viewMinds + Machines Group Limited

Minds + Machines cash flows as TLD revenue mix improves

The internet registry swung to a first-half profit before tax of US$1.7mln from a loss of US$14.7mln last time

Minds + Machines Group Limited - top level domains
The company's top level domains include .luxe and .xxx

Minds + Machines Group Ltd (LON:MMX) saw cash flowing in earnest in the first half as sales of internet top-level domains and underlying profits zoomed higher.

The internet registry, which owns internet TLDs including .luxe and .xxx, generated revenue of US$8.9mln in the six months to 30 June, up 39% compared to this time last year.

Revenue mix was much improved, with a more balanced spread geographically and with the proportion of renewal revenues rising to 68% of the total from 53% a year ago, while a big improvement in automated new sales helped profit margins.

Operating profits before exceptional costs and net of auction revenue increased fourfold to US$2.7mln, enabling a swing to a statutory profit before tax of US$1.7mln compared to a first-half loss of US$14.7mln last time.

Cash matters

There was US$8.9mln cash on the balance sheet at the half year stage, following payment of a US$3mln loan facility and US$1.8mln payment to exit onerous contract, with a further US$5.1mln settlement to be paid in the second half after an in-principle agreement was made over a legacy contract that has been a substantial cash drain on the business over the last five years.

Chief executive Toby Hall was “extremely encouraged” by progress so this year towards his aim of producing “highly predictable, balanced revenue streams through organic growth, innovation and selective acquisition”.

Having announced a £1mln buyback in July, Hall said the board will discuss with shareholders “a more meaningful return of funds either through the introduction of a progressive dividend, a larger tender offer, or a combination of the two”.

He added that current trading is “positive” but the full year outcome will be “dictated by the timing and recognition of revenue from new initiatives”, notably the AdultBlock service that will allow trademark holders to better protect their naming rights across the .xxx, .sex, .porn and .adult TLDs.

House broker FinnCap noted that a "key point" is approaching, as renewal revenues now cover almost all costs: partner payments, cost of sales, and opex.

"MMX remains comfortably on track for our FY 2019 expectations, which remain unchanged," analysts said, adding that the outlook is "much more stable".

Quick facts: Minds + Machines Group Limited

Price: 5.05 GBX

Market: AIM
Market Cap: £44.49 m

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