CentralNic Group revenues 11% ahead of Zeus Capital’s forecasts


CentralNic Group plc (LON:CNIC) provided an H1 trading update that demonstrated strong organic revenue growth and solid EBITDA performance. The company continues to generate cash although currency movements may have hindered its net debt progress. Despite the strong top line performance, we leave our forecasts unchanged until Interim Results on 1 September. The company’s solid outlook reinforces the attractiveness of CentralNic’s earnings multiples and FCF yield.

Strong top line growth: Revenue was $110m, 11% ahead of our $99m estimate,  while EBITDA was $15m, in line with our estimate of $15m. The strong revenue outperformance combined with in line EBITDA indicates H1 revenue mix may have been more biased towards Monetisation (Team Internet) (25% gross margin) than Direct and Indirect revenues (2019: 50% and 32%, respectively).

Monetising Monetisation: The above assumption would confirm the quality and value of the Team Internet acquisition. Based on our current Monetisation segment forecasts, which now appear low, Team Internet’s acquisition multiples are only 0.6x revenue and 2.4x gross profit.

Net cash progress partially offset by FX: Gross cash grew $3.5m to $27.6m over Q2, but net debt only fell $0.4m to $76.4m. We assume the $3.1m difference may have been due to the recent strong appreciation of the Euro, the currency in which CentralNic’s outstanding debt (bonds) is denominated. 

Full year outlook unchanged: The trading update makes our full year forecasts ($204m) appear low. H1 revenue represents 54% of our full year forecasts and we believe H2 is a stronger half due to seasonally strong ecommerce market activity. However, we leave our forecasts unchanged at this time. EBITDA is on track and we are early into H2. We await the release of Interim results on 1 September to provide a more meaningful update to our forecasts.

Attractive valuations: Despite the strong organic growth demonstrated in the H1 trading update, CentralNic Group trades at only 8x 2020 EBITDA, 10x PE and 9% FCF yield.

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CentralNic Group Plc
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Zeus Capital Ltd.

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