35-39 Moorgate
London
EC2R 6AR
www.centralnic.com
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Annual Report
2017
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Highlights
“
I am pleased to report on another year of growth
at CentralNic, as the Group took further steps in its
strategy to build a diversified internet services
business of size and scale, through an acquisitive
roll-up programme which delivers high-levels of
recurring revenues, quality of earnings and
strong cash generation.
Mike Turner, Chairman
”
• CentralNic is now the world’s fifth largest
Registry provider, managing 5.2 million
domain names with 104 exclusive
Registry contracts.
• Acquisition of SK-NIC, the manager
of the exclusive country code top-level
domain for Slovakia, for a maximum cash
consideration of €25.7m (£22.6m).
• Revenue (10%), gross profit (28%),
adjusted EBITDA (20%) and profit after tax
(7%) all show a year-on-year improvement,
a pleasing achievement for the Group.
• Don Baladasan joined the Board on
24 July 2017 as Chief Financial
Officer, bringing significant M&A and
integration experience.
• Exclusive wholesaler contract with
XYZ.com, owner of the .xyz Top-Level
Domain (“TLD”), renegotiated for a
term running until May 2032.
• CentralNic was recognised as the best
performing company in the Infrastructure
Services category of the Megabuyte
Quoted25 awards.
Financial highlights for 2017
Revenue
£24.3m
FY 2016: £22.1m
Recurring revenues* as a
percentage of total revenue
84%
FY 2016: 81%
Gross profit
£9.8m
FY 2016: £7.7m
Gross margin
40%
FY 2016: 35%
Adjusted EBITDA**
£6.6m
FY 2016: £5.5m
Profit after tax
£1.02m
FY 2016: £0.96m
10%
2%
28%
16%
20%
7%
* Includes revenues from domain registrations, domain renewals, and
other recurring revenues stated before deferrals.
** Earnings before interest, tax, depreciation and amortisation, acquisition
costs, exceptional items and non-cash charges.
Contents
Highlights
CentralNic Group at a glance
CentralNic Divisions
Wholesale Division
Retail Division
Enterprise Division
Chairman’s statement
Chief Executive’s report
Strategic report
Chief Financial Officer’s report
1
2
4
5
6
7
8
10
13
16
Board of Directors 20
Directors’ report 22
Corporate governance 26
Remuneration report 29
Independent Auditors’ report 32
Financial statements 37
Particulars of subsidiaries and associates 78
Shareholder information 80
Glossary 82
CentralNic Group Plc Annual Report 2017
1
CentralNic Group at a glance
Our Group
CentralNic Group Plc (LSE: CNIC) (“CentralNic”) is a global leader in the
domain name industry. It sells domain names and website products
to every type of internet user in over 250 countries. With nearly
100 people across the globe, CentralNic comprises 3 distinct
divisions: Wholesale, Retail and Enterprise.
Our Markets
The domain name industry touches
anyone that operates a website.
With an estimated 200 million live websites online
in 2017 and double-digit growth year-on-year,
the domain name industry is active in every
country with unrestricted internet access.
Our Strategy
To build a business of size that delivers strong economies of
scale through organic growth and by acquiring similar businesses,
which demonstrate:
• high levels of recurring revenue
• quality of earnings
• strong cash conversion
Group Revenue 2017
£24.3m
Group EBITDA 2017
£6.6m
Group Revenue 2016
£22.1m
Group EBITDA 2016
£5.5m
2 CentralNic Group Plc Annual Report 2017
Business Footprint
Group HQ
Wholesale Office
Retail Office
Enterprise Office
Wholesale Division
With proprietary technology underpinning over 100 domain registries,
the division distributes domain names through an integrated network
of third party retailers to over 200 countries.
Retail Division
Sells and manages
domain names and
related services directly
to internet users in more
than 250 countries.
Enterprise Division
Markets domain names and related
products, including domain portfolio
management, brand protection,
consultancy services and
software licences to
corporations and
global brands.
Wholesale Division
Retail Division
Enterprise Division
Group
Recurring Revenue 2017
£19.2m
Recurring Revenue 2017
83.6%
Recurring Revenue 2016
£17.2m
Recurring Revenue 2016
81.3%
CentralNic Group Plc Annual Report 2017
3
CentralNic Divisions
Retail
Enterprise
Wholesale
4 CentralNic Group Plc Annual Report 2017
Wholesale Division
CentralNic’s Wholesale Division is a leading distributor of
registries’ domain names, on an exclusive basis, through
retailers globally – the only distributor with six of the top
twenty new TLDs on its platform. The three most important
contributing factors behind this achievement are the Division’s
leading technology platforms, its extensive range of support
services and its integrated network of global retailers.
Every Top-Level Domain extension, such as .com, .org
and .co.uk has an exclusive wholesaler (known as a
“registry backend”). CentralNic’s registry backend supports
over 100 registries across all five categories of domain
name extensions:
• Country Code Top Level Domain extensions (ccTLDs)
such as .la, .cx and .fm;
• Generic Top-Level Domain extensions (gTLDs)
like .xyz and .online;
• “Sponsored” Top-Level Domain extensions for
a specific purpose such as .coop, the internet
designation for cooperatives;
• “DotBrand” Top-Level Domain such as .stc for Saudi
Telecom Corporation, which uses CentralNic’s registry
back-end platform to power domains not for sale but
for the rights holder’s own use;
Domain Extensions exclusively using the CentralNic
platform in 2017
COUNTRY CODE TOP-LEVEL DOMAINS
.FM .PW .SK
COUNTRY CODE TOP-LEVEL DOMAINS
(DISTRIBUTED VIA CENTRALNIC SOFTWARE)
.LA .CX .AM
SECOND-LEVEL DOMAIN EXTENSIONS
.AE.ORG .BR.COM .CN.COM .CO.COM
.CO.NL .CO.NO .COM.DE .COM.FM
.COM.SE .DE.COM .EDU.FM .EU.COM
.GB.NET .GOV.FM .GR.COM .HU.NET
.IN.NET .JP.NET .JPN.COM .MEX.COM
.NET.FM .NZ.BASKETBALL .ORG.FM .RADIO.AM
.RADIO.FM .RU.COM .SA.COM .SE.NET
.UK.COM .UK.NET .US.COM .US.ORG
.WEB.IN .ZA.BZ .ZA.COM
GENERIC TOP-LEVEL DOMAINS
.ART .BAR .BASKETBALL .COLLEGE
.DESIGN .FANS .FEEDBACK .FRL
.FUN .GENT .HOST .INK
.LOVE .OBSERVER .ONLINE .OOO
• Second-Level Domain extensions (SLDs) such as
.PRESS .PROTECTION .REALTY .REIT
.uk.com and .us.com;
CentralNic’s registry backend platform enables retailers
around the world to sell an increasing range of internet domain
names and associated products. It also handles billing and
cash collection on behalf of its registry clients – which hold the
rights to the domains that CentralNic distributes. CentralNic
also supports its registry clients with value added services
such as policy advice and sales and marketing. CentralNic’s
registry backend continues to maintain an uptime which
consistently exceeds the required standards set by industry
regulator ICANN.
CentralNic’s registry backend platform integrates with around
1,500 retailers globally. Through them, the distribution channel
reaches out to over 100,000 resellers. In recent years, China
has been one of CentralNic’s most buoyant markets. This
reflects a business development and operational focus on
China that has positioned the Company to benefit from the
unprecedented demand for domain names in that market.
CentralNic’s DNS system, which powers the domains, is a
global network of nameservers. With 60 locations distributed
around the world, CentralNic’s DNS handles over 1 Billion
queries per day. The DNS assures the stability, security and
resilience of all the domain names supported by CentralNic.
This vital system has maintained its unblemished record of
100% uptime for 21 consecutive years.
.RENT .REST .SECURITY .SITE
.SPACE .STORAGE .STORE .TECH
.THEATRE .TICKETS .WEBSITE .WIKI
.XYZ
NEW GENERIC TOP-LEVEL DOMAINS CONTRACTED
BUT NOT LAUNCHED
.CONTACT .FAN .FORUM .PID
.RUGBY
SPONSORED TOP-LEVEL DOMAINS
.COOP
“DOTBRAND” TOP-LEVEL DOMAINS
.ADAC .DELOITTE .DHL .EPOST
.KPN .LIDL .LPL .LPLFINANCIAL
.MEO .SAPO .SCHWARZ .SFR
.SMART .STC .STCGROUP .VIVA
.WME
Wholesale
Revenue 2017
£4.7m
Wholesale
Revenue 2016
£3.2m
% Recurring
Revenue 2017
87.1%
% Recurring
Revenue 2016
99.2%
Wholesale
EBITDA 2016
£1.2m
Wholesale
EBITDA 2017
£2.1m
CentralNic Group Plc Annual Report 2017
5
Retail Division
CentralNic’s Retail Division manages around 1 million domain
names and associated products. The division retails domain
names to customers in over 250 countries globally through its
24 online retail brands and websites. The division boasts one
of the widest range of domain extensions offered by retailers in
the industry. These domain extensions include around:
150
country code TLDs
(e.g. .uk)
250
country code variants
(e.g. .co.uk)
400
generic TLDs
(e.g. .com)
In addition, the Retail Division supplies products associated
with domain names such as website hosting and website
security certificates. The division’s various brands address
demand from many customer segments including:
Retail customers – that purchase domain names and
associated products for non-business related websites.
Small Medium Sized Businesses (SMBs) – Self-service
small business customers that purchase several domain
names and associated products e.g. website hosting
and SSL certificates typically for an online shop or
informational website which gathers visitor information.
Midcap Corporations – Mid-sized businesses which
register and maintain a portfolio of domain names and
associated products such as SSL Certificates.
Resellers and Registrars – Business customers that
purchase domain names for resale to their own
customers. Companies such as IP law firms, web
designers and website hosting companies are often
resellers of domain names. Other ICANN Registrars
also purchase domain names from CentralNic Retail
in situations where they do not hold a direct
accreditation with a registry.
Domain Professionals – Industry professionals that
trade in domain names or purchase domain names
on behalf of clients.
Retail
Revenue 2017
£15.6m
Retail
Revenue 2016
£14.3m
Retail
EBITDA 2016
£2.4m
Retail
EBITDA 2017
£2.7m
% Recurring
Revenue 2017
100%
% Recurring
Revenue 2016
99.9%
6 CentralNic Group Plc Annual Report 2017
CentralNic Retail Division brands
Global Brands
Instra is a Retail Division brand focused on self-
serve midcap corporate customers and resellers.
It provides a full suite of domain extensions as well
as corporate focused business products such as
Domain Trustee Services. It also offers dedicated
account management and expert support.
Only Domains is an online brand focused on retail
and self-serve small businesses globally. It provides
a wide range of domain names at competitive prices
as well as associated products to help customers
build and publish websites.
Customer
Type
Customer
Type
Customer
Type
Internet.bs is focused on the SMB and internet
professionals segments, such as hosting
and web design companies. It provides a range of
popular domain extensions at highly competitive
prices. Target customers typically require “trade”
pricing and sophisticated tools for managing large
domain name portfolios on behalf of third parties.
Geographically focused retail brands
CentralNic’s geographically focused brands
specialise in providing competitively priced regional
domain names and associated products to internet
users within a specific geography.
Customer
Type
Customer
Type
Domain extension focused retail brands
Other Retail Division brands websites each specialise
in marketing domains under a single Top-Level
Domain to a global audience. These brands also sell
value-added products and services such as hosting,
email and website builders.
www.buy.menu
www.buydomains.london
www.centralnicfintech.com
www.cymrudomains.com
www.laodomains.la
www.tickets.domains
www.registrar.vuelos
www.domain.build
www.domain.luxury
www.domains.asia
www.register.reit
www.centralnicdomains.com
www.domains.bar
www.domains.rest
www.la
www.whatdomain.la
www.registrar.hoteles
www.store.art
www.join.law
www.roar.basketball
Enterprise Division
The enterprise market is gaining in importance in the domain
name industry, and CentralNic is addressing this market in
several ways.
DotBrands
CentralNic provides technical services to companies seeking
their own “DotBrand” TLDs. These are a newly introduced type
of Intellectual Property (“IP”) which allows brands and company
names to occupy the Top-Level of domain names previously
restricted to country codes and generic terms like .com. Unlike
trade marks, this new form of IP can be operated by a company
exclusively, globally and in perpetuity. Therefore, DotBrands have
attracted significant interest in the corporate sector.
DotBrand clients which use CentralNic’s technical and
consulting services include Global 1000 companies such as
Saudi Telecom Company, Etisalat and Kuwait Finance House.
Corporate domain management
Through its high-quality workflow management platform for the
registration and management of domain names, CentralNic
addresses the domain management needs of corporate
clients. The platform can be used as an in-house solution by
enterprise clients, or as technology enabling corporations with
large SME customer bases to monetise those customers by
selling them domain names.Some of the largest corporations
in the German-speaking markets, such as Telcos and
publishing houses, use CentralNic’s corporate domain
management platform. CentralNic has successfully started
introducing it to other geographical and vertical markets.
Premium Domain Names
Like many of its peers, CentralNic realises an enterprise
revenue stream from trading in premium domain names. These
are particularly favoured by large companies for a number of
uses. They may correspond to a company brand name, they
may be easily memorable and marketable (like a two-letter
.com domain or a common word), or they may already benefit
from internet traffic comprising potential customers.
CentralNic trades in its own portfolio, with approximately
56,500 premium domain names (with values ranging from a
small premium over normal retail pricing to seven figure sums).
It also brokers premium domain sales for third parties in
exchange for a commission.
CentralNic is also a shareholder in and distributor of the
.tickets TLD. This innovative new use of a top-level domain
is intended to allow venues, artists, sports teams and other
rights holders to retail tickets direct to consumers, while giving
consumers the comfort of knowing that any website using
a .tickets domain is legitimate.
Enterprise
Revenue 2017
£4.1m
Enterprise
Revenue 2016
£4.6m
% Recurring
Revenue 2017
19.8%
% Recurring
Revenue 2016
15.3%
Enterprise
EBITDA 2016
£2.8m
Enterprise
EBITDA 2017
£2.8m
CentralNic Group Plc Annual Report 2017
7
Chairman’s statement
Our vision is to join the ranks of world leaders
in the industry, as new TLDs (which the Group
distributes) expand to challenge the incumbent
dominant domain name endings (.com etc)
and emerging markets, like China, grow to
rival the size of the North American and
European markets.
Mike Turner Chairman
I am pleased to report on a strong year of growth for CentralNic.
The Group continued its strategy to build a diversified internet
services business of size and scale through an acquisitive
roll-up programme which delivers high-levels of recurring
revenues, quality of earnings and strong cash generation.
In addition, revenue (10%), gross profit (28%), adjusted
EBITDA (20%) and profit after tax (7%) all show year on year
increases, a pleasing achievement for the Group.
SK-NIC, the manager of the exclusive country code top-level
domain for Slovakia, was acquired in mid-December 2017 for
a maximum cash consideration of €25.7 million (£22.6 million).
The Board anticipates SK-NIC to be earnings enhancing in line
with expectations at the time of the acquisition, as well as
providing access to a new international market with sustainable
growth characteristics, a high renewal rate of over 86%, and
the opportunity to leverage CentralNic’s existing expertise and
bespoke technical platforms in the domain management
business. The acquisition was funded by the Company’s own
cash reserves and a term loan and revolving credit facility
totalling £18 million provided by Silicon Valley Bank, which
also provides a £3 million overdraft facility.
Significant growth was delivered in the Wholesale and Retail
Divisions, which contributed to an increase in recurring revenues
and an improvement in the quality of the Group’s earnings.
As part of that, the exclusive wholesaler contract with XYZ.com,
owner of the .xyz Top-Level Domain (“TLD”), was renegotiated in
September 2017 for a term running until May 2032. CentralNic
receives a fixed minimum fee which may increase based on the
volume of .xyz domains managed.
Whilst the Enterprise Division made a significant contribution to
the Group’s profits in the year under review, its contribution
through one-off domain name sales reduced when compared
to the prior year. In 2017, the Group sold portfolios of premium
domain names valued at a total of £3.0 million (2016: £3.7
million). In line with the Group’s strategy, whilst premium domain
name trading is a profitable activity, premium domain name
sales will be a decreasing proportion of revenues and
contribution going forward as the Company focuses on
building recurring revenue based business activities.
Performance
In the year ended 31 December 2017, revenue rose by 10% to
£24.3 million (2016: £22.1 million). This was driven by organic
growth in the Wholesale Division, which grew by almost 50%,
and also in the Retail Division which grew by almost 10%. Gross
profit increased by 28% to £9.8 million (2016: £7.7 million) with
gross margins ahead of the previous year in all divisions and, in
total 40%, (2016: 35%), an increase of 16%. Despite adverse
foreign exchange movements of £0.6 million, compared to a
positive impact of £0.6 million in 2016, adjusted EBITDA was in
line with market expectations at £6.6 million (2016: £5.5 million),
representing an increase of 20% on the prior year. Profit after
tax increased by 7% to £1.02 million (2016: £0.96 million).
8 CentralNic Group Plc Annual Report 2017
Cash flow was positive during the year with year-end cash
balances of £10.9 million (2016: £9.9 million) and net debt
(excluding prepaid costs) of £7.2m (2016: net cash £7.3m).
During the year, CentralNic entered into a new facility
agreement with Silicon Valley Bank, which enabled the
Group to acquire SK-NIC and optimise its capital structure
and gain access to funding for growth opportunities.
Diluted earnings per share increased by over 6% to 1.04p
(2016: 0.97p).
Strategy
The Group’s strategy remains to develop and operate scalable
software platforms by serving global markets with domain
names and related services. It continues to identify and exploit
high growth areas within the domain industry, retaining a
leading role in new Top-Level Domains, servicing country
code domains, and focusing on growth markets including
Eastern Europe and Asia. The Group aims to win and retain
well-resourced clients with complementary objectives and to
make acquisitions which meet the clear strategic criteria of
being earnings accretive in the short term with a strong
recurring revenue base, high quality of earnings, and high
cash conversion.
Management and Board
As part of the strategy to build a diversified business of size
and scale, the management team was strengthened to
support the Group’s ambitions. In May 2017, Sarah Ryan
joined CentralNic as Group Corporate Development Director,
following the previous year’s senior hires of Stuart Fuller and
Andy Churley as Group Commercial Director and Group
Marketing Director respectively. The Board itself was
strengthened further in July 2017 with the appointment
of Don Baladasan as Chief Financial Officer, bringing
considerable financial expertise in buy-and-build strategies
and risk management.
In August 2017 Desleigh Jameson, who joined the Group in
January 2016 when it acquired Instra Corporation, stepped
down from the Board. The integration of Instra’s operations in
to the Group was by that time complete following Desleigh’s
hard work in very quickly merging the highly successful Instra
business in to the ever-expanding CentralNic.
I would like to thank all members of the CentralNic team for
their professionalism and commitment to the ongoing growth
and transformation of the business. It is thanks to our staff, to
our clients and to our distribution channel partners, as well as
to our shareholders, that the Group continues to maintain and
enhance its industry-leading position.
Outlook
Our vision is to join the ranks of world leaders in the industry.
CentralNic strives to achieve this by continuing to disrupt
existing markets and by identifying and exploiting key growth
markets around the world. Moreover, ongoing consolidation
in the domain services industry presents step-change
acquisition opportunities for the Group to enter new markets
and broaden its service offerings.
Trading for the first quarter of 2018 is encouraging and inline
with expectations. CentralNic has continued to win new clients
including the distribution contract for .ooo TLD, owned by the
billion-dollar Mumbai-listed tech company Infibeam. In January
2018 the Group replenished its premium domain trading
inventory by acquiring a portfolio of domain names for a total
consideration of £2.5 million.
As reported in March 2018, discussions are taking place
regarding the potential combination of CentralNic and
KeyDrive S.A. The combination of the two businesses has
strong strategic logic and economies of scale. This represents
an opportunity to create a group with advanced technology
platforms delivering significant recurring revenues for every
major customer type within the industry. Although there can be
no certainty that a transaction will occur, the discussions are
proceeding well and the Board believes that the transaction
will take place in the third quarter of 2018.
The Board believes that the opportunity to continue to build a
sizeable business to rival the largest industry players, using the
Group’s existing infrastructure to deliver economies of scale
both financially and operationally, remains strong. The Group’s
management team has proven its ability to deliver and
integrate substantial acquisitions and there is a plentiful
pipeline of targets. The Directors are confident that the Group
will continue to deliver on its strategic goals in 2018, to deliver
growth both organically and by expansion of the business and
further improve the percentage of recurring revenues and the
Group’s quality of earnings.
Mike Turner Chairman
30 May 2018
CentralNic Group Plc Annual Report 2017
9
Chief Executive’s report
Building on previous acquisitions of Internet.BS
in the Bahamas and Instra Group in Australia
and New Zealand, CentralNic has continued to
successfully execute its acquisition strategy.
In 2017, CentralNic acquired SK-NIC, the
manager of the exclusive country code top-level
domain for Slovakia, We will continue to grow
the company both organically and through
further acquisitions and remain entirely focused
on expanding our global footprint in the domain
and web services industry.
Ben Crawford Chief Executive
Overview
CentralNic continued to develop as an internet services
business of substantial scale that is highly cash generative and
built around a recurring revenue model. There are significant
opportunities available for growth in the market, of which the
Company continues to take advantage.
During the year, the Company’s acquisition strategy continued
to target companies with a strong existing customer base and
a high proportion of recurring revenue, with a particular focus
on businesses with exposure to high-growth and emerging
markets. Building on the previous acquisitions of Internet.BS
in the Bahamas (2014: US$7.5 million) and Instra Group in
Australia and New Zealand (2016: AU$38.0 million), the Group
acquired SK-NIC in December 2017 for a maximum cash
consideration of €25.7 million. SK-NIC is the manager of the
exclusive country code top-level domain for Slovakia, .sk and
realises the majority of its earnings through a recurring revenue
stream from a substantial embedded customer base.
SK-NIC offers significant growth potential, achievable
through the combination of the strongest domain product
in the Slovak market and CentralNic’s specialist technical,
sales and marketing expertise. CentralNic migrated .sk
onto its proprietary software in 2017 and strengthened the
local management team to ensure that .sk achieves global
best practice as a foundation for that nation’s growing
digital economy.
Since its acquisition, the integration of SK-NIC has progressed
according to plan. The .sk operation has been migrated
onto a customised version of the CentralNic registry software
in the Slovak language, and the management team in
Bratislava has been strengthened with the addition of a Head
of Communications. Tasks that were outsourced to the
vendors as part of the transition plan are being successfully
migrated in-house. Trading since the acquisition was
completed is in line with expectations.
In July, CentralNic was recognised as the best performing
company in the Infrastructure Services category of the
Quoted25 awards. This annual award, created by Megabuyte,
acknowledges the top 25 performing technology companies
in the mid-tier of the London Stock Exchange’s AIM market.
Results
CentralNic achieved revenues of £24.3 million, a 10%
increase over 2016 revenues of £22.1 million, and Adjusted
EBITDA of £6.6 million, a 20% increase on 2016’s Adjusted
EBITDA of £5.5 million. The profit after tax reflected a 7%
increase at £1.02m (2016: £0.96m).
The Group continues to improve the quality of its earnings,
increasing recurring revenues to 84% of total revenues. The
Group’s global revenues also continued to grow, with over 37%
of total revenues coming from outside the UK, North America,
and Europe, reflecting a focus on high-growth emerging markets.
10 CentralNic Group Plc Annual Report 2017
At the end of the year, the Group had cash balances of
£10.9 million (2016: £9.9 million) with net debt (excluding
prepaid costs) of £7.2m (2016: net cash £7.3m). During the
year, CentralNic entered into a new facility agreement with
Silicon Valley Bank, which enabled the group to acquire
SK-NIC and optimise its capital structure and gain access
to funding for growth opportunities.
Operational review
Wholesale (Registry Services)
Wholesale revenues grew 48% to £4.7 million (2016: £3.2
million) and the Company maintained its position as a leading
wholesaler of domain names using new gTLDs, with 22.6%
market share at the end of 2017. CentralNic’s Wholesale
Division is the only registry services provider to count six of
the top 20 new gTLDs as clients (from around 1,200
launched in total).
CentralNic has continued to be the world leader in winning
new clients in its Wholesale Division, including a contract to
manage 14 Top Level Domains from OpenRegistry, a
subsidiary of KeyDrive Group. CentralNic manages 104
domain extensions (gTLDs, ccTLDs and SLDs) overall, ranking
as an impressive 5th globally. In September 2017, the Group
renegotiated its exclusive wholesaler contract with .XYZ.com,
the owner of the world’s leading new gTLD, .xyz, on a fixed fee
basis until May 2032 with the potential to increase fees based
on the number of .xyz domains managed.
Retail
Retail revenues grew 9% to £15.6 million in 2017 (2016:
£14.3 million). The retail business serves three of the main
customer groups for domain names and supporting services;
small businesses, resellers and domain investment
professionals. One of the Retail Division’s objectives during
2017 was to broaden the number of supporting products it
can provide to its existing customer base. During the year,
it added IT security products, web and email hosting,
website construction and analysis products to its portfolio
available to its existing and future customer base.
The Retail Division increased the number of domain extensions
it provides and has continued to optimise the costs associated
with domain name provision and therefore increased
profitability. This was in part achieved through an outsource
arrangement with the leading global reseller platform RRPProxy,
a subsidiary of the KeyDrive Group. Considerable
management and technical resource has been dedicated to
this project which, when completed, will result in CentralNic’s
retailers obtaining all their domains from a single supplier, rather
than supporting hundreds of supplier relationships.
Enterprise
Revenues from CentralNic’s Enterprise Division decreased
slightly in 2017, down to £4.1 million (2016: £4.6 million),
reflecting the Group’s strategy to decrease the proportion of
its overall revenues obtained through one-off premium domain
name sales. The recurring revenue components of CentralNic’s
enterprise business continue to grow. With CentralNic’s
assistance, a number of corporate clients completed the
ICANN delegation process in 2017 and have begun to prepare
their “DotBrand” Top Level Domains for use. Other corporate
and government clients continue to licence CentralNic software
and many also use the Group’s fee-based support services to
distribute domains, develop and implement their own policies
and to market and manage their operations in-house.
CentralNic’s premium domain name trading business
performed well with revenues of £3.0 million achieved, reduced
from £3.7 million the previous year. In line with the Group’s
strategy to focus on increasing its revenues in the recurring
category, premium domain name sales will be a decreasing
proportion of revenues and contribution going forward.
Acquisitions: progressing CentralNic’s strategy
Moving forward, CentralNic will continue to identify
acquisitions that will add scale and new market leading
technology platforms to serve its customers as well as
creating opportunities for savings by eliminating duplication
in costs. The Group has established a robust foundation for
future growth, is able to leverage a suite of world-class
software and services, has a large and experienced
management team and significant staff resources able to
support customers around the world.
Infrastructure for growth
People
During 2017, CentralNic made significant additions to its
Board and management team to extend even further its ability
to execute our acquisitions-led growth strategy. In July,
Don Baladasan joined the Board as Chief Financial Officer,
bringing significant public company acquisition and integration
experience. At senior management level the Company had
already recruited Group Commercial Director Stuart Fuller
and Group Marketing Director Andy Churley, from NetNames
(formerly GroupNBT), to reinforce and build sales and
marketing operations. In May 2017, Sarah Ryan was
appointed Corporate Development Director to support the
Board in its M&A activities. Sarah was previously Director of
International M&A for LexisNexis and Thomson Financial
and brings significant transaction experience including in the
Middle East, Russia, China, India, South Africa and Europe.
Current market trends
In December 2017, there were approximately 332.4 million
domain names under management globally. This represents a
growth of 3.1m domain names (0.9%) over 2016. Generic Top
Level Domains (gTLDs e.g. .com and .net) had a combined
total of approximately 146 million domain names (2.9% growth)
and all country code Top Level Domains (e.g. .sk) accounted
for approximately 146 million domain names (2.4% growth).
The top 20 new gTLDs (of which CentralNic manages six)
account for 65% of all registrations in this category.
CentralNic Group Plc Annual Report 2017
11
Chief Executive’s report continued
Across all its business segments, new customer acquisition
remains a priority for the Group.
Finally, we will continue to make earnings enhancing
acquisitions to achieve further scale, additional capabilities
and greater economies of scale.
Ben Crawford Chief Executive
30 May 2018
Post year end
In January 2018, the Group replenished its premium domain
trading inventory for a total consideration of £2.5 million, as a
step towards ensuring that the company retains the capacity
to continue to trade profitably in premium domain names as
required. CentralNic also continued winning new clients,
including the .ooo TLD, owned by billion-dollar Mumbai-listed
tech company, Infibeam.
In March 2018, due to industry speculation, CentralNic
announced that it was in advanced negotiations to merge with
a leading operator of reseller and corporate platforms in the
domain industry, KeyDrive S.A., a Luxembourg company.
The combination of the two businesses has strong strategic
logic and economies of scale and represents an opportunity
to create a group with competitive technology platforms
delivering significant recurring revenues for every major
customer type within the industry. Discussions are ongoing
at the time of publication.
Outlook
Current trading is in line with expectations as the Group
continues to grow both organically and through further
acquisitions and remains entirely focused on expanding its
global footprint in the domain and web services industry.
New products and services are added continually to service
customers. For example, the group plans to offer online
security and brand protection services to its corporate clients.
12 CentralNic Group Plc Annual Report 2017
Strategic report
CentralNic’s strategy for continuing its growth is to increase its scale and scope of
operations by developing and operating scalable software platforms to serve global
markets with domain names and related services. The Company specifically identifies
and develops areas of the domain industry with high-growth and/or high-margin
potential. This includes taking a leading role in disruptive initiatives such as new
Top Level Domains (“TLDs”), selling country code domain extensions, taking market
share in emerging markets, and focusing on the enterprise sector.
The Company continues to win, retain and grow business
from well-resourced clients with complementary objectives.
It also sources and executes acquisition transactions that meet
the Group’s strategic criteria of being earnings accretive with
a strong recurring revenue base, particularly revenues from
domain registrations and their subsequent annual renewal.
The Group has a culture derived from entrepreneurial roots.
This helps underpin its strategy, with a Group-wide passion
for entering and competing profitably in new markets.
CentralNic’s culture is characterised by its focus on growth
and recurring high-quality earnings, a global perspective,
innovation, world-class technology, expert and flexible client
services, and professional execution. The Group is able to
match, and often exceed, the service levels offered by its
larger competitors.
In turn, the organisation is transitioning from a smaller
successful player into a global leader, within the domain name
industry. The Group has established a robust infrastructure
for growth through developing and operating scalable
software platforms to serve global markets with domain
names and related services. This includes recruiting a
highly-experienced management team with complementary
skill-sets and significant staff resources able to support
customers around the world.
CentralNic’s businesses support all stages in the domain
name industry supply chain. The Group’s Wholesale Division
enables its domain registry customers to supply their domains
to an integrated distribution network of around 1,500 industry
accredited registrars (retailers), and through them, over
100,000 resellers. CentralNic supplies its new Top Level
Domains to more accredited registrars than any of its peers,
as well as operating billing and cash collection services.
CentralNic’s retail platforms allow all types of internet users
to register domain names and purchase additional services
required to deploy their websites and email. These platforms
are presented to the buyers through a number of retail
websites focused on different market segments and
geographies. The Retail Division has been increasing the
domain inventory that it provides whilst optimizing
provisioning costs.
Its enterprise platforms allow corporations and domain
investors to manage and protect their valuable domain name
portfolios. CentralNic’s own businesses operate these
software platforms and are offered to third parties on both a
Software as a Service (“SaaS”) and a managed service basis.
The same software platforms are also licensed to third parties,
including governments, telecommunication companies and
other enterprise clients, as well as TLD registries.
Identifying and exploiting relatively
high-growth areas of the domain industry
Demand in growth markets may be driven by supply from
new inventory, such as the launch of a new domain extension,
by a liberalisation of registration policies for a TLD, or by
promotional activities.
CentralNic’s registrars take advantage of these opportunities
in the markets they serve, often delivering strong results.
For instance, The Group’s registrars are the highest sellers of
.law domains for law firms and the second highest sellers of
.ae domains for the United Arab Emirates.
Growth opportunities also come from increased demand
caused by improvements in internet access levels in emerging
markets, emanating from the adoption of smart phones,
broadband connectivity and governmental support for local
digital economic development. Here again, CentralNic is
actively satisfying demand in these emerging markets.
Winning and retaining well-resourced partners
with complementary objectives
CentralNic excels in its ability to acquire and retain entrepreneur
and corporate clients to enable its ongoing growth.
For the Wholesale Division, CentralNic has sought out and
won contracts for over 50 new TLDs since listing. This
inventory includes a range of domain extensions with different
business strategies, including value-based mass market
generic domains such as .xyz and .website, industry-specific
TLDs such as. tickets, and .bar. For country code market
extensions, CentralNic works with the local providers to
develop marketing, distribution and policy initiatives. For
example, the country code for Lao PDR (.LA) has been
repurposed to address the alternative geographies of
CentralNic Group Plc Annual Report 2017
13
Strategic report continued
Los Angeles and Latin America, while successfully retaining its
country’s national Internet identity. Similarly, .FM (the country
code for Micronesia) has been retargeted to address the radio
broadcast and music streaming industries. CentralNic is active
in developing a pipeline of new domain extensions to add to
its Wholesale platform. In 2017, CentralNic continued to win
new clients in its Wholesale Division, including a contract to
manage 14 Top Level Domains from OpenRegistry.
Group-wide, CentralNic deploys a number of online customer
acquisition strategies, including search engine and user
interface optimisation, search engine marketing, and email
marketing. The Group also employs a number of offline
marketing mechanisms such as promotion at events and
exhibitions, partnerships with registries and resellers, outbound
activity from its call centres and direct sales.
CentralNic also excels in customer retention thanks to its
philosophy of having a close collaboration with its clients and a
focus on providing added value. For example, to bring more
value to its clients, CentralNic offers expert advisers. These
include sales, marketing, policy and technical development
resources on a fee-for-service or revenue share model. The
Group’s clients are also provided with business information to
track service provision.
Financial performance
A review of the financial performance of the Group is provided
in the Chief Financial Officer’s report on pages 16 to 19.
Key Performance Indicators
Details of the Key Performance Indicators are provided on
page 16.
Principal risks and uncertainties facing the Group
The Directors have considered the principal risks and
uncertainties facing the Group and the main ones are
outlined below.
Regulatory
The businesses of both registries and registrars are subject to
the legal and contractual environment, and to comply with
ICANN and country code policies. These are subject to change,
which has the potential to influence business outcomes.
CentralNic satisfies the technical and operational requirements
of ICANN and other regulators and maintains an active voice in
the development of policy within the ICANN community.
Market
There is a risk that the market for domains for which the Group
provides registry and registrar services may not increase as
quickly as expected or that the new TLDs may not generate
the revenue levels anticipated by the Board.
In either case, the Group’s revenues could reduce below
expectations with an impact on profitability.
The risk is mitigated to a degree by operating multiple lines of
business themselves exposed to many vertical markets and
segments, the majority of which have very little reliance on
new TLDs.
IT security
If the Group does not prevent security breaches or becomes
susceptible to cyber-attacks, it may be exposed to lawsuits,
lose customers, suffer harm to its reputation, and incur
additional costs. Unauthorised access, computer viruses,
accidents, employee error or malfeasance, intentional
misconduct by computer “hackers” and other disruptions can
occur that could compromise the security of the Group’s
infrastructure or confidential information.
The Group has created a resilient network infrastructure and
Domain Name System server constellation, with failover
secondary systems to ensure critical registry functions are
maintained. The Wholesale business has been certified under
ISO 27001/2013 for data security, thereby mitigating risk by
adherence to international best practice.
Impact on society
The Company has a positive impact on society by offering
internet services in developing countries, contributing to the
United Nations Broadband Commission’s objective of
connecting the 50% of the world that is still offline with
affordable internet.
The Company can see little negative impact on society from
its activities. Whilst the internet itself adds a potential avenue
through which fraudsters and other undesirables can operate,
the Company has stringent policies relating to its position as
an enabler of such traffic and at all times adheres to laws and
regulations in each and every jurisdiction, including working
with regulatory authorities at all times.
14 CentralNic Group Plc Annual Report 2017
Supplier risk
A number of the key technical services used by the Group are
outsourced to key suppliers, thereby creating the potential for
risk in the case of the failure or loss of a supplier. In view of
these risks, redundancies have been introduced between the
suppliers and internal resources, ensuring that no single point
of failure could result in the inability of CentralNic to meet its
contractual or compliance obligations.
Director and employee gender
At the year-end the Board of Directors comprised of seven
members, all of whom are male, the Senior Management team
of eight was made up of five men and three women, and the
overall staff number of 92 contained 61 males and 31 females.
This strategic report was approved by the Board of Directors
on 30 May 2018 and signed on its behalf by:
Mike Turner Chairman
Currency risk
The Group reports its revenues and costs in British Pounds
Sterling, whilst some of these revenues and costs may arise
in other currencies. Fluctuations in exchange rates may
adversely affect the Group’s reported profits and make its
overseas contracts relatively less valuable.
CentralNic contracts are usually denominated in British
Pounds Sterling, US Dollars, Euros or Australian Dollars and
the Directors keep the currency exposure under regular
review. The Directors consider the use of hedging instruments
in the event that currency exposure is considered a material
performance risk.
Dependence on key personnel
The Group has a small management team and the loss of any
key individual or the inability to attract appropriate personnel
could impact upon the Group’s future performance. Incentives
and a performance culture remain an important focus to the
achievement of the Group’s objectives.
Other risk factors
In addition to the impact of the downturn of the world’s
economies, the Group may be adversely affected by other
changes in economic, political, judicial, administrative, taxation
or other regulatory or other unforeseen matters. For example,
the impact on the Group from the UK exiting the European
Union is to emerge and will be monitored and assessed over
the coming months and years.
CentralNic Group Plc Annual Report 2017
15
Chief Financial Officer’s report
The Group showed overall year on year growth
in revenue of 10% and Adjusted EBITDA of 20%.
Organic growth of 10% was achieved with
revenue growing to £24.3m (2016: £22.1m).
This was driven predominately by growth in the
Wholesale and Retail Divisions, which enjoyed
48% and 9% year-on-year growth respectively.
Don Baladasan Chief Financial Officer
The Group’s continued focus on improving the quality of the
revenue mix and earnings was highly successful with recurring
revenues rising to 84% of total revenue, compared to 81% in
2016. The contribution from one-off premium sales was
reduced in line with the Board’s strategy to focus on visibility
and quality of earnings.
The growth in the revenue line flowed down to the Adjusted
EBITDA, which increased by 20% to £6.6m (2016: £5.5m).
The overall Adjusted EBITDA Margin grew to 27% (2016:
25%). Adjusted EBITDA is before share based payment
expenses, acquisition deal fees and exceptional items.
This growth in Adjusted EBITDA was despite adverse foreign
exchange movements of £0.6 million, compared to a
positive impact of £0.6 million in 2016.
The attractive cash generative profile for the Group continued
in 2017 with the net operating cashflow, before tax and
one-off deal costs, being £6.8m (2016: £5.1m). Cash at the
end of 2017 was £10.9m (2016: £9.9m), an increase of
10% with Net Debt (excluding prepaid costs) of £7.2m
(2016: net cash £7.3m).
In December 2017, the Group progressed its acquisition
strategy with the completion of the acquisition for the country
code of Slovakia, SK-NIC. SK-NIC matched the characteristics
of our acquisition target profile, as a high quality, high margin
and recurring revenue asset in a significant growth emerging
market. We continue to seek acquisitions which add
considerable high quality, high margin and recurring
revenues to the Group.
The initial cash consideration of €20.3m (£17.8m) to acquire
SK-NIC was funded by loan-finance from Silicon Valley Bank
(“SVB”) through a £12m term loan and a £6m revolving credit
facility. SVB also provided a £3m overdraft facility which has
not been utilised. This transaction created a more balanced
capital structure which leverages the cash generative profile
for the Group, so this was deemed to be the most appropriate
funding route in order to achieve this.
Key Performance Indicators 2017
• Revenue £24.3m (2016: £22.1m)
• Adjusted EBITDA* £6.6m (2016: £5.5m)
• Profit after taxation £1.02m (2016: £0.96m)
• Cash Balance 31 Dec 2017 £10.9m (2016: £9.9m)
• Net Debt (excluding prepaid costs) 31 Dec 2017 £7.2m
(2016: Net Cash £7.3m)
* Excludes impact of share payment expense for the share options issued to
Directors and Employees and acquisition costs and exceptional items
Wholesale Division
The increase of revenue in the Wholesale Division was driven
predominately by the .xyz and radix TLDs, along with registry
consultancy. SK-NIC contributed £0.3m of revenue, following
the completion of its acquisition on 5 December 2017.
Adjusted EBITDA for the Wholesale Division grew by 70% to
£2.1m (2016: £1.2m). This included £0.2m contribution from
SK-NIC, representing an Adjusted EBITDA margin for SK-NIC
of 79%. Excluding the contribution from SK-NIC, the like for
like Adjusted EBITDA for Wholesale grew by 51% to £1.9m
(2016: £1.2m) representing an adjusted EBITDA margin of
42% (2016: 39%).
16 CentralNic Group Plc Annual Report 2017
Retail Division
Retail revenue continues to be driven by the Instra Group,
with smaller contributions from Internet.bs and the flagship
stores. All three Retail businesses showed year-on-year
revenue growth with overall retail revenue growing by 9% to
£15.6m (2016: £14.3m).
Instra improved its year-on-year revenue to £11.4m (2016:
£10.3m). This was achieved by selling high value domains,
which benefit from higher margins, as well as cutting costs.
The resulting improved margins flowed down to the
Adjusted EBITDA line with Instra showing 20% growth to
£2.6m (2016: £2.2m).
Enterprise Division
Revenue for the Enterprise Division was £4.1m (2016: £4.6m).
The reduction was expected as the Group continued to move
away from its reliance on the sale of Premium Domain names,
to focus on improving quality of earnings by shifting the mix
from these one-off sales to more predictable, recurring revenue
streams. Although revenue reduced for one-off premium
domain sales, revenue increased from other Enterprise
Division recurring revenue streams to £1.1m (2016: £0.9m).
Overall Adjusted EBITDA was £2.8m (2016: £2.8m) with
adjusted EBITDA margin of 70% (2016: 60%).
Revenue profile
The quality of the Group’s earnings remains an important
strategic priority for the Group and its investors, as we increase
the proportion of its revenues derived from predictable sources.
This was one important factor in assessing the SK-NIC
acquisition, with all of SK-NIC’s revenues, earnings and cash
flow derived from new registrations and renewals of domain
names. This, combined with the management’s focus on
recurring revenue streams, resulted in the proportion of
recurring revenues increasing to 84% (2016: 81%).
AIM and corporate overheads, which have not been allocated
by division, were consistent with the prior year at £1.0m
(2016: £1.0m).
Acquisition costs and exceptional items totaled £2.0m
(2016: £1.3m). The acquisition-related costs, supporting the
Group’s acquisition programme, included a variety of deal
costs for SK-NIC and Key Drive Group.
Finance costs include £0.3m of expenses for the term loan
arrangement fees and associated legal costs related to the
acquisition of SK-NIC.
Other non-cash expenses included the amortisation of
intangible assets, totaling £2.2m (2016: £2.1m), reflecting the
charges for the Instra customer list, domain names and
software acquired. They also included depreciation and the
share based payments expense. In accordance with IFRS 2
Share Based Payments, we have included a £0.5m charge
for Director and employee share options within administrative
expenses (2016: £0.6m). Further details can be found in
note 28 to the financial statements.
The Group’s effective tax rate during the year was 25.4%
(2016: 17.5%), with the primary reason for the year-on-year
increase being the disallowable nature of the higher acquisition
related costs incurred during the period.
Basic earnings per share of 1.07 pence (2016: 1.00 pence),
reflected the improved Adjusted EBITDA in the business which
were offset by non-recurring acquisition costs, amortisation
charges, exceptional items and non-cash charges. Diluted
earnings per share, at 1.04 pence (2016: 0.97 pence),
reflected the dilutive effect of the share options “in the money”
at the average share price for the year.
Further details of the earnings per share calculations are
provided in note 12 to the financial statements.
Pensions
The Group created a defined contribution pension scheme in
June 2016 in line with the new auto-enrolment provisions in the
UK. In Australia, the Group operates a superannuation scheme
in line with statutory requirements, and the KiwiSaver scheme
in New Zealand, which is in line with the KiwiSaver Act 2006.
The Group does not operate and has never operated any
defined benefit schemes requiring actuarial valuations.
Dividends
It remains the intention of the Group to generate income
returns for investors in the future as part of a progressive and
commercially prudent dividend policy. However, due to the
continued expansion opportunities presented by the sector,
the Directors do not propose a final dividend in 2017.
Group statement of financial position
The Group had net assets of £26.5m at 31 December 2017
(2016: £25.2m). This increase was driven by the retained
profit for the year offset by downward movements on
the foreign exchange translation reserve, mainly due to
movements in AU$/£GBP exchange rates.
CentralNic Group Plc Annual Report 2017
17
Chief Financial Officer’s report continued
Capital expenditure and investing activities
The most significant investment made during the year was the
acquisition of SK-NIC, with further details of the acquisition
entries provided under Business Combinations in note 25 to
the financial statements. The total value of intangible assets
includes £25.7m of intangibles relating to SK-NIC.
In line with the appropriate treatment for translation of a foreign
operation into the Group’s presentational currency, both the
tangible and intangible assets are translated at the closing
rate, generating foreign exchange differences as presented in
notes 13 and 14 to the financial statements.
With the exception of goodwill, the Group’s intangible assets
are amortised in line with the accounting policy. The carrying
value of customer lists and goodwill are tested annually for
impairment, while the Directors also consider other intangible
assets and investments for indications of impairment.
Further details are provided in note 14 and 16 to the
financial statements.
Capital expenditure on tangible assets was £0.1m during the
year (2016: £0.2m). Expenditure on plant and equipment was
again modest, reflecting the business model, which has a
relatively low capital expenditure requirement. Intangible asset
additions totaled £0.4m (2016: £0.4m), including the costs of
development activities satisfying the criteria detailed in note 3
part to the financial statements. The slight increase related to
capitalised development activities in Instra and dnsXperts UG.
Further details are provided in notes 13, 14 and 25 to the
financial statements.
Cashflow and net cash
The cashflow statement for the Group includes two major
themes: the entries related to the financing and completion
of the SK-NIC acquisition and the results of the ongoing
operations of the business, taking into account the
fluctuations in working capital.
Net cashflow from operating activities was higher than the
previous year at £3.7m (2016: £3.3m). In both years, the net
cashflow from operating activities was in line with expectations
relative to Adjusted EBITDA. 2017 benefitted from favourable
working capital movements of £0.3m.
Investing activities were mainly related to the SK-NIC
acquisition, which was completed in December 2017.
The net cash outflow related to the SK-NIC acquisition totalled
£17.4m (net of cash acquired) in 2017 with a further £4.8m
of deferred and contingent consideration due up to 2024,
which was funded by additional SVB debt of £16.25m.
Banking facilities
A new facility agreement was entered into with SVB on
29 August 2017, which was amended and restated on the
30th November 2017 to support the SK-NIC acquisition on
5 December 2017.
This agreement refinanced the remaining principal of £1.75m
due under the original SVB facility agreement entered into for
the purposes of acquiring Instra in December 2015.
The new SVB facilities comprises a £12m term loan, a £6m
revolving credit facility, and a £3m overdraft facility. The term
and revolving credit facility were fully utilised at the end of the
year, the overdraft was unutilised.
The principal terms of the debt facility include amortisation of
the term loan over 5 years (£2 million per annum) with a bullet
payment at the end of term. Interest repayments have also been
settled quarterly based at a margin above LIBOR. The debt
facility is secured over the material companies within the Group.
Further detail is provided in note 24 of the financial statements.
Scheduled quarterly repayments were made during the year
along with the release of associated finance costs.
Critical accounting policies
The Summary of the Group’s Significant Accounting Policies
is set out in note 3 to the Financial Statements.
The Group’s Revenue recognition policy may be summarised as:
• Revenue from the sale of services is recognised when the
amounts of revenue and cost can be measured reliably;
• Domain sales are recognised over the period to which the
underlying sales contract relates, which can be for periods
between one and ten years. Revenues attributable to future
periods are deferred to future periods and are included in
“Deferred Revenues” and in the case of the Retail business,
the direct costs, associated with domain name Retail
revenues, that are payable to wholesale suppliers of the
domains, are recognised in deferred costs; and
• Revenues from strategic consultancy and other similar
services are recognised in proportion to the stage of
completion of the work.
The Group makes estimates and assumptions regarding the
future, which are regularly evaluated including expectations
of the future that are considered reasonable given historic
experience and current circumstances. In the future, actual
experience may differ from these estimates and assumptions.
18 CentralNic Group Plc Annual Report 2017
Foreign currency risk
The Board notes that the Group has predominantly traded in
US Dollars, Euros, GB Sterling Pounds and Australian Dollars,
and considers the exposure to foreign currency risk to be
acceptable. The Group has held reserves in each of these
currencies to meet trading obligations as required. The
currency risk is actively monitored through a periodic review of
inflows and outflows by currency, including an assessment
of the extent to which currencies are naturally hedged across
the Group’s business lines. Where this is not the case,
consideration is given to the use of hedging instruments.
Don Baladasan Chief Financial Officer
30 May 2018
The Board considers the carrying value of Intangible assets in
particular given the relative materiality to the Group. While the
Board acknowledges that estimates and assumptions could
have a material impact on the carrying value of the intangible
assets, the Board has considered the potential for impairment
as well as the estimated useful lives of the assets and does
not consider the carrying values to be impaired. Further details
are provided in note 4 to the financial statements.
Group financial risk management
The Board reviews the financial risk management policy,
noting that the Group is exposed to market risk, credit risk
and liquidity risk arising from financial instruments. Further
details of the Financial Risk Management Framework is
provided in note 29 to the financial statements.
The Group’s finance function is responsible for managing
investment and funding requirements including cashflow
monitoring and projections. The cashflow projections are
reviewed regularly by the Board to ensure the Group has
sufficient liquidity at all times to meet its cash requirements
and execute its business strategy.
The Group’s strategy is to finance its operations through the
cash generated from operations and where necessary, equity
and debt finance, notably to support investing activities.
The Group’s financial instruments comprise cash and various
items such as trade and deferred receivables. The Group
had £10.9m of cash at the year-end, with interest bearing
financial assets bearing interest at fixed interest rates. Deposit
risk is mitigated by the Directors setting policy that the Group
only places deposits with banks and financial institutions with
high credit ratings.
The Group’s exposure to credit risk from trade receivables is
relatively low, due to the fact that the business has traditionally
dealt with customers who often pay at the point or sale or in
advance. Where there are credit accounts, which is an
increasing trend in the industry particularly for the larger
domain name registrars, receivables are controlled through
credit limits and regular monitoring.
CentralNic Group Plc Annual Report 2017
19
Board of Directors
The Board’s principal duties include the provision of entrepreneurial leadership
to the Group, setting strategy and overseeing business performance and
compliance; deploying good corporate governance commensurate with the
size and scope of the Group’s activities.
Mike Turner Chairman (aged 57)
Mike has 30 years’ M&A experience in London and the US, advising
clients in technology, telecoms, advertising and marketing services,
media, internet and e-commerce sectors.
Benjamin Crawford Chief Executive Officer (aged 52)
Ben is a specialist in global business and corporate development
for internet-related companies. Previous roles include Founding
President of Louise Blouin Media, where he integrated 11 acquisitions
in three countries.
Don Baladasan Chief Financial Officer (aged 44)
Don, a Chartered Management Accountant, is a highly experienced
quoted company Finance Director. Since 2013, he has helped
raise £25m on AIM and integrated many acquisitions and
reverse takeovers.
20 CentralNic Group Plc Annual Report 2017
Thomas Rickert Non-Executive Director (aged 48)
Thomas is a domain industry legal expert working on disputes,
as well as advising registrars, registry service providers and
registry operators.
Samuel Dayani Non-Executive Director (aged 41)
Responsible for purchasing CentralNic in 2003, managing the
restructuring and building a strong management team, ready for
the Group’s AIM listing in 2013.
Thomas Pridmore Non-Executive Director (aged 46)
Tom is a director of the Investment Advisor of Civitas Social Housing
PLC, a real-estate investment trust. He has broad investment and
corporate finance experience.
Iain McDonald Non-Executive Director (aged 47)
Iain is a global expert in technology and e-commerce with a strong
track record investing in early stage companies, including ASOS,
The Hut Group and Boohoo.com. He was a top-ranked retail
equities analyst.
CentralNic Group Plc Annual Report 2017
21
Directors’ report
Principal activities
CentralNic Group Plc is the ultimate holding company of a
Group of companies.
The principal activities of the Group are the provision of domain
name Wholesale (registry), Retail (registrar) and Enterprise
services. A more comprehensive description of the Group’s
activities, performance, and likely developments are provided in
the Chairman’s statement, the Chief Executive’s Report, the
Chief Financial Officer’s Report, the Corporate Governance
Report and the Remuneration Report, which are incorporated
by reference into this report.
A list of the subsidiary undertakings is disclosed in the
Particulars of Subsidiaries and Associates on pages 78 and 79
of the Financial Statements.
Financial instruments
Details of the use of financial instruments and financial risk
management are included in note 29 to the Financial Statements.
Results and dividends
Information on the results is provided in the Chairman’s
Statement and the Chief Financial Officer’s Report.
It remains the intention of the Group to generate income
returns for investors in the future as part of a progressive and
commercially prudent dividend policy. However, due to the
continued expansion opportunities presented by the sector,
the Directors do not propose a final dividend in 2017.
Directors
The Company was incorporated on 19 June 2013, with a view
to becoming the parent company of the Group after admission
to AIM. The admission was completed on 2 September 2013,
and at this time the Board was expanded.
In 2017 there were changes in Board members to reflect the
development of the business. The Directors who served during
the year were as follows:
Executive Directors
Benjamin Crawford (Chief Executive Officer)
Glenn Hayward (Chief Financial Officer and Company Secretary)
– resigned from the Board on 24 July 2017
Desleigh Jameson (Executive Director) – resigned from the
Board on 17 August 2017
Donald Baladasan (Chief Financial Officer) – appointed to the
Board on 24 July 2017
Non-Executive Directors
Mike Turner (Non-Executive Chairman)
Samuel Dayani
Thomas Rickert
Thomas Pridmore
Iain McDonald
22 CentralNic Group Plc Annual Report 2017
The biographical details of the Directors are provided on pages
20 and 21 of this report.
Two Directors will retire at the Company’s Annual General
Meeting, and being eligible will offer themselves for re-election.
The Directors and their interests in the shares in the Group
The Directors of the Company, and their interests in the
shares and share options of the Company, are shown in the
Remuneration Report on pages 29 to 31 of this report.
Transactions with any parties related to the Directors are
disclosed in note 26 to the Financial Statements.
Post year end
Further details on post year end events are disclosed in the
Chief Executive Officer’s Report.
Directors’ conflicts of interest
Each Director is required, in accordance with the provisions of
the Companies Act 2006, to declare any interests that may give
rise to a conflict of interest with the Company on appointment
and subsequently as they arise. Where such a conflict or
potential conflict arises, the Board is empowered under the
Company’s Articles of Association to consider and authorise
such conflicts as appropriate.
Articles of Association
The Company’s Articles of Association set out the Company’s
internal regulation and cover such matters as the rights of
shareholders, the appointment and removal of Directors and
the conduct of Board and general meetings.
A copy of the Company’s Articles of Association is available on the
Group’s website (https://www.centralnic.com/investors/reports).
Subject to the provisions of legislation, the Company’s Articles
of Association and any directions given by resolutions of the
shareholders, the Board may exercise all powers of the
Company and may delegate authorities to committees and
management as it sees fit. Details of the committees of the
Board and their activities are contained in the Corporate
Governance Report on pages 26 to 28 of this report.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Company’s website.
Principal risks and uncertainties
The board’s assessment of the principal risks and uncertainties,
together with the mitigating factors are presented in the Strategic
Report on pages 14 to 15.
Substantial shareholders
In addition to the Directors Interests disclosed in the
Remuneration Report, the Company has been notified that the
following shareholder’s interests exceeded 3% of the Company’s
ordinary share capital in issue at 30 April 2018:
Ordinary shares Percentage
Erin investments 21,630,382 22.42%
Kestrel Partners LLP 17,375,593 18.01%
Living Bridge VC LLP 9,083,019 9.41%
Schroder Investment
Management 7,509,131 7.78%
Jabella 5,687,891 5.89%
Cavendish Asset
Management 5,643,201 5.85%
Herald Investment
Management Ltd 5,025,000 5.21%
Miton Asset Management Ltd 4,128,211 4.28%
Natwest FIS Nominees 3,699,000 3.83%
Estate of Antonio Lentino 3,047,042 3.16%
No substantial shareholders have different voting rights to other
holders of the share capital of the Company.
Corporate governance
The Corporate Governance Report, on pages 26 to 28 is
incorporated into this report by reference.
Corporate responsibility
The Board recognises its employment, environmental and
health and safety responsibilities, and devotes appropriate
resources towards monitoring and improving compliance
with existing standards.
Management and staff
CentralNic’s management team has been assembled to ensure
the Group has the number of people and range of skills required
to deliver the business strategy and to support the expansion of
the Group as it becomes an increasingly international business.
The team is diverse and brings functional expertise across a
number of disciplines including technical and operational
delivery, finance, law, marketing and sales.
While the business is managed under budgetary controls, the
Directors focus on ensuring there is succession planning in
place as is appropriate for a business of our size.
Our staff and consultants represent a number of different
nationalities, and we are pleased by the gender diversity in
our business.
The executive leaders within the business recognise the
importance of engaging with employees and do so informally
on a day to day basis. We often use a cascade approach to
employee communications, with the heads of departments
disseminating appropriate information to their teams, including
those situated in various locations around the world.
While we do not believe that human rights issues are a
significant risk to our business currently, we are conscious that
as we expand into new international markets issues of human
rights may become more significant. The Directors keep all
aspects of business development under review, and act with
caution and integrity to ensure all our activities and specifically
business development activities are respectful of human rights.
Communication with employees is primarily through formal
and informal meetings and through the use of the Group’s
information systems This comprises regular communication of
information affecting our managers and their teams, to ensure
all employees are kept up to date with issues affecting them.
The Board recognises the importance of engaged employees
working within the Group and how they are vital to the future
success of the business. However, given the size of the Group
and the specialist nature of its technical operations, there is
dependency on a few key individuals and this is discussed
further in the Strategic Report on page 15.
The Group is committed to achieving equal opportunities and
to complying with anti-discrimination legislation. The Group is
committed to offering employees and job applicants equal and
fair opportunity to benefit from employment without regard to
their sex, sexual orientation, marital status, race, religion or
belief, age or disability.
The Group has a policy of share participation for employees
across the Group at all levels.
Standards accreditations
CentralNic’s wholesale business is certified against ISO 27001
(Information security management), ISO 9001 (Quality
management system) and ISO 22301 (Business continuity
management) having achieved ISO22301 accreditation during
2016. These certifications are internationally recognised and
provide CentralNic’s stakeholders with additional levels of
assurance as to the technical integrity of the Group’s IT system.
CentralNic Group Plc Annual Report 2017
23
Directors’ report continued
Anti-bribery and corruption, anti-money laundering
and sanctions compliance
CentralNic conducts business ethically, maintains financial integrity
and strives to behave responsibly in its business dealings.
The Group’s Directors and its senior management are
committed to ensuring strict adherence to its anti-bribery and
corruption policy and compliance with anti-bribery and
corruption laws. The Group also maintains and ensures
adherence to its policies in relation to Anti-Money Laundering
and Trade Sanctions and Embargoes, again to comply with
relevant laws across the relevant jurisdictions.
All Directors, employees and consultants have received training
in maintaining the highest standards of professional conduct and
are aware of the need to carry out business fairly, honestly and
openly. Clear lines of communication and responsibility are in
place to report any incidences or suspected incidences of
abuse to provide an effective, trusted reporting mechanism.
Environment
The Group is committed to operating in an environmentally
responsible manner. The Directors consider environmental
impact when making decisions.
The community, charitable and political donations
The Directors consider the impact on the community when
making decisions. During the year charitable donations totalling
£nil were made (2016: £300).
The Group made no political donations during the year, either
in the UK or overseas.
Policy on the payment of creditors
The Group’s policy is to agree terms and conditions for its
business transactions with suppliers and to endeavour to abide
by these terms and conditions, subject to the supplier meeting
their obligations.
No one supplier is considered to be essential to the business
of the Group.
R&D activity
The Group undertakes research and development activities to
enhance it’s competitive position in its chosen markets, drawing
on skilled development resource from across the Group.
Health and safety
The Directors and senior management are committed to
providing for the welfare, health and safety of the Group’s
employees and have procedures in place, including regular
monitoring by third party specialists, to ensure compliance
with its legal and contractual obligations.
Business continuity
The Group has built a resilient technology infrastructure,
designed to provide data security and continuity of service.
The Board recognises the ongoing importance of resilience to
cyber threats and invests in primary and secondary data centres
along with a distributed domain name server constellation
operated by the Group and third party providers. The Board
keeps the infrastructure requirements under review and adopts a
continuous improvement approach to further investment, within
appropriate parameters, as business activities expand. The
technical provision, alongside customer support, is considered
one of the most significant aspects of Business Continuity.
Statement of Directors responsibilities in respect of
the Annual Report and the Financial Statements
The Directors are responsible for preparing the Strategic Report,
the Directors’ Report and the financial statements in accordance
with applicable law and regulations.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law the Directors
have elected to prepare the financial statements in accordance
with International Financial Reporting Standards (IFRSs’) as
adopted by the EU and applicable law.
Under company law the Directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the company and the group and of
the profit or loss of the group for that period. In preparing these
financial statements, the Directors are required to:
• select suitable accounting policies and then apply them
consistently;
• make judgments and accounting estimates that are
reasonable and prudent;
• state whether applicable accounting standards have been
followed, subject to any material departures disclosed and
explained in the financial statements;
• prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the company will
continue in business.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the company’s
transactions and disclose with reasonable accuracy at any time
the financial position of the company and enable them to ensure
that the financial statements comply with the Companies Act
2006. They are also responsible for safeguarding the assets of
the company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
24 CentralNic Group Plc Annual Report 2017
They are further responsible for ensuring that the Strategic Report
and the Report of the Directors and other information included in
the Annual Report and Financial Statements is prepared in
accordance with applicable law in the United Kingdom.
The maintenance and integrity of the CentralNic website is the
responsibility of the Directors; the work carried out by the
auditors does not involve the consideration of these matters
and, accordingly, the auditors accept no responsibility for any
changes that may have occurred in the accounts since they
were initially presented on the website.
Legislation in the United Kingdom governing the preparation and
dissemination of the accounts and the other information included
in annual reports may differ from legislation in other jurisdictions.
Disclosure of audit information
The Directors confirm that, as at the date of approval of this
annual report and these financial statements, so far as each
Director is aware there is no relevant audit information of which
the Company’s auditor is unaware and that he or she has taken
all the steps that he or she ought to have taken as a Director in
order to make himself or herself aware of any relevant audit
information and to establish that the Company’s auditor is
aware of that information.
Going concern
The Directors have in place procedures to review the forecasts
and budgets for the coming year, which have been drawn up
with appropriate regard for both the macroeconomic
environment in which the Group operates and the particular
circumstances influencing the Domain Name industry and the
Group itself. These were prepared with reference to historic and
current industry knowledge, contracted trading activities and
prospects that relate to the future strategy of the Group. As a
result, at the time of approving the financial statements, the
Directors consider that the Company and the Group have
sufficient resources to continue in operational existence for the
foreseeable future and that it is appropriate to adopt the going
concern basis in the preparation of the financial statements.
As with all forecasts, the Directors cannot guarantee that the
going concern basis will remain appropriate given the inherent
uncertainty relating to future events. Principal areas of
Uncertainty and Risks are highlighted on pages 14 and 15.
Auditors
The Company’s independent external auditors, Crowe Clark
Whitehill LLP, were initially appointed on 17 July 2013 and were
most recently reappointed at the Company’s Annual General
Meeting of 7 June 2017. It is proposed by the Board they be
put forward for reappointment as auditors and a resolution
concerning their reappointment will be proposed at the
forthcoming AGM.
Registered office
35-39 Moorgate, London EC2R 6AR
Registered number: 08576358
Approved by the Board and signed on it’s behalf by:
Mike Turner Chairman
30 May 2018
Cautionary statement
Under the Companies Act 2006, a Company’s Directors’ are required to produce
a Strategic Report which contains, among other matters, a fair review by the
Directors of the Group’s business, through a balanced and comprehensive
analysis of the development and performance of the business of the Group and
the position of the Group at the year end, consistent with the size and complexity
of the business.
The Directors’ Report set out above, including the Chairman’s Statement, the
Chief Executive’s Report, and the Chief Financial Officer’s Report incorporated
into it by reference (together with the Directors’ Report), has been prepared only
for the shareholders of the Company as a whole, and its sole purpose and use
is to assist shareholders to exercise their governance rights. In particular, the
Directors’ Report has not been audited or otherwise independently verified.
The Company and its Directors and employees are not responsible for any
other purpose or use or to any other person in relation to the Directors’ Report.
The Directors’ Report contains indications of likely future developments and
other forward-looking statements that are subject to risk factors associated with,
among other things, the economic and business circumstances occurring from
time to time in the countries, sectors and business segments in which the
Group operates.
These factors include, but are not limited to, those discussed under Principal
Risks and Uncertainties. These and other factors could adversely affect the
Group’s results, strategy and prospects. Forward-looking statements involve
risks, uncertainties and assumptions. They relate to events and/or depend on
circumstances in the future which could cause actual results and outcomes to
differ materially from those currently anticipated. No obligation is assumed to
update any forward looking statements, whether as a result of new information,
future events or otherwise.
CentralNic Group Plc Annual Report 2017
25
Corporate governance
Introduction
The Board of CentralNic Plc places governance and controls at
the centre of its strategy. CentralNic Plc has a dedicated
Compliance Committee which meets monthly. The remit of the
Compliance Committee is to ensure that all governance policies
are administered, reviewed and complied with across CentralNic
Plc Group. Don Baladasan, the CFO of CentralNic Plc, chairs
this committee and provides a conduit between The Board and
The Compliance Committee. This ensures timely decisions and
challenges are communicated to The Board. In addition, a formal
summary report relating on the Compliance Committee is
reported at Board meetings.
CentralNic takes a multi-disciplinary approach to governance as
it is not possible to have strong governance being driven by one
department due to departments interacting on day-to-day
operations. The Compliance Committee has representation from
Sales, Marketing, Technology, Operations, Legal and Finance
departments. By engaging with each department and team
leaders, CentralNic works to improve communication,
transparency and accountability in compliance matters.
CentralNic manages enforcement through well publicised
guidelines and policies.
CentralNic views this approach as integral to having a compliant
and robust governance structure. Governance in CentralNic is
seen as a culture and is communicated to staff and embedded
in policies and procedures to ensure compliance. CentralNic
uses legal, industry and political frameworks to create a culture
and infrastructure to attain strong governance and controls.
CentralNic sees governance not only as compliance driven
requirement but as an opportunity to gain commercial sustainability
and advantage. Improved compliance can build customer trust
by ensuring high standards of data processing and security
standards. With GDPR coming into force the measures put into
place in the preceding years on data security, internal training, and
experience of implementing new procedures are engaged to meet
the changes required. This is done by placing all stakeholders at
the centre of governance policy and implementation.
CentralNic uses formalised frameworks and directives such as
MAR, ISO standards and AIM regulations to help build and
maintain a compliant governance structure. Critical to the
business is the infrastructure and technology CentralNic uses
to provide services. Robust business continuity and disaster
recovery plans are in place and tested on a regular basis. IT
security policies and operational controls are in place. CentralNic
continues to engage, monitor and shape internet governance at
ICANN and other international forums, bodies and regulators.
A key tenet of this compliance is to look not only at procedures
but also how technology and systems can drive and support
compliance and manage risks appropriately.
Board governance and policy
The Directors appreciate the value of good corporate governance
and have regard to the provisions of the Corporate Governance
Guidelines for Smaller Quoted Companies, published from time
to time by the Quoted Companies Alliance, to the extent that they
believe it is appropriate in light of the size, stage of development
and resources of an AIM-quoted company.
The Board comprises a Non-Executive Chairman, three
executive directors and four non-executive directors. The Board
meets regularly to consider the business strategy, performance
and the framework of internal controls. To enable the Board to
discharge its duties, all Directors receive appropriate and timely
information. Briefing papers are distributed to all Directors in
advance of Board meetings. All Directors have access to the
advice and services of the Company Secretary, who is
responsible for ensuring that the Board procedures are followed,
and that applicable rules and regulations are complied with.
In addition, procedures are in place to enable the Directors to
obtain independent professional advice in the furtherance of their
duties, if necessary, at the Company’s expense. In line with the
requirements of the Company’s Articles of Association, the
Group has voluntarily chosen that two Directors will retire at the
Annual General Meeting and being eligible, will offer themselves
for re-election.
Board Committees
The Company has established Audit, Nomination and
Remuneration Committees.
The terms of reference for the three committees were reviewed
during the year and are available for inspection on request from
the Company Secretary.
Audit Committee
The Audit Committee has Iain McDonald as Chairman and other
members of the Committee include Mike Turner, Thomas Rickert
and Thomas Pridmore. The Chief Financial Officer is invited to
and regularly does attend the Committee meetings, as does the
Chief Executive Officer.
The primary responsibilities of the Committee, having due regard
for the interests of Shareholders include:
• Monitoring the integrity of the half yearly and annual financial
statements and formal announcements regarding the Group’s
financial performance
• Reviewing significant accounting policies, areas of significant
estimates and judgments and disclosures in financial reports
• Monitoring the quality and effectiveness of internal control
procedures and risk management systems
• Considering the requirement for Internal Audit, taking into
account the size, distribution and nature of the Company
and the Group and its operations
26 CentralNic Group Plc Annual Report 2017
• Reviewing the external auditor reports relating to the
Company’s accounting and internal control procedures
• Overseeing the Board’s relationship with the external
auditors, including their continued independence and
making recommendations to the Board on the selection
of external auditors.
The Audit Committee is required to meet at least twice a year.
During the year the Committee met on three occasions.
The appointment of the independent external auditor is
approved by the shareholders annually. The independent
auditor’s audit of the financial statements is conducted in
accordance with International Standards on Auditing, ISA
(UK and Ireland) issued by the Auditing Practices Board.
It is noted that the external auditor also operates procedures
designed to safeguard their objectivity and independence.
The Audit Committee reviews all fees related to non-audit work,
and the committee reviews any material non-audit work prior
to commencement. Details of auditor fees can be found in
note 7 to the financial statements.
Remuneration Committee
The Group’s Remuneration Committee is responsible, on behalf
of the Board, for developing remuneration policy. Details of
objectives and policy are provided in the Remuneration Report
on pages 29 to 30.
The Remuneration Committee was created in September 2013
and is required to meet at least twice a year. During 2017 the
Committee met on four occasions.
It is the Group’s policy that Executive Directors’ service
contracts contain at least a 3 month notice period.
Nominations Committee
The Group’s Nominations Committee has the power and
authority to carry out a selection process of candidates before
proposing new appointments to the Board.
The Nominations Committee has Mike Turner as its Chairman
and other members of the Committee include Iain McDonald,
Thomas Rickert and Tom Pridmore.
The Nominations Committee was created in September 2013
and is required to meet at least once a year. During 2017 the
Committee met on one occasion.
The Group has adopted a policy for Directors and key employee
share dealings which is appropriate for an AIM-quoted Group.
The Directors comply with Rule 21 of the AIM rules relating to
Director’s dealings and take reasonable steps to ensure
compliance by the Group’s applicable employees.
The Executive and Non-Executive Directors service contracts
are available for inspection by shareholders on request to the
Company Secretary.
The Remuneration Committee has Tom Pridmore as its Chairman
and other members of the Committee include Mike Turner,
Samuel Dayani and Thomas Rickert.
The Chairman and Non-Executive Directors do not participate
in agenda items at any meeting when discussions in respect of
matters relating to their own position take place.
The primary responsibilities of the Committee, having due
regard for the interests of Shareholders include:
• Determining and agreeing with the Board the remuneration
policy for the Chairman of the Board, the non-Executive
Directors and the Executive Directors and other senior
managers
• Reviewing the design of share incentive plans for approval
by the Board and determining the award policy to Executive
Directors and personnel under existing plans
• Determining the remainder of the remuneration packages
(principally salaries, bonus and pension) for the Executive
Directors and senior management including any
performance-related targets
• Reviewing and noting remuneration trends across the Group
• Co-ordinating with the Nominations Committee in relation to
the remuneration to be offered to any new Executive Director;
and
• Taking responsibility for the selection criteria and if appropriate
selecting, appointing and setting terms of reference for any
remuneration consultants engaged to advise the Committee.
Risk management and internal controls
The Board has primary responsibility for establishing and
maintaining the Group’s financial and non-financial controls,
as well as identifying the major risks facing the Group.
Internal control systems are designed to meet the particular
needs of the Group and the risks to which it is exposed. By their
nature, internal controls can provide reasonable but not absolute
assurance against material misstatement or loss.
The Executive Directors and Senior Management have specific
responsibilities for aspects of the Group’s affairs and have
regular discussions to address operational matters, as well as
considering the skill sets required in their teams to maintain the
internal controls required.
Accounting procedures
The financial processes and control systems are kept under
regular review by the Executives with oversight from the Board,
with a view to further evolution and improvement as the Group’s
activities expand. This includes the maintenance of and
adherence to a Financial Procedures Board Memorandum
which is reviewed and updated periodically.
CentralNic Group Plc Annual Report 2017
27
Corporate governance continued
Accounting procedures are managed on a day to day basis by
the Finance team. Responsibility levels are set and agreed with
the Board, with authority delegated to appropriate responsible
managers as well as the Executive. Segregation of duties is
deployed to the degree this is practical and efficient, noting the
size and geographic distribution of the Group.
Communications with shareholders
The Board regards the importance of effective communication
with shareholders as essential. Relations with shareholders are
managed principally by the Chief Executive Officer, Chief
Financial Officer and the Chairman, and meetings are regularly
held with institutional investors and analysts during the year.
The Chairman, Chief Executive Officer, the Chief Financial Officer
and if required other Executive and Non-Executive Directors
make themselves available for meetings with major shareholders
either individually or collectively. The Group’s shareholders are
invited to attend the AGM at which the majority of Directors are
present. The Group’s Nominated Advisors and Joint Brokers
also convey shareholder opinions to the Chairman and Chief
Executive Officer and these are discussed with the Board.
The Group’s website contains information on current business
activities, including the annual and interim results.
Annual General Meeting date
The Annual General meeting will be convened in accordance
with the provisions of the Companies Act 2006. The Annual
General Meeting will take place on 25 June 2018 at 10.00am
at the offices of the Company’s solicitors:
DWF LLP
20 Fenchurch Street
London
EC3M 3AG
The proposed resolutions together with proxy forms and
this annual report will be distributed to shareholders by the
1 June 2018, if not before.
Monthly management accounts are reported to the Board,
under IFRS (EU) with the content aligned to the Group’s
management information requirements. The Board reviews the
accounts in detail during each Board meeting and requests
further information as the need arises. Comparisons to
approved budgets and forecasts are prepared with associated
commentary provided.
The Company prepares annual Budgets which are reviewed by
the Board. The Budgets are then updated during the year to
provide latest forecasts.
Capital expenditure is regulated by the Budget process, and is
kept under regular review during the year. Investment appraisal
techniques, using discounted cashflow projections, are
deployed in relation to material investments and are reviewed
by the Board as part of good governance such that material
transactions that are significant in terms of their size or type
are only undertaken after Board review.
The Board acknowledges that there are processes in place for
identifying, evaluating and managing risks faced by the Group,
and places emphasis on continuous process improvement.
Corporate responsibility, the environment
and health and safety
The Group is committed to maintaining and promoting high
standards of business integrity. Company values, which
incorporate the principles of corporate social responsibility
and sustainability, guide the Group’s relationships with its
stakeholders including clients, employees and the
communities and environment in which the Group operates.
The Group’s approach to sustainability addresses both its
environmental and social impacts, supporting the Group’s vision
to remain an employer of choice, while meeting client demands
for socially responsible partners. By way of example the Group
companies have arranged and promoted a number of ACE
(Athletics, Community and Environmental) activities in the past.
The Company is also certified by the Carbon Neutral Company.
The Group respects local laws and customs while supporting
international laws and regulations. These policies have been
integral in the way Group companies have done business in the
past and will continue to play a central role in influencing the
Group’s practice in the future.
28 CentralNic Group Plc Annual Report 2017
Remuneration report
As the Company is an AIM listed company, it is not required to
present a Directors’ Remuneration report. However, the Board
has chosen to do so in line with evolving best practice.
Remuneration Committee
The membership of the Committee and the principal activities
are detailed in the Corporate Governance section of the annual
report on page 27.
Remuneration policy
The Company’s remuneration policy is focused on being able to
attract, retain and incentivise management with the appropriate
skills and expertise to realise the Group’s strategic objectives
and align managements’ interests with those of shareholders.
The Directors believe that it is important to properly motivate and
reward key senior employees and executives and to do so in a
manner that aligns their interests with the interests of the
Shareholders. The Directors also recognise the importance of
ensuring that all employees are engaged, incentivised and
identify closely with the profitability of the Company.
Directors’ remuneration
The average number of staff employed by the Group is included
in note 8 to the financial statements.
Disclosure of the remuneration for key management personnel,
as required under IAS 24, is also detailed in note 8 to the
financial statements.
In particular the Remuneration Committee seeks to link payment
to performance and as a result create a performance culture
within the business.
In terms of the remuneration of the Company’s Directors, entries
to profit and loss included in the Statement of Comprehensive
Income include:
Share-based
Salaries & fees Bonus Pension payments 2017 2016
£’000 £’000 £’000 £’000 £’000 £’000
Non-Executive Directors
Samuel Dayani – – – – – 45
Thomas Rickert 56 – – 50 106 101
Tom Pridmore 51 – – 50 101 106
Mike Turner 40 – – 123 163 152
Iain McDonald 51 – – 55 106 103
Executive Directors
Robert Pooke 7 – – – 7 67
Ben Crawford 214 120 7 – 341 346
Glenn Hayward 182 – 10 10 202 290
Desleigh Jameson 321 – 4 29 354 213
Donald Baladasan 96 – – – 96 –
1,018 120 21 317 1,476 1,423
Included in the Directors’ emoluments above are the following;
• A charge of £81,000 in relation to Glenn Hayward’s
• A charge of £7,000 in relation to Robert Pooke’s contractual
notice period which expired in February 2017 (2016: £67,000).
• There were no charges included in the year to the Company
and Group by Samuel Dayani (2016: £45,000).
• There were no charges included in the year which were
invoiced (2016: £11,250) by Thomas Rickert.
• There were no charges included in the year to the Company
and Group by Ben Crawford FZE of which Ben Crawford has
a controlling interest (2016: £66,272).
• A charge of £40,000 to the Company and Group by Taylor
Wessing LLP, a partnership where Mike Turner is a partner
(2016: £40,000).
• A charge of £234,000 in relation to Desleigh Jameson’s
contractual notice period and redundancy compensation
(2016: £nil).
contractual notice period (2016: £nil).
• A charge of £96,000 in the year to the Company and Group
by Mataxis Ltd of which Donald Baladasan has a controlling
interest (2016: £nil).
Share options
Prior to admission to AIM, CentralNic established both and an
unapproved share option scheme and an Enterprise Management
Incentive option scheme (EMI) under which certain key executives
and employees were invited to participate. These options were
rolled over into the Company during 2013.
To reflect existing commitments, the options granted in June 2013
for the unapproved option scheme and the EMI scheme vest in
12 equal instalments at 3 month intervals following the Admission
(so that the options have fully vested). The unapproved options
granted on 14 October 2013 vest 3 years after the date of grant
(so again these options have fully vested).
CentralNic Group Plc Annual Report 2017
29
Remuneration report continued
Ben Crawford participates in both the June 2013 and October
2013 unapproved scheme, and Donald Baladasan participates
in the June 2013 unapproved scheme.
further unapproved options issued to Tom Pridmore and Thomas
Rickert, both with a vesting date of 3 February 2019.
Glenn Hayward (a former Director) participates in the EMI
scheme, with options granted on 28 April 2015. The EMI
options granted to Glenn Hayward vested on 10 February 2017.
Desleigh Jameson (a former Director) participates in the
unapproved scheme with the options granted in February
2016 with a vesting date of 14 January 2019.
Unapproved options were also issued to Non-Executive
Directors during 2016. In the case of Mike Turner and Iain
McDonald these options were issued with a vesting date to
coincide with the third anniversary of their appointments, namely
15 September 2018 and 26 October 2018. There were also
No options were issued to the Directors during the year.
These share incentive arrangements are designed to support
the strategy of generating significant sustainable value for
shareholders by linking the rewards for executives and the board
with the value created for Shareholders and thereby aligning the
interests of key executives with those of Shareholders.
Shares acquired or options granted under any share incentive
arrangements operated by the Company will be limited in total to 10
per cent of the Company’s issued share capital from time to time.
The table below shows the outstanding share options issued to
Directors and former Directors at 31 December 2017:
Number of options Exercise price Options granted
Outstanding at 1 January 2017 and 31 December 2017
Ben Crawford 1,316,000 10p 1 June 2013
Donald Baladasan 52,083 10p 1 June 2013
Ben Crawford 850,000 55p 14 October 2013
Thomas Rickert 88,000 55p 14 October 2013
Tom Pridmore 88,000 55p 14 October 2013
Glenn Hayward (former Director) 500,000 35p 28 April 2015
Mike Turner 750,000 40p 4 February 2016
Iain McDonald 350,000 40p 4 February 2016
Thomas Rickert 350,000 40p 4 February 2016
Tom Pridmore 350,000 40p 4 February 2016
Desleigh Jameson (former Director) 200,000 40p 4 February 2016
Total 4,894,083
No options were exercised during the year by the Directors or
former Directors and no options have expired. All options expire
within 10 years of grant.
Further details are provided in relation to share based payments
in note 28 to the financial statements.
In addition, a further 2,035,083 options over ordinary shares
were in issue at 31 December 2017 (2016: 2,150,083), being
held by the Group’s employees.
The IFRS2 charge in the year for all share option plans relating to
the Directors was £452,989 (2016: £497,806).
On 31 December 2017, the closing market price of CentralNic
Group plc ordinary shares was 62 pence. The highest and
lowest price of these shares in the year were 68.0 pence
between 25 August and 8 September 2017 and 46.25 pence
during April 2017 respectively.
30 CentralNic Group Plc Annual Report 2017
(c) Save as disclosed in this annual report, as at the date of
this Document, no Director has any option over any warrant to
subscribe for any shares in the Company.
(d) None of the Directors nor any members of their families,
nor any person connected with them within the meaning of
section 252 of the Act, has a related financial product (as
defined in the AIM Rules) referenced to the Ordinary Shares.
(e) None of the Directors is or has been interested in any
transaction which is or was unusual in its nature or conditions
or significant to the business of the Company and which was
effected by the Company and remains in any respect
outstanding or unperformed.
(f) There are no outstanding loans made or guarantees
granted or provided by the Company to or for the benefit of
any Director other than disclosed in notes 17 and 26 to the
financial statements.
(g) Save as disclosed in this Annual report, there are no potential
conflicts of interest between any duties to the Company of the
Directors and their private interests or their other duties.
Directors’ interests
(a) As at 31 December 2017, the interests of the Directors
(including Directors who were appointed during the year and
those who retired), including persons connected with the
Directors within the meaning of section 252 of the
Companies Act 2006, in the issued share capital of the
Company are as follows:
Ordinary Shares Percentage
Erin Invest & Finance Ltd* 21,630,382 22.56%
Jabella Group Ltd** 5,687,891 5.93%
Natwest FIS Nominees*** 3,699,000 3.86%
Donald Baladasan 72,917 0.08%
Iain McDonald***** 11,500 0.01%
* The beneficial holder of Erin and Natwest FIS Nominee Limited is the father
of Samuel Dayani, a Director of the Company
** Jabellla Group Limited is a BVI company owned inter alia, by Erin.
*** 5,687,891 Ordinary Shares are held by Jabella Group Limited in which
Natwest FIS Nominee Limited has a 8.30 per cent interest and Erin Invest
& Finance Ltd has a 53.30 per cent interest
***** Iain McDonald has an interest, held through a contract for difference,
in 11,500 ordinary shares in the Company.
There are no changes to this information as at the date of
this report.
(b) Save as disclosed in this annual report, none of the
Directors nor any members of their families, nor any person
connected with them within the meaning of section 252 of
the Act, has any interest in the issued share capital of the
Company or its subsidiaries.
CentralNic Group Plc Annual Report 2017
31
Independent auditors report
to the Members of CentralNic Group plc
Opinion
We have audited the financial statements of CentralNic Group
plc (the “Parent Company”) and its subsidiaries (the “Group”) for
the year ended 31 December 2017, which comprise:
• the Group income statement and statement of comprehensive
income for the year ended 31 December 2017;
• the Group and parent company statements of financial
position as at 31 December 2017;
• the Group statement of cash flows for the year then ended;
• the Group and parent company statements of changes in
equity for the year then ended; and
• the notes to the financial statements, including a summary
of significant accounting policies.
The financial reporting framework that has been applied in the
preparation of the Group financial statements is applicable law
and International Financial Reporting Standards (IFRSs) as
adopted by the European Union. The financial reporting
framework that has been applied in the preparation of the
Parent Company financial statements is applicable law and
United Kingdom Accounting Standards, including Financial
Reporting Standard 102 The Financial Reporting Standard
applicable in the UK and Republic of Ireland (United Kingdom
Generally Accepted Accounting Practice).
In our opinion:
• the financial statements give a true and fair view of the state
of the Group’s and of the Parent Company’s affairs as at
31 December 2017 and of the Group’s profit for the period
then ended;
• the Group financial statements have been properly prepared
in accordance with IFRSs as adopted by the European Union;
• the Parent Company financial statements have been properly
prepared in accordance with United Kingdom Generally
Accepted Accounting Practice; and
• the financial statements have been prepared in accordance
with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the
Auditor’s responsibilities for the audit of the financial statements
section of our report. We are independent of the Group in
accordance with the ethical requirements that are relevant to
our audit of the financial statements in the UK, including the
FRC’s Ethical Standard, and we have fulfilled our other ethical
responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
We have nothing to report in respect of the following matters in
relation to which ISAs (UK) require us to report to you when:
• The directors’ use of the going concern basis of accounting
in the preparation of the financial statements is not
appropriate; or
• The directors have not disclosed in the financial statements
any identified material uncertainties that may cast significant
doubt about the Group’s or the parent company’s ability to
continue to adopt the going concern basis of accounting for
a period of at least twelve months from the date when the
financial statements are authorised for issue.
Overview of our audit approach
Materiality
In planning and performing our audit we applied the concept of
materiality. An item is considered material if it could reasonably
be expected to change the economic decisions of a user of
the financial statements. We used the concept of materiality
to both focus our testing and to evaluate the impact of
misstatements identified.
Based on our professional judgement, we determined overall
materiality for the Group financial statements as a whole to be
£200,000 (2016: £170,000). In determining this, we considered
a range of benchmarks with specific focus and weighting on
revenue (0.75% of Group revenue) and profit (8% of Group
profit) for the financial year.
We use a different level of materiality (‘performance materiality’)
to determine the extent of our testing for the audit of the financial
statements. Performance materiality is set based on the audit
materiality as adjusted for the judgements made as to the entity
risk and our evaluation of the specific risk of each audit area
having regard to the internal control environment.
Where considered appropriate performance materiality may be
reduced to a lower level, such as, for related party transactions
and directors’ remuneration.
We agreed with the Audit Committee to report to it all identified
errors in excess of £6,000. Errors below that threshold would
also be reported to it if, in our opinion as auditor, disclosure
was required on qualitative grounds.
Overview of the scope of our audit
We conducted full scope audit work, engaging where
appropriate with component auditors, in four countries (UK,
Australia, New Zealand and Slovakia)) in which the Group has
significant operations. In addition, we performed the audit of
specific balances and transactions in six countries.
In establishing our overall approach to the Group audit, we
determined the type of work that needed to be undertaken
at each of the components by us, as the primary audit
engagement team. For the full scope components in
Australia/New Zealand and Slovakia, where the work was
performed by two component auditors, we determined the
appropriate level of involvement to enable us to determine
that sufficient audit evidence had been obtained as a basis
for our opinion on the Group as a whole.
32 CentralNic Group Plc Annual Report 2017
The primary team led by the Senior Statutory Auditor was
ultimately responsible for the scope and direction of the audit
process. The primary team interacted regularly with the
component teams where appropriate during various stages
of the audit and reviewed all relevant working papers. This,
together with the additional procedures performed at Group
level, gave us appropriate evidence for our opinion on the
Group financial statements.
Key audit matters
In preparing the financial statements, management made a
number of subjective judgements, for example in respect of
significant accounting estimates that involved making
assumptions and considering future events that are inherently
uncertain. We focused our work primarily on these areas by
assessing management’s judgements against available evidence,
forming our own judgements and evaluating the disclosures in the
financial statements. We also addressed the risk of management
override of controls, including evaluating whether there was
evidence of bias by management, which may represent a risk of
material misstatement, especially in areas of critical accounting
estimates and judgements as outlined in note 1.
Key audit matters are those matters that, in our professional
judgement, were of most significance in our audit of the financial
statements of the current period and include the most significant
assessed risks of material misstatement (whether or not due to
fraud) that we identified. These matters included those which
had the greatest effect on: the overall audit strategy, the
allocation of resources in the audit; and directing the efforts of
the engagement team. These matters were addressed in the
context of our audit of the financial statements as a whole,
and in forming our opinion thereon, and we do not provide a
separate opinion on these matters.
In our audit, we tested and examined information, using
sampling and other auditing techniques, to the extent we
considered necessary to provide a reasonable basis for us to
draw conclusions. We obtained audit evidence through testing
the effectiveness of controls, substantive procedures or a
combination of both. In determining the key audit matters we
noted the following changes from the prior year:
• The assessment of the SK-Nic A.S. business combination as
a significant audit risk was specific for the current year ended
31 December 2017, being the year of acquisition.
• The assessment of the Instra Holdings business combination
was specific for the prior year ended 31 December 2016.
There have been no other changes in the Group’s overall
operations during the current year that significantly impacted our
audit. Therefore, our assessment of the most significant risks of
material misstatement and resulting key audit matters, which are
those risks having the greatest effect on the audit strategy and
requiring particular focus, are otherwise the same as in the prior
year and are detailed below.
This is not a complete list of all risks identified by our audit.
Key audit matter in the audit of the group
How the scope of our audit addressed the key audit matter
Revenue recognition
The Group’s operating revenue arises from domain sales,
consultancy services, corporate revenues and software
licensing services and amounted to £24.3 million for the year
ended 31 December 2017.
We obtained an understanding of the revenue agreements
and evaluated the Group’s processes and controls in place
to calculate the amount and timing of subscription and
activity based revenue transactions.
The revenue recognition for these various revenue streams
is sometimes different to the timing of cash flows received
and is recognised in the accounting period in which the
services are rendered, as per the Group’s accounting policy
in Note 3 to the financial statements.
Revenue is a key measure of the financial performance of
the Group, and in our view is of particular interest to the
users of the financial statements in assessing the
performance of the Group.
We performed the following audit procedures on a sample
basis, for both existing and new contracts, to assess the
appropriateness of revenue recognition for individual
transactions:
• assessed the appropriateness of the allocation of
various revenue elements with reference to the terms of
the contract;
• ensured revenue recognised from subscription fees was
supported by signed contracts;
• assessed the existence of debtors through testing to
contracts, cash received where applicable and a review
of credit notes issued after year-end;
• assessed that revenue was recognised in the correct
period, agreeing back to supporting documentation the
contract price and the period in which the services
were delivered.
CentralNic Group Plc Annual Report 2017
33
Independent auditors report continued
Key audit matter in the audit of the group
How the scope of our audit addressed the key audit matter
Business combinations and acquisition accounting (Including the carrying value of goodwill
and separately identifiable intangible assets)
During the year, the Group completed the acquisition of
SK-Nic a.s. as disclosed in Note 25. The Group has
determined this acquisition to be a business combination
for which the purchase price is to be allocated between
acquired assets and liabilities and identified intangible
assets, and leading to the resultant recognition of goodwill
at their respective fair values.
The Group used projected financial information in the
purchase price allocation (‘PPA’) exercise.
Management use their best knowledge to make estimates
when utilising the Group’s valuation methodologies. In order
to determine the fair value of the separately identifiable
intangible assets on a business combination, the valuation
methodologies require input based on assumptions
about the future and use discounted cash flows and cash
flow forecasts.
Due to the Group’s estimation process in the PPA exercise
and the work effort from the audit team, business
combinations is considered a key audit matter.
Carrying value of goodwill, investments and intangible assets
When assessing the carrying value of goodwill, investments
(including fair value) and intangible assets, management
make judgements regarding the appropriate cash generating
unit, strategy, future trading and profitability and the
assumptions underlying these. We considered the risk that
goodwill, investments and/or intangible assets were impaired.
Our procedures included the following:
• Assessing whether the acquisition during the year met
the criteria of a business combination in accordance with
IFRS 3;
• Validating whether the date of acquisition was correctly
determined by scrutinising the key transaction documents
to understand key terms and conditions;
• Assessing the fair value of assets and liabilities recorded in
the purchase price allocation, by performing procedures
including considering the completeness of assets and
liabilities identified and the reasonableness of any
underlying assumptions in their respective valuations and
this would also include assessment on the reasonableness
of the useful lives of the intangible assets and the
consideration given;
• We used our knowledge of the acquired business, and
its industry, to assess the cash flow forecasts used to
determine the value of intangible assets recognised on
date of acquisition. We challenged the key assumptions
used to determine the value of intangible assets, including
those relating to growth rates and discount rates; and
• Assessing the disclosures in respect of the business
combination.
We evaluated, in comparison to the requirements set out in
IAS36, management’s assessment as to whether goodwill,
investments and/or intangible assets were impaired and the
appropriateness in respect of any reversal of previous
impairment made.
We examined Management’s evaluation of the fair value
of investments.
We challenged, reviewed and considered by reference to
external evidence, management’s impairment and fair value
models as appropriate and their key estimates, including the
discount rate. We reviewed the appropriateness and
consistency of the process for making such estimates.
We have no other key audit matters to report with respect to our audit of the parent company financial statements.
34 CentralNic Group Plc Annual Report 2017
Our audit procedures in relation to these matters were designed
in the context of our audit opinion as a whole. They were not
designed to enable us to express an opinion on these matters
individually and we express no such opinion.
Other information
The directors are responsible for the other information. The other
information comprises the information included in the annual
report, other than the financial statements and our auditor’s
report thereon. Our opinion on the financial statements does not
cover the other information and, except to the extent otherwise
explicitly stated in our report, we do not express any form of
assurance conclusion thereon.
In connection with our audit of the financial statements, our
responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained in the
audit or otherwise appears to be materially misstated. If we
identify such material inconsistencies or apparent material
misstatements, we are required to determine whether there is a
material misstatement in the financial statements or a material
misstatement of the other information. If, based on the work
we have performed, we conclude that there is a material
misstatement of this other information, we are required to
report that fact. We have nothing to report in this regard.
We have nothing to report in this regard.
Opinion on other matter prescribed by the
Companies Act 2006
In our opinion based on the work undertaken in the course of
our audit:
• the information given in the strategic report and the
directors’ report for the financial year for which the financial
statements are prepared is consistent with the financial
statements; and
• the directors’ report and strategic report have been prepared
in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In light of the knowledge and understanding of the group
and the parent company and their environment obtained in
the course of the audit, we have not identified material
misstatements in the strategic report or the directors’ report.
We have nothing to report in respect of the following matters
where the Companies Act 2006 requires us to report to you if,
in our opinion:
• adequate accounting records have not been kept by the
parent company, or returns adequate for our audit have not
been received from branches not visited by us; or
• the parent company financial statements are not in agreement
with the accounting records and returns; or
• certain disclosures of directors’ remuneration specified by
law are not made; or
• we have not received all the information and explanations
we require for our audit.
Responsibilities of the directors for the
financial statements
As explained more fully in the directors’ responsibilities statement
set out on page 24, the directors are responsible for the
preparation of the financial statements and for being satisfied
that they give a true and fair view, and for such internal control
as the directors determine is necessary to enable the
preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are
responsible for assessing the group’s and parent company’s
ability to continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going concern
basis of accounting unless the directors either intend to liquidate
the group or the parent company or to cease operations, or
have no realistic alternative but to do so.
CentralNic Group Plc Annual Report 2017
35
Independent auditors report continued
Auditor’s responsibilities for the audit of the
financial statements
Our objectives are to obtain reasonable assurance about
whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to
issue an auditor’s report that includes our opinion. Reasonable
assurance is a high level of assurance, but is not a guarantee
that an audit conducted in accordance with ISAs (UK) will always
detect a material misstatement when it exists. Misstatements
can arise from fraud or error and are considered material if,
individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken
on the basis of these financial statements.
A further description of our responsibilities for the audit of the
financial statements is located on the Financial Reporting
Council’s website at: www.frc.org.uk/auditorsresponsibilities.
This description forms part of our auditor’s report.
Use of our report
This report is made solely to the company’s members, as a
body, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006. Our audit work has been undertaken so
that we might state to the company’s members those matters
we are required to state to them in an auditor’s report and for no
other purpose. To the fullest extent permitted by law, we do not
accept or assume responsibility to anyone other than the
company and the company’s members as a body, for our audit
work, for this report, or for the opinions we have formed.
Nigel Bostock (Senior Statutory Auditor)
for and on behalf of
Crowe Clark Whitehill LLP
Statutory Auditor
London
30 May 2018
36 CentralNic Group Plc Annual Report 2017
Consolidated statement of
comprehensive income
for the year ended 31 December 2017
2017 2016
Note £’000 £’000
Revenue 5,6 24,348 22,129
Cost of sales (14,554) (14,462)
Gross profit 9,794 7,667
Administrative expenses (7,453) (5,637)
Share based payments expense (453) (621)
Operating profit 1,888 1,409
Adjusted EBITDA* 6,607 5,483
Depreciation 13 (100) (125)
Amortisation of intangible assets 14 (2,184) (2,066)
Acquisition costs & settlement items 9 (1,982) (1,262)
Share based payments expense 28 (453) (621)
Operating profit 1,888 1,409
Finance income 10 19 18
Finance costs 10 (536) (270)
Finance income costs 10 (517) (252)
Profit before taxation 7 1,371 1,157
Income tax expense 11 (349) (202)
Profit after taxation attributable to equity shareholders 1,022 955
Items that may be reclassified subsequently to profit and loss
Exchange difference on translation of foreign operation (302) 1,910
Cash flow hedges – effective portion of changes in fair value – (245)
Total comprehensive income for the financial year
attributable to equity shareholders 720 2,620
2017 2016
Note pence pence
Earnings per share
Basic (pence) 12 1.07 1.00
Diluted (pence) 12 1.04 0.97
*Earnings before interest, tax, depreciation and amortisation, acquisition costs, settlement items and non-cash charges.
All amounts relate to continuing activities.
The notes on pages 41 to 70 form an integral part of these financial statements.
CentralNic Group Plc Annual Report 2017
37
Consolidated statement
of financial position
As at 31 December 2017
2017 2016
Note £’000 £’000
ASSETS
Non-current assets
Property, plant and equipment 13 208 161
Intangible assets 14 53,460 29,822
Deferred receivables 15 1,050 1,486
Investments 16 997 997
Deferred tax assets 22 1,502 1,121
57,217 33,587
Current assets
Trade and other receivables 17 14,054 11,529
Inventory 327 390
Cash and bank balances 18 10,862 9,902
25,243 21,821
Total assets 82,460 55,408
EQUITY AND LIABILITIES
Equity
Share capital 19 96 96
Share premium 19 16,545 16,545
Merger relief reserve 19 1,879 1,879
Share based payments reserve 2,507 2,004
Foreign exchange translation reserve 1,608 1,910
Foreign currency hedging reserve – –
Retained earnings 3,817 2,785
Total equity 26,452 25,219
Non-current liabilities
Other payables 20 5,634 3,820
Deferred tax liabilities 22 5,519 3,282
Borrowings 24 15,541 1,324
26,694 8,426
Current liabilities
Trade and other payables and accruals 23 27,047 19,947
Taxation payable 413 783
Borrowings 24 1,854 1,033
29,314 21,763
Total liabilities 56,008 30,189
Total equity and liabilities 82,460 55,408
These financial statements were approved and authorised for issue by the Board of Directors on 30 May 2018 and were
signed on its behalf by:
Mike Turner Chairman
Company Number: 08576358
The notes on pages 41 to 70 form an integral part of these financial statements.
38 CentralNic Group Plc Annual Report 2017
Consolidated statement
of changes in equity
for the year ended 31 December 2017
Share Foreign Foreign
Merger based exchange currency
Share Share relief payments translation hedging Retained
capital premium reserve reserve reserve reserve earnings Total
£’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000
Balance as at 31 December 2015 92 16,522 – 1,390 – 245 1,797 20,046
Profit for the year – – – – – – 955 955
Other comprehensive income
Translation of foreign operation – – – – 1,910 – – 1,910
Cash flow hedge – – – – – (245) – (245)
Total comprehensive income for the year – – – – 1,910 (245) 955 2,620
Transactions with owners
Issue of new shares 4 23 1,879 – – – – 1,906
Share based payments – – – 621 – – – 621
Share based payments
– reclassify lapsed options – – – (33) – – 33 –
Share based payments
– deferred tax asset – – – 26 – – – 26
Balance as at 31 December 2016 96 16,545 1,879 2,004 1,910 – 2,785 25,219
Profit for the year – – – – – – 1,022 1,022
Other comprehensive income
Translation of foreign operation – – – – (302) – – (302)
Total comprehensive income for the year – – – – (302) – 1,022 720
Transactions with owners
Share based payments – – – 453 – – – 453
Share based payments
– reclassify lapsed options – – – (10) – – 10 –
Share based payments
– deferred tax asset – – – 60 – – – 60
Balance as at 31 December 2017 96 16,545 1,879 2,507 1,608 – 3,817 26,452
• 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 share issue costs and other permitted reductions. Where the consideration for shares in
another company includes issued shares, and 90% of the equity is held in the other company.
• 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 notes on pages 41 to 70 form an integral part of these financial statements.
CentralNic Group Plc Annual Report 2017
39
Consolidated statement
of cash flows
for the year ended 31 December 2017
2017 2016
Note £’000 £’000
Cash flow from operating activities
Profit before taxation 1,371 1,157
Adjustments for:
Depreciation of property, plant and equipment 100 124
Amortisation of intangible assets 2,184 2,066
Finance cost – net 428 130
Share based payments 453 621
Decrease/(increase) in trade and other receivables 1,196 (4,066)
(Decrease)/increase in trade and other payables and accruals (1,011) 3,350
Decrease in inventories 77 474
Cash flow from operations 4,798 3,856
Income tax paid (1,098) (538)
Net cash flow generated from operating activities 3,700 3,318
Cash flow used in investing activities
Purchase of property, plant and equipment (104) (145)
Purchase of intangible assets (415) (350)
Acquisition of a subsidiary, net of cash acquired 25 (17,368) (14,831)
Net cash flow used in investing activities (17,887) (15,326)
Cash flow used in financing activities
Proceeds from borrowings (net) 15,298 2,625
Proceeds from issuance of ordinary shares – 23
Payment of deferred consideration – (36)
Net cash flow generated from financing activities 15,298 2,612
Net increase/(decrease) in cash and cash equivalents 1,111 (9,396)
Cash and cash equivalents at beginning of the year 9,902 19,060
Exchange (losses)/gains on cash and cash equivalents (151) 238
Cash and cash equivalents at end of the year 10,862 9,902
Bank borrowings (18,078) (2,625)
Net (debt)/cash excluding issue costs of debt (7,216) 7,277
The notes on pages 41 to 70 form an integral part of these financial statements.
40 CentralNic Group Plc Annual Report 2017
Notes to the consolidated
financial statements
for the year ended 31 December 2017
1. General information
(a) Nature of operations
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
35-39 Moorgate, London, EC2R 6AR.
The CentralNic Group provides wholesale (“registry”), retail (“registrar”) and enterprise services and strategic consultancy for new
Top Level Domains (“TLDs”), Country Code TLD’s (“ccTLDs”) and Second-Level Domains (“SLDs”) and it is the owner and registrant
of a portfolio of domain names, which it uses as domain extensions and for resale on the domain name aftermarket.
(b) Component undertakings
The principal activities of the subsidiaries and other entities included in the financial statements are presented within the Particulars
of Subsidiaries and Associates on pages 78 and 79 of these financial statements.
2. Application of IFRS
(a) Basis of preparation
The financial statements are measured and presented in sterling (£), unless otherwise stated, which is the currency of the primary
economic environment in which many of the entities operate. They have been prepared under the historical cost convention, except
for those financial instruments which have been measured at fair value through profit and loss.
The financial statements have been prepared on the going concern basis, which assumes that the Group will continue to be able to
meet its liabilities as they fall due for the foreseeable future. The financial statements have been prepared in accordance with
International Financial Reporting Standards as adopted by the EU (“IFRS”) issued by the International Accounting Standards Board
(“IASB”), including related interpretations issued by the International Financial Reporting Interpretations Committee (“IFRIC”).
The Directors have reviewed forecasts and budgets for the coming year having regard to both the macroeconomic environment in
which the Group operates, historic and current industry knowledge and contracted trading activities and the future strategy of the
Group. As a result of that review the Directors consider that it is appropriate to adopt the going concern basis of preparation.
(b) Standards, amendments and interpretations to published standards not yet effective
A number of new standards and amendments to standards and interpretations have been issued but are not yet effective and in
some cases have not yet been adopted by the EU.
As described below, the Directors have completed their detailed review of IFRS 9 and IFRS 15 and concluded that the adoption of
these standards would have no material impact on Financial Instruments and Revenue Recognition respectively from the next set of
financial statements. Whilst Directors carry out their detailed review on IFRS 16, which is effective from 1 January 2019, it is currently
expected that no material impact will arise from the adoption of this standard.
IFRS 15 is a prescriptive standard which requires a business to identify the performance obligations which are contracted with its
customer base. The transaction price of the contract is determined after which the transaction price is allocated against the identified
performance obligations. Revenue is recognised against each of the performance obligations as they are satisfied and as control is
transferred. The Group has evaluated the revenue recognition policy in place against the requirement of the standard. Performance
obligations within customer contracts have been identified where domain names are sold for a term, where the management,
customer and technical support is available to the customer over the period of that term, in both Wholesale and Retail Division.
The transaction price of the contract is evaluated in accordance with IFRS 15, and is attached to the performance obligations of the
customer contract. Performance obligations are deemed to be satisfied by transferring control rateably over the period of contractual
time, being the anniversary of the expiry date of the domain name. Enterprise and consultancy revenues take a similar approach,
however revenues here are either recognised when control is passed onto the customer either on a percentage completion basis
inline with contractual milestones or immediately recognised on delivery of the contracted work. Overall, the business has determined
that there is no material impact on the adoption of IFRS 15.
IFRS 9 relates to Financial Instruments which contains the requirement for a) the classification and measurement of financial assets
and financial liabilities, b) Impairment methodology, and c) general hedge accounting. As disclosed in note 29, the Group measures
it’s financial assets and liabilities and accounts for any expected credit losses on the basis of fair value recognition. Therefore, the
adoption of the IFRS 9 causes no material impact on the financial statements.
CentralNic Group Plc Annual Report 2017
41
Notes to the consolidated
financial statements continued
3. Summary of significant accounting policies
The financial statements have been prepared on the historical cost basis, as explained in the accounting policies set out below,
which has been prepared in accordance with IFRS. The principal accounting policies are set out below.
(a) Basis of consolidation
The consolidated financial statements include the financial statements of all subsidiaries. The financial year ends of all entities in the
Group are coterminous.
The financial statements of subsidiaries are included in the consolidated financial statements from the date on which control over the
operating and financial decisions is obtained and cease to be consolidated from the date on which control is transferred out of the
Group. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and
has the ability to affect those returns through its power over the investee.
All intercompany balances and transactions, including recognised gains arising from inter-group transactions, have been eliminated in full.
Unrealised losses are eliminated in the same manner as recognised gains except to the extent that they provide evidence of impairment.
(b) Business combinations
Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of
the consideration transferred measured at acquisition date fair value and the amount of any non-controlling interests in the acquiree.
For each business combination, the Group elects whether to measure the non-controlling interests in the acquiree at fair value or at
the proportionate share of the acquiree’s identifiable net assets. Acquisition-related costs are expensed as incurred and included in
administrative expenses.
When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and
designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date.
This includes the separation of embedded derivatives in host contracts by the acquiree.
If the business combination is achieved in stages, any previously held equity interest is remeasured at its acquisition date fair value
and any resulting gain or loss is recognised in profit or loss.
Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. Contingent
consideration classified as an asset or liability that is a financial instrument and within the scope of IAS 39 Financial Instruments: Recognition
and Measurement, is measured at fair value with changes in fair value recognised in profit or loss. If the contingent consideration is not
within the scope of IAS 39, it is measured in accordance with the appropriate IFRS. Contingent consideration that is classified as equity
is not remeasured and subsequent settlement is accounted for within equity.
Goodwill is initially measured at cost, being the excess of the aggregate of the consideration transferred and the amount recognised
for non-controlling interests, and any previous interest held, over the net identifiable assets acquired and liabilities assumed. If the fair
value of the net assets acquired is in excess of the aggregate consideration transferred, the Group re-assesses whether it has
correctly identified all of the assets acquired and all of the liabilities assumed and reviews the procedures used to measure the
amounts to be recognised at the acquisition date. If the reassessment still results in an excess of the fair value of net assets acquired
over the aggregate consideration transferred, then the gain is recognised in profit or loss.
After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing,
goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cash-generating units that are
expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units.
Where goodwill has been allocated to a cash-generating unit and part of the operation within that unit is disposed of, the goodwill
associated with the disposed operation is included in the carrying amount of the operation when determining the gain or loss on
disposal. Goodwill disposed in these circumstances is measured based on the relative values of the disposed operation and the
portion of the cash-generating unit retained.
(c) Functional and foreign currencies
(i) Functional and presentation currency
Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic
environment in which the entity operates (the ‘functional currency’). The consolidated financial statements are presented in pounds
sterling (£) the Group’s and the Company’s presentational currency.
42 CentralNic Group Plc Annual Report 2017
3. Summary of significant accounting policies continued
(ii) Transactions and balances
Foreign currency transactions are translated into the functional currency at the exchange rates prevailing at the dates of the
transactions or valuation where items are re-measured. Foreign currency gains and losses resulting from the settlement of such
transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies
are recognised in the income statement, except where deferred in other comprehensive income as qualifying cash flow hedges and
qualifying net-investment hedges. Foreign exchange gains and losses that relate to borrowings and cash and cash equivalents are
presented in the income statement within finance income or finance costs. All other foreign exchange gains and losses are
recognised in profit and loss within administrative expenses.
(iii) Group companies
The results and financial position of all of the Group entities, none of which has the currency of a hyper-inflationary economy that
have a functional currency different from the presentation currency of the Group are translated as follows:
a) assets and liabilities for each statement of financial position are translated at the closing rate at the date of that statement of
financial position;
b)
income and expenses for each income statement are translated at average exchange rates (unless this average is not a
reasonable approximation of the cumulative effect of the rates prevailing at the transaction dates, in which case income and
expenses are translated at the rate on the dates of the transactions).
c) All resulting exchange differences are recognised in other comprehensive income.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity
and translated at the closing rate. Exchange differences arising are recognised in other comprehensive income.
(d) Financial instruments
Financial assets and liabilities are recognised in the statements of financial position when CentralNic or one of the CentralNic Group
entities has become a party to the contractual provisions of the instruments.
The CentralNic Group’s financial assets and liabilities are initially measured at fair value plus any directly attributable transaction costs.
The carrying value of the CentralNic Group’s financial assets (primarily cash and bank balances) and liabilities (primarily CentralNic’s
payables and other accrued expenses) approximate their fair values.
Financial instruments are offset when the CentralNic Group has a legally enforceable right to offset and intends to settle either on a
net basis or to realise the asset and settle the liability simultaneously.
Financial instruments recognised in the pro forma aggregated statements of financial position are disclosed in the individual policy
statement associated with each item.
(i) Financial assets
On initial recognition, financial assets are classified as either financial assets at fair value through profit or loss, held-to-maturity
investments, loans and receivables financial assets, or available-for-sale financial assets, as appropriate.
Trade and other receivables
Trade and other receivables (including deposits and prepayments) that have fixed or determinable payments that are not quoted in an
active market are classified as other receivables, deposits and prepayments. Other receivables, deposits and prepayments are
measured at amortised cost using the effective interest method, less any impairment loss. Interest income is recognised by applying
the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial.
Derivative financial instruments
Cash flow hedge
Derivatives are initially recognised at fair-value on the date a derivative contract is entered into and are subsequently re-measured at
their fair-value. The method of recognising the resulting gain or loss depends on whether the derivative is designated a hedging
instrument and if so, the nature of the item being hedged.
The Group has only undertaken hedges of a particular risk associated with a recognised asset or liability or a highly probable forecast
transaction (cash flow hedges).
CentralNic Group Plc Annual Report 2017
43
Notes to the consolidated
financial statements continued
3. Summary of significant accounting policies continued
The Group documents at the inception of the transaction the relationship between hedging instruments and hedged items, as well as
risk management objectives and strategy for undertaking various hedging transactions. The Group also documents its assessment,
both at hedge inception and on an ongoing basis, of whether the derivatives which are used in hedging transactions are highly
effective in offsetting changes in fair values or cash flows of hedged items.
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in other
comprehensive income. The gain or loss relating to the ineffective portion, if any, is recognised immediately in the income statement.
Amounts accumulated in equity are reclassified to profit and loss in the period or periods that the hedged item affects profit and loss.
When a hedging instrument expires or is sold, or where a hedge no longer meets the criteria for hedge accounting any cumulative
gain or loss existing in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in
the income statement. When a forecast transaction is no longer expected to occur, the cumulative gain or loss which was reported
in equity is immediately transferred to the income statement.
Cash and bank balances
Cash and bank balances comprise cash balances that are subject to insignificant risk of changes in their fair value and are used by
the CentralNic Group in the management of its short-term commitments.
(ii) Financial liabilities and equity instruments
Financial liabilities are classified as liabilities or equity in accordance with the substance of the contractual arrangement. Interest,
dividends, gains and losses relating to financial liabilities are reported in profit or loss. Distributions to holders of financial liabilities are
classified as equity and charged directly to equity.
Financial liabilities
Financial liabilities comprise long-term borrowings, short-term borrowings, trade and other payables and accruals, measured at
amortised cost using the effective interest method.
The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest income over
the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments (including all fees on
points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts)
through the expected life of the financial liability, or, where appropriate, a shorter period to the net carrying amount on initial recognition.
Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all its liabilities.
Equity instruments issued by the CentralNic Group are recognised at the proceeds received, net of direct issue costs.
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new ordinary shares or options are
shown in equity as a deduction, net of tax, from proceeds.
Dividends on ordinary shares are recognised as liabilities when approved for appropriation.
(e) Property, plant, and equipment
Property, plant and equipment, including leasehold improvements and office furniture and equipment, are stated at cost less
accumulated depreciation and impairment losses, if any.
Depreciation is calculated using the methods below to write off the depreciable amount of the assets over their estimated useful lives.
Depreciation of an asset does not cease when the asset becomes idle or is retired from active use unless the asset is fully
depreciated. The principal annual rates used for this purpose are:
UK Australia New Zealand Germany Slovakia
Depreciation method Reducing Reducing Reducing Straight Straight
Balance Balance Balance Line Line
Computer equipment 60% – 65% 25% 25% 33% 20%
Furniture and fittings 15% – 20% 5-10% 5-20% 10% 20%
44 CentralNic Group Plc Annual Report 2017
3. Summary of significant accounting policies continued
The depreciation method, useful lives and residual values are reviewed, and adjusted if appropriate, at the end of each reporting
period to ensure that the amounts, method and periods of depreciation are consistent with previous estimates and the expected
pattern of consumption of the future economic benefits embodied in the asset.
Subsequent component replacement costs are included in the asset’s carrying amount or recognised as a separate asset, as
appropriate, only when the cost is incurred and it is probable that the future economic benefits associated with the asset will flow
to the CentralNic Group and the cost of the asset can be measured reliably. The carrying amount of parts that are replaced is
derecognised. The costs of the day-to-day servicing of property, plant and equipment are recognised in profit or loss as incurred.
Cost also comprises the initial estimate of dismantling and removing the asset and restoring the site on which it is located for which
the CentralNic Group are obliged to incur when the asset is acquired, if applicable.
An item of property and equipment is derecognised upon disposal or when no future economic benefits are expected from its use.
Any gain or loss arising from de-recognition of the asset is recognised in profit or loss.
Intangible assets
(f)
Intangible assets represent amounts paid to acquire the rights to own and act as registrant for a portfolio of domain names.
Capitalised domain names have a finite useful life and are measured at cost less accumulated amortisation and impairment losses,
if any. Domain names are amortised on an annual basis at the rate of 10% reducing balance.
Domain names not held for resale are included in the balance sheet at amortised cost and classified as “Domain names” and
amortised over their useful lives. Domain names held for resale are included in the balance sheet at the lower of cost and net
realisable value and classified as stock held for sale, no amortisation being charged. If a decision is taken to sell a domain name
previously included in intangible assets it is reclassified as stock at net book value prior to sale.
The useful economic life for the software acquired as part of the Internet.BS, Instra and SK-NIC acquisitions is five years with the
customer list acquired being amortised over ten years.
Development costs that the CentralNic Group incurs for identifiable and unique software will be capitalised, where the following
criteria are met:
• it is technically feasible to complete the software so that it will be available for use;
• management intends to complete the software product and use or sell it;
• there is an ability to use or sell the software product;
• it can be demonstrated that the asset will probably generate future economic benefits; and
• the expenditure attributable to the software product during its development can be reliably measured.
• that there are adequate technical and finance resources available to complete this development.
Costs capitalised in relation to computer software development may relate to either:
• completely separable software, or;
• enhancements of existing software which are clearly identifiable as new modules within the system or new features which enable
the asset to generate additional future economic benefit. For the avoidance of doubt this excludes the ongoing maintenance to the
existing software.
Directly attributable costs that are capitalised as part of the software product include the employee costs and an appropriate portion
of the relevant overheads. Computer software development recognised as assets are amortised over their estimated useful lives,
which are determined by the Directors.
Costs for development initiatives that the CentralNic Group undertakes that are not otherwise allocable to specific domain names or
projects are charged to expense through profit and loss when incurred.
CentralNic Group Plc Annual Report 2017
45
Notes to the consolidated
financial statements continued
3. Summary of significant accounting policies continued
Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business
combination is their fair value at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any
accumulated amortisation and accumulated impairment losses. Internally generated intangibles, excluding capitalised development
costs, are not capitalised and the related expenditure is reflected in profit or loss in the period in which the expenditure is incurred.
The useful lives of intangible assets are assessed as either finite or indefinite.
Intangible assets are tested for impairment annually if facts and circumstances indicate that impairment may exist. In the event that
the expected future economic benefits of the intangible assets are no longer probable or expected to be recovered, the capitalised
amounts are written down to their recoverable amount through profit and loss.
Impairment of financial assets
(g) Impairment
(i)
Financial assets not categorised at fair value through profit or loss are assessed at the end of each reporting period to determine
whether there is any objective evidence of impairment. A financial asset is impaired if there is objective evidence of impairment as a
result of one or more events that occurred after the initial recognition of the asset and that loss event(s) had an impact on the estimated
future cash flows of the asset. Objective evidence that financial assets are impaired includes default or delinquency by a debtor and the
restructuring of an amount due to the CentralNic Group on terms that the CentralNic Group would not consider otherwise.
An impairment loss in respect of a financial asset measured at amortised cost, including other receivables and deposits, is recognised
in profit or loss and is measured as the difference between the asset’s carrying amount and the present value of estimated future cash
flows, discounted at the financial asset’s original effective interest rate. Losses are recognized in profit or loss and reflected in an
allowance account against the amounts receivable.
When the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the
impairment was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent that the carrying
amount of the investment at the date the impairment is reversed does not exceed what the amortised cost would have been had the
impairment not been recognised.
Impairment of non-financial assets
(ii)
The carrying values of non-financial assets, other than deferred tax assets, are reviewed at the end of each reporting period to
determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is
estimated. The recoverable amount of the asset is the higher of the asset’s fair value less cost to sell and their value-in-use, which is
measured by reference to discounted future cash flows.
An impairment loss is recognised if the carrying value of the asset exceeds its recoverable amount.
An impairment loss is recognised in profit or loss immediately.
In respect of assets other than goodwill, a subsequent increase in the recoverable amount of an asset is treated as a reversal of the
previous impairment loss and is recognised to the extent of the carrying amount of the asset that would have been determined (net of
amortisation and depreciation) had no impairment loss been recognised. The reversal is recognised in profit or loss immediately.
(h) Cash and cash equivalents
Cash and bank balances comprise of cash in hand, bank balances, deposits with financial institutions and short-term, highly liquid
investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.
(i) Employee benefits
Short-term employee benefits, including wages, salaries, paid annual leave and sick leave, bonuses and non-monetary benefits are
accrued in the period in which the associated services are rendered by employees of the CentralNic Group.
(j) Leases
Assets held under leases are classified as operating leases and are not recognised in the CentralNic Group’s statement of financial
position. Payments made under operating leases are recognised in profit or loss on a straight-line basis over the term of the lease.
Lease incentives received are recognised as part of the total lease expense, over the term of the lease.
46 CentralNic Group Plc Annual Report 2017
3. Summary of significant accounting policies continued
(k) Taxation
Taxation for the year comprises of current and deferred tax.
Current tax is the expected amount of income taxes payable in respect of the taxable profit for the year and is measured using the tax
rates that have been enacted or substantively enacted at the end of the reporting period.
Deferred tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and
liabilities and their carrying amounts in the financial statements.
Deferred tax liabilities are recognised for all taxable temporary differences other than those that arise from goodwill or excess of the
acquirer’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities over the business
combination costs or from the initial recognition of an asset or liability in a transaction which is not a business combination and at the
time of the transaction, affects neither accounting profit nor taxable profit.
Deferred tax assets are recognised for all deductible temporary differences, unused tax losses and unused tax credits to the extent
that it is probable that future taxable profits will be available against which the deductible temporary differences, unused tax losses and
unused tax credits can be utilised. The carrying amounts of deferred tax assets are reviewed at the end of each reporting period and
reduced to the extent that it is no longer probable that sufficient future taxable profits will be available to allow all or part of the deferred
tax assets to be utilised.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period when the asset is realised or
the liability is settled, based on the tax rates that have been enacted or substantively enacted at the end of the reporting period.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax
liabilities and when the deferred income taxes relate to the same taxation authority.
Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss. Deferred tax items are recognised in
correlation to the underlying transactions either in other comprehensive income or directly in equity and deferred tax arising from a
business combination is included in the resulting goodwill or excess of the acquirer’s interest in the net fair value of the acquiree’s
identifiable assets, liabilities and contingent liabilities over the business combination costs.
(l) Share based payments
Employees (including Directors and Senior Executives) of the Group receive remuneration in the form of share-based payment
transactions, whereby these individuals render services as consideration for equity instruments (“equity-settled transactions”). These
individuals are granted share option rights approved by the Board which can only be settled in shares of the respective companies
that award the equity-settled transactions. Share option rights are also granted to these individuals by majority shareholders over their
shares held. No cash settled awards have been made or are planned.
The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the
performance and/or service conditions are fulfilled, ending on the date on which the relevant individuals become fully entitled to the
award (“vesting point”). The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date
reflects the extent to which the vesting period has expired and the Group’s best estimate of the number of equity instruments and
value that will ultimately vest. The statement of comprehensive income charge for the year represents the movement in the cumulative
expense recognised as at the beginning and end of that period.
The fair value of share-based remuneration is determined at the date of grant and recognised as an expense in the statement of
comprehensive income on a straight line basis over the vesting period, taking account of the estimated number of shares that will
vest. The fair value is determined by use of Black Scholes model method.
(m) Provisions, contingent liabilities and contingent assets
Provisions are recognised if, as a result of a past event, the CentralNic Group has a present legal or constructive obligation, when it is
probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and when a reliable
estimate of the amount can be made. Provisions are reviewed at the end of each financial reporting period and adjusted to reflect the
current best estimate. Where effect of the time value of money is material, the provision is the present value of the estimated
expenditure required to settle the obligation.
CentralNic Group Plc Annual Report 2017
47
Notes to the consolidated
financial statements continued
3. Summary of significant accounting policies continued
A contingent liability is a possible obligation that arises from past events and whose existence will only be confirmed by the occurrence
of one or more uncertain future events not wholly within the control of the CentralNic Group. It can also be a present obligation arising
from past events that is not recognised because it is not probable that outflow of economic resources will be required or the amount
of obligation cannot be measured reliably.
A contingent liability is not recognised in the financial statements but is disclosed in the notes to the financial statements. When a
change in the probability of a contingent outflow occurs so that the outflow is probable, a liability will be recognised as a provision.
A contingent asset is a probable asset that arises from past events and whose existence will be confirmed only by the occurrence
or non-occurrence of one or more uncertain events not wholly within the control of the CentralNic Group. The CentralNic Group
does not recognise contingent assets but discloses their existence where inflows of economic benefits are probable, but not
virtually certain.
(n) 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 amounts of revenue and cost can be measured reliably. In particular:
(i) Sale of Wholesale (“registry”) services for domain names (“Wholesale Domain sales”)
Wholesale revenues are generated from the provision of wholesale and related services between a registrar and registry operator.
The sub revenue streams would be those of new registrations and renewals. The division performs the role of both the registry
operator and registry service provider for the legacy proprietary domains that the company owns and operates. For third party domain
names, the division provides the registry service provision, whether this be purely technical provision, or incorporate marketing and
billing and cash collection services. An invoice under the Wholesale Division could cover the sale of a domain name for a fixed term
period which could vary between one and ten years. An invoice generated to the registrar is offset by invoice from the registry
operator to derive net revenues. 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 revenues.’
Revenue from strategic consultancy and similar services is recognised in profit and loss in proportion to the stage of completion of
the assignment at the reporting date. The stage of completion is determined based on completion of work performed to date as a
percentage of total services to be performed.
(ii) Sale of Retail (“registrar”) services for domain names (“Retail Domain sales”)
Retail revenues are generated from the provision of retail and similar services to domain registrants and resellers. 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. The transaction constitutes a term period which may vary between one and ten years. 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 revenues’. These revenues are matched to deferred wholesale costs which cover the
same period of the underlying sale.
(iii) Sale of Enterprise services including premium domain names (“Enterprise including Premium Domain Name Sales”)
Revenue from enterprise services and premium domain name sales are recognised in profit and loss at the point of sale. 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. Where no adaptions are required revenue is recognised on delivery.
Revenue from strategic consultancy and similar services is recognised in profit and loss in proportion to the stage of completion of
the assignment at the reporting date. The stage of completion is determined based on completion of work performed.
48 CentralNic Group Plc Annual Report 2017
4. Critical accounting judgments and key sources of estimating uncertainty
In the application of the CentralNic Group’s accounting policies, which are described in note 3, 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 on-going 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 and fair value assessment
The recoverable amounts of individual non-financial assets are determined based on the higher of the value-in-use or the 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
investments, tangible and intangible assets.
The Directors review and test the carrying value of investments, 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 independent of cash flows of other assets or liabilities. If there are indications
that impairment may have occurred, estimates will be prepared of expected future cash flows for each group of assets.
For available for sale assets held at fair value, the Directors review the appropriateness and reasonableness of (i) the valuation
technique(s) followed to determine the fair value and corroborative support (ii) the assumptions used in preparing such valuations and
the evaluation of the sensitivity in such assumptions (iii) the evidence of indicators of a change in fair value and (iv) the adjustments
required if there are indications that a change in fair value has arisen.
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. The carrying value of the Group’s investments, tangible and intangible assets are disclosed in notes 13,
14 and 16 respectively.
Acquisition accounting and goodwill
Where the Group undertakes business combinations, the cost of acquisition is allocated to identifiable net assets and contingent
liabilities acquired and assumed by reference to their estimated fair values at the time of acquisition. The remaining amount is recorded
as goodwill. The valuation of identifiable net assets involves an element of judgement related to projected results. Fair values that are
stated as provisional are not finalised at the reporting date and final fair values may be determined that are materially different from the
provisional values stated.
Judgement was exercised in determining the fair value of the SK-NIC a.s. acquisition. Further details are set out in note 25.
CentralNic Group Plc Annual Report 2017
49
Notes to the consolidated
financial statements continued
5. Segment analysis
CentralNic is an independent global domain name service provider. It provides Wholesale, Retail and Enterprise services and is the
owner and registrant of a portfolio of domain names. 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 segmental analysis is organised around the products and services of the business.
The Wholesale Division is a global distributor of domain names and provides consultancy services to retailers. The Retail Division
provides domain names and ancillary services to end users, also on a global basis. The Enterprise Division represents revenue
generated by providing technical and consultancy services to corporate and DotBrand clients, licencing of the Group’s in house
developed registry management platform, and selling premium domain names.
Management reviews the activities of the CentralNic Group in the segments disclosed below:
2017
Adjusted Non-current Current Non-current Current
Revenue EBITDA assets assets liabilities liabilities
£’000 £’000 £’000 £’000 £’000 £’000
Wholesale Domain Sales 4,706 2,098 29,514 13,896 22,203 19,530
Retail Domain Sales 15,577 2,650 27,571 11,070 4,491 9,759
Enterprise including Premium
Domain Name Sales 4,065 2,828 132 277 – 25
Group overheads including
costs associated with
public company status – (969) – – – –
24,348 6,607 57,217 25,243 26,694 29,314
2016
Adjusted Non-current Current Non-current Current
Revenue EBITDA assets assets liabilities liabilities
£’000 £’000 £’000 £’000 £’000 £’000
Wholesale Domain Sales 3,176 1,237 2,901 12,614 1,775 13,578
Retail Domain Sales 14,320 2,417 30,564 8,848 6,651 8,159
Enterprise including Premium
Domain Name Sales 4,633 2,785 122 359 – 26
Group overheads including
costs associated with
public company status – (956) – – – –
22,129 5,483 33,587 21,821 8,426 21,763
The geographical locations of the non-current and current assets and non-current and current liabilities are located in the following
geographic territories.
2017
Non-current Non-current
assets Current assets liabilities Current liabilities
£’000 £’000 £’000 £’000
UK 3,260 14,817 16,346 18,257
North America – 117 – (12)
Europe 25,874 689 5,857 2,623
Australasia 23,471 5,824 4,491 5,766
ROW 3,036 3,796 – 2,680
55,641 25,243 26,694 29,314
50 CentralNic Group Plc Annual Report 2017
5. Segment analysis continued
2016
Non-current Non-current
assets Current assets liabilities Current liabilities
£’000 £’000 £’000 £’000
UK 2,993 13,781 5,010 13,786
North America – 33 – (123)
Europe 9 135 – 26
Australasia 25,817 4,804 3,023 5,803
ROW 3,647 3,068 393 2,271
32,466 21,821 8,426 21,763
6. Revenue
The Wholesale Division generated its revenue from sale of domain names totalling £4,105,000 (2016: £3,112,000) and £601,000
(2016: £64,000) from consultancy and other services. The Retail Division wholly represents revenue from provision of reselling domain
names totalling £15,577,000 (2016: £14,320,000). The Enterprise Division generates its revenue from sale of premium domain names
amounting to £2,992,000 (2016: £3,744,000), corporate revenues of £590,000 (2016: £574,000), software licensing revenues of
£287,000 (2016: £150,000) and dotbrand revenues of £196,000 (2016: £165,000).
The CentralNic Group’s revenue is generated from the following geographical areas:
2017 2016
Wholesale Domain Sales £’000 £’000
UK 451 805
North America 1,092 904
Europe 1,260 451
ROW 1,903 1,016
4,706 3,176
2017 2016
Retail Domain Sales £’000 £’000
UK 1,402 1,215
North America 3,209 3,416
Europe 4,285 3,723
ROW 6,681 5,966
15,577 14,320
2017 2016
Enterprise including Premium Domain Name Sales £’000 £’000
UK – 4
North America 2,697 3,745
Europe 811 575
ROW 557 309
4,065 4,633
Enterprise including premium domain name sales by nature are subject to annual variation depending on customer demand.
The Wholesale Division had one customer that representing more than 10% of the division’s revenue at £613,000 (2016: none).
No single customer contributes greater than 10% or more of the retail domain sales.
The enterprise including premium domain name sales were principally driven by premium domain name sales of £2,992,000
(2016: £3,744,000) of which £2,638,000 was made to one customer (2016: £3,555,000 to one customer).
CentralNic Group Plc Annual Report 2017
51
Notes to the consolidated
financial statements continued
6. Revenue continued
The CentralNic Group’s revenue is generated from the following countries:
2017 2016
£’000 £’000
Revenue by customer location
United States of America 6,054 7,552
United Kingdom 1,603 1,580
Australia 1,434 1,359
China 1,369 670
Germany 866 908
United Arab Emirates 687 595
France 562 488
Singapore 523 476
Italy 508 436
Hong Kong 452 406
New Zealand 404 346
Canada 402 351
Russian Federation 341 325
Chile 268 426
Switzerland 232 225
India 226 199
Other 8,417 5,787
24,348 22,129
7. Profit before taxation
The profit before taxation is stated after charging the following amounts.
2017 2016
£’000 £’000
Employee benefit expense – wages and salaries 3,788 3,057
Employee benefit expense – social security 354 275
Employee benefit expense – pension 178 132
Employee benefit expense – share based payments 136 123
Staff consultancy fees 468 567
Directors’ remuneration – fees and salaries 843 925
Directors’ remuneration – share based payments 317 498
Operating leases – land and buildings 162 148
Operating leases – equipment 451 431
Fees payable to the company’s auditor for the audit of Parent Company
and consolidated financial statements – UK auditor office 55 50
Fees payable to the company’s auditor for the audit of subsidiary
companies – Overseas auditor associates 50 45
Fees payable to company’s auditors for due diligence and other acquisition costs 102 128
Net loss/(gain) on foreign currency translation 588 (567)
Depreciation and amortisation expense 2,284 2,190
52 CentralNic Group Plc Annual Report 2017
8. Employee information
The average number of persons employed by the Group (excluding Directors) during the year were 92 (2016: 87), analysed by
category, as follows;
2017 2016
Number Number
Management and finance 10 7
Technical 28 29
Sales and marketing 23 21
Administrative 5 6
Operations 26 24
Key management personnel
Total remuneration of key management personnel being the Directors and key senior personnel is £2,360,000 (2016: £1,810,000),
and is set out below in aggregate for each of the categories specified in IAS24, related party disclosures.
2017 2016
Senior key Senior key
Directors personnel Total Directors personnel Total
£’000 £’000 £’000 £’000 £’000 £’000
Wages and salaries 621 743 1,364 623 328 951
Employers NI 68 70 138 57 18 75
Pension 21 37 58 16 16 32
Share based payments 317 35 352 498 25 523
Directors consultancy fees 133 – 133 162 – 162
Settlements 315 – 315 67 – 67
1,475 885 2,360 1,423 387 1,810
The Group made contributions to defined contribution personal pension schemes for 6 Directors in the period (2016: 5). The number of
individuals included within the senior key personnel increased to 8 (2016: 4). Included in the above tables, the highest paid Director had
wages and salaries including pensions of £90,000 (2016: £162,000), Director’s consultancy fees £nil (2016: 66,000), share based
expense of £29,000 (2016: £118,000), and settlement payments of £234,000 (2016: nil) totalling to £353,000 (2016: £346,000).
The Group operates payrolls in several foreign subsidiaries and fully complies with local jurisdiction obligations. Directors and key
personnel are compensated through the payroll of the country in which those individuals fulfill their duties.
9. Acquisition costs and settlement costs
2017 2016
£’000 £’000
Acquisition related costs 1,554 1,094
Costs in relation to Director and employee settlements 428 –
Other non trading items – 168
1,982 1,262
CentralNic Group Plc Annual Report 2017
53
Notes to the consolidated
financial statements continued
10. Finance income and costs
2017 2016
£’000 £’000
Interest income on loans to shareholders 17 18
Interest income on loans to Accent Media Ltd (related party) 2 –
Finance income 19 18
Interest expense on short-term borrowings (7) –
Interest expense on long-term bank borrowings (529) (232)
Cash flow hedges – (38)
Finance costs (536) (270)
Net finance costs (517) (252)
11. Income tax expense
2017 2016
£’000 £’000
Current tax on profits for the year 887 282
Adjustments in respect of prior years (45) (48)
Current income tax 842 234
Deferred income tax (note 22) (493) (32)
Income tax expense 349 202
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 CentralNic is as follows:
2017 2016
£’000 £’000
Profit before taxation 1,371 1,157
Tax calculated at domestic tax rates applicable to profits in the respective countries 204 158
Tax effects of:
– Expenses not deductible for tax purposes 199 82
– Unutilised tax losses (9) 10
Adjustment in respect of prior years (45) (48)
Current income tax 349 202
54 CentralNic Group Plc Annual Report 2017
11. Income tax expense continued
The Company provides for income taxes on the basis of its income for financial reporting purposes, adjusted for items that are not
assessable or deductible for income tax purposes, in accordance with the regulations of domestic tax authorities.
The effective rate of tax for the year is 25.4% (2016: 17.5%).
In the UK, the applicable statutory tax rate for 2017 is 19% (2016: 20%).
In the USA, federal taxes are due at 15% on taxable income. Under California tax legislation a statutory minimum of $800 of state
tax is due.
In Germany, federal taxes are due at 15% on taxable income. With an additional 5.5% solidarity surcharge due on the income tax.
A community business tax of c.17% is also levied with rates determined by the municipality.
In addition, for the current year, included within the domestic tax rates applicable to profits are Australia where income tax is due at
30% of taxable income and New Zealand, where income tax is due at 28% on taxable income.
In Slovakia, income tax is due at 21% of taxable income.
12. Earnings per share
Earnings per share has been calculated by dividing the consolidated profit after taxation attributable to ordinary shareholders by the
weighted average number of ordinary shares in issue during the period.
Diluted earnings per share has been calculated on the same basis as above, except that the weighted average number of ordinary
shares that would be issued on the conversion of the dilutive potential ordinary shares as calculated using the treasury stock method
(arising from the Group’s share option scheme and warrants) into ordinary shares has been added to the denominator. There are no
changes to the profit (numerator) as a result of the dilutive calculation.
2017 2016
Profit after tax attributable to owners (£’000) 1,022 955
Weighted average number of shares:
Basic 95,894,348 95,632,390
Effect of dilutive potential ordinary shares 2,922,785 2,745,348
Diluted 98,817,133 98,377,738
Earnings per share:
Basic (pence) 1.07 1.00
Diluted (pence) 1.04 0.97
CentralNic Group Plc Annual Report 2017
55
Notes to the consolidated
financial statements continued
13. Property, plant and equipment
Computer Furniture
equipment and fittings Total
£’000 £’000 £’000
Cost
At 1 January 2016 356 38 394
Additions 139 6 145
Acquisition of Subsidiary 31 32 63
Exchange differences 51 25 76
Disposals (12) – (12)
At 31 December 2016 565 101 666
Additions 103 1 104
Acquisition of Subsidiary 47 – 47
Exchange differences (7) (6) (13)
Disposals (1) – (1)
At 31 December 2017 707 96 803
Accumulated depreciation
At 1 January 2016 297 32 329
Charge for the year 112 13 125
Exchange differences 45 18 63
Disposals (12) – (12)
At 31 December 2016 442 63 505
Charge for the year 91 9 100
Exchange differences (2) (7) (9)
Disposals (1) – (1)
At 31 December 2017 530 65 595
Property, plant, and equipment, net
At 31 December 2017 177 31 208
At 31 December 2016 123 38 161
Depreciation of property, plant and equipment is included in administrative expenses in the consolidated statement of
comprehensive income.
56 CentralNic Group Plc Annual Report 2017
14. Intangible assets
Domain names Software Customer List Goodwill Total
£’000 £’000 £’000 £’000 £’000
Cost or deemed cost
At 1 January 2016 2,340 1,064 2,548 1,573 7,525
Additions – 350 – – 350
Acquisition of Subsidiary 1,121 1,615 8,738 11,774 23,248
Reclassification (2,295) – – – (2,295)
Exchange Differences – 265 1,430 1,956 3,651
At 31 December 2016 1,166 3,294 12,716 15,303 32,479
Additions – 415 – – 415
Acquisition of Subsidiary – 132 11,709 13,839 25,680
Reclassification (25) – – – (25)
Exchange Differences – (36) (87) (134) (257)
At 31 December 2017 1,141 3,805 24,338 29,008 58,292
Amortisation
At 1 January 2016 1,473 280 382 – 2,135
Charge for the year 196 640 1,230 – 2,066
Reclassification (1,544) – – – (1,544)
At 31 December 2016 125 920 1,612 – 2,657
Charge for the year 104 761 1,319 – 2,184
Reclassification (9) – – – (9)
At 31 December 2017 220 1,681 2,931 – 4,832
Intangible assets, net
At 31 December 2017 921 2,124 21,407 29,008 53,460
At 31 December 2016 1,041 2,374 11,104 15,303 29,822
Amortisation of intangible assets is included in administrative expenses in the consolidated statement of comprehensive income.
Certain domain names previously held as intangible assets were reclassified to stock held for resale in the 2017 and the 2016 periods.
Goodwill and customer list
The Group tests goodwill recognised through business combinations annually for impairment. Additions to goodwill arose through
the business combinations outlined in note 25. The carrying value of goodwill and the customer list is allocated to the respective
segments as follows:
Customer list Goodwill
2017 2016 2017 2016
£’000 £’000 £’000 £’000
Wholesale Division 11,727 – 13,957 –
Retail Division 9,680 11,104 14,933 15,189
Enterprise Division – – 118 114
Total carrying value 21,407 11,104 29,008 15,303
The recoverable amount of goodwill of £29,008,000 (2016: £15,303,000) at 31 December 2017, is determined based on a value
in use using cash flow projections from financial budgets approved by senior management covering a three year period. Cash flow
projections beyond the three year timeframe are extrapolated by applying a flat growth rate in perpetuity per the table below which is
based on management judgement, historical trends, expected return on investment, experience and discretion. The pre-tax discount
rate applied to the cash flow projections is 10.0%. As a result of the analysis, management did not identify any impairment of goodwill.
CentralNic Group Plc Annual Report 2017
57
Notes to the consolidated
financial statements continued
14. Intangible assets continued
The assumptions used in the cash flow projections were as follows:
Growth rates
Wholesale Division 9%
Retail Division 1%
Enterprise Division –%
Discount rates
Discount rates represent the current market assessment of the risks specific to the CGU, taking into consideration the time value of
money and individual risks of the underlying assets that have not been incorporated in the cash flow estimates. The discount rate
calculation is based on the specific circumstances of the Group and its operating segments and is derived from its WACC, with
appropriate adjustments made to reflect the risks specific to the CGU and to determine the pre-tax rate. The cost of equity is derived
from the expected return on investment by the Group’s investors.
Management consider that no reasonable change in these key assumptions would cause the carrying amount of this asset to
exceed its value in use.
15. Deferred receivables
2017 2016
£’000 £’000
Deferred costs 976 1,486
Amounts due from related parties 74 –
1,050 1,486
In June 2017 the Company loaned Accent Media Ltd $100k (£74k). The loan is due for repayment in three years and accrues interest
at 5% which is payable quarterly in arrears. The deferred costs are prepaid invoices for a period over 12 months relating to domain
name purchases from wholesalers
16. Investments
Available for sale investments carried at fair value
£’000
At 31 December 2016 997
Additions –
At 31 December 2017 997
The Company owns less than 20% of the following undertakings which are incorporated in the United Kingdom (UK):
Place of incorporation/ Issued and paid-up/
Name establishment Principal activities registered capital Effective interests
Accent Media Ltd UK Domain registry operator Ordinary shares 10.4%
This investment is categorised in the fair value hierarchy under Level 3 as no observable market data was available.
The fair value of the investment at 31 December 2017 continues to be assessed using a price of recent investment valuation technique,
supported by a DCF valuation technique to corroborate the measure of fair value of the investment. The valuation method applied to
this investment is considered the most appropriate with regard to the stage of the development of the business and the IPEVCV
guidelines. In applying the price of recent investment valuation methodology, the basis used is the initial cost of the investment.
58 CentralNic Group Plc Annual Report 2017
16. Investments continued
In deriving the price of recent investment the Directors have given consideration to the cost of investment arising from transactions
involving both the Company and (subsequently) third parties. In determining the continued use of the price of recent investment valuation
the directors have considered the continued validity of this method by reference to the timing of the most recent transactions, the
existence of indicators of change in fair value and the appropriateness of alternative valuation techniques. The Directors have considered
that whilst Accent Media Limited continues to be at an early-stage, more recent developments within the business provide indicators that
it is now anticipated to progress during 2018/19 in line with the expectations set when the initial investment was made by the Group.
For the corroborative valuation measures determined by use of DCF techniques, the key significant unobservable inputs include
cumulative average growth rate, weighted average cost of capital and expected operating margins. A reasonable change to the input
assumptions, such as 2% change in weighted average cost of capital would lead to an increase or decrease in the value of this
investment of approximately £250,000.
In the event that the performance of Accent Media Limited does not meet future expectations there is a risk that a reduction in the fair
value of the investment could arise. The net assets of Accent Media Limited (in which the Group has 10.4% shareholding) in the most
recently publicly available unaudited financial statements for the year ended 31 March 2017 were £3,619,466.
17. Trade and other receivables
2017 2016
£’000 £’000
Trade receivables 3,826 5,361
Accrued revenue 3,056 1,123
Deferred costs 3,435 3,315
Prepayments 222 163
Supplier payments on account 563 376
Amounts due from shareholders 764 747
Other receivables 2,188 444
14,054 11,529
As of 31 December 2017, trade receivables of £294,000 (2016: £451,000) were past due but not impaired. These primarily relate to
four customers for whom there is considered a low risk of default.
The aging of the trade receivables past due but not impaired is as follows; 0-30 days £3,000 (2016: £163,000), 30-60 days £46,000
(2016: £229,000), 60-90 days £20,000 (2016: £29,000), and over 90 days £225,000 (2016: £30,000).
The deferred costs are prepaid invoices for a period within 12 months relating to domain name purchases from wholesalers. Supplier
payments on account reflect payments to domain name registries for use against future wholesale domain purchases within the
Internet.BS and Instra retail businesses. Other receivables primarily relate to rebates due from registries in the Internet.BS retail business.
Amounts due from shareholders represent amounts due from Jabella Group Limited, a shareholder during the period. Amounts due
from Jabella Group Limited were interest free until 31 August 2013, from which time the balance accrued interest at 2% above LIBOR
(2017: £17,359; 2016: £17,749). The loan was granted in August 2011 for an initial term of five years, the balance is currently
£764,000. The loan is now repayable on demand.
The Directors are reviewing the terms of the loan and consider the loan to be fully recoverable. The Directors consider that the fair
value of this receivable is not materially different from the carrying value.
CentralNic Group Plc Annual Report 2017
59
Notes to the consolidated
financial statements continued
18. Cash and cash equivalents
For the purpose of the statement of cash flows, cash and cash equivalents comprise the following:
2017 2016
Amounts held on deposit £’000 £’000
GBP 1,530 939
USD 7,202 7,428
EUR 1,884 1,171
AUD 157 203
NZD 32 159
CAD 54 –
Other 3 2
10,862 9,902
19. Share capital
The Company’s issued and fully paid share capital is as follows:
Merger relief
Share capital Share premium reserve
Ordinary shares of 0.1 pence each Number £’000 £’000 £’000
At 31 December 2016 and 31 December 2017 95,894,348 96 16,545 1,879
The Company has no authorised share capital.
20. Non-current other payables
2017 2016
£’000 £’000
Deferred revenue 2,282 3,820
Deferred consideration 3,352 –
5,634 3,820
21. 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 share issue costs and other permitted reductions. Where the consideration for shares in another
company includes issued shares, and 90% of the equity is held in the other company.
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
60 CentralNic Group Plc Annual Report 2017
22. Deferred tax
Share-based Other temporary
payments Losses differences Total
Deferred tax assets £’000 £’000 £’000 £’000
At 1 January 2016 168 – – 168
Acquisition of subsidiary – – 835 835
(Charge)/credit to income 79 194 (357) (84)
(Charge)/credit to equity 26 – – 26
Exchange differences – – 176 176
At 31 December 2016 273 194 654 1,121
Acquisition of subsidiary – – 95 95
(Charge)/credit to income 205 27 17 249
(Charge)/credit to equity 60 – – 60
Exchange differences – – (23) (23)
At 31 December 2017 538 221 743 1,502
SK-NIC Instra
intangible intangible Other temporary
assets assets differences Total
Deferred tax liabilities £’000 £’000 £’000 £’000
At 1 January 2016 – – 65 65
Acquisition of subsidiary – 3,002 – 3,002
(Credit)/charge to income – (399) (18) (417)
Exchange differences – 632 – 632
At 31 December 2016 – 3,235 47 3,282
Acquisition of subsidiary 2,451 – – 2,451
(Credit)/charge to income (5) (286) 47 (244)
(Credit)/charge to other comprehensive income – – (53) (53)
Exchange differences 23 60 – 83
At 31 December 2017 2,469 3,009 41 5,519
23. Trade and other payables and accruals
2017 2016
£’000 £’000
Trade payables 3,091 3,120
Accrued expenses 7,024 4,596
Other taxes and social security 208 220
Deferred consideration 523 –
Deferred revenue 9,218 7,375
Customer payments on account 6,877 4,602
Accrued interest 70 22
Other liabilities 36 12
27,047 19,947
CentralNic Group Plc Annual Report 2017
61
Notes to the consolidated
financial statements continued
24. Borrowings
2017 2016
£’000 £’000
Non-current
Bank borrowings 16,078 1,458
Prepaid finance costs (537) (134)
15,541 1,324
Current
Bank borrowings 2,000 1,167
Prepaid finance costs (146) (134)
1,854 1,033
Total borrowings 17,395 2,357
Bank borrowings relate to the £18.0m secured debt facility entered into with Silicon Valley Bank (“SVB”) on 29 August 2017 as
amended and restated on 30 November 2017. The debt facility refinanced the remaining £1.75m due in relation to the original debt
facility entered into with SVB on 8 December 2015, with the remaining £16.25m being drawn down on 30 November 2017 to fund
the initial cash consideration of the SK-NIC acquisition.
Interest for the period has been accrued at the applicable margin plus LIBOR. The term of the loan is 5 years with quarterly loan and
interest repayments.
Bank Prepaid
borrowings finance costs Total
£’000 £’000 £’000
Bank borrowings 1 January 2016 – – –
Term Loan draw down (January 2016) 3,500 (396) 3,104
Repayment in 2016 (875) 128 (747)
Total borrowing as at 31 December 2016 2,625 (268) 2,357
Repayment of initial loan (2,625) 268 (2,357)
New financing draw down (August 2017) 1,750 – 1,750
New financing draw down (November 2017) 16,250 (732) 15,518
Repayment of new financing – 49 49
Exchange differences 78 – 78
Total borrowing as at 31 December 2017 18,078 (683) 17,395
25. Business combinations
On 5 December 2017 CentralNic Group completed the acquisition of the entire share capital of SK-NIC a.s. for a total consideration
of €28.1m, consisting of €26.1m in cash less a cash adjustment for working capital at completion of (€0.4m), plus a fair value
adjustment relating to the deferred and contingent consideration which is due for payment by 2024 (€1.1m) and an assumption of
loans due from the vendor on completion of €3.4m.
The primary reason for the business combination was to acquire the manager of the exclusive country code top-level domain for
Slovakia, .SK. The business exhibits a high level of recurring earnings and provides access to a new international market with
sustainable growth characteristics in line with the Group strategy.
The following table summarises the consideration to acquire the share capital of the SK-NIC a.s. and the provisional fair value of the
assets and liabilities at the acquisition date in line with Group accounting policies.
62 CentralNic Group Plc Annual Report 2017
25. Business combinations continued
Consideration €’000s £’000s
Initial cash consideration 20,273 17,843
Contingent consideration 4,850 4,269
Deferred consideration 1,000 880
Maximum cash consideration 26,123 22,992
Adjustment for working capital (421) (371)
Total cash consideration 25,702 22,621
Fair value adjustment for deferred and contingent consideration (1,064) (937)
Assumption of loans due from the vendor DanubiaTel a.s. 3,413 3,004
Total consideration 28,051 24,688
Fair value recognised on acquisition €’000s £’000s
Assets
Intangible assets – customer list 13,304 11,709
Other intangible assets 150 132
Property, plant & equipment 53 47
Trade receivables 244 215
Other receivables 3,905 3,436
Deferred income tax asset 108 95
Cash 539 474
18,303 16,108
Liabilities
Trade payables 751 661
Other payables and accruals 571 502
Deferred revenue 2,028 1,785
Deferred income tax liability 2,785 2,451
Other income tax liabilities (159) (140)
5,976 5,259
Total identifiable net liabilities at fair value 12,327 10,849
Goodwill arising on acquisition 15,724 13,839
Purchase consideration 28,051 24,688
The initial cash consideration of €20.3m was funded by an increase in the SVB term loan and RCF of €18.4m and existing cash
balances held by the Group of €1.9m.
The deferred of €1m and contingent consideration of €4.85m, totalling €5.85m, has been placed in to an escrow account and subject
to any claims will be released to the vendor in tranches until 2024. Deferred contingent cash consideration of €4.85m is dependent on
SK-NIC attaining defined growth targets over the next three years, with the remaining deferred cash consideration being payable in
2024. At 2017 year end, the deferred cash consideration has been accounted for in the consolidated statement of financial position at
fair value, using a discount factor of 10%, which has amounted to €1.06m. This will unwind as the payment stages become due
through the consolidated statement of comprehensive income.
The growth rates in relation to the contingent consideration are calculated on the number of registered domains at the end of each
financial year over the next 3 years (post completion) with the payment profile being spread over 8 years. The last payment on the profile
is not subject to the defined growth rates. The directors have considered the range of outcomes on the target growth rate which would
trigger the unwinding of the deferred consideration and on the basis that there exists sufficient headroom against management
sensitivity to attain these domain name growth rates, they have concluded that the deferred consideration will be payable in full over
the agreed period, with the first payment from the profile having been settled in April 2018 of €1.02m.
CentralNic Group Plc Annual Report 2017
63
Notes to the consolidated
financial statements continued
25. Business combinations continued
Management have evaluated the value of the acquired customer list in relation to the domains under management at the time of
acquisition and the expected discounted future cashflow that is expected to derive from the existing customer base, with the residual
intangible classed as goodwill. Goodwill arising on acquisition primarily relates to the inherent value of the acquired .sk ccTLD and
goodwill in relation to employees.
Acquisition related costs of £883k (2016: £348k) have been recognised in the income statement, which are included in note 9.
For the post-completion period to 31st December 2017 revenues of £291k (€330k) and Adjusted EBITDA of £230k (€260k) have been
generated by SK-NIC. SK-NIC’s revenue for the year ended 31 December 2017 was £3,207k (€3,664k) and Adjusted EBITDA was
£2,328k (€2,659k), with profit before tax of £2,292k (€2,168k).
The trade and other receivables are stated at gross valuation which equates to the contractual amounts with no provisions being made
against them in line with the director’s expectations.
26. Related party disclosures
(a) Ultimate controlling party
The Company is not controlled by any one party.
(b) Related party transactions
Key management are considered to be the Directors and key management personnel. Compensation has been disclosed in note 8,
while further information can be found in the Remuneration Report on page 29.
(i) Shareholders
Balances outstanding with shareholders:
2017 2016
£’000 £’000
Jabella Group Limited 764 747
Amounts due from Jabella Group Limited were interest free until 31 August 2013, from which time the balance accrued interest at
2% above LIBOR (2017: £17k; 2016: £18k).
Transactions with one member of Erin Investments & Finance Limited, of which no amounts were outstanding at 2017 and 2016 year ends:
2017 2016
£’000 £’000
Operating lease payments 64 73
(ii) Non-Executive Directors
During the year CentralNic engaged with Rickert Rechtsanwaltsgesellschaft mBH, of which Thomas Rickert has a controlling interest,
to provide legal services in relation to the purchase of intangible assets and advise on potential acquisitions. The fees for 2017
were £9,000 (2016 £20,000) and no amounts were outstanding as at 2017 and 2016 year ends.
(ii) Other related parties
Balances outstanding with other related parties:
2017 2016
£’000 £’000
Accent Media Ltd 74 –
In June 2017 the Company loaned Accent Media Ltd $100k (£74k). The loan is due for repayment in three years and accrues
interest at 5% which is payable quarterly in arrears.
64 CentralNic Group Plc Annual Report 2017
27. Commitments
Operating lease commitments
At the end of each of the reporting periods, the minimum lease payments under non-cancellable leases are payable as follows:
2017 2016
Land and buildings £’000 £’000
Less than one year 88 136
Between one and five years 11 28
99 164
The Group leases office space at the following locations, all of which are operating leases:
London, UK. The lease agreement was entered into on 1 January 2010 for an initial term of 6 years, extended to 1 April 2018,
and subsequently extended on a month by month basis.
Melbourne, Australia. The original lease agreement expired on 30 November 2016, with the lease being extended on a month by
month basis with a three month notice period.
Napier, New Zealand. The lease agreement was entered into on 1 August 2012 for an initial term of 3 years, with the right to renew
every 3 years. The final expiry date is 31 July 2021.
Bonn, Germany. The lease agreement was entered into on 1 January 2015 for an initial term of 3 years. The lease will renew each
year for a further year unless either party terminates with 6 months notice.
Bratislava, Slovakia. The lease agreement was acquired on acquisition and can be terminated at any point in time with immediate
effect and as there exists no minimum commitment period, the above table excludes these amounts.
The Group leases equipment under various operating leases, the majority of which exist can be terminated immediately, and equate
to immaterial sums.
28. Share options and warrants
Share options
The share option scheme, which was adopted by CentralNic during 2013, was established to reward and incentivise the executive
management team and staff for delivering share price growth. The option schemes are all equity settled.
The share option scheme is administered by the Remuneration Committee.
No options were granted during 2017 (2016: 2,820,000). Out of the 6,929,166 outstanding options (2016: 7,044,166), 3,730,166
options (2016: 3,230,166) were exercisable.
No options were exercised in 2017 (2016: 230,417), with 115,000 options lapsing during the year (2016: 150,000).
A charge of £452,989 (2016: £621,204) has been recognised in the statement of comprehensive income for the year relating to
these options.
CentralNic Group Plc Annual Report 2017
65
Notes to the consolidated
financial statements continued
28. Share options and warrants continued
These fair values were calculated using the Black Scholes option pricing model. The inputs into the model were as follows:
Date of options grant 4 Feb 2016 4 Feb 2016 4 Feb 2016 4 Feb 2016 4 Feb 2016 29 Aug 2016 29 Aug 2016
Options granted 700,000 750,000 350,000 48,000 419,000 318,000 235,000
Stock price 51p 51p 51p 51p 51p 43p 43p
Exercise price 40p 40p 40p 51p 40p 40p 40p
Interest rate 5% 5% 5% 5% 5% 4% 4%
Volatility 75% 75% 75% 75% 75% 52% 52%
Vesting period 3 years from 15 Sept 26 Oct 3 years from 14 Jan 14 Jan 3 years from
the date 2018 2018 the date 2019 2019 the date
of grant of grant of grant
Time to maturity 10 years 10 years 10 years 10 years 10 years 10 years 10 years
Options are exercisable in accordance with the contracted vesting schedules, if the employee leaves the employment of the Group
prior to the options vesting then the share options previously granted will lapse. The expected volatility was determined with reference
to similar entities trading on AIM.
Details of the share options outstanding at the year-end are as follows:
Number WAEP* Number WAEP*
31 Dec 2017 31 Dec 2017 31 Dec 2016 31 Dec 2016
Outstanding at 1 January 7,044,166 32p 4,604,583 26p
Granted during year – – 2,820,000 40p
Exercised during year – – (230,417) 10p
Lapsed during year (115,000) 40p (150,000) 10p
Outstanding at 31 December 6,929,166 32p 7,044,166 32p
Exercisable at 31 December 3,730,166 26p 3,230,166 25p
* weighted average exercise price.
The weighted average remaining contractual life of the options outstanding at the statement of financial position date is 6.8 years.
Warrants
On 12 August 2013, CentralNic Group executed a warrant instrument to create and issue warrants to Zeus Capital to subscribe for an
aggregate of 1,772,727 ordinary shares. The warrants will expire six years after admission and were exercisable after the first anniversary
of admission (2 September 2014) at the placing price of 55p. The ordinary shares to be allotted and issued on the exercise of any or all
of the warrants will rank for all dividends and other distributions declared after the date of the allotment of such shares but not before
such date and otherwise pari passu in all respects with the ordinary shares in issue on the date of such exercise allotment.
66 CentralNic Group Plc Annual Report 2017
29. Financial instruments
The CentralNic Group is exposed to market risk, credit risk and liquidity risk arising from financial instruments. The CentralNic Group’s
overall financial risk management policy focuses on the unpredictability of financial markets and seeks to minimise potential adverse
effects on the CentralNic Group’s financial performance. The Group does not trade in financial instruments.
The principal financial instruments used by the CentralNic Group, from which financial instrument risk arises, are as follows:
2017 2016
£’000 £’000
Current financial assets
Loan and receivables
Trade and other receivables 9,835 7,673
Cash and cash equivalents 10,862 9,902
20,697 17,575
Current financial liabilities measured at amortised costs
Trade and other payables and accruals 10,432 7,971
Loan and borrowing 1,854 1,033
12,286 9,004
(a) Financial risk management framework
The Directors’ risk management policies are established to identify and analyse the risks faced by the CentralNic Group, to set
appropriate risk limits and controls, and to monitor risks and adherence to limits.
(i) Market risk
Foreign currency risk
The CentralNic Group is exposed to foreign currency risk on transactions and balances that are denominated in a currency other than
its functional currency, primarily US$ and Euros. Foreign currency risk is monitored on an on-going basis to ensure that the
net exposure is at an acceptable level.
The CentralNic Group’s exposure to foreign currency risk is minimal as it trades predominantly in US$, Euros, GB Pound Sterling and
Australian Dollars. Exposure to currency risk is negated by the CentralNic Group holding adequate reserves in these four currencies to
meet trading and provisioned obligations as the need arises.
As the Group evolves, foreign currency risk will be monitored more closely given exposure to additional markets and currencies.
CentralNic Group Plc Annual Report 2017
67
Notes to the consolidated
financial statements continued
29. Financial instruments continued
The carrying amounts of the CentralNic Group’s financial instruments are denominated in the following currencies at 31 December 2017:
Other
GBP US$ Euro AUS$ currencies Total
£’000s £’000s £’000s £’000s £’000s £’000s
Current financial assets
Loan and receivables
Trade and other receivables 4,499 4,419 789 112 16 9,835
Cash and cash equivalents 1,530 7,202 1,884 157 88 10,862
6,029 11,621 2,673 269 104 20,697
Current financial liabilities measured
at amortised costs
Trade and other payables 7,000 2,461 566 280 125 10,432
Loan and borrowing (146) – 2,000 – – 1,854
6,854 2,461 2,566 280 125 12,286
The sensitivity analyses in the table below details the impact of changes in foreign exchange rates on the CentralNic Group’s post-tax
profit or loss for the year ended 31 December 2017.
It is assumed that the named currency is strengthening or weakening against all other currencies, while all the other currencies
remain constant.
If the GBP strengthened or weakened by 10% against the other currencies, with all other variables in each case remaining constant,
then the impact on the CentralNIC Group’s post-tax profit or loss would be gains or losses as follows:
Strengthen/Weaken
£’000
2017
USD +/– 378
EUR +/– 225
AUD +/– 337
Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market
interest rates. The CentralNic Group’s exposure to interest rate risk arises mainly from interest-bearing financial assets and liabilities.
The Directors’ policy is to obtain the most favourable interest rates available.
As at each of 31 December 2016 and 2017, CentralNic Group’s long-term debt facility entered into with SVB bearing interest at a
margin plus LIBOR.
2017 2016
£’000 £’000
Cash and bank balances 10,862 9,902
Effect of interest rate change of 100 basis points on cash and bank balances +/– 109 +/– 99
SVB Bank Facilities 17,395 2,357
Effect of interest rate change of 100 basis points on cash and bank balances +/– 174 +/– 24
Equity price risk
The CentralNic Group does not have any quoted investments as at each of 31 December 2016 and 2017 and as such does not
have significant exposure to equity price risk. At 31 December 2016 and 2017 the CentralNic Group held an unquoted investment in
Accent Media of £1.0m which represents a shareholding of 10.4% of the share capital.
68 CentralNic Group Plc Annual Report 2017
29. Financial instruments continued
(ii) Credit risk
The CentralNic Group’s exposure to credit risk arises mainly from counterparty’s failure to meet its obligation to settle a financial asset. The
Directors consider the CentralNic Group’s exposure to credit risk arising from trade receivables to be minimal as the CentralNic Group is
often paid at the outset or in advance. Credit risk arising from other receivables is controlled through monitoring procedures, including credit
approvals and credit limits, with the balance largely offset by separate liabilities held on the balance sheet relating to the same party.
The CentralNic Group uses ageing analysis to monitor the credit quality of the trade receivables. Any receivables having significant
balances past due or more than 90 days, which are deemed to have higher credit risk, are monitored individually. Analysis of the trade
receivables past due is disclosed in note 17.
For cash and bank balances, the Directors minimise the CentralNic Group’s credit risk by dealing exclusively with banks and financial
institution counterparties with high credit ratings.
The carrying amounts of financial assets at the end of the reporting periods represent the maximum credit exposure.
2017 2016
£’000 £’000
Deferred receivables 74 –
Trade and other receivables 9,835 7,673
Investments 997 997
Cash and bank balances 10,862 9,902
21,768 18,572
(iii) Liquidity risk
Liquidity risk is the risk that the CentralNic Group will encounter difficulty in settling its financial obligations that are settled with cash or
another financial asset. The Directors’ objective is to maintain, as much as possible, a level of its cash and bank balances adequate
enough to ensure that there will be sufficient liquidity to meet its liabilities when they fall due.
The following set forth the remaining contractual maturities of financial liabilities as at:
£’000 Carrying amount Total Within 1 year 1 – 5 years
31 December 2016
Trade and other payables and accruals 7,971 7,971 7,971 –
Borrowings 2,357 2,357 1,033 1,324
10,328 10,328 9,004 1,324
31 December 2017
Trade and other payables and accruals 10,432 10,432 10,432 –
Borrowings 17,395 17,395 1,854 15,541
27,827 27,827 12,286 15,541
(b) Capital risk management
The Directors define capital as the total equity of CentralNic. The Directors’ objectives when managing capital are to safeguard the
CentralNic Group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders
and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Directors
may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.
The Directors manage CentralNic’s capital based on debt-to-equity ratio. The debt-to-equity ratio is calculated as net debt divided
by total equity. Net debt is calculated as total liabilities less cash and cash equivalents.
CentralNic Group Plc Annual Report 2017
69
Notes to the consolidated
financial statements continued
29. Financial instruments continued
The debt-to-equity ratio of the CentralNic Group as at the end of each of the reporting periods was as follows:
2017 2016
£’000 £’000
Total liabilities 27,827 10,328
Less: cash and bank balances (10,862) (9,902)
Net debt/(cash) 16,965 426
Total equity 26,452 25,219
Debt-to-equity ratio 0.64 0.02
The net cash of the CentralNic Group as at the end of each of the reporting periods was as follows:
2017 2016
£’000 £’000
Cash and bank balances 10,862 9,902
Less: Borrowings (excluding prepaid finance costs) (18,078) (2,625)
Net (debt)/cash (7,216) 7,277
(c) Fair values of financial instruments
In addition to the fair value of financial instruments disclosed elsewhere in the financial statements, the following carrying amounts of
the financial assets and liabilities reported in the consolidated financial statements approximate their fair values:
2017 2016
£’000 Carrying amount Fair value Carrying amount Fair value
Trade and other receivables 9,835 9,835 7,673 7,673
Deferred receivables 74 74 – –
Investments 997 997 997 997
Cash and bank balances 10,862 10,862 9,902 9,902
21,768 21,768 18,572 18,572
Trade and other payables and accruals 10,432 10,432 7,971 7,971
11,336 11,336 10,601 10,601
The SK-NIC acquisition on 5 December 2017 had an element of deferred and contingent consideration of €5.85m that has been
placed in to an escrow account and subject to any claims will be released to the vendor in tranches until 2024. Deferred cash
consideration of €5.85m is dependent on SK-NIC attaining defined growth targets over the next three years. At 2017 year end, the
deferred cash consideration has been accounted for in the consolidated statement of financial position at fair value, using a discount
factor of 10%, which has amounted to €1.06m. This will unwind as the payment stages become due through the consolidated
statement of comprehensive income.
The growth rates in relation to the contingent consideration are calculated on the number of registered domains at the end of each
financial year over the next 3 years (post completion) with the payment profile being spread over 8 years. The last payment on the
profile is not subject to the defined growth rates. The directors have considered the range of outcomes on the target growth rate
which would trigger the unwinding of the deferred consideration and on the basis that there exists sufficient headroom against
management sensitivity to attain these domain name growth rates, they have concluded that the deferred consideration will be
payable in full over the agreed period, with the first payment from the profile having been settled in April 2018 of €1.02m.
(d) Fair value hierarchy
Financial instruments carried at fair value are analysed by the levels in the fair value hierarchy. The different levels are defined as follows:
Level 1:
Fair value measurements are derived from quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2:
Level 3:
Fair value measurements are derived from inputs other than quoted prices included within level 1 that are observable
for the asset or liability, either directly or indirectly; and
Fair value measurements derived from valuation techniques that include inputs for the asset or liability that are not
based on observable market data (unobservable inputs).
70 CentralNic Group Plc Annual Report 2017
Company statement of
financial position
as at 31 December 2017
2017 2016
Note £’000 £’000
ASSETS
Fixed assets
Investments 7 13,528 4,575
Deferred tax asset 361 181
13,889 4,756
Current assets
Other debtors, deposits and prepayments 9 27,148 21,841
Cash and bank balances 127 335
27,275 22,176
Total assets 41,164 26,932
LIABILITIES
Current liabilities
Creditors – amounts falling due within one year
Trade and other payables and accruals 11 1,229 969
Borrowings 1,854 1,033
3,083 2,002
Non-current liabilities
Creditors – amounts falling due after one year
Borrowings 15,541 1,324
15,541 1,324
Total liabilities 18,624 3,326
Net assets 22,540 23,605
CAPITAL AND RESERVES
Share capital 10 96 96
Share premium 10 16,545 16,545
Merger relief reserve 10 1,879 1,879
Share based payments reserve 2,038 1,720
Retained earnings 1,982 3,365
Shareholders funds 22,540 23,605
The loss for the year, including Other Comprehensive Income was £1,383,000 (December 2016: profit £857,000).
These financial statements were approved and authorised for issue by the Board of Director’s on 30 May 2018 and were
signed on its behalf by:
Mike Turner Chairman
Company Number: 08576358
The notes on pages 73 to 77 form an integral part of these financial statements.
CentralNic Group Plc Annual Report 2017
71
Company statement of
changes in equity
for the year ended 31 December 2017
Foreign
Share based Merger currency
Share Share payments relief hedging Retained
capital premium reserve reserve reserve Earnings Total
£’000 £’000 £’000 £’000 £’000 £’000 £’000
Balance as at 1 January 2016 92 16,522 1,125 – 245 (387) 17,597
Total comprehensive income for the year – – – – – 1,102 1,102
Other comprehensive income for the year
– cash flow hedge – – – – (245) – (245)
Issue of new shares 4 23 – 1,879 – – 1,906
Share based payments – – 473 – – – 473
Share based payments – deferred tax asset – – 122 – – – 122
Dividend received – – – – – 2,650 2,650
Balance as at 31 December 2016 96 16,545 1,720 1,879 – 3,365 23,605
Profit/(loss) for the year – – – – – (1,383) (1,383)
Share based payments – – 282 – – – 282
Share based payments – deferred tax asset – – 36 – – – 36
Dividend received – – – – – – –
Balance as at 31 December 2017 96 16,545 2,038 1,879 – 1,982 22,540
• 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 share issue costs and other permitted reductions. Where the consideration for shares in
another company includes issued shares, and 90% of the equity is held in the other company.
• Retained earnings represent the cumulative value of the profits not distributed to shareholders, but retained to finance the future
capital requirements of the Company
• Share based payments reserve represents the cumulative value of share based payments recognised through equity.
• Foreign currency hedging reserve represents the effective portion of changes in the fair value of derivatives.
The notes on pages 73 to 77 form an integral part of these financial statements.
72 CentralNic Group Plc Annual Report 2017
Notes to the company
financial statements
for the year ended 31 December 2017
1. General information
Nature of operations
CentralNic Group Plc (“the Company”) 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 35-39 Moorgate, London, EC2R 6AR.
2. Basis of preparation
The financial statements have been prepared in accordance with the historical cost convention as modified by the revaluation of
certain fixed assets. The financial statements have been prepared in accordance with FRS 102 – The Financial Reporting Standard
applicable in the UK and Republic of Ireland and the Companies Act 2006. The principal accounting policies are described below.
They have all been applied consistently throughout the period.
3. Significant accounting policies
(a) Going concern
At 31 December 2017, the Company had net current assets of £24,192,000 (2016: £20,174,000) with the main current asset being
amounts owed from its subsidiaries amounting to £27,121,000 (2016: £21,818,000). The Company has assessed its ongoing costs
with cash generated by its subsidiaries to ensure that it can continue to settle its debts as they fall due.
The Directors have, after careful consideration of the factors set out above, concluded that it is appropriate to adopt the going
concern basis for the preparation of the financial statements and the financial statements do not include any adjustments that would
result if the going concern basis was not appropriate.
(b) Investments
Investments held as fixed assets are stated at cost less provision for impairment.
(c) Taxation
Current tax, including UK corporation tax and foreign tax, is provided at amounts expected to be paid (or recovered) using the tax
rates and laws that have been enacted or substantively enacted by the balance sheet date.
Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date where
transactions or events that result in an obligation to pay more tax in the future or a right to pay less tax in the future have occurred at
the balance sheet date. Timing differences are differences between the Company’s taxable profits and its results as stated in the
financial statements that arise from the inclusion of gains and losses in tax assessments in periods different from those in which they
are recognised in the financial statements.
A net deferred tax asset is regarded as recoverable and therefore recognised only when, on the basis of all available evidence, it can
be regarded as more likely than not that there will be suitable taxable profits from which the future reversal of the underlying timing
differences can be deducted.
Deferred tax is not recognised when fixed assets are revalued unless by the balance sheet date there is a binding agreement to sell
the revalued assets and the gain or loss expected to arise on sale has been recognised in the financial statements. Neither is deferred
tax recognised when fixed assets are sold and it is more likely than not that the taxable gain will be rolled over, being charged to tax
only if and when the replacement assets are sold.
Taxation arising on disposal of a revalued asset is split between the profit and loss account and the statement of changes in equity on
the basis of the tax attributable to the gain or loss recognised in each statement.
(d) Financial instruments
Financial assets and liabilities are recognised in the statements of financial position when the Company has become a party to the
contractual provisions of the instruments.
The Company’s financial assets and liabilities are initially measured at fair value plus any directly attributable transaction costs.
The carrying value of the Company’s financial assets, primarily cash and bank balances, and liabilities, primarily the Company’s
payables and other accrued expenses, approximate their fair values.
CentralNic Group Plc Annual Report 2017
73
Notes to the company
financial statements continued
3. Significant accounting policies continued
(i) Financial assets
On initial recognition, financial assets are classified as either financial assets at fair value through profit or loss, held-to-maturity
investments, loans and receivables financial assets, or available-for-sale financial assets, as appropriate.
Trade and other receivables
Trade and other receivables (including deposits and prepayments) that have fixed or determinable payments that are not quoted in an
active market are classified as other receivables, deposits, and prepayments. Other receivables, deposits, and prepayments are
measured at amortised cost using the effective interest method, less any impairment loss. Interest income is recognised by applying
the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial.
Derivative financial instruments
Cash flow hedge
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in
other comprehensive income. The gain or loss relating to the ineffective portion is recognised immediately in the income statement.
Amounts accumulated in equity are reclassified to profit or loss in the periods when the hedged items affect profit or loss.
(ii) Financial liabilities and equity instruments
Financial liabilities are classified as liabilities or equity in accordance with the substance of the contractual arrangement. Interest,
dividends, gains and losses relating to financial liabilities are reported in profit or loss. Distributions to holders of financial liabilities are
classified as equity and charged directly to equity.
Financial liabilities
Financial liabilities comprise long-term borrowings, short-term borrowings, trade and other payables and accruals, measured at
amortised cost using the effective interest method.
The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest income over
the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments (including all fees on
points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts)
through the expected life of the financial liability or where appropriate, a shorter period to the net carrying amount on initial recognition.
Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all its liabilities.
Equity instruments issued by the Company are recognised at the proceeds received, net of direct issue costs.
(e) Debtors
Short-term debtors are measured at transaction price, less any impairment. Loans receivable are measured initially at fair value net of
transaction costs and are measured subsequently at amortised cost using the effective interest method, less any impairment.
(f) Creditors
Short-term creditors are measured at the transaction price. Other financial liabilities including bank loans, are measured initially at fair
value net of transaction costs and are measured subsequently at amortised cost using the effective interest method.
(g) Parent Company disclosure exemptions
In preparing the separate financial statements of the Parent Company, advantage has been taken of the following disclosure
exemptions available in FRS 102:
• Only one reconciliation of the number of shares outstanding at the beginning and end of the period has been presented as the
reconciliations for the Group (see note 19 in the notes to the Group financial statements) and the Parent Company would be
identical. Hence, the Parent Company has not disclosed this reconciliation in its notes to the financial statements;
• Disclosures in respect of the Parent Company’s financial instruments and share-based payment arrangements have not been
presented as equivalent disclosures have been provided in respect of the Group as a whole;
• No disclosure has been given for the aggregate remuneration of the key management personnel of the Parent Company as their
remuneration is included in the totals for the Group as a whole; and
• No cash flow statement has been presented for the Parent Company.
74 CentralNic Group Plc Annual Report 2017
4. Critical accounting judgements and key sources of estimation uncertainty
In the application of the Company’s accounting policies, which are described in note 3, 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 on-going 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:
Share-based payment
The fair value of share-based remuneration is determined at the date of grant and recognised as an expense in the statement of
comprehensive income on a straight line basis over the vesting period, taking account of the estimated number of shares that will
vest. The fair value is determined by use of Black Scholes model method.
Recognition of deferred tax assets
The recognition of deferred tax assets is based upon whether it is more likely than not that sufficient and suitable taxable profits will be
available in the future against which the reversal of temporary differences can be deducted. To determine the future taxable profits,
reference is made to the latest available profit forecasts. Where the temporary differences are related to losses, relevant tax law is
considered to determine the availability of the losses to offset against the future taxable profits.
5. Profit for the financial period
The Company has taken advantage of section 408 of the Companies Act 2006 and, consequently, a profit and loss account for the Company
alone has not been presented. The Company’s loss for the financial period was £1,383,000 (2016: profit £857,000) which included a net loss
on foreign currency translation of £209,000 (2016: gain of £2,511,000). The Company’s profit for the financial year has been arrived at after
charging auditor’s remuneration payable to Crowe Clark Whitehill LLP for audit services to the Company of £60,000 (2016: £59,000).
6. Employees and Directors’ remuneration
Staff costs during the period by the Company were as follows:
2017 2016
£’000 £’000
Wages and salaries 621 623
Employers NI 68 57
Pension 21 16
Share based payments 317 498
Directors consultancy fees 133 162
Settlements 315 67
1,475 1,423
CentralNic Group Plc Annual Report 2017
75
Notes to the company
financial statements continued
6. Employees and Directors’ remuneration continued
The average number of employees of the Company including Directors performing under a service contract during the period was:
2017 2016
Number Number
Directors under employment contracts only 7 5
Directors under service contracts only 2 2
Directors under a combination of employment and service contracts – 2
9 9
The Group made contributions to defined contribution personal pension schemes for 6 directors in the period (2016: 5). Included in
the above tables, the highest paid director had wages and salaries including pensions of £90,000 (2016: £162,000), Director’s
consultancy fees £nil (2016: 66,000), share based expense of £29,000 (2016: £118,000), and settlement payments of £234,000
(2016: nil) totalling to £353,000 (2016: £346,000).
The Group operates payrolls in several foreign subsidiaries and fully complies with local jurisdiction obligations. Directors and key
personnel are compensated through the payroll of the country in which those individuals fulfill their duties.
7. Investments
£’000
At 1 January 2016 147
Additions – acquisition of Instra Group of companies 4,317
Share Options issued on behalf of subsidiaries 148
Share Options – deferred tax (37)
At 31 December 2016 4,575
Additions – acquisition of SK-NIC 8,826
Share Options issued on behalf of subsidiaries 171
Share Options – deferred tax (44)
At 31 December 2017 13,528
8. Deferred tax
Share based
payments
Deferred tax assets £’000
At 1 January 2016 –
Credit to income 181
At 31 December 2016 181
Credit to income 180
At 31 December 2017 361
76 CentralNic Group Plc Annual Report 2017
9. Debtors
2017 2016
£’000 £’000
Amounts owed by Group undertakings 27,121 21,818
Other debtors 27 23
27,148 21,841
10. Share Capital and share premium
Details of the Company’s share capital are set out in note 19 to the consolidated financial statements.
11. Creditors: amounts falling due within one year
2017 2016
£’000 £’000
Trade creditors 477 173
Accruals and deferred income 675 348
Accrued Interest 70 22
Taxation payable 7 426
1,229 969
CentralNic Group Plc Annual Report 2017
77
Particulars of subsidiaries
and associates
CentralNic Group Plc’s interest is 100% in the issued ordinary share capital of these undertakings included in the consolidated accounts:
Country of incorporation
Subsidiary and principal operations Principal activity Registered office
CentralNic Limited England and Wales Domain registry services provider 35-39 Moorgate, London, EC2R 6AR
TLD Registrar Solutions Limited England and Wales Domain registrar services provider 35-39 Moorgate, London, EC2R 6AR
Hoxton Domains Limited England and Wales Aftermarket domain services 35-39 Moorgate, London, EC2R 6AR
Instra Holdings (UK) Ltd England and Wales Holding Company 35-39 Moorgate, London, EC2R 6AR
Instra Holdings (Aus) Pty Ltd Australia Holding Company Level 2, 222-225 Beach Road, Mordialloc, Victoria, VIC3195
Instra Holdings (NZ) Ltd New Zealand Holding Company C/o Grant Thornon New Zealand Ltd, LR,
152, Fanshawe Street, Auckland, 1010, New Zealand
SK-NIC Slovakia a.s. The Slovak Republic Holding Company Panenská 6, Bratislava 811 03
The companies listed below are 100% subsidiaries of Group Companies and only have ordinary share capital unless otherwise stated.
Country of incorporation
Parent Company Subsidiary and principal operations Principal activity Registered office
CentralNic Limited CentralNic USA Limited USA US sales office c/o C T Corporation System, 818 West
7th Street, Los Angeles, CA 90017
CentralNic Limited GB.com Limited England and Wales Dormant – holds domain name 35-39 Moorgate, London, EC2R 6AR
CentralNic Limited Whois Privacy Limited England and Wales Dormant 35-39 Moorgate, London, EC2R 6AR
CentralNic Limited dnsXperts UG Germany Domain management Beueler Bahnhofsplatz 18, 53225 Bonn
software services
TLD Registrar Solutions Limited Internet Domain Service Commonwealth of Domain registrar services
BS Corp The Bahamas provider
PO Box SS-19084, Ocean Centre, Montagu
Foreshore, East Bay Street, Nassau,
New Providence, The Bahamas.
TLD Registrar Solutions Limited Whois Privacy Corp Commonwealth of Domain registrar services
The Bahamas provider
Instra Holdings (UK) Ltd Domain Directors England and Wales Domain registrar services provider 35-39 Moorgate, London, EC2R 6AR
(Europe) Ltd
Instra Holdings (UK) Ltd Europe Registry Ltd England and Wales Domain registrar services provider 35-39 Moorgate, London, EC2R 6AR
Instra Holdings (UK) Ltd Instra Corporation England and Wales Domain registrar services provider 35-39 Moorgate, London, EC2R 6AR
(Europe) Ltd
Instra Holdings (UK) Ltd White Label Domains Malaysia Domain registrar services provider No/ 36B, 2nd floor, Jalan Tun Mohd Fuad 2.
SDN BHD B12 Taman Tun Dr Ismail, Kuala Lumpur,
60000, Malaysia
Instra Holdings (UK) Ltd Domain Directors Finland Domain registrar services provider 5th floor, Keilaranta 16, Espoo, 02150,
(Finland) Oy Finland
Instra Holdings (UK) Ltd Sublime Technologies France Domain registrar services provider 2, Rue Robert Geffré Bat n°11-
(France) Sarl 17000 La Rochelle – France
Instra Holdings (UK) Ltd Domain Directors France Domain registrar services provider 2, Rue Robert Geffré Bat n°11- 17000
(France) Sarl La Rochelle – France
Instra Holdings (UK) Ltd Tunglim International Hong Kong Domain registrar services provider 2003., 20/F Towers China Hong Kong City,
Pty Limited Tsim Sha Tsui, Kowloon, Hong Kong
Instra Holdings (UK) Ltd Sublime Technology Hong Kong Domain registrar services provider 2003., 20/F Towers China Hong Kong City,
Limited Tsim Sha Tsui, Kowloon, Hong Kong
Instra Holdings (UK) Ltd Domain Directors CA Inc Canada Domain registrar services provider 505 15183 Russell Avenue, White Rock
Burnaby, BC, V4B2P4, Canada
Instra Holdings (Aus) Pty Ltd Domain Directors PTY Ltd Australia Domain registrar services provider Level 2, 222 Beach Road, Mordialloc, VIC 3195
78 CentralNic Group Plc Annual Report 2017
Country of incorporation
Parent Company Subsidiary and principal operations Principal activity Registered office
Instra Holdings (Aus) Pty Ltd Ozenum PTY Ltd Australia Domain registrar services provider Level 2, 222 Beach Road, Mordialloc, VIC 3195
Instra Holdings (Aus) Pty Ltd Instra Corporation Australia Domain registrar services provider Level 2, 222 Beach Road, Mordialloc, VIC 3195
PTY Limited
Instra Corporation PTY Limited Instra Domain Directors B.V.The Netherlands Domain registrar services provider Beechavenue 54-62, 1119PW, Schiphol-Rijk
Instra Corporation PTY Limited Instra Corporation Singapore Domain registrar services provider c/o Asiabiz Services PTE Ltd, 30 Cecil Street,
PTE Ltd #19-08, Prudential Tower, Singapore 049712
Instra Corporation PTY Limited Domain Escrow England and Wales Domain registrar services provider 35-39 Moorgate, London, EC2R 6AR
Services Limited
Instra Corporation PTY Limited Instra-Internet Services Greece Domain registrar services provider 1 Dimokraatias Square, Thessaloniki, 54629,
One-person LLC Greece
Instra Corporation PTY Limited Instra Domain Canada Domain registrar services provider Suite 2300 Bentall 5, 550 Burrard Street,
Directors Inc Vancouver, British Columbia, V6C 2B5
Instra Holdings (NZ) Ltd Instra Corporation Limited New Zealand Domain registrar services provider C/o Grant Thornon New Zealand Ltd, LR,
152, Fanshawe Street, Auckland, 1010,
New Zealand
Instra Holdings (NZ) Ltd Only Domains Limited New Zealand Domain registrar services provider C/o Grant Thornon New Zealand Ltd, LR,
152, Fanshawe Street, Auckland, 1010,
New Zealand
Instra Holdings (NZ) Ltd Private Ranger Limited New Zealand Domain registrar services provider C/o Grant Thornon New Zealand Ltd, LR,
152, Fanshawe Street, Auckland, 1010,
New Zealand
SK-NIC Slovakia a.s. SK-NIC a.s. The Slovak Republic Domain registry services provider Panenská 6, Bratislava 811 03
CentralNic Group Plc Annual Report 2017
79
Shareholder information
Financial calendar
Annual General Meeting
The Annual General Meeting will be held on Monday, the
25 June 2018 at 10am at the offices of the Company’s solicitors:
Solicitors to the Company
DWF LLP
20 Fenchurch Street
London EC3M 3AG
Taylor Wessing LLP
5 New Street Square, London EC4A 3TW
Taylor Wessing LLP
5 New Street Square
London EC4A 3TW
Announcements
• Half-year results for 2018 are expected in September 2018.
• Full year results for 2018 are expected in April 2019.
Dates are correct at the time of printing, but are subject to change.
Solicitors to the Nominated Adviser and Broker
DAC Beachcroft LLP
100 Fetter Lane
London EC4A 1BN
Directors
Mike Turner (Chairman)
Benjamin Crawford (Chief Executive Officer)
Donald Baladasan (Chief Financial Officer)
Samuel Dayani (Non-Executive Director)
Thomas Rickert (Non-Executive Director)
Thomas Pridmore (Non-Executive Director)
Iain McDonald (Non-Executive Director)
Registered office
35-39 Moorgate London EC2R 6AR
Company Secretary
DWF LLP
Company website
www.centralnic.com
Nominated Adviser and Broker
Zeus Capital Limited
82 King Street
Manchester M2 4WQ
41 Conduit Street
London W1S 2YQ
3 Brindleyplace
Birmingham B1 2JB
Joint Broker
Stifel Nicolaus Europe Limited (“Stifel”)
150 Cheapside
London
EC2V 6ET
Auditors
Crowe Clark Whitehill LLP
St Bride’s House
10 Salisbury Square
London EC4Y 8EH
80 CentralNic Group Plc Annual Report 2017
Financial PR
Abchurch Communications
125 Old Broad St
London EC2N 1AR
Bankers
Silicon Valley Bank
Alphabeta
14-18 Finsbury Square
London EC2A 1BR
HSBC Bank plc
89 Buckingham Palace Road
London SW1W 0QL
Company Registrars
Link Asset Services
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU
Link Asset Services is our registrar and they offer many services
to make managing your shareholding easier and more efficient.
Share portal
The Share Portal is a secure online site where you can manage
your shareholding quickly and easily. You can:
• View your holding and get an indicative valuation
• Change your address
• Arrange to have dividends paid into your bank account
• Request to receive shareholder communications by email
rather than post
• View your dividend payment history
• Make dividend payment choices
• Buy and sell shares and access a wealth of stock market
news and information
• Register your proxy voting instruction
• Download a stock transfer form.
• Use the details on the FCA Register to contact the firm.
• Call the FCA Consumer Helpline on 0800 111 6768 if there
are no contact details on the Register or you are told they are
out of date.
• Search our list of unauthorised firms and individuals to avoid
doing business with.
REMEMBER: if it sounds too good to be true, it probably is!
If you use an unauthorised firm to buy or sell shares or other
investments, you will not have access to the Financial
Ombudsman Service or Financial Services Compensation
Scheme (FSCS) if things go wrong.
REPORT A SCAM
If you are approached about a share scam you should tell the FCA
using the share fraud reporting form at http://www.fca.org.uk/
scams, where you can find out about the latest investment scams.
You can also call the Consumer Helpline on 0800 111 6768.
If you have already paid money to share fraudsters you should
contact Action Fraud on 0300 123 2040.
Identity theft
Tips for protecting your shares in the Company:
• Ensure all your certificates are kept in a safe place or hold
your shares electronically in CREST via a nominee.
• Keep correspondence from us and Link in a safe place and
destroy any unwanted correspondence by shredding.
• If you change address, inform Link in writing or update your
address online via the shareholder portal. If you receive a letter
from Link regarding a change of address but have not moved,
please contact them immediately.
• Consider having your dividend paid directly into your bank.
This will reduce the risk of the cheque being intercepted or
lost in the post. If you change your bank account, inform Link
of the details of your new account. You can do this by post
or online via the shareholder portal.
• If you are buying or selling shares, only deal with brokers
registered and authorised to carry out that type of business.
• Be wary of phone calls or e-mails purporting to come from us
or Link asking you to confirm personal details or details of your
investment in our shares. Neither we nor Link will ever ask
you to provide information in this way.
To register for the Share Portal just visit www.signalshares.com.
All you need is your investor code, which can be found on your
share certificate or your dividend tax voucher.
Customer support centre
Alternatively, you can contact Link’s Customer Support Centre
which is available to answer any queries you have in relation to
your shareholding:
By phone – UK – 0871 664 0300 (UK calls cost 12p per minute
plus network extras). From overseas – +44 371 664 0300.
Lines are open 9.00am to 5.30pm, Monday to Friday, excluding
public holidays.
By email – shareholderenquiries@linkgroup.co.uk
By post – Link Asset Services, The Registry, 34 Beckenham
Road, Beckenham, Kent, BR3 4TU.
Sign up to electronic communications
Help us to save paper and get your shareholder information
quickly and securely by signing up to receive your shareholder
communications by email.
Registering for electronic communications is very straightforward.
Just visit www.signalshares.com. All you need is your investor
code, which can be found on your share certificate or your
dividend tax voucher.
Donate your shares to charity
If you have only a small number of shares which are
uneconomical to sell you may wish to donate them to charity
free of charge through ShareGift (Registered Charity10528686).
Find out more at www.sharegift.org.uk or by telephoning
020 7930 3737.
Share fraud warning
Share fraud includes scams where investors are called out of
the blue and offered shares that often turn out to be worthless or
non-existent, or an inflated price for shares they own. These
calls come from fraudsters operating in ‘boiler rooms’ that are
mostly based abroad.
While high profits are promised, those who buy or sell shares in
this way usually lose their money.
The Financial Conduct Authority (FCA) has found most share
fraud victims are experienced investors who lose an average of
£20,000, with around £200m lost in the UK each year.
PROTECT YOURSELF
If you are offered unsolicited investment advice, discounted
shares, a premium price for shares you own, or free company or
research reports, you should take these steps before handing
over any money:
• Get the name of the person and organisation contacting you.
• Check the Financial Services Register at
http://www.fca.org.uk/ to ensure they are authorised.
CentralNic Group Plc Annual Report 2017
81
Glossary
Top Level Domain or ‘TLD’
The suffix attached to internet domain names e.g., .com, .net
Second Level Domain or ‘SLD’
A domain that is directly below a top-level domain e.g. uk.com
Internet Corporation for Assigned Names
and Numbers or ‘ICANN’
A non-profit private organisation that was created to oversee a
number of Internet-related tasks previously performed directly on
behalf of the U.S. government
Country Code Top Level Domain or ‘ccTLD’
An Internet top-level domain generally used or reserved for a
country, a sovereign state, or a dependent territory e.g., .uk, .jp
Domain Name System or ‘DNS’
A hierarchical distributed naming system for computers, services,
or any resource connected to the Internet or a private network
Registry Operator
An entity that maintains the database of domain names for a
given top-level domain and generates the zone files which
convert domain names to IP addresses. It is responsible for
domain name allocation and technically operates its top-level
domain, sometimes by engaging a Registry Service Provider
Domain Name Registrar
An organisation or commercial entity that manages the
reservation of Internet domain names
Registry Service Provider
A company that performs the technical functions of a TLD on
behalf of the TLD owner or licensee. The registry service
provider keeps the master database and operates DNS servers
to allow computers to route Internet traffic using the DNS
82 CentralNic Group Plc Annual Report 2017
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35-39 Moorgate
London
EC2R 6AR
www.centralnic.com
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7
Annual Report
2017