23 May 2022

 

CENTRALNIC GROUP PLC

("CentralNic" or "the Company" or "the Group")

 

UNAUDITED FINANCIAL RESULTS FOR THE THREE MONTHS ENDED 31 MARCH 2022

 

Transformational increase in Revenue and Adjusted EBITDA

CentralNic Group Plc (AIM: CNIC), the global internet platform that derives recurring revenue from operating a marketplace model for online presence and online marketing services, announces its unaudited financial results for the three months ended 31 March 2022.  Both revenue and Adjusted EBITDA have increased year-on-year, driven by a combination of acquisitions and underlying organic growth.

Financial summary:

●       Revenue increased by 86% to USD 156.6m (Q1 2021: USD 84.4m)

●       Organic growth* for the trailing twelve months ending 31 March 2022 of c.53%

●       Net revenue/ gross profit increased by 43% to USD 39.9m (Q1 2021: USD 27.9m)

●       Adjusted EBITDA** increased by 83% to USD 18.5m (Q1 2021: USD 10.1m)

●       Operating profit of USD 10.0m (Q1 2021: USD 1.4m)

●       Non-core operating expenses reduced by 63% to USD 1.1m (Q1 2021: 2.9m)

●       Adjusted operating cash conversion of 128% (Q1 2021: 163%) ahead of historic averages

●    Net debt*** down by 18% to USD 61.3m (gross interest-bearing debt of USD 151.9m, cash of USD 90.6m) as compared to USD 75.0m on 31 December 2021 (gross interest-bearing debt of USD 131.1m, cash of USD 56.1m)

 

Operational highlights:          

●      Company's organic growth further accelerated during the period, driven by investments in new management, staff and systems. EBITDA as a percentage of Net Revenue has increased from 36% in Q1 2021 to 46% in Q1 2022, demonstrating that CentralNic's growth translates into operating leverage

●      The Financial Times listed CentralNic among the top 250 fastest-growing companies and among the top 50 fastest-growing technology companies in Europe

 

Corporate highlights:

●     Acquisition of VGL Verlagsgesellschaft mbH (VGL) in March 2022 for an enterprise value of EUR 60 million (approx. USD 65 million)

●      Oversubscribed GBP 42 million equity raise on 28 February 2022, EUR 21 million bond placing on 7 March 2022 and fully taken up Open Offer of GBP 3 million on 21 March 2022

●    Leverage**** as defined under the Bond Terms reduced from 2.22x as of 31 December 2021 to 1.56x due to improved profitability, continued deleverage and the largely equity financed acquisition of VGL

●      Acquisition of Fireball GmbH and the .ruhr TLD in February 2022 for a total of c USD 0.7 million

 

Outlook:

●      CentralNic's results for Q1 2022 demonstrate the potential of its strong marketplace model for Online Presence and Online Marketing services

●      The Directors are confident that the Company is comfortably trading in line with the recently upgraded forecasts^[1] 

●      The Company will issue an H1 trading update on 18 July 2022

Ben Crawford, CEO of CentralNic, commented: "CentralNic has enjoyed a strong start to the year with year-on-year organic growth now reaching north of 50%, gaining market share in a growing market. At the same time, we have continued to add scale and capability through the completion of three strategic acquisitions in the period, including VGL, our largest acquisition to date, funded by an oversubscribed equity placing and tap bond issue. With notably reduced leverage and a healthy cash cushion, CentralNic remains well positioned for the future ."

 

* Pro forma revenue, adjusted for acquired revenue, constant currency FX impact and non-recurring revenues is estimated at USD 533 million for the trailing 12 months ending 31 March 2022 and at USD 349 million for the trailing 12 months ending 31 March 2021

** Parent, subsidiary and associate earnings before interest, tax, depreciation, amortisation, non-cash charges and non-core operating expenses

*** Includes gross cash, bond and bank debt and prepaid finance costs; it does not include the Mark-To-Market (MTM) valuations for the bond hedges of USD 9.4m as of 31 March 2022 (USD 6.4m as of 31 December 2021)

**** Includes Net Debt as defined under *** plus (i) the Mark-To-Market (MTM) valuations for the bond hedges, (ii) lease liabilities, (iii) guarantee obligations, and (iv) the best estimate of any Deferred Consideration payable in cash, all divided by pro forma EBITDA, i.e. last twelve months' EBITDA including acquired entities' EBITDA on a pro forma basis

 

These unaudited financial results have been prepared for the purpose of fulfilling the information undertaking requirements included in the bond terms for the Senior Secured Callable Bond Issue. To the best of our knowledge, these unaudited financial results have been prepared in accordance with applicable accounting standards and give a true and fair view of the assets, liabilities, financial position and profit or loss of the Issuer and the Group taken as a whole. In addition, to the best of our knowledge, these unaudited financial results include a fair review of the development and performance of the business and the position of the Issuer and the Group taken as a whole. The principal risks and uncertainties that the business faces remain materially consistent with the risks and uncertainties described in the Risks section of the Group's 2021 annual report.

 

 

Ben Crawford - CEO

Don Baladasan - Group Managing Director

Michael Riedl - CFO

 

 

For further information:

CentralNic Group Plc Ben Crawford, Chief Executive Officer Don Baladasan, Group Managing Director Michael Riedl, Chief Financial Officer			+44 (0) 203 388 0600
Zeus (NOMAD and Broker)
Nick Cowles / Jamie Peel / James Edis (Investment Banking)		+44 (0) 161 831 1512
Dominic King (Corporate Broking)		+44 (0) 203 829 5000
Berenberg (Joint Broker) Mark Whitmore / Richard Andrews / Alix Mecklenburg-Solodkoff       SEC Newgate (for Media)	+44 (0) 20 3207 7800
Bob Huxford / Isabelle Smurfit / Max Richardson	+44 (0) 203 757 6880 centralnic@secnewgate.co.uk

Forward-Looking Statements

This document includes forward-looking statements. Whilst these forward-looking statements are made in good faith, they are based upon the information available to CentralNic at the date of this document and upon current expectations, projections, market conditions and assumptions about future events. These forward-looking statements are subject to risks, uncertainties and assumptions about the Group and should be treated with an appropriate degree of caution. 

About CentralNic Group Plc

CentralNic (AIM: CNIC) is a London-based AIM-listed company which drives the growth of the global digital economy by developing and managing software platforms allowing businesses globally to buy subscriptions to domain names, used for their own websites and email, as well as for protecting their brands online. These platforms can also be used for distributing domain name related software and services, an opportunity that contributes significantly to CentralNic's organic growth. The Company's inorganic growth strategy is identifying and acquiring cash-generative businesses in its industry with annuity revenue streams and exposure to growth markets and migrating them onto the CentralNic software and operating platforms. CentralNic operates globally with customers in almost every country in the world. It earns recurring revenues from the worldwide sales of internet domain names and other services on an annual subscription basis. For more information please visit: www.centralnicgroup.com

 

MANAGEMENT COMMENTARY ON PERFORMANCE

 

Introduction

CentralNic's organic growth, combined with its 2021 and 2020 acquisitions, substantially increased the scale and capabilities of the Company. The effect of this is demonstrated in our unaudited Q1 2022 results which show a transformational increase in revenue and adjusted EBITDA, which have grown by 86% and 83% respectively compared to Q1 2021.

 

Performance Overview

                The Company has performed strongly during the quarter with the key financial metrics listed below:

 

	31 March 2022	31 March 2021	Change
	USD m	USD m	%
Revenue	156.6	84.4	86%
Net revenue/ gross profit	39.9	27.9	43%
Adjusted EBITDA	18.5	10.1	83%
Operating profit	10.0	1.4	n.m.
Adjusted operating cash conversion 1	128%	163%	(21%)
Profit / (loss) after tax	4.0	(1.4)	n.m.
EPS - Basic (cents)	1.53	(0.67)	n.m.
EPS - Adjusted earnings - Basic (cents) 2	4.51	3.17	42%

 

¹ Please refer to note 8

² Please refer to note 7

 

Segmental analysis

The Company combined the previous Direct and Indirect segments into a single Online Presence segment for all reporting periods ending 30 September 2021 and later. The Online Marketing segment now includes the VGL and Fireball acquisitions.

 

Organic growth rates quoted below are calculated on a pro forma basis including all the Group's constituents as of the last balance sheet dates and adjusted for non-recurring or non-cash revenues and on a constant currency basis.

 

Online Marketing segment

The Online Marketing segment grew more rapidly, with revenues increasing by USD 71.6 million, or 158%, from USD 45.3 million to USD 116.9 million. Organic revenue grew at a rate of 83%, predominantly driven by CentralNic's TONIC media buying business, with the inorganic growth benefitting from the full quarter impact of the Wando and White & Case acquisitions, as well as the impact of acquiring VGL and, to a lesser degree, Fireball.    

 

The number of visitor sessions also increased by 54% from 0.7 billion in Q1 2021 to 1.0 billion in Q1 2022 and the revenue per thousand sessions ("RPM") increased by 105% from USD 48.0 to USD 98.2^[2]. 

 

CentralNic is a leader in online privacy, as none of our marketing platforms make use of third-party cookies or collect personal data on our customers. We therefore expect that restrictions placed on those practices (e.g. the ban of third-party cookies in Google Chrome or App Tracking Transparency in Apple's iOS 14.5) will benefit CentralNic, as we provide an alternative for online marketers that is proven to be highly effective, whilst respecting the privacy of internet users. This puts us at the forefront of companies offering solutions for a more privacy conscious world.

 

Online Presence segment

Revenue in the Online Presence segment increased by USD 0.6 million for the period ended 31 March 2021, or 2%, from USD 39.1 million to USD 39.7 million, with further growth being impacted by foreign currency revenues translating into less USD in the period.. Organic growth for this segment was 7% for the trailing twelve months ending 31 March 2022.

 

In the Online Presence segment, the Company steered away from increasing sales through discounted bulk sales, leading to the number of processed domain registration years decreasing modestly from 3.4 million in Q1 2021 to 3.1 million in Q1 2022 while at the same time, the average revenue per domain year increased by 11% from USD 8.60 to USD 9.50, ultimately improving the quality of revenue.  The share of Value-Added Service revenue for the period ended 31 March 2022 remained stable at 8%^[3].

                                                                                                                                                                               

 

Outlook

CentralNic enjoyed a very strong start to 2022 particularly our online marketing division.  In Q1 2022 we reported 53% organic revenue growth on a pro forma basis for the trailing twelve months ending 31 March 2022^[4].  Management was pleased with the achievement of strong results in Q1 2022, notably materially exceeding initial market expectations.

 

While the Directors are cognisant of the current global macro-economic environment, they are confident that the Group will comfortably trade in line with the recently upgraded market expectations for the year. By virtue of our confidence, targeted investment in human resources, restructuring and market-leading products, in particular our suite of privacy-safe online marketing technologies, we are well positioned to succeed in a challenging global environment.

 

The pipeline of future acquisition targets remains strong, while the net debt level remains comfortable particularly given the cash generation of the existing Group and the expected contribution from recent acquisitions. We are confident in continuing our trajectory towards joining the ranks of the global leaders in our industry.

 

These outstanding results demonstrate that CentralNic can source and complete transformative acquisitions, but more importantly that it can also integrate them successfully into marketplaces while continuing to deliver organic growth. Moreover, as the Company rapidly scales up, the underlying qualities of high recurring revenues and excellent cash conversion become increasingly meaningful.

 

A virtually pure play recurring revenue business with cash conversion of systematically over 100%, CentralNic continues to improve its key financial metrics as it grows including its cash position, interest coverage and net debt to EBITDA ratio. As our investment levels plateau moving forward, we expect future periods to benefit from increasing operational leverage.

 

 

Ben Crawford

Chief Executive Officer

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME			Unaudited Three months ended 31 March 2022	Unaudited Three months       ended 31 March    2021		Audited Year ended 31 December 2021
	Note		USD m	USD m		USD m
Revenue	4		156.6		84.4		410.5
Cost of sales			(116.7)		(56.5)		(292.0)
Gross profit			39.9		27.9		118.5
Administrative expenses			(28.2)		(25.0)		(101.1)
Share-based payments expense			(1.7)		(1.5)		(5.0)
Operating profit			10.0		1.4		12.4
Adjusted EBITDA(a)			18.5		10.1		46.3
Depreciation of property, plant and equipment			(0.6)		(0.7)		(3.5)
Amortisation of intangible assets			(6.1)		(4.0)		(18.3)
Non-core operating expenses(b)	5		(1.1)		(2.9)		(8.7)
Foreign exchange gain			1.0		0.4		1.6
Share-based payment expenses			(1.7)		(1.5)		(5.0)
Operating profit			10.0		1.4		12.4
Finance income	6		-		-		0.1
Finance costs	6		(2.8)		(2.5)		(10.9)
Net finance costs			(2.8)		(2.5)		(10.8)
Profit / (loss) before taxation			7.2		(1.1)		1.6
Income tax expense			(3.2)		(0.3)		(5.1)
Profit / (loss) after taxation			4.0		(1.4)		(3.5)
Items that may be reclassified subsequently to profit and loss
Exchange difference on translation of foreign operation			1.1		3.7		1.6
Loss arising on changes in fair value of hedging instruments			(3.0)		-		(6.4)
Total comprehensive income/(loss) for the period			2.1		2.3		(8.3)
Profit / (loss) is attributable to: Owners of CentralNic Plc			4.0		(1.4)		(3.5)
Total comprehensive income/(loss) is attributable to: Owners of CentralNic Plc			2.1		2.3		(8.3)
Earnings per share:
Basic (cents)			1.53		(0.67)		(1.56)
Diluted (cents)			1.49		(0.67)		(1.56)
Adjusted earnings - Basic (cents)			4.51		3.17		11.80
Adjusted earnings - Diluted (cents)			4.39		3.04		11.46

 

All amounts relate to continuing activities.

^(a)   Parent, subsidiary and associate earnings before interest, tax, depreciation, amortisation, non-cash charges and non-core operating expenses.

^(b)  Non-core operating expenses include items related primarily to acquisition, integration and other related costs, which are not incurred as part of the

underlying trading performance of the Group, and which are therefore adjusted for, in line with Group policy.

 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION			Unaudited Three months ended 31 March 2022		Restated* Unaudited Three months ended 31 March 2021		Audited Year ended 31 December 2021
			USD m		USD m		USD m
ASSETS
NON-CURRENT ASSETS
Property, plant and equipment			1.9		2.2		1.8
Right-of-use assets			7.2		6.0		6.8
Intangible assets			339.4		261.7		254.2
Deferred receivables			0.4		0.6		0.4
Investments			0.1		0.1		0.1
Deferred tax assets			8.6		5.4		8.6
			357.6		276.0		271.9
CURRENT ASSETS
Trade and other receivables			86.6		58.1		71.4
Inventory			0.9		1.9		0.9
Cash and bank balances			90.6		43.1		56.1
			178.1		103.1		128.4
TOTAL ASSETS			535.7		379.1		400.3
EQUITY AND LIABILITIES
EQUITY
Share capital			0.3		0.3		0.3
Share premium			98.3		39.8		39.8
Merger relief reserve			5.3		5.3		5.3
Share-based payments reserve			19.8		11.7		19.5
Cash flow hedging reserve			(9.4)		-		(6.4)
Foreign exchange translation reserve			4.0		5.1		2.9
Accumulated profits			56.6		54.7		52.6
TOTAL EQUITY			174.9		116.9		114.0
NON-CURRENT LIABILITIES
Other payables			8.3		5.3		4.4
Lease liabilities			2.3		4.7		5.1
Deferred tax liabilities			32.8		20.6		20.3
Borrowings			138.9		120.3		119.3
			182.3		150.9		149.1
CURRENT LIABILITIES
Trade and other payables and accruals			151.1		108.1		117.1
Lease liabilities			5.0		1.4		1.8
Borrowings			13.0		1.8		11.9
Derivative financial instruments			9.4		-		6.4
			178.5		111.3		137.2
TOTAL LIABILITIES			360.8		262.2		286.3
TOTAL EQUITY AND LIABILITIES			535.7		379.1		400.3

 

* The balance sheet as at 31 March 2021 has been restated due to (i) the recognition of USD 1,200,000 of liabilities for prior period credit notes; and (ii) the increase of USD 1,239,000 in amortisation charges due to the restatement of intangible amortisation. The impact of these restatements are fully disclosed in the Annual Report for the year ended 31 December 2021

CENTRALNIC GROUP PLC CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY	Share capital		Share premium			Merger relief reserve	Share- based payments reserve			Cash flow hedging Reserve	Foreign exchange translation reserve		Restated* Accumulated profits / (losses)	Restated Equity attributable to owners of the Parent Company
	USD m		USD m			USD m	USD m			USD m	USD m		USD m	USD m
Balance as at 1 January 2021		0.3		39.8	5.3			11.0	-			1.4	56.1	113.9
Loss for the period		-		-	-			-	-			-	(1.4)	(1.4)
Translation of foreign operation		-		-	-			-	-			3.7	-	3.7
Total comprehensive income for the period		-		-	-			-	-			3.7	(1.4)	2.3
Share-based payments		-		-	-			1.5	-			-	-	1.5
Share-based payments - exercised and lapsed		-		-	-			(0.8)	-			-	-	(0.8)
Balance as at 31 March 2021		0.3		39.8	5.3			11.7	-			5.1	54.7	116.9
Loss for the period		-		-	-			-	-			-	(2.1)	(2.1)
Translation of foreign operation		-		-	-			-	-			(2.2)	-	(2.2)
Total comprehensive income for the period		-		-	-			-	-			(2.2)	(2.1)	(4.3)
Loss arsing on changes in fair value of hedging instruments		-		-	-			-	(6.4)			-		(6.4)
Share-based payments		-		-	-			5.7	-			-	-	5.7
Share-based payments - deferred tax asset		-		-	-			2.2	-			-	-	2.2
Share-based payments - exercised and lapsed		-		-	-			(0.1)	-			-	-	(0.1)
Balance as at 31 December 2021		0.3		39.8	5.3			19.5	(6.4)			2.9	52.6	114.0
Profit for the period		-		-	-			-	-			-	4.0	4.0
Translation of foreign operation		-		-	-			-	-			1.1	-	1.1
Total comprehensive income for the period		-		-	-			-	-			1.1	4.0	5.1
Issue of share capital		-		59.6	-			-	-			-	-	59.6
Share issue costs		-		(1.1)	-			-	-			-	-	(1.1)
Loss arising on changes in fair value of hedging instruments		-		-	-			-	(3.0)			-	-	(3.0)
Share-based payments		-		-	-			1.7	-			-	-	1.7
Share-based payments - deferred tax asset		-		-	-			0.2	-			-	-	0.2
Share based payments - exercised and lapsed		-		-	-			(1.6)	-			-	-	(1.6)
Balance as at 31 March 2022		0.3		98.3	5.3			19.8	(9.4)			4.0	56.6	174.9

 

●      Share capital represents the nominal value of the company's cumulative issued share capital.

●      Share premium represents the cumulative excess of the fair value of consideration received for the issue of shares in excess of their nominal value less attributable share issue costs and other permitted reductions.

●      Merger relief reserve represents the cumulative excess of the fair value of consideration received for the issue of shares in excess of their nominal value less attributable shares issue costs and other permitted reductions.

●      Retained earnings represent the cumulative value of the profits not distributed to shareholders but retained to finance the future capital requirements of the CentralNic Group.

●      Share-based payments reserve represents the cumulative value of share-based payments recognised through equity and deferred tax assets arising thereon, net of exercised and lapsed options. 

●      Cash flow hedging reserve represents the effective portion of changes in the fair value of derivatives.

●      Foreign exchange translation reserve represents the cumulative exchange differences arising on Group consolidation.

 

* The balance sheet as at 31 March 2021 has been restated due to (i) the recognition of USD 1,200,000 of liabilities for prior period credit notes; and (ii) the increase of USD 1,239,000 in amortisation charges due to the restatement of intangible amortisation. The impact of these restatements are fully disclosed in the Annual Report for the year ended 31 December 2021