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CentralNic Group PLC - HALF YEAR RESULTS 2020

RNS Number : 5505X
CentralNic Group PLC
01 September 2020
 

 

 

1 September 2020                                                                                                                                                          

 

CENTRALNIC GROUP PLC

("CentralNic" or "the Company" or "the Group")

 

HALF YEAR RESULTS 2020 

 

Significant Year-on-Year Increases in Revenues and Adjusted EBITDA  

 

CentralNic Group Plc (AIM: CNIC), the global internet platform that derives revenue from the worldwide sales of internet domain names and related services, is pleased to announce its half year results for the six months ended 30 June 2020. Both revenue and Adjusted EBITDA have increased year-on-year, driven by a combination of acquisitions and underlying organic growth.

Financial Summary:

·       Revenue increased by 124% to USD 111.3m (H1 2019: USD 49.7m)

·       Gross profit increased by 78% to USD 35.2m (H1 2019: USD 19.7m)

·       Adjusted EBITDA* increased by 64% to USD 15.1m (H1 2019: USD 9.2m)

·       Operating profit increased by 12% to USD 3.2m (H1 2019: operating profit of USD 2.9m)

·       Net debt** stood at USD 76.4m (gross debt of USD 104.0m, cash of USD 27.6m) as compared to USD 6.0m (gross debt of USD 23.9m, cash of USD 17.9m) in the prior year due to the bond issuances in July and December 2019 to fund highly accretive acquisitions

 

*Excludes impact of share-based payments expense for options, foreign exchange charges, and non-core operating costs

** Includes gross cash, debt and prepaid finance costs

 

As CentralNic made four acquisitions in H2 2019, the Company also prepared a pro forma comparable financial summary including all businesses currently controlled by CentralNic, a definition of which is provided in a footnote on p.2, to effectively isolate organic growth.  

 

Financial Organic Summary on a pro forma basis***:

·       Revenue increased by 18% to USD 111.5m (pro forma H1 2019: USD 94.7m)

·       Gross profit increased by 14% to USD 35.5m (pro forma H1 2019: USD 31.1m)

·       Adjusted EBITDA* increased by 16% to USD 14.9m (pro forma H1 2019: USD 12.8m)

 

 

Operational Highlights:         

·      Record organic growth in the face of the COVID crisis:

All staff and systems remained fully operational with no interruption to the supply chains

Healthy demand for our two largest service lines, Wholesale domains and most importantly Monetisation - the latter also driven by the rollout of a patented SSL monetisation solution

Q2 cash conversion improved to c.138%, higher than historical average of 100%

·      Restructuring and investment in new management to drive growth to scale

During H1 2020, the focus has been on integration

Commercial leaders appointed to all divisions, replacing the former centralised structure

New leadership in shared services (HR, IT, Finance), ensuring ability to scale

 

·      Completion of earn-out for the Team Internet acquisition, with a EUR 2.7 million payment in Q2

 

Post half year end highlights:

·      New heads of customer service and integration appointed

·      2020 tranche of the deferred consideration for SK-NIC of EUR 1.3m settled on 17 July 2020

·      Deferred consideration for the acquisition of the Hexonet group of EUR 3.0m settled by issuing 3.2m new shares on 6 August 2020

·      Capital reduction as resolved by the AGM has been completed effective 14 August 2020

 

              

Outlook

·      The past half year of strong organic growth demonstrates the Company's resilience despite the economic crisis, and ability to execute on its accelerated buy and build strategy

·      Solid cash generation from operations is expected to continue, leading to decreased net debt over time

·      New product launches and further integration activities will support and potentially improve revenue growth and margins

·      Confident in our successful consolidation strategy, we continue to assess a number of opportunities in what is a large, globally fragmented and growing market

·      Having achieved strong results in the first half of 2020, management is confident that the full year results should be in line with management expectations

 

Ben Crawford, CEO of CentralNic, commented: "In the first half of 2020 CentralNic's revenue exceeded our full year performance in 2019. These outstanding results not only demonstrate that CentralNic can source and complete transformative acquisitions, but that it can also integrate them successfully while delivering record organic growth. Moreover, as we scale up rapidly, the underlying qualities of high recurring revenues and excellent cash conversion become increasingly meaningful.

 

"Our pipeline of future deals remains strong, while our net debt level remains comfortable particularly given the profitability of the existing CentralNic Group and the expected contribution from recent acquisitions. We have also brought a number of new senior managers onboard to drive our organic growth, and we are confident in continuing our trajectory towards joining the ranks of the global leaders in our industry." 

 

*** Given that the Group has made a number of key strategic acquisitions in 2019, we have estimated unaudited pro forma information to provide period to period comparison of performance. In doing so, we have made the following assumptions (a)  figures are provided for the entire comparative period, irrespective of when the acquisition by the Group arose (b) adjustments have been made to the currency rates used for the comparative period to the most recent balance sheet date to harmonise the impact of currency fluctuations (c) the impact of unwinding the deferred revenues relating to the period prior to 1 November 2018 arising from change of the terms of conditions, as well as identified material non-cash or one-off revenues, have been excluded to ensure period to period comparability (d) adjustments have been made, as appropriate, to ensure GAAP comparability between periods. Differences to reported figures result.

 

For further information:

 

CentralNic Group Plc


Ben Crawford, Chief Executive Officer

+44 (0) 203 388 0600

Don Baladasan, Group Managing Director


Michael Riedl, Chief Financial Officer




Zeus Capital Limited - NOMAD and Joint Broker


Nick Cowles / Jamie Peel (Corporate Finance)

+44 (0) 161 831 1512

John Goold / Rupert Woolfenden (Institutional Sales)

+44 (0) 203 829 5000

 

Stifel - Joint Broker


Fred Walsh / Alex Price

 

+44 (0) 20 7710 7600

Newgate Communications (for Media)


Bob Huxford

Tom Carnegie

 

+44 (0) 203 757 6880

[email protected]

 

Forward-Looking Statements

This document includes forward-looking statements. Whilst these forward-looking statements are made in good faith, they are based upon the information available to CentralNic at the date of this document and upon current expectations, projections, market conditions and assumptions about future events. These forward-looking statements are subject to risks, uncertainties and assumptions about the Group and should be treated with an appropriate degree of caution. 

 

About CentralNic Group Plc

 

CentralNic (AIM: CNIC) is a London-based AIM-listed company which drives the growth of the global digital economy by developing and managing software platforms allowing businesses globally to buy subscriptions to domain names, used for their own websites and email, as well as for protecting their brands online. These platforms can also be used for distributing domain name related software and services, an opportunity that contributes significantly to CentralNic's organic growth. The Company's inorganic growth strategy is identifying and acquiring cash-generative businesses in its industry with annuity revenue streams and exposure to growth markets and migrating them onto the CentralNic software and operating platforms. 

 

CentralNic operates globally with customers in almost every country in the world. It earns recurring revenues from the worldwide sales of internet domain names and other services on an annual subscription basis. 

 

For more information please visit: www.centralnicgroup.com

 

CHIEF EXECUTIVE OFFICER'S STATEMENT

 

Introduction

CentralNic's organic growth, combined with its 2019 acquisitions substantially increased the scale and capabilities of the Company. The effect of this is fully demonstrated in our H1 2020 results which show a transformational increase in revenues and adjusted EBITDA, both of which have grown by 124% and 64% respectively against the comparative period for 2019.

 

Performance Overview         

The Company has performed strongly during the period with the key financial metrics listed below:

 

 


30 June

2020

30 June

2019

 

Change


USD'000

USD'000

%

Revenue

111,251

49,693

124%

Gross profit

35,199

19,731

78%

Adjusted EBITDA1

15,096

9,230

64%

Operating profit

3,237

2,885

12%

Profit/(loss) after tax

(2,731)

(2,510)

9%

EPS - Basic (cents)

(1.48)

(1.44)

3%

EPS - Adjusted earnings - Basic (cents) 2

4.44

3.91

14%

 

 

1 Excludes impact of share-based payments expense for options, foreign exchange charges, and non-core operating costs

2 Please refer to note 10

 

On a pro forma basis, as defined in the footnote on p.2, the Company grew by 18% organically in H1 2020, as compared to H1 2019 performance on a pro forma basis from USD 94.7m to USD 111.5m.

 

Team Internet represented a significant proportion of the strong performance in the period. The acquired businesses have similar patterns of recurring revenue and cash conversion as CentralNic's prior business, and hence recurring revenue and cash conversion are expected to remain in line with the long-term trend. This underpins the Company's financial stability and visibility of earnings. The decrease in average gross margin from 40% to 32% reflects the change in the business blend as a result of the 2019 acquisitions, with each individual business maintaining its margins.

 

Segmental Analysis

 

As the 2019 transformative acquisitions have altered the business mix of the Group, the Directors reconsidered the segments in which the Company is operating. Starting with this Interim Report, the segments in which the group will be reporting are (a) Indirect, being materially consistent with the former Reseller segment, (b) Direct, combining the former Small Business and Corporate segment, but excluding Monetisation, and (c) Monetisation, which due to its materially enlarged weight warranted its own segment. A reconciliation of the segments is included in note 5 of this Interim Report.

 

Indirect segment

We achieved significant scale in our Indirect segment, with revenues increasing by USD 15.7m or 62%, from USD 25.5m to USD 41.2m, chiefly driven by the acquisition of TPP Wholesale in July 2019 and Hexonet Group in August 2019. On a pro forma basis, revenue increased by USD 3.6m or 9% from USD 38.5m to USD 42.1m.  

 

During the period, the Company successfully completed a number of key integration tasks within its Indirect segment, most notably the migration of all .au domain names from the Webcentral (formerly Arq group) platform to CentralNic's central domain procurement engine, leading to estimated future annualised savings of USD 350,000 on cost of sales.

 

At the same time, CentralNic continued to develop its reseller key accounts with eight of the top ten customer accounts having increased their spend compared to H1 2019, in one instance by 58%.

 

Direct segment

Revenue in the Direct segment decreased by USD 2.6m or 11%, from USD 24.2m to USD 21.6m. The decrease was largely due to the diminishing impact of the November 2018 change in terms and conditions, the reallocation of the data center business to the Indirect business and the reallocation of the monetisation activities to the Monetisation segment. The acquisition of Ideegeo contributed favorably to growth. On a pro forma basis, revenue decreased by USD 0.3m or 1% from USD 21.2m to USD 20.9m. 

 

Management is positive that the segment will return to growth in H2 2020 with further client wins, and a healthy pipeline of prospective clients.  

 

Monetisation

The fastest growing segment of CentralNic's business was Monetisation, which is for the first time presented as a separate segment. On a pro forma basis, revenue increased strongly by USD 13.4m or 38% from USD 35.0m to USD 48.5m.

 

Revenue growth has been driven mostly by an increase in the average yield ("RPM") by 33%. This is a result of both superior traffic quality subsequent to pruning of the publisher base as well as the rollout of Team Internet's patented SSL monetisation technology. At the same time, the number of page visits increased by 4%, explaining the remainder of the outstanding performance.

 

Outlook

In the first half of 2020 CentralNic delivered higher revenue than for the whole of 2019 and reported a record 18% growth on a pro forma basis. Having achieved strong results in the first half of 2020, management is confident that the full year result should be in line with management expectations.

 

These outstanding results demonstrate that CentralNic can source and complete transformative acquisitions, but more importantly that it can also integrate them successfully while continuing to deliver organic growth. Moreover, as we scale up rapidly, the underlying qualities of high recurring revenues and excellent cash conversion become increasingly meaningful.

 

Our pipeline of future deals remains strong, while our net debt level remains comfortable particularly given the profitability of the existing CentralNic Group and the expected contribution from recent acquisitions. We are confident in continuing our trajectory towards joining the ranks of the global leaders in our industry.

 

 

 

 

 

Ben Crawford

Chief Executive

 

 

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME



  Unaudited

Six months

ended 30 Jun 2020


  Restated(d)  Unaudited

Six months

ended 30 Jun

2019


 Restated(c) Audited

Year

ended 31 Dec 2019

Note


USD'000


USD'000


USD'000









Revenue

7


111,251


49,693


109,194

Cost of sales



(76,052)


(29,962)


(66,419)









Gross profit



35,199


19,731


42,775









Administrative expenses



(29,228)


(16,818)


(41,891)

Share based payments expense



(2,734)


(28)


  (2,878)









Operating profit / (loss)



3,237


2,885


(1,994)









Adjusted EBITDA(a)



15,096


9,230


17,920

Depreciation



(971)


(576)


(1,306)

Amortisation of intangible assets



(5,357)


(3,598)


(8,299)

Non-core operating expenses(b)



(2,797)


(2,143)


(7,357)

Share of associate income



-


-


(74)

Share based payment expense



(2,734)


(28)


(2,878)

Operating profit /(loss)



3,237


2,885


(1,994)









Finance income 



6


5


5

Finance costs

8


(4,661)


(4,031)


(3,874)









Net finance costs



(4,655)


(4,026)


(3,869)

Share of associate income



-


-


74

















Profit/(loss) before taxation



(1,418)


(1,141)


(5,789)

Taxation 

9


(1,313)


(1,369)


39

Profit/(loss) after taxation



(2,731)


(2,510)


(5,750)









Items that may be reclassified subsequently to profit and loss








Exchange difference on translation of foreign operation



                           (3,517)


(756)


                     (6,861)

















Total comprehensive loss for the financial year



(6,248)


(3,266)


(12,611)

















Profit/(loss) after tax is attributable to:

Owners of CentralNic Plc

Non-controlling interest



(2,731)

-


(2,467)

(43)


(5,686)

(64)




(2,731)


(2,510)


(5,750)

Total comprehensive loss is attributable to:

Owners of CentralNic Plc

Non-controlling interest



 

(6,248)

-


 

(3,223)

(43)


 

(12,547)

(64)




 

(6,248)

 


 

(3,266)

 


 

(12,611)

 

Earnings per share (note 10):







 

Basic (cents)


(1.48)


(1.44)


(3.25)

 

Diluted (cents)


(1.48)


(1.44)


(3.25)

 

Adjusted earnings - Basic (cents)


4.44


3.91


9.24

 

Adjusted earnings - Diluted (cents)


4.29


3.77


8.97

 

 

 

 

 

 

 

 

 

All amounts relate to continuing activities.

(a)   Earnings before interest, tax, depreciation and amortisation, acquisition costs, non-cash charges and non-core expenses

(b)  Non-core operating expenses include items related primarily to acquisition and integration costs, which are not incurred as part of the underlying trading performance of the Business, and therefore adjusted for, in line with Group policy

 (c)   The comparative figures have been restated to reclassify the foreign exchange differences arising from foreign currency borrowings amounting to USD 3,885,000(net) and USD 2,410,000 from administrative expenses to finance costs and other comprehensive income respectively.

(d)   The comparative figures have been restated to reclassify the foreign exchange differences arising from foreign currency borrowings amounting to USD 485,000 from administrative expenses to Other Comprehensive Income.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION



Unaudited

30 Jun 2020


 

Restated Unaudited

30 Jun 2019


 

Restated Audited

31 Dec 2019

Note


USD'000


USD'000


USD'000









ASSETS
















NON-CURRENT ASSETS








Property, plant and equipment

11


1,604


1,082


1,695

Right-of-use assets

11


4,063


3,875


4,732

Intangible assets

12


199,127


123,220


206,055

Deferred receivables

13


588


1,514

         

            739

Investments



1,552


1,431


1,778

Deferred tax assets



2,871


1,705


2,545




















209,805


132,827


217,544

CURRENT ASSETS








Trade and other receivables

14


38,575


24,872


40,760

Inventory



487


3,876


491

Cash and bank balances



27,631


17,885


26,182




















66,693


46,633


67,433

















TOTAL ASSETS



276,498


179,460


284,977

























EQUITY AND LIABILITIES
















EQUITY








Share capital

17


236


227


             232

Share premium



74,840


74,835


74,840

Merger relief reserve



5,297


2,314


5,297

Share based payments reserve



8,023


3,359


6,095

Foreign exchange translation reserve



(6,227)


3,395


(2,710)

Accumulated losses



(9,039)


(3,588)


(6,681)

















CAPITAL AND RESERVES ATTRIBUTABLE TO OWNERS OF THE GROUP



73,130


80,542


77,073









Non-controlling interests



-


(49)


(69)









TOTAL EQUITY



73,130


80,493


77,004

 

 

NON-CURRENT LIABILITIES








Other payables



5,203


5,736


3,798

Lease liabilities



3,226


3,482


3,832

Deferred tax liabilities



21,565


12,138


22,609

Borrowings

18


98,390


-


98,967












128,384


21,356


129,206

CURRENT LIABILITIES








Trade and other payables and accruals

15


68,394


52,486


75,683

Taxation payable



-


825


             -

Lease liabilities



921


462


871

Borrowings(e)

18


5,669


23,838


2,213




















74,984


77,611


78,767

















TOTAL LIABILITIES



203,368


98,967


207,973

















TOTAL EQUITY AND LIABILITIES



276,498


179,460


284,977

 

(e)  As at 30 June 2020, the Silicon Valley Bank term loan has been extended for a further six months and is now repayable in December 2020. It is therefore reflected in current liabilities.

 

 

CENTRALNIC GROUP PLC

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

 

 

 

Share capital

 

 

Share premium

 

 

Merger relief reserve

 

 

Share based payments reserve

 

Restated Foreign

exchange

translation

reserve

 

 

 

Restated Accumulated Losses

Restated Equity attributable to owners of the Parent Company

Non-Controlling Interest

Restated Total


USD'000

USD'000

USD'000

USD'000

USD'000

USD'000

USD'000

USD'000

USD'000











 

Balance as at 1 January 2019

216

69,238

2,314

3,330

4,151

(1,186)

78,063

5

78,068

 











 











 

Loss for the period

-

-

-

-

-

(2,467)

(2,467)

(43)

(2,510)

 

Adjustment to non-controlling interest






11

11

(11)

-

 

- translation of foreign operation

-

-

-

-

(756)

-

(756)

-

(756)

 

Total comprehensive income for the period

-

-

-

-

(756)

(2,456)

(3,212)

(54)

(3,266)

 

Transactions with owners










 

Issue of new shares

11

5,597

-

-

-

-

5,608

-

5,608

 

Share based payments

-

-

-

25

-

-

25

-

25

 

Share based payments - deferred tax asset

-

-

-

58

-

-

58

-

58

 

Share based payments - exercised and lapsed

-

-

-

 

(54)

 

-

 

54

 

-

 

-

 

-

 











 

Balance as at 30 June 2019

227

74,835

2,314

3,359

3,395

(3,588)

80,542

(49)

80,493

 











 

Loss for the period

-

-

-

-

-

(3,219)

(3,219)

(21)

(3,240)

 

Adjustment to non-controlling interest

-

-

-

-

-

-

-

-

-

 

- translation of foreign operation

 

 

-                            

(1)

-

-

(6,105)

-

(6,106)

1

(6,105)

 

Total comprehensive income for the period

-

(1)

-

-

(6,105)

(3,219)

(9,325)

(20)

(9,345)

 

Transactions with owners










 

Shares issued

5

6

2,983

-

-

-

2,994

-

2,994

 

Share based payments

-

-

-

2,311

-

-

2,311

-

2,311

 

Share based payments - deferred tax asset

-

-

-

551

-

 

-

 

551

-

551

 

Share based payments - exercised and lapsed

-

-

-

(126)

-

126

-

-

-

 











 

Balance as at 31 December 2019

232

74,840

5,297

6,095

(2,710)

(6,681)

77,073

(69)

77,004

 











 

Profit for the period

-

-

-

-

-

(2,731)

(2,731)

-

(2,731)

 

- translation of foreign operation

-

-

-

-

(3,517)

-

(3,517)

-

(3,517)

 

Total comprehensive income for the period

-

-

-

-

(3,517)

(2,731)

(6,248)

-

(6,248)

 

Transactions with owners










 

Issue of new shares

4

-

-

-

-

-

4

-

4

 

Adjustment to non-controlling interest

-

-

-

-

-

-

-

69

69

 

Share based payments

-

-

-

2,385

-

-

2,385

-

2,385

 

Share based payments - deferred tax asset

-

-

-

(84)

-

-

(84)

-

(84)

 

Share based payments - reclassify lapsed options                                                                                         

-

-

-

(373)

-

373

-

-

-

 

Balance as at 30 June 2020

236

74,840

5,297

8,023

(6,227)

(9,039)

73,130

-

73,130

 

 

 

·      Share capital represents the nominal value of the company's cumulative issued share capital.

·      Share premium represents the cumulative excess of the fair value of consideration received for the issue of shares in excess of their nominal value less attributable share issue costs and other permitted reductions.

·      Merger relief reserve represents the cumulative excess of the fair value of consideration received for the issue of shares in excess of their nominal value less attributable shares issue costs and other permitted reductions.

·      Retained earnings represent the cumulative value of the profits not distributed to shareholders but retained to finance the future capital requirements of the CentralNic Group.

·      Share based payments reserve represents the cumulative value of share-based payments recognised through equity.

·      Foreign exchange translation reserve represents the cumulative exchange differences arising on Group consolidation.

·      Foreign currency hedging reserve represents the effective portion of changes in the fair value of derivatives.

·      The non-controlling interests comprise the portion of equity of subsidiaries that are not owned, directly or indirectly, by the Group. These non-controlling interests are individually not material for the Group.

 


CONSOLIDATED STATEMENT OF CASH FLOWS

 



Unaudited

Six months

ended

30 Jun 2020


 

Restated Unaudited

Six months

ended

30 Jun 2019


 

Restated Audited

Year

ended 31 Dec 2019




USD'000


USD'000


USD'000

Cash flow from operating activities
















Profit/(loss) before taxation



(1,418)


(1,141)


(5,789)









Adjustments for:
















Depreciation of property, plant and equipment



971


576


1,306

Amortisation of intangible assets



5,357


3,598


8,299

Profit on investment in associate



-


-


(74)

Finance cost - net



4,655


4,026


3,869

Share based payments



2,734


28


2,878

Increase in trade and other receivables



(804)


(685)


(11,487)

(Decrease)/increase in trade and other payables



(6,453)


(6,370)


16,020

Decrease in inventories



-


62


3,603

Cash flow from operations



5,042


94


18,625









Income tax received/(paid)



613


(1,479)


(2,309)









Net cash flow generated from/(used in) operating activities



5,655


(1,385)


16,316









Cash flow used in investing activities








Purchase of property, plant and equipment



(179)


(449)


(755)

Purchase of intangible assets, net of cash acquired



(1)


-


(14,742)

Payment of deferred consideration



(3,023)


(1,024)


(2,940)

Acquisition of a subsidiary, net of cash acquired



(1,038)


-


(60,900)









Net cash flow used in investing activities



(4,241)


(1,473)


(79,337)









Cash flow used in financing activities








Proceeds/(Repayments) from borrowings (net)



2,585


(1,156)


103,424

Bond arrangement fees



(48)


-


(2,377)

Proceeds from issuance of ordinary shares (net)



4


43


2,133

Payment of liabilities arising from KeyDrive acquisition



-


-


(27,839)

Lease rentals



-


(180)


(528)

Lease interest



-


(50)


-

Interest paid



(3,569)


(311)


(1,970)

Net cash flow (used in)/generated from financing activities



(1,028)


(1,654)


72,843









Net increase/(decrease) in cash and cash equivalents



386


(4,512)


9,822

Cash and cash equivalents at beginning of the period/year



26,182


23,090


23,090

Exchange differences on cash and cash equivalents



1,063


(693)


(6,730)









Cash and cash equivalents at end of the period/year



27,631


17,885


26,182

















 

.

NOTES TO THE FINANCIAL INFORMATION

1.   General information

CentralNic Group Plc is the UK holding company of a group of companies which are engaged in the provision of global domain name services. The company is registered in England and Wales. Its registered office and principal place of business is 4th Floor, Saddlers House, 44 Gutter Lane, London, England, EC2V 6BR.  

The CentralNic Group provides subscription services on a global scale to domain names and associated digital subscription products through Indirect and Direct channels as well as Monetisation services.

 

2.   Basis of preparation

The condensed interim financial information is unaudited and has been prepared on the basis of the accounting policies set out in the Group's 2019 statutory accounts in accordance with Accounting Standard IAS 34 Interim Financial Reporting.

The condensed interim consolidated financial statements do not represent statutory accounts within the meaning of section 435 of the Companies Act 2016. The financial information for the year ended 31 December 2019 is based on the statutory accounts for the year ended 31 December 2019. Those accounts, upon which the auditors issued an unqualified opinion, have been delivered to the Registrar of Companies and did not contain statements under section 498(2) or (3) of the Companies Act 2006.

 

The accounting policies adopted are consistent with those of the previous financial year and corresponding interim reporting period, except for the estimation of income tax, and the adoption of new and amended standards and accounting policies as set out below.

 

As a profitable provider of online subscription services with high cash conversion and solid organic growth, decentrally organised and catering to solid customers distributed over the entire globe, we do not expect CentralNic to be severely affected by COVID-19.  The Directors have taken the necessary precautions to preserve the Group's cash and review the acquisition pipeline and financing plans to ensure stability and optimisation of the business strategies in the current global climate.

 

3.   New and amended standards adopted by the Group

 

In the current reporting period, the Group has applied amendments to IFRS. These include annual improvements to IFRS, changes in standards, legislative and regulatory amendments, changes in disclosure and presentation requirements. The adoption of these has not had any material impact on the Group's financial statements and the accounting policies adopted by the Group in the interim report are consistent with the most recent Annual Report for the year ended 31 December 2019.

 

The International Accounting Standards Board published an amendment to IFRS 16 (''Covid-19 Related Rent Concessions''), in which they provide an accounting policy choice to the lessees to apply practical relief for rent concessions arising as a result of the COVID-19 pandemic. This amendment has not yet been endorsed by the European Union and did not impact the Interim Report June 2020.

 

4.   Critical accounting judgments and key sources of estimating uncertainty

 

In the application of the CentralNic Group's accounting policies, the Directors are required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not apparent from other sources. The estimates and assumptions are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Actual results may differ from these estimates.

 

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

 

The following are the key assumptions concerning the future and other key sources of estimation uncertainty at the statement of financial position date that have a significant risk of causing a significant adjustment to the carrying amounts of assets and liabilities in the financial statements:

 

Impairment Testing

 

The recoverable amounts of individual non-financial assets are determined based on the higher of the value-in-use calculations and the recoverable amount, or fair value less costs to sell. These calculations will require the use of estimates and assumptions. It is reasonably possible that assumptions may change, which may impact the Directors' estimates and may then require a material adjustment to the carrying value of tangible and intangible assets. 

 

The Directors review and test the carrying value of tangible and intangible assets when events or changes in circumstances suggest that the carrying amount may not be recoverable. For the purposes of performing impairment tests, assets are grouped at the lowest level for which identifiable cash flows are largely dependent on cash flows of other assets or liabilities. If there are indications that impairment may have occurred, estimates of expected future cashflows will be prepared for each group of assets. 

Expected future cash flows used to determine the value in use of tangible and intangible assets will be inherently uncertain and could materially change over time.

 

Estimation of useful life

 

The charge in respect of periodic amortisation and depreciation is derived after determining an estimate of an asset's expected useful life. The useful lives of the assets are determined by management at the time the asset is acquired and are reviewed continually for appropriateness.

 

Software development costs

 

The Group accounts for costs incurred to develop software for internal use as per IAS 38 and capitalises the costs incurred during the application development stage which include costs to design the software configuration and interfaces, coding, installation, and testing.  Costs incurred during the preliminary project stage along with post-implementation stages of internal use software are expensed as incurred. Capitalised development costs are amortised over their expected economic useful life. Costs incurred to maintain the existing software are expensed as incurred. The capitalisation and ongoing assessment of recoverability of development costs requires considerable judgement by management with respect to certain external factors, including, but not limited to, technological and economic feasibility, and estimated economic life.

 

Deferred Consideration

 

The fair value of the contingent deferred consideration arising on business combinations is a key area of accounting estimate. Judgement was exercised in determining the fair value of the deferred consideration in the KeyDrive acquisition, as described in note 15.

 

5.   Significant accounting policy

 

a)      Revenue recognition

 

Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for services provided in the course of ordinary activities, net of discounts and sales related taxes.

Revenue from the sale of services is recognised when the performance obligations are met under the customer contract. In particular:

(i)            Indirect Sale of services for domain names to registrars (formerly reported as Reseller)

Indirect revenues are derived from their customer base, registrars, via the following three channels:

(a)   Reseller channel - Revenues are derived by facilitating the sale of domain names and associated digital subscription products to registrars by acting as a wholesale platform provider.

(b)   Registry Operator channel - CentralNic is an asset holder for Country Code TLD .SK, and therefore generates revenues through sale of domain names of .SK extension to registrars

(c)    Registry Service Provider channel - These revenues are generated from the provision of services through the registry service provider mechanism. CentralNic operates as a back-end service provider for third-party Top Level Domains on an exclusive basis, enabling the registrars to sell domain names to registrants.

In accordance with IFRS 15, each segment evaluates the representation of the underlying customer contracts with the registrars and identifies the performance obligation that is required to be met under the customer contract. Determining the transaction price and allocating the transaction price to the performance obligation is done is also considered, followed by the fulfilment of the performance obligation, therefore leading to the revenue recognition of the sale.

For the Reseller channel, upon evaluation of the customer contract, the registry channel has performance obligations that are met at point of sale of the domain name. An invoice under this division could cover the license to utilise the domain name for a fixed term period which could vary between one and ten years, however, all performance obligations are met at the point of sale, and therefore no revenue is deferred.

For the Registry operator revenues and Registry service channels, upon evaluation of the customer contract, the registry channel has several performance obligations that need to be met over the term of the domain name sale. An invoice under these divisions could cover the sale of a domain name for a fixed term period which could vary between one and ten years, and the performance obligations are expected to be fulfilled over the course of this term on a straight-line basis. Revenues that relate to the period in which the services are performed are recognised in the income statement of that period, with the amounts relating to future periods being deferred into ''deferred revenue''.

 

(ii)           Direct sale of services for domain names to domain registrants (formerly reported as Small business and Corporate Services)

For the Direct segment, upon evaluation of the customer contract, the registrar channel has performance obligations that are met at the point of sale of the domain name. An invoice under this segment could cover the license to utilise the domain name for a fixed term period which could vary between one and ten years, however, all performance obligations are met at the point of sale, and therefore no revenue is deferred.

Direct revenues are generated from the provision of retail and similar services to domain registrants. The sub revenue streams would be those of new registrations and renewals. Revenue originates when a transaction is generated on the service registry platform by the customer.

Revenue from the provision of computer software to a customer is recognised when the Group has delivered the related software and completed all of the adaptions required by the customer for either the whole contract or for a specific milestone deliverable within the contract. The revenue is recognised at the point of fulfilment of the performance obligation, in line with the customer contract.

Revenue from strategic consultancy and similar services is recognised in profit and loss in proportion to the stage of completion of the performance obligation at the reporting date. The stage of performance obligation fulfilment is determined based on completion of work performed to date as a percentage of total services to be performed.

(iii)          Monetisation services

In the Monetisation segment, CentralNic places third party advertising ("Advertisers") on domain names held by third parties ("Publisher") not yet or not intended to be developed into website.  Revenues are recognized after a chargeable click on the Advertiser's advertisement placed on a Publisher's domain name or a chargeable redirect from a Publisher's domain name to an Advertiser's website are registered.

The acquisition of Team Internet AG and other transformative acquisitions during 2019 have altered the business mix of the Group which have resulted in the restatement and reclassification of the Group segmental reporting.  At 30 June 2020, certain restatement and reclassification have been made to the segmental reporting analysis of CentralNic Group for the period and financial year ended 30 June 2019 and 31 December 2019 respectively to enhance comparability with the current year's Interim Report ended 30 June 2020. These restatement and reclassification have had no impact on the Group reported Consolidated Statement of Comprehensive Income, Consolidated Statement of Financial Position and Consolidated Statement of Cash Flow. As result, comparative figures in note 6 Segmental Analysis have been adjusted to conform to the Interim Report presentation and the formerly reported segments have been restated and reclassified as follows:

Segments reclassification

(a) Indirect, materially consistent with the former Reseller segment,

(b) Direct, combining the former Small Business and Corporate segment

(c) Monetisation, due to its materially enlarged weight warranted its own segment

 The segments restated were as follows:

 

As at 30 June 2019

Reseller

USD'000

Small Business

USD'000

Corporate

USD'000

Total

USD'000






Previously reported





Revenue

25,509

19,768

4,416

49,693






 

After reclassification

Indirect

USD'000

Direct

USD'000

Monetisation

USD'000

Total

USD'000

Revenue

25,509

24,184

-

49,693






 

As at 31 December 2019

Reseller

USD'000

Small Business

USD'000

Corporate

USD'000

Total

USD'000






Previously reported





Revenue

60,681

37,753

10,760

109,194






 

After reclassification

Indirect

USD'000

Direct

USD'000

Monetisation

USD'000

Total

USD'000

Revenue

60,681

46,638

1,875

109,194

b)   Foreign currency translation

Functional and presentation currency

Items included in the financial statements of each of the CentralNic Group's entities are measured using the currency of the primary economic environment in which the entity operates. The Condensed Consolidated Financial Statements are presented in USD given that more than half of its trade is in US Dollar and the industry in which it operates is predominantly trading in US Dollars.

Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at balance sheet date exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement, except when deferred in equity as reserve for exchange rate adjustments.

In the Condensed Consolidated Statement of Comprehensive Income, the comparative figures for the period ended 30 June 2019 and financial year ended 31 December 2019 have been restated to reclassify the foreign exchange differences arising from foreign currency borrowings from administrative expenses to  finance costs and other comprehensive income respectively. The Directors believe that this change of presentation provides more reliable and relevant information to the users of the Interim Report about the effect of the transaction and the financial performance of the Group.  The change has had a material impact on the Group reported Consolidated Statement of Comprehensive Income, Consolidated Statement of Financial Position and Consolidated Statement of Cash Flow for the period ended 30 June 2019 and financial year ended 31 December 2019, please refer to the footnote in the Condensed Consolidated Statement of Income for further details of the reclassification and presentation.  Following this change of accounting policy and in order to be in conformity with IAS 21.32, future foreign exchange differences arising on the translation of foreign currency borrowings will be recognised in other comprehensive income and accumulated in a separate reserve '' Foreign exchange translation reserve'' in equity.

Change of functional currency

On 1 January 2020, CentralNic Group PLC, the Parent Company changed its functional currency from GBP to EUR.  The change was made to reflect that EUR has become the predominant currency in the company, counting for a significant part of the company's foreign currency borrowings.  The change has been implemented with prospective effect and comparatives have not been restated. The change in functional currency will significantly reduce the volatility of the Parent Company's exposure to foreign currency exchange movement, in particular due to translation of foreign currency borrowings.  

The exchange rates used were as follows:

GBP/EUR exchange rate



1 January 2020

30 June 2020

Spot rate



1.1755

-

Average rate



-

1.1126

Closing rate



-

1.0960

 

6.   Segment analysis

 

CentralNic is an independent global service provider distributing domain names and associated digital subscription products through Indirect and Direct channels as well as Monetisation services to domain name owners. Operating segments are prepared in a manner consistent with the internal reporting provided to the management as its chief operating decision maker in order to allocate resources to segments and to assess their performance.

 

The Directors do not rely on segmental cash flows or analysis of segment assets and liabilities arising from the operating, investing and financing activities for each reportable segment for their decision making and have therefore not included them. As described in note 5, there has been a restatement and reclassification of the Group's segmental reporting and therefore the comparatives have been updated. The segmental analysis is organised around the products and services of the business.

 

The Indirect segment is a global distributor of domain names and provides consultancy services to retailers. The Direct segment provides domain names, ancillary services to end users, monitoring services to protect brands online, technical and consultancy services to corporate clients, licencing of the Group's in house developed registry management platform, also on a global basis. The Monetisation segment provides advertising placement services, sale of domain name and data traffic management services on a global basis.

 

 

 

Management reviews the activities of the CentralNic Group in the segments disclosed below:

 

 

 


Period to 30 June 2020


Indirect

USD'000

Direct

USD'000

Monetisation

USD'000

Total

USD'000

Revenue

41,178

21,619

48,454

111,251

Gross profit

11,881

10,404

12,914

35,199

Total administrative expenses

Share based payments expense




(29,228)

(2,734)

Operating profit




3,237






Adjusted EBITDA

Depreciation

Amortisation of intangibles assets

Non-core operating expenses

Share based payment expense




15,096

(971)

(5,357)

(2,797)

(2,734)

Operating profit




3,237

Finance cost (net)




(4,655)

Profit before taxation




(1,418)

Income tax expense




(1,313)

Profit after taxation




(2,731)

 

 

 

 


Period to 30 June 2019


Indirect

USD'000

Direct

USD'000

Monetisation

USD'000

Total

USD'000

Revenue

25,509

24,184

-

49,693

Gross profit

8,229

11,502

-

19,731

Total administrative expenses

Share based payments expense




(16,818)

(28)

Operating profit




2,885






Adjusted EBITDA

Depreciation

Amortisation of intangibles assets

Non-core operating expenses 

Share based payment expense




9,230

(576)

(3,598)

(2,143)

(28)

Operating profit




2,885

Finance cost (net)




(4,026)

Loss before taxation




(1,141)

Income tax expense




(1,369)

Loss after taxation




(2,510)

 

 

 

 

 

 

 

 

 

 

 

 

 

 


Year to 31 December 2019


Indirect

USD'000

Direct

USD'000

Monetisation

USD'000

Total

USD'000

Revenue

60,681

46,638

1,875

109,194

Gross profit

19,604

22,671

500

42,775

Total administrative expenses

Share based payments expense




(41,891)

(2,878)

Operating loss




(1,994)






Adjusted EBITDA

Depreciation

Amortisation of intangibles assets

Non-core operating expenses

Share of associate income

Share based payment expense




17,920

(1,306)

(8,299)

(7,357)

(74)

(2,878)

Operating loss




(1,994)

Finance cost (net)




(3,869)

Share of associate income




74

Loss before taxation




(5,789)

Income tax expense




39

Loss after taxation




(5,750)

 

7.   Revenue

The Group's revenue is generated from the following geographical areas:



Unaudited 30 Jun 2020


Unaudited 30 Jun 2019


Audited

31 Dec 2019



USD'000


USD'000


USD'000








Indirect Services







UK


526                 


           305


           828

North America


10,832                 


           5,570


13,509

Europe


21,392                 


        17,416


     34,972

       ROW


8,428                


        2,218


       11,372



             41,178


        25,509


      60,681

      Direct Services







UK


1,141                 


           1,431


2,792

North America


               6,811  


        6,777


        11,656

Europe


              8,827  


        8,916


        19,623

ROW


4,840                


        7,060


     12,567



            21,619  


     24,184


46,638

       Monetisation services







UK


               214  


-


          8

North America


               1,807  


-


        102

Europe


45,160


-


1,711

ROW


1,273                 


-


54



               -  


           618


        4,523










48,454


-


1,875

Total revenue


111,251


49,693


109,194















 

The Indirect segment has one customer that represents more than 10% of the segment's revenue during the period amounting to USD 4.3m.

The Direct segment has no customer that represents more than 10% of the segment's revenue during the period.

The Monetisation segment has one customer that represents more than 92% of the segment's revenue during the period amounting to USD 45.0m.

8.   Finance costs

 





Unaudited 6 months ended 30 Jun 2020


Unaudited 6 months ended 30 Jun 2019


Restated(2)

Audited year ended 31 Dec 2019





USD'000


USD'000


USD'000



















Impact of unwinding of discount on Net Present Value of deferred consideration(1)

(28)


(273)


(3,398)

Reappraisal of deferred consideration

-


(3,173)


-

Foreign exchange loss on revolving credit facility revaluation

-


-


(214)

Foreign exchange (loss)/gain on bond revaluation

(321)


-


4,099

Arrangement fees on borrowings

(540)


(157)


(1,420)

Interest expense on short-term borrowings

(114)


(38)


(781)

Interest expense on long-term bank borrowings

(3,576)


(340)


(2,033)

Interest expense on leases


(82)


(50)


(127)



(4,661)


(4,031)


(3,874)

(1)  Details on the impact of deferred consideration on the Finance costs is discussed in detail in note 15.

(2)  The finance costs for the financial year ended 31 December 2019 have been restated to reclassify the foreign exchange loss on the revolving credit facility revaluation from administrative expenses to reflect the appropriate IFRS accounting treatment as per IAS 23.

9.     Income tax expense






Unaudited

6 months ended

30 Jun 2020


Unaudited

6 months ended

30 Jun 2019


 

Audited

Year ended

31 Dec 2019



USD'000


USD'000


USD'000








Current tax on profits for the period- UK and foreign


(2,211)


              (1,886)


(1,292)

Adjustments in respect of previous periods


-


(20)


48

Current income tax


(2,211)


(1,906)


(1,244)








Deferred income tax


898


537


1,283










(1,313)


(1,369)


39








 

A reconciliation of the current income tax expense applicable to the profit before taxation at the statutory tax rate to the

current income tax expense at the effective tax rate of the CentralNic Group are as follows:


Unaudited

6 months end

30 Jun 2020


Restated Unaudited

6 months ended

30 Jun 2019


 

Restated Audited

Year ended

31 Dec 2019


USD'000


USD'000


USD'000







Loss before taxation

(1,418)


(1,141)


(5,789)







Tax calculated at domestic tax rates applicable to profits in the respective countries

 

(1,682)


 

533


 

(1,580)







Tax effects of:






Expenses not deductible for tax purposes

(689)


105


803

Profit set off against goodwill amortisation - SK-NIC

-


(245)


-

Adjustments in respect of previous periods

-


20


48

Effects of different jurisdictional tax rates

-


(226)


-

Tax loss movement 

1,193


(978)


578

Deferred consideration amounts capitalised in local entity

-


(1,016)


-

Deferred tax

898


537


1,283

Withholding tax

-


(7)


(168)

Other adjustments

(1,033)


(92)


(925)







Current tax (expense)/credit for the period/year

(1,313)


(1,369)


39







The Company estimates for income taxes in the condensed financial statements on the basis of its income for financial reporting purposes, adjusted for items that are not assessable or deductible for income tax purposes, in accordance with the regulations of domestic tax authorities.

The effective rate of tax for the period was 93% (Six months ended 2019: 120%), mainly driven by the different jurisdictions tax rate, local tax treatment of deferred consideration amounts, tax losses carried forward and the impact of SK-NIC's profits set off against amortisation of goodwill. As illustrated above the business incurs a high level of non-cash charges which are mainly not deductible for income taxes in the relevant jurisdictions and largely represent permanent differences between accounting and taxable profits. As a percentage of the adjusted EBITDA less non-core operating expenses, the tax charge was 10% for the six months ended 30 June 2020 (Six months ended 2019: 19.4%), which in the opinion of the Directors is a more appropriate measure of the tax cost to the business.

In the UK, the applicable statutory tax rate for 2020/21 is 19% (2019/20: 19%).

In the USA, federal taxes are due at 21% on taxable income. Under California tax legislation a statutory minimum of USD 800 of state tax is due.

In Germany, federal taxes are due at 15% on taxable income. With an additional 5.5% solidarity surcharge due on the income tax. A community business tax of 14%-c.17% is also levied with rates determined by the municipality taking the total effective tax charge to circa 30%-34%.

In Australia and New Zealand, income taxes are due at 30% and 28% respectively on taxable income.

In Slovakia, income tax is due at 21% of taxable income.

 

10.   Earnings per share

 

Earnings per share has been calculated by dividing the consolidated profit/(loss) after taxation attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during the period.

Diluted earnings per share has been calculated on the same basis as above, except that the weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares (arising from the Group's share option scheme and warrants) into ordinary shares has been added to the denominator. There are no changes to the profit (numerator) as a result of the dilutive calculation.

 



Unaudited

As at

30 Jun 2020


Unaudited

As at

30 Jun 2019


Audited

As at

31 Dec 2019



USD'000


USD'000


USD'000








Loss) after tax attributable to owners


(2,731)


(2,467)


(5,686)








Operating profit /(loss)


3,237


2,885


(1,994)

Depreciation


971


576


1,306

Amortisation of intangible assets


5,357


3,598


8,299

Non-core operating expenses


2,797


2,143


7,357

Share of associate income


-


-


74

Share based payment expense


2,734


28


2,878

Adjusted EBITDA


15,096


9,230


17,920

Depreciation


(971)


(576)


(1,306)

Finance costs (excluding deferred consideration related amounts - note 8)


 

(4,633)


 

(585)


 

(476)

Finance income


6


5


5

Taxation


(1,313)


(1,369)


39

Adjusted Earnings


8,185


6,705


16,182








 

Weighted average number of shares:







Basic


184,434,668


171,396,695


175,083,962

Effect of dilutive potential ordinary shares


6,371,718


6,224,426


5,397,202

Diluted


190,806,386


177,621,121


180,481,164

Earnings per share:







Basic (cents)


(1.48)


(1.44)


(3.25)

Diluted (cents)


(1.48)


(1.44)


(3.25)








Adjusted earnings - Basic (cents)


4.44


3.91


9.24

Adjusted earnings - Diluted (cents)


4.29


3.77


8.97








Basic and diluted earnings per share has been impacted by non-recurring acquisition costs, amortisation changes and other significant operating costs.

 

11. Property, plant and equipment


Right of use assets

Motor vehicles

Computer equipment

Furniture and fittings

 

Total


USD'000

USD'000

USD'000

USD'000

USD'000

Cost






At 1 January 2019

                 -

30

1,722

257

2,009

IFRS 16 adjustment on 1 January 2019

                    779

                   -  

                       -  

                       -  

779

Additions

                 3,406

-

273

176

3,855

Exchange differences

                      (15)  

-

(4)

(1)

(20)

At 30 June 2019

4,170

30

1,991

432

6,623

Additions

                 192

-

407

37

636

Acquisition of subsidiary

                 911

-

376

127

1,414

Exchange differences

                      128  

(18)

(128)

(16)

(34)

At 31 December 2019

5,401

12

2,646

580

8,639

Additions

14

-

400

33

447

Exchange differences

             (186)  

-

(79)

(1)

(266)

At 30 June 2020

5,229

12

2,967

612

8,820







 

 

 

Accumulated depreciation




 

At 1 January 2019

                       -  

                  11  

958

109

1,078

 

Charge for the period

295

3

239

39

576

 

Exchange differences

                       -  

                 (1)  

13

                   -

12

 

At 30 June 2019

295

13

1,210

148

1,666

 

Charge for the period

363

2

288

77

730

 

Exchange differences

                       11  

(3)

(175)

(17)

(184)

 

At 31 December 2020

669

12

1,323

208

2,212

 

Charge for the period

504

-

363

104

971

 

Exchange differences

                       (7)  

-

(45)

22

(30)

 

At 30 June 2020

1,166

12

1,641

334

3,153

 







 

Property, plant and equipment- carrying value






 







 

At 30 June 2019

3,875

17

781

284

4,957

 

At 31 Dec 2019

4,732

-

1,323

372

6,427

 

At 30 June 2020

4,063

-

1,326

278

5,667

 

 

The carrying value of property, plant and equipment excluding right of use assets recognised under IFRS 16 at 30 June 2020 was USD 1,604,000 (30 June 2019: USD 1,082,000)



 

12. Intangible assets


Domain Names

Patents & Trademarks

 

Software

Customer List

 

Goodwill

Intellectual Property

 

Total


USD'000

USD'000

USD'000

USD'000

USD'000

USD'000

USD'000

Cost or deemed cost








At 1 January 2019

1,472

3,210

14,639

41,946

77,600

-

138,867

Additions

-

-

-

-

-

-

-

Exchange Differences

(13)

(2)

(39)

(255)

(256)

-

(565)

At 30 June 2019

1,459

3,208

14,600

41,691

77,344


138,302

Additions

-

-

163

-

-

-

163

Acquisition of subsidiary

6,761

1,874

3,232

34,566

31,775

1,464

79,672

Reclassification from Inventory

3,467

-

-

-

-

-

3,467

Exchange Differences

152

92

322

2,925

1,118

175

4,784

At 31 December 2019

11,839

5,174

18,317

79,182

110,237

1,639

226,388

Additions

-

-

787

108

739

-

1,634

Acquisition of Subsidiary

-

-

-

-

(104)

-

(104)

Exchange Differences

(205)

(28)

(262)

(953)

(2,064)

(41)

(3,553)

At 30 June 2020

11,634

5,146

18,842

78,337

108,808

1,598

224,365









Amortisation








At 1 January 2019

399

88

3,718

7,395

-

-

11,600

Charge for the period

54

111

1,135

2,298

-

-

3,598

Exchange differences

(4)

-

(27)

(85)

-

-

(116)

At 30 June 2019

449

199

4,826

9,608

-

-

15,082

Charge for the period

589

187

1,025

2,838

4

58

4,701

Exchange Differences

38

(8)

102

402

(4)

20

550

At 31 December 2019

1,076

378

5,953

12,848

-

78

20,333

Charge for the period

191

211

1,182

3,696

-

77

5,357

Exchange Differences

(77)

(23)

(199)

(145)

-

(8)

(452)

At 30 June 2020

1,190

566

6,936

16,399

-

147

25,238









Carrying value








At 30 June 2019

1,010

3,009

9,774

32,083

77,344

-

123,220

At 31 December 2019

10,763

4,796

12,364

66,334

110,237

1,561

206,055

At 30 June 2020

10,444

4,580

11,906

61,938

108,808

1,451

199,127

 

Amortisation of intangible assets is included in administrative expenses in the combined and consolidated statement of comprehensive income.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

13. Deferred receivables



Unaudited

As at

30 Jun 2020


Unaudited

As at

30 Jun 2019


Audited

As at

31 Dec 2019



USD'000


USD'000


USD'000















Deferred costs


488


1,414


639

Loans to related parties


100


100


100

















588


1,514


739








 

 

 

14. Trade and other receivables



Unaudited

As at

30 Jun 2020


Unaudited

As at

30 Jun 2019


Audited

As at

31 Dec 2019



USD'000


USD'000


USD'000








Trade receivables


21,463


10,124


21,121

Accrued revenue


8,693


7,840


                6,251

Deferred costs


1,365


1,112


1,723

Prepayments and other receivables


3,943


2,803


7,278

Supplier payments on account


3,111


2,993


4,387

 


















38,575


24,872


40,760

 

 

 







 

 

 

 

 

 

 

15. Trade and other payables and accruals

 



Unaudited

As at

30 Jun 2020


Unaudited

As at

30 Jun 2019


Audited

As at

31 Dec 2019



USD'000


USD'000


USD'000








Accounts payable


14,990


5,447


15,645

Accrued expenses


20,623


15,054


23,252

Other taxes and social security


45


262


-

Deferred consideration


6,850


5,838


10,881

Deferred revenue


4,560


6,852


6,331

Customer payments on account


18,057


18,393


16,724

Accrued interest


1,772


245


1,850

Other liabilities


1,497


395


1,000










68,394


52,486


75,683

 

 

 

 

 

 

 

 

 

 

 

 

On 23 June 2020, CentralNic Group has settled EUR 2,700,000 deferred consideration payable to the sellers of Team Internet AG. The deferred consideration and the finance costs also reflected the unwinding of the discount factor resulting from the passage of time.

Deferred consideration is subject to actuarial and net present value discounts and the resulting income or expense are recorded in the finance cost in the Consolidated Statement of Comprehensive Income as described in note 9. The maximum amount of deferred consideration payable in cash or in shares is USD 12.0m, out of which USD 5.6m is in cash and USD 6.4m in shares. Please refer to note 19 for further details of deferred consideration liabilities settled after the balance sheet date.

16. Financial instruments

The CentralNic Group is exposed to market risk, credit risk and liquidity risk arising from financial instruments. The Group's overall financial risk management policy focusses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group's financial performance. The Group does not trade in financial instruments.

The principal financial instruments used by the CentralNic Group, from which financial instrument risk arises, are as follows:



Unaudited

As at

30 Jun 2020


Unaudited

As at

30 Jun 2019


 

Audited

As at

31 Dec 2019

 



USD'000


USD'000


USD'000

 

Financial assets







 

Loan and receivables







 

Trade and other receivables


35,902


23,292


33,701

 

Cash and cash equivalents


27,631


17,885


26,182

 








 








 



63,533


41,177


59,883

 








 








 

Financial liabilities measure at amortised costs







 

Trade and other payables


43,049


25,351


46,555

 

Loan and borrowings (short and long term)


104,059


23,838


101,180

 








 








 



147,108


49,189


147,735

 








 

 

 

 

 

 

 

 

 

 

Cash and Net Debts movement in the 6 months period to 30 June 20 were as follows [table to be updated]:

Cash

USD'000


Net Debts


USD'000

 

Cash at 31 December 2019

26,182


Net debt at 31 December 2019


74,998

 

EBITDA

15,096


Increase in cash


(1,449)

 

Non-core expenses (paid)

(2,797)


Loan repayments


(441)

 

Bond Interest

(3,514)


Proceeds from RCF


3,026

 

Tax paid

746


Arrangement fee amortisation


540

 

Pre-2020 acquisition one-off W/C items(1)

(5,996)


Currency


(245)

 

New acquisitions

(1,017)





 

Net Borrowing

2,585





 

Bond arrangement fees (2nd tranche)

(541)





 

Working capital/Miscellaneous

(3,113)





 

Cash at 30 June 2020

27,631


Net debt at 30 June 2020


76,429

 







(1) Includes deferred consideration, completion statement adjustments, and settlement of acquired one-off liabilities



 

17. Share capital



Number


Share Capital


Share Premium


Merger Relief





USD'000


USD'000


USD'000










At 1 January 2019


170,652,802


216


69,238


2,314

Proceeds from shares issued in connection with the employee share option schemes


100,000


1


44


-

Shares issued to settle the deferred consideration in respect of KeyDrive acquisition


7,384,978


10


5,553


-

At 30 June 2019


178,137,780


227


74,835


2,314

Option exercised in August 2019


436,698


-


5


-

Shares issued in respect of Team Internet acquisition


3,911,650


5


-


2,983

At 31 December 2019


182,486,128


232


74,840


5,297

New shares issued


3,138,356


4


-


-

At 30 June 2020


185,624,484


236


74,840


5,297

 

 

 

18. Borrowings

      At 30 June 2020, the contractual maturities of the Group's non-derivative financial liabilities were as follows:













Less than 6 months

Less than 6-12 months

Between 1 and 2 years

Between 2 and 5 years

Over 5 years

Total contractual cash flows

Carrying amount (assets)/liabilities




USD' 000

USD'000

USD'000

USD'000

USD'000

USD'000

USD'000














Trade and other payables and accruals

42,649

-

-

-

-

42,649

42,649



Borrowings (include prepaid costs)

5,849

298

-

97,912

-

104,059

104,059



Lease liabilities

464

457

923

1,332

972

4,148

4,148



Total non-derivatives

48,962

755

923

99,244

972

150,856

150,856














At 30 June 2020, the SVB Revolving facility is reflected in short term borrowings as its repayment is due within six months from the date of this report.

 

At 31 December 2019, the contractual maturities of the Group's non-derivative financial liabilities were as follows:














Less than 6 months

Less than 6-12 months

Between 1 and 2 years

Between 2 and 5 years

Over 5 years

Total contractual cash flows

Carrying amount (assets)/liabilities




USD'000

USD'000

USD'000

USD'000

USD'000

USD'000

USD'000














Trade and other payables and accruals

46,555

-

-

-

-

46,555

46,555



Borrowings (include prepaid costs)

2,809

348

299

97,724


101,180

101,180



Lease liabilities

403

468

935

1,717

1,180

4,703

4,703



Total non-derivatives

49,767

816

1,234

99,441

1,180

152,438

152,438



 

As at 31 December 2019, a second tranche of bonds for a nominal amount of EUR 40,000,000 had been issued from the existing senior secured bond.  

At 30 June 2019, the contractual maturities of the Group's non-derivative financial liabilities were as follows:













Less than 6 months

Less than 6-12 months

Between 1 and 2 years

Between 2 and 5 years

Over 5 years

Total contractual cash flows

Carrying amount (assets)/liabilities




USD'000

USD'000

USD'000

USD'000

USD'000

USD'000

USD'000














Trade and other payables and accruals

25,351

-

-

-

-

25,351

25,351



Borrowings (include prepaid costs)

23,838

-

-

-

-

23,838

23,838



Lease liabilities

271

290

720

2,279

1,101

4,661

4,661



Total non-derivatives

49,460

290

720

2,279

1,101

53,850

53,850



As at 30 June 2019, the SVB term loan had been reflected in short term borrowings due to its repayment in July 2019 from the Bond proceeds. In July 2019, the EUR 50,000,000 bond proceeds replaced the SVB term loan and was reflected in long term borrowings.

19. Events occurring after the reporting period

Detailed below are the significant events that happened after the Group's period end date of 30 June 2020 and before the signing of this Interim Report and Accounts on 31 August 2020.

SK-NIC deferred consideration

As per the Sale and Purchase Agreement of SK-NIC, an amount of EUR 1,324,492 has been paid as part of the deferred consideration on 17th July 2020. The unwinding of the deferred consideration is not subject to the company growth rate as the Directors believe that there is sufficient headroom against management sensitivity to attain these domain growth rates.    

Issue of shares

As per the Sale and Purchase Agreement of Hexonet Group, a deferred consideration payment of EUR 2,971,000 was payable on the first anniversary of the completion of the acquisition.  In order to fund the deferred consideration payment for the acquisition of Hexonet GmbH and Mediasiren Advertising Inc., on 6th August 2020, CentralNic Group PLC issued 3,208,819 ordinary shares of 1 pence each (the "New Ordinary Shares").   The New Ordinary Shares have been admitted to trading on AIM on 12th August 2020 and will be ranked pari passu with the Company's existing ordinary shares.

Capital Reduction

As resolved by the Annual General Meeting on 4 June 2020 a capital reduction has been completed subsequent to its approval by the High Court and its registration by the Companies House effective 14 August 2020. The Capital Reduction is effected by the cancellation of the Company's share premium amounting to GBP 60,880,000 and thereby increased the distributable reserves which would facilitates making future distributions to its shareholders, including the payment of dividends subject to the continuing satisfactory financial performance of the Group. The Capital Reduction does not result in any cash outflow nor does it impact the Company's profits. There is no change in the number of shares in issue or their nominal value. No new share certificates are being issued because of the Capital Reduction. The Capital Reduction itself does not involve any distribution or repayment of capital or share premium by the Company and does not reduce the underlying net assets of the Company.

 

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