3 MONTHS ENDED 31 MARCH 2021 FINANCIAL RESULTS

1 June 2021

 

CENTRALNIC GROUP PLC

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

 

UNAUDITED FINANCIAL RESULTS FOR THE THREE MONTHS ENDED 31 MARCH 2021

CentralNic Group Plc (AIM: CNIC), the global internet platform company that derives revenue from the worldwide sales of internet domain names and related web services, announces its unaudited financial results for the three months ended 31 March 2021. Both revenue and adjusted EBITDA have increased quarter-on-quarter, driven by a combination of acquisitions and underlying organic growth.

Financial summary:

●       Revenue increased by 48% to USD 84.4m (Q1 2020: USD 56.9m)

●       Organic revenue growth Q1 2021 compared to Q1 2020 is 16%

●       Net revenue/ gross profit increased by 58% to USD 27.9m (Q1 2020: USD 17.7m)

●       Adjusted EBITDA* increased by 23% to USD 10.1m (Q1 2020: USD 8.2m)

●       Operating profit of USD 1.4m (Q1 2020: USD 2.9m)

●       Adjusted operating cash conversion of 163% (Q1 2020: 46%), primarily due to optimisation of working capital

●       Net debt** down to USD 79.0m (gross interest-bearing debt of USD 122.1m, cash of USD 43.1m) as compared to USD 85.0m on 31 December 2020 (gross interest-bearing debt of USD 113.6m, cash of USD 28.6m)

 

Operational highlights:          

●      Significant investment in new management, staff and systems accelerated organic growth to record levels and positions the Group well for continued growth

●      All segments have achieved organic growth compared to the prior year period

●      Investment in new products resulting in improved sales of value-added services in Direct and Indirect segments

●      Financial and operational performance demonstrate the resilience of all businesses in the face of potential business interruption related to the COVID-19 pandemic

 

Financial highlights:

●      Completion of acquisition of SafeBrands, an Enterprise Domain Management and Online Brand Protection provider, strengthening our Enterprise division within the Direct Segment, for USD 3.7m plus a deferred consideration of USD 0.7m

●      Successful, oversubscribed placement of EUR 15m (approximately USD 18.2m) of senior secured callable bonds at 104.5% of par value, implying a yield to maturity of 5.0%

●      Completion of the acquisition of online marketing business Wando Internet Solutions for USD 6.5m plus an additional performance-based earnout of up to USD 6.5m

 

Post period-end highlights:

●      Final EUR 0.8m of deferred consideration for the Team Internet acquisition settled in April 2021

●      EUR 0.6m of deferred contingent consideration for the SafeBrands acquisition settled in May 2021

 

Outlook:

●      The accelerated organic growth is testament to the success of the investment in new management, staff and systems

●      The Company's market consolidation strategy continues, with opportunities being continually assessed in what is a large, globally fragmented and growing market

●      Management expects the full year results to be in line with market expectations

 

 

 

Ben Crawford, CEO of CentralNic, commented: "In Q1 2021, CentralNic generated more revenue and EBITDA than in the whole of FY 2018. In our Direct and Indirect segments, which provide the essential tools for business large and small to go online, growth in domain name sales has notably accelerated. More importantly, our efforts to deliver value-added services through our direct and indirect channels are paying off, with the sales of associated services outpacing domain names sales.

 

Subsequent to the recent acquisitions of Zeropark, Voluum and Wando, which have substantially expanded the service offering past monetising traffic on dormant domain names to a full suite of online marketing and monetisation solutions, including data analytics, management resolved to rename the segment more fittingly as "Online Marketing". 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 to online marketers that is proven to be highly effective whilst respecting the privacy of internet users, putting us at the forefront of companies offering solutions for a more privacy conscious world." 

 

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

** Includes gross cash, debt and prepaid finance costs

 

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.

 

For further information:

CentralNic Group Plc
Ben Crawford, Chief Executive Officer	+44 (0) 203 388 0600
Don Baladasan, Group Managing Director
Michael Riedl, Chief Financial Officer
Zeus Capital Limited - NOMAD and Joint Broker
Nick Cowles / Jamie Peel (Corporate Finance)	+44 (0) 161 831 1512
John Goold / Rupert Woolfenden (Institutional Sales)	+44 (0) 203 829 5000
Stifel - Joint Broker
Fred Walsh / Alex Price / Richard Short	+44 (0) 20 7710 7600
SEC Newgate UK (for Media)
Bob Huxford / Tom Carnegie / Isabelle Smurfit	+44 (0) 203 757 6880 [email protected]

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 2021 results which show a transformational increase in revenue and adjusted EBITDA, both of which have grown by 48% and 23% respectively compared to Q1 2020.

 

Performance Overview

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

 

	31 March 2021	31 March 2020	Change
	USD m	USD m	%
Revenue	84.4	56.9	48%
Net revenue/ gross profit	27.9	17.7	58%
Adjusted EBITDA	10.1	8.2	23%
Operating profit	1.4	2.9	(52)%
Adjusted operating cash conversion 1	163%	46%	117%
Loss after tax	(1.4)	(1.3)	(8)%
EPS - Basic (cents)	(0.67)	(0.73)	8%
EPS - Adjusted earnings - Basic (cents) 2	3.17	1.97	61%

 

¹ Please refer to note 8

² Please refer to note 7

 

Segmental analysis

In our Direct and Indirect segments, which provide the essential tools for business large and small to go online, growth in domain name sales has accelerated notably. More importantly, our efforts to deliver value-added services through our direct and indirect channels are paying off, with the sales of associated services outpacing domain names sales. Organic growth rates quoted below are calculated on a pro forma basis including all the Group's constituents as of the last balance sheet excluding non-cash revenues and on a constant currency basis (which may have a significant impact given fluctuations in foreign exchange rates).

 

Indirect segment

Significant scale was achieved in the Indirect segment, with revenues increasing by USD 4.9m, or 24%, from USD 20.5m to USD 25.4m. The growth has been carried by the Group's key Wholesale brands. Organic growth of the segment was 13%.  

 

Direct segment

Revenue in the Direct segment increased by USD 3.1m, or 29%, from USD 10.6m to USD 13.7m. On an organic basis, revenue grew by 13%. Management is particularly pleased with this development as both the Retail business and the Corporate business have returned to growth, also supported by new project work wins for major Telcos. In particular the North American corporate domain business performed very strongly.  

 

 

 

Online Marketing segment

Subsequent to the recent acquisitions of Zeropark, Voluum and Wando, which have substantially expanded the service offering beyond monetising traffic on dormant domain names to a full suite of demand side and supply side solutions, including data analytics, management resolved to rename the segment more fittingly as "Online Marketing". The Online Marketing segment was the fastest growing one, with revenues increasing by USD 19.5m, or 76%, from USD 25.8m to USD 45.3m. Revenue continued to grow organically at a high rate of 19%, largely driven by Team Internet's PubTONIC, with the remainder being contributed by the acquisitions of Zeropark, Voluum and Wando.  

 

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 to online marketers that is proven to be highly effective whilst respecting the privacy of internet users, putting us at the forefront of companies offering solutions for a more privacy conscious world.

 

 

Outlook

In Q1 2021 CentralNic reported 16% organic revenue growth on a pro forma basis. Management is pleased with the achievement of strong results in Q1 2021, in line with market expectations.

 

These robust results demonstrate that CentralNic can continuously source and complete transformative acquisitions and integrate them successfully while continuing to deliver organic growth. Moreover, as the business scales rapidly, the underlying qualities of high recurring revenues and excellent cash conversion become increasingly meaningful.

 

The pipeline of future acquisition targets remains strong, while the net debt level remains comfortable particularly given the profitability of the existing CentralNic 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.

 

 

 

Ben Crawford

Chief Executive Officer

 

 

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME			Unaudited Three months ended 31 Mar 2021	Unaudited Three months ended 31 Mar 2020		Audited Year ended 31 Dec 2020
	Note		USD m	USD m		USD m
Revenue	4		84.4		56.9		241.2
Cost of sales			(56.5)		(39.2)		(164.9)
Gross profit			27.9		17.7		76.3
Administrative expenses			(25.0)		(13.4)		(70.8)
Share-based payments expense			(1.5)		(1.4)		(5.1)
Operating profit			1.4		2.9		0.4
Adjusted EBITDA(a)			10.1		8.2		30.6
Depreciation of property, plant and equipment			(0.7)		(0.5)		(2.1)
Amortisation of intangible assets			(4.0)		(2.9)		(12.5)
Non-core operating expenses(b)	5		(2.9)		(1.1)		(8.2)
Foreign exchange gain/(loss)			0.4		0.6		(2.1)
Share of associate EBITDA			-		-		(0.2)
Share-based payment expenses			(1.5)		(1.4)		(5.1)
Operating profit			1.4		2.9		0.4
Finance costs	6		(2.5)		(2.2)		(10.0)
Foreign exchange gain on borrowings	6		-		-		0.1
Net finance costs			(2.5)		(2.2)		(9.9)
Share of associate income			-		-		0.1
(Loss)/profit before taxation			(1.1)		0.7		(9.4)
Income tax (expense)/income			(0.3)		(2.0)		1.0
Loss after taxation			(1.4)		(1.3)		(8.4)
Items that may be reclassified subsequently to profit and loss
Exchange difference on translation of foreign operation			3.7		(3.7)		3.2
Total comprehensive income/(loss) for the period			2.3		(5.0)		(5.2)
Loss is attributable to: Owners of CentralNic Plc			(1.4)		(1.3)		(8.4)
Total comprehensive income/(loss) is attributable to: Owners of CentralNic Plc			2.3		(5.0)		(5.2)
Earnings per share:
Basic (cents)			(0.67)		(0.73)		(4.28)
Diluted (cents)			(0.67)		(0.73)		(4.28)
Adjusted earnings - Basic (cents)			3.17		1.97		10.57
Adjusted earnings - Diluted (cents)			3.04		1.90		10.16

 

All amounts relate to continuing activities.

^(a)   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 Mar 2021		Unaudited Three months ended 31 Mar 2020		Audited Year ended 31 Dec 2020
			USD m		USD m		USD m
ASSETS
NON-CURRENT ASSETS
Property, plant and equipment			2.2		1.7		2.2
Right-of-use assets			6.0		4.3		6.5
Intangible assets			262.9		196.6		257.0
Deferred receivables			0.6		0.1		0.7
Investments			0.1		1.4		0.1
Deferred tax assets			5.4		2.3		5.3
			277.2		206.4		271.8
CURRENT ASSETS
Trade and other receivables			58.1		46.4		47.9
Inventory			1.9		0.5		1.0
Cash and bank balances			43.1		24.1		28.7
			103.1		71.0		77.6
TOTAL ASSETS			380.3		277.4		349.4
EQUITY AND LIABILITIES
EQUITY
Share capital			0.3		0.2		0.3
Share premium			39.8		74.8		39.8
Merger relief reserve			5.3		5.3		5.3
Share-based payments reserve			11.7		7.5		11.0
Foreign exchange translation reserve			5.1		(5.5)		1.4
Accumulated profits/(losses)			57.9		(8.8)		59.3
TOTAL EQUITY			120.1		73.5		117.1
NON-CURRENT LIABILITIES
Other payables			5.3		5.2		2.9
Lease liabilities			4.7		3.6		5.2
Deferred tax liabilities			20.6		21.5		22.0
Borrowings			120.3		96.4		107.8
			150.9		126.7		137.9
CURRENT LIABILITIES
Trade and other payables and accruals			106.1		72.0		87.3
Lease liabilities			1.4		0.7		1.3
Borrowings			1.8		4.5		5.8
			109.3		77.2		94.4
TOTAL LIABILITIES			260.2		203.9		232.3
TOTAL EQUITY AND LIABILITIES			380.3		277.4		349.4

 

CENTRALNIC GROUP PLC CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY	Share capital		Share premium		Merger relief reserve		Share- based payments reserve		Foreign exchange translation reserve		Accumulated profits/ (losses)		Equity attributa-ble to owners of the Parent Company	Non-Controlling Interest	Total
	USD m		USD m		USD m		USD m		USD m		USD m		USD m	USD m	USD m
Balance as at 1 January 2020		0.2		74.8		5.3		6.1		(1.8)		(7.5)	77.1	(0.1)	77.0
Loss for the period		-		-		-		-		-		(1.3)	(1.3)	-	(1.3)
Adjustment to non-controlling interest		-		-		-		-		-		-	-	0.1	0.1
Translation of foreign operation		-		-		-		-		(3.7)		-	(3.7)	-	(3.7)
Total comprehensive income for the period		-		-		-		-		(3.7)		(1.3)	(5.0)	0.1	(4.9)
Share-based payments		-		-		-		1.4		-		-	1.4	-	1.4
Balance as at 31 March 2020		0.2		74.8		5.3		7.5		(5.5)		(8.8)	73.5	-	73.5
Loss for the period		-		-		-		-		-		(7.2)	(7.2)	-	(7.2)
Translation of foreign operation		-		-		-		-		6.9		-	6.9	-	6.9
Total comprehensive income for the period		-		-		-		-		6.9		(7.2)	(0.3)	-	(0.3)
Issue of new shares		0.1		43.7		-		-		-		-	43.8	-	43.8
Share issue costs		-		(3.9)		-		-		-		-	(3.9)	-	(3.9)
Capital reduction		-		(74.8)		-		-		-		74.8	-	-	-
Share-based payments		-		-		-		3.8		-		-	3.8	-	3.8
Share-based payments - deferred tax asset		-		-		-		0.2		-		-	0.2	-	0.2
Share-based payments - exercised and lapsed		-		-		-		(0.5)		-		0.5	-	-	-
Balance as at 31 December 2020		0.3		39.8		5.3		11.0		1.4		59.3	117.1	-	117.1
Loss for the period		-		-		-		-		-		(1.4)	(1.4)	-	(1.4)
Translation of foreign operation		-		-		-		-		3.7		-	3.7	-	3.7
Total comprehensive income for the period		-		-		-		-		3.7		(1.4)	2.3	-	2.3
Share-based payments		-		-		-		1.5		-		-	1.5	-	1.5
Share-based payments - exercised and lapsed		-		-		-		(0.8)		-		-	(0.8)	-	(0.8)
Balance as at 31 March 2021		0.3		39.8		5.3		11.7		5.1		57.9	120.1	-	120.1

 

●      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.

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

●      Foreign currency hedging reserve represents the effective portion of changes in the fair value of derivatives.

●      The non-controlling interests comprise the portion of equity of subsidiaries that are not owned, directly or indirectly, by the Group. These non-controlling interests are individually not material for the Group.