TIDMCNIC
RNS Number : 1869H
CentralNic Group PLC
22 November 2022
22 November 2022
CENTRALNIC GROUP PLC
("CentralNic" or "the Company" or "the Group")
UNAUDITED FINANCIAL RESULTS FOR THE NINE MONTHSED 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 / +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 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 Nine months
ended ended Change
30 September 30 September
2022 2021
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 Unaudited Restated (a)
COMPREHENSIVE INCOME Nine months Unaudited Audited
ended 30 Nine months Year ended
September ended 30 September 31 December
2022 2021 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 Restated*
FINANCIAL POSITION Unaudited Unaudited
Nine months Nine months Audited
ended ended Year ended
30 September 30 September 31 December
2022 2021 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 Restated
GROUP PLC Equity
CONSOLIDATED Share- Cash Foreign Restated* attributable
STATEMENTS OF Merger based flow exchange Accumulated to owners of
CHANGES IN Share relief payments hedging translation profits / the Parent
EQUITY Share capital premium reserve reserve Reserve reserve (losses) 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
Restated*
Unaudited Unaudited
Nine months Nine months Audited
ended ended Year ended
CONSOLIDATED STATEMENT OF CASH 30 September 30 September 31 December
FLOWS 2022 2021 2021
USD m USD m USD m
-------------- -------------- -------------
Cash flow from operating activities
Profit/(loss) before taxation 21.0 (1.5) 1.6
Adjustments for:
Depreciation of property, plant
and equipment 2.1 2.7 3.5
Amortisation of intangible assets 21.1 13.5 18.3
Finance cost (net) 14.0 8.0 10.8
Share-based payments 3.8 3.3 5.0
Decrease in trade and other
receivables (5.3) (12.7) (20.8)
Increase in trade and other
payables 1.7 11.6 24.4
Decrease in inventories - - 0.3
Cash flow generated from operations 58.4 24.9 43.1
-------------- -------------- -------------
Income tax paid (4.4) (1.7) (2.2)
-------------- -------------- -------------
Net cash flow generated from
operating activities 54.0 23.2 40.9
Cash flow used in investing
activities
Purchase of property, plant
and equipment (0.6) (0.6) (0.7)
Purchase of intangible assets (3.6) (1.6) (4.1)
Payment of deferred consideration (2.5) (1.7) (1.7)
Proceeds from disposals of investments 0.1 - -
Acquisition of subsidiaries (66.9) (11.1) (18.3)
Net cash flow used in investing
activities (73.5) (15.0) (24.8)
Cash flow used in financing
activities
Proceeds from borrowings 30.5 25.5 25.7
Settlement of forward foreign
exchange contracts (21.0) - -
Accrued interest on bond tap 0.4 - -
Bond arrangement fees (0.8) (0.6) (1.0)
Proceeds from issuance of ordinary
shares (net) 58.5 - -
Payment of lease liability (1.6) (1.4) (2.0)
Interest paid (7.0) (4.5) (8.7)
Net cash flow generated/(used
in) from financing activities 59.0 19.0 14.0
-------------- -------------- -------------
Net increase in cash and cash
equivalents 39.5 27.2 30.1
Cash and cash equivalents at
beginning of the period/year 56.1 28.7 28.7
Exchange losses on cash and
cash equivalents (11.8) (1.9) (2.7)
-------------- -------------- -------------
Cash and cash equivalents at
end of the period/year 83.8 54.0 56.1
* Please refer to the consolidated statement of comprehensive
income and the consolidated statement of financial position for
details of the prior period restatements
NOTES TO THE UNAUDITED FINANCIAL RESULTS
1. General information
CentralNic Group Plc is the UK holding company of a group of
companies which are engaged in the provision of online presence and
online marketing services. The Company is registered in England and
Wales. Its registered office and principal place of business is
4(th) Floor, Saddlers House, 44 Gutter Lane, London EC2V 6BR.
2. Basis of preparation
The financial results for the nine months ended 30 September
2022 are unaudited and have been prepared on the basis of the
accounting policies set out in the Group's 2021 statutory accounts
and, for all periods presented, in line with the principal
disclosure requirements of IAS 34: Interim Financial Reporting.
The unaudited financial results 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 2021, 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 recurring revenue 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 recessionary external factors. 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. Change of functional currency
On 1 January 2022, CentralNic Group Plc, the parent company of
the Group, changed its functional currency from EUR to USD. The
change was made to reflect that - when taking into account the
impact of derivative financial instruments - USD has become the
predominant currency in the company, accounting for a significant
part of the company's foreign currency borrowings. The change has
been implemented with prospective effect only and comparatives have
not been restated. The financial impact of the change is that the
revaluation of the euro-denominated debt (USD 21.6 million
reduction in borrowings) is processed through the profit and loss
account rather than through other comprehensive income. The change
in functional currency also has necessitated a review of the hedge
accounting treatment of the forward foreign exchange contracts with
HSBC Bank Plc and Global Reach Partners Ltd. Following the change
in functional currency, these forward foreign exchange contracts
are no longer considered to be effective and the cumulative cash
flow hedging reserve as at 31 December 2021 has been recycled
through the profit and loss account for the nine month period ended
30 September 2022.
4. Segment analysis
CentralNic is an independent global service provider building
and managing platforms that sell Online Presence and 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 uses privacy-safe AI based data
analytics and automation tools to provide advertising placement
services to match websites that have traffic with online marketers
who want qualified traffic that translates into new customers.
NOTES TO THE UNAUDITED FINANCIAL RESULTS (continued)
4. Segment analysis (continued)
Management reviews the activities of the CentralNic Group in the
segments disclosed below up to a gross profit level only:
Restated
Unaudited
Unaudited Nine months Audited
Nine months ended Year ended
ended 30 September 31 December
30 September 2021 2021
2022 USD m USD m
USD m
--------------- ----------------
Online Marketing
Revenue 412.6 167.0 261.2
Cost of sales (323.7) (123.9) (196.0)
--------------- -------------- ----------------
Gross profit 88.9 43.1 65.2
--------------- -------------- ----------------
Online Presence
Revenue 114.1 113.6 149.3
Cost of sales (74.7) (72.6) (96.0)
--------------- -------------- ----------------
Gross profit 39.4 41.0 53.3
-------------- ----------------
Total revenue 526.7 280.6 410.5
Total cost of sales (398.4) (196.5) (292.0)
--------------- -------------- ----------------
Gross profit 128.3 84.1 118.5
--------------- -------------- ----------------
5. Revenue
The Group's revenue is generated from the following geographical
areas:
Restated
Unaudited
Unaudited Nine months Audited
Nine months ended Year ended
ended 30 September 31 December
30 September 2021 2021
2022 USD m USD m
USD m
--------------- --------------
Online Marketing
UK 1.7 2.3 3.2
North America 13.4 13.5 19.0
Europe 385.6 134.7 217.2
ROW 11.9 16.5 21.8
--------------- --------------
412.6 167.0 261.2
--------------- --------------- --------------
Online Presence
UK 2.9 2.8 3.6
North America 31.9 33.2 43.3
Europe 54.5 54.1 70.5
ROW 24.8 23.5 31.9
114.1 113.6 149.3
--------------- --------------- --------------
Total revenue 526.7 280.6 410.5
--------------- --------------- --------------
* End customers may be located in different territories as
notable parts of the business are conducted through channel
partners
NOTES TO THE UNAUDITED FINANCIAL RESULTS (continued)
6. Non-core operating expenses
Unaudited Unaudited
Nine months Nine months Audited
ended ended Year ended
30 September 30 September 31 December
2022 2021 2021
USD m USD m USD m
Acquisition related costs 3.1 1.8 3.1
Integration and streamlining costs 2.8 3.4 3.9
Other costs (1) 0.1 1.3 1.7
6.0 6.5 8.7
-------------- -------------- -------------
(1) Other costs include items related primarily to business
reviews and restructuring expenses.
7. Finance income and costs
Unaudited Unaudited
Nine months Nine months Audited
ended ended Year ended
30 September 30 September 31 December
2022 2021 2021
USD m USD m USD m
Finance income - - (0.1)
Impact of unwinding of discount
on net present value of deferred
consideration 0.4 0.1 0.2
Reappraisal of deferred consideration (1.4) (0.1) (0.1)
Arrangement fees on borrowings 2.9 1.1 1.6
Interest expense on current borrowings 0.6 0.3 0.3
Interest expense on non-current
borrowings 6.8 6.5 8.7
Interest expense on leases 0.1 0.1 0.2
Foreign exchange loss on borrowings 4.7 - -
Net finance
costs 14.1 8.0 10.8
-------------- -------------- -------------
8. Earnings per share
Earnings per share has been calculated by dividing the
consolidated profit/(loss) after taxation attributable to ordinary
shareholders by the weighted average number of ordinary shares in
issue during the period.
Diluted earnings per share has 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 as calculated using the treasury stock
method (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) as a result of the dilutive
calculation. Due to the loss made in the year ended 31 December
2021, 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.
NOTES TO THE UNAUDITED FINANCIAL RESULTS (continued)
8. Earnings per share (continued)
Unaudited Restated
Nine months Unaudited
ended Nine months Audited
30 September ended Year ended
2022 30 September 31 December
USD m 2021 2021
USD m USD m
Profit/(loss) after tax attributable
to owners 6.5 (5.3) (3.5)
-------------- -------------- --------------
Operating profit 35.1 6.5 12.4
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 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
-------------- -------------- --------------
Adjusted EBITDA 62.0 30.9 46.3
Depreciation (2.1) (2.7) (3.5)
Finance income - - 0.1
Finance costs (excluding deferred
consideration amounts, foreign
exchange loss on borrowings and
write off of arrangement fees on
borrowing - note 7) (9.5) (8.0) (10.9)
Taxation (14.5) (3.8) (5.1)
-------------- -------------- --------------
Adjusted earnings 35.9 16.4 26.8
Weighted average number
of shares:
Basic 262,399,797 230,362,429 227,380,670
Effect of dilutive potential
ordinary shares 7,708,732 6,326,392 6,856,289
-------------- -------------- --------------
Diluted average number
of shares 270,108,529 236,688,821 234,236,959
-------------- -------------- --------------
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
-------------- -------------- --------------
Basic and diluted earnings per share of 2.48 and 2.41 cents
(September 2021 YTD: (2.30) cents) has been impacted by
amortisation charges, non-core expenses, foreign exchange gains and
losses and share-based payment expenses. Interest, tax,
depreciation, amortisation, non-cash charges and non-core operating
expenses. Tax on adjusted earnings is the same figure as that shown
in the consolidated statement of comprehensive income given that
the majority of the adjusting items in the earnings per share
calculation above are also adjusted for when calculating the
Group's tax expense.
The weighted average number of shares for the Company is
disclosed above. The issued share capital of the Company at 30
September 2022 was 288,660,084 and the total number of shares that
were vested but not exercised were 8,203,148. Exercises of options
will largely be covered by the shares held by the Group's Employee
Benefit Trust.
9. 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 nine-month periods ended 30 September
2022 and 30 September 2021, and for the year ended 31 December 2021
was as follows (note that single quarter cash conversion may
diverge notably from the long-term trend and should be expected to
converge towards annual averages as demonstrated historically):
Unaudited Restated
Nine months Unaudited
to 30 September Nine months Audited
2022 to Year ended
USD m 30 September 31 December
2021 2021
USD m USD m
Cash conversion
Cash flow from operations 58.4 24.9 43.1
Exceptional costs incurred and paid
during the year 5.4 9.1 11.0
Settlement of one-off working capital
items from the prior year 1.2 2.5 2.0
Adjusted cash flow from operations 65.0 36.5 56.1
------------------ ---------------- ---------------
Adjusted EBITDA 62.0 30.9 46.3
Conversion % 105% 118% 121%
NOTES TO THE UNAUDITED FINANCIAL RESULTS (continued) 9. Financial
instruments (continued)
Net debt as at 30 September 2022, 30 September 2021 and 31 December
2021 is shown in the table below.
Bond Bank debt Cash Net debt
USD m USD m USD m USD m
-------------- ------------------- --------------- -----------
At 1 January 2021 (107.3) (6.4) 28.7 (85.0)
Placing proceeds (net of costs) (18.2) - 18.2 -
Amortisation of costs (0.5) - - (0.5)
Drawdown - (7.3) 12.2 4.9
Other cash movements - - (3.2) (3.2)
-------------- ------------------- --------------- -----------
Net cash flows before foreign
exchange (18.7) (7.3) 27.2 1.2
Foreign exchange differences 6.7 0.4 (1.9) 5.2
At 30 September 2021 (119.3) (13.3) 54.0 (78.6)
-------------- ------------------- --------------- -----------
Drawdown - (8.5) 8.5 -
Amortisation of costs 0.2 - (0.2) -
Other cash movements - 7.3 (5.3) 2.0
-------------- ------------------- --------------- -----------
Net cash flows before foreign
exchange 0.2 (1.2) 3.0 2.0
Foreign exchange differences 2.4 0.1 (0.9) 1.6
At 31 December 2021 (116.7) (14.4) 56.1 (75.0)
-------------- ------------------- --------------- -----------
Drawdown (22.9) (7.6) 30.5 -
Amortisation of costs (2.2) (0.4) - (2.6)
Other cash movements (0.3) 0.6 9.0 9.3
-------------- ------------------- --------------- -----------
Net cash flows before foreign
exchange (25.4) (7.4) 39.5 6.7
Foreign exchange differences 19.4 2.3 (11.8) 9.9
At 30 September 2022 (122.7) (19.5) 83.8 (58.4)
Derivative financial instruments
In 2021, the Company entered into forward foreign exchange
contracts with HSBC Bank Plc (HSBC) and Global Reach Partners Ltd
(Global Reach) which resulted in a notional EUR 105 million of the
amount outstanding under the bond being hedged at a weighted
average EUR/USD exchange rate of 1.1893 and at a 1:1 hedge ratio.
The forward contract with HSBC expired on 13 July 2022 and the
forward contract with Global Reach expired on 15 July 2022. The
Company settled the forward contracts at the prevailing
mark-to-market valuations on those dates, which resulted in a EUR
20.9 million (USD 21.0 million) cash outflow. The event is neutral
to the Company's net debt as the hedging liabilities mirror the
gains from devaluation of the EUR.
For the year ended 31 December 2021, the Company prepared
hedging documentation which demonstrated that the hedging
instrument and the hedged item offset each other in currency terms
and in amounts, meaning there was a clear economic relationship
between the hedging instrument and hedged item as required under
international accounting standards. However, following the change
in functional currency of the parent company of the Group effective
from 1 January 2022 (as detailed in note 3), this economic
relationship was considered to no longer exist and the cumulative
cash flow hedging reserve as at 31 December 2021 has been recycled
through the profit and loss account for the nine month period ended
30 September 2022. Further, effective from 1 January 2022, the
mark-to-market valuations of the forward contracts (based on
reports provided by each of HSBC and Global Reach) have been
recognised as derivative financial liabilities on the consolidated
balance sheet, with the corresponding fair value movement processed
through the profit and loss account. The change in the fair value
of the derivative financial instrument for the nine months ended 30
September 2022 processed through the profit and loss account is USD
21.0 million (September 2021 YTD: USD 3.8 million processed through
the cash flow hedging reserve; FY2021 USD 6.4 million processed
through the cash flow hedging reserve) and the balance in the cash
flow hedging reserve at 30 September 2022 is USD nil (September
2021 YTD: USD 3.8 million; FY2021 USD 6.4 million).
NOTES TO THE UNAUDITED FINANCIAL RESULTS (continued)
10. Business combinations
Acquisition of M.A Aporia Limited
On 13 September 2022, the Group acquired M.A Aporia Limited, an
Israel-based technology company operating in the fields of social
media and native advertising headquartered in Tel Aviv. Aporia was
acquired for an initial consideration of USD 11.2 million in cash
subject to customary adjustments for net cash and working capital.
An earnout arrangement has also been agreed, under which additional
deferred contingent consideration of up to USD 7.8 million may be
paid over a performance period until and including 2024.
In FY2021, Aporia generated revenue of USD 35.0 million, gross
profit of USD 3.5 million and EBITDA of USD 2.0 million. The
acquisition is part of a larger vertical integration strategy,
providing the Group's Online Marketing segment with more direct
access to high quality traffic to monetise. The acquisition will be
immediately earnings accretive. As Aporia is an exclusive supplier
to CentralNic, the transaction will increase CentralNic's gross
margin and EBITDA margin but have no immediate impact on
revenue.
The purchase price allocation exercise for the acquisition of
M.A Aporia Limited has not yet been completed as at the date of
signing this report, and it is therefore not possible to provide
further details of the fair value estimates of the assets and
liabilities at the acquisition date.
Acquisitions in previous quarters
For further details regarding the acquisitions of VGL
Verlagsgesellschaft mbH on 7 March 2022, of the .ruhr TLD on 28
January 2022, and of Fireball Search GmbH on 2 February 2022,
please refer to note 9 of the unaudited financial results for the
three months ended 31 March 2022 as published and released on 23
May 2022.
Deferred consideration payments
Deferred consideration of EUR 0.1 million (USD 0.1 million) in
respect of the .ruhr TLD acquisition was paid on 30 May 2022. A
final deferred consideration payment of USD 1.1 million for the
acquisition of KeyDrive SA was settled in cash on 18 July 2022.
11. Events occurring after the quarter end
Detailed below are the significant events that happened after
the Group's quarter end date of 30 September 2022 and before the
signing of these Unaudited Financial Results on 22 November
2022.
-- On 14 October 2022, the Group entered into a new Senior
Facilities Agreement ("SFA") under which USD 250 million of new
debt facilities are provided through a syndicate of six banks. The
new debt facilities comprise a USD 150 million term loan ("TL") and
a USD 100 million revolving credit facility ("RCF"). The term loan
replaces the existing EUR 126 million senior secured bonds and
repays drawings under the Group's existing revolving credit
facility. The TL and RCF have an initial maturity date of 14
October 2026, with an option to extend by a further year. The
borrowing cost of the facilities is determined by CentralNic's net
leverage, such that this will initially be 2.75% above SOFR, a
notable reduction compared to the 7% above 3-month EURIBOR for the
senior secured bond it replaces. The refinancing was completed on
31 October 2022. 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%.
-- On 26 October 2022, the Group announced it had entered into
an agreement to acquire Intellectual Property Management Company,
("IPMC"), a California-based domain name management business for an
enterprise value of USD 7.3 million in cash, representing c. 2.7x
its 2021 unaudited revenue and c. 5.9x its 2021 Adjusted EBITDA,
subject to customary adjustments for net cash and working capital.
The purchase price was settled from existing liquidity reserves.
IPMC provides subscription-based corporate domain management
services to enterprise customers including many globally recognised
brands, which are highlighted on IPMC's website at
https://ipm.domains/. On acquisition, IPMC will be integrated into
the enterprise channel within CentralNic's Online Presence segment.
The Company expects better coverage and increased market share in
the North American market as well as synergies from streamlining
procurement and operations. The acquisition will be immediately
earnings accretive.
[1] Analysts forecasts as of 21 November 2022 are within a
bandwidth between USD 687.8 million and USD 709.6 million for FY22
revenue and between USD 80.2 million and USD 82.9 million for FY22
EBITDA.
([2]) Based on analysis of c.84% of the segment (only Team
Internet) which can be adequately and reliably be described by
these KPIs
([3]) Based on analysis of c.76% of the segment which can be
adequately and reliably be described by these KPI
[4] 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
[5] Includes deferred consideration and lease liabilities and
based on pro-forma EBITDA
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END
QRTKZMZMVZNGZZG
(END) Dow Jones Newswires
November 22, 2022 02:00 ET (07:00 GMT)
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