Team Internet Group (LSE:TIG) — Full Year 2021 results

0:01 Good afternoon, ladies and gentlemen, and welcome to the CentralNet Group PLC Full Year Results twenty twenty one Investor Presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged, can be submitted at any time using the Q and A tab that's on the right hand corner of your screen. Just simply type in your question at any time and press send. The company may not be in a position to answer every question it receives during today's meeting. However, the company review all questions submitted today and publish responses where it's appropriate to do so. Before we begin, we would like to submit the following poll. And if you

0:31 would give that your kind attention, I'm sure the company would be most grateful. And I'd now like to hand over to Ben Crawford, CEO from Centrelink. Good afternoon. Thanks very much, Mark, and, hi, everybody. Thank you for attending today. And, yeah, today, we'll be reviewing our results for 2021 and also talking about our new acquisition, a company called VGL. So just as a reminder of what we actually do, Central NIC provides the tools to help businesses succeed online, and we group those into two divisions. Firstly, the online presence division, and that sells the basic tools to get online, web addresses, websites, hosting, email, and all of these are annual subscription products.

1:22 So our business receives from each customer annual payments to retain the services they've bought over the years. And you can see that part of the business has grown at 9%. So which is very good for for for that for that kind of business. It's double the types of growth rates that we've experienced in years gone by, so very happy about that. Second half of our business is called online marketing, and that's where the people that already have websites, we provide them with the tools to either acquire more customers to their websites if they're an ecommerce company, or if they have a high traffic website like a a media business or a blog and so on, We help them make money from from from that traffic.

2:12 These are they're also recurring revenue businesses, but they work in a different way. The customers have long term contracts, and they tend to just put business through us continuously. So for instance, if they're a retailer, they want a constant stream of customers from us, people that will buy. Similarly, if they're a publisher, they want a constant stream of revenues for for their traffic. And you can see that this part of the business has grown at a pretty phenomenal 65% organic growth year on year. The the orange parts on the top of the bars represent adjustments for acquisitions that we made during the course of year, and hence, because we wanted to be very clear. We're doing an exact like for like comparison to measure the organic growth of these businesses.

3:05 Now now why does the business grow so fast? Firstly, the online marketing segment is just a much faster growing part of of the Internet, And and I guess each customer pays us much more frequently. So whilst on the for websites, customers only pay us once a year. Here, our clients pay us every single time they win a new customer. And and, obviously, they're all trying very hard to make that happen as frequently as possible.

3:35 So just high level highlights of of what we did last year. We continued our investment into staff and systems. We've we've built our company through acquisitions, but over the past couple of years, we've been creating a much larger head office function with centralized, you know, HR, full finance suite, including treasury, sales tax, corporate tax experts, and so on, as well as technical support, project management, product, and so on, all centralized to free up the managers to really focus on that organic growth. And the results have clearly paid off. $10,000,000 of investment followed by a $116,000,000 of year on year organic growth.

4:22 Now we're we're very different from those tech companies that have really benefited from COVID. Honestly, we didn't really. We got a small bump, but where we we really seen our growth is as COVID has has has had less and less of an impact over the last year, our business has accelerated faster and faster. And so, clearly, that's not related to COVID. It's related to, one, the growth of the Internet, the advertising market per se, and secondly, to the growth of our business resulting partially from the investment. And then there is a, some market factors that do help us, and that is the new Internet privacy measures that support our growth. So these are things like, one, just general consumer sentiment that they don't like tech companies taking their data and selling it.

5:14 Secondly, regulation, things like GDPR. And lastly, the policy changes of companies like Apple and Google and so on to prevent people's data being being spot on, being stored, and being sold. And why do these help our business? Because we never ever, used any of those types of tools. None of our online marketing tools collect private data at all. And so, hence, as, as customer sentiment, has moved and and regulation has moved towards privacy safe, on our marketing, obviously, we've fallen into favor. Now I'm gonna hand over to Michael to take you through the financial results for 2021.

6:02 Thank you, Ben. So 2021 was the best year in the financial history of Centronic as every year as so far. Revenue increased by 71% to $410,000,000, and net revenue and adjusted EBITDA increased by almost 60% to a 118 and $46,000,000, respectively. Also, the adjusted EPS is up by almost 20% to near 12 US dollar cents. And on operating profit, we went from the small loss position in 2020 to more than $1,000,000 of profit every month. Last but not least, the adjusted cash flow also increased nearly as strong as the adjusted EBITDA by more than 50% to now notably more than $50,000,000 in the year just ended.

6:58 As you could already tell from the figures on the prior slide, when we go into the more detailed p and l, you will see that the net revenue or gross profit has increased slightly less than the revenue, which which means that the gross margin the blended gross margin of the group has diminished from 31% to 29%. However, this is a pure product mix change. The online the online marketing segment has a structurally lower gross margin than the online presence segment. And given the strong growth of 65% organically compared to 9% for the online presence segment, Just more of our business is today online marketing, which automatically makes that the blended gross margin is smaller even though the margins in the businesses are largely stable.

7:52 When we then look at how adjusted EBITDA translates into operating profits, we see that the adjusted EBITDA increased by $17,000,000 rounded, whereas the operating profit increased by only, in quotation marks, $40,000,000, from from last year or from 2020 to the last year. We see that the discrepancy lies entirely, in in one item, amortization of intangible assets, where we need to recognize after each acquisition a certain part of the purchase price for these assets like customer relationships, etcetera. However, other than physical goods, you never buy buy new ones. You don't have to buy your customer relationships yet another time. You don't have to buy your trademark yet another time.

8:40 And so so this item is all noncash in this period and also in the future periods. The money has already been spent long time ago. And, this is also why all equity analysts who cover our share unanimously strip this item out when, analyzing our profitability. Moving on to the balance sheet. Probably, the most notable items lie at the bottom of the slides. So the the gross cash amounts have almost doubled, so the company is in a very good liquidity situation currently. But, also, the net debt has diminished by $10,000,000, and that's despite us having, invested $18,000,000 in four highly accretive transactions during the year, 2021, plus a few, earn out payments for prior year acquisitions together roughly $20,000,000.

9:38 So having said that, so we we you can also you can also tell just from the statistics that the cash conversion of the business is very strong. The question is where does this where does where does this come from? Here on on page nine, you see the cash flow statement under IFRS, no adjustments here. But also on this on this full GAAP presentation, cash flow operation has increased by 80% from around '23 to around $41,000,000. But given that also our, cash flow is also impacted by the m and a activity, IFS doesn't distinguish between illegal bill for due diligence or for customer complaint.

10:28 We have we have started two years ago to systematically provide this bridge. And, as you can tell from the from the chart, our cash conversion has been always very high, 113% in 2019,120 in 2020, and now 116 in 2021. So all of it in a very narrow corridor. And, this is very important to us because, a, it demonstrates that, neither us venturing from online presence into online marketing has diminished our cash conversion ratio nor the now dramatically accelerated organic growth. And the reason for that is that on both sides of the business, it is a market convention that most of the transactions are prepaid.

11:16 And when you think about it for online marketing, it is it is it is quite common sense. Because if you are an ecommerce company that ships a good and the customer doesn't pay, you could come and collect it. However, once you've delivered ad impressions, you can never go and and take them back. And and and for and for that reason, that prepayment is the standard settlement method, it makes that in the end, while both services are different in nature, economically, they are quite comparable.

11:48 Then a few words on, some p and l items, where we receive frequent questions. Operating expenditure increased by twenties by $26,500,000. However, the majority, almost two thirds of that, is acquired operation expenditure from all the acquisitions that were not part of the group for all of 2020 or have only been acquired in 2021. The other the other 25 to 30% of it is the is is the is that invest is that is that investment in operational cost, HR, IT systems, etcetera, that are in here, but which have then also triggered the the substantially accelerated growth rates.

12:39 Amortization of intangible assets, we have addressed on when discussing the bridge from adjusted EBITDA to operating profit. The noncore operating expenses, this is this is all the expenses for us to curate our portfolio of of of companies starting with identifying great new acquisition targets, negotiating the deals, doing the due diligence, refinancing the transaction, and restructuring and integrating the business to become part of the Centering ecosystem. And, as you can tell, the, Express as a percentage of our adjusted EBITDA, the number has already come down quite notably, from 2020 to 2021, persistent trend that we've seen over over, all the past years.

13:30 But also in 2021, there is a one point, roughly $1,500,000 component in there of that we called other. Other stands for a

13:41 strategic review, and we didn't want to use that term given that the strategic review is this London City code word for a sales process, in particular, fire sales process of a company, and nothing could be further from the truth. Here, it was a proper strategic review where we agreed with the board of directors to have an independent assessment of the quality of the two businesses after we had pivoted from standing on one leg online presence to to now having grown a second leg of online marketing. The result of that is that both business are great business to be in, and this is why the board has agreed with us strengthening both businesses through m and a, Safe Friends and Name Action reinforcing the online presence business, One Door and White and Case augmenting the online marketing business.

14:27 But it also means that there is a notable one off component in here that is not a direct part of our continued m and a strategy, And, therefore, we are hopeful that we can, that in a year's time, we can present even the diminished number, which then expressed as a percentage of hopefully even higher profits, will will come down to to low double digit or with a bit of luck even, the single digit percentage area. Last point before I hand back over to Ben, finance cost.

14:59 The finance cost are mostly driven by a bond out of which we have already issued three tranches and and now for the acquisition of of VGL are issuing a fourth tranche. The bond holds holds the 7% coupon. However, on the last two raises in February 2021 and now on the current raise for the trans for the VGL transaction, we've been able to obtain a premium on the bonds, which neutralizes the coupons or mitigates it, I should say, and and which gives us a very good indication that the current that the current bond investors are looking for a yield of around four and a half percent. So our credit risk has dramatically improved over the last two and a half years, and this makes us very hopeful that once we go into into a refinancing exercise, which could already be as early as this July, that we could reduce the interest rate by 2% or more, which would then, all other things being equal, translate into an annualized $2,500,000 of interest savings, which then translates into almost $1 cent of EPS.

16:12 So this refinancing exercise would have a potential to create to to incur a high single digit EPS accretion all in itself. With that, I hand back over to Ben for strategic priorities. Thanks very much, Malcolm. So our current and future strategic priorities are firstly, organic growth in all its forms, winning new customers, growing our existing customers, cross selling new products, new suppliers. Secondly, operating leverage. We we believe this will become more and more visible in the medium term,

16:51 somewhat influenced by integration savings. But in the current labor market, we we doubt very much we'll be laying off any staff as as getting good staff is the is actually one of our biggest challenges as we continue to grow. But much more importantly, as we operate platform businesses, the margins improve with scale. And we've seen this with our peers on Nasdaq that operate similar kinds of platforms to us, but have much larger scale and their margins are likewise higher than ours. M and A remains a focus, and we're always looking for targets that match our own recurring revenue, high cash conversion profile.

17:38 And and and we are also, I'd say, very good at m and a and particularly at finding great value. And so we're we're continuing ways to be focused on that. And then, when it comes to debt, our current, interest rate on our bond is 7%. We'll we'll be able to refinance that in July and get the interest rate down below 5%. Our net debt to EBITDA ratio is currently 1.6. If we just continue trading as we are, we'll get it down below one before the end of the year, assuming we don't use cash for other acquisitions, for instance. And our interest rate coverage is four and a half times, and we're not expecting that to to change moving forward.

18:26 ESG remains a priority for the company. We have an extremely diverse workforce. Inclusivity is really at the heart of what we do. Our slogan is making the Internet everybody's domain, and that means not that we're collecting private data on people all over the world and selling it, nor does it mean we're trying to sell American culture to people in every country in the world. What we actually sell is the tools for people to build their own websites and build their own businesses online and and hopefully, internationalize the Internet as they go. Carbon reduction has been a focus since 2012 when we first announced that we were carbon neutral. However, we had to step back from that statement as we acquired businesses that weren't carbon neutral, but now through a combination of improved efficiency and offsets, we're back in the carbon neutral territory.

19:20 And lastly, we do have a grant program. We've donated over €500,000 in grants for education projects, cybersecurity projects, and accessibility projects for technology and the disabled.

19:37 Very good. So now let's move to VGL, the company that we're in the process of acquiring. VGL is, Germany's leading product comparison site. So if you want a UK equivalent, think about which or future. These, so so they have a content team of editors and web developers that commission a a large group of freelance writers to create content that's extremely templated and based on a on a model that they have developed and found to be extremely effective. So so people come to look at their content. It provides a range of different products all in the same category and allows you to compare and select the one that you're interested in buying.

20:23 Then when you select that one, it refers you to an ecommerce shop where you can actually buy it.

20:29 They have relationships with a a number of the best known and and leading ecommerce brands in the world. And, and when they refer customers and those customers actually, buy a product, they receive a commission. And we're talking about tens of millions of products a year here. When it comes to their the the the traffic on their websites, a a large proportion of it actually is walk up traffic. So these are people that already know the names of the websites and type them in or click on a link, but it costs the company nothing. And so when they receive a commission, it's a 100% gross margin. And that is topped up by their media buying team who are experts at advertising on the Internet and driving more traffic to their websites, which then also convert to revenues.

21:23 So all up, their actual EBITDA for last year was $11,000,000 on revenues of 55,000,000. This is a snapshot of the kind of website that they produce.

21:37 It they're constantly updated. They're German domestic providers, so they're in German. And you can see there's two types of content there. There's photographs with very clear labels that say things like best quality, best value for money, most popular on sale now. So those are for people that like to make a fast decision about what they wanna buy. And then down the bottom, there are a series of links to much more detailed information, product reviews, features lists, ratings, videos for things like assembly and so on. So for those people that wanna do some deep research before they decide which product they want, all of the information is there.

22:22 But the result is the same. It's on this site that customers decide which is the product for them, and then they click through and they acquire it. As I mentioned, there there are significant advertisers as well as having great products that rank high or great websites that rank highly in Google, and that doesn't enable them to take up a lot of the Google search results pages. They they they are expert advertisers, and you can see that's an ad of theirs at the top. And then they have multiple different websites that cover the same category, they can appear at various different points in the first page of the Google search results. Some of these are actually in a partnership with the largest publisher, Axel Springer in Germany.

23:09 And so they're they're a big magazine publisher around each magazine. There are communities of people that are interested in those subject matters. And so they connect up with VGL to offer the products that relate to that interest group. So together, this partnership of Axle Springer and VGL is very similar to the business model of future here in The UK. So so summary of why we're doing the deal, well, we get we get the traffic, and we actually have multiple partners that we can sell traffic to today. And so, obviously, that's something where they're selling it to their current partners, but potentially, we could get more money for it in other areas. We have the great content and the content creation team, which we don't really have at this point.

24:00 So it's really adding a new string to our boat. They have ecommerce partners that they have large scale relationships with. We don't have that at the moment. So we have different kinds of monetization partners, but not not ecommerce companies. So that's fantastic new relationships they bring into the group. And the deal is immediately not only earnings accretive at double digits, but also margin enhancing. And in that this company, VGL, has higher EBITDA margins than we do, and we believe we can improve them. When it comes to growth opportunities, this is a company focused on the German language market. But, because of the EU, there are other countries, neighboring countries that, have essentially the same products, same product numbers, same, standards and specifications.

24:54 So there's absolutely an opportunity to extend their footprint into other geographic and language areas through through the EU, and we could do this much cheaper than the companies just trying from scratch to do that. We've already identified opportunities where, you know, rebate programs from the big ecommerce companies. The online marketing can be achieved comparably, and we already have critical presence, which obviously creates a good bid to launch new products in. Now now they can also, though, expand in Germany. They cover 10 large categories like kitchen gadgets, home improvement, sport and leisure, but they don't cover every single product that they could yet. So there's definitely room for expansion in Germany.

25:41 And then this is a rather small thing, but as we continue to develop new websites, no company has better access to names for websites, domain names than we do. We have direct relationships with all the wholesalers in the world as well as access to the the domain names that are dropped or deleted when companies decide they don't wanna use them anymore. So that together with the new content content we're getting means we'll be able to put together a fantastic new websites at scale. On the cost side, whilst they have a fantastic and very professional and large scale media buying operation, We actually have another one that buys ads in different places. So they're specialists in buying ads from search.

26:30 We are from social media and native. And so that and and we believe that we could buy traffic cheaper than they can in some instances, which would reduce their costs, improve their margins. Secondly, we have another a second company in Berlin, Wando, that we acquired around a year ago. We're planning to shut their offices and move their staff into the billboard offices. And then lastly, because of our large scale compared to build to VGL, we're able to to to move them onto our pricing schedules with suppliers and, therefore, again, reduce their costs. Now, Michael, do you wanna take us through the numbers around this deal? Yes. Happy to. Thank you, Ben. And what we've done here is a simulation how CenturyLink would have presented its 2001 financial year if billboard and also all the other acquisition undertaken in 2021 would have been part of the group for the entire financial year. And the answer is we our revenue would have been $470,000,000 and the EBITDA $58,000,000, also applying a 1% uptick in our blended EBITDA margin.

27:46 And we expect this transaction to be highly accretive As you can tell from the bottom left corner, the consideration that we agreed with the sellers represent 6.2 times EBITDA trading EBITDA, I should say, which is notably below the implied multiples at which CenturyLink is currently trading. And in the on on the right hand side, you see a simulation in order in order to diminish the dilution and and optimize the value creation for the shareholders, we are putting in a €21,000,000 debt tranche, which would, however, still make that our that our leverage ratio comes down from 1.6 times if we had not done the transaction to 1.5 times having done the transaction.

28:39 And from here, the company would then organically deliver, quickly below one times, probably still before the end of this year. On the on the next page, we have the transaction terms. So, again, enterprise value of €60,000,000, including customary adjustments for net cash and working capital, €67,000,000. There's an earn out component. However, the effective multiple can only come down through the earn out that under all circumstances, the EBITDA would always increase faster than the purchase price is being topped up, which would then further enhance the earnings accretion. And the financing has been has been undertaken through a 42,000,000 sterling.

29:27 Fundraise, which, which we announced has already been closed, well oversubscribed, and we're still having this open offer so that other holders who could not be brought in into into that vehicle can still can still pick up their shares. Admission settlement of the new shares is the March 2, and and the difference to the purchase price is being is being funded through a commitment facility with Macquarie who pay us even a premium on top of normal value given that given that we could already call a bond in four weeks in four months and, in the week. This then translates into into an ex indeed expectation of roughly 4.6% as pointed out when we're discussing the slide on our net debt.

30:19 This takes us to the end of our presentation, and we are now open for questions. That's great, Ben and Michael. Thank you very much indeed for updating investors this afternoon. Ladies and gentlemen, please do continue to submit your questions using the Q and A tab situated on the right hand side of your screen. But just while Ben and Michael take a few moments to review those questions submitted already, I'd like to remind you that a recording of this presentation, along with a copy of the slides and the published Q and A, can be accessed via your InvestoMeet company dashboard, dashboard, and we will notify you when they're ready for your review. Ben, Michael, as you can see, there's a number of questions submitted by investors today. If I may, could I hand back to you to read out those questions and give a response where it's appropriate to do so? And I'll pick up from you at the end. Very good. Thank you, Mark. Yes. So first question is, as I believe you recognize your services you offer are very sticky, much effort being needed to switch hosting providers.

31:12 Do you agree? And what steps might you take to capture customers hosted elsewhere? Excellent question. So, absolutely. So so the statistics of this that less than 2% of customers switch providers in in in industry in any one year. So incredibly sticky. And you're right. It does provide a challenge, but it also provides a great opportunity, and that opportunity is acquisitions. So in our industry, you can acquire a company without being concerned that you're gonna lose the customers. So even if the head of sales or the CEO or the head of customer service leaves your company, unlike other companies, they cannot take their customers with them.

32:01 And so it makes it a a really, attractive industry to do a roll up strategy in. Then when it comes to to, the challenges, it's true. It's very challenging to win new customers or win old customers away from competitors. It puts the focus on winning new customers who are just starting out, you know, building a website and so on because they're still up for grabs. Where we do actually get some benefits though is where companies are emerging and we can potentially go to those companies and say, hey, we can offer you a integration as a service where they do have a ongoing dependency on us. So that's one way we've been able to capture customers hosted elsewhere.

32:54 And another, which we're working on, is a far more automated way of doing it, making it much easier, taking away the risks, the costs, and the hassles of doing it. But it's yeah. It it it remains a challenge, and that is really why our industry lends itself far more to a roll up strategy than than simply an organic growth strategy. Next question. Great numbers. What were the reasons behind the strong performance of the online marketing division? So I think we've we've somewhat answered that question. So we absolutely won new customers, and and and those new customers and existing customers grew very rapidly. We obviously had some that grew grew faster than others and are much bigger than others, but we saw a lot of growth.

33:45 And I think that does go partially to our privacy safe solutions, which are solving the problems that are faced by many of our competitors or or the customers of many of our competitors. So we are seeing people moving over to using us. And secondly, our platforms with the combinations of, like, big data, fast processing power, artificial intelligence, in some cases, patented components, essentially delivering better results than some of the alternatives, which is attracting customers to us. Next question. With such a healthy balance sheet, couldn't more of today's acquisition been paid in cash, thus avoiding share dilution?

34:37 Well, it's a it's a controversial point. I would say the the the the the the thing that people criticize our company for the most more than anything else is a level of debt, and that's of net debt. And that's, in a way, surprising because we've got four and a half times interest coverage in it throughout our our our cash. But nonetheless, we we recognize that particularly in The UK, it's a it's a sensitivity among a lot of investors. And hence, if we spend all our cash, we dramatically drive our debt up to, you know, two and a half times plus, EBITDA.

35:24 And, and clearly, whilst that may make economic sense, it it would also put us out of favor with with a group of investors. So rather than doing that, we we went back to equity holders. And for for those of you who are equity holders, we also have an open offer, so you can absolutely participate in this raise as well. And and we were significantly oversubscribed, so there was clearly a a great appetite from investors for us to do this deal and for them to be able to get more shares. Next question. I've been a shareholder for some while and impressed with your top line growth, but could you provide more information about your profitability?

36:11 Thanks. So, I don't know, did you wanna talk about that, Michael? Or Right. So so we're as as as we as we try to to convey, our profitability is is impacted by by IFRS rules, most importantly, probably on business combinations that gives us this item of, amortization of intangible assets, and we we we try to give as many profit figures as as as possible to help readers of our financial information to navigate this. So our our key metric is still the adjusted EBITDA where where we end where we ex where we neutralize expenses, which are not related to operating our business or the business that we currently own.

37:05 This tool this tool basically give a clear view of the of the financial performance of the underlying businesses. But also from the pure from the pure gap metrics, you will see that despite these despite this big amortization item, bit by bit, all our more and more p and l items become positive. So now now we went from now we went into notable profit situation for operating profit. We also know we we also had to break even on profit before tax. And and as as time as time comes, more and more of the of the profit metrics will come above the line. However, we we believe that still cash, is king, and and and therefore, I think a very good metric would be our adjusted cash flow divided by, divided by revenue, which probably gives, a relatively fair presentation of our profitability.

38:05 And maybe still one word on accounting policies in general, in particular, peers in the online marketing business quite frequently only report their net revenue as their as as as their as a revenue figure and and and basically stripping out what they call traffic acquisition cost. And if you would do the same, we would actually then show our gross profit as revenue, $118,500,000, which with the $46,300,000 of EBITDA would give us a 39 EBITDA margin. And also that ratio has been very stable over the last few years. Also last year would have been pretty much the same. And when you look at it from that perspective, 3039% EBITDA margin on the on the gross sorry, on the net revenue plus in the growth rate that puts us comfortably in in that elite group of rule of 40 companies.

38:59 Very good. Thanks, Michael. So can you talk to us about the Fireball Search, .Rua, and now VGL acquisitions? How much synergies do you think you'll be able to get? Are you able to give any guidance? Well, the the the the Fireball Surgeon and dot Roar acquisitions were were very small, but and so the the I think together they had was it a $100,000 of EBITDA? Yes. That is that is correct. Yeah. So so we're doing it. And and so they have no staff, for instance. They're they're more assets.

39:44 And but look. Fireball search essentially means it's it's traffic. It's people using the Internet. And as a and as our online marketing business is a specialist in monetizing such traffic. It's a bit like if we if we bought one of the 100 websites that that that VGL publishes, it it's a group of people trying to find particular things. And as we can match them with the right advertisers or or or now we we have a contract with big ecommerce companies with the right vendors. We're no doubt to derive some revenue synergies there. Similarly, .rua as the domain extension for for the Rural Valley and the and the all the cities there.

40:36 It relies on infrastructure that was currently being provided by a competitor. We can do that ourselves. And so what was a external expense for the previous owners will be completely handled in house for us. And so there, there'll definitely be some some cost synergies as well as bringing our expertise in in in online sales. VGL, I think there's there's definitely a a few synergies. One that I've mentioned is that we can we believe we can buy traffic cheaper than they can in some instances so we can reduce their cost that way using our in house resources. Similarly, we can let them use some of our infrastructure and infrastructure supplies at our at our group cost, which will be able to save some money there.

41:30 So it's it's early days. I'd say what this is what what the work that we have done at the moment would fit would be best characterized as feasibility studies, which have shown us that we can indeed make these savings or the or obtain those revenue advantages. We haven't really moved to having full business plans for them as the best way to do that is obviously to get the people that run these businesses to do the business plans as they have have much more detailed understanding. So so, look, it's definitely there. There'll be revenue and cost synergies moving forward, but I think it's too early stage to really indicate exactly how much they would represent. But, clearly, the key thing is these deals are earnings accretive on on completion.

42:21 So it isn't like we have to wait to to bring shareholder value. We already have done so. Next question. Can you explain what's happening with the pricing in your two divisions? Are you able to raise prices for inflation? Do customer contracts have inbuilt annual inflation linked to price increases? So I think the I mean, the short answer is we can raise prices in some instances, and we do. So we often oh, not often. We probably once a year are doing detailed price reviews, but those price reviews have less to do with inflation and more to do with competition. And and making sure that that the overall result of increasing the prices is that we we earn more money rather than we lose customers to competitors.

43:18 So so that is really our focus, and it's and it's quite a painstaking project. Do customer contracts have inbuilt annual inflation linked to price increases? There are there are few that do, but typically not. On the other hand, we we do have clauses that would stop us ever getting caught in the middle. So if suppliers put their prices up, we can put our prices up too as a general rule. Very good. Next question. Could you talk to us about cybersecurity in your operations given the current geopolitical situation? Yes. So a number of our businesses, we consider, to be critical infrastructure, and so we have that type of approach with cybersecurity.

44:14 There are some of our businesses that are have are are only allowed to have zero downtime through through through the regulators. And so that involves an awful lot of redundancy in things like servers and and and and data hosting and so on. And so that's really the approach we we we bring. We have just appointed a new chief security officer and who's been auditing our systems. And as we have bought so many companies, clearly, some of our businesses are stronger than others in cybersecurity, but it's definitely a focus.

45:00 And and one and and whilst the current geopolitical situation has maybe aggravated or drawn more attention to the risks, the reality is that that that that hackers and have been very active for for many years, and and and they may include criminals, politically motivated. In fact, governmental level attacks do take place. And so happily, at least for us, we we we come very well prepared and experienced in in repelling these kinds of attacks. Next question. I've joined late, so you may have discussed this earlier, but be interested to understand why the purchase multiple is so low and what the organic growth profile is of VGL.

45:54 Well, happy to say VGL went looking for the right investor and the right partner in Germany. And as we have a very large presence in Germany and clearly, Michael being German and and leading our m and a team, we were able to demonstrate to them that we were the right partner and that we shouldn't just be investing. We should actually be acquiring the business, obviously, with this very attractive earn out potential exit for the founders in three years' time. So, yeah, we were able to avoid the the, you know, the the issues of having a large international auction and instead really were able to point to our experience of acquiring German companies and growing them really fast and being just a great home for for growth. And and and happily, they were persuaded, and now we're working together.

47:04 In terms of organic growth, I mean, I think, Michael, our our guidance is in line with the rest of our group or in line with with analysts' projections about the rest of our group. Correct. Very good. So thank you for doing an open offer for shareholders to subscribe to the fundraise and allowing them not to be diluted. In the future, please, could you consider doing the same for your bonds? I'm sure retail investors would be willing to subscribe to these also. Very good suggestion. I don't know if if as our bonds are issued in Norway, I think we're a little less educated about the the how how to open up bond offerings to to retail, but I I we'll we'll absolutely do that and look into that.

48:00 Next question. What levels of growth in EBITDA are required to earn the maximum earn out of €38,000,000? It's got about triple, so it's very significant. Why was the placing priced at such a large discount? As a retail investor, I would have loved to buy my pro rata portion of the 45,000,000 raise at 01:20 p. How can I oversubscribe to the open offer? I don't know how you can oversubscribe to the open offer, but you can certainly buy your pro rata portion is is, we believe. And and difficult to say it was a large discount.

48:47 I mean, there were multiple periods last week when the shares actually traded below 01:20 p. So it's been a very, very volatile time, and and we did feel like that we we we we actually to be able to subscribe at at that level, we felt was a very successful raise. Obviously, if the share price had been where it was on Friday night, you know, continuously for months, we would have hoped for better. But considering it was below $1.20 p at some points on both Tuesday and Thursday, it it it it seemed like a fair fair offer to the board. Next question.

49:32 Is the company affected by the current sanctions crisis, for the rue.comtld? I mean, obviously, yes, the the the the the sanctions well, rudok.comtld is actually an American owned business. So so it's it's whilst it's it's for Russia, It's it's an American owned business, so that doesn't actually prevent us buying or selling those domain names. But clearly, there's sanctions preventing money transfers into Russia.

50:17 And and and and that that we expect could affect our business moving forward. Happily, our exposure to to to Russia and the Ukraine represents a, you know, what what roughly one one to 1.5%. Exactly. So slough slightly north of 1%. And so and we don't expect all that business to disappear immediately by any means. But if it did, then then it wouldn't really impact in any meaningful way on our business. Next question. The also plan to present number without traffic acquisition costs?

51:02 Are you talk with the auditors to do so and expect a date? Thanks. Well, we've definitely been having the discussion with the auditors, but at the minute, the problem is that we we run those two different divisions. And in one, I think the auditors are not at all sympathetic that we could do that based on various audit tests. They feel strongly that we need to be reporting on on gross revenues or billings as gross revenues. Obviously, we're reporting. We're calling our our net profit or our our pro our gross profit net revenue in order to make that clear for those people that wanna do do comparisons with companies that report in that way.

51:52 We're we're trying to trying to be as helpful as possible. And, look, it's possible as the business evolves and the mix changes that we would be able to move to that sometime in the future, but there there isn't a date. Don't know. Did you wanna elaborate on that at all, Michael? Right. So so first of all, we don't want to take the the TEAMER route and then having different routes for different parts of our business where some are reported gross, some are reported net. So it's it's more likely than not that we will just stick with the current presentation. However, if you look at into our segment analysis, the gross profit that is shown there for the online marketing division equals the definition of the so called x tech revenue that so many other online marketing businesses produce as the key as the key metric.

52:46 And therefore, the figure is already in there and can be picked up by any investor who thinks it's the better metric for growth and volume of the business. Thank you. So, Michael, the the next question says, the announcement did suggest oversubscription would be allowed to the extent others did not take it up that's in the open office. That that is that is correct. That's that is that is part of the terms and conditions of the open offer. However, the the amount not taken up will only be known at the end of the process. So it sounds like put put in the biggest order you would like, and and and, hopefully, you'll get Well, every everyone can currently only subscribe for for one share for every 100 and 100.464 shares that they currently own. You So need you need at least 101 shares to participate.

53:38 If then any if then any if any part is not uptaken, it's it's probably best to to to consult with your broker to run you through the exact process how to then participate in the allocation of any amounts not not taken up. That's great. Ben, Michael, I think I might just jump in there. I think you've taken every question that's come in from investors. I think Oliver's final one there, I think, is a statement rather than a question. I think that's that's that. So listen, thank you very much indeed for your time this afternoon and indeed for giving investors the update on your news. I know investor feedback is important to you both, and I'll shortly redirect investors to provide you with their thoughts and expectations. But before doing so, if I may, Ben, just ask you for a few closing comments to conclude.

54:28 Very well. Well, look. First of all, thank you very much all all for joining. It's it's it's it's very rewarding to to get such engagement in particular. As as you'll probably know for the first few years when we listed, we were very focused on institutional investors that we we we we now see see the benefits of having a much broader base of shareholders and are very encouraged that the shareholders feel the same about us. It's been a last year was a was a great year, a real turning point for us. I think something that we we haven't mentioned is we did put out an RNS in mid January indicating that the results were so good. We had to we had to forecast that we were going to be at at the least at the top end of the analyst projections.

55:28 We had so we've already actually then been upgraded once this year. We have there's there's no changes that would lead us to to change that anyway. So very happy to be able to share that with you all. And this acquisition, it bring it it brings myself and Mark, I guess, back to our our days work in media. It is making us more of a media company, but, you know, the best kind of media company where you start with the revenues rather than starting with the content, and and we're kind of backfilling the content into the business. We we really see plenty of opportunities to build just as we have in the online presence.

56:13 We've built a marketplace, so we bought a lot of companies with different suppliers and different customers, and then merged them into a marketplace where we could cross sell between them. And now we're doing the same thing with online traffic. This is an acquisition with different different customers. This the ecommerce companies, different suppliers, the the the of traffic, the websites are down themselves. So, again, we're building a marketplace where we can cross sell, and this will make us a hugely robust business and one where we're hoping we can continue along the path that we've already started. So with those thoughts, thank you again for participating and looking forward to to reading and acting on your feedback. Thank you. That's great.

57:01 Ben, Michael, thank you once again for updating investors this afternoon. Can I please ask investors not to close this session as we'll now automatically redirect you for the opportunity to provide feedback in order the management team can better understand your views and expectations? This will only take a few moments to complete, but I'm sure will be greatly valued by the company. On behalf of the management team of Central NIC Group PLC, we'd like to thank you for attending today's presentation. That concludes today's session, and good evening to you all.