What CentralNic does
CentralNic Group PLC (LON:CNIC) is a provider of registry services for internet domains, a string of characters (e.g. ‘.com’, ‘.net’, or ‘.gov’) used to identify administrative authority or control of different websites online.
CentralNic is headquartered in London but also has offices in New York, Dubai and Los Angeles with account executives in Hong Kong, Abu Dhabi and Melbourne.
What it owns
CentralNic operates its own proprietary registry engine that uses in-house IT systems to distribute its portfolio of domains across a network of 1,500 registrars such as domain retailer GoDaddy.
The firm also owns domain name technology firm KeyDrive, which it acquired last year in a reverse takeover for an initial sum of US£35.8mln.
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.
Four acquisitions were made recently: KeyDrive, Hexonet, TPP Worldwide and Team Internet.
How it’s doing
In its results statement covering the year ended December 31, 2019, CentralNic celebrated a record year with revenue up 95% to US$109.2mln from US$56.0mln in 2018; excluding the effect of acquisitions, revenue rose 61% year-on-year. Adjusted underlying earnings (EBITDA) were up 96% to US$17.9mln from US$9.1mln the previous year.
Net finance costs rose to US$7.76mln from US$1.43mln, resulting in the loss before tax widening to US$8.12mln from US$1.43mln in 2019. Net cash ﬂow from operating activities after tax was higher than the previous year at US$16.3mln (2018: US$8.8mln).
Investing activities were mainly related to the four acquisitions completed during the financial year. The net cash outflow totalled US$79.4mln in 2019 as compared with US$17.6mln in 2018 when the KeyDrive acquisition was largely financed through an issue of equity.
The group’s cash balance at the end of 2019 stood at US$26.2mln, up from US$23.1mln a year earlier while net debt, including pre-paid finance costs, had expanded to US$75.0mln from US$3.2mln a year earlier.
- The company recently reshuffled its leadership with a number of new appointments and director changes
- In March, the group hailed a turnaround of its Team Internet business, which it acquired at the end of 2019, which recorded revenue of US$74.0mln and adjusted underlying earnings (EBITDA) of US$12.3mln between 1 January 2019 through to 24 December 2019 compared to revenue of US$66.7mln and EBITDA of US$10.6mln in the 12 months to 30 June 2019
- Acquisitions have been flowing and more seem likely
- KeyDrive had led to a “significant improvement” in the quality of company earnings
What the analyst says
Following a capital markets event in June, analysts at Edison forecast CentralNic revenue to almost double this year to US$203mln and to rise again to US$214mln in 2021, while profits are tipped to reach US$18.9mln on a normalised basis this year and US$23.4mln a year later.
“CentralNic continues to trade on an FY20 EV/EBITDA of 9.1x and a P/E of 15.8x, a material discount to its peer group, with our DCF indicating further share price upside. M&A could bring CentralNic’s multiples down further,” the research note said.