Interim Results to 30 June 2017

Released : 07/09/2017 07:01

RNS Number : 0442Q
CentralNic Group PLC
07 September 2017
 

                                                                                                                                                                                                        

7 September 2017                                                                                                                                                                   

 

The information contained within this announcement is deemed by the Company to constitute inside information stipulated under the Market Abuse Regulation (EU) No. 596/2014.  Upon the publication of this announcement via the Regulatory Information Service, this inside information is now considered to be in the public domain. 

CENTRALNIC GROUP PLC 

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

 

HALF YEAR RESULTS 2017 

Organic growth and achieving strategic objectives 

 

CentralNic, the global software platform company supporting subscription web services including domain names, is pleased to announce its half year results for the six months ended 30 June 2017, which show strong underlying organic growth across the business. 

Highlights:

 

·      Adjusted EBITDA*, excluding forex gains and losses, of £1.4m (H1 2016: £0.9m) - up 50% 

·      Gross profit £3.0m (H1 2016: £2.3m) - up 29.5%

·      Revenue of £10.6m (H1 2016: £8.9m) - up 19%. 

·      Net cash of £7.73m (2016: £6.04m).

 

* Adjusted EBITDA:  Earnings before interest, tax, depreciation and amortisation, acquisition costs, exceptional items and non-cash charges. 

 

Operational highlights:

 

·     Recurring revenues continue to increase, reflecting the strong focus on growing the proportion of the Group's revenues being of a recurring nature, as exemplified post period-end by the acquisition of SK-NIC in August 2017 and the renegotiated .xyz contract. 

·     Retail division focus on optimising marketing performance having completed integration and consolidation of Instra Group. 

·      Wholesale business maintained its lead in global market share by volume, being the only company which supports six of the Top 20 new Top-Level Domains. 

·      New client wins as a registry service provider included .rugby .observer, .storage, as well as multiple contracts with country code Top-Level Domains. 

 

Post half year end highlights:

 

·      Acquisition of SK-NIC:

-      As announced on the 25th August 2017, the Group has agreed to acquire the business and assets of SK-NIC, the manager of the exclusive country code top-level domain for Slovakia, .sk. 

-      The Board believes that this represents a major, earnings enhancing acquisition, further increasing the proportion of the Group's revenues that are recurring and diversifying the Group's businesses. 

-      A term loan of £18m and overdraft facility of £3m are being provided by the Group's bankers, Silicon Valley Bank ("SVB"), to fund the initial consideration.  

Contract with .XYZ renegotiated: term extended to 2032, with CentralNic receiving a fixed fee based on the volume of .xyz registrations and subscriptions managed. 

 

Commenting on the results, Mike Turner, Chairman of CentralNic, said:

 

"Our underlying first half results have been most encouraging as CentralNic continues to deliver organic growth alongside significant earnings enhancing acquisitions.  

"Both our organic growth and roll-up strategy are underpinned by a drive to increase the size and scale of the business by focussing on activities which will deliver recurring revenues and high visibility of earnings.  This concentrates our efforts on the higher margin and higher growth segments of the market. 

"In keeping with the consistently heavy second-half weighting of results in recent years, the Board is confident that the Company is on track to meet market expectations for the full year to 31 December 2017, as we continue to diversify through the acquisition of businesses with high-levels of recurring revenue, organically grow our existing recurring revenue businesses, and take advantage of opportunities to trade in valuable premium domain names." 

-Ends-

 

For further information:

 

CentralNic Group plc

 

Ben Crawford (CEO)

+44 (0) 203 388 0600

Don Baladasan, Chief Financial Officer

 

 

 

Zeus Capital - Nomad and Joint Broker

 

Nick Cowles / Jamie Peel   

+44 (0) 161 831 1512

John Goold / Alex Davies / Rupert Woolfenden  

+44 (0) 207 829 5000

 

Peel Hunt LLP - Joint Broker

 

Edward Knight / Nick Prowting (Corporate)

+44 (0) 207 418 8900

Alastair Rae

 

 

 

Abchurch Communications

Corporate & Financial PR Advisers to CentralNic 

 

Julian Bosdet

Dylan Mark

Alejandra Campuzano 

+44 (0) 20 7469 4630

+44 (0) 20 7469 4633

+44 (0) 20 7469 4634

 

centralnic@abchurch-group.com

www.abchurch-group.com

 

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 develops and manages software platforms allowing businesses globally to use the internet for their own websites and email, as well as protecting their brands online. Its core growth strategy is identifying and acquiring cash-generative businesses with annuity revenue streams and exposure to emerging markets, and migrating them onto the CentralNic software and operating platforms.

 

CentralNic operates globally with customers in over 200 countries. It earns revenues from the worldwide sales of internet domain names and hosting on an annual subscription basis. 

  

For more information please visit: www.centralnic.com

 

 

 

KEY FINANCIALS H1 2017

 

 

30 June

2017

30 June

2016

 

Change

 

£'000

£'000

%

Revenue

10,587

8,931

18.5%

Gross profit

2,954

2,281

29.5%

Adjusted EBITDA2

1,055

1,309

(19.4%)

Adjusted EBITDA adjusted for FOREX

1,367

908

50%

Adjusted Profit before tax3

670

948

(29.3%)

Loss after tax

(619)

(1,306)

52.6%

Adjusted Profit before tax3

670

948

(29.3%)

Basic EPS (pence)

(0.65)

(1.37)

52.6%

 

1 Billings represents the value of products and / or services invoiced to customers stated prior to discounts or rebates and prior to allocation of revenue share between registry operator and registry service provider. Billings do not equate to statutory revenue.

2 Earnings before interest, tax, depreciation, amortisation, acquisition and non-recurring fees and non-cash charges.

3 Profit before tax adjusted for acquired amortisation charges, acquisition and non-recurring fees and non-cash charges.

 

 

CHIEF EXECUTIVE OFFICER'S STATEMENT

 

In the first half of 2017 it is pleasing to report that the Group's revenues and profit, excluding foreign exchange gains and losses, have shown growth in all three operating divisions whilst maintaining high quality earnings.  As anticipated, this resulted in stable gross margin in the business, at 28% (2016: 26%), with absolute gross profit increasing by £673,000. The recurring revenue base underpins the Group's financial stability and visibility of earnings, and ensures that the Group is well placed to maintain growth in sometimes volatile market conditions. 

 

As the Group moves forward with its growth strategy, it expects to further enhance the recurring earnings across all three of its divisions, in turn reducing the proportion of non-recurring sources of revenues.  The Board believes this approach is aligned with the long term interests of the Group's shareholders. 

 

Retail

 

It is pleasing to report that, in the first half of 2017, the Retail division generated revenues of £7.97m (H1 2016: £6.76m), an Adjusted EBITDA contribution of £0.91m (H1 2016: £1.10m), and an Adjusted EBITDA, excluding foreign exchange gains and losses, of £1.11m (H1 2016: £1.06m).  This period included a full six months of trading for the Instra Group versus five and a half months for H1 2016, following its acquisition on the 14 January 2016.

 

The Instra Group acquisition has been transformational for the Retail division, contributing revenue of £5.83m (H1 2016: £4.89m), Adjusted EBITDA of £0.92m (H1 2016: £0.95m) and Adjusted EBITDA (excluding foreign exchange gains and losses) of £1.08m (H1 2016: £1.03m). This was in line with management's expectations. 

 

Wholesale

 

CentralNic's Wholesale division generated revenue of £1.82m during the first half of the year (H1 2016: £1.64m), Adjusted EBITDA contribution of £0.45m (H1 2016: £0.72m), and an Adjusted EBITDA contribution, excluding foreign exchange gains and losses, of £0.55m (H1 2016: £0.54m). 

 

The division continues to evolve with a blend of business reflecting demand for heavily promoted and low-priced new Top-Level domains, the high volumes offsetting lower per domain revenues.  Domain renewals now account for 18% of new Top-Level Domain ("TLD") transaction volumes (H1 2016: 2%). 

 

The period saw the Wholesale division maintain its lead in the new TLD market, closing out the half year as the only company supporting six out of the top twenty new Top-Level Domains from a total of 1,224 new TLDs launched.  These TLDs (.website, .space, .tech, .site, .online, and .xyz) retain their top twenty rankings at the time of writing. 

 

Additional domain extensions won in the period include .rugby, .observer, and .storage, whilst .realty, .observer, .basketball, .storage, .art and .fun, all launched in the first half. 

 

As part of the diversification of its business into the country code Top-Level Domain sector, CentralNic completed the policy and regulation framework tender which was awarded to the Company in 2016 by a national country code administrator.  The Group also provided software licencing setup and migration support to a ccTLD operator which contributed £0.44m of non-recurring revenue in the period, as well as winning the contract to support a third country code.

 

Enterprise

 

CentralNic's Enterprise division generated £0.80m of revenue in the first half of the year (H1 2016: £0.54m) and an Adjusted EBITDA of £0.22m (H1 2016: EBITDA loss of £0.05m).  The revenues comprise a mix of recurring revenues and trading in premium domain names, which contributed £0.36m in the first half of 2017 (H1 2016: £0.05m).  Premium domain name sales remain a profitable opportunity for the Enterprise business.  Discussions relating to premium sales are ongoing, and are expected to contribute significantly to profits in the second half. 

 

The shift of the Enterprise business towards a recurring revenue model continues as the Company prepares to offer corporate registrar and online brand protection services under the management of the new Commercial Director, a leading specialist in this area. 

 

Outlook

 

CentralNic's growth strategy is focussed on increasing the scale of its recurring revenue businesses, while acquiring additional businesses with similar earnings profiles and access to high margin and high growth markets.  The successful acquisition and integration of the Instra business in 2016 and the announcement of the SK-NIC acquisition in 2017 are clear milestones in that strategy, as is the renegotiation of the .XYZ contract to extend the term to 2032 and obtain a fixed fee based on the volume of domains managed.

 

CentralNic is confident of trading in line with market expectations for the year and of delivering its vision of becoming a major global player in the provision of subscription website-related services to business in years to come. 

 

I would like to thank CentralNic's personnel for their professionalism and commitment to the ongoing growth and transformation of the business.  It is thanks to them, to our clients and to our distribution channel partners, as well as our shareholders, that the Group continues to maintain and enhance its industry-leading position.  

 

Ben Crawford

Chief Executive

 

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

 

 

 

Unaudited

Six months

ended 30 Jun 2017

 

Unaudited

Six months

ended 30 Jun 2016

 

Audited

Year

ended 31 Dec 2016

 

Note

 

£'000

 

£'000

 

£'000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

5

 

10,587

 

8,931

 

22,129

Cost of sales

 

 

(7,633)

 

(6,650)

 

(14,462)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross profit

 

 

2,954

 

2,281

 

7,667

 

 

 

 

 

 

 

 

Administrative expenses

 

 

(3,408)

 

(2,724)

 

(5,637)

Share based payments expense

 

 

(232)

 

(319)

 

(621)

 

 

 

 

 

 

 

 

Operating (loss) / profit

 

 

(686)

 

(762)

 

1,409

 

 

 

 

 

 

 

 

Adjusted EBITDA*

 

 

1,055

 

1,309

 

5,483

Depreciation

 

 

(62)

 

(57)

 

(125)

Amortisation of intangible assets

 

 

(1,064)

 

(946)

 

(2,066)

Acquisition costs and non-recurring fees

 

 

(383)

 

(749)

 

(1,262)

Share based payment expense

 

 

(232)

 

(319)

 

(621)

Operating (loss) / profit

 

 

(686)

 

(762)

 

1,409

 

 

 

 

 

 

 

 

Finance income 

 

 

8

 

18

 

18

Finance costs

 

 

(102)

 

(166)

 

(270)

 

 

 

 

 

 

 

 

Finance income - net

 

 

(94)

 

(148)

 

(252)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Loss) / Profit before taxation

 

 

(780)

 

(910)

 

1,157

 

 

 

 

 

 

 

 

Taxation 

6

 

161

 

(396)

 

(202)

 (Loss) / Profit after taxation attributable to equity shareholders

 

 

(619)

 

(1,306)

 

955

 

 

 

 

 

 

 

 

Items that may be reclassified subsequently to profit and loss

 

 

 

 

 

 

 

Exchange difference on translation of foreign operation

 

 

52

 

2,040

 

1,910

Cash flow hedges - effective portion of changes in fair value

 

 

-

 

(245)

 

(245)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive income / (loss) for the financial year

 

 

(567)

 

489

 

2,620

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic, Pence

7

 

(0.65)

 

(1.37)

 

1.00

Diluted, Pence

7

 

(0.65)

 

(1.37)

 

0.97

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

All amounts relate to continuing activities.

*Earnings before interest, tax, depreciation and amortisation, acquisition costs and non-cash charges.

 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

 

 

 

 

Unaudited

30 Jun 2017

 

Unaudited

30 Jun 2016

 

Audited

31 Dec 2016

 

Note

 

£'000

 

£'000

 

£'000

 

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NON-CURRENT ASSETS

 

 

 

 

 

 

 

Property, plant and equipment

 

 

184

 

191

 

161

Intangible assets

8

 

29,015

 

26,385

 

29,822

Deferred receivables

9

 

1,204

 

1,292

 

1,486

Investments

 

 

997

 

997

 

997

Deferred tax assets

 

 

1,263

 

1,634

 

1,121

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

32,663

 

30,499

 

33,587

CURRENT ASSETS

 

 

 

 

 

 

 

Trade and other receivables

10

 

11,209

 

25,819

 

11,529

Inventory

 

 

386

 

376

 

390

Cash and bank balances

 

 

9,571

 

9,253

 

9,902

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

21,166

 

35,448

 

21,821

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL ASSETS

 

 

53,829

 

65,947

 

55,408

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EQUITY AND LIABILITIES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EQUITY

 

 

 

 

 

 

 

Share capital

12

 

96

 

96

 

96

Share premium

 

 

16,545

 

17,983

 

16,545

Merger relief reserve

 

 

1,879

 

-

 

1,879

Share based payments reserve

 

 

2,255

 

1,680

 

2,004

Foreign exchange translation reserve

 

 

1,962

 

2,040

 

1,910

Retained earnings

 

 

2,171

 

496

 

2,785

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL EQUITY

 

 

24,908

 

22,295

 

25,219

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NON-CURRENT LIABILITIES

 

 

 

 

 

 

 

Other payables

 

 

3,445

 

3,568

 

3,820

Deferred tax liabilities

 

 

3,092

 

65

 

3,282

Borrowings

 

 

807

 

2,042

 

1,324

 

 

 

 

 

 

 

 

 

 

 

7,344

 

5,675

 

8,426

CURRENT LIABILITIES

 

 

 

 

 

 

 

Trade and other payables and accruals

11

 

20,091

 

36,285

 

19,947

Taxation payable

 

 

453

 

525

 

783

Borrowings

 

 

1,033

 

1,167

 

1,033

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

21,577

 

37,977

 

21,763

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES

 

 

28,921

 

43,652

 

30,189

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL EQUITY AND LIABILITIES

 

 

53,829

 

65,947

 

55,408

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CENTRALNIC GROUP PLC

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

 

 

 

 

 

 

 

 

 

 

 

Share capital

 

 

 

 

 

 

 

 

Share premium

 

 

 

 

 

 

 

 

 

 

Merger relief reserve

 

 

 

 

 

 

 

 

 

 

Share based payments reserve

 

 

 

 

 

 

 

 

 

Foreign

exchange

translation

reserve

 

 

 

 

 

 

 

 

 

 

Foreign currency hedging reserve

 

 

 

 

 

 

 

 

 

 

Retained earnings

 

 

 

 

 

 

 

 

Total

 

£'000

£'000

 

 

£'000

 

 

£'000

 

 

£'000

 

 

£'000

 

 

£'000

£'000

 

 

 

 

 

 

 

 

 

Balance as at 1 January 2016

92

16,522

-

1,390

-

245

1,797

20,046

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Profit/(loss) for the period

-

-

-

-

-

-

(1,306)

other comprehensive income/(expense)

 

 

 

 

 

 

 

 

- translation of foreign operation

-

-

-

-

2,040

-

2,040

- Cash flow hedge

-

-

-

-

-

(245)

-

(245)

Total comprehensive income for the period

-

-

 

-

 

-

 

2,040

 

(245)

 

(1,306)

489

Transactions with owners

 

 

 

 

 

 

 

Issue of new shares

4

1,461

-

-

-

-

1,465

Share issue costs

-

-

-

-

-

-

-

Share based payments

-

-

-

319

-

-

319

Share based payments - deferred tax asset

-

-

 

-

 

(24)

 

-

 

-

(24)

Share based payments - exercised and lapsed

-

-

 

-

 

(5)

 

-

 

-

-

 

 

 

 

 

 

 

 

 

Balance as at 30 June 2016

96

17,983

-

1,680

2,040

-

496

22,295

 

 

 

 

 

 

 

 

 

Profit/(loss) for the period

-

-

-

-

-

-

2,260

other comprehensive income/(expense)

 

 

 

 

 

 

 

- translation of foreign operation

-

-

-

-

(130)

-

(130)

- Cash flow hedge

-

-

-

-

-

-

-

-

Total comprehensive income for the period

-

-

 

-

-

 

(130)

 

-

 

-

(130)

Transactions with owners

 

 

 

 

 

 

 

Issue of new shares

-

(1,438)

1,879

-

-

-

441

Share issue costs

-

-

-

-

-

-

-

Share based payments

-

-

-

303

-

-

303

Share based payments - deferred tax asset

-

-

 

-

50

 

-

 

-

50

Share based payments - exercised and lapsed

-

-

 

-

 

(29)

 

-

 

-

-

 

 

 

 

 

 

 

 

 

Balance as at 31 December 2016

96

16,545

1,879

2,004

1,910

-

2,785

25,219

 

 

 

 

 

 

 

 

 

Profit/(loss) for the period

-

-

-

-

-

-

(619)

other comprehensive income/(expense)

 

 

 

 

 

 

 

- translation of foreign operation

-

-

-

-

52

-

52

- Cash flow hedge

-

-

-

-

-

-

-

-

Total comprehensive income for the period

-

-

 

-

-

 

52

 

-

 

-

52

Transactions with owners

 

 

 

 

 

 

 

Issue of new shares

-

-

-

-

-

-

-

Share issue costs

-

-

-

-

-

-

-

Share based payments

-

-

-

232

-

-

232

Share based payments - deferred tax asset

-

-

 

-

24

 

-

 

-

24

Share based payments - exercised and lapsed

-

-

 

-

 

(5)

 

-

 

-

-

 

 

 

 

 

 

 

 

 

Balance as at 30 June 2017

96

16,545

1,879

2,255

1,962

-

2,171

24,908

 

·      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 issued 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.

·      Foreign exchange translation reserve represents the cumulative exchange differences arising on group consolidation.

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

CONSOLIDATED STATEMENT OF CASH FLOWS

 

 

 

Unaudited

Six months

ended

30 Jun 2017

 

Unaudited

Six months

ended

30 Jun 2016

 

Audited

Year

ended 31 Dec 2016

 

 

 

£'000

 

£'000

 

£'000

 

 

 

 

 

 

 

 

Cash flow from operating activities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Profit / (loss) before taxation

 

 

(780)

 

(910)

 

1,157

 

 

 

 

 

 

 

 

Adjustments for:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation of property, plant and equipment

 

 

62

 

57

 

124

Amortisation of intangible assets

 

 

1,064

 

946

 

2,066

Reclassification of intangible assets

 

 

-

 

-

 

752

Finance income/(cost) - net

 

 

52

 

79

 

130

Share based payments

 

 

232

 

319

 

621

Share of result of associate

 

 

-

 

-

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating cashflow before working capital changes

 

 

630

 

491

 

4,850

 

 

 

 

 

 

 

 

Decrease / (Increase) in trade and other receivables

 

 

724

 

(17,862)

 

(4,066)

Increase / (Decrease) in trade and other payables and accruals

 

 

(374)

 

19,074

 

3,350

Decrease / (Increase)  in inventories

 

 

4

 

(262)

 

(278)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flow from operations

 

 

984

 

1,441

 

3,856

 

 

 

 

 

 

 

 

Income tax paid

 

 

(507)

 

(397)

 

(538)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net cash flow from operating activities

 

 

477

 

1,044

 

3,318

 

 

 

 

 

 

 

 

Cash flow used in investing activities

 

 

 

 

 

 

 

Purchase of property, plant and equipment

 

 

(86)

 

(110)

 

(145)

Purchase of intangible assets, net of cash acquired

 

 

(161)

 

(1,237)

 

(350)

Loan payments paid to/from third parties

 

 

-

 

-

 

-

Acquisition of a subsidiary, net of cash acquired

 

 

-

 

(12,881)

 

(14,831)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net cash flow used in investing activities

 

 

(247)

 

(14,228)

 

(15,326)

 

 

 

 

 

 

 

 

Cash flow used in financing activities

 

 

 

 

 

 

 

(Repayments) / Proceeds from borrowings (net)

 

 

(583)

 

3,208

 

2,625

Proceeds from issuance of ordinary shares (net)

 

 

-

 

2

 

23

Reduction in deferred consideration

 

 

-

 

(36)

 

(36)

Net cash flow generated from / (used in) financing activities

 

 

(583)

 

3,174

 

2,612

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (decrease) /  increase in cash and cash equivalents

 

 

(353)

 

(10,010)

 

(9,396)

Cash and cash equivalents at beginning of the period/year

 

 

9,902

 

19,060

 

19,060

Exchange differences on cash and cash equivalents

 

 

22

 

203

 

238

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents at end of the period/year

 

 

9,571

 

9,253

 

9,902

 

 

 

 

 

 

 

 

NOTES TO THE FINANCIAL INFORMATION

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 35-39 Moorgate, London, EC2R 6AR.  

The CentralNic Group provides Wholesale ("registry"), Retail ("registrar") and Enterprise services and strategic consultancy for new Top Level Domains ("TLDs"), Country Code TLD's ("ccTLDs") and Second-Level Domains ("SLDs") and it is the owner and registrant for a portfolio of domain names, which it uses as SLD domain extensions and for resale on the domain aftermarket.

2.     Basis of preparation

The condensed interim consolidated financial statements do not represent statutory accounts within the meaning of section 435 of the Companies Act 2016. The financial information for the year ended 31 December 2016 is based on the statutory accounts for the year ended 31 December 2016. Those accounts, upon which the auditors issued an unqualified opinion, have been delivered to the Registrar of Companies and did not contain statements under section 498(2) or (3) of the Companies Act 2006.

The condensed interim financial information is unaudited and has been prepared on the basis of the accounting policies set out in the Group's 2016 statutory accounts in accordance with IAS 34 Interim Financial Reporting.

The seasonality or cyclicality of operations does not impact on the interim financial statements.

3.     Critical accounting judgments and key sources of estimating uncertainty

In the application of the CentralNic Group's accounting policies, the directors are required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not apparent from other sources.  The estimates and assumptions are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.  Actual results may differ from these estimates.

 

The estimates and underlying assumptions are reviewed on an on-going basis.  Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

 

The following are the key assumptions concerning the future and other key sources of estimation uncertainty at the statement of financial position date that have a significant risk of causing a significant adjustment to the carrying amounts of assets and liabilities in the Financial statements:

 

Impairment Testing

The recoverable amounts of individual non-financial assets are determined based on the higher of the value-in-use calculations and the recoverable amount, or fair value less costs to sell.  These calculations will require the use of estimates and assumptions.  It is reasonably possible that assumptions may change, which may impact the Directors' estimates and may then require a material adjustment to the carrying value of tangible and intangible assets. 

 

The directors review and test the carrying value of tangible and intangible assets when events or changes in circumstances suggest that the carrying amount may not be recoverable. For the purposes of performing impairment tests, assets are grouped at the lowest level for which identifiable cash flows are largely dependent on cash flows of other assets or liabilities.  If there are indications that impairment may have occurred, estimates will be prepared of expected future cash flows for each group of assets. 

 

Expected future cash flows used to determine the value in use of tangible and intangible assets will be inherently uncertain and could materially change over time. 

Estimation of useful life

The charge in respect of periodic amortisation and depreciation is derived after determining an estimate of an asset's expected useful life. The useful lives of the assets are determined by management at the time the asset is acquired and are reviewed continually for appropriateness.

Share based payments

The fair value of share-based remuneration is determined at the date of grant and recognised as an expense in the statement of comprehensive income on a straight line basis over the vesting period, taking account of the estimated number of shares that will vest. The fair value is determined by use of Black Scholes model method.

4.     Segment analysis

CentralNic is an independent global domain name service provider.  It provides Wholesale, Retail and Enterprise services and it is the owner and registrant of a portfolio of domain names, which it uses as SLD domain extensions.  Operating segments are prepared in a manner consistent with the internal reporting provided to the management as its chief operating decision maker in order to allocate resources to segments and to assess their performance.  These reportable operating segments includes the aggregation of certain operating units.  Management reviews the activities of the CentralNic Group in the segments disclosed below:

 

 

Period ended 30 June 2017

 

Revenue

Adjusted EBITDA

Non-current assets

Current assets

Non-current liabilities

Current liabilities

 

£'000

£'000

£'000

£'000

£'000

£'000

Wholesale domain sales

1,816

453

2,881

10,884

1,193

13,101

Retail domain sales

7,974

913

29,578

9,966

6,151

8,396

Enterprise including premium domain name sales

797

223

127

393

-

80

Group overheads including costs associate with public company status

-

(534)

-

-

-

-

 

 

 

 

 

 

 

 

10,587

1,055

32,586

21,243

7,344

21,577

 

 

 

 

Period ended 30 June 2016

 

Revenue

Adjusted EBITDA

Non-current assets

Current assets

Non-current liabilities

Current liabilities

 

£'000

£'000

£'000

£'000

£'000

£'000

Wholesale domain sales

1,638

722

3,651

26,293

2,544

9,581

Retail domain sales

6,755

1,103

26,731

8,929

3,131

28,001

Enterprise including premium domain name sales

538

(60)

117

226

-

395

Group overheads including costs associate with public company status

-

(456)

-

-

-

-

 

 

 

 

 

 

 

 

8,931

1,309

30,499

35,448

5,675

37,977

 

 

 

 

Year ended 31 December 2016

 

Revenue

Adjusted EBITDA

Non-current assets

Current assets

Non-current liabilities

Current liabilities

 

£'000

£'000

£'000

£'000

£'000

£'000

Wholesale domain sales

3,176

1,237

2,901

12,614

1,775

13,578

Retail domain sales

14,320

2,417

30,564

8,848

6,651

8,159

Enterprise including premium domain name sales

4,633

2,785

122

359

-

26

Group overheads including costs associate with public company status

-

(956)

-

-

-

-

 

 

 

 

 

 

 

 

22,129

5,483

33,587

21,821

8,426

21,763

5.     Revenue

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

 

 

Unaudited

6 months ended

30 Jun 2017

 

Unaudited

6 months ended

30 Jun 2016

 

Audited

Year ended

31 Dec 2016

 

 

£'000

 

£'000

 

£'000

Wholesale Domain Sales

 

 

 

 

 

 

UK

 

204

 

463

 

805

North America

 

537

 

443

 

904

Europe

 

608

 

234

 

451

ROW

 

467

 

498

 

1,016

 

 

1,816

 

1,638

 

3,176

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retail Domain Sales

 

 

 

 

 

 

UK

 

685

 

526

 

1,215

North America

 

2,085

 

1,419

 

3,416

Europe

 

2,059

 

1,950

 

3,723

ROW

 

3,145

 

2,860

 

5,966

 

 

7,974

 

6,755

 

14,320

 

 

 

 

 

 

 

Enterprise including Premium Domain Name Sales

 

 

 

 

 

 

UK

 

-

 

-

 

4

North America

 

36

 

31

 

3,745

Europe

 

298

 

254

 

575

ROW

 

463

 

253

 

309


s

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

797

 

538

 

4,633

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Enterprise including premium domain name sales by nature are subject to annual variation depending on customer demand.

 

The following table shows customers that represented 10% or more of the wholesale domain sales:

 

 

 

Unaudited

6 months ended

30 Jun 2017

 

Unaudited

6 months ended

30 Jun 2016

 

Audited

Year ended

31 Dec 2016

 

 

£'000

 

£'000

 

£'000

 

 

 

 

 

 

 

Customer A

 

26

 

177

 

287

Customer B

 

50

 

96

 

189

Customer C

 

440

 

-

 

-

Other customers

 

1,300

 

1,365

 

2,700

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,816

 

1,638

 

3,176

 

 

 

 

 

 

 

 

 

 

 

 

 

 

No single customer contributes greater than 10% or more of the retail domain sales. 

In the six months ended 2017 enterprise including premium domain name sales were principally driven by premium domain name sales of £355k of which £348k was made to one customer.

In prior periods the enterprise including premium domain name sales were principally driven by premium domain name sales of £3,744k for the year ended 31 Dec 2016 (6 months ended 2016: £5k) of which £3,555k was made to one customer (6 months ended 2016: £5k to one customer).

6.     Income tax expense

 

 

 

 

 

Unaudited

6 months ended

30 Jun 2017

 

Unaudited

6 months ended

30 Jun 2016

 

Audited

Year ended

31 Dec 2016

 

 

£'000

 

£'000

 

£'000

 

 

 

 

 

 

 

Current tax on profits for the period

 

(153)

 

443

 

282

Adjustments in respect of previous periods

 

-

 

-

 

(48)

Current income tax

 

(153)

 

443

 

234

 

 

 

 

 

 

 

Deferred income tax

 

(8)

 

(47)

 

(32)

 

 

 

 

 

 

 

 

 

(161)

 

396

 

202

 

 

 

 

 

 

 

A reconciliation of the current income tax expense applicable to the profit before taxation at the statutory tax rate to the current income tax expense at the effective tax rate of the CentralNic Group are as follows:

 

 

 

Unaudited

6 months ended

30 Jun 2017

 

Unaudited

6 months ended

30 Jun 2016

 

Audited

Year ended

31 Dec 2016

 

£'000

 

£'000

 

£'000

 

 

 

 

 

 

(Loss)/profit before taxation

(780)

 

(910)

 

1,157

 

 

 

 

 

 

Tax calculated at domestic tax rates applicable to profits in the respective countries

(217)

 

(110)

 

158

 

 

 

 

 

 

Tax effects of:-

 

 

 

 

 

Expenses not deductible for tax purposes

56

 

473

 

82

Adjustments in respect of previous periods

-

 

-

 

(48)

Unutilised tax losses

-

 

33

 

10

 

 

 

 

 

 

Current tax expense for the period/year

(161)

 

396

 

202

 

 

 

 

 

 

 

The Company provides for income taxes on the basis of its income for financial reporting purposes, adjusted for items that are not assessable or deductible for income tax purposes, in accordance with the regulations of domestic tax authorities.

The effective rate of tax for the period was 20.7% (Six months ended 2016: 24.7%)

In the UK, the applicable statutory tax rate for 2016/17 is 19% (2015/16: 20%).

In the USA, federal taxes are due at 15% on taxable income.  Under California tax legislation a statutory minimum of $400 of state tax is due.

In Germany, federal taxes are due at 15% on taxable income. With an additional 5.5% solidarity surcharge due on the income tax. A community business tax of c.17% is also levied with rates determined by the municipality.

In Australia and New Zealand, income taxes are due at 30% and 28% respectively on taxable income.

 

7.     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 (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.

 

 

Unaudited

6 months ended

30 Jun 2017

 

Unaudited

6 months ended

30 Jun 2016

 

Audited

Year ended

31 Dec 2016

 

 

£'000

 

£'000

 

£'000

 

 

 

 

 

 

 

Profit / (loss) after tax attributable to owners

 

(619)

 

(1,306)

 

955

Weighted average number of shares:

 

 

 

 

 

 

Basic

 

95,894,348

 

95,417,444

 

95,632,390

Effect of dilutive potential ordinary shares

 

-

 

-

 

2,745,348

Diluted

 

95,894,348

 

   95,417,444

 

98,377,738

Earnings per share:

 

 

 

 

 

 

Basic (pence)

 

(0.65)

 

(1.37)

 

1.00

Diluted (pence)

 

(0.65)

 

(1.37)

 

0.97

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At 30 June 2016 and 30 June 2017, the contingently issuable potential ordinary shares included within the share options are anti-dilutive and are not included in the calculation.

8.     Intangible assets

 

 

Domain Names

 

Patents & Trademarks

 

Software

 

Customer List

 

Goodwill

 

Total

 

£'000

£'000

£'000

£'000

£'000

£'000

Cost or deemed cost

 

 

 

 

 

 

At 1 January 2016

2,340

-

1,064

2,548

1,573

7,525

Additions

1,121

-

116

-

-

1,237

Acquisition of subsidiary

-

11

1,637

8,738

7,927

18,313

Exchange Differences

25

2

217

1,147

1,064

2,455

At 30 June 2016

3,486

13

3,034

12,433

10,564

29,530

Additions

-

-

234

-

-

234

Acquisition of subsidiary*

-

(11)

(22)

-

3,847

3,814

Reclassification

(2,295)

-

-

-

-

(2,295)

Exchange Differences

(25)

(2)

48

283

892

1,196

At 31 December 2016

1,166

-

3,294

12,716

15,303

32,479

Additions

-

-

161

-

-

161

Exchange Differences

-

-

7

36

53

97

At 30 June 2017

1,166

-

3,462

12,752

15,356

32,736

 

 

 

 

 

 

 

Amortisation

 

 

 

 

 

 

At 1 January 2016

1,473

-

280

382

-

2,135

Charge for the period

95

-

274

577

-

946

Acquisition of subsidiary

-

11

23

-

-

34

Exchange differences

25

2

3

-

-

30

At 30 June 2016

1,593

13

580

959

-

3,145

Charge for the period

101

-

366

653

-

1,120

Acquisition of subsidiary*

-

(11)

(23)

-

-

(34)

Reclassification

(1,544)

-

-

-

-

(1,544)

Exchange Differences

(25)

(2)

(3)

-

-

(30)

At 31 December 2016

125

-

920

1,612

-

2,657

Charge for the period

52

-

375

637

-

1,064

Exchange Differences

-

-

-

-

-

-

At 30 June 2017

177

-

1,295

2,249

-

3,721

 

 

 

 

 

 

 

Carrying value

 

 

 

 

 

 

At 30 June 2016

1,893

-

2,454

11,474

10,564

26,385

At 31 December 2016

1,041

-

2,374

11,104

15,303

29,822

At 30 June 2017

989

-

2,167

10,503

15,356

29,015

Amortisation of intangible assets is included in administrative expenses in the combined and consolidated statement of comprehensive income.

Certain domain names previously held as intangibles were reclassified to stock held for resale in the period to 31 December 2016.

*The fair values recognised on acquisition of the Instra Group which completed in January 2016 were finalised in the period ended 30th December 2016, as a result the acquired intangibles have been updated in the period.

9.    Deferred receivables

 

 

Unaudited

6 months ended

30 Jun 2017

 

Unaudited

6 months ended

30 Jun 2016

 

Audited

Year ended

31 Dec 2016

 

 

£'000

 

£'000

 

£'000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deferred costs

 

1,127

 

1,292

 

1,486

Loans to related parties

 

77

 

-

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,204

 

1,292

 

1,486

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10.  Trade and other receivables

 

 

Unaudited

6 months ended

30 Jun 2017

 

Unaudited

6 months ended

30 Jun 2016

 

Audited

Year ended

31 Dec 2016

 

 

£'000

 

£'000

 

£'000

 

 

 

 

 

 

 

Trade receivables

 

3,607

 

3,599

 

5,361

Accrued revenue

 

1,860

 

16,256

 

1,123

Deferred costs

 

3,741

 

2,972

 

3,315

Prepayments

 

255

 

164

 

163

Prepaid finance costs

 

-

 

334

 

-

Supplier payments on account

 

591

 

377

 

376

Loan to third party

 

-

 

-

 

-

Amounts due from shareholders

 

755

 

738

 

747

Other taxes and social security

 

37

 

37

 

-

Other receivables

 

363

 

1,342

 

444


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

11,209

 

25,819

 

11,529

11.  Trade and other payables and accruals

 

 

Unaudited

6 months ended

30 Jun 2017

 

Unaudited

6 months ended

30 Jun 2016

 

Audited

Year ended

31 Dec 2016

 

 

£'000

 

£'000

 

£'000

 

 

 

 

 

 

 

Accounts payable

 

1,336

 

10,740

 

3,120

Accrued expenses

 

5,081

 

14,589

 

4,596

Other taxes and social security

 

163

 

97

 

220

Deferred consideration

 

-

 

829

 

-

Deferred revenue

 

7,649

 

7,488

 

7,375

Customer payments on account

 

5,820

 

2,503

 

4,602

Accrued interest

 

17

 

29

 

22

Other liabilities

 

25

 

10

 

12


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

20,091

 

36,285

 

19,947

  

12.  Share capital

 

 

Number

 

Share
Capital

 

Share Premium

 

Merger

Relief

 

 

 

 

£'000

 

£'000

 

£'000

 

 

 

 

 

 

 

 

 

At 1 January 2016

 

92,007,481

 

92

 

16,522

 

-

 

Issued in connection with the acquisition of the Instra Group

 

 

3,656,450

 

 

4

 

 

1,459

 

 

-

 

Proceeds from shares issued in connection with the employee share option schemes

 

 

20,417

 

 

-

 

 

2

 

 

-

At 30 June 2016

 

95,684,348

 

96

 

17,983

 

-

 

Fair value adjustment in relations to shares issued in connection with the acquisition of the Instra Group

 

 

-

 

 

-

 

 

(1,459)

 

 

1,879

 

Proceeds from shares issued in connection with the employee share option schemes

 

 

210,000

 

 

-

 

 

21

 

 

-

At 31 December 2016 and 30 June 2017

 

95,894,348

 

96

 

16,545

 

1,879

On 14 January 2016 the company issued 3,656,450 new ordinary shares to Antonio Frank Lentino of 0.1 pence each at 40 pence per share.  A merger relief reserve of £1,879,415 was created to reflect the fair value of those shares at 51.5 pence per share.  

The company has no authorised share capital.

 

13.  Financial instruments

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

The principal financial instruments used by the CentralNic group, from which financial instrument risk arises, are as follows:

 

 

Unaudited

6 months ended

30 Jun 2017

 

Unaudited

6 months ended

30 Jun 2016

 

Audited

Year ended

31 Dec 2016

 

 

£'000

 

£'000

 

£'000

Financial assets

 

 

 

 

 

 

Loan and receivables

 

 

 

 

 

 

Trade and other receivables

 

10,955

 

25,819

 

11,365

Inventory

 

386

 

376

 

390

Cash and cash equivalents

 

9,571

 

9,253

 

9,902

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

20,912

 

35,448

 

21,657

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial liabilities measure at amortised costs

 

 

 

 

 

 

Trade and other payables

 

20,091

 

36,285

 

19,947

Loan and borrowings

 

1,033

 

1,167

 

1,033

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

21,124

 

37,452

 

20,980

 

 

 

 

 

 

 

               

 

14.  Seasonal or cyclical factors

There are no seasonal factors that materially affect the operations of any company in the group.

15.  Nature of financial information

The financial information presented above does not constitute statutory financial information for either the company or the CentralNic group.

16.  Post Balance Sheet Events

On the 25th August 2017, the Board of CentralNic announced that it has agreed to acquire the business and assets of SK-NIC, the manager of the exclusive country code top-level domain for Slovakia, .sk. The Board believes that this will represent a major, strategic and earnings enhancing acquisition for the Group.  

The acquisition is expected to legally complete in September 2017 with an initial cash consideration of €21.27 million and deferred cash consideration of up to €4.85 million, dependent on SK-NIC attaining defined growth targets over the next three years.  

The initial cash consideration is being funded by the Company's own cash reserves and a term loan of £18 million, provided by Silicon Valley Bank ("SVB").  SVB is also providing a £3 million overdraft facility.  The existing term loan will be also repaid as part of this refinancing.   It is expected that the deferred consideration will be paid from the profits of the enlarged Group. 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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