Final Results

RNS Number : 4614L

CentralNic Group PLC

28 April 2015

 



Press Release

28 April 2015

CentralNic Group plc

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

Final results

for the year ended 31 December 2014

CentralNic (AIM: CNIC), the internet platform that derives revenue from the worldwide sales of internet domain names, today announces its audited results for the year ended 31 December 2014. 

The Company's full Annual Report is also being published today, while the Company's Annual General Meeting will be held on 28 May 2015.

Operational highlights

§ A year of rapid Profitable Growth combined with Investing earnings and funds raised at the IPO

§ Net revenue grew by 99% to £6.07m (2013: £3.05m) - growing revenues from registry, registrar and enterprise services

§ Adjusted EBITDA grew by 70% to £1.72m (2013: £1.02m) - reflecting strong revenue growth offset by additional costs invested in the fledgling in-house registrar and enterprise businesses

§ Ranked as the world's Number Two new TLD registry provider by volume - launched 8 new generic Top-Level Domains during the year, including the leader by volume, .xyz;

§ Entered the global top 30 domain retailers via the Internet.BS acquisition in June 2014

§ Acquired a 12% Equity Stake in Accent Media Limited, the successful applicant for the highly sought-after .tickets new Top-Level Domain

§ Finished the year with 3 profitable operating divisions: registry services, registrar services and enterprise services (including the premium domains business created in the second half of the year) - reflecting a diversified and resilient business model

Financial highlights

	31 Dec 2014	31 Dec 2013	Change
	£'000	£'000	£'000
Billings	9,888	3,891	5,997
Revenue	6,067	3,051	3,016
Gross profit	3,573	2,338	1,235
Adjusted EBITDA*	1,724	1,015	709
Adjusted Profit before taxation**	1,658	1,006	652
Profit before taxation	520	701	(181)
Net cashflow from operating activities	1,414	1,134	280

* - Earnings before interest, tax, depreciation, amortisation, acquisition deal fees and non-cash charges; excludes share based payments expense of £222,269 and acquisition deal fees of £466,197

** - Profit before taxation, amortisation of intangible assets, acquisition deal fees and non-cash charges; excludes share based payments expense of £222,269 and acquisition deal fees of £466,197

§ Billings (including partner share) increased by 154% to £9.89 million (2013: £3.89 million), reflecting the billing for the new Top-Level Domains launched during the year and the new business activities in the registrar and enterprise divisions

§ Net cash of £3.06 million at the end of the year (2013: £4.93 million)

§ Net revenue increased by 99% to £6.07 million (2013: £3.05 million).  All 3 divisions saw growth in net revenue, augmented by a half year of trading results in the registrar division from the acquisition of the Internet.BS trade and the creation of the premium domains business in the enterprise division

§ Adjusted EBITDA of £1.72 million (2013: £1.02 million) reflected strong performance from the registry business, the acquired registrar business (the trade of Internet.BS) and the premium domains business.  These activities combined, after accounting for the impact of deferrals to income and costs and normal business overheads, contributed £2.55 million to Adjusted EBITDA (2013: £0.68 million).  This was then offset by lower consultancy and licence sales of £0.10m (2013:  £0.48m) combined with £0.93 million of operating costs (2013:  £0.15 million) taking into account the first full year of costs related to being on AIM as well as investing in the fledgling new business areas

§ Profit before taxation of £0.52 million (2013: £0.70 million) reflected Adjusted EBITDA plus interest income offset by non-cash charges for depreciation and amortisation of £0.54 million (2013: £0.26 million) coupled with acquisition deal fees of £0.47 million (2013: £nil) and the charge for share based payments of £0.22 million (2013: £0.07 million).  Adjusted profit before taxation, excluding amortisation charges, the acquisition deal fees and the share based payments charge was £1.66 million (2013: £1.01 million)

§ Net cash-flow from operating activities increased to £1.41 million (2013: £1.13 million).  This reflected a strong underlying conversion to operating cashflow from Adjusted EBITDA, but then offset by £0.47m of professional fees related to acquisitions and investments 

Post year end

§ Nine additional exclusive gTLD contracts announced - .site, .online, .tech, .fan, .love, .forum, .realty, .rent, .coop

§ New gTLDs entered launch phase in 2015: .space; .design; .college

§ Launched retail website for cymru.domains - in top 5 registrars by volume for both .cymru and .wales

§ First billings for DomiNIC domain management software

Commenting on the results, John Swingewood, Chairman of CentralNic, said:

"I am extremely pleased with our strategic progress during the year.  The Group has successfully transitioned its business to offering a range of domain-related services as a wholesaler, retailer and supplier to enterprise customers.  This provides the Group with multiple opportunities in the domain name supply chain at a time of considerable change within the industry. 

2014 has been a very good year for the Group, successfully acquiring and investing in exciting new business opportunities.  The Group also invested in strengthening the leadership capabilities within the business. 

The Group is strongly placed to benefit from the re-organisation of the internet namespace, with access to earnings from domains as both a wholesaler and retailer in the primary markets and as a broker in the secondary market.  Furthermore, the Group is exposed to both developed and emerging economies, being active in those markets either directly or via the Group's extensive distribution channel.  With the world's internet users estimated at 3.1bn, there is still more than half of the global population who are yet to get online.  As such, continuing sustained growth in the world's internet users presents us with considerable opportunity. 

The Board is excited by the considerable opportunities for CentralNic and is confident that the Group will achieve its commercial targets for 2015."

-Ends-

For further information:

CentralNic Group plc
Ben Crawford (CEO)	[phone]
Zeus Capital - Nomad and Joint Broker
Ross Andrews / Nick Cowles	[phone]
John Goold / Alex Davies	[phone]
Peel Hunt LLP - Joint Broker
Richard Kauffer / Euan Brown (Corporate)	[phone]
Alastair Rae (Syndications)
Abchurch Communications
Jamie Hooper / Canace Wong	[phone]
[e-mail]	www.abchurch-group.com

About CentralNic Group plc

CentralNic (LSE: CNIC) is a London-based AIM-listed company which earns revenues from the worldwide sales of internet domain names over a technology platform that it developed and manages.   These domain names are sold on an annual subscription basis and paid for by customers upfront, making CentralNic a cash-generative business with annuity revenue streams.   CentralNic comprises three business lines within the domain name industry.   It operates a global wholesale network, supplying domain names to over 1,500 vendors in 77 countries, and is a leader in wholesaling for new Top-Level Domains - the new endings for domain names being introduced as alternatives to .com and .net.  CentralNic is the exclusive wholesaler for all domains ending with .tickets, .website, .wiki, .bar, .feedback and .xyz, with more than 50 others under contract.   CentralNic is also a leading global domain name retailer, with its retail websites including internetbs.net, buydomains.london and domain.luxury.  Additionally, via its enterprise programme, CentralNic supplies domain names (including high-value premium domain names), software and services directly to large corporations and governments.

For more information please visit: www.centralnic.com

Chairman's Statement

In 2014 the Group has successfully transitioned its business to offering a range of domain-related services as a wholesaler, retailer and supplier to enterprise customers.  This provides the Group with multiple opportunities in the domain name supply chain at a time of considerable change within the industry.

2014 has been a very good year for the Group, successfully acquiring and investing in exciting new business opportunities.  The Group also invested in strengthening the leadership capabilities within the business.  For these reasons, the Group is well positioned to take advantage of the new TLD market as it develops, and I am extremely pleased with our strategic progress during the year.

In 2014 the roll out of the new Top-Level Domains gathered pace, with approaching 500 new domain extensions having launched by the end of the year.  The Group successfully launched 8 new domains during the year, including the programme's highest volume domain .xyz, resulting in CentralNic taking a leading position among the world's domain registry service providers.  In parallel to this activity, the Group's existing portfolio of Second Level Domains continued to exhibit revenue growth which was pleasing in the context of new competition in the market.  Overall our registry business continues to grow profitably, enabling us to invest in developing our other business lines.

As highlighted in the previous year, our strategy includes investing in opportunities within the domain name industry.  In 2014 we acquired the retail trade of Internet BS and a minority equity stake in Accent Media, the successful applicant for the much sought-after .tickets new Top-Level Domain.  Both present very promising earnings-enhancing opportunities.

Performance

I am pleased to report that the Group's financial performance was in line with expectations, growing revenues and Adjusted EBITDA whilst also investing to expand the scope of the Group's business activities.

The Group's net revenue grew by nearly 100%, reflecting steady organic growth in the registry business, a half year of revenues from our acquired retail business and trading valuable premium domain names on the aftermarket, a new venture for the Group.

It was encouraging to see net revenue from our registry business (wholesale) growing to £2.8m, an increase of 8% over the prior year (2013: £2.6m).  Growth included early revenues from the new top level domains combined with steady performance from CentralNic's legacy portfolio of Second-Level Domain extensions (including the likes of .uk.com, .us.com and .cn.com) and country codes like .LA and .PW.

CentralNic invested during the year, acquiring the Internet.BS registrar in June for a total consideration of up to US$7.5m.  This marked a significant entry into the retail market for the Group, seeking the benefits of vertical integration within the domain name supply chain.  As a result, the Group's retail activities contributed £1.6m of net revenues during the second half of the year in line with the business case.  A second significant investment was acquiring a 12% equity stake in Accent Media Limited for US$1.6m in September.  Accent Media is the successful applicant for the .tickets new Top-Level Domain, which is scheduled to launch in 2015.

Other new activities launched during the year included an enterprise division focussed on providing domains, domain related software and services to the corporate market.  This division includes a premium domains business which began trading in the second half of the year, selling domains from the Group's portfolio to contribute £1.6m to Group net revenues.  The remaining enterprise business closed the year in the pre-revenue phase, although indications are promising for the future.

The Group also continued its investment programme during the year, expanding its resources to grow its in-house registrar business and commence the enterprise business as well as further strengthening the Board and the management team.  Despite these additional operating costs, the Group delivered Adjusted EBITDA of £1.72m (2013: £1.02m) and net cashflow from operating activities of £1.41m (2013: £1.13m)

Dividend

It remains the Directors intention to recommend payment of a dividend when appropriate and commercially prudent to do so.

While it is the intention of the Group to generate income returns for investors in the future as part of a progressive dividend policy, due to the continued expansion opportunities within the sector the Directors do not propose a final dividend in 2014.

Outlook

The Group is strongly placed to benefit from the re-organisation of the internet namespace, with access to earnings from domains as both a wholesaler and retailer in the primary markets and as a broker in the secondary market.  Furthermore, the Group is exposed to both developed and emerging economies, being active in those markets either directly or via the Group's extensive distribution channel.  With the world's internet users estimated at 3.1bn, there is still more than half of the global population who are yet to get online.  As such, continuing sustained growth in the world's internet users presents us with considerable opportunity.

It is fair to say that current demand for the new Top-Level Domains is still at a very early stage, reflecting only the beginnings of consumer awareness to the choices available when seeking to purchase domain names.  Awareness should grow in 2015 with an increased retail footprint and the expected launch and promotion of new Top-Level Domains by the so-called "super-brands".  This has potential to stimulate growth for alternative TLDs and that will benefit the Group - whether this be via the Group's proprietary Second Level Domains or via the new Top-Level Domains serviced on behalf of clients.  Since the end of 2014, the Group has started to launch four more TLDs and has a minimum of twenty two further new Top-Level Domains yet to launch, with the majority expected to start earning revenues in 2015.  Plus the business continues to secure new TLD clients, converting from a healthy pipeline.

The registrar business also presents considerable opportunities in terms of diversifying the revenue streams into other value-added services.  Work is under way to broaden the Group's retail offerings with a view to delivering a more comprehensive set of services for consumers seeking to deploy their online presence.

Demand for domain names and related services from Corporates is also a market segment presenting considerable opportunity.  The Group has built out the solutions it can offer to this enterprise segment, whether this be via the proprietary Domain Management software (DomiNIC) and related domain portfolio services or via consultancy offerings to Corporates who themselves applied for their own .brand Top-Level Domain.  Coupled with Corporate demand for premium domain names the Group is able to present comprehensive solutions for the Corporate segment of the market.

I would like to thank CentralNic's personnel for their professionalism and commitment to the ongoing development of the business in what has been a period of considerable progress for the Group. 

It is thanks to them, working in tandem with our clients and our distribution channel partners, that we continue to enhance our industry leading position and reputation.

John Swingewood

Chairman

28 April 2015

Chief Executive Officer's Report

During 2014, CentralNic was transformed from a company with one line of business, to having three profitable divisions in the domain name industry - registry, registrar and enterprise solutions.  CentralNic also emerged in 2014 as an early global leader in new Top-Level Domains - the largest restructuring of the internet to date.

Performance overview

CentralNic has made significant progress in 2014.  Billings were £9.89 million, representing a 154% increase on 2013; revenues were up 99% to £6.07 million, and Adjusted EBITDA of £1.72 million was achieved - an increase of 70% over 2013.  This growth is the result of our threefold strategy: firstly as a wholesaler, launching our first eight TLDs together with continued growth in our legacy domains business.  Secondly, we acquired the trade of domain retailer Internet.bs and launched seven additional retail websites - adding retail revenues and profits.  And thirdly, our enterprise division started successfully trading in premium domain names and offering consulting services, also contributing both revenues and profits in its first year of trading.

At the end of a year of launches, investments and acquisitions, the Group had cash balances of £3.06 million (2013: £4.93 million).

New Top-Level Domains

2014 witnessed the earliest launch stages of what the internet industry regulator ICANN called "the biggest change since the inception of the internet," with the introduction of the new gTLD programme, allowing new entrants to join the ranks of .com, .org, and .net.  Only a small number of retailers received their accreditations from ICANN to sell domains under the new TLDs in 2014, and a lack of public awareness pending the launches of the "superbrand TLDs" such as .google, .apple and .sony, meant that the market for new TLDs in 2014 was softer than had been projected by ICANN and other industry experts.  It was essentially limited to domain investors and other early adopters. 

However, CentralNic fared exceptionally well with the TLDs contracted exclusively to use our technical and billing platform.  The eight new TLDs we launched represented less than 2% of the total number of top level domains launched, yet we achieved and maintained the ranking of the world's Number Two new TLD registry provider by total number of registrations with almost 20% global market share.  We are also pleased to rank as the world's Number One for the highest number of active retailers for any one TLD.  CentralNic's client .xyz is the TLD with the overall highest number of registrations, based on an aggressive global sales and marketing campaign supported by CentralNic.

     Business Development

When CentralNic listed on the AIM market in 2013 our clearly stated objective was to accelerate our growth by focussing on the full gamut of revenue opportunities in the domain industry, and not relying solely on the new Top-Level Domains already contracted with us.  Considerable progress was made in 2014 in realising those objectives:

1.    Adding new domains to our inventory

When CentralNic listed, its expectations were to obtain distribution contracts for an additional five domain extensions over the ensuing two years.   This objective was actually met by April 2014 - with co.com, .website, .press, .space and .host, and we have now been awarded a further eleven exclusive TLD contracts: .coop, .design, .fan, .forum, .love, .online, .realty, .rent, .site, .tech and .tickets - all expected to launch in 2015 and 2016.  CentralNic is also an investor in Accent Media Ltd which holds the exclusive rights to the .tickets TLD, which will have an exposure to actual ticketing revenue as it bundles ticket vending software with a domain name.

Today, in my opinion the portfolio of new TLDs available via CentralNic is second to none, and we hope to augment the portfolio further by converting additional opportunities from our sales pipeline.

2.    Increasing our global retail market coverage

While relatively few retailers are actively selling domains using new TLDs at this stage, CentralNic is efficiently engaging with those that are already part of our global network, and on-boarding those that are not - working with our partners to become a clear leader in the industry, as measured by the metric "highest number of retailers for an individual TLD." China continues to be CentralNic's fastest growing geographic market, with other emerging markets also presenting a key focus for our growth.

3.    Entering the retail marketplace ourselves

CentralNic was one of the earliest adopters of vertical integration in the domain industry in 2014 when it joined the ranks of the world's top thirty domain name retailers by acquiring the trade of registrar Internet.bs ("IBS"), serving customers from 200 countries in eight languages; and at the same time it launched seven "flagship store" websites, each retailing domain names targeted at a single territory or industry vertical (such as domains.asia and buydomains.london; domain.luxury and domain.bar).

4.    Engaging with growth markets

CentralNic has identified two key growth markets, and is engaging with both.

The first is the enterprise market: with around 400 global corporations which have applied to obtain their own brands as Top-Level Domains, and thousands more starting to focus on the challenges and opportunities presented by an increasingly complex and important Domain Name System, CentralNic is selling a suite of software and services to an increasing number of telcos, banks, and media and entertainment businesses, both at Global 1000 level and below. 

Secondly, CentralNic is focussed on developing economies including China and countries in the MENA region.  As both telecoms companies and major internet infrastructure providers work to deliver internet access to "the next five billion" internet users, CentralNic is attuned to the resulting new opportunities to assist businesses in those territories to acquire domain names and get their businesses online to serve their rapidly expanding local and international markets.

Outlook

CentralNic is on a continuing rapid growth trajectory.  Having doubled revenues and increased Adjusted EBITDA by 70% in 2014, our strategy is working and we continue to move forward accordingly. 

Though 2014 marked a slow start to the roll-out of new Top-Level Domains, CentralNic's clients accounted for one in five of all new TLD domains registered - and that was with only the first eight of our TLDs launched.  CentralNic has another eighteen TLDs already confirmed for retail distribution, including those widely predicted to be the future bestsellers: such as .design and .online.  Plus we have a healthy pipeline of future opportunities.

Moreover, with so much new product to take to market, it is a great time to be a domain name retailer, and CentralNic's retail division expects continued growth in its chosen markets.

Finally, CentralNic's focus on large corporations and government contracts makes us part of the two leading growth drivers of the domain industry - enterprises entering the domain industry and developing world Governments supporting the expected rapid expansion in mobile-enabled internet use to enable economic development. 

In 2014, CentralNic demonstrated the ability to launch new businesses, win new service contracts and successfully integrate new acquisitions.  We are confident in our ability to use these same strategies to meet our commercial objectives in the years to come. 

Ben Crawford

Chief Executive Officer

28 April 2015

CENTRALNIC GROUP PLC
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

					2014		2013
	Note				£'000		£'000
Revenue	3				6,067		3,051
Cost of sales					(2,494)		(713)
							2,057
Gross profit					3,573		2,338
Administrative expenses					(2,854)		(1,578)
Share based payments expense					(222)		(66)
Operating Profit					497		694
Adjusted EBITDA*					1,724		1,015
Depreciation					(90)		(16)
Amortisation of intangible assets					(448)		(239)
Acquisition deal fees					(467)		-
Share based payments expense					(222)		(66)
Operating Profit					497		694
Finance income					23		7
Profit before taxation					520		701
Income tax expense	4				(156)		(171)
							5940
Profit after taxation attributable to equity shareholders					364		530
Other comprehensive income
Other comprehensive income					-		1
Total comprehensive income for the financial year attributable to equity shareholders					364		531
Earnings per share
Basic, Pence	5				0.60		1.00
Diluted, Pence	5				0.56		0.91

All amounts relate to continuing activities.

*Earnings before interest, tax, depreciation and amortisation, non-trading items and non-cash charges

CENTRALNIC GROUP PLC

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

					2014		2013
	Note				£'000		£'000
ASSETS
NON-CURRENT ASSETS
Property, plant and equipment					90		54
Intangible assets					6,118		1,941
Deferred receivables					916		694
Investments	6				997		2
Deferred tax assets					74		-
					8,195		2,691
CURRENT ASSETS
Trade and other receivables					2,333		316
Cash and bank balances					3,056		4,932
							6
					5,389		5,248
TOTAL ASSETS					13,584		7,939
EQUITY AND LIABILITIES
EQUITY
Share capital	7				61		59
Share premium					4,935		3,485
Share based payments reserve					1,018		742
Foreign exchange translation reserve					1		1
Retained Earnings					885		521
TOTAL EQUITY					6,900		4,808
NON-CURRENT LIABILITIES
Other payables					725		457
Deferred tax liabilities					72		62
					797		519
CURRENT LIABILITIES
Trade and other payables and accruals					5,671		2,427
Taxation payable					216		185
					5,887		2,612
TOTAL LIABILITIES					6,684		3,131
TOTAL EQUITY AND LIABILITIES					13,584		7,939

CENTRALNIC GROUP PLC

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

	Share capital	Share premium	Share based payments reserve	Foreign exchange translation Reserve	Retained earnings	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Balance as at 31 December 2012	50	-	-	-	629	679
Profit for the year	-	-	-	-	530	530
other comprehensive income for the year - translation of foreign operation	-	-	-	1	-	1
Total comprehensive income for the year	-	-	-	1	530	531
Dividends	-	-	-	-	(638)	(638)
Issue of new shares	9	4,991	-	-	-	5,000
Share issue costs	-	(1,506)	-	-	-	(1,506)
Share based payments	-	-	742	-	-	742
Balance as at 31 December 2013	59	3,485	742	1	521	4,808
Profit for the year	-	-	-	-	364	364
other comprehensive income for the year - translation of foreign operation	-	-	-	-	-	-
Total comprehensive income for the year	-	-	-	-	364	364
Issue of new shares	2	1,472	-	-	-	1,474
Share issue costs	-	(22)	-	-	-	(22)
Share based payments	-	-	222	-	-	222
Shared base payments- deferred tax assets	-	-	54	-	-	54
Balance as at 31 December 2014	61	4,935	1,018	1	885	6,900
Balance as at 31 December 2013	59	3,485	742	1	521	4,808

Share capital represents the nominal value of the company's cumulative issued share capital.   Share premium represents the cumulative excess of the fair value of consideration received for the issue of shares in excess of their nominal value less attributable share issue costs and other permitted reductions.   Retained profits represent the cumulative value of the profits not distributed to shareholders, but retained to finance the future capital requirements of the CentralNic Group.  Share based payments reserve represents the cumulative value of share based payments recognised through equity.  Foreign currency translation reserve represents the cumulative exchange differences arising on Group consolidation.

CENTRALNIC GROUP PLC

CONSOLIDATED STATEMENT OF CASHFLOWS

					2014		2013
					£'000		£'000
Cash flow from operating activities
Profit before taxation					520		701
Adjustments for:
Depreciation of property, plant and equipment					90		16
Amortisation of intangible assets					448		239
Share based payments					222		66
Operating profit before working capital changes					1,280		1,022
Increase in trade and other receivables					(664)		(138)
Increase in trade and other payables and accruals					934		375
Cash flow from operations					1,550		1,259
Income tax paid					(136)		(125)
Net cash flow from operating activities					1,414		1,134
Cash flow used in investing activities
Purchase of property, plant and equipment					(126)		(50)
Purchase of intangible assets					(1,838)		(216)
Disposal of intangible assets					-		-
Loan repayments (paid to)/ received from third parties					(102)		283
Purchase of investments					(997)		-
Net cash flow used in investing activities					(3,063)		17
Cash flow used in financing activities
Proceeds from issuance of ordinary shares					-		4,169
Repayments of borrowings					-		319
Dividends paid					-		(638)
Reduction in deferred consideration					(230)		(223)
Net cash flow generated from / (used in) financing activities					(230)		3,627
Net increase in cash and cash equivalents					(1,879)		4,778
Cash and cash equivalents at beginning of the year					4,932		160
Exchange losses on cash and cash equivalents					3		(6)
Cash and cash equivalents at end of the year					3,056		4,932

CENTRALNIC GROUP PLC

NOTES TO THE CONSOLIDATED FINANCIAL INFORMATION

1.       Basis of preparation

The Company was incorporated on 19 June 2013 and on 9 August 2013 acquired the entire share capital of CentralNic Limited.  As a result of this transaction, the ultimate shareholders in CentralNic Limited received shares in the Company in direct proportion to their original shareholdings in CentralNic Limited.

Under IFRS 3 (revised) "Business Combinations", the acquisition of CentralNic Limited by the Company has been accounted for as a reverse acquisition and the consolidated IFRS financial statements of the Company is therefore a continuation of the financial statements of CentralNic Limited.

As a result any financial statements after 9 August 2013 represent consolidated financial statements of the Group.  Prior to this date, the historical financial statements represent the financial statements of the Company's subsidiary, CentralNic Limited (see Note 3 of the Company financial statements), and CentralNic Limited's subsidiary undertakings.   On this basis, the comparative information is pro-forma.

The financial statements are measured and presented in sterling (£), unless otherwise stated, which is the currency of the primary economic environment in which the entities operate.  They have been prepared under the historical cost convention, except for financial instruments that have been measured at fair value through profit and loss.

The financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRSs") as issued by the International Accounting Standards Board ("IASB") and as adopted by the EU and those parts of the Companies Act 2006 applicable to companies reporting under IFRS. 

The financial information set out above does not constitute the Company's statutory accounts for the year ended 31 December 2014 or 31 December 2013 but is derived from those accounts.  The auditor's report on those financial statements was unqualified and did not contain a statement under s498 (2) - (3) of Companies Act 2006.   

The audited Annual Report and Financial Statements for the 12 months ended 31 December 2014 and notice of AGM will shortly be sent to shareholders and published at: www.centralnic.com/investors/reports.

CENTRALNIC GROUP PLC

NOTES TO THE CONSOLIDATED FINANCIAL INFORMATION

2.         Segment analysis

CentralNic is an independent global domain name service provider.   It provides registry, registrar and enterprise services and it is the owner and registrant of a portfolio of domain names, which it uses as SLD domain extensions.   Management reviews the activities of the CentralNic Group in the segments disclosed below.

		2013
	Revenue	Adjusted EBITDA	Non-current assets	Current assets	Non-current liabilities	Current liabilities
	£'000	£'000	£'000	£'000	£'000	£'000
Registry Domain Sales	2,587	1,079	2,691	5,245	519	2,604
Registrar Domain Sales	-	(63)	-	3	-	8
Enterprise including Premium Domain Name Sales	66	66	-	-	-	-
Consultancy and other services	398	410	-	-	-	-
Group overheads including costs associated with public company status	-	(477)	-	-	-	-
	3,051	1,015	2,691	5,248	519	2,612

 

		2014
	Revenue	Adjusted EBITDA	Non-current assets	Current assets	Non-current liabilities	Current liabilities
	£'000	£'000	£'000	£'000	£'000	£'000
Registry Domain Sales	2,801	1,091	3,741	3,397	570	4,235
Registrar Domain Sales	1,550	(19)	4,454	1,992	227	1,652
Enterprise including Premium Domain Name Sales	1,612	1,500	-	-	-	-
Consultancy and other services	104	104	-	-	-	-
Group overheads including costs associated with public company status	-	(952)	-	-	-	-
	6,067	1,724	8,195	5,389	797	5,887

CENTRALNIC GROUP PLC

NOTES TO THE CONSOLIDATED FINANCIAL INFORMATION

3.         Revenue

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

		2014		2013
		£'000		£'000
Registry Domain Sales
UK		935		952
North America		840		898
Europe		483		453
ROW		543		284
		2,801		2,587
Registrar Domain Sales
UK		76		-
North America		358		-
Europe		491		-
ROW		475		-
Other Revenues		150		-
		1,550		-
Enterprise including Premium Domain Name Sales
North America		1,612		66
		1,612		66
Consultancy and other Services
UK		3		2
North America		20		17
ROW		81		379
		104		398

Premium domain name trading was included within enterprise services in 2014, having previously been classified within registry sales.   Consultancy revenues by nature are subject to annual variation depending on customer demand. 

The following table shows customers that represent 10% or more of the registry domain sales:

			2014		2013
			£'000		£'000
Customer A			326		490
Customer B			382		487
Other customers			2,093		1,610
			2,801		2,587

No single customer contributes greater than 10% or more of the registrar domain sales.    The enterprise and premium domain name sales were principally driven by premium domain name sales of £1,610,000 in December 2014 which were made to a single client.

CENTRALNIC GROUP PLC

NOTES TO THE CONSOLIDATED FINANCIAL INFORMATION

4.         Income tax expense

				2014		2013
				£'000		£'000
Current tax on profits for the year				166		137
Adjustments in respect of previous years				-		33
Current Income Tax				166		170
Deferred Income Tax				(10)		1
Income tax expense				156		171

A reconciliation of the current income tax expense applicable to the profit before taxation at the statutory tax rate to the current income tax expense at the effective tax rate of CentralNic is as follows:

				2014		2013
				£'000		£'000
Profit before taxation				520		701
Tax calculated at domestic tax rates applicable to profits in the respective countries				112		135
Tax effects of:
Expenses not deductible for tax purposes				51		1
Capital allowance in excess of depreciation				3		1
Adjustments in respect of previous years				-		33
Current income tax				166		170

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

The effective rate of tax for the year is 30.1% (2013: 24.4%),  when excluding the impact of the non-cash share based payments expense the effective rate of tax for the year is 21.0% (2013: 22.3%)

In the UK, the applicable statutory tax rate for 2014 is 21% (2013: 23%).    

In the USA, federal taxes are due at 15% on the first US$50,000 of taxable income and 25% thereafter.   Under California tax legislation an additional 8.85% of state tax is due on taxable income.

CENTRALNIC GROUP PLC

NOTES TO THE CONSOLIDATED FINANCIAL INFORMATION

5.         Earnings per share

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

In calculating earnings per share prior to the group reconstruction on 9 August 2013 whereby the Company became the new parent company of the CentralNic Group it is of limited significance to calculate earnings per share based on the historical equity of the CentralNic Group.

Accordingly, a pro forma earnings per share has been included based on the relevant number of shares in CentralNic Group Plc following the reorganisation on 9 August 2013 but prior to the issue of shares by the Company to raise new funds and the actual shares in issue after that date.  The calculation of earnings per share is based on the following earnings and number of shares.

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

	2014 £'000	2013 £'000
Profit after tax attributable to owners	364	530
Weighted average number of shares:
Basic	60,047,493	52,814,446
Effect of dilutive  potential ordinary shares	5,328,727	5,328,727
Diluted	65,376,220	58,143,173
Earnings per share:
Basic	0.60 pence	1.00 pence
Diluted	0.56 pence	0.91 pence

CENTRALNIC GROUP PLC

NOTES TO THE CONSOLIDATED FINANCIAL INFORMATION

6.         Investments

	£'000
At 31 December 2013	2
Disposals	(2)
Additions	997
At 31 December 2014	997

During the year, the Company disposed of its 5% interest in DBS Mena, a company incorporated in the United Arab Emirates (UAE) upon it's de-registration as a registered company within the United Arab Emirates.   

The Company acquired less than 20% of the following undertakings which are incorporated in the United Kingdom (UK):

Name	Place of incorporation/ establishment	Principal activities	Issued and paid-up/ registered capital	Effective interests
Accent Media Ltd	UK	Domain registry operator	Ordinary shares	12%

The Company owns more than 50% of the following undertakings which are incorporated in the United Kingdom, USA and the Commonwealth of The Bahamas:

Name

Place of incorporation/ establishment

Principal activities

Issued and paid-up/ registered capital

Effective interests

CentralNic Limited

England and Wales

Domain registry services provider

Ordinary shares

100%

CentralNic USA Limited

USA

US sales office

Ordinary stock

100%

GB.com Limited

England and Wales

Dormant - holds domain name

Ordinary shares

100%

Who Is Privacy Limited

England and Wales

Dormant

Ordinary shares

100%

TLD Registrar Solutions Limited

England and Wales

Domain registrar services provider

Ordinary shares

100%

Internet Domain Service BS Corp

Commonwealth of The Bahamas

Domain registrar services provider

Ordinary shares

100%

Whois Privacy Corp

Commonwealth of The Bahamas

Dormant

Ordinary shares

100%

Hoxton Domains Limited

England and Wales

Domain registrar services provider

Ordinary shares

100%

CENTRALNIC GROUP PLC

NOTES TO THE CONSOLIDATED FINANCIAL INFORMATION

7.         Share capital

            The Company's issued and fully paid share capital is as follows:

		Share Capital	Share Premium
	Number	£'000	£'000
At 1 January 2014	59,090,909	59	3,485
Issued in connection with the acquisition of the trade and assets of Internet.BS Corp on 16 June 2014 less share issue costs	2,090,738	2	1,450
At 31 December 2014	61,181,647	61	4,935

On 16 June 2014 the Company issued 2,090,738 new ordinary shares toMarco Rinaudo of 0.1 pence each at 70.5 pence per share.   A share premium was created on the issue of these shares totalling £1,471,880.    Issue costs in relation to these shares were £21,568.

The Company has no authorised share capital.

CENTRALNIC GROUP PLC

NOTES TO THE CONSOLIDATED FINANCIAL INFORMATION

8.         Business combinations

On 16^th June 2014 the Group acquired the trade and assets of Internet.bs Corp a private company incorporated in the Commonwealth of the Bahamas and specialising in the retailing of internet domain names.   

The following table summarises the consideration to acquire the trade and assets of Internet.bs Corp and the fair value of the assets and liabilities at the acquisition date in line with group accounting policies.

Consideration						£'000
Cash						1,710
Equity instruments (2,090,738 ordinary shares)						1,474
Deferred consideration						837
Contingent consideration						322
Adjustment for working capital						(18)
Total consideration						4,325
Fair value recognised on acquisition						£'000
Intangible assets - Customer list						2,548
Intangible assets - Software						500
Trade receivables						214
Deferred costs						1,183
Cash						129
						4,574
Liabilities
Accruals						30
Payments on account						212
Deferred revenue						1,385
						1,627
Total identifiable net assets at fair value						2,947
Goodwill arising on acquisition						1,378
Purchase consideration						4,325

The fair value of the 2,090,738 ordinary shares issued as part of the consideration paid to continue the trade and assets of Internet.bs Corp was based on the published share price on 16^th June 2014 which was 70.5p.

The deferred consideration is due for payment on the first anniversary of the acquisition date.

The contingent consideration is dependent on the operating profit in the first year post acquisition and is due for payment on the first anniversary of the acquisition date.   The fair value of the contingent consideration is based on the directors' assessment of the likely operating profit for the year.

CENTRALNIC GROUP PLC

NOTES TO THE CONSOLIDATED FINANCIAL INFORMATION

9.         Share Options and Warrants

            Share Options

The share option scheme, which was adopted by CentralNic during 2013, was established to reward and incentivise the executive management team and staff for delivering share price growth.

The share option scheme is administered by the Remuneration Committee.

There were 3,556,000 options granted during 2013, no options were granted in 2014.   5,000 options lapsed during the year, none of the awarded options have been exercised to date.

A charge of £222,269 (2013: £66,447) has been recognised in the statement of comprehensive income for the year relating to these options.

These fair values were calculated using the Black Scholes option pricing model.  The inputs into the model were as follows:

	Share options granted 1June 2013	Share Options granted 14 October 2013
Options Granted	2,530,000	1,026,000
Stock price	10p	55p
Exercise price	10p	57p
Interest rate	5%	5%
Volatility	75%	75%
Time to maturity	10 years	10 years

The expected volatility was determined with reference to similar entities trading on AIM.

Details of the share options outstanding at the year end are as follows:

	Number 31 Dec 2014	WAEP* 31 Dec 2014	Number 31 Dec 2013	WAEP* 31 Dec 2013
Outstanding at 1 January	3,556,000	23p	-	-
Granted during year	-	-	3,556,000	23p
Expired during year	-	-	-	-
Lapsed during year	5,000	10p	-	-
Outstanding at 31 December	3,551,000	23p	3,556,000	23p
Exercisable at 31 December	968,895	23p	378,639	23p

* weighted average exercise price.

The weighted average remaining contractual life of the options outstanding at the statement of financial position date is 8.6 years.

Options are exercisable in accordance with the contracted vesting schedules.  Options granted in June 2013 may be exercised in respect of 1/12 of the Option Shares from 1 September 2013 and a further 1/12 of the Option Shares following the expiry of each subsequent 3 month period.   Options granted on the 14^th October 2013 may be exercised 3 years after the date of grant.

Warrants

On 12 August 2013, CentralNic Group executed a warrant instrument to create and issue warrants to Zeus Capital to subscribe for an aggregate of 1,772,727 ordinary shares.  The warrants will expire six years after admission and were exercisable after the first anniversary of admission (2nd September 2014) at the placing price of 55p.  The ordinary shares to be allotted and issued on the exercise of any or all of the warrants will rank for all dividends and other distributions declared after the date of the allotment of such shares but not before such date and otherwise pari passu in all respects with the ordinary shares in issue on the date of such exercise allotment. 

These fair values were calculated using the Black Scholes warrant pricing model.  The inputs into the model were as follows:

	Warrants issued 12 August 2013
Warrants Granted	1,772,727
Stock price	55p
Exercise price	55p
Interest rate	5%
Volatility	75%
Time to maturity	6 years

A charge of £675,409 was recognised in the share premium account in 2013. 

-Ends-

 

END

 

 

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