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Q&A:
• CEO revealed that CNIC is in a tender process with the UK government for “big contracts” and that RNS should follow when done -> narrative gave me confidence CNIC is in a top position to win
• CEO said that he expects the “first notable impact in Q4” from the Microsoft contract
• Regarding margins, CEO said product mix is expected to consolidate so GP margin should not erode much further
RNS: pretty positive, not much surprise following 1H udpate
• Positive outlook: "at least in line with current market expectations for the full year." Consensus: FY23 Revenue: $ 783 - 834m ; Adj EBITDA: $ 91 - 98m
• "Online Marketing and Online Presence segments, gaining market share"
• Online marketing (c. 77% group revenue) - 1H23 Revenue: +18% yoy ; KPIs were positive: The number of visitor sessions increased by 49% from 3.5 billion for TTM 2022 to 5.3 billion for TTM 2023 and the RPM remained stable at USD 100.
• Online Presence (c. 23%) - 1H23 Revenue +20% yoy ; KPIs were positive: The number of processed domain registration years increased by 7% from 12.0m for TTM 2022 to 12.9m for TTM 2023 and the average revenue per domain year increased by 6% from USD 9.83 to USD 10.46. The share of Value-Added Service revenue TTM 2023 was 7%
• New prime clients despite the current macro backdrop: • Zeropark, CentralNic's commerce media business, has announced three strategic partnerships: 1) becoming a Tier 1 Demand Partner of Sovrn, a leading publisher technology platform. 2) a significant deal with booking.com, the global online travel agency. 3) Klarna, the Buy Now Pay Later platform has become a direct publisher on the Zeropark network ; • Voluum, CentralNic's flagship ad tracker, has announced the launch of a new integration with popular e-commerce platform Shopify, allowing customers to directly feed conversion data from their Shopify stores into Voluum, bolstering their ad, product, and page performance
Remains a strong buy
It is really since that money used for buying shares could have been used to reduce debt. Debt is higher than it would have been had no shares been purchased.
Net debt only rose because of the amount of cash used for the “non-recurring deferred contingent consideration”, so it’s not really a case of buying shares via debt, and one wouldn’t expect this to be the case in H2.
This stock continues to disappoint me. The results were ok, not gleaming. I don't agree in seeing debt increased to buy back shares or pay dividends. It would be wise to clear debts first. I'm sorry to disagree with the last post but selling shares back to the market would be dilution. If a company buys back 10% of its shares, it is likely the sp would rise until fair market value is reached prob 10%. When you reissue those shares a likely share price fall will follow. Seen it before many times. I don't like companies holding shares in treasury, it's a bit of a cheat since one way or another they tend to be reissued. With share buy backs I prefer to see cancellation. This is my largest holding for 2 years and is no where near what I call fair value, but you can't fight the market
Regarding the upcoming CNIC investor presentation, if an II wants to take a stake, CNIC can flip the shares held in treasury for a quick and tidy profit without having to dilute PIs.
Sound business from an astute bod.
The significant increase in profit after tax to 9.4m and the big jump in EPS are the top 2 numbers that make me very pleased. We should get care rating northwards soon surely. Very cheap at current SP / Market value.
Very strong H1 results this morning.
With 11.37c adjusted EPS in H1, CNIC are well on track to beat Zeus's forecast of 21.3c EPS this year, which Zeus themselves say is conservative.
Cash flows remain terrific, if not quite as high as previously, and are expected to normalise higher again in H2 - CNIC would have reduced net debt by almost $21m without the buybacks, divi and deferred consideration.
CNIC themselves state they're trading "at least" in line with expectations, setting up a beat for the year.
I note an increase in the mentions of AI in the statement.......
CNIC remain exceptionally cheap imho given the cash flows, low rating, digital expansion potential etc.
My previous analysis was spot on. I am a little concerned at no follow through at the 130 level. It seems like it might roll over. Hope not. If not no reason why a test of highs later this year
Yep, looking good here, with slow and steady rises each day.
Hopefully the buybacks have finally eliminated any large sellers and buying/news flow from here will have a decent impact.
I have averaged up today, this looks like the first base in an uptrend, and potential cup and handle break out. All the news is good from the company, next stop 138. On the 23rd of February, it went from 130 to 139 in 2 days.
That's a pretty impressive RNSNON:
- Booking.com
- Klarna
- Shopify
- and Sovrn, a "leading publisher technology platform reaching 500 million active consumers each day"
Not a bad list of partners.....
Https://uk.advfn.com/stock-market/london/centralnic-CNIC/share-news/CentralNic-Group-PLC-Continued-Expansion-with-Key/91742825
"7 August 2023
CentralNic Group plc
Integrations
CentralNic Group PLC (AIM: CNIC), the global internet company that derives recurring revenue from privacy-safe, AI-based customer journeys that help online consumers make informed choices, is pleased to announce a series of recent strategic partnerships, achievements, and the overall progress of the Group.
Zeropark (www.zeropark.com), the Commerce Media offering of CentralNic, has now been upgraded to a Tier 1 Demand Partner by Sovrn, a leading publisher technology platform reaching 500 million active consumers each day1. This exclusive status not only reflects the scale of business that Zeropark has achieved with Sovrn, but also underscores CentralNic's continued commitment to compliance, transparency, and a mutual respect for Terms of Service (TOS) and operating practices. As a Tier 1 partner, Zeropark now has access to premium placements that are only available to a select group of Sovrn's most trusted partners.
In addition, Zeropark has secured a significant deal with Booking.com, the global online travel agency which recorded over 600 million website visits in June 20232. This partnership is aimed at increasing vacation bookings on Booking.com through targeted ad campaigns run by Zeropark's media buying team. Using the Zeropark platform, CentralNic will connect high-intent travellers seeking their next getaway directly to Booking.com.
Furthermore, Klarna, the Buy Now Pay Later platform, has become a direct publisher on the Zeropark network. This strategic alignment marks a transformative phase in e-commerce advertising, creating novel opportunities for advertisers and enhancing the product discovery and purchase journey for Klarna's 150 million users3.
Voluum (www.voluum.com), CentralNic's flagship ad tracker, has launched a new integration with the popular e-commerce platform Shopify. This free integration will allow the Company's customers to directly feed conversion data from their Shopify stores into Voluum, bolstering their ad, product, and page performance. Together, Voluum and Shopify aim to provide the necessary tools to millions of entrepreneurs, to enable them to create successful online stores and reach customers online, through mobile applications, and in physical stores.
Michael Riedl, CEO, commented: "These recent strategic alliances are not just partnerships, they are a testament to CentralNic's unwavering commitment to innovation and collaboration. They seamlessly align with CentralNic's strategic objective to work hand-in-hand with industry leaders across all sectors we engage in.
etc"
Not a super fan of technical analysis, but one should acknowledge when a price closes above the 200 moving average.
I would look at CNIC price remaining above the 200MA over the next 2 to 3 sessions for a confirmation that the momentum is a tailwind for the stock... let's go!
Following the excellent trading update CNIC will hopefully be featured in the upcoming issue of Techinvest.
June's issue had a nice summary of the Q1 results and concluded thus:
"CentralNic’s accounts are complicated by the many acquisitions made in recent years and the associated amortisation of intangibles. However, it is reassuring that the acquisitions appear to be working out well, with organic growth across the group continuing to impress (the 46% increase in the quarter looking particularly impressive).
Operating leverage in particular is driving momentum and there should be more to come in this respect as acquisitions are further bedded in and CentralNic continues to win market share in the digital marketing sphere where a strong secular growth trend is unfolding. The directors expressed confidence that the company will trade at least in line with market expectations for the current year.
Trading on a prospective P/E of 6.9 for fiscal 2023, CentralNic’s shares look exceptional value, particularly as debt continues to fall and operational leverage kicks in. We also feel that securing key partnerships with leading technology companies including Google, Amazon and recently Microsoft, is a testament to the strength and quality of the company’s offering. Continue to buy"
ShareSoc is hosting a webinar with CentralNic (CNIC.L) on 06 September 2023, which may be of interest to current shareholders or potential investors. Michael Riedl (CEO) and William Green (CFO) will be presenting. You can register here: https://www.sharesoc.org/events/sharesoc-webinar-with-centralnic6-sep-2023/
Following the H1 update Zeus have raised their EPS forecasts for this year by 2% and by 12% next year.
They now see 21.3c EPS this year, rising to 25.1c EPS next year.
In summary:
"H1 update: Walking the talk
CentralNic provided a solid H1 2023 update, giving the company confidence in delivering 2023 results at least in line with expectations and to continue its share buyback programme. Gross revenue grew c. 31% organically in the LTM to end of H1 2023, with strong performance and market share gains across all business lines. Adjusted EBITDA/net revenue margin was steady and in line with our full year estimate. Adjusted cash conversion was 89% and is expected to improve in H2. Net debt was higher in H1 due to increased share buybacks. At the current share price, we expect material share buybacks to continue.
We raise our 2023 net debt estimate, lower share count and thereby upgrade Adj EPS by 2% in 2023 and 12% in 2024. We expect continued strong earnings performance to drive CentralNic’s low multiples (2023: c.6x EBITDA, c.8x PE) higher."
"Outlook and forecast revisions:
Strong trading in H1 2023 gives the Board confidence that full year results will be at least in line with market expectations. H1 2023 gross revenue is about 48.0% of our full year 2023 estimates, compared to 46.8% in 2022 on a pro forma basis. We leave revenue and profit estimates unchanged. However, we increase our net debt forecast due to increased share buybacks, discussed above. Cash outflows for share buybacks in H1 2022 was $13.7m, already near our original full year forecast of $14.8m.
Given the company plans to continue aggressively buying back shares, we raise our cash outflows for share buybacks and our year-end net debt figure by $38m to $76m. We lower our 2023 weighted average share count by 5.9m to 269.7m, assuming shares are purchased evenly throughout H2 2023 at the current share price. We lower 2024 weighted average share count by 24m shares to 244m, reflecting the full impact of share buybacks in H2 2023.
As a result, we raise Adj EPS by 2% in 2023 and by 12% in 2024. We expect net debt/EBITDA to remain low at 0.8x in 2023, broadly unchanged from 0.7x in 2022.
Valuation: The shares have risen 15% over the last month but remain attractively valued at c.6x EV/ EBITDA, c.8x Adj PE and c.13% FCFE 2023."
Thanks for a really useful – and civilised – discussion, peoples.
Berenberg retain their Buy and 250p valuation:
Https://www.sharecast.com/equity/Centralnic_Group/broker-views
Just catching up having been away for the excellent H1 trading update. Most importantly:
"the Directors remain confident that the Group continues to trade at least in line with current market expectations for the full year."
The "at least" suggests that once again CNIC will beat expectations.
The conclusion of this new Master Investor article says it all:
Https://masterinvestor.co.uk/equities/small-cap-catch-up-cnic-gph-and-dwf/?mc_cid=820afaaa6c&mc_eid=db9f9bbaf2
"I know I can be boring, but these shares really are looking so attractive at present, just look at that massive annual recurring revenue driving its balance sheet.
With the highest guesstimate being 350p, the market’s average consensus Target Price is 260p for the £358m capitalised group’s shares, which at 127p are only trading on 8 times current year earnings – that really is ridiculously cheap in my view."
Last night, Alphabet results were out.
Google’s ad revenue are growing again after a couple of tricky quarters – thanks in no small part to YouTube. Q1: -0.2% ; Q2: +3.3%.
This is very good for CNIC considering its synergetic relationship with Google!
Let's not forget the huge buyback and the progressive dividend policy... for a stock trading at 8x fwd EPS and with a ridiculously easy to beat consensus... c'mon..
Agreed with ggrantsu - having resilience in such tough macro backdrop is a pledge of quality but more importantly, the stock forward growth is pretty low and easy to beat which will lead to upgrade by sell side. Moreover, current low ratings and deep discount to peers really provide downside protection, in other words, if the flat operating momentum was for a stock trading at 30x fwd EPS (as opposide to 8x for CNIC) or 20 EV/EBITDA (as opposide to 5.6x for CNIC) I would be worried. Still, such low rating doesn't pledge for CNIC cash generation and maiden profit. Remain a strong buy in my book
Not meaning to jump in and hijack here...but honestly think not seeing the wood from the trees a little with this. we have just gone through probably the worse half year of ad spend / consumer confidence in 15 years - much of the digital ad market has been posting profit warnings.
i'm not sure single digit organic growth on extremely tough comparables can just be brushed off as underwhelming performance. I for one was expecting sub 180mm in revenue this Q2 given the backdrop. I think some more relative perspective needs to be utilised here...
Plus - we have Microsoft Bing kicking off in Q3/4...that doesn't even seem to be getting factored in across the broker reports.
I have done similar analysis of the pro forma adjustments for the various acquisitions etc, but where I have come too in my head is that you just need to look at the last four quarters, of gross profit, and EBITDA to realise this is not growing anywhere like at the rates highlighted by management
Gross profit: 46m; 49m; 46m; 45m
EBITDA: 23m; 24m; 21m; 23m
Maybe it’s growing +10% organically; more likely it’s flat; maybe it declined in the current quarter. My point is it’s nothing like +30%, unless you include the contribution from acquisitions in periods prior to when they were acquired, which definitionally is a bit iffy.
If revenue is growing organically at 30% then EBITDA should have been growing much faster given the ‘operating leverage’ we are meant to benefit from. The last quarters haven’t really indicated much evidence of that. That’s not too say it doesn’t benefit from it, or that it won’t in the future, I’m just highlighting another inconsistency with the supposed investment case, suggesting perhaps management’s marketing spin has been running a bit ahead of the evidence for a couple of quarters, which is the ‘disappointment’
What do you mean by flat?
I have c. 9.7% organic revenue growth in 1H 2023. Split: Q1 12.2% ; Q2 7.4%
They have made 4 acquisitions as highlighted below from their RNS in 2022.
1. VGL: $55.3m revenues annually or $13.8m per quarter. VGL was acquired on 8th March 2022. So we have 2 additional months of VGL revenue in 2023. That is $9.2 worth of revenues
2. MA Aporia: $35m revenue annually or 8.75m per quarter – as it was acquired in Sep, the whole quarterly revenue is considered inorganic in Q1 2023 and Q2
3. Intellectual property mgmt. $2.74m revenue annually or 0.67m per quarter, and once again the whole quarterly revenue is considered inorganic in Q1 2023 and Q2
4. Portfolio generating websites - similar to the point 3 above , around $0.5m of quarterly revenue and Q2
This totals to c$29.1m of inorganic revenue in 1H2023.
They have reported $396m of revenue in 1H 2023. Or organically they only made $367m (subtracting out the $29.1m of inorganic revenue). 1H 2022 they made $335m of revenue => c9.7% organic growth in 1H 2023. Split: Q1 12.2% ; Q2 7.4%
What I meant by the ‘organic growth disappointment’ is the fact that the information value of the Company’s preferred definition of organic growth is quite low when looking at any quarter and not necessarily reflective of actual current organic growth. So for me at least, it was a disappointment to find out that organic growth has been effectively flat, despite the Company saying it has been 30%+. This was apparent last quarter as well, when growth was flat