CentralNic Group Plc acquisition of KeyDrive S.A.

RNS Number : 7039U

CentralNic Group PLC

16 July 2018

 

Press release

Monday 16th July 2018

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART, IN OR INTO THE UNITED STATES, CANADA, AUSTRALIA, JAPAN, THE REPUBLIC OF SOUTH AFRICA OR ANY OTHER JURISDICTION WHERE TO DO SO MIGHT CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF SUCH JURISDICTION

In member states of the European Economic Area ("EEA") other than the United Kingdom, this information is only addressed to and directed at persons who are "qualified investors" within the meaning of Article 2(1)(e) of the Prospectus Directive (Directive 2003/71/EC and any amendments thereto including Directive 2010/73/EU to the extent implemented in the relevant EEA member state) and any relevant implementing measure in the relevant member state of the EEA ("Qualified Investors").

The information contained within this Announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulation (EU) No. 596/2014 ("MAR"). Upon publication of this Announcement, this information is now considered to be in the public domain.

CentralNic Group Plc

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

Proposed acquisition of KeyDrive S.A. for up to $55 million and share Placing raising £24 million

Proposed Placing of 46,153,847 Ordinary Shares at 52 pence per Ordinary Share

Proposed Admission of the Enlarged Share Capital to trading on AIM

Publication of Admission Document and Notice of General Meeting 

Lifting of Suspension in trading of Ordinary Shares

CentralNic Group Plc (AIM: CNIC), the internet platform that derives revenue from the worldwide sales of internet domain names and associated web presence services, announces that it has entered into a conditional agreement to acquire the entire share capital of KeyDrive S.A. and its subsidiaries ("KeyDrive" or the "KeyDrive Group") for an initial consideration of $35.8 million, representing an enterprise value of $44.5 million, plus a performance based earn out of up to $10.5 million.

KeyDrive is a global technology business that operates in the domain name services industry. KeyDrive develops and operates software platforms used for selling subscription-based tools for businesses to operate online, including domain names, hosting, email, domain portfolio management and online advertising services. In the year to 31 December 2017, KeyDrive generated revenues of $58.26 million and adjusted EBITDA of $5.87 million.

Acquisition Highlights

·     The Acquisition will substantially increase CentralNic's scale and product range, adding KeyDrive's strength in the domain reseller and corporate services market to CentralNic's existing expertise in the domain registry and retail registrar segments

·     The Directors believe that opportunities for both cost and revenue synergies exist, which the Board expects to be realised as the two businesses are integrated

·    The Enlarged Group will rank as the 11^th largest domain name registrar globally by gTLD volume, and be among the top five registry service providers by number of registry clients

·     The Consideration for the Acquisition comprises:

o  $16.5 million in cash funded from the Placing proceeds

o  The issue of 28,006,607 Consideration Shares, valued at $19.3 million at the Placing Price to Inter.Services S.A, a holding company whose largest shareholder is Alex Siffrin, CEO of KeyDrive

o  A performance-based earn-out of up to $10.5 million, a minimum of 15 per cent of which shall be settled in cash and up to 85 per cent of which may be settled by the issue of additional consideration shares at the prevailing market price

·     The Placing comprises the issue of 46,153,847 new Ordinary Shares at a price of 52 pence per share, a 10.3% per cent discount to the closing middle market price of 58 pence per share on 13 March 2018, the last business day before trading in the shares was suspended pending an announcement regarding a reverse takeover

·     The Acquisition constitutes a reverse takeover under the AIM Rules and is therefore conditional on obtaining shareholder approval at the General Meeting scheduled for 10:00am on Wednesday 1^st of August 2018. At the General Meeting a number of other resolutions will be proposed, which will include, inter alia, resolutions to authorise the issue of the Placing Shares and the Consideration Shares. 

·     CentralNic has secured irrevocable commitments to vote in favour of the resolutions to effect the Acquisition and the Placing to be proposed at the General Meeting in respect of 31,017,273 Ordinary Shares, representing 32.14 per cent of the Existing Ordinary Shares.  The Company has also received a binding commitment from Kestrel partners LLP to vote in favour of the resolutions to effect the Acquisition and Placing in respect of a total of 18,086,593 Ordinary Shares, representing 18.7 per cent of the Existing Ordinary Shares. 

·   The Admission Document relating to the Acquisition, the Placing and the proposed Readmission of the Enlarged Share Capital to trading on AIM is available on the Company's website, www.centralnic.com, and will be posted to shareholders later today. The Admission Document includes a notice of the General Meeting that will be held at the offices of CMS Cameron McKenna Nabarro Olswang LLP, Cannon Place, 78 Cannon Street, London EC4N 6AF on 1 August 2018 at 10.00am. at which shareholder approval for, inter alia, the Acquisition and the Placing will be sought

·    The suspension of trading in CentralNic's Ordinary Shares will be lifted at 8:00am today, immediately following publication of the Admission Document

Ben Crawford, CEO of CentralNic, said:

"The acquisition of KeyDrive is transformative for CentralNic, significantly increasing the Company's scale and giving it significant extra firepower in the domain name industry to rival the traditional major players. KeyDrive's values and reputation within the industry match CentralNic's. The acquisition makes strong strategic sense to CentralNic and is a leap forward towards becoming a global leader.

"I am looking forward to welcoming the management and employees of KeyDrive to the CentralNic Group.  Alex Siffrin will add further weight and industry expertise to the Company's management team as Group Chief Operating Officer, and having taken a significant equity stake as part of the deal, clearly shares our confidence in the prospects of the enlarged group."

Alex Siffrin, CEO and Founder of KeyDrive, said: 

"Both companies bring complementary strengths and added depth across the various web disciplines and that is very rare in the domain name and web services industry.  We share a vision and a passion to deliver the very best products and solutions to the market and to become one of the leading organisations in our industry. I am looking forward to working closely with my new colleagues in pursuit of that goal."

-Ends-

For further information:

CentralNic Group Plc
Ben Crawford, CEO Don Baladasan, Chief Financial Officer	[phone]
Zeus Capital Limited - NOMAD and Joint Broker
Nick Cowles / Jamie Peel (Corporate Finance) John Goold / Rupert Woolfenden (Institutional Sales)	[phone]  [phone]
Stifel  - Joint Broker
Fred Walsh / Neil Shah / Rajpal Padam	[phone]
Sequence Advisers LLP Transaction Corporate Finance Adviser to CentralNic Group Plc
Graham Smith Toby Ramsden	[phone]  [phone]
Abchurch - Financial PR
Julian Bosdet Dylan Mark Alejandra Campuzano	[phone] [phone] [phone]
[e-mail]	www.abchurch-group.com

THIS ANNOUNCEMENT IS FOR INFORMATION PURPOSES ONLY, IS NOT INTENDED TO AND DOES NOT CONSTITUTE OR FORM PART OF ANY OFFER OR INVITATION TO PURCHASE OR SUBSCRIBE FOR, UNDERWRITE, SELL, OR ISSUE OR THE SOLICITATION OF AN OFFER TO PURCHASE OR SUBSCRIBE, SELL, ACQUIRE, DISPOSE OF ORDINARY SHARES OR ANY OTHER SECURITY IN THE UNITED STATES OF AMERICA, CANADA, AUSTRALIA, THE REPUBLIC OF SOUTH AFRICA, JAPAN OR IN ANY JURISDICTION IN WHICH, OR TO ANY PERSONS TO WHOM, SUCH OFFERING, SOLICITATION OR SALE WOULD BE UNLAWFUL.

This announcement is not for publication or distribution, directly or indirectly, in or into the United States of America. This announcement is not an offer of securities for sale into the United States. The securities referred to herein have Not been and will not be registered under the U.S. Securities Act of 1933, as amended, and may not be offered or sold in the United States, except pursuant to an applicable exemption from registration. No public offering of securities is being made in the United States.

The information contained herein is not for release, directly or indirectly, in or into the United States of America, Australia, Canada, the Republic of South Africa or Japan. This document (and the information contained herein) is not and does not contain or constitute an offer of securities for sale, or solicitation of an offer to purchase or subscribe for securities, in the United States, Australia, Canada, the Republic of South Africa or Japan or any other jurisdiction where such an offer or solicitation or the release, publication or distribution of this document would be unlawful.

THE CONTENT OF THIS ANNOUNCEMENT HAS NOT BEEN APPROVED BY AN AUTHORISED PERSON WITHIN THE MEANING OF THE FINANCIAL SERVICES AND MARKETS ACT 2000 (AS AMENDED) ("FSMA"). RELIANCE ON THIS ANNOUNCEMENT FOR THE PURPOSE OF ENGAGING IN ANY INVESTMENT ACTIVITY MAY EXPOSE AN INDIVIDUAL TO A SIGNIFICANT RISK OF LOSING ALL OF THE PROPERTY OR OTHER ASSETS INVESTED.

This communication is directed only at (i) persons who have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 ("Order") (investment professionals); (ii) persons falling within Article 49(2)(a) to (d) of the Order (high net worth companies, unincorporated associations etc.); or (iii) other persons to whom it may otherwise lawfully be communicated (all such persons referred to above being "Relevant Persons"). Any investment activity to which this communication relates will only be available to and will only be engaged with Relevant Persons. By accepting receipt of this communication, each recipient is deemed to confirm, represent and warrant that they are a Relevant Person.

Zeus Capital Limited, which is authorised and regulated in the United Kingdom by the FCA, is acting as nominated adviser and joint broker to the Company in connection with the proposed Placing and Admission and no one else and will not be responsible to anyone other than the Company for providing the protections afforded to its clients nor for providing advice to any other person in relation to the Placing and Admission and/or any other matter referred to in this Announcement.

Stifel Nicolaus Europe Limited, which is authorised and regulated in the United Kingdom by the FCA, is acting as joint broker to the Company in connection with the proposed Placing and Admission and no one else and will not be responsible to anyone other than the Company for providing the protections afforded to its clients nor for providing advice to any other person in relation to the Placing and Admission and/or any other matter referred to in this Announcement.

No representation or warranty, express or implied, is or will be made as to, or in relation to, and no responsibility or liability is or will be accepted by Zeus or Stifel or any of their respective affiliates or any of their respective directors, officers, employees, advisers or representatives (collectively, "Representatives") as to or in relation to, the accuracy or completeness of this Announcement or any other written or oral information made available to or publicly available to any interested party or its advisers, and any liability therefor is expressly disclaimed.

This Announcement contains certain forward-looking statements, beliefs or opinions, with respect to certain of the Company's current expectations and projections about future prospects, developments, strategies, performance, anticipated events or trends and other matters that are not historical facts. These forward-looking statements, which sometimes use words such as "aim", "anticipate", "believe", "intend", "plan" "estimate", "expect" and words of similar meaning, include all matters that are not historical facts and reflect the Directors' beliefs and expectations and involve a number of risks, uncertainties and assumptions that could cause actual results and performance to differ materially from any expected future results or performance expressed or implied by the forward-looking statement. Statements contained in this Announcement regarding past trends or activities should not be taken as a representation that such trends or activities will continue in the future.

About CentralNic Group plc

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

PLACING STATISTICS⁽¹⁾

Number of Existing Ordinary Shares in issue immediately prior to Admission	96,492,348
Number of Consideration Shares to be issued pursuant to the Acquisition(2)	28,006,607
Number of Placing Shares being issued pursuant to the Placing	46,153,847
Number of Ordinary Shares in issue on Admission	170,652,802
Percentage of the Enlarged Share Capital being issued pursuant to the Acquisition	43.5 per cent.
Percentage of the Enlarged Share Capital being placed pursuant to the Placing	27.0 per cent.
Market capitalisation on Admission (approximately)(3)	£88.7 million
Placing Price	52 pence
Estimated gross proceeds from the Placing of the Placing Shares	£24 million
Estimated net proceeds from the Placing of the Placing Shares receivable by the Company	£20.5 million
Estimated expenses	£3.5 million
AIM 'ticker'	CNIC
ISIN number	GB00BCCW4X83

Notes

(1)     The placing statistics above assume that no other Ordinary Shares are issued, save for the Placing Shares and the Consideration Shares

(2)     The initial Consideration Shares are the Consideration Shares issued on Completion of the Acquisition and do not include any Additional Consideration Shares

(3)     Market capitalisation calculated on the basis of the Placing Price

EXPECTED TIMETABLE OF PRINCIPAL EVENTS

Publication and posting of the Admission Document, and posting of Form or Proxy	16 July 2018
Trading of Existing Ordinary Shares recommences	16 July 2018
Latest time and date for receipt of Forms of Proxy	10.00 a.m. on 30 July 2018
General Meeting	10.00 a.m. on 1 August 2018
Expected completion of the Acquisition	2 August 2018
Admission and dealings in the Placing Shares and Consideration Shares to commence on AIM	8.00 a.m. on 2 August 2018
CREST stock accounts expected to be credited for Placing Shares (where applicable)	2 August 2018
Dispatch of definitive share certificates (where applicable)	9 August 2018

References to time are to London time unless otherwise stated. Each of the dates in the above timetable is indicative only and is subject to change without further notice 

LETTER FROM THE CHAIRMAN

CentralNic Group Plc

(incorporated in England and Wales with registered number 08576358)

Registered Office:

35 - 39 Moorgate
London
EC2R 6AR

Directors:                                                                                                                                                                                     

Mike Turner (Non-Executive Chairman)                                                                                                                         

Benjamin Crawford (Chief Executive Officer)                                                                                                                

Don Baladasan (Chief Financial Officer)                                                                                                                          

Iain McDonald (Non-Executive Director)
Samuel Dayani (Non-Executive Director)
Thomas Rickert (Non-Executive Director)
Thomas Pridmore (Non-Executive Director)

To the holders of Existing Ordinary Shares and, for information purposes, to the holders of Options: Dear Shareholders,

Proposed Placing of 46,153,847 Ordinary Shares at 52 pence per Ordinary Share,
Proposed acquisition of KeyDrive,
Proposed Admission of the Enlarged Share Capital to trading on AIM and
Notice of General Meeting

1. Introduction

CentralNic has today announced that it has entered into a conditional agreement to acquire the entire share capital of KeyDrive S.A. and its subsidiaries ("KeyDrive" or the "KeyDrive Group") for an initial consideration of $35.8 million, representing an enterprise value of $44.5 million. The initial consideration comprises $16.5 million in cash and the issue of 28,006,607 Consideration Shares, valued at $19.3 million at the Placing Price. In addition, CentralNic may pay a performance-based earn-out of up to $10.5 million, a minimum of 15 per cent. of which shall be settled in cash and up to 85 per cent. of which may be settled by the issue of Additional Consideration Shares ("the Acquisition").

The Consideration Shares will be issued to Inter.Services, the principal shareholder of KeyDrive, the largest shareholder of which is Alex Siffrin, the founder and Chief Executive Officer of the KeyDrive Group. Following the Acquisition (and prior to the payment of any earn-out consideration), Inter.Services will have an interest of 28,006,607 Ordinary Shares representing 16.4 per cent. of the Enlarged Share Capital. The initial cash consideration of $16.5 million will be paid to the minority shareholders of the KeyDrive Group. In addition Alex Siffrin will join the Operating Board as Group Chief Operating Officer on completion of the Acquisition. It is anticipated that Alex Siffrin may join the Board in due course, though there has been no agreement with Alex to this effect at the date of the Admission Document.

In order to fund the cash payments required to effect the Acquisition, which include the purchase for cash of shares in KeyDrive owned by minority shareholders, and to repay debt-like items within the KeyDrive Group, the Company is proposing to raise £24 million by way of the Placing and to put in place additional debt facilities of £6 million. On completion of the Acquisition, the Enlarged Group will have a total drawn debt of £13 million under its facilities.

KeyDrive is a global technology business headquartered in Luxembourg, operating in the domain name services industry. KeyDrive develops and operates software platforms used for selling subscription-based tools for businesses to operate online including domain names, hosting, email, domain portfolio management and online advertising services.

Through its internally developed and managed software platforms, as at 31 March 2018, KeyDrive manages c.5.9 million domain names from c.870 domain name registries, supplied to c.1,400 resellers in 95 countries and over 44,000 end users in over c.200 countries worldwide.

KeyDrive generated revenues of $58.26 million and adjusted EBITDA of $5.87 million in FY17. KeyDrive generated 94 per cent. of its FY17 revenue from recurring sources and 76 per cent. of its revenues from existing customers renewing their contracts. Historical financial information on KeyDrive for the financial years ended 31 December 2015, 2016 and 2017 is presented in Section C of Part III of the Admission Document.

The Directors believe there is a compelling strategic rationale for the Acquisition. KeyDrive's technology platforms and customer bases complement CentralNic's such that the Enlarged Group will own and operate high quality software platforms for each major customer type for domains and web presence services. Additionally, there is direct duplication of activities within CentralNic and KeyDrive in some areas, creating opportunities for cost synergies. In the medium term, the Board expects to realise operational and revenue synergies from cost rationalisation, and the cross-selling of products and services to the respective existing customer bases of each business.

The initial enterprise value of $44.5 million represents a multiple of 7.58 times Adjusted EBITDA of the KeyDrive Group for the financial year ended 31 December 2017 (audited). The Acquisition would substantially increase CentralNic's scale and the proportion of its revenues derived from recurring sources. The Acquisition would also decrease CentralNic's reliance on earnings from premium domain trading and create a global technology platform to enable further acquisitions.

The Acquisition and Placing are conditional, inter alia, on their approval by CentralNic's shareholders at a General Meeting to be convened and held on 1 August 2018, and Admission taking place by no later than 30 September 2018.

CentralNic is seeking approval at the General Meeting to make the Acquisition, to grant the Directors authority to allot Ordinary Shares up to an aggregate nominal amount of £42,160.46 in connection with the issue of 28,006,607 Consideration Shares and 46,153,847 Placing Shares (which are to be issued at a price of 52 pence per share, representing a discount of 10.3 per cent. to the closing price of 58 pence on 13 March 2018, the last business day before trading in the shares was suspended pending an announcement regarding the proposed Acquisition) (such authority to be used in conjunction with the Annual General Meeting Authorities) and up to 12,943,787 Additional Consideration Shares; and to disapply pre-emption rights up to an aggregate nominal amount of £36,553.85 in respect of the Placing Shares (such authority to be used in conjunction with the Annual General Meeting Authorities). The Company is also seeking the approval of Shareholders for two new share plans, the CentralNic Group plc Long Term Incentive Plan ("LTIP") and the CentralNic Group plc Share Option Plan ("SOP"), the principal features of which are summarised in paragraphs 8.5 and 8.6 respectively of Part IV of the Admission Document and set out in Appendix I and Appendix II respectively of the notice of General Meeting set out in Part V of the Admission Document. As the Annual General Meeting Authorities are being utilised in connection with the issue of the Consideration Shares and the Placing Shares (in conjunction with the authorities sought under the Transaction Resolutions), the Company is seeking authority to allot new shares in the Company up to an aggregate nominal value of £56,884.27 (equivalent to 56,884,270 Ordinary Shares, which is approximately equal to thirty three per cent. of the issued share capital of the Company immediately following Admission).

The Company has received irrevocable undertakings from Shareholders to vote in favour of the General Meeting Resolutions in respect of a total of 31,017,273 Ordinary Shares, representing 32.14 per cent. of the Existing Ordinary Shares. The Company has also received a binding commitment from Kestrel Partners LLP to vote in favour of the Transaction Resolutions in respect of a total of 18,086,593 Ordinary Shares representing 18.7 per cent. of the Existing Ordinary Shares.

The Acquisition, if completed, is of sufficient size to constitute a reverse takeover under the AIM Rules. Accordingly, it is subject to the publication of the Admission Document and conditional upon the passing of the Resolutions by Shareholders to approve the Acquisition. The Acquisition is expected to complete on 2 August 2018, and the Admission is expected to occur at 8.00 a.m. on 2 August 2018.

2.      Background to and Rationale for the Acquisition

The Directors believe the Enlarged Group will represent a domain end users services business of substantial scale which is highly cash generative, based on a recurring revenue model, and has themanagement and organisational structure to take advantage of significant opportunities for growth. The Directors believe that there is a strong strategic rationale for the Acquisition.

CentralNic has an established position in the global domain name and web presence services industry. Principally, it operates software platforms serving end users (such as small businesses and website design companies) and domain name registries (the rights holders to Top-Level Domain names such as .xyz, .online, .sk and .la).

Since Admission to AIM in September 2013, the Directors believe that CentralNic has become a leading "registry service provider" for new Top-Level Domain names. Today, CentralNic is ranked as the number two registry service provider globally by volume for new Top-Level Domains and the number five registry service provider globally based on total number of Domain Registries supported. Despite the strong market position, this activity now represents less than 10 per cent. of CentralNic's total revenue, as CentralNic has expanded into other domain related businesses. Today the majority of its activities are in the area of retailing domain names to end users.

As part of its expansion, CentralNic has successfully executed an acquisition strategy, targeting companies with strong existing customer bases and recurring revenues, focusing on selling established products such as .com and country code domains, particularly with exposure to high growth emerging markets. CentralNic has completed three significant acquisitions since admission to AIM in September 2013, Internet.BS in the Bahamas, Instra Group in Australia, and New Zealand and SK.NIC, the manager of the exclusive country code top-level domain for Slovakia, .sk.

The acquisition of KeyDrive represents a continuation of this acquisition strategy but represents CentralNic's most transformational deal to date. It allows CentralNic to add significant scale and new market leading technology platforms serving two additional important markets: domain resellers and large corporations, as well as creating opportunities for savings by eliminating duplication in costs. The Enlarged Group will also serve as a robust foundation for future growth, able to leverage a suite of software and services, a large and experienced management team and significant staff resources around the world.

KeyDrive's reseller platform operations are highly complementary to CentralNic. RRPproxy is a supplier of domain names to established registrars in mature and emerging markets. In addition, KeyDrive has a presence in corporate domain name management, through its BrandShelter business and associated ThomsenTrampedach GmbH (26.5 per cent. owned) business. Corporate domain name management represents an attractive segment of the market as corporates look to protect against cyber-crime and maintain domain portfolios to protect their brands around the world.

The Directors believe the Acquisition will also give the Enlarged Group an improved market position in its existing markets. The Directors believe the Enlarged Group would rank as the 11th largest domain name registrars by gTLD volume globally and be among the top five Registry Service Providers globally by number of registry clients. The Enlarged Group will also have the opportunity to upsell services including shared hosting, SSL Certificates, email, online brand protection and online advertising to its enlarged customer base.

Further detail on the strategy of the Enlarged Group and potential synergies that could be realised as a result of the Acquisition is set out in paragraph 6 of this Part I.

CentralNic and KeyDrive entered into a strategic alliance in 2017, each outsourcing to the other tasks where the other company had a stronger operation and superior technology. This work was done on the basis that each company carried its own costs, and with no cross-company billing in 2017. As part of this process, the companies have developed joint working groups and made substantial progress in collaboration, allowing post-acquisition integration plans to be designed based on actual experience of working together.

3. Information on KeyDrive

Since its foundation in 2000, KeyDrive has emerged as one of the leading European companies for the distribution and management of domain names. Its reseller, corporate and retail platforms administer in excess of 5.9 million domains for more than 1,400 resellers plus c.44,000 direct end-user and corporate customers in more than 200 countries. KeyDrive currently has over 110 employees and is headquartered in Luxembourg-city, Luxembourg, with the majority of staff located at St. Ingbert, Germany. The largest division of KeyDrive by revenues is its reseller platforms, which supply retailers globally with domain names for resale. KeyDrive's reseller platform makes the long tail of domain name inventory available to retailers by sourcing domain names from hundreds of suppliers then reselling them through a single channel. The Directors believe KeyDrive is a top global provider in domain name reseller platforms and has a wide range of customers including some of the key global internet players. KeyDrive has also developed and manages a platform providing corporate services, including domain name portfolio management, to enterprise clients including blue chip players in the automotive and consumer products sectors. KeyDrive's other main business activities include a registry services platform, website hosting and online advertising services.

For FY17, KeyDrive generated revenues of $58.26 million and adjusted EBITDA of $5.87 million.

Revenue Model

All services offered by KeyDrive (like the core services operated by CentralNic) are on a time-limited basis, requiring customers to pay renewal fees to retain the services at the end of each term. For example, domain name registrations, which represent 95 per cent. of KeyDrive's reseller platform revenues, are not outright sales where title passes to a buyer. Rather they are contracts that allow the buyer use of the domain name for one or more years with an option to renew that registration in subsequent periods.

The KeyDrive businesses also exhibit excellent cash conversion rates, as domain name registration and renewal fees are paid at the beginning of the one-or-more year subscription period.

While the various business units of KeyDrive generate different levels of gross margin, within those business units, margins are relatively stable, as continuous improvements in automation and economies of scale reduce costs in parallel to downward pressure on pricing.

History

The KeyDrive group of companies has grown both organically, through the in-house development and management of software platforms, and through the acquisition of a number of businesses, under the continuous management of the Chief Executive Officer and largest shareholder of Inter.Services, Alex Siffrin. Inter.Services will, on Admission, be a significant shareholder in the Company (as a result of the issue of Consideration Shares to Inter.Services) with an interest of 16.4 per cent. in the share capital of CentralNic. Alex Siffrin will join the Operating Board of the Enlarged Group as Group Chief Operating Officer.

KeyDrive was founded in 2000 by Alex Siffrin in Friedrichsthal, Germany with the launch of the Germany-focused retail website DomainDiscount24, selling domain names to German businesses on a subscription basis. The global reseller platform RRPproxy was launched by KeyDrive a year later in 2001, selling domain names to retailers globally on a subscription basis. RRPproxy allows retailers to obtain domains from many registry suppliers using different technologies and based in different countries through a single wholesale channel, vastly simplifying the supply chain. This reseller platform grew significantly in scale and as at 31 December 2017 represented c.53 per cent. of KeyDrive's revenues. In addition to RRPproxy, KeyDrive operates PartnerGate, a similar business focused on German-speaking markets, and Toweb, a leading wholesaler of .br domain names outside of its native Brazil. In aggregate, KeyDrive's reseller platform business ranks among the top in the world in terms of volume, with reseller clients notably including some of the world's largest technology companies and domain retailers.

KeyDrive's corporate platform, BrandShelter, a portal for domain administration and online brand protection, was launched in 2009, as a technology-led European challenger in the corporate registrar industry, which is dominated by two US-based companies. As more enterprises around the world grow internationally and globalise, the need for them to acquire domain portfolios to protect their brands in different countries increases. A highly technically advanced, international supplier like BrandShelter is increasingly attractive to these global, cost conscious businesses.

In April 2017, KeyDrive acquired European Domain Centre and merged this business into BrandShelter.

KeyDrive launched the data centre business SKYWAY in 2010, as its initial entry into the hosting market, a recurring revenue business. Hosting is an important upsell service, with hosting revenues contributing the majority of the revenue from web services of many of the largest companies in the industry, including United Internet, GoDaddy and OVH. KSRegistry, KeyDrive's registry services platform and a direct competitor to CentralNic's original business, was launched in 2012. It is now the registry service provider for 14 gTLDs and 3 ccTLDs, with particular strength in the "DotBrand" area - companies obtaining their own brands as new TLDs. In 2017 KSRegistry acquired OpenRegistry, another competitor in the space, from Group NCC. It has since merged OpenRegistry into KSRegistry and outsourced the technical fulfilment of 14 TLDs it managed to CentralNic in September 2017, which was one of the first commercial arrangements between the two companies. In 2012, KeyDrive acquired Moniker, a domain retailer based in the United States offering specialist services for domain investors including brokered domain aftermarket sales, escrow and appraisals services. Established in 2001 in the USA, Moniker has a substantial client base, with c.19,600 clients with c.514,000 domains. Moniker's US staff were made redundant, with the business now wholly managed from Germany.

KeyDrive Divisions

Today, KeyDrive operates the following divisions, each with a number of brands and products as set out below.

Reseller Platform

KeyDrive's reseller platform division streamlines and automates the domain name supply chain, earning subscription fees on a per domain basis. It does this by connecting registries that own domains to retailers, on a global scale. This activity represents c.69 per cent. of KeyDrive's revenues. KeyDrive operates three key reseller platform brands:

·       RRPproxy: A leading Europe-based domain reseller program and technology leader with c.3.0 million domain names from c.1,400 direct resellers;

·       Toweb Brasil: Leading not-in-country .br reseller to non-residents of Brazil with more than 88,500 .br domain names under management; and

·       PartnerGate GmbH: Reseller to primarily German-speaking countries with c.1.7 million domain names on its platform.

Corporate Platform

This division, represents c.7 per cent. of KeyDrive's revenues and, provides companies and brand owners with services aimed at managing and securing domain names as well as protecting companies from intellectual property abuse on the internet. It comprises one wholly owned and one partially owned company:

·       BrandShelter manages its corporate clients' domain portfolios and offers monitoring of trademark use on the internet by unauthorised persons and provides support for the corresponding countermeasures. BrandShelter also offers support for the realisation of company-owned ".BRAND" Top-Level Domains;

·       KeyDrive has a 26.5 per cent. shareholding in Thomsen Trampedach GmbH, which assists international brands on implementation of online brand promotion and protection strategies, including corporate domain name management, domain name recovery, brand anti-counterfeiting monitoring and enforcement.

Registry Platform

The KeyDrive registry platform represents 2 per cent. of KeyDrive Group revenues. It is a leader in registry backend services in the field of DotBrand top level domains in continental Europe. Together KeyDrive's registries are responsible for the backend of 31 top level domains:

·       KSRegistry GmbH located in St. Ingbert, Germany, was founded by the KeyDrive Group in 2012 in anticipation of the ICANN new gTLD programme;

·       OpenRegistry S.A. provides back-end technology solutions for registrars, such as new generic top-level domain names registration systems and DNS solutions; and

·       KeyDrive also owns the registry DotSaarland GmbH, the registry for .SAARLAND domain names. The .SAARLAND TLD is operated in the interest and with the participation of the Saarland people with the purpose of promoting the regional identity of the Saarland people.

Retail Platform

KeyDrive's retailer division sells domain names and web services, including hosting and email, direct to end users. KeyDrive operates two retail brands, representing c.19 per cent. of KeyDrive Group's total revenues:

·     Moniker.com, Inc.: Captive reseller for the US market with c.514,000 domain names from c.19,600 customers; and

·     DomainDiscount24: Captive reseller for the European market with c.431,000 domain names from c.24,600 customers.

Value-Added Services

SKYWAY DataCenter GmbH supplies worldwide companies and individuals with multi-purpose IT services from a modern Tier III datacenter. This activity represents c.1 per cent. of KeyDrive Group's revenues.

PTS GmbH together with its subsidiary Local Presence Services Ltd. offers professional privacy and trustee services for domains.

KeyDrive has a 66.7 per cent. holding in TrafficClub, an innovative online advertising platform in its early stages of development.

KeyDrive Strategy

KeyDrive's core strategy has been and will continue to be to expand its software platforms along the value chain of domain name services by:

·       continuing to provide, launch and cross sell adjacent and complementary services to existing clients;

·       expanding into new developed and developing geographies using existing services and brands to reach new clients; and

·       partnering with businesses that provide technological or service offerings that allow KeyDrive to reduce costs or add complementary services.

4. Information on CentralNic

CentralNic's primary business is operating its proprietary retail platforms selling domain names and associated web presence services including hosting and email on a subscription basis. The main customer segments it addresses include small businesses, small-cap corporations and internet professionals. As a retailer, CentralNic currently manages c.938,000 domain names and c.233,000 end-user customers.

CentralNic's retail business has customers globally with particular concentrations in the USA, the UK and emerging markets. The Company's retail business, which contributes the majority of its revenues through its 27 websites, has focused on selling legacy TLD's including .com and ccTLDs, which account for approximately 90 per cent. of all domain sales in the wider market. Its technical platforms support retail websites targeted at specific countries, with localisation features including local language, currency and pricing, products, preferred payment method, and customer service. This localisation capability has enabled CentralNic retailers to obtain market share in growth markets such as the UAE and Singapore despite having no physical presence in those territories.

CentralNic is also active in registry services, providing a registry platform and associated services (technology, compliance, distribution, marketing, billing and cash collection) for new Top-Level Domain registries and for country-code TLD registries. Over 6.150 million domains and 102 domain extensions are directly managed by CentralNic's software platform. CentralNic is a leading registry service provider for new Top-Level Domains, with six of the top twenty sellers (out of over 1,500 launched) using the CentralNic platform, and it ranks fifth in the world for number of TLDs supported. Since admission to AIM, CentralNic has been focused on growth by new customer acquisition, and has successfully won the registry platform contracts for 54 domains registries not contracted to it at the time of admission, including 14 registry contracts that were previously serviced by the OpenRegistry division of KeyDrive. These include country codes as well as new Top-Level Domains. CentralNic also operates a full stand-alone registry service in Slovakia, providing c.375,000 domains ending in .SK (the exclusive Slovak country-code) to c.2,600 local retailers. Lastly, CentralNic trades in valuable premium domain names. This is a high margin business which involves acquiring portfolios of premium domain names, and then selling those domain names to end user customers typically wishing to use them for websites and email. Following an acquisition of domain portfolios in January 2018 for £2.5 million, CentralNic's premium domain inventory consists of c.42,300 domain names. Trading in premium domain names is expected to contribute a decreasing proportion of CentralNic's revenues moving forward. As announced on 31 May 2018, in FY17, CentralNic reported revenues of £24.3 million, adjusted EBITDA of £6.6 million and profit before tax and exceptional items of £5.6 million. These results reflected a 10 per cent. year-on-year increase in revenues, and a 20 per cent. year-on-year increase in adjusted EBITDA over the year prior. Net debt at 31 December 2017 was £7.2 million. Since admission to AIM, CentralNic has strengthened its Board with the additions of Non-Executive Chairman Mike Turner, a prominent corporate lawyer, leading Taylor Wessing's Technology M&A practice across the UK and USA, and Non-Executive Director Iain McDonald, a successful technology investor and an experienced Non-Executive Director. At a management level, CEO Ben Crawford has been joined by Don Baladasan as CFO, who brings significant acquisition and integration experience in a listed environment, and Corporate Development Director Sarah Ryan, who previously headed mergers and acquisitions for Europe at Lexis-Nexis and Thomson Financial. CentralNic has also recruited Group Commercial Director Stuart Fuller and Group Marketing Director Andy Churley, both formerly of Group NBT/NetNames.

Key Corporate Activity Since Flotation

Since admission to AIM, CentralNic has made three significant acquisitions, as detailed below:

Internet.bs (June 2014)

CentralNic acquired the business and assets of Internet.bs for £2.9 million in cash plus £1.5 million in shares, providing CentralNic with a profitable retail business specialising in selling the most popular domains to domain investors and internet professionals globally, which CentralNic has since developed.

Instra Group (January 2016)

CentralNic acquired the entire share capital of Instra Group for £16.8 million in cash and £1.9 million in shares, extending the Company's retail offerings to include all new TLDs and most ccTLDs as well as hosting services, and extending its customer base to include more small businesses and small cap corporations globally and increasing CentralNic's exposure to the Asia-Pacific region.

SK.NIC (December 2017)

CentralNic acquired the entire share capital of SK.NIC, the manager of the exclusive country-code for Slovakia, .sk, for £19 million in cash at completion plus deferred payments of a maximum of £4.3 million. This resulted in CentralNic becoming the owner of the rights holder to the exclusive official country-code domain name for Slovakia, .sk, and access to an additional 2,600 retail registrars in Slovakia. This business provides a substantial embedded customer base in Slovakia, with significant growth potential to be achieved through combining the strongest domain product in the growing Slovak market with CentralNic's specialist technical and sales and marketing expertise.

CentralNic Strategy

The Directors intend to continue to grow CentralNic both organically and through further acquisitions and the key elements of this strategy are as follows:

l        remain focused on the domain and web services industry;

introduce new products and services to its customers;

·        focus on new customer acquisition;

·        leverage its customer base to upsell and cross-sell additional products and solutions; and

·        continue to make earnings enhancing acquisitions to achieve further economies of scale and growth of the Group's global footprint.

5.      The Enlarged Group's Market

The domain name and web presence services industry supplies the tools for businesses to get online including domain names, websites, shared hosting, email, security and protection services.

The growth of the industry is driven primarily by the global adoption of the internet. As consumers get online, businesses' need for their own websites, email, and ecommerce capabilities to communicate with and service customers increases. There are currently c.4 billion internet users worldwide¹, with the focus now on the next generation of global internet users. This focus is reflected in Goal 9c of the new Sustainable Development Goals adopted by the United Nations, which is to "provide universal and affordable access to the internet in least developed countries by 2020".

CentralNic's and KeyDrive's current businesses are predominantly active in the domain name sector, where the size of the global retail domain name market is estimated by the Directors to be worth between $3 billion to $4 billion. The Enlarged Group's exposure to the allied markets, including shared hosting, website building, SSL certificates, email and digital marketing, is currently very small, representing a considerable opportunity for future expansion through cross-selling of these services.

The total number of domain names registered globally as at the end of Q1 2018 is c.333.8 million, including c.167.3 million (50 per cent.) using traditional gTLDs (such as .com, .net, .org), c.146.3 million (44 per cent.) using country-code TLDs (such as .cn, .de, .co.uk), and 20.2 million (6 per cent.) using new TLDs (such as .xyz, .online, .site). The cumulative average growth rate for domain name registration from 2012 to 2017 was 7 per cent. Pricing of domain names is extremely heterogeneous. The wholesale prices vary from under $1 to many hundreds of dollars for standard domains in the primary market. Premium domain names can sell for hundreds to millions of dollars each.²

The table below shows the number of domains that CentralNic and KeyDrive hold under management on their retail and reseller platforms as at December 2017.

Registrar Brand	Domains (m)	Market Share (%)
CentralNic Retail	1.0	0.3
CentralNic Reseller	0.3	0.1
KeyDrive Retail	1.0	0.3
KeyDrive Reseller	4.8	1.5
Total	7.1	2.2

The table below ranks registrars by number of gTLD domains under management as accurate figures are not available for the majority of ccTLDs. The market is heavily skewed to the largest registrar, GoDaddy, which reports having 72 million domains under management (gTLDs and ccTLDs).

¹ Source: Global Digital Report 2018 compiled by We are social Ltd.

² Source: Domain Name Industry Brief by Verisign, Inc (June 2018).

Top Registrars of gTLDs

				No. of gTLD
			Market	domains	Market
Rank	Registrar/Registrar Group	Symbol	Capitalisation	(milions)	Share
1	GoDaddy	NYSE:GDDY	$12.4 bn	62.2	32.3%
2	Tucows	NASDAQ:TCX	$0.7 bn	21.1	10.9%
3	Alibaba	NYSE:BABA	$522 bn	12.2	6.4%
4	Endurance International Group NASDAQ: EIGI		$1.4 bn	11.1	5.8%
5	Web.com	NASDAQ:WEB	$1.2 bn	10.3	5.4%
6	United Internet	ETR:UTDI	$13.9 bn	8.1	4.2%
7	Turncommerce	Private	-	4.8	2.5%
8	GMO	TYO:9449	$2.8 bn	4.8	2.5%
9	Namecheap	Private		4.5	2.3%
10	Chengdu West	Private		4.5	2.3%
11	CentralNic	AIM: CNIC	£0.06 bn	3.2	1.7%

Source: Company research based on third party data. Market Capitlisation as at 15 June 2018.

As a provider of distribution services to TLD registries, CentralNic's Registry Services division supports c.6.15 million domains, representing 1.8 per cent. of all domains registered globally. This ranking is also heavily skewed, with the market leader Verisign commanding c.50 per cent. market share based on domains under management, reflecting the market dominance of .com. The table below shows the top five registry providers when ranked by the number of individual registries they support, as a measure of their ability to win and retain clients. The Enlarged Group will provide registry backend services to a total of 119 TLDs, ranking it number five globally for number of TLDs supported.

Top Five Registry Service Providers
Market			No. of	Market
Rank	Registrar/Registrar Group	Capitalisation	Registries	Share
1	Neustar	Taken private in 2017 for $2.9 bn	275	17.4%
2	Rightside	Taken private in 2017 for $0.2 bn	240	15.2%
3	Afilias	Private	211	13.4%
4	Verisign	$17.3 bn	165	10.5%
5	CentralNic	£0.06 bn	118	7.5%

Source: Company research based on third party data

KeyDrive is a small-scale competitor to CentralNic in this area (ranked 13th globally on a standalone basis), so the Enlarged Group will not support a significantly greater volume of domains than CentralNic does currently. However, both companies operate "DotBrand" services for enterprises, which enable large companies to operate their own new Top-Level Domain names - an important newly launched category of online intellectual property. The Enlarged Group will be one of the largest Registry Service Providers for DotBrands outside of the USA and Japan, combining existing CentralNic clients such as Saudi Telecom, Etisalat, Kuwait Finance House and William Morris Endeavour, with KeyDrive clients including leading Germany-based global companies.

The web services industry is significantly larger than the domain sector and is estimated by the Directors to make between $22 billion to $30 billion in annual revenues. Companies such as GoDaddy in the USA, United Internet in Germany, and OVH in France have gained significant scale through selling additional services to domain name customers.

While domain name subscription sales currently represent the largest revenue contributor to CentralNic and KeyDrive, the Enlarged Group will have exposure to shared hosting, website builder, SSL Certification, online advertising and other related "upsell" subscription services.

Enlarged Group's Strategy, Synergies and Post-Acquisition Plan

Enlarged Group's Strategy

The Enlarged Group's core areas of strategic focus will be:

·       realising cost synergies through the integration of back-end registry platforms to CentralNic's platform and the migration of CentralNic's wholesale and retail registrar platforms to KeyDrive's RRPproxy platform;

·       initiating cross-selling opportunities of both CentralNic's and KeyDrive's existing customers and distribution channels;

·       implementing an effective business integration of shared corporate services; and

·       leveraging its platform by identifying selective value-accretive acquisitions.

Synergies

A key part of the integration plan is to build on the due diligence already undertaken and continue to identify and quantify potential synergies that could be generated from the combination of the two businesses, and to develop a detailed plan to deliver the benefits of these.

A single reseller platform supporting all in-house retailers

RRPproxy is a leading Europe-based global domain retail platform - with 3.0 m domain names from 1,400 resellers - offering almost all domains through a single API. CentralNic will migrate its registrars to the RRPproxy platform, providing technical upgrades and cost synergies. RRPproxy will become the core of the Enlarged Group's retail platform.

http://www.rns-pdf.londonstockexchange.com/rns/7039U_1-2018-7-15.pdf

A single registry platform supporting al TLD clients

KeyDrive's registry divisions will be migrated and merged onto CentralNic's market leading registry technology platform:

http://www.rns-pdf.londonstockexchange.com/rns/7039U_2-2018-7-15.pdf

Revenue Synergies

The Company has identified a number of potential revenue synergies including the following:

·       CentralNic is accredited to sell a number of country codes from the Asia-Pacific region not historically sold by KeyDrive. These can be offered by the combined group to KeyDrive's reseller and end user customers, including corporations;

·       over recent years CentralNic has established an enterprise-focused business development team including the former heads of sales and marketing from Group NBT/NetNames. The merger will enable those sales resources to offer potential clients the full services suite of BrandShelter, a corporate registrar platform offering a range of services not formerly available from CentralNic, with significant global customers;

·       CentralNic's Registry services division, which distributes domains to retailers globally, supplies many more retailers than the KeyDrive companies that compete with it. Merging the CentralNic and KeyDrive Registry services businesses will not only save costs, but will also immediately expose KeyDrive's registry customers to a wider base of potential retailers that could sell their domain; and

·       KeyDrive's corporate and value-added services can be sold to CentralNic's existing customers.

Post-Acquisition Plan

CentralNic has a detailed plan to maximise the successful integration of the Acquisition, as it aims to be the "GoDaddy of Emerging Markets". A new management structure has been developed, with all operations and technical staff from both companies reporting up to the new Group Chief Operating Officer Alex Siffrin (formerly Chief Executive Officer of KeyDrive), and all sales and marketing staff from both companies reporting up to CentralNic's heads of Sales and Marketing. In addition to the projects already underway since 2017, initial planning meetings for all integration projects have already taken place, facilitated by an external change management consultancy.

The Directors anticipate that the integration process will be ongoing for 18 to 24 months post completion of the Acquisition. Plans have started to achieve key integration milestones within three months of the acquisition as part of a 100 day plan, with initial costs in year one followed by recurring savings.

Following the Acquisition, the Enlarged Group will have personnel in the following locations, allowing it to market and cross sell its services across the world.

http://www.rns-pdf.londonstockexchange.com/rns/7039U_3-2018-7-15.pdf

6.      Integration Plan and Systems and Controls of the Enlarged Group
Group Integration Programme Structure

A change management programme has already been initiated with key personnel from CentralNic and KeyDrive collaborating in working groups.

The integration has been formalised by the formation of the Integration Steering Committee which is responsible for overseeing successful delivery of the integration plan.

The Integration Steering Committee (ISC) is chaired by Don Baladasan with other members being Alex Siffrin, Michael Riedl and Stuart Fuller, supported by an overall programme manager. Individual project managers report to the programme manager, and are responsible for integration in the following areas: technical, sales, marketing, finance and human resources, and governance and compliance.

Integration Plan

The 100-day plan forms the first phase of the integration programme and is divided into the functional business areas. Key items included in the plan, by business area, are:

·       HR & Staff Communications

o   Roll out of the combined operational and management structure

o   Programme of staff communications

o   Welcome event(s) and individual staff meetings

o   Harmonisation of employee benefits

o   Alignment of policies for pay and performance, training and development, recruitment etc

o   Review and revision of other local staff policies

·       Legal and Compliance

o   Rollout of Group policies and training for sanctions, anti-bribery and corruption, anti-money laundering, whistle-blowing, MAR (inter alia)

o   Rationalisation of legal entity structure

·       Finance

o   Implement new financial reporting procedures and delegated authorities

o   Review and revise Group reporting pack

o   Migrate CentralNic to KeyDrive data warehouse and management information systems

o   Review finance systems

o   Consolidation of enlarged Group insurances

o   Review and revise transfer pricing, management fees and tax structures

o   Implement FX strategy

·       Operations and Technical

o   Rollout Group communication and collaboration tools

o   Rollout CentralNic's client relationship management system to KeyDrive

o   Rollout CentralNic's automated marketing tools to KeyDrive

o   Implementation of new sales and marketing strategies for combined product set

o   Cross-training of sales, operations and technical staff on combined product set

Integration Work Already Underway

In addition to the above, a number of integration initiatives have already commenced following CentralNic and KeyDrive entering into a strategic alliance in October 2017:

·       Working groups established covering sales and marketing, operations, technical, human resources, finance and legal and compliance

·       Migration of KeyDrive to CentralNic's registry platform

·       Migration to KeyDrive's reseller platform

·       Cross-training of sales teams on combined product set

·       Evaluation of operational tools and processes

Systems and Controls

The Board of CentralNic places governance and controls at the centre of its strategy. CentralNic has a dedicated Compliance Committee that meets monthly. The remit of the Compliance Committee is to ensure that all governance policies are administered, reviewed and complied with across the CentralNic Group. Don Baladasan chairs this committee and provides a conduit between the Board and the Compliance Committee. This ensures timely decisions and challenges are communicated to the Board. In addition, a formal summary report relating to the Compliance Committee is reported at Board meetings.

CentralNic uses formalised frameworks and directives including the QCA Code, GDPR, MAR, ICANN, ISO standards and AIM regulations to help build and maintain a compliant governance structure. In addition, CentralNic takes a multi-disciplinary approach to governance and the Compliance Committee has representation from the sales, marketing, technology, operations, legal and finance departments. In order to achieve a compliant and robust governance structure, governance at CentralNic is embedded in its policies and procedures. CentralNic views governance not only as a compliance driven requirement but also as an opportunity to gain commercial sustainability and advantage by placing all stakeholders at the centre of governance policy and implementation.

Financial Systems and Reporting

CentralNic has reviewed the month end reporting processes within KeyDrive and has started the process to integrate these reporting processes into the timetable and existing processes at CentralNic. Management reporting within the Enlarged Group will be enhanced by extending the KeyDrive data warehouse to cover the CentralNic data. The migration of portions of CentralNic data to this warehouse has already started. The use of this data warehouse by the Enlarged Group will improve the reporting capability of the Enlarged Group.

A number of accounting systems within CentralNic and KeyDrive are currently in use including Sage, Xero, Omega, and Datev, and consolidations are prepared as part of the month-end accounting process. A post-acquisition review of all ledger and consolidation systems will be undertaken to identify any efficiencies and improvements in this area.

The Group monthly reporting pack and timetable will be revised to incorporate the KeyDrive business and implemented to gather all of the information relating to all members of the Group in a consistent and thorough manner. This information will be both statutory and commercial in nature. It will also seek to ensure that internal controls are being effectively implemented within the KeyDrive Group, such as key balance sheet reconciliations, and that material items are approved by the Group CEO and/or CFO prior to being committed.

Immediately following the acquisition of KeyDrive the finance functions will continue to operate in their existing structure, and a review will be undertaken within the first 3 months to determine the optimal future operating structure.

7. Financial Information

Audited historical financial information on CentralNic for the three years ended 31 December 2017 is incorporated by reference into Section A of Part III as set out in paragraph 20 of Part IV of the Admission Document. Section C of Part III of the Admission Document contains audited historical financial information on KeyDrive for the three years ended 31 December 2017. Audited historical information on SK.NIC for the three years ended 31 December 2017 is contained in Section E of Part III of the Admission Document.

The following summary financial information on KeyDrive, CentralNic and SK.NIC has been derived from the financial information contained in Section C of Part III of the Admission Document (in the case of KeyDrive) from the financial information incorporated by reference into Section A of Part III of the Admission Document (in the case of CentralNic) and from the financial information contained in Section E of Part III of the Admission Document (in the case of SK.NIC). The following summary financial information should be read in conjunction with the full text of the Admission Document and with the financial information incorporated by reference into Section A of Part III, as set out in paragraph 20 of Part IV of the Admission Document.

Investors should not rely solely on this summarised financial information.
Summary Financial Information on KeyDrive

	Year ended	Year ended	Year ended
$'000 (except percentage figures)	31 December 2015	31 December 2016	31 December 2017
Revenue	53,840	54,473	58,262
Gross Profit	7,587	8,609	9,000
Gross Profit Margin	14.10%	15.80%	15.44%
Operating Profit	2,554	3,994	4,328
Profit after tax	3,485	2,095	199
Adjusted EBITDA	3,847	5,487	5,873
Depreciation	(499)	(453)	(440)
Amortisation of intangible assets	(794)	(1,040)	(1,105)
Operating profit	2,554	3,994	4,328

Revenue has increased in the KeyDrive Group from $53.8 million in FY15 to $58.3 million in FY17 driven by organic growth in RRPproxy and BrandShelter, in addition to the acquisition of OpenRegistry in January 2017.

Gross margin has increased to 15.4 per cent. in FY17 (14.1 per cent. in FY15). This is primarily due to a higher share of less saturated and hence higher margin TLDs, such as .io.

The growth in FY17 revenue from FY16 is due to the OpenRegistry acquisition (contributing $838k revenue) and revenue increases in Toweb Lux and Partner Gate.

Although employee numbers remained stable across the three years ended 31 December 2017, staff costs (primarily within Key Systems and mostly Euro denominated) had an adverse effect on EBITDA in FY17 due to the strengthening of the Euro against the US Dollar.

Summary financial information on SK.NIC
£'000 (except percentage figures)	31 December 2015	31 December 2016	31 December 2017
Revenue	2,916	3,397	3,207
Gross Profit	2,592	3,010	2,106
Gross Profit Margin	88.9%	88.6%	65.6%
Adjusted EBITDA	2,429	2,839	1,942
Depreciation	(7)	(12)	(15)
Operating profit	2,418	2,823	1,917
Operating Profit	2,418	2,823	1,917
Profit after tax	1,851	2,163	1,508

SK.NIC has seen increasing registration volumes over the three years ended 31 December 2017, during which period has seen revenue increase from £2.9 million to £3.2 million.

The increased registrations have also been converted into increased renewal volumes with over 300,000 renewals in FY17. The percentage of customers renewing has increased to over 86.3 per cent. in FY17 (85.4 per cent. FY16).

One reason for the increase of registrations and renewal volumes in FY17, is the reduction in pricing of SK.NIC domains. SK.NIC management took the decision to reduce pricing to align more closely with the pricing of .com domains, and this was approved by the policy committee, representing the Company, the Government of Slovakia, the domain industry and the local internet community. Given their recent experience, the Directors believe the current pricing model provides for sustainable growth.

Gross profit decreased in FY17 to £2.1 million (£3.0 million FY16) with the gross profit margin decreasing to 65.6 per cent. (85.6 per cent. FY16). This was partly due to planned price reductions and other certain one-off mitigation and system upgrade costs. In the first 4 months of the current financial year margins have increased back to in excess of 80 per cent. and the SK.NIC business has traded in-line with the Directors expectations.

 

Summary financial information on CentralNic

	Year ended	Year ended	Year ended
£'000 (except percentage figures)	31 December 2015	31 December 2016	31 December 2017
Revenue	10,393	22,129	24,348
Gross Profit	4,860	7,667	9,794
Gross Profit Margin	46.76%	34.65%	40.23%
Adjusted EBITDA	3,254	5,483	6,607
Depreciation	(71)	(125)	(100)
Operating profit	1,459	1,409	1,022
Operating Profit	1,459	1,409	1,888
Profit after tax	906	955	1,022

Revenue has grown over the three years from £10.4 million in FY15 to £24.3 million in FY17. This growth has primarily occurred as the result of the acquisition of Instra on 14 January 2016, which contributed £10.4 million of revenue in FY16 and £11.1 million in FY17. In December 2016 the sale of premium domain names generated in excess of £3.5 million of revenue. In November 2017, the Group generated £3.0 million of revenue from the sale of various SLDs.

Gross margin has decreased from 47 per cent. in FY15 to 40 per cent. in FY17, primarily as a result of the Instra acquisition which has diluted the overall Group margin. Instra's revenue stream comes from the retail segment, which generates approximately 20 per cent. to 25 per cent. gross margin, by contrast

 CentralNic's wholesale and enterprise gross margins are typically between 40 per cent. to 75 per cent Recurring revenue comprises subscription based domain names and ongoing contracts for set services. Over the review period the proportion of recurring revenue increased from 66 per cent. in FY15 to 85 per cent. in FY17.

8.      Principal Terms of the Acquisition

CentralNic has agreed, subject to a number of conditions, including the approval of the Acquisition by Shareholders at the General Meeting and subject to Admission, to acquire 100 per cent. of KeyDrive's share capital for an initial consideration of $35.8 million, representing an Enterprise Value of $44.5 million. At completion, KeyDrive is estimated to have approximately $8.7 million of net debt which the Company intends to discharge. The initial consideration is subject to adjustment following a completion accounts exercise. The initial consideration comprises $16.5 million in cash and the issue of 28,006,607 Consideration Shares valued at $19.3 million at the Placing Price. CentralNic has incorporated a wholly owned German subsidiary (Holdco) and both CentralNic and Holdco will acquire shares in KeyDrive as part of the Acquisition. In addition to the cash and Consideration Shares, if certain financial performance tests are met, CentralNic will pay Inter.Services a performance-based earn-out of up to $10.5 million, a minimum of 15 per cent. of which shall be settled in cash and up to 85 per cent. of which may be settled by the issue of Additional Consideration Shares, taking the total maximum enterprise value to $55.0 million. If the performance-based earn-out pays out less than $10.5 million in total, CentralNic will pay for certain tax losses within the KeyDrive Group on the same basis as the payment of the performance-based earn-out but only to the extent that such tax losses are used by the Enlarged Group and provided that the aggregate consideration for the earn-out and the tax losses does not exceed $10.5 million.

The Consideration Shares will be issued to Inter.Services, the largest shareholder of which is Alex Siffrin, the founder and CEO of the KeyDrive Group. Following the Acquisition (and prior to payment of any earn-out consideration), Inter.Services will have an interest in 28,006,607 Ordinary Shares representing 16.4 per cent. of the Enlarged Share Capital. The initial cash consideration of $16.5 million will be paid to the minority shareholders of the KeyDrive Group.

The Acquisition Agreement contains provisions to ensure Inter.Services is not capable of holding in excess of 25 per cent. of the issued share capital of the Company following the issue of Additional Consideration Shares.

The Acquisition Agreement contains certain warranties given by the shareholders of KeyDrive in relation to the KeyDrive Group, subject to certain limitations as to quantum. Claims under the warranties must be brought within two years of Completion. Please refer to paragraph 10.1 of Part IV of the Admission Document for further details about the Acquisition Agreement.

9.      Financial Impact of the Acquisition

CentralNic is financing the Acquisition and associated expenses through the Placing, raising gross proceeds of £24 million, its own cash resources and debt. SVB will be providing debt of c.£6 million, which is an extension of the current facilities entered in to for the SK.NIC acquisition (summarised in paragraph 10.7 of Part IV of the Admission Document). The Company estimates that the gross debt of the Enlarged Group following completion of the Acquisition will be c.£13 million.

Following the acquisition the Directors believe the Group will have improved quality of earnings due to a higher percentage of recurring revenue. Based on 2017 financial years for CentralNic, SK.NIC and KeyDrive, the Enlarged Group would have had a 91 per cent. recurring revenue profile. The existing CentralNic Group (comprising CentralNic and SK.NIC) currently has an 86 per cent. recurring revenue profile based on 2017 pro forma numbers.

The Company will incur advisers' fees, commission and expenses of c.£3.5 million in connection with the Acquisition, the Placing and Admission.

In addition, the Company has agreed with Jabella Group Limited ("Jabella") that shortly after Admission, Jabella will repay the loan of £772,000 outstanding to the Company. This would be funded by a sale of shares by Jabella to Kestrel Partners LLP at the Placing Price on the date of Admission. Further details of this agreement are set out in paragraph 10.12 of Part IV of the Admission Document.

10.    Current Trading and Future Prospects

CentralNic has traded in line with expectations for the first four months of 2018 with revenue of £6.5 million. Management are especially pleased with SK.NIC's performance as it has integrated well within the Group

32and is trading in line with expectations with revenue of c.£1.0 million for the first four months of the year. The gross profit margin for the first four months of 2018 in SK.NIC has increased to 85 per cent., compared to 66 per cent. in 2017. The reduction in 2017 was due to the inclusion of one-off infrastructure investment and price reductions.

In addition, Instra, an acquisition made in 2016, has shown year on year growth in both revenue and EBITDA with revenue for the first four months of 2018 of £3.2 million.

Gross profit margin across CentralNic remains in line with expectations for the first four months of the year at approximately 30 per cent. reflecting lower activity within the premium domain trading business during the first four months of the year.

CentralNic's net debt at 30 April 2018 was £10.6 million, which was slightly more than expected due to timing differences relating to deferred consideration payments to SK.NIC. Net operating cashflow for the first four months of the year is in line with expectations.

KeyDrive performance for the first four months has been in line with management expectations, achieving revenues of c.$21 million with margins being achieved in line with management expectations.

11. Directors and Senior Management

Directors

Mike Turner (Non-Executive Chairman, age 57)

Mike is a recognised leader in UK and cross-border technology mergers and acquisitions. He has over 30 years of experience working in London, New York and Los Angeles, advising private and publicly held clients on corporate transactions in technology, telecoms, advertising/marketing services, traditional/digital media, internet and e-commerce sectors. Mike is a Partner and Global Head of Technology Media and Communications at the international law firm Taylor Wessing, as well as holding a number of non-executive board positions with media and technology companies. Previously, Mike was a general partner responsible for technology investments at Oakfield Partners. Mike obtained an LLB at the University of Reading.

Ben Crawford (Chief Executive Officer, age 53)

Ben Crawford has been the CEO of CentralNic for nine years, over which time the Company built its global distribution platform, listed on AIM, became a leading distributor of new Top-Level Domains, and then commenced its roll-up strategy to build a retail business focused on emerging markets. Ben is a specialist in global business and corporate development - his former positions included Founding President of Louise Blouin Media, integrating 11 acquisitions in three countries and launching artinfo.com; Managing Director of SportBusiness Group and Executive Producer of the official website of the Sydney Olympic Games. Ben has an MBA from the Australian Graduate School of Management and a First Class Honours Degree from the University of Sydney.

Don Baladasan (Chief Financial Officer, age 44)

Don, a Chartered Management Accountant, has several years' experience of being Finance Director of AIM listed companies. Over the last five years he has assisted AIM listed businesses in raising several million pounds of equity in addition to overseeing a series of acquisitions including reverse takeovers. Don has several years' experience of integrating internationally acquired companies from a finance, governance and commercial perspective. This experience was gained at Stemcor, an international steel trader which at the time had operations in 46 countries and a turnover in excess of £6 billion, where Don was Head of Accounting Development. Don initially studied Medicine at Guys Hospital before completing a BSc in Economics at CASS Business School. He was then awarded a place on the Financial Times graduate scheme where he trained as a Chartered Management Accountant.

Iain McDonald (Non-Executive Director, age 47)

Iain is a global expert in technology and e-commerce, having had a track record in investing in early stage companies such as ASOS, The Hut Group, Eagle Eye Solutions, Anatwine and Metapack. He is the founder of Belerion Capital, an investor and investment advisor in technology and e-commerce companies. Iain is also a non-executive director of various of his investee companies, as well as other technology companies such as My Sale Group plc, The Hut Group and Boohoo.com. Previously, Iain was a retail and e-commerce analyst and held positions in a number of UK investment banks. Iain graduated from the London School of Economics and Political Science (LSE), with a BSc in Economics & Economics History.

Samuel Dayani (Non-Executive Director, age 40)

Samuel Dayani is a partner at the Joseph Samuel Group, where he is responsible for managing the Group's investments and business development in the Real Estate, Medtech, Energy & Renewables, Fashion and Technology & Telecoms sectors. Samuel was responsible for purchasing CentralNic in 2003 and managing the restructuring of the business, building the management team and delivering an institutional grade business for its listing in 2013. Previously Samuel was the Chief Operating Officer and later Managing Director of ViaVision Ltd, an interactive TV company on Sky, when it was sold to Yoomedia plc in 2004. Samuel graduated from Queen Mary College, University of London with a Bachelor of Science in Business and Biology in 2000.

Thomas Rickert (Non-Executive Director, age 48)

Thomas Rickert is an attorney-at-law in Germany. He is the owner of Rickert Rechtsanwaltsgesellschaft mbH, a law firm based in Bonn, Germany. Thomas has extensive experience in the domain industry working on domain disputes as well as advising registrars, Registry Service Providers and registry operators both on contractual as well as policy matters. Thomas is an expert speaker on domain related subjects both at the national and international level. Thomas served on the Council of the Generic Names Supporting Organisation (GNSO), which is the body responsible for developing policy for generic domain names, for 4 years (2011-2015). He is one of the co-chairs of the CCWG-ACCT, a group that works on improving ICANN's accountability.

Tom Pridmore (Non-Executive Director, age 46)

Tom Pridmore began his career as a solicitor at Norton Rose, specialising in investment funds and corporate finance, where he acted on behalf of institutional clients in relation to a variety of Fund management and commercial activities. Tom then joined Telewest Plc as Head of Corporate Strategy, where he was responsible for directing investment into strategic internet and interactive television companies. Since 2000, Tom has acted as a fund manager, founding a number of investment management platforms in the UK and internationally. In this capacity he has managed real estate investment and development operations across the EMEA region, on behalf of both institutional and private clients.

KeyDrive Senior Management

Alex Siffrin (Chief Executive Officer, age 41)

Alex Siffrin is CEO of KeyDrive S.A. He founded KeyDrive, in 2000, whilst still a student studying physics and computer science at the Saarland University, Germany. Originally KeyDrive was an extension of his academic research in computer science and now he has grown the company to offer a range of domain name and web services globally. Alex is responsible for the corporate and operational strategy of KeyDrive, and has overseen the organic and acquisitive growth of the company over nearly 20 years. On completion of the Acquisition, Alex will become Group Chief Operating Officer on the Operating Board of the Enlarged Group.

Michael Riedl (Executive Vice President and CFO, age 42)

Michael Riedl has been Executive Vice President and CFO of KeyDrive S.A. since August 2011, overseeing the growth of the company over the last 6 years. Prior to joining KeyDrive, Michael held managing positions in the private equity and ICT industries. He started his career with Roland Berger Strategy Consultants where he specialised in performance improvement programs. Michael was Chief Restructuring Officer at Group Saint-Paul in Luxembourg from 2004 to 2007 before joining DZ Equity Partners, the private equity firm, in Frankfurt in 2007. In 2008, Michael joined BIP Investment Partners where he worked on private equity opportunities with a focus on buyouts until 2011, when he joined KeyDrive. Michael holds a Bachelor's degree in Computer Science from James Madison University, USA, a Master of Science degree in Business Administration from European Business School, Germany, and a LLM from Frankfurt School of Finance and Management. He is also a Chartered Management Accountant. On completion of the Acquisition, Michael will continue as Chief Financial Officer of the KeyDrive business, reporting to the Chief Financial Officer of the Enlarged Group.

Volker Greimann (Chief Legal Officer and General Counsel, age 43)

Volker has been the Chief Legal Officer and General Counsel at Key-Systems GmbH (a member of KeyDrive S.A. Group) since July 2008. Current appointments include Non-Executive Director and Nominations Committee member at Nominet UK, the official registry of UK domain names, a position he has held since April 2016. Volker is an experienced internet industry executive and has been involved at ICANN in the Registry Stakeholders Group from 2011 to 2012 and the GNSO Council where he served as Vice-Chair for 2 years from October 2012. At Key-Systems, Volker is responsible for registry policy management, contractual and legal compliance, contractual work, litigation management and providing legal and policy advice to the company. Volker studied Law and Japanese studies at the University of Trier. On completion of the Acquisition, Volker will become the Internal Legal Counsel for the Enlarged Group's registrar businesses. 

12.    Corporate Governance

The Directors acknowledge the importance of the principles set out in the QCA Code. Although this code is not compulsory for AIM quoted companies, the Company intends to continue to apply the principles set out in the QCA Code, as far as they consider appropriate for a company of CentralNic's size and nature. From 28 September 2018 the Company will disclose and explain where it departs from the QCA Code on the Company's website.

The Board comprises seven Directors, two of whom are executive Directors, a chairman and four of whom are non-executive Directors, each bringing a different experience set and background. Each of Iain McDonald, Thomas Rickert and Thomas Pridmore are considered to be "independent" non-executive Directors under the criteria identified in the QCA Code. Mike Turner is the non-executive Chairman.

The Board shall meet regularly to consider strategy, performance and the framework of internal controls. To enable the Board to discharge its duties, all Directors receive appropriate and timely information. Briefing papers are distributed to all Directors in advance of Board meetings. All Directors have access to the advice and services of the Chief Financial Officer, who is responsible for ensuring that the Board procedures are followed and that applicable rules and regulations are complied with. In addition, procedures are in place to enable the Directors to obtain independent professional advice in the furtherance of their duties, if necessary, at the Company's expense.

The Nominations Committee continually assesses the composition of the Board to ensure it has an appropriate balance of skills, diversity, experience, knowledge and independence, and is planning to further strengthen the Board in the course of 2018.

Board Committees

The Company has constituted three committees of its Board, namely the Audit, Nomination and Remuneration Committees.

The Audit Committee has Iain McDonald as Chairman, and has primary responsibility for monitoring the quality of internal controls, ensuring that the financial performance of the Company is properly measured and reported on and reviewing reports from the Company's auditors relating to the Company's accounting and internal controls, in all cases having due regard to the interests of Shareholders. The Audit Committee meets at least twice a year. Samuel Dayani, Thomas Rickert and Thomas Pridmore are the other members of the Audit Committee. Don Baladasan attends Audit Committee meetings by invitation.

The Nomination Committee has Mike Turner as Chairman, and as necessary identifies and nominates for the approval of the Board, candidates to fill board vacancies as and when they arise. The Nomination Committee meets at least once a year. Samuel Dayani, Thomas Rickert and Thomas Pridmore are the other members of the Nomination Committee. Duties include reviewing the board composition and skills set, considering succession planning and keeping Board performance under evaluation with a view to continuous development.

The Remuneration Committee has Mike Turner as Chairman, and reviews the performance of the executive Directors and determines their terms and conditions of service, including their remuneration and the grant of options, having due regard to the interests of Shareholders. The Remuneration Committee meets at least once a year. Samuel Dayani, Thomas Rickert and Thomas Pridmore are the other members of the Remuneration Committee. The Remuneration Committee also considers broad policy in relation to the remuneration of the Chairman of the Board. Non-executive Director remuneration is a matter for the Chairman and the executive members of the Board. No Director is involved in any decisions as to their own remuneration or benefits.

13.    Share Dealing Code

The Directors understand the importance of complying with the AIM Rules, MAR and applicable legislation relating to dealings by directors and certain other employees of the Group in the Ordinary Shares and has established a share dealing code. The Company will take all reasonable steps to ensure compliance by the Directors and any relevant employees with that code. The Directors believe that the share dealing code adopted by the Board is appropriate for a company quoted on AIM and is compliant with rule 21 of the AIM Rules and applicable legislation relating to dealing policies.

14.    Applicability of the Takeover Code

The Takeover Code is issued and administered by the Panel and governs, amongst other things, transactions involving companies to which the Takeover Code applies. The Takeover Code applies to the Company and therefore its Shareholders are entitled to the protection afforded by the Takeover Code. Under Rule 9 of the Takeover Code, if an acquisition of interests in shares were to increase the aggregate holding of the acquirer and its concert parties to interests in shares carrying 30 per cent. or more of the voting rights in the Company, the acquirer and, depending on circumstances, its concert parties would be required (except with the consent of the Panel) to make a cash offer for the outstanding shares in the Company at a price not less than the highest price paid for interests in shares by the acquirer or its concert parties during the previous 12 months. This requirement would also be triggered by any acquisition of interests in shares by a person holding (together with its concert parties) shares carrying between 30 per cent. and 50 per cent. of the voting rights in the Company if the effect of such acquisition were to increase that person's and its concert parties' percentage interest in the Company's shares.

15.    The Bribery Act

The government of the United Kingdom has issued guidelines setting out appropriate procedures for companies to follow to ensure that they are compliant with the UK Bribery Act 2010. The Company has implemented an anti-bribery and anti-corruption policy that has been adopted by the Board.

16.    Dividend Policy

The objective of the Directors has historically been to focus on capital growth for Shareholders through its expansion strategy. However, taking into consideration the increased scale and cash generation potential of the Enlarged Group and the importance of dividend income to Shareholders, subject to the availability of distributable reserves, the Directors intend to commence a progressive dividend policy with a maiden final dividend (subject to Shareholder approval) of 0.75p payable for the year ending 31 December 2019.

All Ordinary Shares, including the New Ordinary Shares, carry equal dividend rights. As a holding company, the ability of the Company to pay dividends will principally depend on dividends or interest paid to it by its subsidiaries.

17.    Share Incentive Schemes

The Directors believe that the success of the Enlarged Group will depend to a high degree on the retention and future performance of the management team and key employees. Prior to its admission to AIM in September 2013, the Company implemented share option schemes for key executives and employees (the "Unapproved Share Option Scheme" and the "EMI Scheme"). The final tranche of the three rounds of Options granted under the EMI Scheme vested in April 2018. The Company also granted further options under the EMI Scheme and Unapproved Share Option Scheme in February 2016 and August 2016. The principal terms of the Unapproved Share Option Scheme and EMI Scheme are summarised in paragraph 8 of Part IV of the Admission Document.

The Company is seeking the approval of Shareholders for the New Share Plans, the CentralNic Group Plc Long Term Incentive Plan ("LTIP") and the CentralNic Group Plc Share Option Plan ("SOP"), the principal features of which are summarised in paragraph 8 of Part IV of the Admission Document and set out in Appendix I and Appendix II respectively of the notice of General Meeting set out in Part V of the Admission Document.

The rules of the LTIP and the SOP are available for inspection during normal business hours at the registered office of the Company and at the offices of CMS Cameron McKenna Nabarro Olswang LLP, Cannon Place, 78 Cannon Street, London EC4N 6AF from the date of despatch of the Admission Document until the conclusion of the meeting and will also be available for inspection at the meeting venue immediately prior to and during the meeting itself. In connection with the New Share Plans, the Directors recommend that CentralNic Shareholders approve the Share Plan Resolutions at the General Meeting.

The Directors intend to grant options to Ben Crawford and Don Baladasan under the proposed LTIP. Further details of these grants are set out at paragraph 5 of Part IV of the Admission Document.

18.    Information on the Placing

£24 million (before fees and expenses) is being raised by way of a placing of 46,153,847 Ordinary Shares at a placing price of 52 pence per Ordinary Share. The Placing Shares will represent c.27.0 per cent. of the Enlarged Group's issued share capital immediately following completion of the Acquisition. The Placing Price represents a discount of c.10.3 per cent. to the closing middle market price of 58 pence per Ordinary Share on 13 March 2018 (being the last business day before the shares were suspended pending an announcement regarding a reverse takeover). The Placing is not being underwritten.

The Placing Agreement contains certain provisions (including customary market related provisions) entitling Zeus Capital to terminate the Placing Agreement, and Stifel to terminate its rights and obligations under the Placing Agreement, in each case in certain limited circumstances at any time prior to Admission.

An application will be made to the London Stock Exchange for the Enlarged Share Capital to be admitted to trading on AIM. The Placing Shares will rank pani passu with the Group's existing issued Ordinary Shares.

The Placing is conditional on the Placing Agreement becoming unconditional (and not being terminated) and the Placing Agreement is conditional, among other things, on the Acquisition Agreement becoming unconditional (other than as regards any condition relating to the Placing Agreement or Admission having taken place) and on Admission becoming effective by no later than 8.00 a.m. on 2 August 2018 (or such later time as CentralNic, Zeus Capital and Stifel may agree). Admission is expected to become effective, and dealings in the Placing Shares to commence, at 8.00 a.m. on 2 August 2018. The Placing Agreement is not subject to any right of termination after Admission.

Upon Admission, CentralNic's Enlarged Share Capital will comprise 170,652,802 Ordinary Shares with voting rights. CentralNic does not hold any shares in treasury. This figure of 170,652,802 Ordinary Shares may be used by shareholders in CentralNic following Admission as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change in their interest in, the share capital of CentralNic under the FCA's Disclosure Guidance and Transparency Rules.

19.    Interests in Ordinary Shares

As at 13 July 2018, being the latest practicable date prior to publication of the Admission Document, the Directors were in aggregate interested, directly or individually, in 84,417 Ordinary Shares, representing c.0.09 per cent. of the Existing Ordinary Shares.

The Directors intend to grant options to Ben Crawford and Don Baladasan under the proposed LTIP. At Admission, the Directors will in aggregate be interested, directly or indirectly, in 7,345,806 Ordinary Shares, representing c. 4.3 per cent. of the Enlarged Share Capital.

As part of the Transaction, by way of participation in the Placing Don Baladasan will acquire 86,538 Ordinary Shares, Iain McDonald will acquire 96,153 Ordinary Shares and Michael Riedl (via an entity called Neozoon Sàrl) will acquire 1,087,713 Ordinary Shares. In addition, at Admission, Inter.Services, in which Alex Siffrin is the largest Shareholder, will hold 28,006,607 Ordinary Shares as a result of the issue of Consideration Shares.

20.    Lock-ins and Orderly Market Arrangements

At Admission, Inter.Services will hold, or be interested in, directly and indirectly, an aggregate of 28,006,607 Ordinary Shares, representing c.16.4 per cent. of the Enlarged Share Capital.

Inter.Services has undertaken not to dispose of any interest in such Ordinary Shares for the period of 12 months following Admission or any interest in the Additional Consideration Shares for the period of 12 months following their issue, save for in certain limited circumstances. In addition, Inter.Services has further agreed that, for a further period of six months, it shall only dispose of any interest in the Ordinary Shares or the relevant Additional Consideration Shares (as the case may be) through Zeus Capital and/or Stifel and in accordance with certain orderly market requirements.

Details of these lock-in and orderly marketing arrangements are set out in paragraph 10.3 of Part IV of the Admission Document.

21.    Admission, Settlement and Dealings

Application will be made to the London Stock Exchange for the Enlarged Share Capital to be re-admitted to trading on AIM. It is expected that Admission will become effective and dealings in the Enlarged Share Capital on AIM will commence at 8.00 a.m. on 2 August 2018.

The Ordinary Shares will be in registered form and will be capable of being held in either certificated or uncertificated form (i.e. in CREST).

CREST is a paperless settlement system enabling securities to be evidenced otherwise than by certificate and transferred otherwise than by written instrument in accordance with the CREST Regulations. 

Taxation

Information regarding taxation is set out in paragraph 14 of Part IV of the Admission Document. These details are intended only as a general guide to the current tax position in the UK. If an investor is in any doubt as to his or her tax position or is subject to tax in a jurisdiction other than the UK, he or she should consult his or her own independent financial adviser immediately.

22.      Risk Factors

Your attention is drawn to the risk factors set out in Part II of the Admission Document and to the section entitled "Important Information" on pages 2 to 5 of the Admission Document. In addition to all other information set out in the Admission Document, potential investors should carefully consider the risks described in those sections before making a decision to invest in the Company.

23.      Related party transactions

Kestrel Partners LLP is a substantial shareholder in the Company (and therefore a related party of the Company for the purposes of the AIM Rules), and has conditionally subscribed for • Placing Shares. In addition Don Baladasan and Iain McDonald have subscribed for 85,538 and 96,153 Placing Shares respectively. The participation of each of these parties in the Placing constitutes a related party transaction under Rule 13 of the AIM Rules.

In the case of each of the Directors above who has conditionally committed to subscribe, the remaining Directors are deemed to be independent and, in the case of Kestrel Partners LLP, all Directors are deemed to be independent. Therefore, having consulted with the Company's nominated adviser, Zeus Capital, each of the aforementioned Directors' participation, and Kestrel Partners LLP's participation in the Placing is considered, by the relevant independent Directors, to be fair and reasonable insofar as Shareholders are concerned.

24.      Additional Information

Shareholders should read the whole of the Admission Document and not just rely on the information in this announcement. Shareholders' attention is drawn to the information set out in Parts II to IV (inclusive) of the Admission Document which contain further information on the Company and the Group.

25.      Action to be Taken

A Form of Proxy for use in respect of the General Meeting will be enclosed with the Admission Document to be sent to Shareholders. Shareholders are entitled to appoint one or more persons as proxies to exercise all or any of their rights to attend, speak and vote at the General Meeting. A proxy need not be a member of the Company.

Whether or not Shareholders intend to attend the General Meeting, they should complete and sign the Form of Proxy in accordance with the instructions printed on it and return this as soon as possible but, in any event, to be valid, so as to reach the Company's Registrar, Link Asset Services Limited at The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU no later than 10.00 a.m. on 30 July 2018 (or, in the event that the meeting is adjourned, no later than two days before the time of any adjourned meeting). If Shareholders attend the meeting, Shareholders will still be able to vote but this will only be necessary if a Shareholder intends to change the voting instructions given on their Form of Proxy.

26.      General Meeting

The General Meeting is to be held at 10.00 a.m. on 1 August 2018 at CMS Cameron McKenna Nabarro Olswang LLP, Cannon Place, 78 Cannon Street, London EC4N 6AF to consider and, if thought fit, pass the Resolutions proposed in connection with, inter alia, the Acquisition and the Placing.

The General Meeting Resolutions to be proposed are set out in the notice of General Meeting in Part V of the Admission Document, and are summarised below:

·       an ordinary resolution that, subject to the passing of the next three resolutions referred to below, the Acquisition be approved for the purposes, inter alia, of Rule 14 of the AIM Rules;

·       an ordinary resolution to authorise the Directors to allot Ordinary Shares up to an aggregate nominal amount of (a) £42,160.46 (such amount to include the Placing Shares and the Consideration Shares);

·       an ordinary resolution to authorise the Directors to allot Ordinary Shares up to an aggregate nominal amount of £12,943.79 (such amount being an estimate of the maximum number of Additional Consideration Shares which may be issued pursuant to the Acquisition Agreement to Inter.Services). This resolution expires on 31 July 2023, the anticipated time period in which Additional Consideration Shares may be required to be issued.

·       a special resolution to grant the Directors power to allot Ordinary Shares for cash on a non pre-emptive basis up to an aggregate nominal amount of £36,553.85 in connection with the Placing;

·       an ordinary resolution that:

(a)   the rules of the LTIP (the principal features of which are set out in Appendix I of the notice of General Meeting set out in Part V of the Admission Document) be approved; and

(b)   the Directors be authorised to adopt further schemes for the benefit of employees outside the UK based on the LTIP but modified for local laws provided that any shares made available under such further schemes are treated as counting against any limits on individual or overall participation in the LTIP;

·       an ordinary resolution that:

(a)   the rules of the SOP (the principal features of which are set out in Appendix II of the notice of General Meeting set out in Part V of the Admission Document) be approved; and

(b)   the Directors be authorised to adopt further schemes for the benefit of employees outside the UK based on the SOP but modified for local laws provided that any shares made available under such further schemes are treated as counting against any limits on individual or overall participation in the SOP;

·       an ordinary resolution to authorise the Directors to allot Ordinary Shares up to an aggregate nominal amount of £56,884.27 (such amount being approximately equal to thirty three per cent. of the issued share capital of the Company immediately following Admission); the Directors currently intend only to make use of this authority (a) to issue Ordinary Shares as consideration in connection with any acquisitions of companies or businesses which the Company may wish to make in the future; and/or (b) in connection with an offer for subscription or placing of Ordinary Shares with investors to raise additional funds for the Company in the future;

·       a special resolution to grant the Directors power to allot Ordinary Shares for cash on a non pre-emptive basis up to an aggregate nominal amount of £17,065.28 (such amount being approximately 10 per cent. of the issued share Capital of the Company immediately following Admission); the proposed resolution also disapplies the statutory pre-emption provisions in connection with a rights issue or other pre-emptive offer.

28. Recommendation and Irrevocable Undertakings

The Directors consider that the Acquisition and the Placing are in the best interests of the Company and Shareholders as a whole. Accordingly, the Directors recommend that Shareholders vote in favour of the Transaction Resolutions at the General Meeting, as they have irrevocably undertaken to do so in respect of their own aggregate holdings of 84,417 Ordinary Shares, representing 0.09 per cent. of the issued share capital as at the latest practicable date before publication of the Admission Document.

The Directors consider that the New Share Plans are in the best interests of the Company and Shareholder as a whole. Accordingly, the Directors recommend that Shareholders vote in favour of the Share Plan Resolutions at the General Meeting, as they have irrevocably undertaken to do so in respect of their own holdings.

The Directors consider that the Directors' authorities granted by the General Authority Resolutions are in the best interests of the Company and the Shareholders as a whole. Accordingly, the Directors recommend that Shareholders vote in favour of the General Authority Resolutions at the General Meeting, as they have irrevocably undertaken to do so in respect of their own holdings.

In addition, irrevocable undertakings to vote in favour of the General Meeting Resolutions at the General Meeting have been secured from Shareholders holding in aggregate 31,017,273 Ordinary Shares, representing 32.14 per cent. of the issued share capital.

The Company has also received a binding commitment from Kestrel Partners LLP to vote in favour of the Transaction Resolutions in respect of a total of 18,086,593 Ordinary Shares representing 18.7 per cent. of the Existing Ordinary Shares.

Yours faithfully

Mike Turner
Chairman

 

DEFINITIONS

The following definitions apply throughout this Announcement, unless the context requires otherwise:

"Acquisition"	the proposed acquisition by Holdco of the entire issued share capital of KeyDrive pursuant to the Acquisition Agreement, further details of which are set out in paragraph 10.1 of Part IV of the Admission Document
"Acquisition Agreement"	the share sale and purchase agreement dated 16 July 2018 between (1) Inter.Services (2) PrizeFlyer LLC (3) BIP Venture Partners S.A. (4) the Company and (5) Holdco pursuant to which, conditional on, inter alia, the passing of the Resolutions and Admission becoming effective, the Company and Holdco and shall acquire the entire issued share capital of KeyDrive
"Act"	the Companies Act 2006 (as amended)
"Additional Consideration"	the additional consideration which may be payable to Inter.Services pursuant to the Acquisition Agreement which may be satisfied by the allotment of the Additional Consideration Shares or cash
"Additional Consideration Shares"	Ordinary Shares which may be allotted to Inter.Services pursuant to the Acquisition Agreement in connection with the earn-out payable under it
"Admission"	admission of the Enlarged Share Capital to trading on AIM becoming effective in accordance with Rule 6 of the AIM Rules
"Admission Document" or "Document	the admission document of the Company dated 16 July 2018
"AIM"	the market of that name operated by the London Stock Exchange
"AIM Rules"	the AIM Rules for Companies (including, without limitation, any guidance notes or statements of practice) published by the London Stock Exchange which govern the rules and responsibilities of companies whose shares are admitted to trading on AIM (as amended or reissued from time to time)
"AIM Rules for Nominated Advisers"	the rules setting out the eligibility, ongoing obligations and certain disciplinary matters in relation to nominated advisers, as published by the London Stock Exchange (as amended or reissued from time to time)
"Annual General Meeting Authorities"	means the authority to allot shares and the disapplication of pre-emption rights granted to the Directors following the passing of the resolutions at the annual general meeting of the Company held on 25 June 2018
"Articles"	the articles of association of the Company, as at the date of Admission, a summary of which is set out in paragraph 4 of Part IV of the Admission Document
"Audit Committee"	the audit committee of the Board, as constituted from time to time
"Board"	the board of directors of the Company from time to time, or a duly constituted committee thereof
"certificated" or "certificated form"	recorded on the relevant register of the share or security concerned as being held in certificated form in physical paper (that is, not in CREST)
"Company" or "CentralNic"	CentralNic Group Plc, a public limited company incorporated in England and Wales with registered number 08576358 and registered office at 35-39 Moorgate, London EC2R 6AR
"Company's Registrars"	the Company's registrars, being Link Asset Services Limited
"Completion"	Completion of the Acquisition in accordance with the terms and conditions of the Acquisition Agreement
"Compliance Committee"	a committee established to be responsible for compliance with, inter alia, governance policies
"Consideration Shares"	the 28,006,607 Ordinary Shares to be allotted and issued by the Company to Inter.Services on Completion pursuant to the Acquisition Agreement
"CREST"	the computer based system and procedures which enable title to securities to be evidenced and transferred without a written instrument, administered by Euroclear UK & Ireland in accordance with the CREST Regulations
"CREST Regulations"	the Uncertificated Securities Regulations 2001 (SI 2001/3755), including (i) any enactment or subordinate legislation which amends those regulations; and (ii) any applicable rules made under those regulations or such enactment or subordinate legislation for the time being in force (as amended)
"Directors"	the directors of the Company as at the date of the Admission Document, whose details are set out on page 15 of the Admission Document, and "Director" means any of them
"EBITDA"	earnings before interest, taxation, depreciation and amortisation
"EMI Scheme"	the Company's Enterprise Management Incentive Scheme established prior to the date of the Admission Document
"Enlarged Group"	the combined group comprising the Group and the KeyDrive Group following the Acquisition
"Enlarged Share Capital"	the entire issued share capital of the Company immediately following Admission comprising the Existing Ordinary Shares and the New Ordinary Shares
"Euroclear UK & Ireland"	Euroclear UK & Ireland Limited, a company incorporated under the laws of England and Wales with registered number 2878738 and the operator of CREST
"Existing Ordinary Shares"	the 96,492,348 Ordinary Shares issued as at the date of the Admission Document
"FCA"	the UK Financial Conduct Authority
"Form of Proxy"	the form of proxy sent to eligible shareholders with the Admission Document
"FSMA"	the Financial Services and Markets Act 2000 (as amended)
"FY15"	the financial year ended 31 December 2015
"FY16"                                                      the financial year ended 31 December 2016	"FY17"
"FY18"                                                      the financial year ended 31 December 2017	"FY19"
"General Authority Resolutions"	the resolutions to be put to Shareholders at the General Meeting in connection with the Directors seeking authority to allot shares and disapply pre-emption rights being the resolutions numbered 7 to 8 inclusive in the notice convening the General Meeting
"General Meeting" or "GM"	the general meeting of the Company to be held at CMS Cameron McKenna Nabarro Olswang LLP, Cannon Place, 78 Cannon Street, London EC4N 6AF on 1 August 2018, notice of which is set out at the end of the Admission Document
"General Meeting Resolutions"	the Transaction Resolutions, the Share Plan Resolutions and the General Authority Resolutions
"Group"	the Company and its subsidiary undertakings (prior to the Acquisition)
"Holdco"	CentralNic Germany GMBH, a holding company incorporated in Germany with registered number 23747 and registered office at Kaiserplatz 7-9 53113 Bonn
"IFRS"	International Financial Reporting Standards, as adopted for use in the European Union
"Integration Steering Committee"	a committee established to be responsible for integration between CentralNic and KeyDrive on which Don Baladasan, Alex Siffrin, Michael Riedl and Stuart Fuller sit
"Inter.Services"	Inter.Services GmbH
"Instra Group"	together, Instra Holdings (UK) Ltd, Instra Holdings (Aus) Pty Ltd, Instra Holdings (NZ) Ltd, Instra Corporation PTY Limited, Instra Domain Directors B.V., Instra Corporation PTE Limited, Instra-Internet Services One-person LLC, Instra Corporation Limited, Europe Registry Ltd, Domain Directors PTY Ltd, Domain Directors (Europe) Ltd, Domain Directors (Finland) Oy, Domain Directors (France) Sarl, Domain Directors CA Inc, Instra Domain Directors Inc.2
"ISIN"	international security identification number
"KeyDrive" or the "KeyDrive Group"	KeyDrive S.A. and its subsidiaries
"LIBOR"	London Interbank Offered Rate
"London Stock Exchange"	London Stock Exchange plc
"Long Term Incentive Plan" or "LTIP"	the new share plan described in paragraph 8.5 of Part IV of the Admission Document
"New Ordinary Shares"	the Consideration Shares and the Placing Shares
"New Share Plans"	the Long Term Incentive Plan and Share Option Plan
"Nomination Committee"	the nomination committee of the Board, as constituted from time to time
"Official List"	the official list maintained by the UK Listing Authority
"Option"	an option or any other right to acquire or receive Ordinary Shares
"Operating Board"	the Operating board comprised of all key members of the Company's management responsible for the day to day management of the Company and executing the strategy laid out by the Board
"Ordinary Shares"	ordinary shares of £0.001 each in the capital of the Company
"Panel"	the UK Panel on Takeovers and Mergers
"Placing"	the conditional placing of the Placing Shares by Zeus Capital and Stifel as agents for the Company, pursuant to the Placing Agreement
"Placing Agreement"	the conditional agreement dated 16 July 2018 between the Company, Holdco, the Directors, Zeus Capital and Stifel, relating to the, Placing, further details of which are set out in paragraph 10.2 of Part IV of the Admission Document
"Placing Price"	52 pence per Placing Share
"Placing Shares"	the 46,153,847 Ordinary Shares to be allotted and issued by the Company pursuant to the Placing, such allotment being conditional upon Admission
"Prospectus Directive"	the EU Prospectus Directive 2003/71/EC (as amended)
"Prospectus Rules"	the prospectus rules made by the FCA under Part VI of FSMA (as amended or reissued from time to time)
"QCA"	the Quoted Companies Alliance
"QCA Code"	the Corporate Governance Code for Small and Mid-Size Quoted Companies issued by the QCA (as amended or reissued from time to time)
"Remuneration Committee"	the remuneration committee of the Board, as constituted from time to time
"Reporting Accountant"	Crowe U.K. LLP, a limited liability partnership registered in England with registered number OC307043 and its registered office is at St Bride's House, 10 Salisbury Square, London, EC4Y 8EH
"Shareholder(s)"	holder(s) of Ordinary Shares
"Share Option Plan" or "SOP"	the share option plan described in paragraph 8.6 of Part IV of the Admission Document
"Share Plan Resolutions"	the resolutions to be put to Shareholders at the General Meeting in connection with the New Share Plans being the resolutions numbered 5 and 6 inclusive in the notice convening the General Meeting
"SK-NIC"	SK-NIC A.S., a company incorporated in Slovakia with registered number 35698446 and registered office at Borská 6, Bratislava 841 04.
"Stifel"	Stifel Nicolaus Europe Limited, a company incorporated in England and Wales with registered number 3719559 and registered office at 150 Cheapside, London EC2V 6ET
"SVB"	Silicon Valley Bank
"Takeover Code"	the City Code on Takeovers and Mergers issued by the Panel (as amended or reissued from time to time)
"Transaction Resolutions"	the resolutions to be put to Shareholders at the General Meeting in connection with the Acquisition and the Placing, being the resolutions numbered 1 to 4 inclusive in the notice convening the General Meeting
"UK" or "United Kingdom"	the United Kingdom of Great Britain and Northern Ireland
"UK Listing Authority"	the FCA, acting in its capacity as the competent authority for the purposes of Part VI of FSMA
"Unapproved Share Option Scheme"	the Company's unapproved share option plan established prior to the Date of the Admission Document
"uncertificated" or "uncertificated form"	recorded on the relevant register of the share or security as being held in uncertificated form in CREST and title to which, by virtue of the CREST Regulations, may be transferred by means of CREST
"United States" or "US"	the United States of America, its territories and possessions, any State of the United States of America and the District of Columbia
"USD" or "US$"	United States Dollars
"VAT"	value added tax
"Zeus Capital"	Zeus Capital Limited, a company incorporated in England and Wales with registered number 4417845 and registered office at 82 King Street, Manchester M2 4WQ

GLOSSARY

"API"	an application programming interface, which is part of the server that receives requests and sends responses
"country code top level domain" or "ccTLD"	an internet top-level domain generally used or reserved for a country, a sovereign state, or a dependent territory e.g. .uk, .jp
"DNS" or "domain name system"	a hierarchical distributed naming system for computers, services, or any resource connected to the internet or a private network
"domain name registrar" or "registrar"	an organisation or commercial entity that manages the reservation of internet domain names
"Domain Registries"	organisations that manage the registration of domain names within the domains for which they are responsible, control the policies of domain name allocation and technically operate their domains
"GDPR"	the General Data Protection Regulation (GDPR) EU 2016/679
"gTLD"	generic top level domain
"ISO"	International Organisation for Standardisation
"MAR"	the Market Abuse Regulation (EU) No. 596/2014 (MAR)
"recurring revenue"	revenue associated with subscription services that require periodic renewal payments to ensure continuity of service, such as domain names and hosting contracts
"registry operator"	an entity that maintains the database of domain names for a given top-level domain and generates the zone files which convert domain names to IP addresses. It is responsible for domain name allocation and technically operates its top-level domain
"Registry Service Providers"	a company that runs the operations of a TLD on behalf of the TLD owner or licensee. (the registry service provider keeps the master database and generates zone files to allow computers to route internet traffic using the DNS)
"SLD"	second level domain
"SSL Certificates"	data files that encrypt data packets such as login and credit card details
"SSL Certification"	the installing of a secure sockets layer on a web server that enables encrypted communication between a web browser and a web server, designed to decrease the risk of sensitive information from being stolen or tampered with
"The Internet Corporation for Assigned Names and Numbers" or "ICANN"	a non-profit private organisation that was created to oversee a number of internet-related tasks previously performed directly on behalf of the US government
"Tier III"	a Tier III data center is a location with redundant and dual-powered servers, storage, network links and other IT components
"top level domain" or "TLD"	the suffix attached to internet domain names e.g. .com, .net

 

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