CentralNic Group PLC (LON:CNIC) headed higher on Friday morning after the internet domain names specialist announced the €26mln acquisition of Slovakian counterpart SK-NIC and confirmed it is on track to hit full-year expectations.
The acquisition first: CentralNic is paying an initial €21.27mln for SK-NIC – which manages the top-level domain for Slovakia, .sk – plus up to a further €4.85mln in future milestone payments.
The move is part of CentralNic’s strategy to expand into new territories and build up its product offering.
AIM-quoted CentralNic said the purchase, which is set to complete next month, would be double-digit earnings-enhancing in the first full year of ownership.
Given that the majority of Slovakian companies and websites use the .sk domain and 77% of those renew their licences every year, SK-NIC will also increase the visibility and predictability of group revenues.
Importantly, the SK-NIC management team and staff are staying with the business.
“SK-NIC is a major, earnings enhancing acquisition for the group, which is wholly consistent with our growth strategy,” said chief executive Ben Crawford.
“The .sk country code adds a substantial new product and SK-NIC's network of over 2,100 local retailers extends our geographic footprint into an important new market with considerable growth potential.
“The acquisition of SK-NIC moves us another step forward in our strategy to increase substantially the proportion of group revenues generated from recurring revenue streams spread across diversified products, territories and customer types.”
Full-year performance on track
CentralNic is due to report its interims in a couple of weeks but gave investors a little taste of what’s to come today.
Revenue for the six months ended 30 June is expected to come in 19% higher at £10.59mln (H1 2016: £8.93mln), with underlying earnings (EBITDS) jumping 50% to £1.37mln (H1 2016: £908,000) on a constant currency basis.
As for its cash position, that remained healthy at £9.57mln as of the end of June, although CentralNic said it would be dipping into that to pay for some of today’s acquisition.
“Given the consistently heavy second-half weighting of results in recent years, the board is confident that the Company is on track to meet market expectations for the full year to 31 December 2017.
“The company continues to diversify through the acquisition of businesses with high-levels of recurring revenue and take advantage of increased opportunities to trade in valuable premium domain names.”
In early afternoon trading, CentralNic shares were 4.2%, or 2.75p higher at 68.0p.
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