CNIC.L Regulatory News (CNIC)

30 November 2020

CENTRALNIC GROUP PLC

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

NINE MONTHS ENDED 30 SEPTEMBER 2020 FINANCIAL RESULTS

Significant Year-on-Year Increases in Revenues and Adjusted EBITDA

CentralNic Group Plc (AIM: CNIC), the global internet platform that derives revenue from the worldwide sales of internet domain names and related web services, is pleased to announce its results for the nine months ended 30 September 2020. Both revenue and Adjusted EBITDA have increased year-on-year, driven by a combination of acquisitions and underlying organic growth.

Nine months Financial Summary:

· Revenue increased by 118% to USD 168.5m (Sep 2019 YTD: USD 77.1m)

· Net revenue/Gross profit increased by 74% to USD 53.3m (Sep 2019 YTD: USD 30.6m)

· Adjusted EBITDA* increased by 68% to USD 22.1m (Sep 2019 YTD: USD 13.1m)

· Operating profit increased to USD 1.9m (Sep 2019 YTD: USD 0.1m)

· Cashflow from operations up to USD 13.5m (Sep 2019 YTD: USD (0.3)m) with adjusted operating cash conversion of 93%

· Net debt** as at 30 September 2020 stood at USD 44.9m (gross debt of USD 108.6m, cash of USD 63.6m including USD 37.3m raised in September to acquire the assets of Codewise but not yet deployed) versus USD 35.9m in the prior year (gross debt of USD 54.9m, cash of USD 19.0m)

*Excludes impact of share-based payments expense for options, foreign exchange charges, and non-core operating costs

** Includes gross cash, debt and prepaid finance costs.

CentralNic made four acquisitions in H2 2019, and the Company has prepared a pro forma comparable financial summary including all businesses currently controlled by CentralNic, a definition of which is provided in footnote *** below, to enable effective comparison of 2020 with 2019 and show more clearly the organic growth within CentralNic's businesses.

Financial Organic Summary on a pro forma basis***:

· Revenue increased by 17% to USD 169.9m (pro forma YTD Sep 2019: USD 145.1m)

· Gross profit increased by 10% to USD 55.2m (pro forma YTD Sep 2019: USD 50.0m)

· Adjusted EBITDA* increased by 4% to USD 22.2m (pro forma YTD Sep 2019: USD 21.4m) notwithstanding notable investment in scalability and future organic growth

Operational Highlights:

· Record organic growth of 17% on a pro forma*** basis despite the COVID-19 crisis.

· All staff and systems remained fully operational with no interruption to the supply chains

· Healthy demand for our two largest service lines, Wholesale domains and most importantly Monetisation - the latter also driven by the rollout of a patented SSL monetisation solution

Financial Highlights:

· Completion of earn-out for the Team Internet acquisition, with a EUR 2.7 million payment in June 2020

· In July 2020, EUR 1.3m of deferred consideration for SK-NIC was settled with a maximum of EUR 1.7m still to be paid

· Conversion of the share premium account into a distributable reserve in August 2020

· The final deferred consideration payment of EUR 2.7m for Hexonet was made in August 2020 by issuing 3.2m new ordinary shares

· The final deferred consideration payment of EUR 0.45m for GlobeHosting was paid in August 2020

· Successful placing of 40 million shares at a price of GBP 0.75 per share for total net proceeds of approximately USD 37.3m

Post half nine months period highlights:

· Completion of acquisition of Zeropark and Voluum businesses for USD 36 million

· Settlement of KeyDrive 2019 earnout for USD 2.2m, paid 15% in cash and 85% by issuing 1.7m consideration shares. A further earn out of up to USD 1.4m of may still be earned.

Outlook

· The first nine months of strong organic growth demonstrates the Company's resilience despite the economic crisis, and the ability to drive value by executing an accelerated buy and build strategy

· New product launches and further integration activities will support and potentially improve revenue growth and margins in future periods

· We continue to assess a number of opportunities to continue our successful consolidation strategy, in what is a large, globally fragmented and growing market

· Having achieved strong results in the first nine months of 2020, management is confident that the full year results should be in line with management expectations

Ben Crawford, CEO of CentralNic, commented: "In the first nine months of 2020 CentralNic's reported revenue exceeded our cumulative reported revenue for financial years 2018 and 2019 combined. These outstanding results not only demonstrate that CentralNic can source and complete transformative acquisitions, but that it can also integrate them successfully while delivering double digit organic growth. Moreover, as we scale up rapidly, the underlying CentralNic qualities of high recurring revenues and excellent cash conversion become increasingly meaningful.

"Our pipeline of future deals remains strong and we consider our net debt level to be comfortable given the profitability of the existing CentralNic Group and the expected contribution from recent acquisitions, which together will lead to a reduction over time, absent further acquisition activity. We have also brought a number of new senior managers onboard to drive our organic growth and we are confident in continuing our trajectory towards joining the ranks of the global leaders in our industry."

*** Given that the Group has made a number of key strategic acquisitions in 2019, we have estimated unaudited pro forma information to provide period to period comparison of performance. In doing so, we have made the following assumptions (a) figures are provided for the entire comparative period, irrespective of when the acquisition by the Group arose (b) adjustments have been made to the currency rates used for the comparative period to the most recent balance sheet date to harmonise the impact of currency fluctuations (c) the impact of unwinding the deferred revenues relating to the period prior to 1 November 2018 arising from change of the terms of conditions, as well as identified material non-cash or one-off revenues, have been excluded to ensure period to period comparability (d) adjustments have been made, as appropriate, to ensure GAAP comparability between periods. Differences to reported figures result.

For further information:

Forward-Looking Statements

This document includes forward-looking statements. Whilst these forward-looking statements are made in good faith, they are based upon the information available to CentralNic at the date of this document and upon current expectations, projections, market conditions and assumptions about future events. These forward-looking statements are subject to risks, uncertainties and assumptions about the Group and should be treated with an appropriate degree of caution.

About CentralNic Group Plc

CentralNic (AIM: CNIC) is a London-based AIM-listed company which drives the growth of the global digital economy by developing and managing software platforms allowing businesses globally to buy subscriptions to domain names, used for their own websites and email, as well as for protecting their brands online. These platforms can also be used for distributing domain name related software and services, an opportunity that contributes significantly to CentralNic's organic growth. The Company's inorganic growth strategy is identifying and acquiring cash-generative businesses in its industry with annuity revenue streams and exposure to growth markets and migrating them onto the CentralNic software and operating platforms. 

CentralNic operates globally with customers in almost every country in the world. It earns recurring revenues from the worldwide sales of internet domain names and other services on an annual subscription basis. 

For more information please visit: www.centralnicgroup.com

CHIEF EXECUTIVE OFFICER'S STATEMENT

Introduction

CentralNic's organic growth, combined with its 2019 and 2020 acquisitions substantially increased the scale and capabilities of the Company. The effect of this is fully demonstrated in our first nine months' 2020 results which show a transformational increase in revenues and adjusted EBITDA, both of which have grown by 118% and 68% respectively against the comparative period for 2019. This is before the impact of the acquisition of the Zeropark and Voluum businesses, which completed after the balance sheet date of this report.

Performance Overview

The Company has performed strongly during the nine months period with the key financial metrics listed below:

1 Excludes impact of share-based payments expense for options, foreign exchange charges, and non-core operating costs

2 Please refer to note 10

On a pro forma basis, as defined in footnote *** above, the Company grew revenue by 17% organically during the nine months period ended 30 September 2020, as compared with the nine months period ended 30 September 2019 performance on a pro forma basis from USD 142.8m to USD 170.8m.

Team Internet represented a significant proportion of the strong performance in the period. The acquired businesses have similar patterns of recurring revenue and cash conversion as CentralNic's prior business, and hence recurring revenue and cash conversion are expected to remain in line with the long-term trend. This underpins the Company's financial stability and visibility of earnings. The decrease in average gross margin from 40% to 32% reflects the change in the revenue mix as a result of the 2019 acquisitions. Each individual business maintained its margins, and the marginal drop of gross margin on a proforma basis from 34.4% to 32.5% is explained by the Monetisation business growing faster than the remainder of the Group.

Segmental Analysis

Indirect segment

We achieved significant scale in our Indirect segment, with revenues increasing by USD 21.5m or 51%, from USD 41.9m to USD 63.5m, chiefly driven by the acquisition of TPP Wholesale in July 2019 and Hexonet Group in August 2019. On a pro forma*** basis, revenue increased by USD 4.9m or 8% from USD 60.3m to USD 65.2m.  

During the period, the Company successfully completed a number of key integration tasks within its Indirect segment, most notably the migration of all .au domain names from the Webcentral (formerly Arq group) platform to CentralNic's central domain procurement engine, leading to estimated future annualised savings of USD 350,000 on cost of sales.

At the same time, CentralNic continued to develop its reseller key accounts with six of the top ten customer accounts having increased their spend compared with the first nine months of 2019, in one instance by 63%.

Direct segment

Revenue in the Direct segment decreased by 9%, from USD 35.1m to USD 32.1m. The decrease was largely due to the diminishing impact of the November 2018 change in terms and conditions, the reallocation of the data center business to the Indirect business and the reallocation of the monetisation activities to the Monetisation segment. The acquisition of Ideegeo contributed favorably to growth. On a pro forma basis, revenue declined by USD 0.6m or 2% from USD 32.5m to USD 31.8m.

Management is positive that the segment will return to growth with further client wins, and a healthy pipeline of prospective clients.

Monetisation

The fastest growing segment of CentralNic's business was Monetisation, which is for the first time presented as a separate segment. On a pro forma basis, revenue increased strongly by USD 20.5m or 39% from USD 52.4m to USD 72.9m.

Revenue growth has been driven mostly by an increase in the average yield ("RPM") by 36%. This is a result of both superior traffic quality subsequent to pruning of the publisher base as well as the rollout of Team Internet's patented SSL monetisation technology. At the same time, the number of page visits increased by 2%, explaining the remainder of the outstanding performance.

Outlook

In the first nine months of 2020 CentralNic delivered higher revenue than for the whole of 2018 and 2019 combined and reported a 17% growth on a pro forma*** basis. Having achieved strong results in the first nine months of 2020, management is confident that the full year results should be in line with management expectations.

These outstanding results demonstrate that CentralNic can source and complete transformative acquisitions, but more importantly that it can also integrate them successfully while continuing to deliver organic growth. Moreover, as we scale up rapidly, the underlying qualities of high recurring revenues and excellent cash conversion become increasingly meaningful.

Our pipeline of future deals remains strong and our net debt level remains comfortable, particularly given the profitability of the existing CentralNic Group and the expected contribution from recent acquisitions. We are confident in continuing our trajectory towards joining the ranks of the global leaders in our industry.

Ben Crawford

Chief Executive

All amounts relate to continuing activities.

(a) Earnings before interest, tax, depreciation and amortisation, acquisition costs, non-cash charges and non-core operating expenses

(b)  Non-core operating expenses include items related primarily to acquisition, integration and other related costs, which are not incurred as part of the underlying trading performance of the Business, and therefore adjusted for, in line with Group policy.

 (c) The comparative figures have been restated to reclassify the foreign exchange differences arising from foreign currency borrowings amounting to USD 3,885,000(net) and USD 2,410,000 from administrative expenses to finance costs and other comprehensive income respectively.

(d) The comparative figures have been restated to reclassify the foreign exchange differences arising from foreign currency borrowings amounting to USD 485,000 from administrative expenses to Other Comprehensive Income.

(e) As at 30 Jun 2020, the Silicon Valley Bank term loan has been extended for a further six months and is now repayable in December 2020. It is therefore reflected in current liabilities.

(f) During the period ended 30 September 2020, as resolved by the Annual General Meeting on 4 June 2020 a capital reduction has been completed subsequent to its approval by the High Court and its registration by the Companies House effective 14 August 2020. The Capital Reduction is effected by the cancellation of the Company's share premium and thereby increased the distributable reserves.

· 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.

· Merger relief reserve represents the cumulative excess of the fair value of consideration received for the issue of shares in excess of their nominal value less attributable shares issue costs and other permitted reductions.

· Retained earnings 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 exchange translation reserve represents the cumulative exchange differences arising on Group consolidation.

· Foreign currency hedging reserve represents the effective portion of changes in the fair value of derivatives.

· The non-controlling interests comprise the portion of equity of subsidiaries that are not owned, directly or indirectly, by the Group. These non-controlling interests are individually not material for the Group.

.

NOTES TO THE FINANCIAL INFORMATION

1. General information

CentralNic Group Plc is the UK holding company of a group of companies which are engaged in the provision of global domain name services. The company is registered in England and Wales. Its registered office and principal place of business is 4th Floor, Saddlers House, 44 Gutter Lane, London, England, EC2V 6BR.

The CentralNic Group provides subscription services on a global scale to domain names and associated digital subscription products through Indirect and Direct channels as well as Monetisation services.

2. Basis of preparation

The condensed interim financial information for the nine month period ended 30 September 2020 is unaudited and has been prepared on the basis of the accounting policies set out in the Group's 2019 statutory accounts in accordance with the Group's bond terms and, for all periods presented, in line with the principal disclosure requirements of Accounting Standard IAS 34 Interim Financial Reporting.

The condensed interim consolidated financial statements do not represent statutory accounts within the meaning of section 435 of the Companies Act 2016. The financial information for the year ended 31 December 2019 is based on the statutory accounts for the year ended 31 December 2019. Those accounts, upon which the auditors issued an unqualified opinion, have been delivered to the Registrar of Companies and did not contain statements under section 498(2) or (3) of the Companies Act 2006.

The accounting policies adopted are consistent with those of the previous financial year and corresponding interim reporting period, except for the estimation of income tax, and the adoption of new and amended standards and accounting policies as set out below.

As a profitable provider of online subscription services with high cash conversion and solid organic growth, decentrally organised and catering to solid customers distributed over the entire globe, we do not expect CentralNic to be severely affected by COVID-19. The Directors have taken the necessary precautions to preserve the Group's cash and review the acquisition pipeline and financing plans to ensure stability and optimisation of the business strategies in the current global climate.

3. New and amended standards adopted by the Group

In the current reporting period, the Group has applied amendments to IFRS. These include annual improvements to IFRS, changes in standards, legislative and regulatory amendments, changes in disclosure and presentation requirements. The adoption of these has not had any material impact on the Group's financial statements and the accounting policies adopted by the Group in the interim report are consistent with the most recent Annual Report for the year ended 31 December 2019.

The International Accounting Standards Board published an amendment to IFRS 16 (''Covid-19 Related Rent Concessions''), in which they provide an accounting policy choice to the lessees to apply practical relief for rent concessions arising as a result of the COVID-19 pandemic. This amendment has not yet been endorsed by the European Union and did not impact the Interim Report September 2020.

4. Critical accounting judgments and key sources of estimating uncertainty

In the application of the CentralNic Group's accounting policies, the Directors are required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not apparent from other sources. The estimates and assumptions are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

The following are the key assumptions concerning the future and other key sources of estimation uncertainty at the statement of financial position date that have a significant risk of causing a significant adjustment to the carrying amounts of assets and liabilities in the financial statements:

Impairment Testing

The recoverable amounts of individual non-financial assets are determined based on the higher of the value-in-use calculations and the recoverable amount, or fair value less costs to sell. These calculations will require the use of estimates and assumptions. It is reasonably possible that assumptions may change, which may impact the Directors' estimates and may then require a material adjustment to the carrying value of tangible and intangible assets.

The Directors review and test the carrying value of tangible and intangible assets when events or changes in circumstances suggest that the carrying amount may not be recoverable. For the purposes of performing impairment tests, assets are grouped at the lowest level for which identifiable cash flows are largely dependent on cash flows of other assets or liabilities. If there are indications that impairment may have occurred, estimates of expected future cashflows will be prepared for each group of assets.

Expected future cash flows used to determine the value in use of tangible and intangible assets will be inherently uncertain and could materially change over time.

Estimation of useful life

The charge in respect of periodic amortisation and depreciation is derived after determining an estimate of an asset's expected useful life. The useful lives of the assets are determined by management at the time the asset is acquired and are reviewed continually for appropriateness.

Software development costs

The Group accounts for costs incurred to develop software for internal use as per IAS 38 and capitalises the costs incurred during the application development stage which include costs to design the software configuration and interfaces, coding, installation, and testing. Costs incurred during the preliminary project stage along with post-implementation stages of internal use software are expensed as incurred. Capitalised development costs are amortised over their expected economic useful life. Costs incurred to maintain the existing software are expensed as incurred. The capitalisation and ongoing assessment of recoverability of development costs requires considerable judgement by management with respect to certain external factors, including, but not limited to, technological and economic feasibility, and estimated economic life.

Deferred Consideration

The fair value of the contingent deferred consideration arising on business combinations is a key area of accounting estimate. Judgement was exercised in determining the fair value of the deferred consideration in the KeyDrive acquisition, as described in note 15.

5. Significant accounting policy

a) Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for services provided in the course of ordinary activities, net of discounts and sales related taxes.

Revenue from the sale of services is recognised when the performance obligations are met under the customer contract In particular:

(i) Indirect Sale of services for domain names to registrars (formerly reported as Reseller)

Indirect revenues are derived from their customer base, registrars, via the following three channels:

(a) Reseller channel - Revenues are derived by facilitating the sale of domain names and associated digital subscription products to registrars by acting as a wholesale platform provider.

(b) Registry Operator channel - CentralNic is an asset holder for Country Code TLD .SK, and therefore generates revenues through sale of domain names of .SK extension to registrars

(c) Registry Service Provider channel - These revenues are generated from the provision of services through the registry service provider mechanism. CentralNic operates as a back-end service provider for third-party Top Level Domains on an exclusive basis, enabling the registrars to sell domain names to registrants.

In accordance with IFRS 15, each segment evaluates the representation of the underlying customer contracts with the registrars and identifies the performance obligation that is required to be met under the customer contract. Determining the transaction price and allocating the transaction price to the performance obligation is done is also considered, followed by the fulfilment of the performance obligation, therefore leading to the revenue recognition of the sale.

For the Reseller channel, upon evaluation of the customer contract, the registry channel has performance obligations that are met at point of sale of the domain name. An invoice under this division could cover the license to utilise the domain name for a fixed term period which could vary between one and ten years, however, all performance obligations are met at the point of sale, and therefore no revenue is deferred.

For the Registry operator revenues and Registry service channels, upon evaluation of the customer contract, the registry channel has several performance obligations that need to be met over the term of the domain name sale. An invoice under these divisions could cover the sale of a domain name for a fixed term period which could vary between one and ten years, and the performance obligations are expected to be fulfilled over the course of this term on a straight-line basis. Revenues that relate to the period in which the services are performed are recognised in the income statement of that period, with the amounts relating to future periods being deferred into ''deferred revenue''.

(ii) Direct sale of services for domain names to domain registrants (formerly reported as Small business and Corporate Services)

For the Direct segment, upon evaluation of the customer contract, the registrar channel has performance obligations that are met at the point of sale of the domain name. An invoice under this segment could cover the license to utilise the domain name for a fixed term period which could vary between one and ten years, however, all performance obligations are met at the point of sale, and therefore no revenue is deferred.

Direct revenues are generated from the provision of retail and similar services to domain registrants. The sub revenue streams would be those of new registrations and renewals. Revenue originates when a transaction is generated on the service registry platform by the customer.

Revenue from the provision of computer software to a customer is recognised when the Group has delivered the related software and completed all of the adaptions required by the customer for either the whole contract or for a specific milestone deliverable within the contract. The revenue is recognised at the point of fulfilment of the performance obligation, in line with the customer contract.

Revenue from strategic consultancy and similar services is recognised in profit and loss in proportion to the stage of completion of the performance obligation at the reporting date. The stage of performance obligation fulfilment is determined based on completion of work performed to date as a percentage of total services to be performed.

(iii) Monetisation services

In the Monetisation segment, CentralNic places third party advertising ("Advertisers") on domain names held by third parties ("Publisher") not yet or not intended to be developed into website. Revenues are recognized after a chargeable click on the Advertiser's advertisement placed on a Publisher's domain name or a chargeable redirect from a Publisher's domain name to an Advertiser's website are registered.

The acquisition of Team Internet AG and other transformative acquisitions during 2019 have altered the business mix of the Group which have resulted in the restatement and reclassification of the Group segmental reporting. At 30 June 2020, certain restatement and reclassification have been made to the segmental reporting analysis of CentralNic Group for the period and financial year ended 30 June 2019 and 31 December 2019 respectively to enhance comparability with the current year's Interim Report ended 30 June 2020. These restatement and reclassification have had no impact on the Group reported Consolidated Statement of Comprehensive Income, Consolidated Statement of Financial Position and Consolidated Statement of Cash Flow. As result, comparative figures in note 6 Segmental Analysis have been adjusted to conform to the Interim Report presentation and the formerly reported segments have been restated and reclassified as follows:

Segments reclassification

(a) Indirect, materially consistent with the former Reseller segment,

(b) Direct, combining the former Small Business and Corporate segment

(c) Monetisation, due to its materially enlarged weight warranted its own segment

 The segments restated were as follows:

b) Foreign currency translation

Functional and presentation currency

Items included in the financial statements of each of the CentralNic Group's entities are measured using the currency of the primary economic environment in which the entity operates. The Condensed Consolidated Financial Statements are presented in USD given that more than half of its trade is in US Dollar and the industry in which it operates is predominantly trading in US Dollars.

Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at balance sheet date exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement, except when deferred in equity as reserve for exchange rate adjustments.

In the Condensed Consolidated Statement of Comprehensive Income, the comparative figures for the period ended 30 June 2019 and financial year ended 31 December 2019 have been restated to reclassify the foreign exchange differences arising from foreign currency borrowings from administrative expenses to finance costs and other comprehensive income respectively. The Directors believe that this change of presentation provides more reliable and relevant information to the users of the Interim Report about the effect of the transaction and the financial performance of the Group. The change has had a material impact on the Group reported Consolidated Statement of Comprehensive Income, Consolidated Statement of Financial Position and Consolidated Statement of Cash Flow for the period ended 30 September 2019 and financial year ended 31 December 2019, please refer to the footnote in the Condensed Consolidated Statement of Income for further details of the reclassification and presentation. Following this change of accounting policy and in order to be in conformity with IAS 21.32, future foreign exchange differences arising on the translation of foreign currency borrowings will be recognised in other comprehensive income and accumulated in a separate reserve '' Foreign exchange translation reserve'' in equity.

Change of functional currency

On 1 January 2020, CentralNic Group PLC, the Parent Company changed its functional currency from GBP to EUR. The change was made to reflect that EUR has become the predominant currency in the company, counting for a significant part of the company's foreign currency borrowings. The change has been implemented with prospective effect and comparatives have not been restated. The change in functional currency will significantly reduce the volatility of the Parent Company's exposure to foreign currency exchange movement, in particular due to translation of foreign currency borrowings.

The exchange rates used were as follows:

6. Segment analysis

CentralNic is an independent global service provider distributing domain names and associated digital subscription products through Indirect and Direct channels as well as Monetisation services to domain name owners. Operating segments are prepared in a manner consistent with the internal reporting provided to the management as its chief operating decision maker in order to allocate resources to segments and to assess their performance.

The Directors do not rely on segmental cash flows or analysis of segment assets and liabilities arising from the operating, investing and financing activities for each reportable segment for their decision making and have therefore not included them. As described in note 5, there has been a restatement and reclassification of the Group's segmental reporting and therefore the comparatives have been updated. The segmental analysis is organised around the products and services of the business.

The Indirect segment is a global distributor of domain names and provides consultancy services to retailers. The Direct segment provides domain names, ancillary services to end users, monitoring services to protect brands online, technical and consultancy services to corporate clients, licencing of the Group's in house developed registry management platform, also on a global basis. The Monetisation segment provides advertising placement services, sale of domain name and data traffic management services on a global basis.

Management reviews the activities of the CentralNic Group in the segments disclosed below:

7. Revenue

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

The Indirect segment has one customer that represents more than 10% of the segment's revenue during the period amounting to USD 7.5m.

The Direct segment has no customer that represents more than 10% of the segment's revenue during the period.

The Monetisation segment has one customer that represents more than 92% of the segment's revenue during the period amounting to USD 66.9m.

8. Non-core operating expenses

(1) Other costs include items related primarily to business reviews and restructuring expenses.

9. Finance costs

(1) Details on the impact of deferred consideration on the Finance costs is discussed in detail in note 15.

(2) The finance costs for the financial year ended 31 December 2019 have been restated to reclassify the foreign exchange loss on the revolving credit facility revaluation from administrative expenses to reflect the appropriate IFRS accounting treatment as per IAS 23.

10. Income tax expense

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 the CentralNic Group are as follows: