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Last close As at 24/03/2023
GBP1.37
▲ 5.50 (4.18%)
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Research: TMT
CentralNic continues to benefit from advertisers looking for privacy-safe marketing solutions, with 66% organic revenue growth for the last 12 months (LTM) to Q322 (LTM to Q222: 62%). Management anticipates 9M22 gross revenue of at least US$525m, net revenue of US$127m (a 24.2% margin) and adjusted EBITDA of at least US$61m (an 11.6% margin). Management expects CentralNic to materially exceed current market expectations for FY22, ahead of Q4, which is typically the strongest advertising quarter. We have therefore revised our FY22 revenue estimate upwards by 9% to US$702m, with adjusted EBITDA of US$81m, an 11.5% margin. Despite CentralNic’s continuing momentum, the group trades on FY22e multiples of 5.9x EV/EBITDA and 7.7x P/E.
CentralNic Group |
Another quarter of record growth |
9M22 trading update |
Software and comp services |
18 October 2022 |
Share price performance
Business description
Next events
Analysts
CentralNic Group is a research client of Edison Investment Research Limited |
CentralNic continues to benefit from advertisers looking for privacy-safe marketing solutions, with 66% organic revenue growth for the last 12 months (LTM) to Q322 (LTM to Q222: 62%). Management anticipates 9M22 gross revenue of at least US$525m, net revenue of US$127m (a 24.2% margin) and adjusted EBITDA of at least US$61m (an 11.6% margin). Management expects CentralNic to materially exceed current market expectations for FY22, ahead of Q4, which is typically the strongest advertising quarter. We have therefore revised our FY22 revenue estimate upwards by 9% to US$702m, with adjusted EBITDA of US$81m, an 11.5% margin. Despite CentralNic’s continuing momentum, the group trades on FY22e multiples of 5.9x EV/EBITDA and 7.7x P/E.
Year end |
Revenue (US$m) |
Adjusted |
PBT* |
EPS* |
DPS |
P/E |
12/20 |
240.0 |
29.4 |
18.6 |
10.0 |
0.0 |
14.8 |
12/21 |
410.5 |
46.3 |
31.9 |
11.8 |
0.0 |
12.5 |
12/22e** |
701.9 |
81.0 |
65.0 |
19.2 |
0.0 |
7.7 |
12/23e** |
804.8 |
92.4 |
77.8 |
20.8 |
0.0 |
7.1 |
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.
New extended $250m debt facilities
Net debt at 30 September 2022 was stable at $63m ($64m at 30 June 2022), despite the acquisition of Aporia ($11m). Adjusted operating cash conversion remained at c 100%. CentralNic also announced $250m of new debt facilities with an initial four-year term, extendable to five years, comprising a $150m term loan and a $100m revolving credit facility (RCF). The term loan will refinance the existing €126m senior secured bonds as well as the group’s existing RCF. The extended facilities also offer increased capacity for M&A. Borrowing costs on the new facilities will vary with net leverage, up to a maximum permitted leverage of 3.0x. Initial costs will be 2.75% above (SOFR) (c 2.8%), which would deliver an approximate $3.6m fall in annual borrowing costs over the bond financing.
Estimates revised upwards
Management expects CentralNic to materially exceed current market expectations for FY22. As such, we are revising our estimates upwards. Were CentralNic to replicate its Q322 performance ($190m gross revenue, $22m adjusted EBITDA) in Q422, we would anticipate FY22 gross revenue of c $715m. To retain a degree of caution, we have taken a pro forma approach to estimate FY22 gross revenue of $702m. We have raised FY22 net revenues by 2% to $180m, with adjusted EBITDA up 9% to $81m. Our FY23 assumptions remain unchanged, leading to gross revenue of $805m based on 10% growth on year end run-rate.
Valuation: More growth at a compelling price
Despite the naysayers, CentralNic continues to deliver compelling growth, together with a sticky customer base, high recurring revenues and adjusted cash conversion of over 100%. Our latest estimates imply 71% y-o-y revenue growth for FY22 (on top of a five-year revenue CAGR of 72%), with the shares trading on 7.7x FY22 P/E and 5.9x EV/adjusted EBITDA. Comparators will become more challenging, but CentralNic offers a resilient blend of growth at a reasonable price.
Estimate revisions
The full impact of our estimate revisions is set out in Exhibit 1 below.
Exhibit 1: Estimate revisions – new versus old estimates
Year end 31 December |
Actual |
Old |
New |
y-o-y |
Old |
New |
y-o-y |
||
US$'000 |
2021 |
2022e |
2022e |
Change |
growth |
2023e |
2023e |
Change |
growth |
Income statement |
IFRS |
IFRS |
IFRS |
(%) |
(%) |
IFRS |
IFRS |
(%) |
(%) |
Gross revenue |
410,540 |
642,289 |
701,931 |
9 |
71 |
736,403 |
804,783 |
9 |
15 |
Net revenue |
118,499 |
176,460 |
179,938 |
2 |
52 |
196,008 |
199,958 |
2 |
11 |
Adjusted EBITDA |
46,251 |
74,113 |
80,972 |
9 |
75 |
84,714 |
92,440 |
9 |
14 |
Profit before tax (normalised) |
31,939 |
58,658 |
65,006 |
11 |
104 |
70,693 |
77,835 |
10 |
20 |
Profit before tax (reported) |
1,555 |
21,618 |
27,933 |
|
|
35,335 |
42,405 |
|
|
Net income (normalised) |
26,842 |
46,927 |
52,005 |
11 |
94 |
53,020 |
58,377 |
10 |
12 |
Basic average number of shares (m) |
227 |
271 |
271 |
281 |
281 |
||||
EPS – basic normalised (c) |
11.80 |
17.30 |
19.18 |
11 |
62 |
18.87 |
20.78 |
10 |
8 |
EPS – diluted normalised (c) |
10.69 |
16.13 |
17.87 |
11 |
67 |
17.63 |
19.42 |
10 |
9 |
Revenue growth (%) |
71.0 |
56.4 |
71.0 |
14.7 |
14.7 |
||||
Gross margin (%) |
28.9 |
27.5 |
25.6 |
26.6 |
24.8 |
||||
Adjusted EBITDA margin (%) |
11.3 |
11.5 |
11.5 |
11.5 |
11.5 |
||||
Adjusted EBITDA / net revenue (%) |
39.0 |
42.0 |
45.0 |
43.2 |
46.2 |
||||
Capex |
(3,555) |
(7,256) |
(7,929) |
9 |
123 |
(8,319) |
(9,091) |
9 |
15 |
Closing net debt/(cash) |
81,394 |
65,601 |
61,373 |
(6) |
(25) |
25,981 |
17,212 |
(34) |
(72) |
Source: Company accounts, Edison Investment Research
Exhibit 2: Financial summary
Year end 31 December |
US$'000 |
2019 |
2020 |
2021 |
2022e |
2023e |
|
INCOME STATEMENT |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
||
Gross revenue |
|
|
109,194 |
240,012 |
410,540 |
701,931 |
804,783 |
Cost of Sales |
(66,419) |
(164,894) |
(292,041) |
(521,993) |
(604,825) |
||
Net revenue |
42,775 |
75,118 |
118,499 |
179,938 |
199,958 |
||
Adj. EBITDA |
|
|
17,921 |
29,394 |
46,251 |
80,972 |
92,440 |
Normalised operating profit |
|
|
16,615 |
27,310 |
42,737 |
74,964 |
85,552 |
Amortisation of acquired intangibles |
(8,299) |
(13,747) |
(18,291) |
(24,118) |
(24,925) |
||
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 |
41,840 |
55,621 |
||
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 |
65,006 |
77,835 |
Profit Before Tax (reported) |
|
|
(6,616) |
(11,834) |
1,555 |
27,933 |
42,405 |
Reported tax |
39 |
975 |
(5,097) |
(9,884) |
(14,850) |
||
Profit After Tax (norm) |
16,119 |
19,592 |
26,842 |
52,005 |
58,377 |
||
Profit After Tax (reported) |
(6,577) |
(10,859) |
(3,542) |
18,049 |
27,554 |
||
Minority interests |
64 |
- |
- |
- |
- |
||
Net income (normalised) |
16,183 |
19,592 |
26,842 |
52,005 |
58,377 |
||
Net income (reported) |
(6,513) |
(10,859) |
(3,542) |
18,049 |
27,554 |
||
Basic average number of shares outstanding (m) |
175 |
197 |
227 |
271 |
281 |
||
EPS - basic normalised (c) |
|
|
9.24 |
9.96 |
11.80 |
19.18 |
20.78 |
EPS - diluted normalised (c) |
|
|
8.97 |
9.57 |
10.69 |
17.87 |
19.42 |
EPS - basic reported (c) |
|
|
(3.72) |
(5.52) |
(1.56) |
6.66 |
9.81 |
Dividend (c) |
0.00 |
0.00 |
0.00 |
0.00 |
0.00 |
||
Revenue growth (%) |
155.9 |
119.8 |
71.0 |
71.0 |
14.7 |
||
Gross Margin (%) |
39.2 |
31.3 |
28.9 |
25.6 |
24.8 |
||
Adj. EBITDA Margin (%) |
16.4 |
12.2 |
11.3 |
11.5 |
11.5 |
||
Adj. EBITDA / Net Revenue (%) |
41.9 |
39.1 |
39.0 |
45.0 |
46.2 |
||
Normalised Operating Margin |
15.2 |
11.4 |
10.4 |
10.7 |
10.6 |
||
BALANCE SHEET |
|||||||
Fixed Assets |
|
|
217,544 |
270,578 |
271,830 |
339,783 |
326,074 |
Intangible Assets |
206,055 |
255,716 |
254,169 |
324,621 |
313,187 |
||
Tangible and Right-of-use Assets |
6,427 |
8,677 |
8,601 |
6,103 |
4,266 |
||
Investments & other |
5,062 |
6,185 |
9,060 |
9,060 |
8,621 |
||
Current Assets |
|
|
67,433 |
77,606 |
128,391 |
165,513 |
211,395 |
Stocks |
491 |
1,011 |
895 |
895 |
2,616 |
||
Debtors |
40,760 |
47,941 |
71,363 |
71,363 |
71,363 |
||
Cash & cash equivalents |
26,182 |
28,654 |
56,133 |
93,255 |
137,416 |
||
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 |
201,956 |
233,649 |
Minority interests |
69 |
- |
- |
- |
- |
||
Shareholders' equity |
|
|
77,073 |
113,896 |
113,982 |
201,956 |
233,649 |
CASH FLOW |
|||||||
PBT |
(6,616) |
(11,834) |
1,555 |
27,933 |
42,405 |
||
Depreciation and amortisation |
9,605 |
15,831 |
21,805 |
30,126 |
31,813 |
||
Share-based payments |
2,878 |
5,113 |
5,006 |
5,006 |
5,006 |
||
Working capital |
8,963 |
4,129 |
1,503 |
- |
(1,721) |
||
Exceptional & other |
3,795 |
9,413 |
10,798 |
9,957 |
7,717 |
||
Tax |
(2,309) |
(1,957) |
(2,230) |
(9,884) |
(14,850) |
||
Net operating cash flow |
|
|
16,316 |
20,695 |
38,437 |
63,138 |
70,370 |
Capex |
(15,497) |
(4,259) |
(3,555) |
(7,929) |
(9,091) |
||
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) |
13,602 |
44,162 |
||
Opening net debt/(cash) |
|
|
2,115 |
74,998 |
84,985 |
81,394 |
61,373 |
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 |
61,373 |
17,212 |
Source: Company accounts, Edison Investment Research
|
|
Alkane’s Q123 operational results, announced today, were notably ahead of our forecasts, driven by both mill throughput (which operated at an elevated rate equivalent to 1.08Mtpa) and head grade (which, at 2.75g/t, was materially ahead of our expectations) to result in gold production for the quarter of 19,489oz (cf guidance for FY23 of 55-60koz). Given these results, our forecasts are under review.
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