Commenting on the results, Mike Turner, Chairman of CentralNic, said: “In my first full year as Chairman of the CentralNic Group I have been pleased with the Group’s strategic development. We now have a more diverse business active in the majority of the world’s geographic markets, notably with expansion of our retail services following the acquisition of the Instra Group. This is important to the future of our business, not least in providing a strong and comprehensive retail capability in close geographic proximity to emerging domain name markets, notably in the Asia Pacific region.
“Another significant development during 2016 was the increased adoption of domain names from the new Top Level Domain name programme. The new TLD programme is regarded as the biggest change in our industry for many years. It is particularly pleasing that, as a result of the first application round of new TLDs, CentralNic is contracted as registry service provider to some of the most successful new TLDs, including the leader by volume, .xyz.
“The Enterprise Division presents interesting opportunities to grow revenues at relatively high margins by adopting a more service-led approach. In seeking to unlock the potential of our corporate-facing business, I am pleased we have recently been able to strengthen our management team with senior commercial hires, bringing considerable experience in this market segment.
“The amount of change in the business is signi cant, with activity levels high across each of our three divisions and with our mergers and acquisitions programme continuing to bring bene ts and present new and interesting opportunities to the Group.
“With continued progress in all areas of our business, at this stage of the year we remain con dent in the outlook for 2017.”
CentralNic (AIM: CNIC), the internet platform that derives revenue from the worldwide sales of internet domain names, today announces its audited results for the year ended 31 December 2016.
The Company’s full Annual Report is also being published and sent to shareholders today, and the Company’s Annual General Meeting will be held on 7 June 2017 at the offices of DWF LLP, 20 Fenchurch Street, London, EC3M 3AG at 10.00am.
Financial summary
31 Dec 31 Dec Change Change
2016 2015
-------------------------------- ----------- ----------- ----------- ----------
GBP'000 GBP'000 GBP'000 %
-------------------------------- ----------- ----------- ----------- ----------
Revenue 22,129 10,393 11,736 +113%
-------------------------------- ----------- ----------- ----------- ----------
Gross profit 7,667 4,860 2,807 +58%
-------------------------------- ----------- ----------- ----------- ----------
Adjusted EBITDA* 5,483 3,254 2,229 +68%
-------------------------------- ----------- ----------- ----------- ----------
Adjusted Profit before
taxation** 4,724 2,954 1,770 +60%
-------------------------------- ----------- ----------- ----------- ----------
Profit before taxation 1,157 1,454 (297) (20%)
-------------------------------- ----------- ----------- ----------- ----------
Net cashflow from operating
activities 3,318 5,686 (2,368) (42%)
-------------------------------- ----------- ----------- ----------- ----------
* Excludes share based payments expense of GBP621,000 and acquisition costs and exceptional items of GBP1,262,000
** Excludes share based payments expense of GBP621,000, acquisition costs and exceptional items of GBP1,262,000 and acquired amortisation charges, in relation to the intangible assets of Internet.BS and the Instra Group, of GBP1,684,000.
-- Revenue increased by 113% to GBP22.13 million (2015: GBP10.39 million). Retail revenue grew
significantly to GBP14.32m (2015: GBP3.41m) with Instra Group transforming the retail division
after the acquisition on 14th January 2016. Instra Group contributed GBP10.28m of revenue
in the period since acquisition.
-- Adjusted EBITDA of GBP5.48 million (2015: GBP3.25 million) reflected the flow-down effect
of the revenue growth in the retail division, including the Adjusted EBITDA contribution from
Instra Group of GBP2.21 million in the period since acquisition. The enterprise division contributed
GBP2.79 million of Adjusted EBITDA (2015: GBP2.61 million) mainly from premium domain name
trading, while the wholesale division contributed GBP1.24 million (2015: GBP1.40m). Central
overheads, not allocated by division, were GBP0.96 million (2015: GBP0.93 million).
-- Profit before taxation of GBP1.16 million (2015: 1.45 million) reflected the GBP2.23 million
increase in Adjusted EBITDA predominantly offset by non-cash expenses including amortisation
of intangible assets of GBP2.07 million (2015: GBP0.58 million) and share based payment charges
of GBP0.62 million (2015: GBP0.32 million). Also offsetting were acquisition costs and exceptional
items of GBP1.26 million (2015: GBP0.83 million), including fees related to the Group's mergers
and acquisition programme and integration costs associated with the Instra Group acquisition.
Finance costs of GBP0.27 million (2015: GBPnil) included interest charges and professional
fees related to the GBP3.50 million term loan drawn in January 2016.
-- Adjusted profit before taxation, excluding acquired amortisation charges, acquisition costs
and exceptional items and the share based payment expense was GBP4.72 million (2015: GBP2.95
million), an increase of 60%.
-- Net cash-flow generated from operating activities was GBP3.32 million (2015: GBP5.69 million),
with 2015 having benefitted from favourable working capital movements as a result of the timing
of increased payments to new TLD registry operators combined with additional funds paid on
account by retailers to support new TLD activity levels. In 2016 there was also increased
activity from retailers in China, who migrated from a pre-pay to a post-pay settlement model.
Taking the two years in aggregate, the net cashflow generated from operating activities was
in line with expectations, relative to Adjusted EBITDA.
-- Net cash was GBP7.28 million at the end of the year (2015: GBP19.06 million). The reduction
mainly reflected the cash outflow for the Instra Group acquisition which totalled AU$30.30
million (GBP14.83 million), offset by the net cashflow generated from operating activities.
The Instra acquisition was funded by a combination of the equity placing in December 2015
(which raised GBP9.40 million net of fees), the GBP3.50 million term loan facility and GBP1.93
million from the Group's available cash.
Highlights
-- A year of growth, particularly following the Instra acquisition. Group revenues grew by 113%
to GBP22.13m (2015: GBP10.39m) and Adjusted EBITDA grew by 68% to GBP5.48m (2015: GBP3.25m).
-- Profit before taxation of GBP1.16m (2015: GBP1.45m) after deduction of non-cash charges, acquisition
costs and exceptional items.
-- Recurring/subscription revenues increased to 81% of overall revenues (2015: 67%).[1]
-- Acquisition of Instra Group completed on 14 January 2016 for consideration of GBP18.60m (AU$38.04m);
contributing Retail revenue of GBP10.28m and Adjusted EBITDA of GBP2.21m.
-- Wholesale Division maintained ranking as the world's number one new TLD registry services
provider by volume, increasing market share to 32% (2015: 23%). Wholesale domains under management
of 9.89m (2015: 3.39m) reflected volume-based promotions of new TLDs which present potential
for future renewals.
-- Enterprise revenues included GBP3.74m (2015: GBP3.22m) of premium domain name revenues and
a full year of dnsXperts revenues.
Post year end
-- Increased renewal revenues are expected to emerge in 2017, as the base of domains due to renew
or expire has increased to 9.89m million domains in the Wholesale business (2015: 3.39 million)
and 1.27 million in the Retail business (2015: 0.72 million).
-- New Top-Level Domains (nTLDs) contracted but not launched during 2016 include: .basketball,
.contact, .fan, .forum, .pid, .rugby, .storage; while the .art, .fun, .realty and .observer
TLDs launched in the first quarter of 2017.
-- In the Enterprise Division, the Group has identified online security and brand protection
services for corporate customers as an important potential recurring revenue line of business.
The Group has recently appointed two experienced executives from this segment - formerly of
Group NBT (Netnames) - to lead revenue growth initiatives in this area.
-- Following the successful acquisitions of Internet.bs and Instra Group, CentralNic continues
to assess acquisition targets to enhance the Group's product and services suite, market access,
customer base and financial performance. CentralNic expects to further strengthen its leadership
team with the appointment of a Corporate Development Director in 2017, to accelerate its acquisition
processes.
-- In line with the Group's acquisition strategy, discussions are ongoing with SK-NIC, a.s.,
the registry service provider for the .sk country code top level domain for Slovakia. These
discussions have not been concluded. The Board will provide shareholders with a further update
in due course.
