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

Team Internet Group (AIM: TIG)

Last close As at 21/05/2024

GBP1.82

7.00 (4.00%)

Market capitalisation

GBP430m

More on this equity

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.

Analyst avatar placeholder

Written by

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.

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 £49,500 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 2021 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

More on Team Internet Group

View All

Latest from the TMT sector

View All TMT content

Research: TMT

Filtronic — Building a stronger connection

In early 2020 Filtronic’s management refocused the business on market niches where the company’s expertise in designing and manufacturing high performance radio-frequency (RF) components and sub-systems operating at frequencies up to 180GHz can command a premium. Having doubled the RF manufacturing capacity in FY20, management’s strategy, led by new CEO Richard Gibbs, is to broaden the customer base and product range. Generating higher revenues from the same cost base should deliver improved EBITDA margin.

Continue Reading

Subscribe to Edison

Get access to the very latest content matched to your personal investment style.

Sign up for free