LONDON (Alliance News) - Minds + Machines on Wednesday reported a significantly wider interim loss as the company warned of an impact to top-line revenue from, a slowdown in "high value" one-off sales.
Shares in Minds + Machines were down 13% at 6.41 pence each following the announcement.
The owner and operator of internet domains widened its pretax loss in the six months ended June to USD14.7 million from just USD505,000 a year before.
The increased loss was primarily due to a management review of inherited contracts resulting in one-off costs of USD11.8 million. The review of historic legacy agreements led to taking an onerous contract provision, resulting in a write-down of USD7.0 million, an associated USD4.1 million reduction in intangible assets, and a USD721,000 restructuring cost.
The company also said moving from the IFRS 9 accounting standard to IFRS 15 led to a USD2.1 million provision. IFRS 15 governs the recognition of revenue and costs from contracts with customers.
Minds + Machines also suffered a USD700,000 one-off cost related to the company's ICM acquisition in June. Minds + Machines acquired ICM, a top level domain name owner, for USD10.0 million cash and 225.0 million consideration shares roughly equivalent to USD20.6 million earlier in the year.
Minds + Machines' revenue increased 22% to USD6.4 million from USD5.3 million a year before, with renewal revenue up 40% to USD3.4 million from USD2.4 million.
Registrations within its portfolio increased 38% year on year to 1.5 million, with a particularly strong growth in the US.
The company remains "cautiously optimistic" about its full-year operating earnings before interest, tax, depreciation and amortisation outcome.
In the period, operating Ebitda almost tripled to USD661,000 from USD238,000.
Chief Executive Officer Toby Hall, however, warned that a " slow-down in high value one-off sales is likely to impact top-line revenues."
"The period has been a transformative time for the company. The strong registration and renewal revenue growth in our existing MMX portfolio, complemented by the ICM acquisition, have contributed to significant revenue growth and a stronger business with an increasingly predictable level of recurring revenues, leading management to expect renewal revenues to surpass the group's full cost base within the next 24 months," said Hall.
He added: "The treatment of certain historic contracts, most notably those inherited by current management, has been addressed enabling a much clearer picture of the company's ongoing progress to be presented in future periods."