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Research: TMT
CentralNic’s H123 trading update shows that revenue, EBITDA and margins have continued to grow in the year, giving us confidence in our forecasts, which we leave unchanged. On 3 July, management announced that it was increasing its FY23 share buyback programme up to £34m, a £30m uplift from when it was first announced in May, highlighting management’s commitment to maximising shareholder returns. With its FY22 dividend now paid and the company focusing more on organic growth, management remains aligned to its waterfall model for free cash flow allocation, which we analysed in our Q123 update.
Written by
CentralNic Group |
Focusing on shareholder returns |
H123 trading update |
Software & computer services |
24 July 2023 |
Share price performance
Business description
Analysts
CentralNic Group is a research client of Edison Investment Research Limited |
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CentralNic’s H123 trading update shows that revenue, EBITDA and margins have continued to grow in the year, giving us confidence in our forecasts, which we leave unchanged. On 3 July, management announced that it was increasing its FY23 share buyback programme up to £34m, a £30m uplift from when it was first announced in May, highlighting management’s commitment to maximising shareholder returns. With its FY22 dividend now paid and the company focusing more on organic growth, management remains aligned to its waterfall model for free cash flow allocation, which we analysed in our Q123 update.
Year end |
Revenue (US$m) |
Adjusted EBITDA* (US$m) |
PBT* |
Diluted EPS* |
EV/EBITDA |
P/E |
12/21 |
410.5 |
46.3 |
31.9 |
10.9 |
11.4 |
15.0 |
12/22 |
728.2 |
86.0 |
64.3 |
21.4 |
6.1 |
7.7 |
12/23e |
833.7 |
94.4 |
80.7 |
20.1 |
5.6 |
8.2 |
12/24e |
909.6 |
103.0 |
89.3 |
22.5 |
5.1 |
7.3 |
Note: *Excludes impact of share-based payments, foreign exchange charges and non-core operating costs.
CentralNic reported gross revenue of US$396m (+18% y-o-y), net revenue of US$91m (+11% y-o-y) and EBITDA of US$44m (+15% y-o-y, 48.4% EBITDA/net revenue margin) in its H123 trading update. On a quarterly basis, the group expanded EBITDA to net revenue to over 50% in Q2 from 47% in Q1, driven by operating leverage and ahead of our full year forecast of 49.5% (vs 48.4% in FY22).
The group’s balance sheet remains robust with cash of US$83m at the half year and net debt of US$68m (0.72x FY23e EBITDA), despite incurring financing cash outflows of US$13.7m for share repurchases and US$3.5m relating to its FY22 dividend, as well as US$15.2m for deferred contingent consideration.
Adjusted cash conversion, which typically exceeds 100%, fell to 89% in the period, which we believe was driven by one-off costs. Management expects this to normalise to over 100% in H2.
On 3 July, the company announced that it was increasing its FY23 share buyback programme up to £34m (or a maximum of 28.866m shares), a £30m uplift from when it was first announced on 15 May 2023. Despite the large increase in its share buyback programme, we believe CentralNic is still well-positioned to fulfil its capital allocation plans (shown in our Q123 update) given the cash-generative nature of the business and its robust balance sheet.
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