, obviously, clients -- and clients has been at the sort of the center of our proposition to the markets. We have launched and implemented a sector-based go-to-market approach in North America. This is incredibly important to us as we look to expand our footprint in the sectors and clients outside of our concentration in the U.S. tech market. and we're starting to see that develop as we go. We have obviously executed some price uplift, particularly in Escode, both in contracts and verifications. That is demonstrating and coming through in value and actually the profitability of the Escode business. And we've continued to deliver on the growth plan for Escode, which we briefed at the Capital Markets event. And that includes investments in North America, but also in other markets, noticeably Australia. From a capabilities perspective, we've talked about changing the mix of our services within the business very positively. And as we briefed at the Capital Markets events, our Managed Services business has performed very strongly, as has our Digital Forensics and Incident Response, the 999 core elements of our services, very positive to see and a really important change in the mix of our business. We've established two new consulting implementation capability areas specifically in Digital Identity and Operational Technology. We see these as opportunities in the market for growth in the future. So we've built the foundations in those areas. And I've talked about the importance of a people-powered, tech-enabled business and the importance of alliances in building the propositions right for our clients to solve their complex issues. So we've been building those alliances. And it's very positive to see that, as an example of the progress we've made, we've been awarded the Global Partner of the Year for Splunk, which, for those not in the technology industry, is one of the lo- largest providers of monitoring software globally, recently acquired by the giant Cisco. So to be awarded that recognition, I think, is a huge testament to the efforts of our teams and the building and the delivery of our services to our clients, so great progress in that area. So global delivery was a key element of our strategy. We've launched the scheduling platform Kantata, and I'll come back to that in a second, in the U.K., North America and the Philippines, so joining our regional delivery capability to be able to provide a single view of our scheduling and resources wherever they sit in the world. We are extending that, obviously, to the other parts of our business. It's really important to say Kantata, whilst a scheduling tool, also starts to deliver much imp- really important [ MI ] for our business to be able to operate it more effectively. Our new Manila office, which we opened earlier this year, continues to grow very much in line with expectations. Very positively, we now have a mixture of services not only from a capabilities point of view, but also from some of the enabling functions, so very, very positive. To give an exa- some concrete examples of how this is starting to affect our business, we have been able to win work historically we would not have been able to compete for. For example, we won a recent project with a global FMCG client to deliver a range of services using all of our capabilities with a 50-50 delivery model using European resources but also resources from our Manila office, so a great example of our teams adapting and being able to move into new clients, markets and propositions. A second area of client I would highlight is a client in the airline industry where we are delivering an entirely new service to them using a mix of technical capabilities within their home market, but also using resources from our Philippines office to execute, so great progress, lots more to do, but the trajectory is positive. Finally, we've talked about differentiated brand and bringing the profile of both our Escode business and our cyber business to market. And we've obviously launched the brand for Escode, which we've demonstrated previously. That's been very positively received, both by clients and also by colleagues. We've developed an industry analyst program with the likes of IDC and Forrester, and this is very important for building our cyber profile particularly so that it is recognized by procurement functions by clients for the quality and capability of the services that we offer. That has really been embedded and really starting to pay some dividends. And finally, we fo- continue to focus our -- building our brand and reputation at some industry key events globally, both particularly in North America, the U.K. and Europe, but actually in all of our key markets, to just build that recognition for what NCC is and what it does, so some very positive progress. And I'll hand over now, Guy, maybe with the clicker, to talk about the financials.

Thank you very much indeed, Mike, and good morning to everyone. So I'm going to start by saying that we're very pleased to be able to confirm that our adjusted EBITDA for the 12 months at the end of May finished at GBP 42.1 million. That's per our new measure and is in line with our post-close announcement and our June statements to the market. That is ahead of consensus, which is very pleasing and up GBP 4.9 million year-on-year at constant currency. So what are the things that drove that? So 12 months ago, we set out our financial framework for FY '24, and it's very pleasing to able to report and be able to evidence that we've delivered material improvements in those metrics, especially evident in the second half of the year, driven around our four pillars of sustainable revenue growth, improving our gross margin and our margin efficiency, improving our efficiency in our cost base and delivering a stronger balance sheet for the group as a whole. I'd like to spend a few minutes going through our summary financials, which will provide some of the proof points on that. But I would also like to finish [ with saying ] these -- this financial framework remains absolutely relevant and in place for our stub period. And when we announce our full 16-month financial year results in December, we'll set out the framework for FY '25. So first of all, I'd like to just go through our group income statement. On the left-hand side, you can see the income statement itself. On the bottom right-hand side, we're providing a bridging table, as we did in January, the half year results, between our old metrics and our new measures. Notably, our adjusted EBITDA now accounts for share-based payments. But if I go to the top left, you will see here, so GBP 335.1 million was the revenue in FY '23. We saw a GBP 10.7 million decline in FY '24, which is as we expected, and I'll talk through the bridging items of that in a minute. But I think what's really strong in some of these -- in these numbers is that, despite that GBP 10.7 million deterioration in revenue, we saw an increase in our adjusted EBITDA, up from GBP 39.2 million to GBP 42.1 million in spite of the GBP 2 million impact of foreign exchange, mostly driven by U.S. dollar. So stripping that out, it's a 13% increase in our adjusted EBITDA. The main drivers of that are -- so a very strong improvement in our gross margin, which Mike talked about a few minutes ago, up 2 percentage points to 41.4%. That was driven by Cyber, which is up by 2.4 percentage points. And I'll talk about the operational step change which has helped deliver that, especially in the second half. Escode was down 1.6% as a consequence of some targeted investment in line with the Capital Markets event, and I'll just give a little bit more of a flavor of that in a minute. Our overheads remain flat year-on-year. That is benefiting from the efficiency changes and savings that we've made through the year, offset by some inflation and some of the strategic investments we made for our strategy and our capabilities. So if we now go to the group revenue bridge, so this is a waterfall chart which shows the four main -- the four blocks driving the GBP 10.7 million reduction in cash revenue. You'll see here that revenue in Cyber dropped by GBP 5.9 million. That's 0.8% on a constant currency basis. That was driven primarily by North America, which was down by 26.8%, which we'll talk about in a few minutes. And our task performance, what is -- what was excellent was, in the second half, we saw our Cyber business return to growth, so 6% growth in half 2, compared to a 9.6% deterioration and a decline year-on-year, which we highlighted in our half year results. And Escode continued to deliver positive revenue growth in constant currency at 5.4%, and I'll give a further breakdown of that in a couple of minutes. In total, the GBP 5.9 million FX impact and GBP 1.7 million in Escode gave a kind of headwind of GBP 8.1 million from an FX point of view on our revenue. So looking at cybersecurity in -- at more detail, first of all, I'd like to talk about markets, and then I've got a second slide, which will talk about our 4 capabilities. So the left-hand side of this chart shows the revenue by half for our last 4 halves in each of our geographical areas. If I draw your attention to the left-hand 4 bars, which is the U.K. and Asia Pac, what was very pleasing to see, a very big step forward in the second half of this year from GBP 60.8 million in half 1 to GBP 69.0 million in half 2. That has been driven primarily by a stellar performance in our Managed Services business. If I look at North America, that is where we see a consequential decrease from half to half. In half 1, we saw a decline of 32%, half 2 of around 19%. And within that, Q4 was down negative a bit, in low single digits, and that is the trend that we've seen so far through our summer stub period in the last 4 months. So we are not calling a bounce-back or recovery on those revenues, but we're beginning to see some stabilization, and we're working very hard on that, and Mike will come to talk about that in our strategic outlook going forward in a couple of minutes. We've seen some excellent growth within Europe as well. So overall, the European business ended up 13% up year-on-year. That was 6% in our core Cyber business and then 31% in our other revenue areas, which were our DetACT business, which we announced the disposal of in January. And also our Crypto business performed very strongly through the first and second half of the year. So that's the revenue story from a market point of view. I'll just talk very quickly about gross margin. So the table on the right-hand side here demonstrates that the full year gross margin jumped by 2.4 percentage points to 34.2%. The second half of the year delivered a really big material step change at 38% gross margin. That is the highest gross margin the Cyber division has ever recorded since we started measuring the division performance back in FY '17. It's not as a consequence of maybe periods in the past when we had very strong margin performance or really strong market demand possibly outstripping supply. That's as a result of really good operational performance by the business and the globalization of our resource base and the kind of really good discipline actions that have been taken over the last year. We do see this as a real proof point that delivering 36% to 37% gross margin in Cyber, which we flagged as part of our medium-term financial ambitions, is absolutely deliverable. Moving on to the capabilities, so this -- the revenue performance here is split between our 4 capabilities of Technical Assurance services, Consulting and Implementation, Managed Services, Digital Forensics and Incident Response, and then our other services, which are Crypto and DetACT businesses, primarily in Europe. Again, you can see here largely the impacts of what's happened in TAS predominantly -- sorry, excuse me, Technical Assurance Services, predominantly driven by North America, so down 28.6% in the first half, 15% in the second half and, again, low single digits in Q4. Consulting and Implementation decreased slightly year-on-year. We have new leadership in place, and we have invested into the resources into that, particularly through the second half. So we're confident and excited about the future for that business going forward. Managed Services is where -- obviously is the big step forward here. So GBP 39.5 million in the second half of the year represents 30% of all of our Cyber revenue. To make it a comparison, the GBP 23.7 million in the darker gray bar under Managed Services here in F- in the first half of FY '23 represented 16.6% of our overall mix. So this gives us a much more resilient business overall, particularly given Managed Services revenue typically is around about 88% recurring with long-term contracts. So that's very, very, very pleasing to be able to see those coming through the numbers. The Digital Forensics and Incident Response business had a very strong year overall of 21.5%, especially evident in the first half to some -- to a large extent. And again, Mike will probably touch on this later. That does depend on what's -- kind of the demand that's going on in the business and the amount of ransom-ware activity out in the marketplace. So that is Cyber. What I would now like to do is touch and talk to our Escode business. Same -- similar format slides with the revenue for the markets on the left-hand side here and the two service lines of escrow contracts and verification services on the right-hand side. Let me just talk to the revenue first. So we've now delivered 7 consecutive quarters of year-on-year growth. And you can see on the chart that this is consistent across all markets. So there's a really, really sort of [ same ] level of consistent gross -- growth every quarter and across all markets. That is driven -- really pleasing me -- both by contracts and verification performance, as you can see on the right-hand side. Contract growth is benefiting from both the really strong client retention rate of 95% in the second half of the year compared to 91% in the similar period the year before. And overall, our verification performance, that's client spending more money with us, ensuring that their services are live development and work for them in their environments, is also increasing. So spend per client is in good shape, too. Gross margin declined by 1.6 percentage points, as I flagged earlier when we talked about the group income statement. That was as a consequence of targeted investments in sales, particularly Australia and North America. And overall, we saw an adjusted decline in the EBITDA, down again to GBP 28.3 million. That was partly impacted by the headwinds of FX, which foreign exchange of U.S. dollar translation is around about GBP 1 million, and some one-offs in the prior year. So that's the operating P&L. What has been the impact on our net debt and how do we stand in terms of our balance sheet? So we finished the year, as you can see on the right-hand side here, with a net -- the 12-month period, excuse me, with a net debt of GBP 38.5 million. That's GBP 11.1 million better than we began the year with us maintaining our dividend policy and our dividend payments at GBP 14.5 million in the year. We retain a rolling credit facility of GBP 162.5 million with an accordion option on top of that. Our cash conversion remained very strong at 91%. And it's worth noting that the GBP 3.7 million of CapEx and M&A, that includes the proceeds from the sale of our DetACT business back in January. So that's it for me. Very pleasing to see -- great to see the delivery against all the elements of the financial framework. They remain in place and Mike is now going to talk about our forward strategy.

Thanks, Guy. As Guy said, we've highlighted, if you like, the things we focused on, what have we done, what we've achieved. And now I'd very much like to just give you some of the headlines for our areas of future focus over the coming period. I thought it was quite important, just, again, for consistency, to reiterate a slide you've seen before, which encapsulates our strategy, which is very much to focus on our two businesses, Cybersecurity and Escode. We talked about those. You've seen the numbers behind them. And our strategy is then built around 4 pillars. Our clients are clearly at the center of everything we do, building the right capabilities to service those clients, delivering efficiently on a global basis where possible, but with a local relationship, and, of course, building brand and recognition for the great work that NCC Group does. Our ambition remains the same in terms of our cybersecurity business. That is a mid-teens revenue growth with a mid-teens adjusted EBITDA percentage margin and a low-teens adjusted EBIT margin percentage. Ultimately, Escode, our aim is to retain and grow our market leadership and single-digit revenue growth, which we have been able to deliver consistently over the last number of quarters. The next slide is something, again, I was just really keen to reiterate. When we're talking about our cyber business, what are we looking to achieve? NCC has phenomenal capability and incredible technical depth. And what we aim to provide our clients with is a full cyber security life cycle that's built around our four capability areas, so whatever our client needs at whatever point of need they have, we're able to respond. And that is all underpinned by something which I categorize as the DNA of NCC Group with the ability to bring insight, intelligence and innovation. And what I mean by these are, insight, we have -- we work with clients globally. We understand the market incredibly well, we see trends, and so we're able to enrich our services with visibility, if you like, of trends. Intelligence is being able to identify actually what is coming down the line. We work very closely with agencies globally to understand what the threat is, and we provide that as a support to our clients around the threat to clients and to institutions and, ultimately, being able to innovate. And I talked about winning new types of work, responding to complex problems, and we can do that because of the quality and depth of our teams across all 4 capabilities. So very important, that is our framework. That is what we're building. We're consistently talking about this and building and investing to actually execute against this. Our focus for FY '25 for Cyber remains consistent. Again, it's work in progress. We want to continue to grow key practices where we perceive there to be additional market opportunity. Two of those areas I've highlighted are digital identity, the ability to be able to provide access to systems which underpin every element of the digital economy, and operational technology, the elements of smart factories, et cetera, where the risk and the threat is growing. They are areas where we have now invested. We now have the right leadership. And clearly, the opportunity now is to see the returns on those investments. Guy talked about some of the challenges that we've seen within our Technical Assurance Services. This is absolutely the heart of NCC Group. It is our license to operate. It is where we have many of the components that add to that intelligence, insight and innovation. So it remains strategically very important to us. We, therefore, have to continue to focus on addressing the changes in the market dynamics that we reported on previously, notably in North America. And that has revolved around ensuring that we expand our footprint outside of sectors where we have been concentrated historically. And I talked about the vertical -- the sector-based approach to our go-to-market, which is incredibly important. And we continue to invest in areas where we do see higher demand in Technical Assurance Services and to innovate our services. We recently launched, for example, an entirely new proposition which is in high demand, which is providing assurance around -- security assurance around AI implementations [ in our ] clients, incredibly topical in the race to deploy AI. We now provide a leading service in that domain. The third area is about leveraging our global delivery model. I mentioned Kantata, our scheduling platform, and the ability to drive further [ MI ]. That will be deployed to our other regions such as Europe this calendar year, which will give us greater insights across the business. And finally, as I say, continue to innovate, it's very much about responding to market needs and to provide those propositions which our clients are looking for to address their challenges. I've talked about the AI piece, and we're looking at how we use the huge amount of data and telemetry that we have currently within the business, particularly in some of our larger offerings like Managed Services, and how we automate to drive even greater efficiencies around the use of that data and actually the deployment of services, so a lot going on, a huge amount of focus, but very much within the framework of our overall strategy as we continue to execute on that. I'll just touch on Escode. And obviously, this was the subject of a Capital Markets event, so we've provided quite a lot of information. Part of the growth plan for Escode is around geographical footprint. So we have made additional investments. Guy's referenced some of the -- some of that investment and in particularly North America and Australia as new markets where we perceive a significant opportunity. We have continued to develop on our expansion into new sectors. We've historically been very strong, for example, in regulated areas such as financial services, but we're seeing greater demand in areas such as critical national infrastructure. And again, referencing the Capital Market event, we have seen some interesting developments there. But we've obviously acquired some -- a footprint within the EU, which has driven some significant opportunities for us and looks quite positive. Finally, we're implementing a new and smooth-lined sales approach just to create greater alignment internally between our sales operation and, therefore, speed to market. So again, a clear growth plan, and we continue to execute against it. I'll just finish perhaps now with a quick summary as we look into the next phase of our transformation. We've laid some of the foundations. We have the -- we are now confident in terms of our direction. We -- it is now -- we continue to execute in terms of the next steps. We're clear very much on what we need to do. We've continued to simplify our business with a view to providing profitable growth and shareholder value and, importantly, sustainable gross margins. Throughout this, we're absolutely intent on remaining aligned to client needs, and we are confident in the medium-term financial goals for the business. With that, I will conclude and perhaps open it up to Q&A.

We will now start the Q&A. [Operator Instructions] Our first question is from Julian Yates at Investec. Julian, please go ahead. Our next question is from Andrew Ripper at Liberum.

Good morning, everybody. Can you hear me okay?

We can.

Well done on the second half performance. I've got three, if that's okay. First, I just wanted to ask Mike, in terms of the sort of strategic objectives for FY '25 and how you're thinking about the Cyber business going forward, can you just talk about how the flywheel has evolved across the different regions and how you'd like to move that forward over time?

Yes, certainly I could. Thanks, Andrew. Great question. So obviously, in terms of our capabilities and actually go-to-market in the different regions, there are different levels of maturity just through historical -- the way the businesses have grown, the acquisitions that have happened historically. So there is -- there are definitely different levels of maturity. So for example, I would say our business in North America is predominantly Technical Assurance Services. And we, therefore, think there is significant opportunity to actually be able to expand capabilities and go-to-market to be able to take more than, if you like, a single capability to market. So that's North America. In the U.K., I think we are -- again, it's where the majority of our business has grown from and therefore is probably more mature. Northwest Europe is predominantly Managed Services. And we think -- and certainly, that seems an area where a huge opportunity resides for us in terms of expanding into that European market. So there is different levels of maturity and certainly building capabilities, but more importantly, the ability and the confidence to go to market around what is -- we have the capabilities, we have the credentials. Having the ability to go to market with that story, I think, is a really big focus for us going into FY '25.

And just following on from that, are acquisitions going to be a part of that?

I think, clearly, we're now at a position where we are confident in terms of where we are. And therefore, that gives us the -- certainly the consideration for identifying opportunities for both organic and inorganic growth. So it's definitely something that we are more actively considering.

I think just, if I can add to that, the foundational work that's been done in globalizing the capabilities means that inorganic activity is much more ingestible than it would have been in the past. That's [indiscernible] plus, of course, the increasing balance sheet strength is enormously helpful in delivering on our ratio.

Absolutely right. I think that chassis we built -- because I think the importance of ensuring that, whatever targets we might consider, the ability to integrate effectively into the business is something that we are, I think, very aware of.

And then just one for Guy on the numbers, just looking at the gross margins across Cyber, the U.K. and APAC really stood out in the second half. I think it was 48%. Is there anything funny about that number? And I appreciate you've got some intercompany effects, perhaps, with North America. Could you talk about whether that's a real number? Is it sustainable? And on North America, I think you're still down at 21%. Where do you think you can get that gross margin to?

Yes, so I'll try and answer it in a couple of parts because the disclosures are there, and I think it's helpful to see them. Do I think the -- kind of the numbers in the second half in the U.K. -- well, yes, I do -- I think we -- utilization was very hot through the second half, particularly in the U.K. So we saw second half utilization overall, which we now include our consulting and implementation as well as our Technical Assurance Services at 68%, and it ran substantially over that in the U.K. So the U.K. team is running pretty hot, if I'm honest, right? So that did support that number to some degree. So as we kind of glo- as we get used to using Kantata now from a global scheduling point of view, we'll probably kind of balance out -- and hopefully be able to balance out our demand a little bit more. There is an intercompany effect, as you said. So without wanting to get into too much boring detail on the call for everyone, there's a reasonable amount of work in North America, which is won in North America and then delivered particularly out of the U.K. or out of Manila and, in some cases, the Asia Pac. And in those cases, there was sort of a margin boost to the P&L. So the segmentals that we've disclosed really show kind of an economic end-to-end of the clients in that market, if that makes sense. But that's notwithstanding the fact that North America at 20%, 21% is -- we are challenging ourselves and we've got to be -- we want to be a lot better than that in that marketplace. And that's about us doing everything that we do better and take a best-in-practice [ route for ] the rest of the group. The team did a great job embracing that and working on that. And it's an area which, in the coming months, Kantata will help with because, as Mike mentioned, Kantata, not only will it help us with global scheduling, but actually will, for the first time, become [indiscernible] actually see client profit by piece or by project, which we've never had before. And that will be enormously helpful in effectively making learnings and then rolling that into making better pricing decisions.

And then just finally, given your comments about utilization, what's your view on resourcing going forward? Can you share with us your plans for head count in the Cyber and Assurance business for FY '25?

Yes. So look, we're going through our budgeting process at the moment. Given the volatility we saw through the first 3 quarters of the year on TAS in particular, we are making sure that we're as sound and solid as we can be through that budgeting process to understand what our requirements for next year are. As you say, we've been running pretty hot, particularly in Technical Assurance Services. So we'll make sure we kind of -- we resource up as we need to. We've gotten much more -- I think Kevin Brown and the team, from a COO perspective, are -- we take a much more global view on recruitment than we probably used to a couple of years ago. And that global flexibility in choosing where we resource actually enables us to [ view ] quickly -- more flexible and quicker in resourcing where resource is available than maybe we used to do in the past as well. So that's a bit of a sort of -- apologies, it's a bit of a nonanswer because I don't want to commit to a number until we get to the budget, but it will be in support of the right level of growth given where our run rates are.

Our next question is from Bob Liao at Zeus.

I just had a number of questions. First was on Escode, and I just wanted to know about the price increases that you put through and to what extent they're sustainable. And then secondly, related to that, is the new business that you're getting in critical infrastructure, whether the margins on that business is comparable to historic margins? The second question, Managed Services business, that's where there seems to be a lot of opportunity. I just wanted to know what specifically really needs to be put in place to get that market really growing alongside Europe and the U.K. And then just very quickly on consulting, what drove the decline in consulting? I know you're talking about a new management team there. So was there -- does that mean there was a problem with execution, or is there more of a market or client issue?

Should we split that between us? How do you want to--

[indiscernible]

[indiscernible] start with pricing?

Yes. So it's the price increase, so I'll have to try and sort of -- I probably would need to confirm the exact numbers afterwards, Bob, which I'm very happy to do. We've been -- Andrew and the team have been quite targeted and increasingly sophisticated about how we target any price increases and testing them. They've been -- typically, I think, it's sort of in the sort of 5% to 6% range. What we see from an infrastructure margins point of view in terms of that segment is that they're certainly not dilutive. And those programs particularly lend themselves towards verification as well as contracts growth as well. So that's margin supportive, too. In fact, that's the way I would answer those questions.

Yes. So both -- because you broke up a little bit on the money service question. I think, if -- hopefully, I've got this right, it's the extent to which money services -- what have we done to grow it as we have and how does that read across to North America? Is that -- hopefully, that's -- that's what I'll try and answer.

Yes, it's more so about what would get North America, yes, growing, right?

Yes. So what has been successful? Let me start there and then I'll move to North America. So North -- so the money services business was in credit -- was very much not integrated between our various geographies. We have now integrated it, so it is now far more unified. We have a common approach from a technology perspective. We have a clearer set of propositions. It is far more integrated. So it is a richer offering to clients. What that has meant is we're able to provide a proposition not only for maybe where we would have traditionally been perceived in terms of that sort of medium sector of the market, we're actually now winning enterprise-level clients around Managed Services. And TikTok is probably as enterprise as you can possibly get. So that's worked very well. What is particularly challenging in the North American market is the level of fragmentation and competition. And again, that comes through from a maturity perspective. So that leads you to how do we start to win there? clearly, we built a bit more leadership team in North America. Our global leader is now based in North America. We've also invested more in terms of our go-to-market, clarified some of the propositions and focused on segments of the market where we believe there is greater opportunity given what I've said about the competition. But ultimately, to really shift the dial then, we are looking at whether it's all potentially inorganic growth. But the challenge in that space is obviously the valuations and whether that is something that we can rightly go after. So it is a complex picture. What I wouldn't want to do is divert resources and capital to go after a market that is too difficult. We'll pick our battles, and we'll see where we can get growth most effectively for the capital we've got ability to deploy. So hopefully, that answers your question on that one. On the consulting piece, I think, again, it's about evolution. We started with a more -- with a consultative practice, which wa- which had a number of propositions which were a particular part of the market, largely compliance and assessment driven. What we have done is invested in new leadership to be able to broaden that offering. And I talked about identity and I talked about [indiscernible]. So it really is about we've reset some of those propositions that maybe are not -- don't have as much traction in the market as they historically did. But we are seeing greater opportunities in other areas. And importantly, about the consulting areas, I think it gives us that agility I talked about and being able to respond to client needs. We don't have to be as prescriptive in terms of our -- we do a certain thing. We can actually be far more flexible, listen to what our client needs and be able to respond. So that's why we see -- we sort of almost reset, and now we're looking for that, for the growth to come back.

For our next question, we will return to the line of Julian Yates from Investec.

Hello, can you hear me? Is that any better?

Yes. Very good.

Well, fantastic. I don't think I was on mute no more. I just have sort of one question. It's around the Philippines actually. You talked about that in your opening remarks. Could you just talk about how utilized the personnel are that you have out there? I think you said you have near to 100. And how easy it is to shift current work over to the Philippines to get a margin improvement on your current work? Or is it really very much focused around new work and getting better pricing and better win rates on new work, and how this will evolve as well, I guess, over a couple of years?

I don't have the actuals utilizations unless it's in [indiscernible].

It's a little bit [indiscernible] obviously it's a [indiscernible].

[indiscernible] is it sort of an office that's full of people waiting to have business delivered to them at the moment? Are they idle or what [indiscernible]?

No, no, absolutely --

They're running at sort of 30% and 45% depending on the week at the moment and that's building over time. There's quite a lot of training and every is still going on as well.

[indiscernible] I think that is a really important part. Obviously, it's not a workforce that you hire and it's ready to go. It is -- we are building talent in the market. So there is a -- we land -- develop the individuals, put them through training. We've got a number of [ secondies ] over there. We've done a phenomenal job in terms of building skill sets. So there is sort of a lag component. It is an investment for building capability. But in terms of the trajectory of our utilization, it's entirely in line with plans and very positive. I think it is -- literally it's TikTok month-on-month. So we're positive about the direction of travel. More to do, as always, but it is positive. In terms of work, it's a really important one. Obviously, historically, this has not been a -- we have not been able to -- we have not operated in a truly global way. So a number of our [ MSA ] contracts do not provide that flexibility. So there is an element of we identify those MSAs or contracts where we have the opportunity to be able to do it. So there is some which do have that flexibility. But then there are [ these ] which are constraints, and we have to wait until either renewals or until we actually renegotiate. Net new work is -- obviously, we have a completely new approach, which gives us the flexibility to move it as we require, subject to, and this is obviously the caveat, subject to client requirements. Some clients are still very much -- have requirements that it is on-site, so clearly, or there -- or certain nationals or if there are national security requirements. And obviously, we do work for various government departments as well. So there are some nuances and fle- and constraints with it. But in terms of ability to move forward, we're seeing a lot more ability. And as I said, the utilization is very much in line with plans. So we're very positive about the future.

On the shifting of work and utilizing the office, what's the culture like with the onshore staff, call it monitoring staff, in terms of using this facility that they now have been given? Is that a positive wave that they see using business? Or is it - is there, I guess, a hindrance to it? I'm just interested in sort of the culture adaptation to using that facility.

Yes. It's new. And with anything new, there is a cultural shift. We have seen -- as I mentioned, two of the sort of the very large clients where we've net new work. And that has been really positively received. It's new work for new clients, so that's really positive. I think there's a couple of other really important bits of feedback we've had, which is we've deployed [ secondies ] to lead the training, and they have been absolutely amazed by the quality of resources that we have brought on. That has obviously -- we've been able to talk about that internally. So that -- we're very pleased with that. The second thing is, actually, we are now -- because we have delivered work from Manila, then we are really starting to see the client feedback coming through about the quality of the work. And I do want to try and break this sort of onshore/offshore narrative because it isn't actually the way -- we have a global team and we are able to resource and deploy work that fits with client needs to actually help us support and drive margins. So it isn't onshore versus offshore. For example, a lot of our work used to be delivered in the U.K. from North America. We never talked about that in the same context. So it is a global team. We will resource and deploy resources, as the client wants, from wherever they are in the world, that meets our client needs. And that's why I think we -- it's important to get that flexibility.

Our next question is from Martin O'Sullivan at Shore Capital.

I just had a quick question on Managed Services, which is obviously emerging as a very strong performer. I think you previously indicated that you spent less than 1% of Managed Services revenues on marketing for top-of-the-funnel generation. I'm just wondering what's your current thinking around that in terms of perhaps increasing that spend? Given the scale of the opportunity in Managed Services, do you feel it's not particularly necessary, given the cross-selling opportunity in Managed Services?

I'll take sort of the CFO part of the question before I get to maybe the marketing, and then I'll refer to Guy a little bit. So we are reassessing our budgets. We're looking at the budgets. So to give you some absolute numbers, it's very difficult to do. However, I would say, historically, NCC Group has not been a company that has been marketing-led, and I'll use the phrase, maybe one of the best kept secrets in the industry, unless you're sort of a techie. So actually, I think it's really important, in terms of building that brand, that we do more. Now whether that's specifically around Managed Services or actually around our suite of services. And the importance of that flywheel sort of suite of capabilities I talk about is certainly something that we are actively considering and looking at, but also equally that we spend our pounds, dollars, euros, wisely so we get the most bang for our buck. So that's why we've invested in new markets like CMO, et cetera. But it's certainly driving that. Top-of-funnel is very important to us. Reputation is one thing, but, actually, I think it's really important to work to build from the top as well.

There are no further questions on the webinar. I will hand back to management for closing remarks.

I'd just like to finish by thanking everybody, particularly our colleagues, for all of the hard work this year to give a very, I think, very sound, solid set of numbers. Our transformation continues. We're very clear on what we want to do and very much looking forward to the period ahead. Thank you very much for your -- for joining us this morning. I look forward to speaking to you soon.