1 March 2021

CENTRALNIC GROUP PLC

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

UNAUDITED PRELIMINARY ACCOUNTS FOR THE PERIOD ENDED 31 DECEMBER 2020

CentralNic Group Plc (AIM: CNIC), the global internet platform that derives revenue from the worldwide sales of internet domain names and related web services, announces its unaudited preliminary accounts for the financial year ended 31 December 2020. The audited annual report and accounts for 2020 will be published towards the end of April 2021. Both revenue and Adjusted EBITDA have increased year-on-year, driven by a combination of acquisitions and underlying organic growth.

Financial Summary:

·       Revenue increased by 121% to USD 241.2m (FY2019: USD 109.2m)

·       Net revenue/Gross profit increased by 78% to USD 76.3m (FY2019: USD 42.8m)

·       Adjusted EBITDA* increased by 71% to USD 30.6m (FY2019: USD 17.9m)

·       Operating profit increased by USD 3.2m to USD 0.4m (FY2019: operating loss of USD (2.8m))

·       Net debt** stood at USD 85.0m (gross interest bearing debt of USD 113.6m, cash of USD 28.7m) as compared to USD 75.0m in FY2019 (gross interest bearing debt of USD 101.2m, cash of USD 26.2m)

As CentralNic made one major acquisition in 2020 and four acquisitions in 2019, the Company also prepared a pro forma comparable financial summary including all businesses currently controlled by CentralNic (a definition of which is provided in a footnote on the page below), to effectively isolate organic growth. 

Financial Organic Summary on a pro forma basis***:

·       Revenue increased by 9% to USD 289.7m (pro forma FY2019: USD 265.9m)

·       Gross profit increased by 8% to USD 96.6m (pro forma FY2019: USD 89.5m)

·       Adjusted EBITDA* increased by 4% to USD 35.6m (pro forma FY2019: USD 34.1m)

Operational Highlights:         

·       Strong organic growth in the face of the COVID crisis

·       All staff and systems remained fully operational with no interruption to the supply chains

·       Completed an operational restructure which included investing significantly in new management personnel and systems to position the Group well for future growth

·       Healthy demand for our two largest service lines, Wholesale domains and, most importantly, Monetisation - the latter also driven by the rollout of a patented SSL monetisation solution in late 2019

Financial Highlights:

·      Payment of EUR 2.7m of earn-out for the Team Internet acquisition paid in June 2020 (EUR 0.9m of retention payment are still outstanding)

·      EUR 1.3m of deferred consideration for SK-NIC was settled in July 2020; a maximum of EUR 1.7m is yet to be paid

·      Conversion of the share premium account into a distributable reserve in August 2020

·      The final deferred consideration payment of EUR 2.7m for Hexonet was settled in August 2020 by issuing 3.2m new shares

·      The final deferred consideration payment of EUR 0.45m for GlobeHosting was paid in August 2020

·      Payment of the 2019 KeyDrive earnout of USD 2.2m, paid 15% in cash and 85% by issuing 1.7m new shares; up to USD 1.4m of earnout may still be payable if certain conditions are met

·      Successful placing of 40 million shares at a price of GBP 0.75 per share for total net proceeds of approximately USD 37.3m

·      Acquisition of Codewise for USD 36.0m

·      Profitable sale of a minority interest in Thomsen Trampedach for USD 1.8m

Post Year-End Highlights:

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

·      Successful, oversubscribed placement of EUR 15m (USD 18.2m approximately) of senior secured callable bonds at 104.5% of nominal value

·      Completion of the acquisition of Wando Internet Solutions for USD 6.5m plus an additional earnout of up to USD 6.5m

Outlook:

·      The strong organic growth in 2020 demonstrates the Company's resilience despite the economic crisis, and ability to execute on its accelerated buy and build strategy

·      New product launches and further integration activities will support revenue growth and margins

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

·      Management is pleased that the full year results have been delivered in line with management expectations

Ben Crawford, CEO of CentralNic, commented: "In 2020, CentralNic generated as much revenue as in the five preceding years all added together. These outstanding results not only demonstrate that CentralNic can source and complete transformative acquisitions, but that it can also integrate them successfully while delivering record organic growth. Moreover, as we scale up rapidly, the underlying qualities of high recurring revenues with 99% of revenue derived from sales of recurring products and services and high cash conversion calculated at 106% on an adjusted basis become increasingly meaningful.

"Our pipeline of future deals remains strong, while our net debt level remains comfortable particularly given the profitability and healthy cash flow from the existing CentralNic Group and the expected contribution from recent acquisitions. We have also brought on new staff, including a number of new senior managers, and systems to drive our organic growth, and we are confident in continuing our trajectory towards joining the ranks of the global leaders in our industry." 

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

** Includes gross cash, debt and prepaid finance costs

*** Given that the Group has made a number of key strategic acquisitions in 2019 and 2020, we have estimated unaudited pro forma information to provide period-to-period comparison of performance. In doing so, we have made the following assumptions: (a)  figures are provided for the entire comparative period, irrespective of when the acquisition by the Group arose; (b) adjustments have been made to the currency rates used for the comparative period to the most recent balance sheet date to harmonise the impact of currency fluctuations; (c) the impact of unwinding the deferred revenues relating to the period prior to 1 November 2018 arising from a change in the terms of conditions, as well as identified material non-cash or one-off revenues, have been excluded to ensure period to period comparability; and (d) adjustments have been made, as appropriate, to ensure GAAP comparability between periods. Differences to reported figures may result.

These unaudited preliminary accounts have been prepared for the purpose of fulfilling the information undertaking requirements included in the bond terms for the Senior Secured Callable Bond Issue.

For further information:

Forward-Looking Statements

This document includes forward-looking statements. Whilst these forward-looking statements are made in good faith, they are based upon the information available to CentralNic at the date of this document and upon current expectations, projections, market conditions and assumptions about future events. These forward-looking statements are subject to risks, uncertainties and assumptions about the Group and should be treated with an appropriate degree of caution. 

About CentralNic Group Plc

CentralNic (AIM: CNIC) is a London-based AIM-listed company which drives the growth of the global digital economy by developing and managing software platforms allowing businesses globally to buy subscriptions to domain names, used for their own websites and email, as well as for protecting their brands online. These platforms can also be used for distributing domain name related software and services, an opportunity that contributes significantly to CentralNic's organic growth. The Company's inorganic growth strategy is identifying and acquiring cash-generative businesses in its industry with annuity revenue streams and exposure to growth markets, and migrating them onto the CentralNic software and operating platforms. CentralNic operates globally with customers in almost every country in the world. It earns recurring revenues from the worldwide sales of internet domain names and other services on an annual subscription basis. For more information please visit: www.centralnicgroup.com

MANAGEMENT COMMENTARY ON PERFORMANCE

Introduction

CentralNic's organic growth, combined with its 2019 and 2020 acquisitions, substantially increased the scale and capabilities of the Company. The effect of this is demonstrated in our unaudited preliminary FY2020 results which show a transformational increase in revenues and adjusted EBITDA, both of which have grown by 121% and 71% respectively against FY2019. This is before the impact of the acquisitions of SafeBrands and Wando Internet Solutions, which completed after the balance sheet date of this report.

Performance Overview

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

¹ Please refer to note 7

On a pro forma basis (as defined in the footnote on page 2), the Company grew by 9% organically during FY2020, as compared to FY2019, from USD 265.9m to USD 289.7m.

Team Internet represented a significant proportion of the strong performance in the period. The acquired businesses have similar patterns of recurring revenue and cash conversion as CentralNic's prior business, and hence recurring revenue and cash conversion are expected to remain in line with the long-term trend. This underpins the Company's financial stability and visibility of earnings. The decrease in average gross margin from 39.2% to 31.6% reflects the change in the business blend as a result of the 2019 and 2020 acquisitions. The marginal drop of gross margin on a proforma basis from 33.7% to 33.4% is testament to this fact.

Segmental Analysis

Indirect segment

Significant scale was achieved in the Indirect segment, with revenues increasing by USD 25.1m or 41%, from USD 60.7m to USD 85.8m, chiefly driven by the full year effect of the acquisitions of TPP Wholesale in July 2019 and Hexonet Group in August 2019. On a pro forma basis, revenue increased by USD 5.7m or 7% from USD 83.3m to USD 89.1m.  

During the period, the Company successfully completed a number of key integration tasks within its Indirect segment, most notably the migration of all .au domain names from the Webcentral (formerly Arq Group) platform to CentralNic's central domain procurement engine, leading to estimated future annualised savings of USD 350,000 on cost of sales.

At the same time, CentralNic continued to develop its reseller key accounts with seven out of the top ten customer accounts having increased their spend compared to 2019 by up to 63%.

Direct segment

Revenue in the Direct segment decreased by USD 3.2m or 7%, from USD 46.6m to USD 43.4m. The decrease was largely due to the diminishing impact of the November 2018 change in terms and conditions, the reallocation of the data center business to the Indirect business and the reallocation of the monetisation activities to the Monetisation segment. The acquisition of Ideegeo contributed favourably to growth. On a pro forma basis, revenue was stable with USD 44.3m in FY2019 and USD 44.4m in FY2020. 

Management is positive that the segment will return to growth with further client wins, and a healthy pipeline of prospective clients.  

Monetisation

The fastest growing segment of CentralNic's business was Monetisation, which is for the first time presented as a separate segment. On a pro forma basis, revenue increased strongly by USD 17.9m or 13% from USD 138.3m to USD 156.2m. Excluding the acquisition of Codewise, revenue would have increased by USD 26.9m or 35% from USD 76.5m to USD 103.4m. The contraction of Codewise revenue was due to optimisation for gross profit and was known at the time of acquisition. Going forward, Management expects both businesses to contribute to growth.

Revenue growth has been driven mostly by an increase in the average yield ("RPM") of 36%. This is a result of both superior traffic quality subsequent to pruning the publisher base, as well as the rollout of Team Internet's patented SSL monetisation technology. At the same time, the number of page visits increased by 1%.

Outlook

In 2020 CentralNic delivered higher revenue than for the whole of the last five years combined and reported 9% revenue growth on a pro forma basis. Management is pleased with the achievement of strong results in 2020, in line with management expectations.

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

The pipeline of future deals remains strong, while the net debt level remains comfortable particularly given the profitability of the existing CentralNic Group and the expected contribution from recent acquisitions. We are confident in continuing our trajectory towards joining the ranks of the global leaders in our industry.

Year-to-date, the Company has been trading in line with management's expectations.

Ben Crawford

Chief Executive Officer

All amounts relate to continuing activities.

^(a)   Subsidiary and Associate Earnings before interest, tax, depreciation, amortisation, non-cash charges and non-core operating expenses.

^(b)  Non-core operating expenses include items related primarily to acquisition, integration and other related costs, which are not incurred as part of the underlying trading performance of the Group, and which are therefore adjusted for, in line with Group policy.

^(c)   The prior year figures have been restated for the reclassification of foreign exchange differences arising from foreign currency borrowings as follows:

·      a foreign exchange gain of USD 3,885,000 has been reclassified from administrative expenses to finance costs

·      a foreign exchange loss of USD 1,583,000 has been reclassified from administrative expenses to other comprehensive income

·      this results in a net increase in administrative expenses of USD 2,302,000

·      Share capital represents the nominal value of the Company's cumulative issued share capital.

·      Share premium represents the cumulative excess of the fair value of consideration received for the issue of shares in excess of their nominal value less attributable share issue costs and other permitted reductions.

·      Merger relief reserve represents the cumulative excess of the fair value of consideration received for the issue of shares in excess of their nominal value less attributable share issue costs and other permitted reductions. Where the consideration for shares in another company includes issued shares, and 90% of the equity is held in the other company.

·      Retained earnings represent the cumulative value of the profits not distributed to Shareholders but retained to finance the future capital requirements of the CentralNic Group.

·      Share-based payments reserve represents the cumulative value of share-based payments recognised through equity.

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

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