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Minds + Machines sees recurring revenues surpass overheads as portfolio gathers pace
Embargoed until 07.00: 18 July 2019
Minds + Machines Group Limited
("MMX" or the "Company")
Notice of Results, Trading Update and Proposed Share Buyback
Minds + Machines Group Limited (AIM: MMX), the top-level domain registry company, expects to announce results for the six month period ended 30 June 2019 on 24 September 2019 which are expected to be in line with management expectations and to highlight the continued progress made in H1 2019, resulting in a further improved revenue mix and strong operating cashflow during the period.
In H1 2019 the Company has continued to experience a healthy year-on-year growth in registrations, up 19% to 1.82million. Underpinning the Company's H1 performance has been strong channel growth within the original 28 MMX properties, new sales billings through the channel are up 30%. Meanwhile, the historic decline in the ICM portfolio, which had seen a 16% decline in H1 2018 billings over H1 2017, has been fully stabilised at $2.8million (H1 2018: $2.8million). Indeed, management believes there is now a clear pathway to drive future growth from the ICM portfolio, significant improvements having been achieved in three of the four ICM properties in H1 where in the same period last year there had been decline, with further new initiatives coming online in Q3. Importantly, cash-inflows for the period were ahead of expectations at $8.6million (H1 2018 $6.3million) with cash generated of $3.6million including the receipt of $1.6million from contested gTLD auctions (H1 2018 cash generation net of auction proceeds: $0.5million).
Against the positive H1 backdrop of stronger operating cashflow and greater visibility, the Company has also sought to address the ongoing drag of one of its legacy contracts against which it had made an onerous provision in H1 2018 of $7.0million in addition to the $2.1million contractual marketing commitment, bringing the total liability to $9.1million at that time. Currently, the estimated liability stands at $7.9million. The Company is therefore pleased to report it has reached an in principle agreement that it will make a one-off payment of c. $5.1m as full and final settlement for any further liability or contractual spend offset by revised contract terms which the Directors now estimate will generate net revenues of approximately $0.5million to MMX over the remaining contractual period. Binding legal contract and payment is expected in H2 and given the positive outlook can be made from the Company's existing cash resources.
Proposed Share Buyback
The Company is traditionally second half weighted, particularly with regards to cash generation and the Directors expect this will be no different in the current financial year. This weighting, combined with the solid H1 trading progress and previously announced operational efficiencies that will impact H2, give the Directors every confidence that the business is now on a solid cash-generative footing, underpinned by a significant renewal base and strong pipeline of new iniatives across the portfolio and a cash balance of $8.9million, the $3million loan facility having been settled in Q1.
The Directors therefore believe that the current share price of the Company reflects neither the stable recurring revenue nor the ongoing growth and intend shortly to commence a share buyback of up to £1million, funded out of existing cash resources. This will serve both to provide an initial return of capital to shareholders, is part of the Group's broader strategy to deliver shareholder value and will reduce the share capital of the Company. Full details of the buyback will be set out in a separate announcement.
Toby Hall, CEO of MMX, commented:
"Whilst we are not upgrading guidance for the full year at this stage, we are extremely encouraged by the progress made in the first half. Our revenues are increasingly predictable, with healthy channel sales and strong renewal revenues now driving the business forward. With the legacy onerous contract issue now in the process of being resolved and innovation based activity supplementing our organic growth, the outlook is bright."
H1 analysts' meeting
A meeting for analysts will be held on 24 September 2019 at the offices of finnCap, 60 New Broad Street, London EC2M 1JJ; those wishing to attend should contact Belvedere Communications on the number provided below.
The information communicated in this announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) No. 596/2014.
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For further information
Minds + Machines Group Limited (LSE: MMX) is the owner of a world class portfolio of 32 ICANN approved top-level domains (gTLDs). The Company generates revenues through the registration and annual renewal of names by organisations and individuals within each of its top-level domains, sales being processed through the Group's network of global registrar and distribution partners.
The MMX portfolio is currently focused around generic names (e.g. .work, .vip), consumer interest (e.g. .fashion, .wedding), lifediv (e.g. .fit, .surf, .yoga), professional occupations (e.g. .law), and geographic domains (e.g. .london, .boston, .miami, .bayern). In 2018, the Company completed its first acquisition, the ICM portfolio, and recently launched its first innovation based project, .luxe, which combines the strengths of the World Wide Web's naming system with that of blockchain. For more information on MMX and its rapidly growing renewal base, please visit www.mmx.co.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact [email protected] or visit www.rns.com.
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Market Cap: £53.15 m
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