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News from 2017

Top-level domain specialist CentralNic Group PLC (LON:CNIC) revealed revenues more than doubled last year and underlying earnings increased 65% as it set out strategy to capitalise on that stellar growth.

Turnover advanced 110% in the 12 months to December 31 to £22.1mln with two-thirds of 2015’s sales recurring in 2016.

EBITDA moved to £5.5mln from £3.3mln previously, while CentralNic was sitting on cash of £7.3mln at the period end.

The scale of the recent achievement is best illustrated by how the top line has grown since 2013, when the business was turning over just £5.5mln.

“Following the rapid scaling up of our operations in 2016, we have made a pleasing start to 2017,” said chief executive Ben Crawford, updating on current trading.

“We have additional sales resources, new licences to help grow our business in China, new TLDs launching and opportunities to sell software licenses and enterprise services.”

CentralNic is a wholesale, retail and enterprise supplier of domain names and other, associated services.

For the uninitiated the top-level domain (TLD) is the label given to the very last section of an internet name, located after the last dot – so suffixes such as .com, .org and .gov.

Back in 2011 a body called the Internet Corporation for Assigned Names and Numbers (ICANN) ended the restrictions on naming TLDs, ushering many new era for companies such as CentralNic that had prepared properly for this revolution.

Domains using the new TLDs rose from 11mln at the beginning of last year to 27mln at the end with CentralNic riding this wave. It is now the number-one provider with market share by volume currently around 32%, up from 20%.

The Chinese market accounted for 60% of all new top-level domain sales globally and the AIM-listed company was the biggest non-domestic wholesale provider there with exclusivity over .xyz, .site, .ink and .design.

Joining the world leaders

CentralNic’s longer-term vision is to “join the ranks of world leaders in its industry, which include a number of multi-billion-dollar companies”.

It also sees consolidation opportunities and chances to broaden its “service offering”.

Its growth strategy will focus on developing and scaling up its software platforms, while concentrating on growth areas including China.

Acquisitions are also, potentially, on the cards but they must “meet clear strategic criteria including being earnings accretive in the short term with a strong recurring revenues base”.

“With support from our investors, we look forward to continuing the evolution of our business in 2017, scaling up to meet the demand for domain name services as it grows globally,” said CEO Crawford.

Broker’s take on the stock

Zeus Capital said CentralNic’s financial performance was in line with expectations, although it thinks forecast revenues of £25.7mln and adjusted EBITDA of £6.5mln for the current year may prove a little “prudent”.

The shares marked time at 47p each. On a forward earnings multiple of 11.7-times, the stock trades at a significant discount to its peers, pointed out Zeus analyst John Wilson.

“Given the growth prospects of the business, coupled with the strong operating cash flow characteristics, the impressive track record being built by management via successful acquisitions and the diversification of the business, we feel the shares offer investors a value opportunity given the industry backdrop, where CentralNic’s listed peers are typically capitalised in the billions of dollars,” he said in a note to clients.