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Minds + Machines upbeat as it plans £13mln shareholder offer

Last updated: 13:04 20 Sep 2016 BST, First published: 08:04 20 Sep 2016 BST

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The group is now a pure-play registry business, aiming to create value from the many top level domain names it owns.

Minds + Machines Group Ltd (LON:MMX) is optimistic after a transformational first half which saw revenues double and it launch into China while registrations for top level domains continue to grow.

Alongside its interims today, the AIM group also announced it would return £13mln to shareholders via a tender offer at 13p a share - an 18.2% premium to the closing price on September 16 and a subscription investment of  £5.5mln by Goldstream Capital Master Fund I also at 13p.

Goldstream is owned by Hony Capital - a leading Chinese equity investment and asset management company, and the firm believes this will help it increase its presence in Asia.

Previously the group had no exposure to China. As at the end of 2015, 62% of its billings came from Europe and 38% from the US with no contribution from the Asia region.

The group is now a pure-play registry business, aiming to create value from the many top level domain names it owns.

It noted that in the first half of 2016, net registrations in new gTLDs grew by 11.6 million to a whopping 28.2mln. To give an idea of the value of such names, MMX noted industry news that the purchase of .shop (not owned by the firm) in May had been for US$41.5 million.

The launch into China helped billings in the six months to June 30 rise over 300% to US$8.05 million (2015: US$2.0 million), while revenues more than doubled to US$7.4 million ( 2015: US$3.6 million).

Notably, there was positive operating underlying earnings (EBITDA) before restructuring costs of US$2 million in the period.

The firm continues its strategy to reduce costs and onngoing operating costs were cut 27% to US$3.6 million 2015: US$4.9 million), it said, with further savings to be realised in the second half as MMX decreases towards its 2017 target of US$6 million. The retained loss for the period was US$1.9mln (2015: loss of US$3.6mln).

In April this year new management set off on a new course for MMX with two transformational outsourcing deals for its  top level domain business.

The firm inked an agreement with Nominet, which operates .uk and currently has over 10.7mln domains registered on its platform, to take over the management and running of up to 28 top level domains within Minds + Machines’ portfolio.

It also made a deal with Uniregistrar Corp to take over its loss-making consumer-facing www.mindsandmachines.com branded registrar operation.

Broker FinnCap has now started covering the stock, noting that the refocused company is showing promising signs, with half- on -half billings up 308% in the latest six months, driven by the successful launch of .vip.

Analyst Harold Evans said he looked forward to the firm delivering on its potential to become a scalable, cash generative business, with strong recurring revenue.

The broker's modest assumptions derive a fair value of 20p, suggesting 54% upside to the 13p tender price announced today.

"It is, however, challenging to predict short-term success, given the immaturity of MMX’s domains," he added.

MMX shares rose 15.91% to 12.75p on the day, giving it a market cap of £85mln.

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