Centralnic Group PLC – Interim Results GP up 60%
Centralnic Group PLC who operate sub domains uk.com, us.com, eu.com, br.com, no.com and many more domain names that they sell via their own and partner registrars see Gross Profits rise 60% in the past 6 months. The company recently floated on the AIM (Alternative Investment Market) it secured £5m in cash in the floatation and the company is also focusing on new GTLDs.
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Below are the results release this morning.
CENTRALNIC GROUP PLC
(“CentralNic” or “the Company”)
Interim results for the six months ended 30 June 2013
CentralNic (AIM: CNIC), the internet registry service provider which derives revenues from the worldwide distribution of internet domain names, today announces its interim results for the six months ended 30 June 2013.
Operational highlights
§ The Company undertook an institutional fund raise and prepared to list on AIM. The IPO took place on September 2nd, 2013, securing a very strong balance sheet with over £5m in cash.
§ Gross Profit in the first half was up 60% to £1.21m, EBITDA was up 64% to £0.762m, and Profit Before Tax was up 97.5% to £0.636m .
§ The CentralNic-distributed .PW has been the world’s most successful Top-Level Domain (“TLD”) launch since 2011, attaining sales of 250,000 domains in the first six months from launch.
§ The Company signed contracts to supply domain names to 40 new domain retailers, including leading Chinese registrars and the world’s largest domain name retailer, GoDaddy, which collaborated with CentralNic on a significant promotion for the .LA domain in Los Angeles in July.
§ 14 client applications for new Top-Level Domains (TLDs) passed ICANN’s initial evaluation and collision risk assessment, and being uncontested will therefore be exclusively powered by CentralNic when they launch. An additional 39 TLDs have passed initial evaluation and remain candidates for CentralNic to distribute.
Financial highlights
30-Jun-13
30-Jun-12
31 Dec 2012
£’000
£’000
£’000
Revenue
1,735
1,496
2,933
Gross Profit
1,210
756
1,739
EBITDA
762
464
1,134
PBT
636
322
835
Post period end
§ IPO and admission to AIM successfully completed raising £7m, including £5m of new money.
§ Re-launched .LA domains in Los Angeles in partnership with GoDaddy
§ Signed initial clients for TLD Registrar Solutions – CentralNic’s domain retailing service
§ ICANN has moved into contracting phase for new TLD applicants
Commenting on the results, John Swingewood, Chairman, said:
“We are extremely pleased with the progress seen in this first half, which is reflected in these results, serving as confirmation that our model of distributing domain names to retailers globally represents a significant and growing opportunity. The Company is undergoing sustained growth resulting from increased demand for our domain names, establishing new retail channels and securing new inventory. What is more impressive is that these results are yet to include revenues from sales of our pipeline of new Top-Level Domains, which include .college, .bar, .wiki and .xyz, for which the first launch activities are due to start at the end of the year.
“Our objectives when we listed on AIM were to accelerate our growth through securing new retail channels, including our own proprietary channels, and obtaining new inventory through commercial and government contracts, including making strategic investments in new TLD applicants. I am delighted that we are already making progress in each of those areas only weeks after listing. These are exciting times for CentralNic and the Board is confident that the Company will achieve its commercial targets for the full year.”
Ends
For further information, please contact:
CentralNic PlcBen Crawford, Chief Executive Officer
+44 (0)203 388 0600
Zeus CapitalRoss Andrews / Nick Cowles (Corporate Finance)John Goold (Institutional Sales)
+44 (0)161 831 1512+44 (0)207 533 7716
Bell PottingerDavid Rydell / Charles Goodwin / Guy Scarborough
+44 (0)207 861 3232
About CentralNic Group plc
§ CentralNic (LSE: CNIC) is a leading provider of registry services to the global market for domain names and is headquartered in London. The Company has developed a proprietary engine for powering and distributing domain names, and is the exclusive global distributor for domains using 30 different domain extensions. These include .la (for domains such as http://intel.la), .uk.com (for domains such as http://avon.uk.com), and .us.com (for domains such as http://activia.us.com).
§ CentralNic’s distribution network includes 1500 registrars – entities such as GoDaddy and Network Solutions in over 80 countries that retail domain names directly to the public and wholesale them through an additional network of over 100,000 resellers. End users register these domain names as an address for their websites, as a defensive measure to protect their brands online, as a method of capturing internet traffic and achieving desired rankings on search engines, and as an investment.
§ CentralNic distributes domains on behalf of their clients – owners or rights-holders – on a revenue share basis. CentralNic-distributed domains use an annual registration fee model, paid in advance by the end users, providing a predictable annuity revenue stream for both CentralNic and its clients.
§ CentralNic was selected as the Registry Service Provider and distributor for 60 applications for new Top-Level Domains (TLDs) – a program devised by the domain industry regulator ICANN to supplement the existing TLDs such as .com and .co.uk with new domain extensions, scheduled to launch from the end of 2013. Fourteen of CentralNic’s clients’ applications for new TLDs have passed Initial evaluation and collision risk assessment by ICANN, and are uncontested, and therefore will be exclusively powered by CentralNic when they launch. CentralNic will also be distributing additional TLDs from a further list of 39 that have passed initial evaluation and are currently in the process risk assessment and/or contestation resolution, including .app, .art, .blog, .law, .llc, .mail, .news, and school.
§ CentralNic’s clients acquiring and funding these new TLDs include a number of successful entrepreneurs as well as Global 1000 companies such as Saudi Telecom, Qatar Telecom, Etisalat and Kuwait Finance House, and media and entertainment industry leaders The Guardian and William Morris Endeavor. CentralNic currently receives consulting revenues relating to the new TLD application process, and when this process comes to an end it will receive revenues for the distribution of domains using the new TLDs.
§ CentralNic is itself the rights holder for 24 domain extensions, including .us.com, .eu.com, .uk.com, .ru.com and .cn.com. It therefore retains 100% of the wholesale revenues for domains using those domain extensions.
§ CentralNic is the owner of a portfolio of premium domain names including 18 two-letter .com domains including http://us.com and http://uk.com.
§ In addition to its growth as a global distributor of domain names, the Directors believe that there is potential for CentralNic to also become a significant retailer of domain names direct to end users, and CentralNic has already obtained the necessary accreditations, built the technology, signed initial contracts and commenced trading as a domain name retailer.
All Group information and news can be found at http://www.centralnic.com
Chief Executive Officer’s Statement
Performance overview
I am pleased to report that the Company has made significant progress in the first half of the year, which is reflected by the profitability, cash generation and rapid growth trajectory which the Company’s strategy is producing. In particular, the strong performance was driven by continued growth in revenue from the sale of domain names, supplemented with consulting revenues relating to new TLDs.
Revenue for the half year was £1.753 million, producing Profit Before Tax of £0.636 million which represents a 36% margin on gross revenue and a 97.5% increase over the 2012 first half profit (£0.322m). This result combines strong deferred revenues from prior periods, continued growth in billings for existing inventory, the successful launch of a new TLD, and consulting revenues relating to new TLDs.
Profits for the first half were also boosted by non-recurring consulting revenues relating to new TLDs, including through a cooperation agreement with GMO Registry, a member of GMO Internet Group, Japan’s largest internet services provider with over 4.75 million web infrastructure customers. This agreement includes ongoing training, joint development, support and monitoring services relating to Top-Level Domains operated by GMO Registry.
The Board is encouraged by these strong results and believes that the Company is well positioned to achieve accelerated growth from the launch of the Top Level Domains it is contracted to distribute. In addition, it also sees further growth coming from the accelerated investment in building out the Company’s distribution network, including its own retail business, and acquiring additional TLDs for distribution by winning government contracts and via strategic investments in new TLD applicants.
The successful flotation of CentralNic on AIM in early September 2013, alongside a fundraising of £5m enables CentralNic to execute its strategy by investing those funds over the next 18 months. The Directors believe that the potential combined impact of an enhanced distribution network alongside the new inventory to be generated by the launch of new TLDs by ICANN provided a compelling rationale for the IPO and fund raising.
At the half year end the Company had cash balances of £0.816 million reflecting continued profitable trading in the lead-up to the IPO, with the Company’s cash balance increasing to over £5 million post IPO.
While some of the business development and sales activities described below produced revenues in this half, it is the nature of the business that the return on today’s investment occurs and recurs in future years. Therefore CentralNic’s most crucial activities this half were focused on future earnings: engaging new retailers, obtaining contracts to distribute additional domains, and supporting its clients in successfully navigating the ICANN process for obtaining new TLDs.
Business Development
During the period CentralNic continued to expand its global retailer network by signing contracts with 40 new registrars and resellers including the world’s largest registrar, GoDaddy, which has 12 million customers and 55 million domains under management. This contract was the basis for a significant relaunch campaign for the .LA TLD in Los Angeles, in July.
CentralNic also signed contracts with leading Chinese registrars Eranet International, Nihand Networks and Shanghai Meicheng Technology Information Development Co., Ltd. Technical integration with all four of these major companies was completed and the first billings recorded during the first half.
The Company estimates that its distribution network of domain retailers now represents over 82% of the global market domain selling market.
Sales
During the period, the domain names distributed by CentralNic included domains using 26 popular Second-Level domain (“SLD”) alternatives to country codes, including domains ending .uk.com for the UK and .us.com for the USA. They also include country code domains which have been repurposed as international domains, such as .LA, the country code for Lao PDR. It is successfully sold in California, Latin America and in China (where the word “la” is the equivalent of an exclamation mark).
As a result of strong demand, combined with CentralNic’s sales and marketing efforts, CentralNic’s billings for SLD domains were 12.25% higher than in the first half of 2012, with strong performances globally, and particularly in Asia.
In 2012, CentralNic was selected as the exclusive global distributors of .PW, the country code for the Republic of Palau, re-purposed as “Professional Web” by CentralNic’s client Radix, which retained responsibility for sales and marketing activities. .PW was made generally available through CentralNic’s global registrar network in March 2013, and by June press reports confirmed that 250,000 .PW domains had been sold, with a large proportion of those sold through CentralNic’s registrar network in China. This figure represents the highest registration numbers for a new TLD launch since 2011.
New Domain Extension Contracts
During the first half of 2013, CentralNic completed negotiations and signed contracts to be the exclusive global distributor for the following domain extensions:
§ .in.net – a domain extension for India from Radix, the Registry Operator founded by Bhavin Turakhia, founder of Directi group, the leading domain name wholesaler and retailer in India.
§ .Africa.com – a domain extension for the entire continent of Africa, to be launched in partnership with Africa.com, the fastest growing Africa-related website.
§ CentralNic also re-negotiated its distribution contract for .LA, increasing its revenue share as a reward for introducing new retailers, as well as establishing a marketing fund to increase sales of .LA domains
New Top-Level Domains
Industry regulator ICANN completed its Initial Evaluations of all new TLD Applications, and the results are in line with the Board’s expectations. To date, of the 60 applications supported by CentralNic:
§ 14 have passed initial evaluation and “collision risk” assessment by ICANN, and are uncontested, and therefore are guaranteed to be powered by CentralNic when they launch.
§ 36 applications have passed initial evaluation, and are in risk evaluation and/or in contention resolution between CentralNic’s clients and other applicants. The Board anticipates that CentralNic’s clients will obtain some of these TLDs, resulting in CentralNic obtaining exclusive distribution rights to them.
§ Three are in extended evaluation or dispute resolution. CentralNic anticipates that its clients will be successful in obtaining at least one of these TLDs.
§ 7 have been withdrawn or are expected to be withdrawn, mostly in the course of the contention resolution process. This is in line with the Board’s expectations.
CentralNic continues to support its clients in navigating the ICANN evaluation and contention resolution processes, and assisting them in developing their launch marketing and operational strategies, based on CentralNic’s years of experience. The consulting fees that CentralNic currently receives from some of its clients will be supplanted with revenues from the sale of domains as the TLDs pass from the application stage to the operational mode.
In summary, the process of approving new Top-Level Domains by the industry regulator ICANN is moving forward in line with management’s expectations, with no change to our forecast of minimal net revenues from new TLDs for 2013.
Meanwhile CentralNic is in discussions with a number of new TLD applicants regarding a range of potential deals, including the applicants using CentralNic’s TRS domain retailing platform, and CentralNic making strategic investments in applicants.
Current Trading and Outlook
During the first half, CentralNic achieved rapid growth through increasing the reach of its distribution network, increasing the inventory of domain names offered and improving the sell-through of our domain names, as well as obtaining consulting revenues relating to new TLDs. In addition, a number of contracts were signed in the first half which will start producing long-term revenue streams.
Additionally, the Company is delighted to welcome our new shareholders to the register, and we look forward to a successful future as an AIM listed company. We have already started using the funds raised in the IPO to accelerate growth and further drive the annuity model on which the business runs.
The Directors remain confident that the Company is set to achieve its commercial targets for the current year. Taking into account the non-recurring nature of the consulting revenues in the first half, the company is well on track to achieve strong revenues and profits for the full year 2013.
Ben Crawford
Chief Executive Officer
25 September 2013
STATEMENT OF COMPREHENSIVE INCOME
UnauditedSix monthsended 30 Jun 2013
UnauditedSix monthsended 30 Jun 2012
AuditedYearended 31 Dec 2012
Note
£’000
£’000
£’000
Revenue
2,3
1,735
1,496
2,933
Cost of sales
(525)
(740)
(1,194)
1,
Gross profit
1,210
756
1,739
Administrative expenses
(574)
(434)
(904)
Profit before taxation
636
322
835
Corporation tax
4
(172)
(90)
(242)
Profit after taxation
464
232
593
Other comprehensive income
Other comprehensive (expense)/income
-
-
-
Total comprehensive income for the financial year
464
232
593
Pro forma earnings per share
Basic and diluted, Pence
5
0.93
0.46
1.19
STATEMENT OF FINANCIAL POSITION
Unaudited30 Jun 2013
Unaudited30 Jun 2012
Audited31 Dec 2012
£’000
£’000
£’000
ASSETS
NON-CURRENT ASSETS
Property, plant and equipment
15
43
21
Intangible assets
1,840
2,081
1,959
Deferred receivables
922
955
977
Investments
2
2
2
2,779
3,081
2,959
CURRENT ASSETS
Other receivables, deposits and prepayments
182
493
497
Cash and bank balances
816
168
160
998
661
657
TOTAL ASSETS
3,777
3,742
3,616
EQUITY AND LIABILITIES
EQUITY
Share capital
50
50
50
Accumulated profits
455
658
629
TOTAL EQUITY
505
708
679
NON-CURRENT LIABILITIES
Other payables
725
1,042
725
Deferred tax liabilities
107
45
107
832
1,087
832
CURRENT LIABILITIES
Other payables and accruals
2,133
1,831
1,964
Taxation payable
307
116
141
2,440
1,947
2,105
TOTAL LIABILITIES
3,272
3,034
2,937
TOTAL EQUITY AND LIABILITIES
3,777
3,742
3,616
STATEMENT OF CHANGES IN EQUITY
Share capital
Accumulated profits
Total
£’000
£’000
£’000
Balance as at 1 January 2012
50
426
476
Profit / (loss) after taxation and total comprehensive income for the period
-
232
232
Total comprehensive income for the period
-
232
232
Dividends
-
-
-
Balance as at 30 June 2012
50
658
708
Profit / (loss) after taxation and total comprehensive income for the period
-
361
361
Total comprehensive income for the period
-
361
361
Dividends
-
(390)
(390)
Balance as at 31 December 2012
50
629
679
Profit / (loss) after taxation and total comprehensive income for the period
-
464
464
Total comprehensive income for the period
-
464
464
Dividends
-
(638)
(638)
Balance as at 30 June 2013
50
455
505
STATEMENT OF CASH FLOWS
UnauditedSix monthsended
30 Jun 2013
UnauditedSix monthsended
30 Jun 2012
AuditedYearended 31 Dec 2012
£’000
£’000
£’000
Cash flow from operating activities
Profit before taxation
636
322
835
Adjustments for:
Depreciation of property, plant and equipment
8
12
25
Amortisation of intangible assets
118
130
274
Operating profit before working capital changes
762
464
1,134
(Decrease)/increase in other receivables, deposits and prepayments
(1)
(196)
(103)
Increase in other payables and accruals
171
7
43
Cash flow from operations
932
275
1,074
Income tax paid
(6)
(27)
(92)
Net cash flow from operating activities
926
248
982
Cash flow used in investing activities
Purchase of property, plant and equipment
(1)
-
(20)
Purchase of intangible assets
-
-
(11)
Disposal of intangible assets
-
-
18
Purchase of investments
-
-
(2)
Net cash flow used in investing activities
(1)
-
(15)
Cash flow used in financing activities
Net decrease/(increase) in loans to shareholders
369
(99)
(218)
Dividends paid
(638)
-
(390)
Reduction in deferred consideration
-
-
(218)
Net cash flow used in financing activities
(269)
(99)
(826)
*
Net increase/(decrease) in cash and cash equivalents
656
149
141
Cash and cash equivalent at beginning of the period/year
160
19
19
Cash and cash equivalent at end of the period/year
816
168
160
1. Basis of preparation
CentralNic Group plc (“the Company”) was incorporated in England and Wales, on 19 June 2013 to act as the holding company of a group involved in the provision of registry services and strategic consultancy for new Top Level Domains (“TLDs”), Country Code TLD’s (“ccTLDs”) and Second-Level Domains (“SLDs”); and registrant for a portfolio of domain names which it uses as SLD domain extensions for domains. After the reporting date, on 9 August 2013, the Company acquired each of CentralNic Limited and its subsidiary undertakings (together the “CentralNic Group”) and TLD Registrar Solutions Limited. On 2 September 2013 the Company raised gross proceeds of £5 million in a placing and its issued share capital was admitted to trading on the AIM market of the London Stock Exchange (“Admission”).
The condensed un audited interim financial information for the six months ended 30 June 2013 relates to a period prior to the formation of the current legal group but to a period during which the subsidiary entities were under common control and therefore presents the results of the CentralNic Group and TLD Registrar Solutions Limited as if they had always been combined. Under this method, the results and net assets of CentralNic and its subsidiaries are aggregated (with eliminations for intercompany transactions and balances), as are the related share capital balances and reserves.
The condensed un audited interim financial information on the CentralNic Group for the six months ended 30 June 2013 has been prepared on a basis consistent with, and on the basis of the accounting policies set out in, the financial information on the CentralNic Group set out in Part III of the Company’s AIM admission document for the three year period ended 31 December 2012 and audited comparative amounts for the year ended 31 December 2012 have been extracted without adjustment therefrom. The condensed un audited interim financial information on the CentralNic Group has been prepared on the basis of the accounting policies, presentation, methods of computation and estimation techniques expected to be adopted in the financial information by the Company in preparing its statutory financial statements for the period ending 31 December 2013.
The condensed un audited interim financial information has been prepared in accordance with IFRS issued by the IASB, including IAS and interpretations issued by IFRIC, as adopted for use in the European Union.
The financial information is presented in UK Pounds Sterling (“£”), which is the functional currency for the CentralNic Group and the Company. All financial information presented in £ has been rounded to the nearest thousand unless otherwise stated.
2. Segment analysis
The CentralNic Group is an independent global domain name registry service provider. It provides registry services and strategic consultancy and it is the owner and registrant for a portfolio of domain names, which it uses as SLD domain extensions for domains. Management reviews the activities of the CentralNic Group as one segment.
The CentralNic Group’s revenue from external customers and its non-current assets (other than deferred tax assets) are divided into the following geographical areas:
Unaudited6 months ended30 Jun 2013
Unaudited6 months ended30 Jun 2012
AuditedYear ended31 Dec 2012
Revenue
Non-current assets
Revenue
Non-current assets
Revenue
Non-current assets
£’000
£’000
£’000
£’000
£’000
£’000
United States
563
6
446
6
899
6
Europe and RoW
1,172
2,773
1,050
3,075
2,034
2,953
1,735
2,779
1,496
3,081
2,933
2,959
3. Revenue
Unaudited6 months ended30 Jun 2013
Unaudited6 months ended30 Jun 2012
AuditedYear ended31 Dec 2012
£’000
£’000
£’000
Revenue from Domain Sales
1,347
1,112
2,479
Revenue from Consultancy
323
337
424
Other revenues
65
47
30
1,735
1,496
2,933
The following table shows customers that represent 10% or more of total revenue:
Unaudited6 months ended30 Jun 2013
Unaudited6 months ended30 Jun 2012
AuditedYear ended31 Dec 2012
£’000
£’000
£’000
Customer A
242
258
516
Customer B
232
172
345
Other customers
1,261
1,066
2,072
1,735
1,496
2,933
4. Corporation tax
Unaudited6 months ended
30 Jun 2013
Unaudited6 months ended
30 Jun 2012
AuditedYear ended
31 Dec 2012
£’000
£’000
£’000
Current tax
172
90
180
Deferred tax
-
-
62
172
90
242
A reconciliation of the current tax expense applicable to the profit before taxation at the statutory tax rate to the income tax expense at the effective tax rate of the CentralNic Group are as follows:
Unaudited6 months ended30 Jun 2013
Unaudited6 months ended30 Jun 2012
AuditedYear ended31 Dec 2012
£’000
£’000
£’000
Profit before taxation
636
322
835
Tax at the applicable statutory tax rate of24.5%
156
79
205
Tax effects of:-
Non-deductible expenses
15
9
20
Other differences
1
2
(45)
Current tax expense for the period/year
172
90
180
5. Pro forma earnings per share
This financial information represents the historical information prior to group reconstruction on 9 August 2013 whereby the Company became the new parent company of the CentralNic Group. It is of limited significance to calculate earnings per share based on the historical equity of CentralNic Limited.
Accordingly, a pro forma earnings per share has been included based on the relevant number of shares in CentralNic Group Plc following the acquisition but prior to the issue of shares by the Company to raise new funds on Admission. The calculation of earnings per share is based on the following earnings and number of shares.
Unaudited6 months ended30 Jun 2013
Unaudited6 months ended30 Jun 2012
AuditedYear ended31 Dec 2012
£’000
£’000
£’000
Profit after tax attributable to owners
464
232
593
Weighted average number of shares:
Basic and diluted
50 million
50 million
50 million
Earnings per share:
Basic and diluted
0.93 pence
0.46 pence
1.19 pence
6. Share capital of CentralNic Group Plc
At 30 June 2013 the the Company had issued share capital of one ordinary share of £1.
On 9 August 2013, the Company issued 49,999 Ordinary Shares in exchange for the entire issued share capital of CentralNic.
On 9 August 2013, the Company sub-divided its 50,000 shares of £1 each into 50 million Ordinary Shares of 0.1p each pursuant to an ordinary resolution of the Company.
On 2 September 2013, the Company issued 9,090,909 new ordinary shares to investors in a placing at 55pence per share.
On admission to AIM on 2 September 2013 the Company’s had 59,090,909 shares in issue.
7. Subsequent events
On 9 August 2013, the Company:
§ acquired the entire issued share capital of CentralNic Limited for consideration of the issue, credited as fully paid, of 49,999 ordinary shares in the Company to shareholders in CentralNic Limited;
§ acquired the entire issued share capital of TLD Registrar Solutions Limited for consideration of £1; and
§ sub-divided its 50,000 shares of £1 each into 50 million ordinary shares of 0.1p each
On 12 August 2013, the Company was re-registered as a public limited company.
On 2 September 2013 the Company raised gross proceeds of £5 million in a placing of