Internet
CentralNic Group PLC ("CentralNic" or "the Company" or "the Group") Unaudited Financial Results For The Six Months Ended 30 June 2021
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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.
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.
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
CentralNic's organic growth, combined with its 2021 and 2020 acquisitions, substantially increased the scale and capabilities of the Company. The effect of this is demonstrated in our unaudited H1 2021 results which show a transformational increase in revenue and adjusted EBITDA, both of which have grown by 57% and 36% respectively compared to H1 2020.
The Company has performed strongly during the quarter with the key financial metrics listed below:
Please refer to note 8
Please refer to note 7
In our Direct and Indirect segments , which provide 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 through our direct and indirect channels are paying off, with the sales of associated services outpacing domain names sales. The Company intends to combine the Direct and Indirect segment into a single Online Presence segment as of the next reporting date.
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 constant currency basis.
Significant scale was achieved in the Indirect segment, with revenues increasing by USD 10.1m in the six months ended 30 June, or 25%, from USD 41.2m to USD 51.3m . The growth has been carried by the Group's key Wholesale brands and traction was particularly strong in the North American markets. Organic growth of the segment was 12% over the period.
Revenue in the Direct segment increased by USD 5.4m , or 25%, from USD 21.6m to USD 27.0m . On an organic basis, revenue grew by 10%. Management is particularly pleased with this development as both the Retail business and the Enterprise business have continued their return to growth and successfully onboarded the SafeBrands acquisition.
After the recent acquisitions of Zeropark, Voluum and Wando, which have substantially expanded the service offering beyond monetising traffic to a full suite of online customer acquisition solutions, including data analytics, management resolved to rename the segment more fittingly as "Online Marketing". The Online Marketing segment was the fastest growing one, with revenues increasing by USD 47.9m , or 99%, from USD 48.5m to USD 96.4m . Revenue continued to grow organically at a high rate of 28%, largely driven by Team Internet's PubTONIC, with the remainder being contributed by the acquisitions of Zeropark, Voluum and Wando.
CentralNic is a leader in online privacy, as none of our marketing platforms make use of third-party cookies or collect personal data on our customers. We therefore expect that restrictions placed on those practices (e.g. the ban of third-party cookies in Google Chrome or App Tracking Transparency in Apple's iOS 14.5) will benefit CentralNic, as we provide an alternative to online marketers that is proven to be highly effective whilst respecting the privacy of internet users, putting us at the forefront of companies offering solutions for a more privacy conscious world.
All amounts relate to continuing activities.
Subsidiary and associate earnings before interest, tax, depreciation, amortisation, non-cash charges and non-core operating expenses.
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.
instruments
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.
The financial results for the six months ended 30 June 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 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 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.
CentralNic is an independent global service provider distributing domain names and associated digital subscription products through Indirect and Direct channels, 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 Indirect segment is a global distributor of domain names through a network of channel partners. The Direct segment sells domain names and ancillary services to end users, monitoring services to protect brands online, technical and consultancy services to corporate clients, and licenses the Group's in-house developed registry management platform, also 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.
Management reviews the activities of the CentralNic Group in the segments disclosed below:
Amortisation of intangibles assets
Non-core operating expenses
Foreign exchange gain
Share-based payment expenses
(8.3)
(5.1)
1.0
(1.7)
Amortisation of intangibles assets
Non-core operating expenses
Foreign exchange loss
Share-based payment expenses
(5.4)
(2.8)
(0.4)
(2.7)
Amortisation of intangibles assets
Non-core operating expenses
Foreign exchange loss
Share of associate income
Share-based payment expenses
(12.5)
(8.2)
(2.1)
(0.2)
(5.1)
The Group's revenue is generated from the following geographical areas:
Other costs include items related primarily to business reviews and restructuring expenses.
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 period.
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 the year ended 31 December 2020 , 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.
Basic and diluted earnings per share of (0.68) cents (H1 2020: (1.68) cents ) has been impacted by 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 most of the adjusting items in the earnings per share calculation above are also adjusted for when calculating the Group's tax expense.
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 six-month period ended 30 June 2021 was as follows:
On 22 February 2021 , CentralNic acquired Wando Internet Solutions, a Berlin -based technology company specialising in social marketing, search engine marketing (SEM) advertising and display advertising that enables augmentation of the quality and volume of internet traffic on domain names and websites in order to generate superior returns. In FY2020, Wando generated unaudited revenue of EUR 4.9m (c. USD 5.6m ) and unaudited EBITDA of EUR 1.2m (c. USD 1.4m ). The acquisition is a vertical integration and more than half of Wando's historical revenue generation has come from CentralNic; it has been integrated into CentralNic's Online Marketing segment. The initial consideration for the acquisition is EUR 5.4m (c. USD 6.6m ) and the sellers of Wando may earn up to another EUR 5.4m (c. USD 6.6m ) payable in Q3 2022 subject to stretched performance targets being met. The following table summarises the consideration paid for Wando Internet Solutions and the fair values of the assets and liabilities at the acquisition date, in line with Group policies.
Developed technologies
Trade receivables
Other assets
5.0
0.5
2.3
Other liabilities
(0.7)
For further details regarding the acquisition of SafeBrands on 9 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 .
Detailed below are the significant events that happened after the Group's half year end date of 30 June 2021 and before the signing of these Unaudited Financial Results on 31 August 2021 .
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