8 Dec 2015 07:13
| 8 December 2015 |
THIS ANNOUNCEMENT AND THE INFORMATION CONTAINED HEREIN IS RESTRICTED AND IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN, INTO OR FROM THE UNITED STATES, AUSTRALIA, CANADA, JAPAN, THE REPUBLIC OF SOUTH AFRICA OR ANY OTHER JURISDICTION IN WHICH SUCH RELEASE, PUBLICATION OR DISTRIBUTION WOULD BE UNLAWFUL.
FURTHER, THIS ANNOUNCEMENT IS MADE FOR INFORMATION PURPOSES ONLY AND DOES NOT CONSTITUTE AN OFFER TO SELL OR ISSUE OR SOLICITATION TO BUY, SUBSCRIBE FOR OR OTHERWISE ACQUIRE SHARES IN CENTRALNIC IN ANY JURISDICTION IN WHICH ANY SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL.
CentralNic Group Plc
("CentralNic") or (the "Company") or (the "Group")
Proposed Acquisition of Instra Group for AU$33 million - Substantial Transaction
Conditional Placing of 25 million Ordinary Shares to raise £10 millionPosting of Circular to Shareholders & Notice of General Meeting
Sale of Premium Domains
CentralNic, the internet platform business which derives revenues from the global sale of domain names, is pleased to announce that it has conditionally agreed to acquire the entire issued share capital of the companies forming the Instra Group for a total consideration of AU$33 million, consisting AU$30 million in cash and AU$3 million in shares in CentralNic Group plc. The total consideration will be adjusted for working capital balances at completion.
The Company also announces a firm placing with institutional investors to raise approximately £10 million before expenses (the "Placing") through the issue of 25 million new Ordinary Shares of 0.1p each at 40 pence per share. The Placing received demand from new and existing institutional investors.
Acquisition Highlights
• Instra Group is a privately owned domain name retailer serving the global market with customers in the majority of countries.
• Instra Group supplies its customers with domain names for over 150 country codes (the equivalents of .co.uk for over 150 countries) as well as for all new Top-Level Domains available to consumers.
• The company offers three main services; (i) domain portfolio registration allowing corporate clients to build websites and protect their brands online all over the world; (ii) domain names and website hosting for small businesses and individuals; and (iii) white label domain sales platforms.
• The Acquisition will extend CentralNic's capabilities and provide access to new growth markets.
• It will significantly increase CentralNic's retail offering.
• Instra Group has strong recurring revenues at circa 57%, high margins and is profitable and cash generative.
Placing Highlights
• CentralNic intends to raise approximately £10 million before expenses through a placing by Zeus Capital and Peel Hunt of 25 million new ordinary shares of the Company of 0.1 pence each at a price of 40 pence per share.
• The Placing Shares and the Consideration shares will represent approximately 30.9% of the Company's issued share capital following Admission.
Terms in this announcement which are not defined herein shall have the same meanings as in the Circular to Shareholders of the Company dated 8 December 2015.
CentralNic also announces that it has entered into a premium domain name sales agreement for a number of domain names from its portfolio, under which it will receive consideration of US$3.6 million in cash, which will be utilised to further accelerate growth within the Group, including the Instra Group acquisition, acquiring additional premium domains to augment the existing portfolio and assisting the Group's expansion into high growth markets, as well as facilitating the Group's diversification strategy.
CentralNic is trading in line with market expectations.
Ben Crawford, CentralNic's CEO commented:
"This has been a year of growth for CentralNic from both an operational and financial perspective, and this deal is transformative for the Group as we continue on our growth strategy. Instra Group is a fast growing, robust and global business and we look forward to integrating Instra into CentralNic. This acquisition will grow our current revenues by 70% and extend our retail capabilities to serve customers in the fast growing emerging markets, globally. We are delighted with the support shown by both new and existing investors for this Placing."
-Ends-
For further information:
CentralNic Group Plc |
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Ben Crawford (CEO) | +44 (0) 203 388 0600 |
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Zeus Capital Limited- Nomad and Joint Broker |
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Ross Andrews / Nick Cowles | +44 (0) 161 831 1512 |
John Goold /Alex Davies | +44 (0) 207 533 7727 |
Peel Hunt LLP - Joint Broker |
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Richard Kauffer / Euan Brown (Corporate) | +44 (0) 207 418 8900 |
Alastair Rae (ECM Syndicate) |
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Abchurch Communications |
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Jamie Hooper / James Burman | +44 (0) 20 7398 7714 |
centralnic@abchurch-group.com | 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 the global leader by volume 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.
Introduction to the acquisition of Instra Group
CentralNic, the internet platform business which derives revenues from the global sale of domain names, is pleased to announce that it has conditionally agreed to acquire the entire issued share capital of the Companies forming the Instra Group for a total consideration of AU$33 million.
The total consideration will be satisfied by the issue of new ordinary shares (consideration shares) with an aggregate value of AU$3 million and the balance in cash. Of the cash payment, AU$5 million will be held in escrow and released in tranches of AU$1 million over the next five years. The cash consideration will be funded through the combination of existing cash resources of CentralNic, a £3.5 million term loan, the net proceeds of the Placing and cash from Premium domain name sales.
The Acquisition
Instra Group is a privately owned domain name retailer serving the global market. Instra Group supplies its customers with domain names for over 150 country codes (the equivalents of .co.uk for over 150 countries) as well as for all new Top-Level Domains available to consumers. The business was founded in 1997 and is run from offices in Melbourne, Australia and Napier, New Zealand. Instra Group's full management team will remain with the business post Acquisition.
Instra Group offers domain portfolio registration for corporate clients that require domain names for websites, brand protection and online traffic acquisition. The company also provides domain names and website hosting for small businesses through its OnlyDomains brand. It has also developed an advanced white-label reseller platform which should enable future channel development.
Instra Group has six retail brands targeting various businesses in a number of different markets:
· Instra Corporation
· Asia Registry
· Europe Registry
· America Registry
· Africa Registry
· OnlyDomains
Unaudited financial information on Instra Group
Instra Group is cash generative and benefits from recurring revenue streams as clients pay upfront for one to ten year usage of a domain name, then continue to pay renewal fees for continued usage.
Revenues are derived from most countries in the world, notably including high growth markets such as Brazil, India and China.
Unaudited financial information is as follows:
y/e 30 June AU$'000 | 2015 | 2014 | 2013 |
Revenue | 14,837 | 13,468 | 11,291 |
Cost of Sales | (8,840) | (8,103) | (6,896) |
Gross Profit | 5,997 | 5,365 | 4,394 |
Gross Margin % | 40% | 40% | 39% |
Administrative Expenses | (3,670) | (3,231) | (2,688) |
Operating Profit | 2,327 | 2,134 | 1,706 |
Adjusted EBITDA | 2,231 | 2,003 | 1,860 |
EBITDA Margin % | 15% | 15% | 16% |
Profit Before Tax | 2,171 | 1,966 | 1,784 |
The financial information is presented on a proforma basis for the business activities that specifically relate to the domain name retail business being acquired, having applied CentralNic's accounting policies. These activities will remain in the Instra Group post-completion of the Acquisition and as such the financial information presents the most relevant view to the reader of the historic financial performance.
Highlights of note from the financial information include
· Revenue reflects retail revenues invoiced, adjusted for the deferral of registration revenues. In the year ended 30 June 2015, AU$2,395,000 of revenues were deferred having applied CentralNic's accounting policy to comply with International Financial Reporting Standards.
· There is a consistent trend of double-digit revenue growth in recent years.
· Before the application of revenue deferrals, billed revenues increased by 14% in 2015, and by 17% in 2014.
· After the application of revenue deferrals, revenue increased by 10% in 2015 and by 19% in 2014.
· Gross profits and margins reflect revenues less wholesale costs of domains, IT costs and staff costs.
· Gross margins have been consistent across the last three years.
· Administrative expenses are largely fixed, with the exception of advertising expenditure which has increased in each of the last three years to support growth in revenues.
Cashflow from operations totalled AU$3,686,000 in 2015 (AU$3,666,000 in 2014) and net cashflow
AU$2,415,000 in 2015 (AU$2,991,000 in 2014).
Acquisition rationale
The Acquisition will give CentralNic new capabilities and access to new growth markets. Instra Group adds a number of capabilities required to deliver CentralNic's growth strategy including:
· A comprehensive inventory of domain names allowing international companies to protect their brands by registering domain names in all major global markets;
· Proven expertise in successfully entering growth markets;
· Excellence in user-interface design;
· A multi-lingual customer service call centre;
· Additional products such as SSL certificates and website hosting;
· A white label retail service suitable for corporate customers; and
· An increasingly strong presence in the Asia-Pacific region and emerging markets.
Integration strategy
CentralNic plans to consolidate all its retail websites into the Instra Group. An implementation plan is in place, and the Company intends to:
· Implement technical integration, including IT platform consolidation using CentralNic's expertise in automation;
· Supply Instra Group's full inventory of domain names through CentralNic's other retail businesses;
· Upgrade the marketing and User Interface design of CentralNic's existing retail sites;
· Offer Instra Group's shared hosting to CentralNic's existing retail clients;
· Combine global sales and account management to upgrade services for Instra Group's corporate customers;
· Service CentralNic's current retail customers with Instra Group's call centre;
· Combine Instra Group's expertise in emerging market retail with CentralNic's domain name wholesaling capabilities to enjoy the benefits of vertical integration; and
· Upgrade Instra Group's financial reporting and associated procedures.
It is anticipated that the existing management team will remain with Instra Group following completion of the Acquisition. Desleigh Jameson, Instra's Chief Executive, is expected to join the Board of CentralNic (proposed Director) following completion of the Acquisition.
The Company has also announced the appointment of Iain McDonald this morning as Non-executive Director.
Synergies
The Directors believe the Acquisition will result in significant revenue synergies expected to generate an additional £1.2m of EBITDA annually from 2017.
Revenue synergies will derive from a number of areas including the global roll-out of the Instra Corporate White Label retail offering using CentralNic sales staff around the world and Instra's call centre selling services to CentralNic clients.
Cost synergies will be driven through the consolidation of support centres into Napier, New Zealand, consolidation of IT platforms and elimination of operational roles and functions from the UK where they are duplicated in the Instra Group.
While there are some cost synergies, there will also be incremental compliance costs. The Directors believe the savings will largely be offset by additional costs of integration and implementing additional compliance controls.
Details of the proposed placing
On behalf of the Company and within the terms of the placing agreement entered into today between Zeus Capital and Peel Hunt (the "Joint Brokers"), the Directors and the Company (the "Placing Agreement"), the Joint Brokers have conditionally placed an aggregate of 25 million Placing Shares at a price of 40 pence per Placing Share with certain institutional investors to raise £10 million (before expenses). The Placing Price represents a discount of 30.4% to the closing mid-market price of shares in the Company at 7 December 2015, the latest practicable date prior to the publication of this announcement. The Placing Shares and the Consideration Shares will represent approximately 30.9% of the issued share capital of the Company. The Placing proceeds will be used to finance the Acquisition.
The Placing Shares and the Consideration Shares will, following Admission, rank in full for all dividends and other distributions declared, made or paid in respect of the issued Ordinary Share capital of the Company and otherwise rank pari passu in all other respects with the Existing Ordinary Shares.
The Placing Agreement contains customary warranties from the Company in favour of the Joint Brokers in relation to, inter alia, the accuracy of the information in this announcement and other matters relating to the Group and its business. In addition, the Company has agreed to indemnify the Joint Brokers in relation to certain liabilities it may incur in respect of the Placing. The Joint Brokers have the right to terminate the Placing Agreement in certain circumstances prior to Admission, in particular, in the event of a material breach of the warranties or a material adverse change or if the Placing Agreement does not become unconditional.
The Placing is conditional upon, amongst other things, Admission of the Placing Shares becoming effective and the Placing Agreement becoming unconditional in all respects by no later than 8.00 a.m. on 30 December 2015 or such later date (being not later than 5:30 p.m. Melbourne time on 15 January 2016) as the Company and the Joint Brokers may agree. Application has been made to the London Stock Exchange for the Placing Shares to be admitted to trading on AIM. It is expected that Admission of the Placing Shares will occur and that dealings will commence at 8.00 a.m. on 30 December 2015. It is expected that Admission of the Consideration Shares will occur and that dealings will commence on completion of the Acquisition.
The Placing is not underwritten.
Sale of Premium Domain Names
CentralNic has entered into a premium domain name sales agreement for a number of its domain names from its portfolio, under which it will receive consideration of US$3.6 million in cash, which will be utilised to further accelerate growth within the Group, including the Instra Group acquisition, acquiring additional premium domains to augment the existing portfolio and assisting the Group's expansion into high growth markets, as well as facilitating the Group's diversification strategy.
Current trading
CentralNic announced its half year results for the six month period ended 30 June 2015 on 15 September 2015, reporting revenue growth across all 3 divisions of the Group.
Following completion of the Acquisition and the Sale of Premium Domain Names, the Directors expect cash on the balance sheet at the end of December 2015 to be in excess of £4 million.
The Directors confirm CentralNic's trading is in line with market expectations for the year ending 31 December 2015.
General Meeting
A circular regarding the Placing and Acquisition and a notice convening the General Meeting to be held at DWF LLP, 20 Fenchurch Street, London, EC3M 3AG, on 29 December 2015 will be posted to Shareholders today. A copy of the Circular will be available on the Company's website at www.centralnic.com.
Recommendation
The Board believes the Acquisition and the Placing to be in the best interests of the Company and its Shareholders as a whole. Accordingly, the Board unanimously recommend Shareholders to vote in favour of the Resolutions as they intend so to do in respect of their aggregate shareholdings amounting to 39,417,854 Existing Ordinary Shares, representing 58.8% of the Existing Ordinary Shares.
Total Voting Rights
In accordance with the provisions of the Disclosure and Transparency Rules of the Financial Conduct Authority, the Company confirms that, following the issue of the Placing Shares and the Consideration Shares, its issued share capital will comprise approximately 97,007,481 ordinary shares of 0.1 pence each. All of the ordinary shares have equal voting rights. The total number of voting rights in the Company post admission is therefore estimated at 97,007,481.
This figure may be used by shareholders as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change to their interest in, the share capital of the Company under the Disclosure and Transparency Rules.
DEFINITIONS
The following words and expressions shall have the following meanings in this announcement, unless the context otherwise requires:
"Acquisition" the proposed acquisition of Instra Group
"Adjusted EBITDA" the Earnings before Interest, Taxation, Depreciation, Amortisation, share based payments and non-cash charges
"Admission" the admission to trading on AIM of the Placing Shares and, Consideration Shares becoming effective in accordance with Rule 6 of the AIM Rules
"AIM" the AIM market operated by the London Stock Exchange
"AIM Rules" the rules for AIM companies as published by the London Stock Exchange from time to time
"Board" or "Directors" the directors of the Company
"Circular" the Circular posted to Shareholders of the Company dated 8 December 2015
"Company" or "CentralNic" CentralNic Group Plc, a public company limited by shares in England and Wales with company number 8576358 whose registered office is 35-39, Moorgate, London, EC2R 6AR
"Consideration Shares" estimated at up to 5 million new Ordinary Shares (assuming that such shares are issued at the Placing Price) potentially to be issued by the Company to satisfy part of the consideration of the Acquisition, conditional on the passing of the Resolutions
"Enlarged Share Capital" the entire issued Ordinary Share capital of the Company immediately following Admission of the Placing Shares and the Consideration Shares
"Existing Ordinary Shares" 67,007,481 Ordinary Shares currently in issue as at 7 December 2015 (being the latest practicable date prior to the publication of this announcement)
"Form of Proxy" the form of proxy for use at the General Meeting which accompanies the Circular
"General Meeting" the general meeting of the Company, notice of which is set out in the Circular
"Group" the Company, its subsidiaries and its subsidiary undertakings
"Instra Group" the Instra Group consists of a group of 16 companies and their
subsidiaries including:
Instra Corporation Pty Limited
Domain Directors (Europe) Ltd
Instra Corporation Limited
Private Ranger Limited
Only Domains Limited
White Label Domains SDN BHD B12
Domain Directors Pty Ltd
Domain Directors (Finland) OY
Domain Directors (France) SARL
Instra Corporation (Europe) Ltd
Sublime Technology Limited
Europe Registry Ltd
Sublime Technologies (France) SARL
Tunglim International Pty Limited
Ozenum Pty Ltd
Domain Directors CA Inc
"London Stock Exchange" London Stock Exchange plc
"Notice of General Meeting" the notice of the General Meeting, which is set out in the
Circular
"Ordinary Shares" ordinary shares of 0.1 pence each in the share capital of the
Company
"Peel Hunt" Peel Hunt LLP, a limited liability partnership with registered number OC357088 whose registered office is at Moor House, 120 London Wall, London EC2Y 5ET
"Placing" the placing of the Placing Shares by Zeus Capital and Peel Hunt pursuant to the Placing Agreement
"Placing Agreement" the conditional placing agreement entered into between the Company, Zeus Capital and Peel Hunt on 8 December 2015
"Placing Price" 40 pence per Placing Share
"Placing Shares" 25 million new Ordinary Shares to be issued by the Company conditional on the passing of the Resolutions
"Registrars" CAPITA Asset Services at PXS 1, 34 Beckenham Road, Beckenham, BR3 4TU
"Resolutions" the resolutions to be proposed at the General Meeting, as set out in the Notice of General Meeting
"Shareholder(s)" holder(s) of Ordinary Shares
"UK" or "United Kingdom" the United Kingdom of Great Britain and Northern Ireland
"US" or "United States" the United States of America
"Zeus Capital" Zeus Capital Limited, a private company limited by shares with company number 4417845 whose registered office is at 82, King Street, Manchester M2 4WQ
PLACING STATISTICS
Placing Price 40p
Number of Existing Ordinary Shares 67,007,481
Number of Placing Shares to be issued pursuant to the Placing 25,000,000
Gross proceeds of the Placing £10,000,000
Estimated net proceeds of the Placing (excluding VAT) Approximately £9,250,000
Number of Consideration Shares to be issued up to 5,000,000
Total number of Ordinary Shares in issue at Admission 97,007,481
Percentage of the Enlarged Share Capital represented
by the Placing Shares and the Consideration Shares 30.9%
AIM Symbol CNIC
ISIN GB00BCCW4X83
EXPECTED TIMETABLE OF PRINCIPAL EVENTS
2015
Announcement of Placing and date of Circular 8 December
Latest time and date for receipt of Form of Proxy 10.00 a.m. on 23 December
General Meeting 10.00 a.m. on 29 December
Admission and dealings in the Placing Shares are expected to commence on AIM 30 December
Notes:
1. The statistics above assume the passing at the General Meeting of the Resolutions and Admission.
2. For the purposes of calculating the statistics above, it is assumed that the maximum number of Consideration Shares are allotted at the Placing Price, however, the actual price is subject to the agreed terms of the Acquisition with the price to be determined as at the date of completion.
3. Some of the times and dates above are indicative only and if any of the details contained in the timetable above should change, the revised times and dates will be notified to Shareholders by means of an announcement through a Regulatory Information Service.
4. All of the above times refer to London time unless otherwise stated.
5. Events listed in the above timetable following the General Meeting are conditional on the passing at the General Meeting of the Resolutions.