Internet domains specialist Minds + Machines Group Ltd (LON:MMX) saw its shares jump higher today after it said it anticipates its underlying earnings to be slightly ahead of expectations for 2017 after a strong second half.
Billings were in line with expectations in 2017 while profits were boosted by the company losing out on a couple of auctions for the rights to top-level domains (TLD); under the auctioning system, the winning bid for a TLD is shared out equally among the losing bidders.
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By the end of the year, the number of domains under its management stood at 1.32mln, up two-thirds from 0.8mln at the end of 2016.
Billings in the second half of the year clocked in at around US$10mln, versus US$5.6mln in the first half, which meant full-year billings were roughly US$15.6mln; this was enough for Minds + Machines (MMX) to achieve its first year of profitability as an operating business.
The group said the mix of the billings also continued to improve, with the all-important renewal revenue rising to US$5.6mln from US$3.8mln the year before, while recurring income, for the first time, exceeded fixed operating costs, which management has been working hard to reduce.
Fixed operating costs in 2017 were slice to less than US$5.5mln from US$6.5mln in 2016.
Net cash at the end of the year had risen to US$15.9mln from US$15.3mln a year earlier, and the company noted that this was despite settling some US$3.1mln of balance sheet liabilities during the year associated with contracts that were restructured in 2016.
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The group launched a strategic review in May and acknowledged that this is taking a frustratingly long time but said it hopes to have concluded the process by the time of the announcement of the full-year results, which are scheduled to be released in April.
"To have transformed the company from a loss-making business to a profitable one on an ongoing basis within 24 months is an achievement the whole team should be proud of,” said Toby Hall, the chief executive officer of MMX.
“2018 has started positively and I look forward to updating shareholders in April with our strategy for building on this profitable platform and delivering value to shareholders," he added.
House broker finnCap said it would leave its full-year 2018 forecasts unchanged for now.
It is predicting "9% sales growth, but more significantly, a 29% improvement in EBITDA, with margins forecast to grow (from 25% to 29%) due to a growing proportion of (high margin) renewal revenue".
"We continue to view MMX as materially undervalued and see today's news as one of two share price catalysts – the second relates to the company's strategic review, which will conclude in April," it said.
In late afternoon trading, Mids + Machines shares up 19.3% to 9.6p.
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