With the world rapidly accelerating its digital transformation agenda in recent times, we sit down with AIM-listed cyber security service provider ECSC Group (AIM: ECSC) to discuss how it plans to capitalise on the favourable backdrop and ramp up its client base that already includes 10 FTSE 100 firms.
As the ECSC share price continues to gain momentum following a 20 percent increase in the year-to-date and a c. £8m m.cap, find out why CEO Ian Mann is confident in the growth prospects of the business and why even Warren Buffett should consider making an investment!
Firstly, please tell us a bit about your business and its value proposition?
ECSC Group plc (AIM: ECSC) was founded back in 2000 and is the UK’s longest running full-service cyber security service provider. With an extensive range of in-house developed proprietary technologies, including advanced Artificial Intelligence (AI) systems, ECSC provides expert security breach prevention and advisory support to a broad and diverse client base, ranging from e-commerce start-ups to global blue-chip organisations, including 10% of the FTSE 100.
ECSC operates from two Security Operations Centres (SOCs): one in Yorkshire, UK, and the other in Brisbane, Australia. As a result, it is able to offer flexible 24/7/365 cyber security monitoring, detection, and response support to its clients, either as a fully managed service or to enhance an organisation’s existing cyber security systems. In addition, ECSC’s Assurance division provides guidance, certification to industry standards, and extensive testing services to allow organisations to assess their cyber security protection.
ECSC is led by a highly experienced senior management team with over 80 years’ combined experience within the Company, and has delivered consecutive organic growth for the last 20 years. Despite the economic challenges posed by the pandemic, the Company delivered adjusted EBITDA profitability and cash generation during 2020 and has a clear growth strategy to continue this momentum into 2021.
The current climate is presenting challenge and opportunity – how has this applied to your business?
The COVID-19 pandemic, while presenting economic challenges to any business and to ours, has also presented ECSC with an opportunity to leverage its innovative proprietary technology in reaction to the rise in cyber-attacks that have proliferated during the crisis. The rise in remote working has also brought home for many companies the importance of cyber security in ensuring the smooth transition to flexible and home working arrangements.
The increase in breaches is making cyber security a key governance issue for company boards, and, when combined with recent GDPR legislation that requires immediate breach reporting, the UK sector, already estimated to be worth over £8 billion, is set to grow considerably in the coming years. In light of this, there is significant opportunity for ECSC to scale to meet current demand and predicted market growth.
Growth catalysts are crucial to business growth – what do you believe yours are?
The increasing importance of cyber security as an essential part of any business and responsible governance, due to the increasing threats and incidence of cyber-attacks that are taking place, is undoubtedly a growth catalyst for us. We are in an industry that is growing, but more importantly for us, our proprietary technology allows us to really differentiate ourselves in a competitive landscape.
These proprietary technologies include our Artificial Intelligence (AI) systems, which ECSC’s NEBULA solution is a part of. NEBULA uses ECSC’s KEPLER AI technology, combined with 20 years of Security Operations Centre experience, which has led to the development of an effective SIEM or SOAR solution in the cloud. NEBULA takes logs from traditional IT environments, remote workers and cloud systems, thereby giving 24/7/365 detection, investigation and response capability. As NEBULA comes with a range of tailored service options, it can be used to service organisations of any size and budget, allowing ECSC to offer a comprehensive service to all potential clients.
The continued investment in Research and Development by ECSC, which now totals 14% of revenue, is a clear indicator of the importance the Company places in continuing to innovate and provide solutions for the problems of the future.
What are the biggest headwinds you foresee to achieving growth in the coming months and years? How will you tackle them?
The impact of COVID-19 was certainly an initial headwind that the Company had to navigate, and we did so effectively and with resilience. As we are now emerging from the COVID-19 period, and with the associated rise of cyber-attacks and cyber-crime, we are well positioned to capitalise and grow.
ECSC has seen continued growth in recurring Managed Detection and Response revenue which demonstrates the strength of this division and our effective strategy of winning consulting clients and converting them into long-term managed services clients. This impressive growth strategy has continued this year, with a number of contract wins in our MDR division. Despite the challenges of 2020, we added 90 new Assurance division clients. In addition, we expanded the Partner Programme to over 150 partners, contributing to 4% of revenue (2019: 2%) and 13% of the new client wins.
Going forward, the Company will be focused on resuming its organic growth strategy and ensuring we have the technology, people, and certified processes to deliver.
Imagine you find yourself in a lift with Warren Buffett. What would be your ‘elevator pitch’ to summarise why he should invest in your business?
ECSC is a very attractive investment proposition. Led by a highly experienced management team, it has a strong track record as a profitable, cash generative and financially stable business and operates in a sector that is experiencing rapid growth.
ECSC is well respected within the industry, and the Company’s broad client base includes 10% of the FTSE 100, demonstrating the calibre of clients that trust us with their cyber security requirements. The continued growth in recurring revenue demonstrates the resilience and strength of our business model; our strategy of converting consulting clients into long-term managed service clients and developing these relationships leads to our strong revenue figures.
We continue to invest in our R&D to ensure our technology remains innovative and effective in serving the industry well. Our growth strategy is clear and well-defined, and the Company is looking to leverage its proprietary software and strength of client base to continue its growth.
We look forward with confidence to delivering improved operating results and shareholder value as we move out of this COVID-19 period.
Please note: this interview is part of the ShareBuyers’ going for growth series. This series enables companies with strong growth potential to share their story with retail investors.