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CentralNic Group PLC - 9 MONTHS ENDED 30 SEPTEMBER 2020 FINANCIAL RESULTS

RNS Number : 8429G
CentralNic Group PLC
30 November 2020
 

 

 

30 November 2020                                                                                                                                                         

 

CENTRALNIC GROUP PLC

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

 

NINE MONTHS ENDED 30 SEPTEMBER 2020 FINANCIAL RESULTS

 

Significant Year-on-Year Increases in Revenues and Adjusted EBITDA

 

CentralNic Group Plc (AIM: CNIC), the global internet platform that derives revenue from the worldwide sales of internet domain names and related web services, is pleased to announce its results for the nine months ended 30 September 2020. Both revenue and Adjusted EBITDA have increased year-on-year, driven by a combination of acquisitions and underlying organic growth.

Nine months Financial Summary:

·       Revenue increased by 118% to USD 168.5m (Sep 2019 YTD: USD 77.1m)

·       Net revenue/Gross profit increased by 74% to USD 53.3m (Sep 2019 YTD: USD 30.6m)

·       Adjusted EBITDA* increased by 68% to USD 22.1m (Sep 2019 YTD: USD 13.1m)

·       Operating profit increased to USD 1.9m (Sep 2019 YTD: USD 0.1m)

·       Cashflow from operations up to USD 13.5m (Sep 2019 YTD: USD (0.3)m) with adjusted operating cash conversion of 93%

·       Net debt** as at 30 September 2020 stood at USD 44.9m (gross debt of USD 108.6m, cash of USD 63.6m including USD 37.3m raised in September to acquire the assets of Codewise but not yet deployed) versus USD 35.9m in the prior year (gross debt of USD 54.9m, cash of USD 19.0m)

 

*Excludes impact of share-based payments expense for options, foreign exchange charges, and non-core operating costs

** Includes gross cash, debt and prepaid finance costs.

 

CentralNic made four acquisitions in H2 2019, and the Company has prepared a pro forma comparable financial summary including all businesses currently controlled by CentralNic, a definition of which is provided in footnote *** below, to enable effective comparison of 2020 with 2019 and show more clearly the organic growth within CentralNic's businesses.

 

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

·       Revenue increased by 17% to USD 169.9m (pro forma YTD Sep 2019: USD 145.1m)

·       Gross profit increased by 10% to USD 55.2m (pro forma YTD Sep 2019: USD 50.0m)

·       Adjusted EBITDA* increased by 4% to USD 22.2m (pro forma YTD Sep 2019: USD 21.4m) notwithstanding notable investment in scalability and future organic growth

 

Operational Highlights:         

·       Record organic growth of 17% on a pro forma*** basis despite the COVID-19 crisis.

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

·       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

 

Financial Highlights:

·      Completion of earn-out for the Team Internet acquisition, with a EUR 2.7 million payment in June 2020

·      In July 2020, EUR 1.3m of deferred consideration for SK-NIC was settled with a maximum of EUR 1.7m still 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 made in August 2020 by issuing 3.2m new ordinary shares

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

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

 

Post half nine months period highlights:

·      Completion of acquisition of Zeropark and Voluum businesses for USD 36 million

·      Settlement of KeyDrive 2019 earnout for USD 2.2m, paid 15% in cash and 85% by issuing 1.7m consideration shares. A further earn out of up to USD 1.4m of may still be earned.

 

              

                 Outlook

·      The first nine months of strong organic growth demonstrates the Company's resilience despite the economic crisis, and the ability to drive value by executing an accelerated buy and build strategy

·      New product launches and further integration activities will support and potentially improve revenue growth and margins in future periods

·      We continue to assess a number of opportunities to continue our successful consolidation strategy, in what is a large, globally fragmented and growing market

·      Having achieved strong results in the first nine months of 2020, management is confident that the full year results should be in line with management expectations

 

Ben Crawford, CEO of CentralNic, commented: "In the first nine months of 2020 CentralNic's reported revenue exceeded our cumulative reported revenue for financial years 2018 and 2019 combined. These outstanding results not only demonstrate that CentralNic can source and complete transformative acquisitions, but that it can also integrate them successfully while delivering double digit organic growth. Moreover, as we scale up rapidly, the underlying CentralNic qualities of high recurring revenues and excellent cash conversion become increasingly meaningful.

 

"Our pipeline of future deals remains strong and we consider our net debt level to be comfortable given the profitability of the existing CentralNic Group and the expected contribution from recent acquisitions, which together will lead to a reduction over time, absent further acquisition activity. We have also brought a number of new senior managers onboard to drive our organic growth and we are confident in continuing our trajectory towards joining the ranks of the global leaders in our industry." 

 

*** Given that the Group has made a number of key strategic acquisitions in 2019, 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 change of the terms of conditions, as well as identified material non-cash or one-off revenues, have been excluded to ensure period to period comparability (d) adjustments have been made, as appropriate, to ensure GAAP comparability between periods. Differences to reported figures result.

 

For further information:

 

CentralNic Group Plc

 

Ben Crawford, Chief Executive Officer

+44 (0) 203 388 0600

Don Baladasan, Group Managing Director

 

Michael Riedl, Chief Financial Officer

 

 

 

Zeus Capital Limited - NOMAD and Joint Broker

 

Nick Cowles / Jamie Peel (Corporate Finance)

+44 (0) 161 831 1512

John Goold / Rupert Woolfenden (Institutional Sales)

+44 (0) 203 829 5000

 

Stifel - Joint Broker

 

Fred Walsh / Alex Price / Richard Short

 

+44 (0) 20 7710 7600

Newgate Communications (for Media)

 

Bob Huxford

Tom Carnegie

 

+44 (0) 203 757 6880

centralnic@newgatecomms.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 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

 

CHIEF EXECUTIVE OFFICER'S STATEMENT

 

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 fully demonstrated in our first nine months' 2020 results which show a transformational increase in revenues and adjusted EBITDA, both of which have grown by 118% and 68% respectively against the comparative period for 2019. This is before the impact of the acquisition of the Zeropark and Voluum businesses, which completed after the balance sheet date of this report.

 

Performance Overview

               

The Company has performed strongly during the nine months period with the key financial metrics listed below:

 

 

 

30 September

2020

30 September

2019

 

Change

 

USD'000

USD'000

%

Revenue

168,474

77,124

118.4%

Gross profit

53,251

30,588

74.1%

Adjusted EBITDA1

22,075

13,113

68.3%

Operating profit

1,882

99

1,801%

Profit/(loss) after tax

(6,185)

(6,064)

(2.0)%

EPS - Basic (cents)

(3.33)

(3.36)

(1.0)%

EPS - Adjusted earnings - Basic (cents) 2

6.71

5.47

22.7%

 

1 Excludes impact of share-based payments expense for options, foreign exchange charges, and non-core operating costs

2 Please refer to note 10

 

On a pro forma basis, as defined in footnote *** above, the Company grew revenue by 17% organically during the nine months period ended 30 September 2020, as compared with the nine months period ended 30 September 2019 performance on a pro forma basis from USD 142.8m to USD 170.8m.

 

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 40% to 32% reflects the change in the revenue mix as a result of the 2019 acquisitions. Each individual business maintained its margins, and the marginal drop of gross margin on a proforma basis from 34.4% to 32.5% is explained by the Monetisation business growing faster than the remainder of the Group.

 

Segmental Analysis

 

Indirect segment

 

We achieved significant scale in our Indirect segment, with revenues increasing by USD 21.5m or 51%, from USD 41.9m to USD 63.5m, chiefly driven by the acquisition of TPP Wholesale in July 2019 and Hexonet Group in August 2019. On a pro forma*** basis, revenue increased by USD 4.9m or 8% from USD 60.3m to USD 65.2m.  

 

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 six of the top ten customer accounts having increased their spend compared with the first nine months of 2019, in one instance by 63%.

 

Direct segment

 

Revenue in the Direct segment decreased by 9%, from USD 35.1m to USD 32.1m. 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 favorably to growth. On a pro forma basis, revenue declined by USD 0.6m or 2% from USD 32.5m to USD 31.8m. 

 

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 20.5m or 39% from USD 52.4m to USD 72.9m.

 

Revenue growth has been driven mostly by an increase in the average yield ("RPM") by 36%. This is a result of both superior traffic quality subsequent to pruning of 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 2%, explaining the remainder of the outstanding performance.

 

Outlook

 

In the first nine months of 2020 CentralNic delivered higher revenue than for the whole of 2018 and 2019 combined and reported a 17% growth on a pro forma*** basis. Having achieved strong results in the first nine months of 2020, management is confident that the full year results should be 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 we scale up rapidly, the underlying qualities of high recurring revenues and excellent cash conversion become increasingly meaningful.

 

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

 

Ben Crawford

Chief Executive

 

 

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

 

 

  Unaudited

Nine months

ended 30 Sep 2020

    Unaudited

Nine months

ended 30 Sep 2019

 Restated(c)

Audited Year

ended 31 Dec 2019

Note

 

USD'000

USD'000

USD'000

 

 

 

 

 

 

 

 

 

Revenue

7

 

168,474

 

77,124

 

109,194

 

Cost of sales

 

 

(115,223)

 

(46,536)

 

(66,419)

 

 

 

 

 

 

 

 

 

 

Gross profit

 

 

53,251

 

30,588

 

42,775

 

 

 

 

 

 

 

 

 

 

Administrative expenses

 

 

(47,467)

 

(28,489)

 

(41,891)

 

Share based payments expense

 

 

(3,902)

 

(2,000)

 

  (2,878)

 

 

 

 

 

 

 

 

 

 

Operating profit / (loss)

 

 

1,882

 

99

 

(1,994)

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA(a)

 

 

22,075

 

13,113

 

17,920

 

Depreciation

 

 

(1,494)

 

(911)

 

(1,306)

 

Amortisation of intangible assets

 

 

(8,777)

 

(5,599)

 

(8,299)

 

Non-core operating expenses(b)

8

 

(6,020)

 

(4,504)

 

(7,357)

 

Share of associate income

 

 

-

 

-

 

(74)

 

Share based payment expense

 

 

(3,902)

 

(2,000)

 

(2,878)

 

Operating profit /(loss)

 

 

1,882

 

99

 

(1,994)

 

 

 

 

 

 

 

 

 

 

Finance income 

 

 

8

 

5

 

5

 

Finance costs

9

 

(6,491)

 

(6,454)

 

(7,759)

 

Foreign exchange gain/loss on debts

9

 

(4,466)

 

1,445

 

3,885

 

 

 

 

 

 

 

 

 

 

Net finance costs

 

 

(10,949)

 

(5,004)

 

(3,869)

 

Share of associate income

 

 

-

 

-

 

74

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Profit/(loss) before taxation

 

 

(9,067)

 

(4,905)

 

(5,789)

 

Taxation 

10

 

2,882

 

(1,159)

 

39

 

Profit/(loss) after taxation

 

 

(6,185)

 

(6,064)

 

(5,750)

 

 

 

 

 

 

 

 

 

 

Items that may be reclassified subsequently to profit and loss

 

 

 

 

 

 

 

 

Exchange difference on translation of foreign operation

 

 

                           4,311

 

(2,149)

 

                     (6,861)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive loss for the financial year

 

 

(1,874)

 

(8,213)

 

(12,611)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Profit/(loss) after tax is attributable to:

Owners of CentralNic Plc

Non-controlling interest

 

 

(6,185)

-

 

(6,012)

(52)

 

(5,686)

(64)

 

 

 

 

(6,185)

 

(6,064)

 

(5,750)

 

Total comprehensive loss is attributable to:

Owners of CentralNic Plc

Non-controlling interest

 

 

 

(1,874)

-

 

 

(8,161)

(52)

 

 

(12,547)

(64)

 

 

 

 

 

(1,874)

 

 

 

(8,213)

 

 

 

(12,611)

 

 

Earnings per share (note 10):

 

 

 

 

 

 

 

Basic (cents)

 

(3.33)

 

(3.36)

 

(3.25)

 

Diluted (cents)

 

(3.33)

 

(3.36)

 

(3.25)

 

Adjusted earnings - Basic (cents)

 

6.71

 

5.47

 

9.24

 

Adjusted earnings - Diluted (cents)

 

6.43

 

5.32

 

8.97

 

                             

 

 

 

 

 

 

 

 

 

All amounts relate to continuing activities.

(a)   Earnings before interest, tax, depreciation and amortisation, acquisition costs, 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 Business, and therefore adjusted for, in line with Group policy.

 (c)   The comparative figures have been restated to reclassify the foreign exchange differences arising from foreign currency borrowings amounting to USD 3,885,000(net) and USD 2,410,000 from administrative expenses to finance costs and other comprehensive income respectively.

(d)   The comparative figures have been restated to reclassify the foreign exchange differences arising from foreign currency borrowings amounting to USD 485,000 from administrative expenses to Other Comprehensive Income.

 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

 

 

Unaudited

30 Sep 2020

 

 

Restated Unaudited

30 Sep 2019

 

 

Restated Audited

31 Dec 2019

Note

 

USD'000

 

USD'000

 

USD'000

 

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NON-CURRENT ASSETS

 

 

 

 

 

 

 

Property, plant and equipment

12

 

1,716

 

1,178

 

1,695

Right-of-use assets

12

 

4,128

 

3,789

 

4,732

Intangible assets

13

 

204,730

 

149,993

 

206,055

Deferred receivables

14

 

290

 

484

         

            739

Investments

 

 

1,557

 

1,390

 

1,778

Deferred tax assets

 

 

3,305

 

2,301

 

2,545

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

215,726

 

159,135

 

217,544

CURRENT ASSETS

 

 

 

 

 

 

 

Trade and other receivables

15

 

41,227

 

30,053

 

40,760

Inventory

 

 

452

 

3,863

 

491

Cash and bank balances

 

 

63,662

 

18,967

 

26,182

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

105,341

 

52,883

 

67,433

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL ASSETS

 

 

321,067

 

212,018

 

284,977

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EQUITY AND LIABILITIES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EQUITY

 

 

 

 

 

 

 

Share capital

18

 

292

 

227

 

             232

Share premium(f)

 

 

40,570

 

74,835

 

74,840

Merger relief reserve

 

 

5,297

 

2,314

 

5,297

Share based payments reserve

 

 

8,124

 

5,712

 

6,095

Foreign exchange translation reserve

 

 

1,601

 

2,002

 

(2,710)

Accumulated losses(f)

 

 

62,352

 

(7,133)

 

(6,681)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CAPITAL AND RESERVES ATTRIBUTABLE TO OWNERS OF THE GROUP

 

 

118,236

 

77,957

 

77,073

 

 

 

 

 

 

 

 

Non-controlling interests

 

 

-

 

(58)

 

(69)

 

 

 

 

 

 

 

 

TOTAL EQUITY

 

 

118,236

 

77,899

 

77,004

 

 

NON-CURRENT LIABILITIES

 

 

 

 

 

 

 

Other payables

 

 

2,233

 

3,045

 

3,798

Lease liabilities

 

 

3,226

 

3,076

 

3,832

Deferred tax liabilities

 

 

21,681

 

13,279

 

22,609

Borrowings

19

 

103,516

 

54,441

 

98,967

 

 

 

 

 

 

 

 

 

 

 

130,656

 

73,841

 

129,206

CURRENT LIABILITIES

 

 

 

 

 

 

 

Trade and other payables and accruals

16

 

66,083

 

58,206

 

75,683

Taxation payable

 

 

-

 

996

 

             -

Lease liabilities

 

 

1,007

 

633

 

871

Borrowings(e)

19

 

5,085

 

443

 

2,213

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

72,175

 

60,278

 

78,767

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES

 

 

202,831

 

134,119

 

207,973

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL EQUITY AND LIABILITIES

 

 

321,067

 

212,018

 

284,977

 

(e)  As at 30 Jun 2020, the Silicon Valley Bank term loan has been extended for a further six months and is now repayable in December 2020. It is therefore reflected in current liabilities.

(f)  During the period ended 30 September 2020, as resolved by the Annual General Meeting on 4 June 2020 a capital reduction has been completed subsequent to its approval by the High Court and its registration by the Companies House effective 14 August 2020.  The Capital Reduction is effected by the cancellation of the Company's share premium and thereby increased the distributable reserves.

 

 

 

 

CENTRALNIC GROUP PLC

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

 

 

 

Share capital

 

 

Share premium

 

 

Merger relief reserve

 

 

Share based payments reserve

 

Restated Foreign

exchange

translation

reserve

 

 

 

Restated Accumulated Profits/(Losses)

Restated Equity attributable to owners of the Parent Company

Non-Controlling Interest

Restated Total

 

USD'000

USD'000

USD'000

USD'000

USD'000

USD'000

USD'000

USD'000

USD'000

 

 

 

 

 

 

 

 

 

 

 

Balance as at 1 January 2019

216

69,238

2,314

3,330

4,151

(1,186)

78,063

5

78,068

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss for the period

-

-

-

-

-

(6,012)

(6,012)

(52)

(6,064)

 

Adjustment to non-controlling interest

 

 

 

 

 

11

11

(11)

-

 

- translation of foreign operation

-

-

-

-

(2,149)

-

(2,149)

-

(2,149)

 

Total comprehensive income for the period

-

-

-

-

(2,149)

(6,001)

(8,150)

(63)

(8,213)

 

Transactions with owners

 

 

 

 

 

 

 

 

 

 

Issue of new shares

11

5,597

-

-

-

-

5,608

-

5,608

 

Share based payments

-

-

-

1997

-

-

1,997

-

1,997

 

Share based payments - deferred tax asset

-

-

-

439

-

-

439

-

439

 

Share based payments - exercised and lapsed

-

-

-

 

(54)

 

-

 

54

 

-

 

-

 

-

 

 

 

 

 

 

 

 

 

 

 

 

Balance as at 30 Sep 2019

227

74,835

2,314

5,712

2,002

(7,133)

77,957

(58)

77,899

 

 

 

 

 

 

 

 

 

 

 

 

Profit for the period

-

-

-

-

-

326

326

(12)

314

 

Adjustment to non-controlling interest

-

-

-

-

-

-

-

-

-

 

- translation of foreign operation

 

 

-                            

(1)

-

-

(4,712)

-

(4,713)

1

(4,712)

 

Total comprehensive income for the period

-

(1)

-

-

(4,712)

326

(4,387)

(11)

(4,398)

 

Transactions with owners

 

 

 

 

 

 

 

 

 

 

Shares issued

5

6

2,983

-

-

-

2,994

-

2,994

 

Share based payments

-

-

-

339

-

-

339

-

339

 

Share based payments - deferred tax asset

-

-

-

170

-

-

 

170

-

170

 

Share based payments - exercised and lapsed

-

-

-

(126)

-

126

-

-

-

 

 

 

 

 

 

 

 

 

 

 

 

Balance as at 31 Dec 2019

232

74,840

5,297

6,095

(2,710)

(6,681)

77,073

(69)

77,004

 

 

 

 

 

 

 

 

 

 

 

 

Loss for the period

-

-

-

-

-

(6,185)

(6,185)

-

(6,185)

 

- translation of foreign operation

-

-

-

-

4,311

-

4,311

-

4,311

 

Total comprehensive income for the period

-

-

-

-

4,311

(6,185)

(1,874)

-

(1,874)

 

Transactions with owners

 

 

 

 

 

 

 

 

 

 

Issue of new shares

60

41,768

-

-

-

-

41,828

-

41,828

 

Share issuance costs

-

(1,198)

-

-

-

-

(1,198)

-

(1,198)

 

Elimination of share premium

 

-

 

(74,840)

 

-

 

-

 

-

 

74,840

 

-

 

-

 

-

 

Adjustment to non-controlling interest

-

-

-

-

-

-

-

69

69

 

Share based payments

-

-

-

2,468

-

-

2,468

-

2,468

 

Share based payments - deferred tax asset

-

-

-

(61)

-

-

(61)

-

(61)

 

Share based payments - reclassify lapsed options                                                                                         

-

-

-

(378)

-

378

-

-

-

 

Balance as at 30 Sep 2020

292

40,570

5,297

8,124

1,601

62,352

118,236

-

118,236

 

                                 

 

 

·      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.

·      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.

·      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.

 

 

CONSOLIDATED STATEMENT OF CASH FLOWS

 

 

 

Unaudited

Nine months

ended

30 Sep 2020

 

 

 Unaudited

Nine months

ended

30 Sep 2019

 

 

Restated Audited

Year

ended 31 Dec 2019

 

 

 

USD'000

 

USD'000

 

USD'000

Cash flow from operating activities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss before taxation

 

 

(9,067)

 

(4,905)

 

(5,789)

 

 

 

 

 

 

 

 

Adjustments for:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation of property, plant and equipment

 

 

1,494

 

911

 

1,306

Amortisation of intangible assets

 

 

8,777

 

5,599

 

8,299

Profit on investment in associate

 

 

-

 

-

 

(74)

Finance cost - net

 

 

10,949

 

5,004

 

3,869

Share based payments

 

 

3,902

 

2,000

 

2,878

Decrease/(increase) in trade and other receivables

 

 

819

 

(5,393)

 

(11,487)

(Decrease)/increase in trade and other payables

 

 

(3,367)

 

(3,537)

 

16,020

Decrease in inventories

 

 

39

 

47

 

3,603

Cash flow from operations

 

 

13,546

 

(274)

 

18,625

 

 

 

 

 

 

 

 

Income tax received/(paid)

 

 

52

 

(1,819)

 

(2,309)

 

 

 

 

 

 

 

 

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

 

 

13,598

 

(2,093)

 

16,316

 

 

 

 

 

 

 

 

Cash flow used in investing activities

 

 

 

 

 

 

 

Purchase of property, plant and equipment

 

 

(609)

 

(566)

 

(755)

Purchase of intangible assets, net of cash acquired

 

 

(583)

 

(14,717)

 

(14,742)

Payment of deferred consideration

 

 

(5,130)

 

(2,940)

 

(2,940)

Acquisition of a subsidiary, net of cash acquired

 

 

(1,038)

 

(12,573)

 

(60,900)

 

 

 

 

 

 

 

 

Net cash flow used in investing activities

 

 

(7,360)

 

(30,796)

 

(79,337)

 

 

 

 

 

 

 

 

Cash flow used in financing activities

 

 

 

 

 

 

 

Proceeds/(Repayments) from borrowings (net)

 

 

2,377

 

57,437

 

103,424

Bond arrangement fees

 

 

(48)

 

(2,280)

 

(2,377)

Proceeds from issuance of ordinary shares (net)

 

 

37,302

 

43

 

2,133

Payment of debt like items

 

 

-

 

(27,839)

 

(27,839)

Lease rentals

 

 

(470)

 

(440)

 

(528)

Interest paid

 

 

(5,624)

 

(973)

 

(1,970)

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

 

 

33,537

 

25,948

 

72,843

 

 

 

 

 

 

 

 

Net increase/(decrease) in cash and cash equivalents

 

 

39,775

 

(6,941)

 

9,822

Cash and cash equivalents at beginning of the period/year

 

 

26,182

 

23,090

 

23,090

Exchange differences on cash and cash equivalents

 

 

(2,295)

 

2,818

 

(6,730)

 

 

 

 

 

 

 

 

Cash and cash equivalents at end of the period/year

 

 

63,662

 

18,967

 

26,182

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

.

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 4th Floor, Saddlers House, 44 Gutter Lane, London, England, EC2V 6BR.  

The CentralNic Group provides subscription services on a global scale to domain names and associated digital subscription products through Indirect and Direct channels as well as Monetisation services.

 

2.   Basis of preparation

The condensed interim financial information for the nine month period ended 30 September 2020 is unaudited and has been prepared on the basis of the accounting policies set out in the Group's 2019 statutory accounts in accordance with the Group's bond terms and, for all periods presented, in line with the principal disclosure requirements of Accounting Standard IAS 34 Interim Financial Reporting.

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 2019 is based on the statutory accounts for the year ended 31 December 2019. 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 accounting policies adopted are consistent with those of the previous financial year and corresponding interim reporting period, except for the estimation of income tax, and the adoption of new and amended standards and accounting policies as set out below.

 

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

 

3.   New and amended standards adopted by the Group

 

In the current reporting period, the Group has applied amendments to IFRS. These include annual improvements to IFRS, changes in standards, legislative and regulatory amendments, changes in disclosure and presentation requirements. The adoption of these has not had any material impact on the Group's financial statements and the accounting policies adopted by the Group in the interim report are consistent with the most recent Annual Report for the year ended 31 December 2019.

 

The International Accounting Standards Board published an amendment to IFRS 16 (''Covid-19 Related Rent Concessions''), in which they provide an accounting policy choice to the lessees to apply practical relief for rent concessions arising as a result of the COVID-19 pandemic. This amendment has not yet been endorsed by the European Union and did not impact the Interim Report September 2020.

 

4.   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 ongoing 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 of expected future cashflows will be prepared 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.

 

Software development costs

 

The Group accounts for costs incurred to develop software for internal use as per IAS 38 and capitalises the costs incurred during the application development stage which include costs to design the software configuration and interfaces, coding, installation, and testing.  Costs incurred during the preliminary project stage along with post-implementation stages of internal use software are expensed as incurred. Capitalised development costs are amortised over their expected economic useful life. Costs incurred to maintain the existing software are expensed as incurred. The capitalisation and ongoing assessment of recoverability of development costs requires considerable judgement by management with respect to certain external factors, including, but not limited to, technological and economic feasibility, and estimated economic life.

 

Deferred Consideration

 

The fair value of the contingent deferred consideration arising on business combinations is a key area of accounting estimate. Judgement was exercised in determining the fair value of the deferred consideration in the KeyDrive acquisition, as described in note 15.

 

5.   Significant accounting policy

 

a)      Revenue recognition

 

Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for services provided in the course of ordinary activities, net of discounts and sales related taxes.

Revenue from the sale of services is recognised when the performance obligations are met under the customer contract In particular:

(i)            Indirect Sale of services for domain names to registrars (formerly reported as Reseller)

Indirect revenues are derived from their customer base, registrars, via the following three channels:

(a)   Reseller channel - Revenues are derived by facilitating the sale of domain names and associated digital subscription products to registrars by acting as a wholesale platform provider.

(b)   Registry Operator channel - CentralNic is an asset holder for Country Code TLD .SK, and therefore generates revenues through sale of domain names of .SK extension to registrars

(c)    Registry Service Provider channel - These revenues are generated from the provision of services through the registry service provider mechanism. CentralNic operates as a back-end service provider for third-party Top Level Domains on an exclusive basis, enabling the registrars to sell domain names to registrants.

In accordance with IFRS 15, each segment evaluates the representation of the underlying customer contracts with the registrars and identifies the performance obligation that is required to be met under the customer contract. Determining the transaction price and allocating the transaction price to the performance obligation is done is also considered, followed by the fulfilment of the performance obligation, therefore leading to the revenue recognition of the sale.

For the Reseller channel, upon evaluation of the customer contract, the registry channel has performance obligations that are met at point of sale of the domain name. An invoice under this division could cover the license to utilise the domain name for a fixed term period which could vary between one and ten years, however, all performance obligations are met at the point of sale, and therefore no revenue is deferred.

For the Registry operator revenues and Registry service channels, upon evaluation of the customer contract, the registry channel has several performance obligations that need to be met over the term of the domain name sale. An invoice under these divisions could cover the sale of a domain name for a fixed term period which could vary between one and ten years, and the performance obligations are expected to be fulfilled over the course of this term on a straight-line basis. Revenues that relate to the period in which the services are performed are recognised in the income statement of that period, with the amounts relating to future periods being deferred into ''deferred revenue''.

 

(ii)           Direct sale of services for domain names to domain registrants (formerly reported as Small business and Corporate Services)

For the Direct segment, upon evaluation of the customer contract, the registrar channel has performance obligations that are met at the point of sale of the domain name. An invoice under this segment could cover the license to utilise the domain name for a fixed term period which could vary between one and ten years, however, all performance obligations are met at the point of sale, and therefore no revenue is deferred.

Direct revenues are generated from the provision of retail and similar services to domain registrants. The sub revenue streams would be those of new registrations and renewals. Revenue originates when a transaction is generated on the service registry platform by the customer.

Revenue from the provision of computer software to a customer is recognised when the Group has delivered the related software and completed all of the adaptions required by the customer for either the whole contract or for a specific milestone deliverable within the contract. The revenue is recognised at the point of fulfilment of the performance obligation, in line with the customer contract.

Revenue from strategic consultancy and similar services is recognised in profit and loss in proportion to the stage of completion of the performance obligation at the reporting date. The stage of performance obligation fulfilment is determined based on completion of work performed to date as a percentage of total services to be performed.

(iii)          Monetisation services

In the Monetisation segment, CentralNic places third party advertising ("Advertisers") on domain names held by third parties ("Publisher") not yet or not intended to be developed into website.  Revenues are recognized after a chargeable click on the Advertiser's advertisement placed on a Publisher's domain name or a chargeable redirect from a Publisher's domain name to an Advertiser's website are registered.

The acquisition of Team Internet AG and other transformative acquisitions during 2019 have altered the business mix of the Group which have resulted in the restatement and reclassification of the Group segmental reporting.  At 30 June 2020, certain restatement and reclassification have been made to the segmental reporting analysis of CentralNic Group for the period and financial year ended 30 June 2019 and 31 December 2019 respectively to enhance comparability with the current year's Interim Report ended 30 June 2020. These restatement and reclassification have had no impact on the Group reported Consolidated Statement of Comprehensive Income, Consolidated Statement of Financial Position and Consolidated Statement of Cash Flow. As result, comparative figures in note 6 Segmental Analysis have been adjusted to conform to the Interim Report presentation and the formerly reported segments have been restated and reclassified as follows:

Segments reclassification

(a) Indirect, materially consistent with the former Reseller segment,

(b) Direct, combining the former Small Business and Corporate segment

(c) Monetisation, due to its materially enlarged weight warranted its own segment

 The segments restated were as follows:

 

 

 

 

 

 

As at 31 December 2019

Reseller

USD'000

Small Business

USD'000

Corporate

USD'000

Total

USD'000

 

 

 

 

 

Previously reported

 

 

 

 

Revenue

60,681

37,753

10,760

109,194

 

 

 

 

 

 

After reclassification

Indirect

USD'000

Direct

USD'000

Monetisation

USD'000

Total

USD'000

Revenue

60,681

46,638

1,875

109,194

b)   Foreign currency translation

Functional and presentation currency

Items included in the financial statements of each of the CentralNic Group's entities are measured using the currency of the primary economic environment in which the entity operates. The Condensed Consolidated Financial Statements are presented in USD given that more than half of its trade is in US Dollar and the industry in which it operates is predominantly trading in US Dollars.

 

Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at balance sheet date exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement, except when deferred in equity as reserve for exchange rate adjustments.

In the Condensed Consolidated Statement of Comprehensive Income, the comparative figures for the period ended 30 June 2019 and financial year ended 31 December 2019 have been restated to reclassify the foreign exchange differences arising from foreign currency borrowings from administrative expenses to  finance costs and other comprehensive income respectively. The Directors believe that this change of presentation provides more reliable and relevant information to the users of the Interim Report about the effect of the transaction and the financial performance of the Group.  The change has had a material impact on the Group reported Consolidated Statement of Comprehensive Income, Consolidated Statement of Financial Position and Consolidated Statement of Cash Flow for the period ended 30 September 2019 and financial year ended 31 December 2019, please refer to the footnote in the Condensed Consolidated Statement of Income for further details of the reclassification and presentation.  Following this change of accounting policy and in order to be in conformity with IAS 21.32, future foreign exchange differences arising on the translation of foreign currency borrowings will be recognised in other comprehensive income and accumulated in a separate reserve '' Foreign exchange translation reserve'' in equity.

Change of functional currency

On 1 January 2020, CentralNic Group PLC, the Parent Company changed its functional currency from GBP to EUR.  The change was made to reflect that EUR has become the predominant currency in the company, counting for a significant part of the company's foreign currency borrowings.  The change has been implemented with prospective effect and comparatives have not been restated. The change in functional currency will significantly reduce the volatility of the Parent Company's exposure to foreign currency exchange movement, in particular due to translation of foreign currency borrowings. 

The exchange rates used were as follows:

GBP/EUR exchange rate

 

 

1 January 2020

30 June 2020

30 September 2020

Spot rate

 

 

1.1755

-

-

Average rate

 

 

-

1.1126

1.0960

Closing rate

 

 

-

1.0960

1.0995

 

 

6.   Segment analysis

 

CentralNic is an independent global service provider distributing domain names and associated digital subscription products through Indirect and Direct channels as well as Monetisation services to domain name owners. 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.

 

The Directors do not rely on segmental cash flows or analysis of segment assets and liabilities arising from the operating, investing and financing activities for each reportable segment for their decision making and have therefore not included them. As described in note 5, there has been a restatement and reclassification of the Group's segmental reporting and therefore the comparatives have been updated. The segmental analysis is organised around the products and services of the business.

 

The Indirect segment is a global distributor of domain names and provides consultancy services to retailers. The Direct segment provides domain names, ancillary services to end users, monitoring services to protect brands online, technical and consultancy services to corporate clients, licencing of the Group's in house developed registry management platform, also on a global basis. The Monetisation segment provides advertising placement services, sale of domain name and data traffic management services on a global basis.

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

Nine months ended 30 September 2020

 

Indirect

USD'000

Direct

USD'000

Monetisation

USD'000

Total

USD'000

Revenue

63,478

32,102

72,894

168,474

Gross profit

19,198

14,888

19,165

53,251

Total administrative expenses

Share based payments expense

 

 

 

(47,467))

(3,902)

Operating profit

 

 

 

1,882

 

 

 

 

 

Adjusted EBITDA

Depreciation

Amortisation of intangibles assets

Non-core operating expenses

Share based payment expense

 

 

 

22,075

(1,494)

(8,777)

(6,020)

(3,902)

Operating profit

 

 

 

1,882

Finance cost (net)

 

 

 

(10,949)

Loss before taxation

 

 

 

(9,067)

Income tax expense

 

 

 

2,882

Loss after taxation

 

 

 

(6,185)

 

 

 

 

 

Nine months ended 30 September 2019

 

Indirect

USD'000

Direct

USD'000

Monetisation

USD'000

Total

USD'000

Revenue

41,978

35,146

-

77,124

Gross profit

13,245

17,343

-

30,588

Total administrative expenses

Share based payments expense

 

 

 

(28,489)

(28)

Operating profit

 

 

 

2,071

 

 

 

 

 

Adjusted EBITDA

Depreciation

Amortisation of intangibles assets

Non-core operating expenses

Share based payment expense

 

 

 

13,113

(911)

(5,599)

(4,504)

(2,000)

Operating profit

 

 

 

99

Finance cost (net)

 

 

 

(5,004)

Loss before taxation

 

 

 

(4,905)

Income tax expense

 

 

 

(1,159)

Loss after taxation

 

 

 

(6,064)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year ended 31 December 2019

 

Indirect

USD'000

Direct

USD'000

Monetisation

USD'000

Total

USD'000

Revenue

60,681

46,638

1,875

109,194

Gross profit

19,604

22,671

500

42,775

Total administrative expenses

Share based payments expense

 

 

 

(41,891)

(2,878)

Operating loss

 

 

 

(1,994)

 

 

 

 

 

Adjusted EBITDA

Depreciation

Amortisation of intangibles assets

Non-core operating expenses

Share of associate income

Share based payment expense

 

 

 

17,920

(1,306)

(8,299)

(7,357)

(74)

(2,878)

Operating loss

 

 

 

(1,994)

Finance cost (net)

 

 

 

(3,869)

Share of associate income

 

 

 

74

Loss before taxation

 

 

 

(5,789)

Income tax expense

 

 

 

39

Loss after taxation

 

 

 

(5,750)

 

7.   Revenue

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

 

 

Nine months ended

Financial year ended

 

 

30 Sep 2020 (Unaudited)

30 Sep 2019 (Unaudited)

 31 Dec 2019 (Audited)

 

 

USD'000

USD'000

USD'000

 

 

 

 

 

 

 

 

Indirect Services

 

 

 

 

 

 

 

UK

 

807     

 

581

 

828

 

North America

 

16,916 

 

9,824

 

13,509

 

Europe

 

32,558  

 

25,487

 

34,972

 

       ROW

 

13,197  

 

6,086

 

11,372

 

 

 

63,478 

 

 41,978

 

60,681

 

      Direct Services

 

 

 

 

 

 

 

UK

 

1,848 

 

2,230

 

2,792

 

North America

 

10,317  

 

 9,456

 

11,656

 

Europe

 

12,519 

 

13,560

 

19,623

 

ROW

 

7,418    

 

 9,900

 

12,567

 

 

 

32,102  

 

35,146

 

46,638

 

       Monetisation services

 

 

 

 

 

 

 

UK

 

256  

 

-

 

8

 

North America

 

2,574  

 

-

 

 102

 

Europe

 

68,264

 

-

 

1,711

 

ROW

 

1,800 

 

-

 

54

 

 

 

 -  

 

 618

 

4,523

 

 

 

 

 

 

 

 

 

 

 

72,894

 

-

 

1,875

 

Total revenue

 

168,474

 

77,124

 

109,194

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

                 

 

The Indirect segment has one customer that represents more than 10% of the segment's revenue during the period amounting to USD 7.5m.

The Direct segment has no customer that represents more than 10% of the segment's revenue during the period.

The Monetisation segment has one customer that represents more than 92% of the segment's revenue during the period amounting to USD 66.9m.

8.   Non-core operating expenses

 

 

 

 

 

Nine months ended

Financial year ended

 

 

 

 

30 Sep 2020 (Unaudited)

30 Sep 2019 (Unaudited)

31 Dec 2019 (Audited)

 

 

USD'000

USD'000

 

USD'000

 

 

 

 

 

 

 

Acquisition related costs

686

1,652

 

3,466

 

Acquisition related bonuses

-

603

 

603

 

Integration and streamlining costs

3,010

2,249

 

3,288

 

Other costs(1)

2,324

-

 

-

 

 

 

 

 

 

 

 

 

 

 

6,020

4,,504

 

7,357

 

                   

 

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

9.   Finance costs

 

 

 

 

 

Nine months ended

Financial year ended

 

 

 

 

 

 

Restated(2)

 

 

 

 

 

30 Sep 2020 (Unaudited)

30 Sep 2019 (Unaudited)

31 Dec 2019 (Audited)

 

 

USD'000

USD'000

 

USD'000

 

Impact of unwinding of discount on Net Present Value of deferred consideration(1)

70

(299)

 

(3,398)

 

Reappraisal of deferred consideration

-

(3,173)

 

-

 

Foreign exchange loss on revolving credit facility revaluation

(196)

(363)

 

(214)

 

Foreign exchange (loss)/gain on bond revaluation

(4,270)

1,808

 

4,099

 

Arrangement fees on borrowings

(837)

(1,218)

 

(1,420)

 

Interest expense on short-term borrowings

(248)

(728)

 

(781)

 

Interest expense on long-term bank borrowings

(5,357)

(949)

 

(2,033)

 

Interest expense on leases

 

(119)

(87)

 

(127)

 

 

 

 

(10,957)

(5,009)

 

(3,874)

 

                     

(1)  Details on the impact of deferred consideration on the Finance costs is discussed in detail in note 15.

(2)  The finance costs for the financial year ended 31 December 2019 have been restated to reclassify the foreign exchange loss on the revolving credit facility revaluation from administrative expenses to reflect the appropriate IFRS accounting treatment as per IAS 23.

10.   Income tax expense

 

 

Nine months ended

Financial year ended

 

 

30 Sep 2020

(Unaudited)

 

30 Sep 2019

(Unaudited)

 

31 Dec 2019

(Audited)

 

 

 

USD'000

 

USD'000

 

USD'000

 

 

 

 

 

 

 

 

Current tax on profits for the period- UK and foreign

 

1,295

 

              (1,860)

 

(1,292)

 

Adjustments in respect of previous periods

 

57

 

38

 

48

 

Current income tax

 

1,352

 

(1,822)

 

(1,244)

 

 

 

 

 

 

 

 

 

Deferred income tax

 

1,530

 

663

 

1,283

 

 

 

 

 

 

 

 

 

 

 

2,882

 

(1,159)

 

39

 

 

 

 

 

 

 

 

 

                 

 

 

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:

 

 

 

 

 

 

 

 

 

 

 

 

Nine months ended

Financial year ended

 

 

30 Sep 2020

 

 

30 Sep 2019

 

Restated

31 Dec 2019

 

(Unaudited)

 

(Unaudited)

 

(Audited)

 

USD'000

 

USD'000

 

USD'000

 

 

 

 

 

 

Loss before taxation

(9,067)

 

(4,905)

 

(5,789)

 

 

 

 

 

 

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

 

(798)

 

 

(1,377)

 

 

(1,580)

 

 

 

 

 

 

Tax effects of:

 

 

 

 

 

Expenses not deductible for tax purposes

(1,001)

 

42

 

803

Adjustments in respect of previous periods

57

 

38

 

48

Tax loss movement 

1,982

 

478

 

578

Deferred tax

1,530

 

663

 

1,283

Withholding tax

-

 

(7)

 

(168)

Other adjustments

1,112

 

(996)

 

(925)

 

 

 

 

 

 

Current tax (expense)/credit for the period/year

2,882

 

(1,159)

 

39

 

 

 

 

 

 

The Company estimates for income taxes in the condensed financial statements 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 nine months period was 32% (Nine months ended 2019: 24%), mainly driven by the different jurisdictions tax rate, local tax treatment of deferred consideration amounts, tax losses carried forward and the impact of SK-NIC's profits set off against amortisation of goodwill. As illustrated above the business incurs a high level of non-cash charges which are mainly not deductible for income taxes in the relevant jurisdictions and largely represent permanent differences between accounting and taxable profits. As a percentage of the adjusted EBITDA less non-core operating expenses, the tax charge was 18% for the nine months ended 30 Sep 2020 (Nine months ended 2019: 13.5%), which in the opinion of the Directors is a more appropriate measure of the tax cost to the business.

In the UK, the applicable statutory tax rate for 2020/21 is 19% (2019/20: 19%).

In the USA, federal taxes are due at 21% on taxable income. Under California tax legislation a statutory minimum of USD 800 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 14%-c.17% is also levied with rates determined by the municipality taking the total effective tax charge to circa 30%-34%.

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

In Slovakia, income tax is due at 21% of taxable income.

 

11.   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.

 

 

 

 

As at

30 Sep 2020

(Unaudited)

 

 

As at

30 Sep2019

(Unaudited)

 

 

As at

31 Dec 2019

(Audited)

 

 

USD'000

 

USD'000

 

USD'000

 

 

 

 

 

 

 

Loss) after tax attributable to owners

 

(6,185)

 

(6,012)

 

(5,686)

 

 

 

 

 

 

 

Operating profit /(loss)

 

1,882

 

99

 

(1,994)

Depreciation

 

1,494

 

911

 

1,306

Amortisation of intangible assets

 

8,777

 

5,599

 

8,299

Non-core operating expenses

 

 

6,020

 

 

4,504

 

 

7,357

Share of associate income

 

-

 

-

 

74

Share based payment expense

 

3,902

 

2,000

 

2,878

Adjusted EBITDA

 

22,075

 

13,113

 

17,920

Depreciation

 

(1,494)

 

(911)

 

(1,306)

Finance costs (excluding deferred consideration related amounts - note 8)

 

 

(11,027)

 

 

(1,537)

 

 

(476)

Finance income

 

8

 

5

 

5

Taxation

 

2,882

 

(1,159)

 

39

Adjusted Earnings

 

12,444

 

9,511

 

16,182

 

 

 

 

 

 

 

 

Weighted average number of shares:

 

 

 

 

 

 

Basic

 

185,521,432

 

173,793,044

 

175,083,962

Effect of dilutive potential ordinary shares

 

8,044,990

 

5,072,447

 

5,397,202

Diluted

 

193,566,422

 

178,865,491

 

180,481,164

Earnings per share:

 

 

 

 

 

 

Basic (cents)

 

(3.33)

 

(3.36)

 

(3.25)

Diluted (cents)

 

(3.33)

 

(3.36)

 

(3.25)

 

 

 

 

 

 

 

Adjusted earnings - Basic (cents)

 

6.71

 

5.47

 

9.24

Adjusted earnings - Diluted (cents)

 

6.43

 

5.32

 

8.97

 

 

 

 

 

 

 

Basic and diluted earnings per share has been impacted by non-recurring acquisition costs, amortisation changes and other significant operating costs.

12. Property, plant and equipment

 

Right of use assets

Motor vehicles

Computer equipment

Furniture and fittings

 

Total

 

USD'000

USD'000

USD'000

USD'000

USD'000

Cost

 

 

 

 

 

At 1 January 2019

                 -

30

1,722

257

2,009

IFRS 16 adjustment on 1 January 2019

                    779

                   -  

                       -  

                       -  

779

Additions

                 3,598

-

440

188

4,226

Acquisition of subsidiary

-

-

28

45

73

Exchange differences

                    (138)  

(19)

(209)

(27)

(393)

At 30 September 2019

4,239

11

1,981

463

6,694

Additions

                 -

-

240

25

265

Acquisition of subsidiary

                 911

-

348

82

1,341

Exchange differences

                      251  

1

77

10

339

At 31 December 2019

5,401

12

2,646

580

8,639

Additions

160

-

717

37

914

Exchange differences

             (18)  

-

5

14

1

At 30 September 2020

5,543

12

3,368

631

9,554

 

 

 

 

 

 

 

 

 

Accumulated depreciation

 

 

 

 

At 1 January 2019

                       -  

                  11  

958

109

1,078

 

Charge for the period

462

5

369

75

911

 

Exchange differences

                      (12)  

                 (5)  

(222)

                  (23)

(262)

 

At 30 September 2019

450

11

1,105

161

1,727

 

Charge for the period

196

-

158

41

395

 

Exchange differences

                       23  

1

60

6

90

 

At 31 December 2020

669

12

1,323

208

2,212

 

Charge for the period

769

-

577

148

1,494

 

Exchange differences

                      (23)  

-

(2)

29

4

 

At 30 September 2020

1,415

12

1,898

385

3,710

 

 

 

 

 

 

 

 

Property, plant and equipment- carrying value

 

 

 

 

 

 

 

 

 

 

 

 

 

At 30 Sep 2019

3,789

-

876

302

4,967

 

At 31 Dec 2019

4,732

-

1,323

372

6,427

 

At 30 Sep 2020

4,128

-

1,470

246

5,844

 

The carrying value of property, plant and equipment excluding right of use assets recognised under IFRS 16 at 30 September 2020 was USD 1.7m (30 September 2019: USD 1.2m)

 

13. Intangible assets

 

Domain Names

Patents & Trademarks

 

Software

Customer List

 

Goodwill

Intellectual Property

 

Total

 

USD'000

USD'000

USD'000

USD'000

USD'000

USD'000

USD'000

Cost or deemed cost

 

 

 

 

 

 

 

At 1 January 2019

1,472

3,210

14,639

41,946

77,600

-

138,867

Additions

-

-

142

-

-

-

142

Acquisition of subsidiary

-

1,038

-

13,632

15,421

1,464

31,555

Exchange Differences

(60)

(54)

(276)

(1,616)

(2,105)

113

(3,998)

At 30 September 2019

1,412

4,194

14,505

53,962

90,916

1,577

166,566

Additions

-

-

21

-

-

-

21

Acquisition of subsidiary

6,761

836

3,232

20,934

16,354

-

48,117

Reclassification from Inventory

3,467

-

-

-

-

-

3,467

Exchange Differences

199

144

559

4,286

2,967

62

8,217

At 31 December 2019

11,839

5,174

18,317

79,182

110,237

1,639

226,388

Additions

85

2

1,381

192

655

-

2,315

Acquisition of Subsidiary

-

-

-

-

(93)

-

(93)

Exchange Differences

370

33

(19)

1,563

3,176

21

5,144

At 30 September 2020

12,294

5,209

19,679

80,937

113,975

1,660

233,754

 

 

 

 

 

 

 

 

Amortisation

 

 

 

 

 

 

 

At 1 January 2019

399

88

3,718

7,395

-

-

11,600

Charge for the period

79

184

1,638

3,522

149

27

5,599

Exchange differences

(18)

(3)

(198)

(273)

(144)

10

(626)

At 30 September 2019

460

269

5,158

10,644

5

37

16,573

Charge for the period

564

114

522

1,614

(145)

31

2,700

Exchange Differences

52

(5)

273

590

140

10

1,060

At 31 December 2019

1,076

378

5,953

12,848

-

78

20,333

Charge for the period

886

320

1,806

5,647

-

118

8,777

Exchange Differences

(30)

(53)

(81)

(85)

165

(2)

(86)

At 30 September 2020

1,932

645

7,678

18,410

165

194

29,024

 

 

 

 

 

 

 

 

Carrying value

 

 

 

 

 

 

 

At 30 September 2019

952

3,925

9,347

43,318

90,911

1,540

149,993

At 31 December 2019

10,763

4,796

12,364

66,334

110,237

1,561

206,055

At 30 September 2020

10,362

4,564

12,001

62,527

113,810

1,466

204,730

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

14. Deferred receivables

 

 

As at

30 Sep 2020

(Unaudited)

 

As at

30 Sep2019

(Unaudited)

 

As at

31 Dec 2019

(Audited)

 

 

USD'000

 

USD'000

 

USD'000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deferred costs

 

190

 

384

 

639

Loans to related parties

 

100

 

100

 

100

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

290

 

484

 

739

 

 

 

 

 

 

 

 

 

 

15. Trade and other receivables

 

 

As at

30 Sep 2020

(Unaudited)

 

As at

30 Sep 2019

(Unaudited)

 

As at

31 Dec 2019

(Audited)

 

 

USD'000

 

USD'000

 

USD'000

 

 

 

 

 

 

 

Trade receivables

 

20,790

 

11,911

 

21,121

Accrued revenue

 

6,676

 

8,746

 

                6,251

Deferred costs

 

1,335

 

874

 

1,723

Prepayments and other receivables

 

9,335

 

3,903

 

7,278

Supplier payments on account

 

3,091

 

4,619

 

4,387

 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

41,227

 

30,053

 

40,760

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

16. Trade and other payables and accruals

 

 

 

As at

30 Sep 2020

(Unaudited)

 

As at

30 Sep 2019

(Unaudited)

 

As at

31 Dec 2019

(Audited)

 

 

USD'000

 

USD'000

 

USD'000

 

 

 

 

 

 

 

Accounts payable

 

19,448

 

6,307

 

15,645

Accrued expenses

 

18,214

 

16,402

 

23,252

Other taxes and social security

 

146

 

157

 

-

Deferred consideration

 

3,072

 

8,242

 

10,881

Deferred revenue

 

6,431

 

6,919

 

6,331

Customer payments on account

 

15,359

 

18,173

 

16,724

Accrued interest

 

1,877

 

938

 

1,850

Other liabilities

 

1,536

 

1,068

 

1,000

 

 

 

 

 

 

 

 

 

66,083

 

58,206

 

75,683

 

 

 

 

 

 

 

 

 

 

 

 

On 23 June 2020, CentralNic Group has settled EUR 2,700,000 deferred consideration payable to the sellers of Team Internet AG in cash. On 15 July 2020, CentralNic Group settled EUR 1,324,492 deferred consideration to the seller of SK-NIC. On 6 August 2020, the Company settled EUR 2,971,000 deferred consideration to the sellers of Hexonet Group by issuing 3,208,819 consideration shares and on 31 August 2020, settled an amount of EUR 450,000 as deferred considered to the seller of GlobeHosting in cash.  The deferred consideration and the finance costs also reflected the unwinding of the discount factor resulting from the passage of time.

Deferred consideration is subject to actuarial and net present value discounts and the resulting income or expense are recorded in the finance cost in the Consolidated Statement of Comprehensive Income as described in note 9. The maximum amount of deferred consideration payable in cash or in shares is USD 9.9m, out of which USD 3.5m is in cash and USD 6.4m in shares. Please refer to note 19 for further details of deferred consideration liabilities settled after the balance sheet date.

17. 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.

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

 

 

 

 

As at

30 Sep 2020

(Unaudited)

 

 

 

As at

30 Sep 2019

(Unaudited)

 

 

 

As at

31 Dec 2019

(Audited)

 

 

 

USD'000

 

USD'000

 

USD'000

 

Financial assets

 

 

 

 

 

 

 

Loan and receivables

 

 

 

 

 

 

 

Trade and other receivables

 

34,178

 

25,817

 

33,701

 

Cash and cash equivalents

 

63,662

 

18,967

 

26,182

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

97,840

 

44,784

 

59,883

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial liabilities measure at amortised costs

 

 

 

 

 

 

 

Trade and other payables

 

45,303

 

28,511

 

46,555

 

Loan and borrowings (short and long term)

 

108,600

 

54,884

 

101,180

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

153,903

 

83,395

 

147,735

 

 

 

 

 

 

 

 

                 

 

 

 

 

 

 

 

 

 

 

 

Cash and Net Debts movement in the 9 months period to 30 September 20 were as follows:

 

As at

30 Sep 2020

(Unaudited)

 

 

 

 

 

Cash conversion

USD'000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flow from operations

13,546

 

 

 

 

 

Exceptional costs incurred and paid during the period

6,020

 

 

 

 

 

Settlement of one-off working capital items from prior period

1,029

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted cash flow from operations

20,595

 

 

 

 

 

Adjusted EBIDTA

22,075

 

 

 

 

 

Conversion %

93.3%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Bond

Bank debt

Cash

Net debt

 

 

USD'000

USD'000

USD'000

USD'000

 

 

 

 

 

 

 

 

 

 

 

 

 

At 31 Dec 19

(97,724)

(3,456)

26,182

(74,998)

 

 

 

 

 

 

 

Draw down

-

(2,377)

2,377

-

 

Amortisation of costs

(1,223)

(199)

-

(1,422)

 

Placing proceeds (net of costs)

-

-

37,298

37,298

 

Other cash movements

-

-

100

100

 

Net cash flows before foreign exchange

(1,223)

(2,576)

39,775

35,976

 

Foreign exchange differences

(3,461)

(161)

(2,295)

(5,917)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At 30 Sep 20

(102,408)

(6,193)

63,662

(44,939)

 

 

 

 

 

 

 

 

 

                                         

 

18. Share capital

 

 

Number

 

Share Capital

 

Share Premium

 

Merger Relief

 

 

 

 

USD'000

 

USD'000

 

USD'000

 

 

 

 

 

 

 

 

 

At 1 January 2019

 

170,652,802

 

216

 

69,238

 

2,314

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

 

100,000

 

1

 

44

 

-

Shares issued to settle the deferred consideration in respect of KeyDrive acquisition

 

7,384,978

 

10

 

5,553

 

-

Option exercised in August 2019

 

436,698

 

-

 

5

 

-

At 30 September 2019

 

178,574,478

 

227

 

74,840

 

2,314

Shares issued in respect of Team Internet acquisition

 

3,911,650

 

5

 

-

 

2,983

At 31 December 2019

 

182,486,128

 

232

 

74,840

 

5,297

New shares issued

 

3,138,356

 

4

 

-

 

-

Elimination of share premium to create distributable reserve

 

                     -

 

 

-

 

(74,840)

 

-

Shares issued to settle deferred consideration of Hexonet Group

 

3,208,819

 

4

 

3,324

 

-

Shares issued in relation to the acquisition of Codewise

 

40,000,000

 

52

 

38,444

 

-

Shares issuance costs

 

-

 

-

 

(1,198)

 

-

At 30 September 2020

 

228,833,303

 

292

 

40,570

 

5,297

 

 

 

 

 

 

 

 

 

 

 

 

19. Borrowings

      At 30 September 2020, the contractual maturities of the Group's non-derivative financial liabilities were as follows:

 

 

 

 

 

 

 

 

 

 

 

 

Less than 6 months

Less than 6-12 months

Between 1 and 2 years

Over 5 years

Total contractual cash flows

Carrying amount (assets)/liabilities

 

 

 

USD' 000

USD'000

USD'000

USD'000

USD'000

USD'000

 

 

 

 

 

 

 

 

 

 

 

 

 

Trade and other payables and accruals

45,303

-

-

-

-

45,303

45,303

 

 

Borrowings (include prepaid costs)

6,036

156

-

102,408

-

108,600

108,600

 

 

Lease liabilities

500

508

954

955

4,233

4,233

 

 

Total non-derivatives

51,839

664

954

955

158,136

158,136

 

 

 

 

 

 

 

 

 

 

 

 

 

At 30 September 2020, the SVB Revolving facility is reflected in short term borrowings as its repayment is due within six months from the date of this report.

 

At 31 December 2019, the contractual maturities of the Group's non-derivative financial liabilities were as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Less than 6 months

Less than 6-12 months

Between 1 and 2 years

Over 5 years

Total contractual cash flows

Carrying amount (assets)/liabilities

 

 

 

USD'000

USD'000

USD'000

USD'000

USD'000

USD'000

 

 

 

 

 

 

 

 

 

 

 

 

 

Trade and other payables and accruals

46,555

-

-

-

-

46,555

46,555

 

 

Borrowings (include prepaid costs)

2,809

348

299

97,724

 

101,180

101,180

 

 

Lease liabilities

403

468

935

1,180

4,703

4,703

 

 

Total non-derivatives

49,767

816

1,234

99,441

1,180

152,438

152,438

 

 

                               

 

As at 31 December 2019, a second tranche of bonds for a nominal amount of EUR 40,000,000 had been issued from the existing senior secured bond.  

At 30 September 2019, the contractual maturities of the Group's non-derivative financial liabilities were as follows:

 

 

 

 

 

 

 

 

 

 

 

 

Less than 6 months

Less than 6-12 months

Between 1 and 2 years

Over 5 years

Total contractual cash flows

Carrying amount (assets)/liabilities

 

 

 

USD'000

USD'000

USD'000

USD'000

USD'000

USD'000

 

 

 

 

 

 

 

 

 

 

 

 

 

Trade and other payables and accruals

28,511

-

-

-

-

28,511

28,511

 

 

Borrowings (include prepaid costs)

2,398

-

-

52,486

-

54,884

54,884

 

 

Lease liabilities

206

243

568

1,161

3,709

3,709

 

 

Total non-derivatives

31,115

243

568

1,161

87,104

87,104

 

 

                             

In July 2019, the EUR 50,000,000 bond proceeds replaced the SVB term loan and was reflected in long term borrowings.

20. Events occurring after the reporting period

Detailed below are the significant events that happened after the Group's period end date of 30 September 2020 and before the signing of this Interim Report and Accounts on 30 November 2020.

Acquisition of Zeropark and Voluum

On 31 October 2020, CentralNic Group PLC completed the acquisition of Zeropark and Voluum businesses including all material trade and assets pertaining thereto (together, being "Codewise").  Codewise is a Monetisation and Marketing technology business offering digital solutions, including Zeropark (an Ad Exchange platform connecting domain investors and other traffic providers with online marketers) and Voluum (SaaS analytics, measurement, optimisation and media buying tools). In addition to the underlying Zeropark and Voluum platforms, CentralNic took on all Codewise staff and management, including the development team developing the platforms to serve an increasing number of monetisation and marketing customers.  Zeropark operates a revenue model based on cost per 1k impressions ("CPM") and cost per click ("CPC") together with a commission-based model on sales in marketplace whereas Voluum operates a revenue model based on a recurring yearly tiered  subscription pricing for its Tracker product, together with a commission-based model on demand side platforms ("DSPs").

KeyDrive deferred consideration

The acquisition of KeyDrive SA on 2 August 2018, has performed well against its highly ambitious targets set for FY2019. As a result of this performance, USD 2,245,000 Additional Consideration attributable to the FY2019 objectives is payable to Inter.Services GmbH ("Inter.Services").  On 3 November 2020, 15% of the total consideration amounting to USD 336,750 has been settled in cash. The remainder of the Additional Consideration attributable to the FY2019 objectives will be settled by issuing 1,685,723 Additional Consideration Shares. Inter.Services may still earn up to a maximum of USD 1,423,000 of Additional Consideration in the future under the terms of the SPA, which the Company considers a contingent liability.

 

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