Commenting on the results, Mike Turner, Chairman of CentralNic PLC LON:CNIC, said: “During 2016 to date, CentralNic has advanced its growth strategy through the acquisition of the Instra Group. Together with Internet.BS, the Group is now able to address demand from a number of retail segments across geographic markets. This reflects our strategy to enhance the quality and visibility of the Group’s earnings.
In our wholesale business, where our strategy focusses on achieving scale through automation, our technical systems have been able to scale at an unprecedented pace to accommodate the additional volumes achieved by our clients as they gained market share. This presents an opportunity for future renewal revenues. It was also pleasing that the Group won additional wholesale clients during the period.
In our Enterprise business the Group made progress in discussions with channel partners to access corporate customers. Whilst the results in the first half were modest, the Group is excited about the future prospects for this division as we seek to deploy our technology platforms and service offerings.
Trading in our core businesses overall has remained in line with the Board’s expectations since the half year. Our team is in discussions with trade buyers for premium domain name sales, and anticipating that these sales will proceed, the Board is confident of achieving the market expectations for the year.”
CentralNic (AIM: CNIC), the internet platform business that derives revenue from the worldwide sales of internet domain names, today gave DirectorsTalk its half year results for the six months ended 30 June 2016.
Financial highlights
30 June 30 June Change Change
2016 2015
----------------------------- ----------- ----------- ----------- ----------
GBP'000 GBP'000 GBP'000 %
----------------------------- ----------- ----------- ----------- ----------
Billings(1) 45,080 7,932 37,148 + 468%
----------------------------- ----------- ----------- ----------- ----------
Revenue 8,931 4,445 4,486 + 101%
----------------------------- ----------- ----------- ----------- ----------
Gross profit(2) 2,281 1,918 363 +19%
----------------------------- ----------- ----------- ----------- ----------
Adjusted EBITDA(3) 1,309 1,011 298 +29%
----------------------------- ----------- ----------- ----------- ----------
Adjusted Profit before
tax(4) 948 845 103 +12%
----------------------------- ----------- ----------- ----------- ----------
(Loss) Profit after
tax (1,306) 287 (1,593)
----------------------------- ----------- ----------- ----------- ----------
Net cashflow from operating
activities 1,044 469 575
----------------------------- ----------- ----------- ----------- ----------
Basic EPS (pence) (1.37) 0.47 (1.84)
----------------------------- ----------- ----------- ----------- ----------
(1) Billings represents the value of products and/or services invoiced to customers stated prior to discounts or rebates and prior
to allocation of revenue share between registry operator and registry service provider. Billings do not equate to statutory revenue.
(2) 30 June 2015 restated for consistency of cost allocations
(3) Earnings before interest, tax, depreciation, amortisation, acquisition and non-recurring fees and non-cash charges
(4) Profit before tax adjusted for acquired amortisation charges, acquisition and non-recurring fees and non-cash charges
— The financial results reflect a change in mix within the business when compared to the 1(st) half of 2015. The Retail division results were significantly enhanced by the acquisition of the Instra Group, while sales of premium domain names by the Enterprise division in the first half of 2015 did not recur in the first half of 2016. This change in mix diluted the gross margin to 26% (2015: 43%) while increasing the overall gross profit in the Group by GBP363,000
— The Group improved its quality of earnings over the period, increasing recurring revenues by 130% to GBP5.33m (2015: GBP2.28m), representing 60% of reported revenue (2015: 51%). Increasing recurring revenues remains a focus for the Group going forward
— The results for the Retail business included the performance of the Instra Group, which was acquired on 14 January 2016. This acquisition, combined with organic growth within the Internet BS business, delivered total Retail division revenue of GBP6.76m (2015: GBP1.79m) and Adjusted EBITDA contribution of GBP1.10m (2015: EBITDA loss of GBP0.01m). Instra Group contributed revenue of GBP4.88m and Adjusted EBITDA contribution of GBP0.95m for the period under CentralNic’s ownership
— The Enterprise division generated revenue of GBP0.54m (2015: GBP1.05m) and an Adjusted EBITDA loss of GBP0.05m (2015: EBITDA profit of GBP0.83m). There was a change of mix in the division, notably with minimal premium domain name sales when compared to the first half of the previous year (2015: GBP0.70m) and with the inclusion of the subsidiary dnsXperts UG, a strategic acquisition completed in July 2015. dnsXperts UG contributed revenue of GBP0.24m and an EBITDA loss of GBP0.09m during the 1(st) half of 2016
— The Wholesale division generated revenue of GBP1.64m (2015: GBP1.61m) and an Adjusted EBITDA contribution of GBP0.71m (2015: GBP0.64m). This reflected a change in revenue mix, in line with management expectations, combined with favourable movements in foreign exchange rates
-- Central costs not allocated to the divisions were GBP0.46m (2015: GBP0.44m). Acquisition and non-recurring fees totalled GBP0.75m (2015: GBP0.14m) and included integration costs, acquisition fees, shut-down costs for the old Internet BS legal entity, a settlement agreement and related legal fees, and fees associated with treasury policy and compliance
— Amortisation charges of GBP0.95m (2015: GBP0.29m) reflected the amortisation of intangible assets related to the acquisition of the Instra Group (GBP0.67m)
— Cash and cash equivalents were GBP9.25m (2015: GBP4.44m) and net cash after borrowings were GBP6.04m (2015: GBP4.44m). Cash balances reflected a temporary increase in net working capital due to the timing of the June 2016 .xyz 2(nd) anniversary marketing campaign
Operational highlights
— The successful acquisition and integration of Instra Group progressed in line with management expectations, which included the consolidation of retail operations and the customer support centre. A market entry and development roadmap has been defined for the enlarged retail business
— Unprecedented growth saw the wholesale business increase from 20% to over 34% of global market share by volume, supporting 6 of the Top 25 new Top-Level Domains, including the leader, .xyz. New client wins as a registry service provider included .store, .fm, .am, and .art
— In June 2016, the Company developed and implemented a gateway service to connect domains using competing wholesale platforms to CentralNic’s network of retailers. The first Top-Level Domain, .cx, was implemented onto the gateway towards the end of June 2016
Post period end:
— The 2(nd) anniversary marketing campaign in June 2016 resulted in the number of .xyz registrations increasing to around 6.5 million domain names. The volume of these domain names that are renewed will be established over the coming year
— Discussions are progressing well with a leading software and managed service provider to enable the sale of domain names via its channel of telecommunications industry clients
-- The Company has advanced its plan to offer a brand monitoring service to corporate clients
