Centralnic Share Discussion Threads

[petes5] 27/2/2023 10:45

I give up (this might be a lie however). Great results from 2 companies this am and nothing happens. Two weeks ago 2 others i owned the results were not good. Sold out and pleased i had got with a small loss. Both went up and still going.These are strange times and very confusing. Looks like the only way is to follow the heard and go short term trading but i struggle to do this. Or perhaps i should just sell up and retire.

[boadicea] 27/2/2023 10:33

It seems clear enough that the dividend is intended to be a permanent faeture -
"This reflects a greater emphasis on returns to shareholders IN FUTURE."

[k8 rhm] 27/2/2023 09:16

That's exactly how I see it Diesel...and what a platform of fundamentals they have to do this.

[adamb1978] 27/2/2023 09:15

I dont see the dividend as one-off. I'd expect an interim dividend, say 0.5p in mid 2023, so that you see 1p total in FY22, followed by 1.5p in FY23 and then perhaps 10% growth p.a. thereafter

[diesel] 27/2/2023 09:04

It’s clear that the new CEO is keen to return shareholder value, the share buyback provided a temporary blip to share price a one off divvy will do the same. An announcement of a continuing dividend policy will change the profile and target investors. Debt reduction is one of the main contributors to shareholder perception and should be a draw to those who are debt averse.
All in all they are setting out a maturing company with reduced risk to a debt and acquisition profile. These will see new highs within the next few weeks.

[davebowler] 27/2/2023 08:54

Zeus-
Growth opportunities ahead
CentralNic delivered 2022 results slightly ahead of our upgraded estimates and expects to surpass expectations for the year ahead. Strong gross margins indicate that signs of increased competition or pricing pressure in the Online Marketing division are limited. Indeed, the division’s organic growth accelerated to 86% from 65% in 2021. The company’s strong growth appears set to continue, particularly with a new management team that is more focused on developing new growth opportunities. We believe CentralNic’s outstanding growth and track record of earnings outperformance are not factored into its shares’ low multiples.

Expanding margins, reducing net debt and maiden dividend: Revenue was $728m, exactly in line with our forecast, and pro forma EBITDA was $86.0m, slightly ahead of our upgraded forecast of $85.2m. CentralNic benefited from scale in 2022, with pro forma EBITDA/ net revenue margin rising to 48% in 2022 from 39% in 2021. SG&A fell to 13% of sales from 18% in 2021. Adjusted EPS was 20.1 cents, slightly ahead our forecast of 19.9 cents. Adjusted operating cash conversion was 110%, leading to net debt falling to $56.6m, broadly in line with our estimate of $56.8m. As a result, the company reduced financial leverage (net debt including deferred consideration/ pro forma EBITDA) to only 0.9x from 2.2x at the end of 2021. Strong results and outlook have led CentralNic to propose a dividend of 1.0p for the year.

Outstanding growth: CentralNic delivered 60% organic revenue growth accelerating from 37% in 2021. The company indicated that the Online Marketing division is “largely decorrelated from the softer performance reported by some of the major online marketing players”. The division accelerated organic growth to 86% from 65% in 2021, predominantly driven by TONIC. Strong gross margins indicate signs of increased competition and pricing pressure are limited. Gross margin was 22.0% in H2 2022, up from 21.5% in H1 2022. Divisional KPIs show the company continues to benefit from the ban of third-party cookies in browsers. The number of visitor sessions increased 77% from 2.6bn in 2021 to 4.6bn in 2022 and the revenue per thousand sessions (called “RPM” by CentralNic) increased 37% from $76.40 to $105.00.

The Online Presence division continued to grow reliably, delivering 4% organic growth in 2022. The company processed 2% fewer domain registrations (12.3m v 12.6m) as it avoided lower margin, high volume transactions. As a result, the fall in registrations was more than offset by 5% increase in average revenue per domain year from $9.40 in 2021 to $9.90 in 2022.

Developing growth opportunities: Encouragingly, the new management team appears more focused on developing new growth opportunities. We see opportunities for new products to vertically integrate and diversify its customer base and geographic reach in TONIC and VGL, respectively. The company expects to surpass 2023 expectations. However, we conservatively leave our recently upgraded profit estimates (+4% EBITDA) unchanged, given the early stage in the year.

Underrated: CentralNic trades at only 5.5x 2023 EBITDA and 8.0x PE, at the bottom of its peer group range, despite having a FY22 FCFF yield of 13.7% and delivering strong growth and earnings outperformance. In our view, the current valuation is at odds with the substantial cash generation that we forecast.

[adamb1978] 27/2/2023 08:50

Some other smaller points after looking at the results in more detail:

- the gross margin decline in recent years seems to have largely stopped with H2 GM being on 20 bps below H1
- interest costs in FY23 will be materially lower partly as a result of debt being lower, but also that they've fixed half their facility at 3.92%
- there's a reasonable bump to the FY22 results to come from some FY22 acquisitions
- on the downside, the share count will be higher in FY23 from H2 FY22 acquisitions

My guesstime is that FY23 EPS will be north of 20p, and I have it in the 21p-22p range so a FY23 PE of 6.5x and double-digit FCF yield. I assume relatively benign organic growth too.

Think its a very safe hold and I'd say it has 100% upside from here over a year or two

Adam

[rivaldo] 27/2/2023 08:48

Everyone knew the results were going to be good, and the share price rose nicely in the run-up to this morning. So I suspct there are quite a few traders/short-termers who are happy with their small but quick profit and who have now exited.

In which case the rise so far today is actually pretty encouraging! With the pullback now to a 2.5p rise today, hopefully this will be a base from which CNIC can continue to re-rate to where it should be, which imo is certainly over 200p and probably nearer to 250p as per some broker valuations.

Particularly given that now a number of investment funds who aren't able to invest in anything which doesn't pay a dividend will now be able to invest in CNIC.

[jeanesy] 27/2/2023 08:43

Disappointing but predictable reaction to results following recent trading patterns.

[niklol] 27/2/2023 08:25

Positive thoughts!

[doobz] 27/2/2023 08:19

Niklol I know what you're saying but I've also seen much less impressive results and seen things really fly. I just don't get it here anymore. Anyway time will see it right let's hope

[niklol] 27/2/2023 08:15

Know what you're saying but so many companies give good updates and share price goes down so I'm happy it's up!!!!!

[doobz] 27/2/2023 08:11

Another disappointing initial reaction, deserved to gap up over at least 10% imo classic cnic

[rivaldo] 27/2/2023 07:43

A VERY interesting comment from Zeus Capital in thheir update today:

"The company expects to surpass 2023 expectations".

They've "conservatively" left their forecasts unchanged for the moment, but this comment is revealing from the house broker since it's not explicitly stated in the results AFACS.

Hsduk101, Zeus note the following as regards the excellent cash flows and subsequent low net debt ratios:

"Adjusted operating cash conversion was 110%, leading to net debt falling to $56.6m, broadly in line with our estimate of $56.8m. As a result, the company reduced financial leverage (net debt including deferred consideration/ pro forma EBITDA) to only 0.9x from 2.2x at the end of 2021."

[hsduk101] 27/2/2023 07:25

Whats is there total debt(Inc acquisitions) against Cash and EBITDA at now?

[robsy2] 27/2/2023 07:23

Yes, the key words for me are,

"Whilst early into the new financial year, we anticipate 2023 will see yet another year of robust growth and shareholder returns. We remain committed to delivering outstanding value to our shareholders, and we are confident of another successful year.

Given this confidence, I am pleased to announce that the Directors intend to propose paying a maiden dividend of 1.0p for the year 2022 to the AGM to be held in late April. This is the next step of our plan of returning cash to shareholders, following the completion of our maiden share buyback programme in early 2023. I look forward to keeping you updated on our progress throughout 2023."

[rivaldo] 27/2/2023 07:20

Lovely - a surprise maiden 1p dividend :o))

The results are miles ahead of Edison's upgraded forecasts and even slightly ahead of Zeus's more recently upgraded forecasts in terms of EBITDA and EPS.

Adjusted 20.01c EPS puts CNIC on a historic P/E of just 8.4.

Most importantly, the outlook statement is as positive as ever - "we are confident of another successful year".

Net cash flows from operating activities are a whopping $77.5m, and EBITDA margins have increased beautifully to 48% from 39%.

Some might not like the familiar adjustments from the headline numbers, but imo it's the cash flows and the performance of the core business which is all-important, and these are outstanding, together with the huge recurring income.

[niklol] 27/2/2023 07:17

Yes excellent RNS

[niklol] 27/2/2023 07:16

Yes excellent RNS

[adamb1978] 27/2/2023 07:15

Yes, fine at first glance.20 cents EPS put this on a historic PE of

[doobz] 27/2/2023 07:06

That'll do :)

[earwacks] 26/2/2023 22:56

O good I stand corrected. It’s not a situation which I feel is imminent with CNiC. Probably announce first dividend tomorrow!

[yf23_1] 26/2/2023 20:11

Think you may be wrong there.
"Treasury shares are ordinary shares which the company acquired from shareholders. While the company is listed as the owner of the treasury shares, it is not allowed to exercise the right to attend or vote at meetings, and no dividends may be paid to the company".

The treasury shares can be used for employee stock options etc. Cancelling the shares reduces the shares issued (which includes treasury shares) and reduces shares outstanding (which doesn't include treasury shares).

[earwacks] 26/2/2023 18:25

Azaman . Providing the shares they buy back are not cancelled they would earn a dividend if one was being paid, like all ordinary shares. I’ve a feeling £1.30 - £1.60 is the new trade range. This could be breached if the results show even more growth with any additional share purchasing by the company. Any hostile bid seems unlikely to be successful at this stage of the game. I asked Ben about this before Christmas and he said apart from their own holdings he is confident that other institutional owners would fight off an unwanted challenge. Of course depends how desperate a predator is as there is clearly a lot more value here than the market is giving it credit for

[doobz] 26/2/2023 11:56

2 much larger trades at end of day as well, more confidence