TIDMCNIC

RNS Number : 9457C

CentralNic Group PLC

28 February 2022

28 February 2022

CENTRALNIC GROUP PLC

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

UNAUDITED PRELIMINARY ACCOUNTS FOR THE YEARED 31 DECEMBER 2021

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 preliminary accounts for the financial year ended 31 December 2021. The audited annual report and accounts for 2021 will be published in early April 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 71% to USD 410.5m (FY2020: USD 240.0m) 
   --       Organic revenue increased by 39% (FY2020: 9%) 
   --       Net revenue (gross profit) increased by 58% to USD 118.5m (FY2020: USD 75.1m) 

-- Adjusted EBITDA* increased by 57% to USD 46.3m (FY2020: USD 29.4m) resulting in a margin of 11.3% on gross revenue and 39.0% on net revenue, i.e. excluding passthrough expenses such as registry fees and revenue shares

   --       Operating profit of USD 12.4m (FY2020: operating loss of USD 2.1m) 
   --       Profit before tax of USD 1.6m (FY2020: loss before tax of USD 11.8m) 

-- Net debt** down to USD 75.0m (gross interest bearing debt of USD 131.1m, cash of USD 56.1m) as compared to USD 85.0m in FY2020 - despite four acquisitions for a combined USD 18.3m in the year, and the settlement of combined deferred consideration of USD 1.7m

   --       Adjusted cash conversion ratio of 116% (FY2020: 120%) 
   --       Adjusted EPS for the year increased by 18% to USD 11.80 cents (FY2020: USD 9.96 cents) 

Financial highlights:

   --      Non-recurring revenue products contributed less than 1% of our total revenue 

-- Successful bond tap issue of EUR 15m at 104.5% of nominal value, implying a yield to maturity of sub 5%

-- Acquisition of SafeBrands (Online Presence segment) in January 2021, Wando Internet Solutions (Online Marketing segment) in February 2021, White & Case Ltd (Online Marketing segment) in November 2021 and NameAction (Online Presence segment) in December 2021

-- Final and interim deferred consideration payments made for Team Internet (Online Marketing segment) and SafeBrands ( Online Presence segment ) respectively

-- Currency exposure on the EUR 105m bond has been hedged at a locked-in average EUR/USD rate of 1.1891, 3.3% below the prior year balance sheet date

Operational highlights:

-- Very strong traction for the Group's privacy-safe online marketing technologies in the context of privacy-conscious policies of Big Tech

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

-- New Data and AI group established to improve growth and profitability, enhance customer service, optimise business operations and decision making, enhance marketing, reduce customer churn, and automate detection of non-compliant customer activity

-- Appointment of Carsten Sjoerup in the new role of Chief Technology & Product Officer to lead the integration of technology and product teams across all brands, with a focus on technical expertise and new product launches

   --      Experienced non-executive directors added to the board 
   --      New customer wins for the Registry business include JISC and Dot London 

Post year-end highlights:

   --      Exceptionally strong start into the year augurs well for financial year 2022 
   --      Acquisition of Fireball GmbH and the .ruhr TLD in February 2022 for a total of c.USD 0.7m 

Outlook:

-- The record organic growth in 2021 as the world started to come out of lockdown demonstrates the success of the Company's strategy of investing during the pandemic

-- The Company's market consolidation strategy continues, with acquisition opportunities being continually evaluated in a large, global and fragmented market

-- The Group is consolidating the carefully curated assets into its marketplace model for online presence and online marketing services which facilitates to develop network effects among the highly complementary businesses it has acquired

-- The Company is pleased to announce that the strong growth experienced during 2021 has continued into 2022 to date

-- The year-on-year revenue growth experienced during Q1 to date, which has been driven largely by the performance of the Online Marketing segment, is materially ahead of the revenue growth rates implied by analyst consensus expectations for the full year to 31 December 2022

-- Given the early stage of the current financial year and given the uncertainty implied by the geopolitical situation, the Directors have yet to fully ascertain the expected impact on full year performance; they however reconfirm their opinion that it should be at least at or above the high end of the latest range of analyst expectations ** *

Ben Crawford, CEO of CentralNic, commented: "CentralNic has enjoyed a very strong 2021 across both our online presence subscription products and our privacy-safe online marketing solutions - achieving record organic growth of 39% for the year. Significant investment in human resources, restructuring and market-leading products has contributed to the Group having revised its performance expectations for 2021 upwards repeatedly over the course of the year.

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

"These robust results reflect CentralNic's continued success in sourcing, completing and integrating transformative acquisitions, integrating them into marketplaces enjoying network effects, and driving organic growth. The pipeline of future acquisition targets remains strong and we are confident in continuing our trajectory towards joining the ranks of the global leaders in our industry."

* 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

*** Analyst expectations of revenue and adjusted EBITDA for the financial year ending 31 Dec 2022 currently range from USD 420.2m to USD 469.2m and USD 48.0m to USD 51.3m respectively.

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 2020 annual report.

Ben Crawford - CEO

Don Baladasan - Group Managing Director

Michael Riedl - CFO

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 
            Broker 
           Nick Cowles / Jamie Peel                                    +44 (0) 161 831 1512 
           Dominic King / Rupert Woolfenden                            +44 (0) 203 829 5000 
           SEC Newgate (for Media) 
           Bob Huxford / Isabelle Smurfit /                            +44 (0) 203 757 6880 
            Max Richardson                                      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 2019, 2020 and 2021 acquisitions, substantially increased the scale and capabilities of the Company. The effect of this is demonstrated in our unaudited preliminary FY2021 results which show a transformational increase in revenues and adjusted EBITDA, both of which have grown by 71% and 57% respectively compared to FY2020.

Performance overview

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

 
                              31 December       Restated 
                                     2021    31 December     Change(2) 
                                                    2020 
                                  USD'000        USD'000             % 
                             ------------  -------------  ------------ 
 Revenue                          410,540        240,012           71% 
                             ------------  -------------  ------------ 
 Gross profit                     118,499         75,118           58% 
                             ------------  -------------  ------------ 
 Adjusted EBITDA                   46,251         29,394           57% 
                             ------------  -------------  ------------ 
 Operating profit / (loss)         12,353        (2,079)          n.m. 
                             ------------  -------------  ------------ 
 Profit/(loss) before tax           1,555       (11,834)          n.m. 
                             ------------  -------------  ------------ 
 Loss after tax                   (3,542)       (10,859)          n.m. 
                             ------------  -------------  ------------ 
 EPS - Basic (cents)               (1.56)         (5.52)          n.m. 
                             ------------  -------------  ------------ 
 EPS - Adjusted earnings 
  - Basic (cents) (1)               11.80           9.96           18% 
                             ------------  -------------  ------------ 
 

(1) Please refer to note 7

(2) n.m. - not meaningful

On a pro forma basis (as defined in the footnote on page 2), the Company grew by 39% organically during FY2021.

Segmental analysis

The Company has combined the previous Direct and Indirect segments into a single Online Presence segment for all reporting periods ending 30 September 2021 and later. In this segment, which provides the essential tools for businesses to go online, growth in domain name sales has accelerated notably. More importantly, our efforts to deliver value-added services are paying off, with the growth in sales of associated services outpacing growth in domain names sales. The Online Marketing (formerly "Monetisation") segment, was renamed as its service offering has been substantially expanded through the acquisitions of Zeropark, Voluum and Wando, to a full suite of online customer acquisition solutions, including data analytics.

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 Presence segment

Significant scale was achieved in the Online Presence segment, with revenues increasing by USD 21.4m for the year ended 31 December 2021, or 17%, from USD 127.9m to USD 149.3m. Organic growth for this segment was 9% over the year. The growth has been predominantly carried by the Group's Wholesale and Enterprise brands. Enterprise has seen growth further accelerated by the successful SafeBrands acquisition.

The number of processed domain registration years increased by 9% from 11.3m in 2020 to 12.3m in 2021. At the same time, the average revenue per domain year increased by 2% from USD 9.02 to USD 9.24. The share of Value-Added Service revenue in 2021 was 8.3%[1].

Online Marketing segment

The Online Marketing segment grew more rapidly, with revenues increasing by USD 149.2m, or 133%, from USD 112.1m to USD 261.3m. Organic revenue grew at a rate of 65%, predominantly driven by CentralNic's PubTONIC media buying business, with the inorganic growth being contributed by the full year impact of the Zeropark and Voluum acquisitions and this year's acquisitions of Wando and the White & Case website portfolio.

The number of visitor sessions also increased by 49% from 2.1 billion in 2020 to 3.1 billion in 2021 and the revenue per thousand sessions ("RPM") increase by 36% from USD 47.9 to USD 64.9[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.

Outlook

CentralNic has enjoyed a very strong 2021, across both our online presence subscription products and our privacy-safe online marketing technologies - achieving record organic growth of 39% by virtue of our significant investment in human resources, restructuring and market-leading products. This contributed to the Group revising its performance expectations for 2021 upwards repeatedly over the course of the year.

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 over 100%, CentralNic continues to improve its cash position, interest coverage and net debt to EBITDA ratio as it grows. As our investment levels plateau moving forward, we expect future periods to benefit from increasing operational leverage.

The pipeline of future deals 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                                                             Restated (c)Year ended31 December 2020 
                                                       Unaudited 
                                                      Year ended 
                                                31 December 2021 
                                 Note                    USD'000                               USD'000 
                            -------------  ---------------------            -------------------------- 
 
 Revenue                          4                      410,540                               240,012 
 Cost of sales                                         (292,041)                             (164,894) 
 
 Gross profit                                            118,499                                75,118 
 
 Administrative expenses                               (101,140)                              (72,084) 
 Share-based payment 
  expenses                                               (5,006)                               (5,113) 
 
 Operating profit/(loss)                                  12,353                               (2,079) 
 
 Adjusted EBITDA (a)                                      46,251                                29,394 
 Depreciation of property, 
  plant and equipment                                    (3,514)                               (2,084) 
 Amortisation of 
  intangible assets                                     (18,291)                              (13,747) 
 Non-core operating 
  expenses (b)                    5                      (8,702)                               (8,237) 
 Foreign exchange 
  gain/(loss)                                              1,615                               (2,137) 
 Share of associate EBITDA                                     -                                 (155) 
 Share-based payment 
  expenses                                               (5,006)                               (5,113) 
                                           ---------------------            -------------------------- 
 Operating profit/(loss)                                  12,353                               (2,079) 
--------------------------  -------------  ---------------------  --------  -------------------------- 
 
 Finance income                                               59                                     5 
 Finance costs                    6                     (10,857)                               (9,976) 
 Foreign exchange gain on 
  borrowings                      6                            -                                   137 
 
 Net finance costs                                      (10,798)                               (9,834) 
 Share of associate income                                     -                                    79 
 
 
 Profit/(loss) before 
  taxation                                                 1,555                              (11,834) 
 Taxation (charge)/credit                                (5,097)                                   975 
                                           ---------------------            -------------------------- 
 Loss after taxation                                     (3,542)                              (10,859) 
 
 Items that may be 
 reclassified subsequently 
 to profit and loss 
 Exchange difference on 
  translation of foreign 
  operation                                                1,573                                 3,243 
 
 
 Total comprehensive loss 
  for the financial year                                 (1,969)                               (7,616) 
 
 
 Loss after tax is 
  attributable to: 
  Owners of CentralNic 
  Group Plc                                              (3,542)                              (10,859) 
                                           ---------------------            -------------------------- 
                                                         (3,542)                              (10,859) 
 Total comprehensive 
  profit/(loss) is 
  attributable to: 
  Owners of CentralNic 
  Group Plc                                              (1,969)                               (7,616) 
                                           ---------------------            -------------------------- 
 
                                                         (1,969)                               (7,616) 
                                           ---------------------            -------------------------- 
 
   Earnings per share 
 Basic (cents)                                            (1.56)                                (5.52) 
 Diluted (cents)                                          (1.56)                                (5.52) 
 Adjusted earnings - Basic 
  (cents)                                                  11.80                                  9.96 
 Adjusted earnings - 
  Diluted (cents)                                          11.46                                  9.57 
 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) N on-core operating expenses include items related to 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. 
      (c) The prior year figures have been restated as follows: 
        *    Revenue has reduced by USD 1,200,000 due to the 
             recognition of a credit note provision 
 
 
        *    Amortisation charges have increased by USD 1,239,000 
             due to the restatement of intangible asset 
             amortisation 
 
 
 
 CONSOLIDATED STATEMENT OF FINANCIAL POSITION 
                                                             Unaudited         Restated (a) 
                                                            Year ended           Year ended 
                                                      31 December 2021     31 December 2020 
                                                               USD'000              USD'000 
                                                   -------------------  ------------------- 
 
 ASSETS 
 
 NON-CURRENT ASSETS 
 Property, plant and equipment                                   1,820                2,222 
 Right-of-use assets                                             6,781                6,455 
 Intangible assets                                             254,169              255,716 
 Other non-current assets                                          439                  661 
 Investments                                                        58                  114 
 Deferred tax assets                                             8,563                5,410 
 
 
                                                               271,830              270,578 
                                                   -------------------  ------------------- 
 CURRENT ASSETS 
 Trade and other receivables                                    71,363               47,941 
 Inventory                                                         895                1,011 
 Cash and bank balances                                         56,133               28,654 
 
 
                                                               128,391               77,606 
 
 
 TOTAL ASSETS                                                  400,221              348,184 
 
 
 
 EQUITY AND LIABILITIES 
 
 EQUITY 
 Share capital                                                     290                  290 
 Share premium                                                  39,845               39,845 
 Merger relief reserve                                           5,297                5,297 
 Share-based payments reserve                                   19,506               11,032 
 Cash flow hedging reserve                                     (6,419)                    - 
 Foreign exchange translation reserve                            2,933                1,360 
 Accumulated profits                                            52,530               56,072 
 
 
 TOTAL EQUITY                                                  113,982              113,896 
 
 
 
   NON-CURRENT LIABILITIES 
 Other payables                                                  4,420                2,878 
 Lease liabilities                                               5,105                5,204 
 Deferred tax liabilities                                       20,334               21,965 
 Borrowings                                                    119,251              107,820 
 
                                                               149,110              137,867 
                                                   -------------------  ------------------- 
 CURRENT LIABILITIES 
            Trade and other payables and accruals              117,016               89,256 
 Lease liabilities                                               1,837                1,346 
 Borrowings                                                     11,857                5,819 
 Derivative financial liabilities                                6,419                    - 
 
 
                                                               137,129               96,421 
                                                   -------------------  ------------------- 
 
 
 TOTAL LIABILITIES                                             286,239              234,288 
 
 
 TOTAL EQUITY AND LIABILITIES                                  400,221              348,184 
                                                   -------------------  ------------------- 
 

(a) The prior year figures have been restated as follows:

-- Closing accumulated profits as at 31 December 2020 have reduced by USD 2,000,000 due to the recognition of a credit note provision of USD 1,200,000 in 2020 and of USD 800,000 in 2019

-- Trade and other payables and accruals have increased by USD 2,000,000 due to the recognition of the above credit note provisions

-- Closing intangible assets have reduced by USD 1,239,000 due to the restatement of intangible asset amortisation

 
 CENTRALNIC                                                                                                  Equity 
  GROUP PLC                                                                                            attributable 
  CONSOLIDATED                                                      Cash       Foreign                    to owners 
  STATEMENTS                              Merger   Share-based      flow      exchange   Accumulated         of the 
  OF CHANGES          Share      Share    relief      payments   hedging   translation      profits/         Parent   Non-Controlling      Total 
  IN EQUITY         capital    premium   reserve       reserve   reserve       reserve      (losses)        Company          Interest     equity 
                    USD'000    USD'000   USD'000       USD'000   USD'000       USD'000       USD'000        USD'000           USD'000    USD'000 
 Balance as 
  at 1 January 
  2020 (restated)       232     74,840     5,297         6,095         -       (1,883)       (8,308)         76,273              (69)     76,204 
                   --------  ---------  --------  ------------  --------  ------------  ------------  -------------  ----------------  --------- 
 Loss for 
  the year                -          -         -             -         -             -      (10,859)       (10,859)                 -   (10,859) 
 Adjustment 
  to 
  non-controlling 
  interest                -          -         -             -         -             -             -              -                69         69 
 Other 
  comprehensive 
  income - 
  translation 
  of foreign 
  operation               -          -         -             -         -         3,243             -          3,243                 -      3,243 
                   --------  ---------  --------  ------------  --------  ------------  ------------  -------------  ----------------  --------- 
 Total 
  comprehensive 
  loss for 
  the year                -          -         -             -         -         3,243      (10,859)        (7,616)                69    (7,547) 
 Transactions 
  with owners 
 Issue of 
  share capital          58     43,674         -             -         -             -             -         43,732                 -     43,732 
 Share issue 
  costs                   -    (3,829)         -             -         -             -             -        (3,829)                 -    (3,829) 
 Elimination 
  of share 
  premium                 -   (74,840)         -             -         -             -        74,840              -                 -          - 
 Share-based 
  payments                -          -         -         5,179         -             -             -          5,179                 -      5,179 
 Share-based 
  payments 
  - deferred 
  tax assets              -          -         -           157         -             -             -            157                 -        157 
 Share-based 
  payments 
  - exercised 
  and lapsed              -          -         -         (399)         -             -           399              -                 -          - 
                   --------  ---------  --------  ------------  --------  ------------  ------------  -------------  ----------------  --------- 
 Balance as 
  at 31 December 
  2020 (restated)       290     39,845     5,297        11,032         -         1,360        56,072        113,896                 -    113,896 
                   --------  ---------  --------  ------------  --------  ------------  ------------  -------------  ----------------  --------- 
 Loss for 
  the year                -          -         -             -         -             -       (3,542)        (3,542)                 -    (3,542) 
 Other 
  comprehensive 
  income - 
  translation 
  of foreign 
  operation               -          -         -             -         -         1,573             -          1,573                 -      1,573 
                   --------  ---------  --------  ------------  --------  ------------  ------------  -------------  ----------------  --------- 
 Total 
  comprehensive 
  loss for 
  the year                -          -         -             -         -         1,573       (3,542)        (1,969)                 -    (1,969) 
 Transactions 
  with owners 
 Loss arising 
  on changes 
  in fair value 
  of hedging 
  instruments             -          -         -             -   (6,419)             -             -        (6,419)                 -    (6,419) 
 Share-based 
  payments                -          -         -         6,633         -             -             -          6,633                 -      6,633 
 Share-based 
  payments 
  - deferred 
  tax assets              -          -         -         2,704         -             -             -          2,704                 -      2,704 
 Share-based 
  payments 
  - exercised 
  and lapsed              -          -         -         (863)         -             -             -          (863)                 -      (863) 
                   --------  ---------  --------  ------------  --------  ------------  ------------  -------------  ----------------  --------- 
 Balance as 
  at 31 December 
  2021                  290     39,845     5,297        19,506   (6,419)         2,933        52,530        113,982                 -    113,982 
                   --------  ---------  --------  ------------  --------  ------------  ------------  -------------  ----------------  --------- 
 
 

-- 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 share issue costs and other permitted reductions. Where the consideration for shares in another company includes issued shares, and 90% of the equity is held in the other company.

-- 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.

-- 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.

 
                                                                                       Restated 
                                                                  Unaudited             Audited 
                                                                 Year ended          Year ended 
                                                           31 December 2021    31 December 2020 
 CONSOLIDATED STATEMENT OF CASH FLOWS                               USD'000             USD'000 
                                                        -------------------  ------------------ 
 Cash flow from operating activities 
 
 Profit / (loss) before taxation                                      1,555            (11,834) 
 
 Adjustments for: 
 
 Depreciation of property, plant and equipment                        3,514               2,084 
 Amortisation of intangible assets                                   18,291              13,747 
 Share of associate income                                                -               (155) 
 Gain on sale of associate                                                -               (266) 
 Finance cost (net)                                                  10,798               9,834 
 Share-based payments                                                 5,006               5,113 
 Increase in trade and other receivables                           (18,816)             (8,066) 
 Increase in trade and other payables and accruals                   20,017              12,195 
 Decrease in inventories                                                302                   - 
                                                        -------------------  ------------------ 
 Cash flow from operations                                           40,667              22,652 
                                                        -------------------  ------------------ 
 
 Income tax paid                                                    (2,230)             (1,957) 
                                                        -------------------  ------------------ 
 
 Net cash flow generated from operating activities                   38,437              20,695 
 
 Cash flow used in investing activities 
 Purchase of property, plant and equipment                            (722)             (1,296) 
 Purchase of intangible assets                                      (2,833)             (2,963) 
 Payment of deferred consideration                                  (1,719)             (5,467) 
 Proceeds from disposals of investment in associate                       -               1,814 
 Acquisition of subsidiaries, net of cash acquired                 (18,344)            (37,065) 
                                                        -------------------  ------------------ 
 
 Net cash flow used in investing activities                        (23,618)            (44,977) 
 
 Cash flow used in financing activities 
 Proceeds from borrowings                                            26,631               2,208 
 Bond arrangement fees                                                (625)               (645) 
 Proceeds from issuance of ordinary shares (net)                          -              34,667 
 Payment of finance leases                                          (1,981)             (1,081) 
 Interest paid                                                      (8,647)             (9,512) 
 Net cash flow generated from financing activities                   15,378              25,637 
                                                        -------------------  ------------------ 
 
 Net increase in cash and cash equivalents                           30,197               1,355 
 Cash and cash equivalents at beginning of the year                  28,654              26,182 
 Exchange differences on cash and cash equivalents                  (2,718)               1,117 
                                                        -------------------  ------------------ 
 
 Cash and cash equivalents at end of the year                        56,133              28,654 
 
 
 

NOTES TO THE UNAUDITED PRELIMINARY ACCOUNTS

   1.   General information 

CentralNic Group Plc is the UK holding company of a group of companies which are engaged in the provision of global domain name services. The Company is registered in England and Wales. Its registered office and principal place of business is 4th Floor, Saddlers House, 44 Gutter Lane, London EC2V 6BR.

The CentralNic Group is a global internet platform that derives revenue from the worldwide sales of internet domain names and related web services.

   2.   Basis of preparation 

The preliminary accounts for the year ended 31 December 2021 are unaudited and have been prepared on the basis of the accounting policies set out in the Group's 2020 statutory accounts for the purpose of fulfilling the information undertaking requirements included in the bond terms for the Senior Secured Callable Bond Issue, and, for all years presented, in line with the principal disclosure requirements of IAS 34: Interim Financial Reporting.

The unaudited preliminary accounts are condensed and do not represent statutory accounts within the meaning of section 435 of the Companies Act 2016. The statutory accounts for the year ended 31 December 2020, upon which the auditors issued an unqualified opinion, are available on the Group's website and did not contain statements under section 498(2) or (3) of the Companies Act 2006.

As a profitable provider of online subscription services with high cash conversion and solid organic growth, de-centrally organised and catering to solid customers distributed over the entire globe, CentralNic has not been, and is not expected to be, severely affected by COVID-19. The Directors have taken the necessary precautions to preserve the Group's cash and review the acquisition pipeline and financing plans to ensure stability and optimisation of the business strategies in the current global climate.

   3.   Segment analysis 

CentralNic is an independent global service provider distributing domain names and associated digital subscription products through its Online Presence segment, as well as providing Online Marketing services. Operating segments are organised around the products and services of the business and are prepared in a manner consistent with the internal reporting used by the chief operating decision maker to determine allocation of resources to segments and to assess segmental performance. The Directors do not rely on analyses of segment assets and liabilities, nor on segmental cash flows arising from the operating, investing and financing activities for each reportable segment, for their decision making and therefore have not included them.

The Online Presence segment conducts business as a global distributor of domain names through a network of channel partners as well as selling domain

names and ancillary services to end users, monitoring services to protect brands online, technical and consultancy services to corporate clients, and licensing the Group's in-house developed registry management platform on a global basis. The Online Marketing segment provides advertising placement services to match those who have traffic, e.g. domain name owners and content website operators, with

those who want traffic, e.g. ecommerce website operators and affiliates on a global basis, including AI based data analytics and automation tools.

NOTES TO THE UNAUDITED PRELIMINARY ACCOUNTS (continued)

   3.   Segment analysis (continued) 

Management reviews the activities of the CentralNic Group in the segments disclosed below:

 
                                                               Year ended 31 December 2021 
                                                  ----------------------------------------------------- 
                                                         Online Presence   Online Marketing       Total 
                                                                 USD'000            USD'000     USD'000 
------------------------------------------------  ----  ----------------  -----------------  ---------- 
 Revenue                                                         149,274            261,266     410,540 
------------------------------------------------------  ----------------  -----------------  ---------- 
 Gross profit                                                     53,250             65,249     118,499 
------------------------------------------------------  ----------------  -----------------  ---------- 
 Total administrative expenses                                                                (101,140) 
  Share-based payments expenses                                                                 (5,006) 
------------------------------------------------------  ----------------  -----------------  ---------- 
 Operating profit                                                                                12,353 
------------------------------------------------------  ----------------  -----------------  ---------- 
 
 Adjusted EBITDA                                                                                 46,251 
  Depreciation of property, plant and equipment                                                 (3,514) 
  Amortisation of intangibles assets                                                           (18,291) 
  Non-core operating expenses                                                                   (8,702) 
  Foreign exchange gain                                                                           1,615 
  Share-based payment expenses                                                                  (5,006) 
------------------------------------------------------  ----------------  -----------------  ---------- 
 Operating profit                                                                                12,353 
------------------------------------------------------  ----------------  -----------------  ---------- 
 Finance cost (net)                                                                            (10,798) 
 Profit before taxation                                                                           1,555 
------------------------------------------------------  ----------------  -----------------  ---------- 
 Income tax expense                                                                             (5,097) 
------------------------------------------------------  ----------------  -----------------  ---------- 
 Loss after taxation                                                                            (3,542) 
------------------------------------------------------  ----------------  -----------------  ---------- 
 
 
                                                                         Restated 
                                                                Year ended 31 December 2020 
                                                  ----------------------------------------------------- 
                                                         Online Presence   Online Marketing       Total 
                                                                 USD'000            USD'000     USD'000 
------------------------------------------------  ----  ----------------  -----------------  ---------- 
 Revenue                                                         127,939            112,073     240,012 
------------------------------------------------------  ----------------  -----------------  ---------- 
 Gross profit                                                     45,091             30,027      75,118 
------------------------------------------------------  ----------------  -----------------  ---------- 
 Total administrative expenses                                                                 (72,084) 
  Share-based payments expenses                                                                 (5,113) 
------------------------------------------------------  ----------------  -----------------  ---------- 
 Operating loss                                                                                 (2,079) 
------------------------------------------------------  ----------------  -----------------  ---------- 
 
 Adjusted EBITDA                                                                                 29,394 
  Depreciation of property, plant and equipment                                                 (2,084) 
  Amortisation of intangibles assets                                                           (13,747) 
  Non-core operating expenses                                                                   (8,237) 
  Foreign exchange loss                                                                         (2,137) 
  Share of associate income                                                                       (155) 
  Share-based payment expenses                                                                  (5,113) 
------------------------------------------------------  ----------------  -----------------  ---------- 
 Operating loss                                                                                 (2,079) 
------------------------------------------------------  ----------------  -----------------  ---------- 
 Finance cost (net)                                                                             (9,834) 
 Share of associate income                                                                           79 
------------------------------------------------------  ----------------  -----------------  ---------- 
 Loss before taxation                                                                          (11,834) 
------------------------------------------------------  ----------------  -----------------  ---------- 
 Income tax expense                                                                                 975 
------------------------------------------------------  ----------------  -----------------  ---------- 
 Loss after taxation                                                                           (10,859) 
------------------------------------------------------  ----------------  -----------------  ---------- 
 

NOTES TO THE UNAUDITED PRELIMINARY ACCOUNTS (continued)

   4.   Revenue 

The Group's revenue is generated from the following geographical areas:

 
                               Unaudited        Restated 
                              Year ended      Year ended 
                             31 December     31 December 
                                    2021            2020 
                                 USD'000         USD'000 
                           -------------  -------------- 
      Online Presence 
    UK                             3,648           3,365 
    North America                 41,279          35,966 
    Europe                        72,462          62,887 
    ROW                           31,885          25,721 
                                 149,274         127,939 
                           -------------  -------------- 
       Online Marketing 
    UK                             3,239             575 
    North America                 19,045           6,197 
    Europe                       217,211         100,129 
    ROW                           21,771           5,172 
 
 
                                 261,266         112,073 
                           -------------  -------------- 
       Total revenue             410,540         240,012 
 
 
 
 
   5.   Non-core operating expenses 
 
                                                          Unaudited             Restated 
                                                         Year ended           Year ended 
                                                   31 December 2021     31 December 2020 
                                                            USD'000              USD'000 
 Acquisition related costs                                    3,081                1,386 
 Integration and streamlining costs                           3,915                3,613 
 Other costs (1)                                              1,706                3,238 
 
                                                              8,702                8,237 
                                                 ------------------  ------------------- 
 

(1) Other costs include items related primarily to business reviews and restructuring expenses.

NOTES TO THE UNAUDITED PRELIMINARY ACCOUNTS (continued)

   6.   Finance costs 
 
                                                                                   Unaudited            Restated 
                                                                                  Year ended          Year ended 
                                                                            31 December 2021    31 December 2020 
                                                                                     USD'000             USD'000 
 Finance income                                                                         (59)                 (5) 
 Impact of unwinding of discount on net present value of deferred 
  consideration                                                                          246                 221 
 Reappraisal of deferred consideration                                                  (71)                 921 
 Foreign exchange (gain)/loss on revolving credit facility revaluation                     -               (137) 
 Arrangement fees on borrowings                                                        1,553               1,115 
 Interest expense on short-term borrowings                                               269                 235 
 Interest expense on long-term borrowings                                              8,664               7,324 
 Interest expense on leases                                                              196                 160 
 Net finance costs                                                                    10,798               9,834 
                                                                          ------------------  ------------------ 
 
 
   7.     Earnings per share 

Earnings per share has been calculated by dividing the consolidated loss after taxation attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during the year. Diluted earnings per share have been calculated on the same basis as above, except that the weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares (arising from the Group's share option scheme and warrants) into ordinary shares has been added to the denominator. There are no changes to the profit (numerator) because of the dilutive calculation. Due to the loss made in each year, the impact of the potential shares to be issued on exercise of share options and warrants would be anti-dilutive and therefore diluted earnings per share is reported on the same basis on earnings per share.

 
                                                                                   Unaudited            Restated 
                                                                                  Year ended          Year ended 
                                                                            31 December 2021    31 December 2020 
                                                                                     USD'000             USD'000 
 
 Loss after tax attributable to owners                                               (3,542)            (10,859) 
 Operating profit/(loss)                                                              12,353             (2,079) 
 Depreciation of property, plant and equipment                                         3,514               2,084 
 Amortisation of intangible assets                                                    18,291              13,747 
 Non-core operating expenses                                                           8,702               8,237 
 Foreign exchange (gain)/loss                                                        (1,615)               2,137 
 Share of associate income                                                                 -                 155 
 Share-based payment expenses                                                          5,006               5,113 
                                                                          ------------------  ------------------ 
 Adjusted EBITDA                                                                      46,251              29,394 
 Depreciation                                                                        (3,514)             (2,084) 
 Finance costs (excluding deferred consideration related amounts - note 
  6)                                                                                (10,857)             (8,698) 
 Finance income                                                                           59                   5 
 Taxation                                                                            (5,097)                 975 
                                                                          ------------------  ------------------ 
 Adjusted earnings                                                                    26,842              19,592 
                                                                          ------------------  ------------------ 
 Weighted average number of shares: 
 Basic                                                                           227,380,670         196,680,310 
 Effect of dilutive potential ordinary shares                                      6,856,289           8,019,971 
                                                                          ------------------  ------------------ 
 Diluted                                                                         234,236,959         204,700,281 
 Earnings per share: 
 Basic (cents)                                                                        (1.56)              (5.52) 
 Diluted (cents)                                                                      (1.56)              (5.52) 
 Adjusted earnings - Basic (cents)                                                     11.80                9.96 
 Adjusted earnings - Diluted (cents)                                                   11.46                9.57 
 
 

Basic and diluted earnings per share of (1.56) cents (2020: (5.52) cents) have been impacted by amortisation charges, non-core operating expenses, foreign exchange gains and losses, share of associate income and share-based payment expenses.

NOTES TO THE UNAUDITED PRELIMINARY ACCOUNTS (continued)

   8.     Financial instruments 

The CentralNic Group is exposed to market risk, credit risk and liquidity risk arising from financial instruments. The Group's overall financial risk management policy focusses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group's financial performance. The Group does not trade in financial instruments.

Cash conversion for the year ended 31 December 2021 was as follows:

 
                                                   Unaudited       Restated 
                                                  Year ended     Year ended 
                                                 31 December    31 December 
                                                        2021           2020 
                                                     USD'000        USD'000 
 Cash conversion 
 Cash flow from operations                            40,667         22,652 
 Exceptional costs incurred and paid during 
  the year                                            11,025          7,466 
 Settlement of one-off working capital items 
  from the prior year                                  1,975          5,075 
                                               -------------  ------------- 
 Adjusted cash flow from operations                   53,667         35,193 
                                               -------------  ------------- 
 Adjusted EBITDA                                      46,251         29,394 
 Conversion %                                           116%           120% 
 
 
 
 
 Net debt as at 31 December 2021 and 2020 is shown in the table below. 
                                                                 Bond   Bank debt      Cash   Net debt 
                                                              USD'000     USD'000   USD'000    USD'000 
                                                       --------------  ----------  --------  --------- 
 
 At 31 December 2020                                        (107,334)     (6,305)    28,654   (84,985) 
 Drawdown                                                           -     (8,488)     8,488          - 
 Amortisation of costs                                          (500)           -         -      (500) 
 Placing proceeds (net of costs)                             (17,966)           -    17,966          - 
 Other cash movements                                               -           -     3,743      3,743 
                                                       --------------  ----------  --------  --------- 
 Net cash flows before foreign exchange                     (125,800)    (14,793)    58,851   (81,742) 
 Foreign exchange differences                                   9,104         381   (2,718)      6,767 
 
 
 
 
 At 31 December 2021                                        (116,696)    (14,412)    56,133   (74,975) 
                                                       --------------  ----------  --------  --------- 
 
 
 

NOTES TO THE UNAUDITED PRELIMINARY ACCOUNTS (continued)

   9.     Business combinations 

Acquisition of Safebrands

For further details regarding acquisition of Safebrands on 09 January 2021, please refer to note 9 of the unaudited financial results for the three months ended 31 March 2021, as published and released on 1 June 2021

Acquisition of Wando Internet Solutions

For further details regarding the acquisition of Wando Internet Solutions on 22 February 2021, please refer to note 9 of the unaudited financial results for the six months ended 30 June 2021, as published and released on 31 August 2021.

Acquisition of White and Case Ltd

On 1 October 2021, CentralNic Group Plc acquired White and Case Ltd, a publishing network of revenue generating websites for a consideration of USD 6.5m in cash and assumed working capital liabilities from White & Case Ltd. The acquisition was financed from available liquidity. The acquisition will be immediately earnings accretive. On a standalone basis, the websites are expected to generate at least USD 2.0m in annualised revenue and USD 1.5m in annualised EBITDA post-acquisition. As CentralNic is already today monetising roughly half of the websites' traffic, this is expected to translate into c.USD 1.0m of additional revenue, c.USD 0.5m of reduced COGS and c.USD 1.5m of EBITDA in the 2022 financial year. The acquisition is part of a larger vertical integration strategy, providing the Group's Online Marketing segment with more proprietary and exclusive traffic to monetise.

The following table summarises the consideration paid for White and Case Ltd and the fair values of the assets and liabilities at the acquisition date, in line with Group policies.

 
                                                          USD'000 
                                                         -------- 
 
   Initial cash consideration                               5,317 
 Working capital adjustment                                   591 
 Deferred consideration                                       584 
                                                         -------- 
 Total consideration                                        6,492 
                                                         -------- 
 
 Fair values recognised on acquisition 
  Assets 
  Domain name assets                                        6,492 
                                                         -------- 
 Total assets                                               6,492 
 
 Total identifiable estimated net assets at fair value      6,492 
                                                         -------- 
 Purchase consideration                                     6,492 
                                                         -------- 
 

The deferred consideration of USD 584k was settled on 15 November 2021.

Acquisition of NameAction

On 06 December 2021, CentralNic acquired the domain name and brand protection business trading as NameAction, in a share and asset deal for a total consideration of USD 1.0m in cash from NameAction Inc. The NameAction business is expected to contribute at least USD 2.0m and USD 0.2m in adjusted EBITDA to the Online Presence segment in 2022.

The acquisition comprised an asset purchase of domain names and assumed working capital liabilities for a initial consideration of USD 675k in cash, and a share purchase of two Chilean entities and one Brazil based entity for an initial consideration of USD 75k in cash. In addition, there are two deferred consideration payments of USD 125k each due on 6 December 2022 and 6 December 2023 respectively. The acquisition was financed from available liquidity. This acquisition provides CentralNic with a greater presence in the South American market

NOTES TO THE UNAUDITED PRELIMINARY ACCOUNTS (continued)

   9.     Business combinations (continued) 

Acquisition of NameAction (continued)

The following table summarises the consideration paid for NameAction and the fair values of the assets and liabilities at the acquisition date, in line with Group policies.

 
                                                          USD'000 
                                                         -------- 
 
   Initial cash consideration                                 750 
 Deferred consideration                                       250 
                                                         -------- 
 Total consideration                                        1,000 
                                                         -------- 
 
 Fair values recognised on acquisition 
  Assets 
  Domain name assets                                        1,067 
  Property, plant and equipment                                10 
  Trade receivables                                            38 
  Other receivables                                            17 
  Cash and other equivalents                                   94 
                                                         -------- 
 Total assets                                               1,226 
 Liabilities 
  Trade payables                                              218 
  Other liabilities                                            40 
                                                         -------- 
 Total liabilities                                            258 
                                                         -------- 
 Total identifiable estimated net assets at fair value        968 
  Goodwill arising on acquisition                              32 
                                                         -------- 
 Purchase consideration                                     1,000 
                                                         -------- 
 

10. Events occurring after the year end

Detailed below are the significant events that happened after the Group's year end date of 31 December 2021 and before the signing of these Unaudited Preliminary Accounts on 28 February 2022.

-- On 28 January 2022, CentralNic acquired domain assets of the TLD .ruhr for a purchase price of EUR 150k. Additional consideration of EUR 150k is payable in May 2022. .ruhr is the domain address for the urban agglomeration centred around the river Ruhr in Germany, consisting of c.50 cities, including Dortmund and Essen, with roughly 5m inhabitants. There are currently c.10k domain names registered using the .ruhr Top-Level Domain. .ruhr will be migrated from its existing service providers and will be fully managed by CentralNic's internal resources, joining another German regional TLD, .saarland.

(--) On 2 February 2022, CentralNic acquired Fireball Search GmbH for a purchase price of EUR 315k. Founded in 1996, Fireball was once the leading search engine in Germany, and the name retains high consumer awareness, despite being acquired by and merged into Lycos Europe in the early 2000s. In 2016, Fireball was re-established as an independent company, with a completely overhauled version of the service, including a strong focus on privacy, a core value of CentralNic. Search results are powered by Bing. Fireball opens up new traffic sources for CentralNic to monetise through its proprietary Online Marketing tools, and it adds alternative monetisation channels for CentralNic to generate revenues from internet traffic.

[1] Based on analysis of c.77% of the segment which can be adequately and reliably be described by these KPI

[2] Based on analysis of parts of the business that were continuously owned and operational for all of 2020 and 2021, covering c.77% of the segment's revenue in 2021

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END

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February 28, 2022 02:00 ET (07:00 GMT)

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