22 November 2022

 

CENTRALNIC GROUP PLC

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

 

UNAUDITED FINANCIAL RESULTS FOR THE NINE MONTHS ENDED 30 SEPTEMBER 2022

 

Transformational 88% increase in Revenue and 101% rise in Adjusted EBITDA

CentralNic Group Plc (AIM: CNIC), the global internet software company that derives recurring revenue from marketplaces for online presence and online marketing services, announces its unaudited financial results for the nine months ended 30 September 2022. The Company has achieved record revenue and Adjusted EBITDA for the period, driven by sustained organic growth which has been further supplemented with five acquisitions, including one acquisition post the period end.

Financial summary:

●       Revenue increased by 88% to USD 526.7m (September 2021 YTD: USD 280.6m)

●       Organic revenue growth* for the trailing twelve months ending 30 September 2022 of c.66%

●       Net revenue/gross profit increased by 53% to USD 128.3m (September 2021 YTD: USD 84.1m)

●       Adjusted EBITDA** doubled to USD 62.0m (September 2021 YTD: USD 30.9m)

●       Operating profit of USD 35.1m (September 2021 YTD: USD 6.5m)

●       Non-core operating expenses reduced by 8% to USD 6.0m (September 2021 YTD: 6.5m)

●       Adjusted operating cash conversion of 105% (September 2021 YTD: 118%)

●       Net debt*** reduced by 22% to USD 63.4m as compared to USD 81.4m on 31 December 2021

 

Operational highlights:          

●      The Company's organic growth further accelerated during the period, driven by the ongoing market share gains of its proprietary privacy-safe online marketing solutions which are facing a USD 100bn+ opportunity

●      The number of visitor sessions increased by 83% from 1.8 billion in September 2021 YTD to 3.3 billion in September 2022 YTD and the revenue per thousand sessions ("RPM") increased by 60% from USD 64.9 to USD 104.1 

●      EBITDA as a percentage of Net Revenue has increased from 37% in September 2021 YTD to 48% in September 2022 YTD, demonstrating that CentralNic's operating leverage enables revenue growth to drive increasing profitability

 

Corporate highlights:

●      Leverage**** reduced from 2.2x pro forma EBITDA as of 31 December 2021 to 1.2x due to improved profitability and continued deleverage

●      Acquisition of VGL, a leading product review website publisher, in March 2022 for an enterprise value of EUR 60 million (c. 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

●      On 18 July 2022, the final deferred consideration payment for the acquisition of KeyDrive SA was settled totalling USD 1.1 million

●      Acquisition of M.A Aporia on 13 September 2022 for an initial consideration of USD 11.2 million

●      Appointment of Claire MacLellan as Non-Executive Director on 14 September 2022

 

Post quarter end highlights:

●      Acquisition of Intellectual Property Management Company ("IPMC") on 26 October 2022 for an enterprise value of USD 7.3 million

●      In October 2022, the EUR 126 million of senior secured bonds were refinanced via a new Senior Facilities Agreement comprising a USD 150 million term loan and a USD 100 million revolving credit facility. These new debt facilities have an initial maturity date of 14 October 2026 with an option to extend by a further year. The borrowing cost will initially be 2.75% above SOFR, a notable reduction compared to the 7% above 3m EURIBOR for the senior secured bonds it replaces

●      Between 9 and 21 November 2022, the Company entered into three separate interest rate swap transactions to fix the variable interest component on USD 75 million of the new USD 150 million term loan at a blended fixed rate of 3.92%

 

Outlook:

●      CentralNic's results for the nine months to September 2022 ("September 2022 YTD") demonstrate the continued momentum within the business and significant potential of its strong marketplace model for Online Presence and Online Marketing services

●      The Directors remain confident in the Company's outlook, with the business trading comfortably inline with the recently upgraded market expectations^[1]. The Company will issue its full year trading update on 30 January 2023

Ben Crawford, CEO of CentralNic, commented: "CentralNic continued to build momentum in the third quarter, despite slower growth in the wider   economy, with year-on-year organic revenue growth now reaching a record 66%, EBITDA more than doubling, and operating profit on a completely new level due to CentralNic's operating leverage.  This continued strong and consistent financial performance has allowed us to refinance at a notably improved interest rate, with a syndicate of quality banks which have the means to provide ongoing support for CentralNic's growth strategy.  With the sustainability of our growth proven in a recessionary environment, and endorsed by leading financial institutions, we look forward to the future with even greater confidence."

 

* Pro forma revenue, adjusted for acquired revenue, constant currency FX impact and non-recurring revenues is estimated at USD 683 million for the trailing 12 months ending 30 September 2022 and at USD 411 million for the trailing 12 months ending 30 September 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, prepaid finance costs and the Mark-To-Market (MTM) valuations for the bond hedges (bond debt, bank debt and prepaid finance costs of USD 142.2m, hedging liabilities of USD 5.0m, and cash of USD 83.8m as of 30 September 2022 as compared to bond debt, bank debt and prepaid finance costs of USD 131.1m, hedging liabilities of USD 6.4m, and cash of USD 56.1m as of 31 December 2021) 

**** Includes Net Debt as defined under *** plus (i) lease liabilities, (ii) guarantee obligations, and (iii) 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

 

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 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 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

Michael Riedl - CFO

 

 

For further information:

CentralNic Group Plc
Ben Crawford, Chief Executive Officer 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 fast-growing London-based software and managed services company which drives the growth, efficiency, inclusiveness and safety of the global digital economy by developing and managing online marketplaces allowing businesses globally to buy subscriptions to domain names, websites and email, to monetise their websites, and to acquire customers online. It has delivered 78% CAGR since its IPO in 2013 through a combination of organic growth and acquiring and integrating cash-generative businesses in its industry with annuity revenue streams and exposure to growth markets. 

For more information please visit: www.centralnicgroup.com 

 

MANAGEMENT COMMENTARY ON PERFORMANCE

Introduction

CentralNic's organic growth, combined with its accelerated acquisition strategy, substantially increased the scale and capabilities of the Company. The effect of this is demonstrated in our unaudited September 2022 YTD results which show a transformational increase in revenue and adjusted EBITDA, which have grown by 88% and 101% respectively compared to September 2021 YTD.

 

Performance Overview

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

 

	Nine months ended 30 September 2022	Nine months ended 30 September 2021	Change
	USD m	USD m	%
Revenue	526.7	280.6	88%
Net revenue/ gross profit	128.3	84.1	53%
Adjusted EBITDA	62.0	30.9	101%
Operating profit	35.1	6.5	440%
Adjusted operating cash conversion *****	105%	118%	n.m.
Profit / (loss) after tax	6.5	(5.3)	n.m.
EPS - Basic (cents)	2.48	(2.30)	n.m.
EPS - Adjusted earnings - Basic (cents) ******	13.68	7.12	92%

 

^***** Please refer to note 9

^****** Please refer to note 8

 

Segmental analysis

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 has proven to be largely decorrelated from the softer performance reported by some of the major online marketing players, with the Company's Online Marketing segment further accelerating its growth with revenues increasing by USD 245.6 million, or 147%, from USD 167.0 million to USD 412.6 million. Organic revenue doubled, predominantly driven by CentralNic's TONIC media buying platform. Inorganic growth was obtained from the full year impact of the Wando and White & Case acquisitions, as well as the acquisition of VGL and, to a lesser degree, Fireball and Aporia.

 

The number of visitor sessions also increased by 83% from 1.8 billion in September 2021 YTD to 3.3 billion in September 2022 YTD and the revenue per thousand sessions ("RPM") increased by 60% from USD 64.9 to USD 104.1[2]. 

 

CentralNic is a leader in online privacy, as none of our marketing platforms make use of third-party cookies and rather rely on contextual data. 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 continue to 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, a key success factor in winning market share.

 

 

 

 

Online Presence segment

Organic growth for the Online Presence segment was 4.3% for the trailing twelve months ended 30 September 2022. Reported revenue in the segment increased only marginally though by less than 1%, from USD 113.6 million in September 2021 YTD to USD 114.1 million in September 2022 YTD, as a result of non-USD revenues translating into fewer USD following the devaluation of most global currencies against the dollar.  

 

The average revenue per domain year decreased by 6% from USD 9.50 in September 2021 YTD to USD 8.90 in September 2022 YTD, while the number of processed domain registrations increased 7% from 9.1 million in September 2021 YTD to 9.7 million in September 2022 YTD. The share of Value-Added Service revenue for the period ended 30 September 2022 remained stable at 8%[3].

 

 

Outlook

CentralNic has enjoyed a very strong 2022, particularly in our Online Marketing segment. In September 2022 YTD, we reported 66% organic revenue growth on a pro forma basis for the trailing twelve months ended 30 September 2022[4].

 

Whilst the Directors continue to monitor the global macro-economic environment closely, they are confident that the Group will trade comfortably inline with the recently upgraded market expectations for the current financial year. Targeted investment in people and our market-leading products, in particular our suite of privacy-safe online marketing technologies, position us to  succeed even in a challenging global environment.

 

The pipeline of future acquisition targets also remains strong, while our net leverage has substantially reduced and is now only 1.2x trailing 12-month EBITDA[5] - compared to 2.2x as of 31 December 2021. CentralNic is therefore comfortably positioned, particularly given the Group's high cash generation and the expected contribution from the recently completed acquisitions. With USD 100m of committed finance facilities, CentralNic now has additional capacity to continue its disciplined capital allocation to highly earnings accretive M&A opportunities.

 

These outstanding results further 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 strong organic growth. Moreover, as the Company rapidly scales up, the underlying qualities of high recurring revenues and excellent cash conversion become increasingly meaningful, demonstrated by EBITDA as a percentage of Net Revenue increasing from 37% in September 2021 YTD to 48% in September 2022 YTD.

 

As a virtually pure-play recurring revenue business with high inherent cash conversion consistently above 100%, the Company continues to improve its key financial metrics as it grows, including its cash position, interest coverage and net debt to EBITDA ratio.

 

CentralNic continued to build momentum in the third quarter, despite slower growth in the wider   economy, with year-on-year organic revenue growth now reaching a record 66%, EBITDA more than doubling, and operating profit on a completely new level due to CentralNic's operating leverage.  This continued strong and consistent financial performance has allowed us to refinance at a notably improved interest rate, with a syndicate of quality banks which have the means to provide ongoing support for CentralNic's growth strategy.  With the sustainability of our growth proven in a recessionary environment, and endorsed by leading financial institutions, we look forward to the future with even greater confidence.

 

 

Ben Crawford

Chief Executive Officer

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME			Unaudited Nine months ended 30 September 2022	Restated (a) Unaudited Nine months ended 30                             September 2021		Audited Year ended 31 December 2021
	Note		USD m	USD m		USD m
Revenue	5		526.7		280.6		410.5
Cost of sales			(398.4)		(196.5)		(292.0)
Gross profit			128.3		84.1		118.5
Administrative expenses			(89.4)		(74.3)		(101.1)
Share-based payments expense			(3.8)		(3.3)		(5.0)
Operating profit			35.1		6.5		12.4
Adjusted EBITDA(b)			62.0		30.9		46.3
Depreciation of property, plant and equipment			(2.1)		(2.7)		(3.5)
Amortisation of intangible assets			(21.1)		(13.5)		(18.3)
Non-core operating expenses(c)	6		(6.0)		(6.5)		(8.7)
Foreign exchange gain			6.1		1.6		1.6
Share-based payment expenses			(3.8)		(3.3)		(5.0)
Operating profit			35.1		6.5		12.4
Finance income	7		-		-		0.1
Finance costs	7		(9.4)		(8.0)		(10.9)
Foreign exchange loss on borrowings			(4.7)		-		-
Net finance costs			(14.1)		(8.0)		(10.8)
Profit/(loss) before taxation			21.0		(1.5)		1.6
Income tax expense			(14.5)		(3.8)		(5.1)
Profit/(loss) after taxation			6.5		(5.3)		(3.5)
Items that may be reclassified subsequently to profit and loss
Exchange difference on translation of foreign operation(d)			(30.5)		(0.6)		1.6
Movement arising on changes in fair value of hedging instruments			6.4		(3.8)		(6.4)
Total comprehensive income/(loss) for the period			(17.6)		(9.7)		(8.3)
Profit/(loss) is attributable to: Owners of CentralNic Group Plc			6.5		(5.3)		(3.5)
Total comprehensive income/(loss) is attributable to: Owners of CentralNic Group Plc			(17.6)		(9.7)		(8.3)
Earnings per share:
Basic (cents)			2.48		(2.30)		(1.56)
Diluted (cents)			2.41		(2.30)		(1.56)
Adjusted earnings - Basic (cents)			13.68		7.12		11.80
Adjusted earnings - Diluted (cents)			13.29		6.93		11.46

 

All amounts relate to continuing activities.

^(a)   The consolidated statement of comprehensive income for the nine months ended 30 September 2021 has been restated as follows:

(i) Revenue has reduced by USD 1.4 million due to the recognition of liabilities for prior period credit notes

(ii) Amortisation of intangible assets has increased by USD 1.0 million due to a restatement of intangible assets

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

^I  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

^(d)  The USD 30.5 million Exchange difference on translation of foreign operations is the result of lower USD revaluations of non-current assets denominated in EUR, as EUR deteriorated against USD during the year. These non-current assets are primarily Goodwill and Intangible Assets arising from acquisitions and as such this loss has no impact on reported cash flow or future cash flow

 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION			Unaudited Nine months ended 30 September 2022		Restated* Unaudited Nine months ended 30 September 2021		Audited Year ended 31 December 2021
			USD m		USD m		USD m
ASSETS
NON-CURRENT ASSETS
Property, plant and equipment			1.8		2.0		1.8
Right-of-use assets			5.6		6.4		6.8
Intangible assets			314.1		252.3		254.2
Deferred receivables			0.4		0.5		0.4
Investments			-		0.1		0.1
Deferred tax assets			7.9		6.6		8.6
			329.8		267.9		271.9
CURRENT ASSETS
Trade and other receivables			93.4		62.0		71.4
Inventory			0.8		1.0		0.9
Cash and bank balances			83.8		54.0		56.1
			178.0		117.0		128.4
TOTAL ASSETS			507.8		384.9		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			22.1		17.0		19.5
Cash flow hedging reserve			-		(3.8)		(6.4)
Foreign exchange translation reserve			(27.6)		2.0		2.9
Accumulated profits			59.1		51.2		52.6
TOTAL EQUITY			157.5		111.8		114.0
NON-CURRENT LIABILITIES
Other payables			11.5		3.4		4.4
Lease liabilities			1.9		4.7		5.1
Deferred tax liabilities			26.8		21.5		20.3
Borrowings			0.5		121.3		119.3
			40.7		150.9		149.1
CURRENT LIABILITIES
Trade and other payables and accruals			159.0		105.2		117.1
Lease liabilities			3.9		1.9		1.8
Borrowings			141.7		11.3		11.9
Derivative financial instruments			5.0		3.8		6.4
			309.6		122.2		137.2
TOTAL LIABILITIES			350.3		273.1		286.3
TOTAL EQUITY AND LIABILITIES			507.8		384.9		400.3

 

* The consolidated statement of financial position as at 30 September 2021 has been restated as follows (please refer to the Annual Report for the year ended 31 December 2021 for further disclosure): (i) Trade and other payables and accruals have increased by USD 3.4 million due to the recognition of liabilities for prior period credit notes. USD 1.4 million relates to the nine month period ended 30 September 2021, USD 1.2 million relates to the year ended 31 December 2020, and USD 0.8 million relates to the year ended 31 December 2019; (ii) Intangible assets have decreased by USD 2.2 million due to increased amortisation charges. USD 1.2 million relates to the year ended 31 December 2020 and USD 1.0 million relates to the nine month period ended 30 September 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		-		-	-			-	-			-	(5.3)	(5.3)
Translation of foreign operation		-		-	-			-	-			0.6	-	0.6
Total comprehensive income for the period		-		-	-			-	-			0.6	(5.3)	(4.7)
Loss arising on fair value of hedging instruments		-		-	-			-	(3.8)			-	-	(3.8)
Share-based payments		-		-	-			4.9	-			-	-	4.9
Share-based payments - deferred tax asset		-		-	-			1.5						1.5
Share-based payments - exercised and lapsed		-		-	-			(0.4)	-			-	0.4	-
Balance as at 30 September 2021		0.3		39.8	5.3			17.0	(3.8)			2.0	51.2	111.8
Profit for the period		-		-	-			-	-			-	1.8	1.8
Translation of foreign operation		-		-	-			-	-			0.9	-	0.9
Total comprehensive income for the period		-		-	-			-	-			0.9	1.8	2.7
Loss arising on fair value of hedging instruments		-		-	-			-	(2.6)			-	-	(2.6)
Share-based payments		-		-	-			2.3	-			-	-	2.3
Share-based payments - deferred tax asset		-		-	-			0.7	-			-	-	0.7
Share-based payments - exercised and lapsed		-		-	-			(0.5)	-			-	(0.4)	(0.9)
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		-		-	-			-	-			-	6.5	6.7
Translation of foreign operation		-		-	-			-	-			(30.5)	-	(30.5)
Total comprehensive income for the period		-		-	-			-	-			(30.5)	6.5	(24.0)
Issue of share capital		-		59.6	-			-	-			-	-	59.6
Share issue costs		-		(1.1)	-			-	-			-	-	(1.1)
Movement arising on fair value of hedging instruments		-		-	-			-	6.4			-	-	6.4
Share-based payments		-		-	-			3.8	-			-	-	3.8
Share-based payments - deferred tax asset		-		-	-			(0.4)	-			-	-	(0.4)
Share based payments - exercised and lapsed		-		-	-			(0.8)	-			-	-	(0.8)
Balance as at 30 September 2022		0.3		98.3	5.3			22.1	-			(27.6)	59.1	157.5

 

●         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.

 

* Please refer to the consolidated statement of comprehensive income and the consolidated statement of financial position for details of the prior period restatements