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Acquisition of Aporia for up to US$19m

CentralNic Group 15 September 2022 Update
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CentralNic Group

Acquisition of Aporia for up to US$19m

M&A update

Software and comp services

15 September 2022

Price

120p

Market cap

£337m

£1.15/US$

Net debt (US$m) at 30 June 2022

63.6

Voting shares in issue

280.9m

Free float

73%

Code

CNIC

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(4.8)

6.2

2.7

Rel (local)

(1.1)

5.4

4.2

52-week high/low

149.9p

104.9p

Business description

CentralNic Group provides the essential tools for businesses to go online, operating through two divisions: online presence (reseller, corporate and SME); and online marketing. Services include domain name reselling, hosting, website building, security certification and website monetisation

Next events

Q322 trading update

19 October 2022

Q322 results

November 2022

Analysts

Richard Williamson

+44 (0)20 3077 5700

Dan Ridsdale

+44 (0)20 3077 5700

CentralNic Group is a research client of Edison Investment Research Limited

As part of a broader vertical integration strategy, disintermediating its value chain to create a more efficient ecosystem, CentralNic has announced the acquisition of MA Aporia, a media and native advertising company. CentralNic is paying an initial cash consideration of US$11.2m, together with performance payments of up to US$7.8m for FY22–24. This implies an initial FY21 EV/EBITDA multiple of 5.6x. The acquisition will be immediately earnings accretive. As Aporia is already an exclusive supplier to CentralNic, the transaction will increase CentralNic’s margins but will have no impact on revenue. Aporia generated FY21 revenue of US$35m, gross profit of US$3.5m and EBITDA of US$2.0m. Despite CentralNic’s continuing momentum (H122 organic growth of 62%), the group trades on c 5.9x FY22 EV/EBITDA and a P/E of 8.0x.

Year end

Revenue (US$m)

Adjusted
EBITDA* (US$m)

PBT*
(US$m)

EPS*
(c)

DPS
(c)

P/E
(x)

12/20

240.0

29.4

18.6

10.0

0.0

13.8

12/21

410.5

46.3

31.9

11.8

0.0

11.7

12/22e**

642.3

74.1

58.7

17.3

0.0

8.0

12/23e**

736.4

84.7

70.7

18.9

0.0

7.3

Note: *Excludes impact of share-based payments, share option expenses, foreign exchange charges and non-core operating costs. **FY22e and FY23e EPS figures reflect 280.9m voting shares in issue.

Acquisition earnings accretive in FY22

We have updated our forecasts for the acquisition, with no change to revenues. FY22 EBITDA sees a marginal uplift due to its partial year contribution, but FY23 EBITDA rises by US$1.5m. We assume an US$11.2m fall in cash at 31 December 2022, with subsequent cash payments of US$3.9m in each of FY23 and FY24.

Valuation: Strong growth at a compelling price

CentralNic offers a compelling proposition, with organic revenue growth of 62% (last 12 months to H122), recurring revenue products contributing more than 99% of total gross revenues and an adjusted cash conversion of over 100%. Our estimates imply 56% y-o-y revenue growth for FY22, with the shares trading on an FY22 P/E of 8.0x and c 5.9x FY22 EV/adjusted EBITDA. The group has delivered a five-year revenue CAGR of 72%, putting it amongst the fastest-growing technology companies in Europe (Financial Times, 2022), and it is also part of the AIM 100 and AIM UK 50 indices.

Exhibit 1: Financial summary

31-December

US$'000

2019

2020

2021

2022e

2023e

INCOME STATEMENT

IFRS

IFRS

IFRS

IFRS

IFRS

Gross revenue

 

 

109,194

240,012

410,540

642,289

736,403

Cost of Sales

(66,419)

(164,894)

(292,041)

(465,829)

(540,395)

Net revenue

42,775

75,118

118,499

176,460

196,008

Adjusted EBITDA

 

 

17,921

29,394

46,251

74,113

84,714

Normalised operating profit

 

 

16,615

27,310

42,737

68,616

78,410

Amortisation of acquired intangibles

(8,299)

(13,747)

(18,291)

(24,084)

(24,852)

Exceptionals

(8,259)

(10,529)

(7,087)

(4,000)

-

Share-based payments

(2,878)

(5,113)

(5,006)

(5,006)

(5,006)

Reported operating profit

(2,821)

(2,079)

12,353

35,526

48,552

Net Interest

(471)

(8,693)

(10,798)

(9,957)

(7,717)

Joint ventures & associates (post tax)

74

79

-

-

-

Exceptionals

-

-

-

(3,950)

(5,500)

Profit Before Tax (norm)

 

 

16,144

18,617

31,939

58,658

70,693

Profit Before Tax (reported)

 

 

(6,616)

(11,834)

1,555

21,618

35,335

Reported tax

39

975

(5,097)

(7,926)

(12,659)

Profit After Tax (norm)

16,119

19,592

26,842

46,927

53,020

Profit After Tax (reported)

(6,577)

(10,859)

(3,542)

13,692

22,676

Minority interests

64

-

-

-

-

Net income (normalised)

16,183

19,592

26,842

46,927

53,020

Net income (reported)

(6,513)

(10,859)

(3,542)

13,692

22,676

Basic average number of shares outstanding (m)

175

197

227

271

281

EPS - basic normalised (c)

 

 

9.24

9.96

11.80

17.30

18.87

EPS - diluted normalised (c)

 

 

8.97

9.57

10.69

16.13

17.63

EPS - basic reported (c)

 

 

(3.72)

(5.52)

(1.56)

5.05

8.07

Dividend (c)

0.00

0.00

0.00

0.00

0.00

Revenue growth (%)

155.9

119.8

71.0

56.4

14.7

Gross Margin (%)

39.2

31.3

28.9

27.5

26.6

Adj. EBITDA Margin (%)

16.4

12.2

11.3

11.5

11.5

Adj. EBITDA / Net Revenue (%)

41.9

39.1

39.0

42.0

43.2

Normalised Operating Margin

15.2

11.4

10.4

10.7

10.6

BALANCE SHEET

Fixed Assets

 

 

217,544

270,578

271,830

339,654

325,830

Intangible Assets

206,055

255,716

254,169

324,279

312,488

Tangible and Right-of-use Assets

6,427

8,677

8,601

6,315

4,722

Investments & other

5,062

6,185

9,060

9,060

8,621

Current Assets

 

 

67,433

77,606

128,391

161,285

202,404

Stocks

491

1,011

895

895

2,393

Debtors

40,760

47,941

71,363

71,363

71,363

Cash & cash equivalents

26,182

28,654

56,133

89,027

128,647

Current Liabilities

 

 

(78,767)

(96,421)

(137,129)

(130,710)

(131,190)

Creditors

(75,683)

(89,256)

(117,016)

(117,016)

(117,016)

Short term borrowings

(3,084)

(7,165)

(13,694)

(13,694)

(14,174)

Other

-

-

(6,419)

-

-

Long Term Liabilities

 

 

(129,206)

(137,867)

(149,110)

(172,630)

(172,630)

Long term borrowings

(102,799)

(113,024)

(124,356)

(147,876)

(147,876)

Other long-term liabilities

(26,407)

(24,843)

(24,754)

(24,754)

(24,754)

Net Assets

 

 

77,004

113,896

113,982

197,599

224,414

Minority interests

69

-

-

-

-

Shareholders' equity

 

 

77,073

113,896

113,982

197,599

224,414

CASH FLOW

PBT

(6,616)

(11,834)

1,555

21,618

35,335

Depreciation and amortisation

9,605

15,831

21,805

29,582

31,155

Share-based payments

2,878

5,113

5,006

5,006

5,006

Working capital

8,963

4,129

1,503

-

(1,498)

Exceptional & other

3,795

9,413

10,798

9,957

7,717

Tax

(2,309)

(1,957)

(2,230)

(7,926)

(12,659)

Net operating cash flow

 

 

16,316

20,695

38,437

58,237

65,056

Capex

(15,497)

(4,259)

(3,555)

(7,256)

(8,319)

Acquisitions/disposals

(63,840)

(40,718)

(26,482)

(90,150)

(9,400)

Net interest

(1,970)

(9,512)

(8,647)

(9,957)

(7,717)

Equity financing

2,133

34,667

-

58,500

-

Dividends

-

-

-

-

-

Net Cash Flow

(62,858)

873

(247)

9,374

39,620

Opening net debt/(cash)

 

 

2,115

74,998

84,985

81,394

65,601

FX

(6,730)

1,117

(2,718)

-

-

Other non-cash movements

(3,295)

(11,977)

6,556

6,419

-

Closing net debt/(cash)

 

 

74,998

84,985

81,394

65,601

25,981

Source: Company accounts, Edison Investment Research

General disclaimer and copyright

This report has been commissioned by CentralNic Group and prepared and issued by Edison, in consideration of a fee payable by CentralNic Group. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2022 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for ‘wholesale clients’ within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are ‘wholesale clients’ for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a ‘personalised service’ and, to the extent that it contains any financial advice, is intended only as a ‘class service’ provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the ‘FPO’) (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the ‘publishers' exclusion’ from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by CentralNic Group and prepared and issued by Edison, in consideration of a fee payable by CentralNic Group. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2022 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for ‘wholesale clients’ within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are ‘wholesale clients’ for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a ‘personalised service’ and, to the extent that it contains any financial advice, is intended only as a ‘class service’ provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the ‘FPO’) (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the ‘publishers' exclusion’ from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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