CentralNic Group — A solid Q121, with double-digit organic growth

Team Internet Group (AIM: TIG)

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Research: TMT

CentralNic Group — A solid Q121, with double-digit organic growth

CentralNic delivered 16% Q121 LTM pro forma revenue growth, with all its businesses contributing. Management indicated that growth in domain name sales had accelerated notably, benefiting the Direct and Indirect segments, with both Retail and Corporate returning to growth. Monetisation has been rebranded Online Marketing, with revenues increasing 76% to US$45.3m (54% of Q121 group sales), making it the fastest-growing segment. As expected, with the growth of Online Marketing, adjusted EBITDA margins softened from 14.4% in Q120 to 12.0% in Q121. CentralNic made two acquisitions in the period: SafeBrands (online brand protection) for a total consideration of US$4.4m and Wando Internet Solutions (online marketing) for US$6.5m upfront plus a further up to US$6.5m, funded by a €15m bond placing. CentralNic is trading in line with management’s expectations and the pipeline of future deals remains strong. The shares trade on an FY21e EV/adjusted EBITDA of 9.1x and P/E of 12.3x, which does not reflect the growth prospects for the group.

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TMT

CentralNic Group

A solid Q121, with double-digit organic growth

Q121 update

Software & comp services

2 June 2021

Price

86.4p

Market cap

£198m

US$1.42/GBP

Net debt (US$m) at 31 March 2021

79.0

Shares in issue

228.8m

Free float

69%

Code

CNIC

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

Business description

CentralNic is a leading provider of global domain name services, operating through three divisions: Indirect (wholesale, registry); Direct (SME, enterprise); and Online Marketing. Services include domain name reselling, hosting, website building, security certification and website monetisation.

Analysts

Richard Williamson

+44 (0)20 3077 5700

Russell Pointon

+44 (0)20 3077 5757

CentralNic Group is a research client of Edison Investment Research Limited

CentralNic delivered 16% Q121 LTM pro forma revenue growth, with all its businesses contributing. Management indicated that growth in domain name sales had accelerated notably, benefiting the Direct and Indirect segments, with both Retail and Corporate returning to growth. Monetisation has been rebranded Online Marketing, with revenues increasing 76% to US$45.3m (54% of Q121 group sales), making it the fastest-growing segment. As expected, with the growth of Online Marketing, adjusted EBITDA margins softened from 14.4% in Q120 to 12.0% in Q121. CentralNic made two acquisitions in the period: SafeBrands (online brand protection) for a total consideration of US$4.4m and Wando Internet Solutions (online marketing) for US$6.5m upfront plus a further up to US$6.5m, funded by a €15m bond placing. CentralNic is trading in line with management’s expectations and the pipeline of future deals remains strong. The shares trade on an FY21e EV/adjusted EBITDA of 9.1x and P/E of 12.3x, which does not reflect the growth prospects for the group.

Year end

Revenue (US$m)

Adj. EBITDA*
(US$m)

PBT**
(US$m)

EPS**
(c)

DPS
(c)

P/E
(x)

12/19***

109.2

17.9

16.1

9.24

0.00

13.3

12/20***

241.2

30.6

19.8

10.57

0.00

11.6

12/21e

323.4

39.5

26.7

9.93****

0.00

12.3

12/22e

350.0

43.7

30.1

10.94****

0.00

11.2

Note: *Excludes impact of share-based payments, share option expense, foreign exchange charges and non-core operating costs. **PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments. ***CentralNic’s FY19 results have been restated, with minor changes to the FY20 results.
****FY21/22e EPS figures reflect 228.8m voting shares in issue.

Q121 revenue increased by 48% to US$84.4m (Q120: US$56.9m), with gross profit rising by 58% to US$27.9m (Q120: US$17.7m), a 33.1% margin. Adjusted EBITDA rose by 23% to US$10.1m (Q120: US$8.2m), a 12.0% margin. With adjusted operating cash conversion of 163% (Q120: 46%), despite spending over US$10m on acquisitions in Q121, net debt fell to US$79.0m (31 December 2020: $85.0m). Adjusted EPS rose 61% to 3.17c (Q120: 1.97c).

After the acquisitions of Zeropark, Voluum and Wando, which have substantially expanded the Online Marketing segment, it is notable that none of CentralNic’s marketing platforms uses third-party cookies or collects personal data. As such, the impending ban on third-party cookies in Google Chrome and Apple’s App Tracking Transparency in iOS 14.5 is likely to benefit CentralNic, as the group provides a privacy-conscious alternative to online marketers.

Having been in a close period for much of FY20, in a separate RNS, CentralNic confirmed a number of share and option awards, including the allotment of shares to the employee benefit trust (EBT). Following admission of these shares on 7 June 2021, CentralNic will have 228.8m voting shares, with 22.4m non-voting shares held by the EBT, together making 251.2m fully diluted shares in issue. Our EPS estimates have been adjusted accordingly.

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Frankfurt +49 (0)69 78 8076 960

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United Kingdom

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