TIDMCNIC
RNS Number : 9561O
CentralNic Group PLC
25 August 2017
Press Release 25 August 2017
The information contained within this announcement is deemed by
the Company to constitute inside information stipulated under the
Market Abuse Regulation (EU) No. 596/2014. Upon the publication of
this announcement via the Regulatory Information Service, this
inside information is now considered to be in the public
domain.
CentralNic Group Plc
("CentralNic" or "the Company" or "the Group" or "CentralNic
Group")
Pre-Close Trading Update, Notice of Results
and
Agreement to Acquire SK-NIC, A.S.
("SK-NIC")
Manager of the country code Top-Level Domain for Slovakia,
.sk
Pre-Close Trading Update and Notice of Results
CentralNic, the global software platform company supporting
subscription web services including domain names, is pleased to
announce a pre-close trading update for the six months to 30 June
2017 ("the Period"). The Company's interim results for the Period
will be published on 7(th) September 2017.
Revenue for the Period is expected to be 19% ahead of the prior
year at GBP10,587,000 (2016: GBP8,931,000) with adjusted EBITDA*,
excluding foreign exchange gain and losses, rising 50% to
GBP1,367,000 (2016: GBP908,000). Adjusted EBITDA* including foreign
exchange is estimated at GBP1,055,000 including an GBP312,000
foreign exchange loss (2016: GBP1,309,000 including a GBP401,000
foreign exchange gain). Cash at 30 June 2017 was GBP9,570,000.
Given the consistently heavy second-half weighting of results in
recent years, the Board is confident that the Company is on track
to meet market expectations for the full year to 31 December 2017,
as the Company continues to diversify through the acquisition of
businesses with high-levels of recurring revenue and takes
advantage of increased opportunities to trade in valuable premium
domain names.
*Adjusted EBITDA: Earnings before interest, tax, depreciation
and amortisation, acquisition costs, exceptional items and non-cash
charges.
Agreement to acquire SK-NIC, A.S., Manager of Slovakia's
Top-Level Domain, .sk
The Board of CentralNic is pleased to announce that it has
agreed to acquire the business and assets of SK-NIC, the manager of
the exclusive country code top-level domain for Slovakia, .sk. The
Board believes that this will represent a major, strategic and
earnings enhancing acquisition for the Group.
Acquisition description and rationale
-- Agreement to acquire for initial cash consideration of
EUR21.27 million with deferred cash consideration of up to EUR4.85
million, dependent on SK-NIC attaining defined growth targets over
the next three years.
-- Acquisition is expected to legally complete around the beginning of September 2017.
-- Acquisition in line with CentralNic's core growth strategy:
o Earnings enhancing acquisition of a business managing a
substantial country code top-level domain. The Board anticipates
double digit earnings enhancement for the first full year of
ownership.
o Increases visibility and predictability of Group revenue, with
a larger proportion being generated from recurring revenue
streams.
o SK-NIC provides access to a new international market with
sustainable growth characteristics - including growing demand for
the .sk domain, the dominant domain in the Slovak market.
o Introduces .sk as a new product to the CentralNic portfolio
with excellent visibility of earnings, and a high renewal rate of
over 77%.
o Opportunity to leverage CentralNic's existing expertise and
bespoke technical platforms in the domain management business.
Integration strategy
The existing management and staff will join the CentralNic
Group. Local management has already started to work with Group
functions to execute an effective and collaborative integration
process, including:
-- Migrating SK-NIC's systems to CentralNic's proprietary
registry platform, which will provide technical and software
consistency and greater technical scalability and resilience across
the wholesale business.
-- CentralNic Group has entered into transitional services
agreements with the vendor DanubiaTel a.s. to provide operational
services such as datacenter services, IT support & security
management, legal & finance support, human resources support,
and other administrative services to ensure uninterrupted
operations and client service for SK-NIC's customers. These
services will be transitioned to CentralNic over the terms of these
agreements.
Transaction details
The initial cash consideration is being funded by the Company's
own cash reserves and a term loan of GBP18 million, provided by
Silicon Valley Bank ("SVB"). SVB is also providing a GBP3 million
overdraft facility. It is expected that the deferred consideration
will be paid from the profits of the enlarged Group.
The vendor is Danubia Tel Netherlands B.V. which is a subsidiary
of Danubia Holding, a.s.
The acquisition involves the purchase of the business, including
all the property, rights and assets, of SK-NIC. SK-NIC has managed
the .sk country code since 1993 and is officially recognised as the
sponsoring organisation of the Slovak country-code top-level domain
("ccTLD") by the worldwide governing body, the Internet Assigned
Numbering Authority ("IANA").
SK-NIC has a long term track-record of growth in domains under
management, supported by strong performance by the Slovak economy
over recent years. Slovakia has a population of over five million
and delivered GDP growth almost double the Eurozone average for
2015. It has an estimated penetration of 63 domains per 1000 head
of capita as at 31 December 2016, compared to the neighboring Czech
Republic at 121 domains per 1000 head of capita and to the UK with
162 domains per 1000 head of capita - indicating significant growth
potential with competitive pricing and service levels.
SK-NIK has attractive cash conversion characteristics, as domain
name customers typically pay annually in advance. Furthermore,
SK-NIC enjoys a high domain name renewal rate of over 77%,
providing consistent and attractive recurring revenues from a
diversified customer base, which includes over 360,000 domains
under management and over 2,100 active retailers in Slovakia.
CentralNic intends to invest to improve the SK-NIC service using
the Group's superior platform technology and through the provision
of new services. The team and training in Slovakia will be
strengthened, placing a new emphasis on marketing, communications
and retailer support. There will also be a commitment to supporting
the Slovak internet community by offering a superior service at
more competitive prices than provided historically. The Group will
also contribute five percent of SK-NIC's revenues to a fund
dedicated to projects that contribute to the Slovakian digital
economy, under the terms of a co-operation agreement with the
Slovakian Government.
SK-NIC began the process of upgrading its systems to the world
class CentralNic platform in the first half of 2017, as well as
reducing its pricing to internationally competitive levels in two
stages, in September 2016 and January 2017 - establishing new cost
and revenue baselines for the growth expected under CentralNic's
ownership. Restated using CentralNic's accounting policies and IFRS
standards (which defer revenue over the life of a domain), SK-NIC's
unaudited Profit before Tax and Adjusted EBITDA in the first half
of 2017 were EUR1.08 million and EUR0.97 million respectively on
revenues of EUR1.89 million. The unaudited results for 2016
(predating the systems upgrade costs and price reductions),
restated under CentralNic's policies and IFRS standards, were
Profit before Tax of EUR3.58 million and Adjusted EBITDA of EUR3.38
million on revenues of EUR4.14 million.
Ben Crawford, CentralNic Group CEO, said:
"SK-NIC is a major, earnings enhancing acquisition for Group,
which is wholly consistent with our growth strategy. The business
will benefit significantly from CentralNic's technology and
expertise, to improve its security, resilience and growth, as well
as bringing to the Group strong recurring revenues. The .sk country
code adds a substantial new product and SK-NIC's network of over
2,100 local retailers extends our geographic footprint into an
important new market with considerable growth potential.
"The acquisition of SK-NIC moves us another step forward in our
strategy to increase substantially the proportion of Group revenues
generated from recurring revenue streams spread across diversified
products, territories and customer types.
"We continue to pursue this roll-up strategy and our goal, which
is to continue to build a global business of considerable size and
scale."
-Ends-
For further information:
CentralNic Group Plc
Ben Crawford (CEO)
Don Baladasan, Chief Financial
Officer +44 (0) 203 388 0600
Zeus Capital Limited - NOMAD
and Joint Broker
Nick Cowles / Jamie Peel +44 (0) 161 831 1512
John Goold / Alex Davies +44 (0) 207 829 5000
Sequence Advisers LLP
Corporate Finance Adviser +44 (0) 203 405 7198
Toby Ramsden +44 (0) 203 405
Graham Smith 7203
Peel Hunt LLP - Joint Broker
Edward Knight / Nick Prowting
(Corporate)
Alastair Rae (Syndications) +44 (0) 207 418 8900
Abchurch Communications
Corporate & Financial PR
Advisers to CentralNic
Julian Bosdet / Dylan Mark
/ Alejandra Campuzano +44 (0) 207 398 7719
centralnic@abchurch-group.com www.abchurch-group.com
Grayling Slovakia
For SK-NIC / Slovak media
enquiries only
Jana Riecanska +421 915 759 469
jana.riecanska@grayling.com
About CentralNic
CentralNic (AIM: CNIC) is a London-based AIM-listed company
which develops and manages software platforms allowing businesses
globally to use the internet for their own websites and email, as
well as protecting their brands online. Its core growth strategy is
identifying and acquiring cash-generative businesses with annuity
revenue streams and exposure to emerging markets, and migrating
them onto the CentralNic software and operating platforms.
CentralNic operates globally with customers in over 200
countries. It earns revenues from the worldwide sales of internet
domain names and hosting on an annual subscription basis.
For more information please visit: www.centralnic.com
This information is provided by RNS
The company news service from the London Stock Exchange
END
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