Team Internet Group (LSE:TIG) — Half year results

0:01 Good afternoon, ladies and gentlemen, and welcome to the Central NIC Group PLC Half Year Results Investor Presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged and could be submitted at any time via the q and a tab. It's just situated on the right hand corner of your screen. Please just simply type in your questions at any time and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, all questions will be reviewed. The response is published on the investor meet company platform where it is appropriate to do so. Before we begin, I would like to submit the following poll. And if you could give that your kind attention, I'm sure the company would be most grateful. And I'd now like to hand you over to CEO, Ben Crawford. Good afternoon, sir. Good afternoon, Jake, and welcome, everybody. Thank you for joining us.

0:48 So we're here to present our half yearly results, and we've got a a little bit more detail as well this time about our company and our sustainable growth.

0:58 So these are the things we're gonna cover. First highlights, then a profile of our business, what it does, and then drill down on the sustainable online marketing growth. I'll hand over to Michael then to talk you through the financial results, and then we'll finish with the outlook for for the future. So to start with the highlights, CentralNET's online marketing business has achieved 98% organic growth in h '1. So in other words, just on the strength of building that business, we've doubled its size in one year. A a a great achievement, particularly as this was a relatively small business only a few years ago, and, and, hopefully, we expect it to be a sign of things to come.

1:48 Another key point that we've, mentioned many times in the past is that we operate essentially platform businesses. So as we scale up, our margins improve, And we've shown enormous evidence of that in the first half of this year in that our only a year ago, our EBITDA was 36% of our net revenue number. The first half of this year, it's 47% of our net revenue number. So a vast improvement in operating leverage. Our growth has been widely recognized now by the Feet, ranked as among the top 50 fastest growing tech companies in Europe, and we've been listed in the FTSE Russell, I m I 100, and The UK 50 indices.

2:39 And lastly, as well as all this organic growth, we haven't, let up on our acquisitions. We've made three acquisitions so far in the first half of the year with the main one being VGL, our German product comparison website company for which we raised successfully over 42,000,000 sterling in an oversubscribed raise during the first week of the Ukraine war. So so against all odds, we've had magnificent support from investors and bought an absolute gem of the business, and you'll see soon how that fits into our our structure. So next, I'm gonna move into our business profile. So we IPO ed back in 2013.

3:26 And from 2013 to 2019, we were very focused on what we call online presence businesses. We still are. But but, up until the end of 2019, it was our sole focus. And what we did here is we bought a number of companies in in this industry of selling domain names and value added services, but each of them had a different different customer group and a different supplier group. And we merged them together, which gives us an enormously comprehensive range of products as we cover all the suppliers. And you can see there that's all down the bottom. So we have the domain names that we actually own, like .sk, the country code for Slovakia, the domain names that we power, like .xyzed, and the domain names that are owned by third parties like .com.

4:16 And in addition to that, we have our value added services, which are things like Office three six five, the productivity suite for Microsoft, and SSL certificates. So all of these are integrated into our supplier platform. And then that supplier platform is is integrated into various different channels of distribution. And there are three main channels here, the reseller channel where we sell products and services to big retailers around the world like GoDaddy, like Google Domains, like WordPress, and another 20,000 smaller retailers from all over the world. Then we have our own retailers, so we're selling direct to to small businesses in almost every country in the world. And then lastly, we have enterprise clients, and these clients look at domain names as the trademarks of the Internet. So they will typically buy large portfolios of domain names that relate to their brands and protect them in all countries around the world.

5:16 Now the key investment case or characteristic of this business is that everything we're selling is a subscription product. So we receive annual payments for these products. And if people don't pay us, then they lose their domain names. They lose their the the demands relate to their trademarks or their websites stop working. The email goes down. So, so there's a very predictable and high, renewal rate for these domain names. Secondly, it's an incredibly sticky business. So only 2% of customers change from one supplier to another in this entire industry each year. So it's very, very sticky. We also have a lot a lot to go, a lot in front of us in terms of new products that we can launch.

6:02 So there's many opportunities for additional bundling and upselling. And then lastly, there continue to be lots of attractive acquisitions all over the world. And so we will continue to be able to build this business as we have so successfully through acquisitions.

6:20 Now let's move on to online marketing. And on the online marketing side, we only started this at the very end of twenty nineteen, and we've taken a very similar approach, building a marketplace by buying companies with different suppliers and different customers and merging them together. So in this case, the the customers that we partnered with or we or that we're owning are what we call the demand side platform. So there are millions of companies that advertise on the Internet, but they tend to be highly concentrated in the tools they use to advertise. So the largest and most successful is Google Ads. So so 4,000,000 businesses use Google Ads to place their ads on the Internet.

7:07 Obviously, it's very easy from Google Ads to place your ads on Google Search or on YouTube, which are the two biggest websites in the world, the two highest traffic websites in the world, but the demand is so great for Google Ads that they that actually a quarter of all of the revenue booked by Google Ads doesn't go on placing ads on Google websites, but on third party websites. This dates all the way back to 2007 when Google announced it was gonna look at monetizing the whole Internet, not just its own products. Secondly, we have Amazon. So Amazon is obviously the biggest store in the world, and they have rolled out something that's well known for retailers for many, many decades all around the world called co op advertising, which is when you go back to your suppliers and say, I want some marketing dollars to drive more business to so I can sell more of your product.

8:03 And Amazon is doing this at an absolutely massive, massive scale and and which has made it, seems, the single largest advertiser on the Internet because it literally has such massive budgets from all the money that it's, it's it's taking from its suppliers. And then lastly, CentralNIC has its own ad agency platform. So this is a demand side platform again where advertising agencies working on behalf of enterprise customers can place ads on websites all around the world. So, essentially, that's where our money comes from. That's where the big advertisers. And then down the bottom, we have our suppliers where the traffic comes from because that's what these people are buying. They're buying what we call eyeballs traffic.

8:52 Essentially, people surfing the Internet. They're redirecting them to the advertisers' websites. And how do we reach these people? Two ways. One, through organic traffic. This represents about 20% of our traffic as people click on links, people clicking on search results, people typing in the name of websites that they wanna go to. But the vast majority comes from media buyers placing ads on other websites, on websites like TikTok, on websites like Facebook, and even on Google search. And, and the reason for this is because, on the one hand, we have the platforms that have all the advertisers and all the money, but, actually, people surfing the Internet are going to different websites. So we got billions of people on Facebook and TikTok, and the advertisers advertising Google and Amazon can't reach them directly. So what we we have developed is a fantastic solution for making a frictionless and much more efficient Internet where we can easily connect up the surfers, the people traveling around the Internet with the advertisers whose products and services they want to buy.

10:09 So let's go into some more detail on how we do that. So, but before we do, let's just look at the market sizes. So the domain market, about $7,000,000,000 a year. Value added services, about another $53,000,000,000 a year. And the growth here is, you know, two to 6%, roughly. So we're talking about a $60,000,000,000 market growing at, say, 5%. Great market to be in, and we're very excited to be a a growing part of that. But a much larger and faster growing market is the online marketing market, which this year is expected to build $600,000,000,000 and grow at north of 20%. So, and whilst in the online presence market, we're talking about subscriptions.

10:59 So customers pay us once a year. In the online marketing market, we've got rolling contracts where people pay us every time they win a new customer, thanks to our technology. So, obviously, that gives a scope for them to pay us many, many times a year. And the better our products are, the more often we get paid. The result of that is this, that you can see in the two parts of our business, online presence, growing at a very respectable 5% up to around a 150,000,000 in the last twelve months. Whereas over in the online marketing side, we're growing at almost a 100% up to $460,000,000 build in the last, in the last twelve months. So, clearly, an awful lot more growth on that side. You could see those orange adjustments there. They relate to companies that we acquired during the course of this of of of this last year because we wanna make sure and make it clear we're doing a true like for like comparison that new acquisitions played no role in in this doubling in size that was we we doubled in size, and then the new acquisitions were in addition to that in terms of growth.

12:14 Now let's move on to our sustainable online marketing growth. Why is this doubling in size so strong and so sustainable? And there's really three factors in that. The first one is that just the sheer size of the opportunity we're addressing. So those 4,000,000 customers that buy their ads on Google Ads spend well over $200,000,000,000 this year with Google. And of that and of that, 56,000,000,000 is then being spent by Google on acquiring traffic from third parties like us. And so and then if you add to that, Amazon is spending $44,000,000,000 this year on buying traffic to push people up to Amazon to buy products on their store. So altogether, that market and and we've been doing business with Google for twelve years, with Amazon for seven years, been growing year on year, quarter on quarter over the all that period.

13:18 And and yet, we only have 0.4% of the market at the moment. So there is a massive, massive opportunity for us to grow Because if you look at that 100 me $100,000,000,000 a year growing at 30%, that means there's 30,000,000,000 more spend next year than this year, and that's up for grabs. We don't have to take market away from other people in order to grow enormously. We can just access that additional 30,000,000,000. Then when it comes to the ad platform, whilst any agency can sign up to it, we're only at the beginning of that voyage now. We've got some great agencies and some great products, but plenty more to sign up. So we're only at 0.05% of the spend of ad agencies, which add up to 70,000,000,000 this year. They actually spend a lot more, but a lot of that is spent on by advertising on Amazon, on Google, and so on. So we're talking about the 70,000,000,000 that isn't being double counted here.

14:23 And then on top of that, there are partners that we've just signed up like Yahoo or we haven't yet signed up like Bing, which also have very large multibillion dollar spends on traffic as well. So that is a direction we're planning to expand our business in. So if the first part is the demand side, then let's look at what the second part of our sustainability package is, and that is our proprietary hyperscaling publishing platforms. So we have taken the traditional publishing business and just turned it on its head. So how traditional publishing business is obviously a fixed number of websites. So if you're the Daily Mail, the New York Times, or Rolling Stone, or whatever it may be, you have a fixed number of websites that are very focused on particular areas of interest. They get a certain type of person with a certain type of interest coming to them regularly.

15:16 The the sites are generally created manually using the skills of journalists and editors, photographers, designers, illustrators, etcetera. So they're quite labor and cost intensive to build and maintain, and and the traffic tends to come organically. So it isn't because New York Times is constantly advertising everywhere that people go there. They go there because of the long standing reputation for quality and so on. And the growth tends to be relatively low because the same people come back again and again and again to read that news every day. Now our model is completely different from that. So firstly, we have published a few websites. We have technology that builds an unlimited number of websites. We currently have 25,000,000 websites on the Internet today.

16:07 Now each of those websites is very, very light on content. We don't use many much in the way of journalists, designers, photographers, etcetera. Mostly, we're just hosting ads. The purpose of the website, though, is to host ads in a micro niche. So this niche might be hair transplant clinics in Follum, you know, dentists in Brixton, etcetera, and indeed cordless vacuum cleaners for German language speakers, hair extensions for Portuguese speakers, and so on. So really micro targeted and millions of these domain names. And then but then what we do is we actually hire media buyers to send traffic to these pages to then click on the ads. So that's our revenue model. We're not basing it very largely on content as a rule. We're basing it on media buying. It's the way that we get customers there.

17:12 And, again, just as there's enormous amounts of growth available our demand side partners, there's enormous amounts of growth available here too. Google lists about 5,000 different categories of advertising. We're focused on less than 10% of that today. So even though we've got these millions of websites because they're all micro targeted around these these small number of categories, there's an enormous amount of categories that we haven't even looked at yet. Now to the third part, our outsourced media buying agencies. And so, again, we've turned the media buying business on its head as well. So, traditionally,

17:55 a a a media buying client is a company that says, hey. I've got I I've got a product to sell. I have this amount of advertising budget. Could you guys go and place the ads for me? We've taken the opposite point of view. We've said, look. You guys, the media buyers, you're experts at finding high intent clients, clients that want hair transplants in form, clients that want dentists in Brixton, clients that want cordless vacuum cleaners that speak German and so on. You go out and find me them and pretty much any other niche that you can find me, and I will create industrially all the landing pages that you need in order to push those customers to. And then at one extra click, they get through to the vendor, to the dentist, to the hair transplant clinic, to Amazon to buy the cordless vacuum cleaner, and so on.

18:49 So the way it works is we recruit the the media buying agency. They place an ad on TikTok, on Facebook, on Daily Mail, on Google search. They place the ad wherever they are best equipped to find the best customers. When the customer is surfing those sites, click on an ad, they go through to our landing page, then they go through to the actual advertiser's site itself. The advertiser then pays the Google or the Amazon, whoever the middleman is. They give us a revenue share, and we give the media buying company a revenue share. So this revenue share model means, one, we're not taking risk. Two, it's enormously scalable. All of these media buyers now have a client with unlimited budget. So long as they can get us their customers, we can get them paid.

19:44 And, that means that we are the best and dream client of these media buying companies, and they're scaling up all over the world thanks to our partnership with them. So this is the the the way that we have created a massively scalable business with these three components. And now I'm gonna hand over to Michael who can tell you what the financial results that that that have come from this model look like. Over to you, Mark. Thank you, Ben. And the answer to the question you postulated is it has gone very well. Our gross revenue has almost doubled to around $335,000,000. Net revenue, so that's after traffic acquisition costs and other pass through expenses, up more than half to $82,000,000.

20:35 And EBITDA, again, up by almost 100% to 83.6%, now representing 47% of net revenue, whereas in the same period last year, it was 36%. But we clearly see that the operating leverage from the dramatic growth rate we've been experiencing over the last couple of years is now finally trickling down to the to the bottom line. The same applies to all other key financials that we see on this page. Adjusted EPS up almost 60% despite the additional shares being issued, for the acquisition of EGL. Operating profit has gone from from barely breakeven to a quite notable double digit figure, And, also, the adjusted cash flow is up by more than 60% to more than $40,000,000 in the first half of this year, and we will have some backup slides to these figures as we progress through the presentation.

21:38 Yes. I got it. Yeah. Income statement. So the the gross margin trend has continued in line with with prior years, but, again, all a segment mix change. So online marketing now makes up more than 75% of the total revenue. And also within both segments, products with, or services, which have systematically lower gross margins, grow faster. So most importantly, the media buying activity that that Ben, explained to us all. And, how however, the important part is, that gross profit as an absolute figure goes up quite dramatically at at more than 50%, And, also, the margin calculated, as a percentage of of, net revenue also goes up from the as as I mentioned on the slide before, from 36% to 47%, which if you add them together, it is typical, rule of 40 math.

22:50 We are not very far from 100. So we are quite happy with the result that's that the model that we conceived over the last couple of years throws off in monetary terms.

23:04 Looking at looking at the at the vast increase of the operating profit, so we're we're basically seeing a a 19 a $19,000,000 $19,000,000 increase in adjusted EBITDA, and we're also seeing roughly $19,000,000 increase in operating profit. So now finally, both figures go hand in hand. This was not always that that was not always the case. However, as you as you can see, it's still amortization of intangible assets. That's the fastest growing, driver that reduces adjusted EBITDA down to operating profit. And here, this is this is an item which doesn't correspond to any cash flow in this period nor any future period because it is simply spreading out.

23:54 A part of the purchase price that we paid in prior periods over over time. So these are the amortization on customer databases, trademarks, etcetera, which are of, however, all goods that you don't buy twice, so we don't lose our customers and don't have to reacquire them again.

24:18 Moving on to the balance sheet. So the composition of the balance sheet has not changed quite dramatically. It's it's more it's mostly it's it's mostly goodwill and acquired intangible assets on the asset side. However, the it is more the liability side that has that has, attracted attention over the last couple of quarterly reports. And here, we're happy to announce that net debt has diminished by 25% despite us having paid part of the purchase price for the VGA acquisition by issuing additional bonds. And when which is which what you basically see is that the gross debt is still going up because of because of the additional tranche of bonds.

25:11 The the cash has accumulated faster, actually setting off the total net debt figure. And addressing the question why that is, we prepared the following two slides for you. The first is the cash flow statement, person to IFRS, No adjustments here. And our cash flow operations has more than doubled from around 17,000,000 to around $38,000,000 in the first half of this year, almost almost in full amount for the financial year 2021. And in in line with with prior practice, basically, since 2019, we are presenting this adjusted cash flow bridge where we where we eliminate any distortions on cash flow by our MA activity is being is being neutralized.

26:07 And we can again demonstrate well north of 100% of cash conversion. Those who follow our share a little bit later, there are always certain variations around the long term trend of 120%, sometimes 10% more like it or or less. But in any case, it is a very stable pattern that we are always very well north of 100.

26:37 A few words on this FAQ slides, the the items that we normally receive the most questions around. So the operate the operation expenditure has increased by $8,800,000 in the first half of this year. However, as it was always the case also on on on prior quarterly reports, it is very largely m and a driven. In this case, most notably, the acquisition of VGL, in Berlin, Germany that we acquired in early March. So we now have four months of it consolidated in our h one figures. Amortization of intangible assets, we addressed when discussing the bridge between adjusted EBITDA and the operating profit. One other item that has always received a certain level of scrutiny is our noncore operating expenses, a quite quite a quite complex term, which basically represents the cost associated with our m and a activity from identifying the assets to do our due diligence, negotiating the deals, closing them, and integrating the assets to become part of the Centering ecosystem, which are all expenses which are not required to operate the businesses that we already owned before.

28:05 And here, however, our strategy pays off, which is reducing outside advisers, which very often come at hundreds of sterling hourly rates with still well paid, but but still over the course of the year, much cheaper internal staff, which has now which has now led to the to the fact that we could already now deliver on our promise, which is to reduce this item to 10% or less of our EBITDA. And now already in the first half of this year, we've very well overperformed on that on that target, basically taking taking this item down to somewhere around 7%, and we're very happy about this outcome.

28:53 The last item, finance cost. I already mentioned a few times on this call that we that we included another tranche of bonds in the financing mix for the acquisition of BGL. However, we have we have ventured out and and made explicit in in the in the long form interim report that is published on our website that we advanced talks with a pool of banks and and and are confident that in the next month or so, we will be able to announce more detailed terms of of a refinancing arrangement where we would where we would expect that despite the current market condition and despite the the the the the rise in in base rates, we can still deliver, lower interest rates than what we are currently paying, so fully delivering on our promise here.

29:57 With this, I hand back over to Ben for the outlook. Very good. Thank you, Michael. So let's start with what our priorities are, and not surprisingly, organic growth remains number one for us as clearly that's what we've been delivering. So that involves, obviously, the continuation of of of the program that I've described where we're still at a early stage of exploring the actual potential size of that market. But let's say, new customer wins are very important for us, growing existing customers, cross selling, launching new products, contracting with new supplies. Operating leverage, as you've seen, we're really delivering that now as our platforms have relatively fixed costs, and we can run a huge amount of new of additional transactions without having to, increase the cost too markedly, and so that we plan to continue.

30:58 With, m and a, we always look at targets that match our investment case, namely recurring revenue, high cash conversion, low CapEx, and so on. And, there are plenty of targets out there still. We're in a position of great competitive advantage in that we do business with almost every company in our industry, and so we're coming to them as an existing partner offering for them to become part of a larger success story. And we certainly expect that to continue as we move forward. And lastly, as Michael was just talking about the debt. Now we're very we we're very clear on what's viewed as sustainable debt. We firstly, our bonds, can refinance anytime in the next eleven months, and we expect to reduce the headline coupon rate on those through our new refinancing.

31:58 Then secondly, as you've will have noticed, our net debt to EBITDA ratio now is below one. It was 2.5 times only at the beginning of twenty twenty. And so not only have we generated enough cash to reduce it down to below one times, but in the interim, we've made many acquisitions with our cash as well. So we're we're so, clearly, our business delivers on that deleveraging and cash conversion. And, certainly, we would always expect to keep our net debt below two times moving forward. Our interest rate coverage is currently north of five times, and and, again, that's such a massively comfortable place. We'd really like to stay there as we move forward. But those are their only priorities. ESG has always been a priority for us, and and and here are some of the components of that. Firstly, diversity. We have a extremely diverse workforce around the world, and we're working hard at reflecting that diversity in our board, more so than we even than we do today.

33:05 Inclusivity is is essentially the heart of our mission. We say making the Internet everybody's domain is why we're we go to work every day, and we are very successful in having customers in virtually every country in the world. And here, our customers aren't just passively looking at the Internet. They're actually building parts of the Internet, entrepreneurs, enterprise clients securing their intellectual property on the Internet, and, of course, not only building websites, but winning new customers and monetizing the Internet from from from almost every country in the world. We also are a carbon neutral company. We first declared we were carbon neutral back in 2012, then we bought quite a lot of non carbon neutral companies, but we have since since then brought them all into line and back as being a carbon neutral company for a couple of years now. That will continue.

34:03 And lastly, on top of all these things that we're doing to make our business a a great corporate citizen. In addition to that, we do have a grant project called the SKNET and fund, and that fund is used to support with grants, educational initiatives, cybersecurity initiatives, initiatives to make the Internet more accessible to the disabled, and so on. We've already spent €600,000 in these grants, and we're we're and over the next month, we'll be issuing additional grants in that program as well. So lastly, looking at our outlook, clearly, the company is confident at comfortably meeting the the the numbers in the market, and we will be doing issuing our q three update the October 17.

34:57 But I think to to summarize here, our results clear demonstrations of our strong performance, our growth, the sustainability of that growth, the potential of our marketplace model, which is truly being realized here. As, additional online privacy measures come into play, following with GDPR, Google's ban on third party cookies, Apple's app tracking transparency, and other measures like that, they have all been tailwinds for us because our business does not capture private information of customers and sell it. Never has.

35:46 What we do is simply connect people that wanna buy products and services direct with the websites of those suppliers without capturing their private data on the pass through. And so all of these measures actually benefit us and has helped us get more growth and support. We've talked about our our great pipeline of acquisition targets. And then lastly, obviously, our cash position just continues to improve every day, which will obviously mean we get better interest rate coverage, better net debt to EBITDA ratio as the company grows. So on that, on that note, we will now, we finished the presentation. I think we'll move to questions. But, I don't know. Jake, do you come in at this point? Absolutely. Michael as well, thank you very much indeed for your presentation this afternoon. Ladies and gentlemen, please do continue to submit your questions just by using the q and a tab that's situated on the top right hand corner of your screen. But just while the team takes a few moments to review those questions that were submitted already, I would 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 investor dashboard.

36:58 Ben, Michael, as you can see, we have received a number of questions throughout today's presentation. So thank you to all the investors for taking the time to submit their questions this afternoon. Michael, Ben, if I could just hand back to you to run through that q and a tab. And where appropriate to do so, if you could please just read out the questions and give your response, and then I'll pick up from you at the end. Thank you. Happy to. Thank you, Jake. So first question is from Steven, and it is who are your main competitors in the online marketing division? So, as I mentioned, online marketing is a $600,000,000,000 business in which we build 450,000,000. So, clearly, we're a a small player in that business at the moment. Of that 600,000,000,000, Google has about 50% market share followed by Facebook, where they think about 20%, followed by Amazon, although Amazon is the fastest growing.

37:52 So there are very large chunks of that of that revenue that are going to the big platform players. But as as I explained earlier, part of our strategy here is to partner with those platform players to because they need to acquire traffic from third parties like us as well as dealing directly with advertising agencies through our agency platform, Zero Park as well. So it's a it yeah. There there there are many companies that are enjoying revenues from online marketing. But when it comes to our particular business model of combining that platform revenue share partnership with the hyperscaling publishing tools and the media buying, That's a very unusual business model, one that we're really pioneers in. There's a couple of other companies doing something similar, but hardly any at all.

38:52 So, really, this is this is a pretty much a blue sky type of area at the moment. So then moving on to question two, John. Hi, Ben. Firstly, congratulations on the results. Great to see as an existing shareholder. Thank you, John. My question, given how positive the results are, the reduction in net debt, are you thinking of accelerating your m and a? I appreciate the most recent ones are still betting in. We did four acquisitions last year. We actually did three in q one of this year, but two of them were very, very small. I I I would say we're pretty comfortable with that rate. We might see some getting bigger as we're able to buy bigger companies.

39:41 But at this stage, obviously, as organic growth is carrying so much, is is doing such a great job at the moment, and our company is getting bigger and obviously taking quite a lot of resource and focus on making sure we get that right. I don't think we're really planning to accelerate m and a at this stage, but, certainly, we plan to continue it at the existing rates. Next question from John. Ben, could you explain, if possible, what is the long term vision of CenturyLink in terms of its listing? Do Do you envisage when you're bigger to of switching to the main market and aim for the FTSE two fifty seeing as sadly UK PLC is losing tech companies? Surely, the surely, the Central Inc. Would be a great opportunity for retail and fund managers.

40:31 Yeah. We absolutely agree that we think we're really flying the flag for UK headquartered tech companies here being able to, yeah, to to achieve competitive results to companies in The United States and around the world in terms of growth, in terms of and and and we're ahead of many of them in profitability. So as you all noted, we're already reporting quarterly. So I think our philosophy and certainly Michael and his team are to make us main market ready. So if ever we do wanna make that transition, we're fully equipped to do so and and and properly organized to do so.

41:17 Yeah. We'll we'll at this stage, we don't have anything planned for the immediate short term in in moving off their market. But, clearly, we're we're we're preparing ourselves to do bigger and better things. And and and so when the time is right, you know, obviously, we'd love to be in the FTSE two fifty or indeed the FTSE one hundred when the opportunity arises. So moving on to Steven. Given the darkening economic outlook, inflation, base rates, Ukraine, COVID lockdowns in China, have you detected any slowdown in demand in the areas of the online marketing division? And if so, what areas in particular? I I I would say the the short answer is that we're seeing great underlying growth, which is not being phased by the things that you're talking about there.

42:17 You could see we've given guidance to analysts, and the numbers in the market do build in the possibility that our growth could slow down, but that isn't actually based on any experience, on any data. It's just based on being cautious saying, hey. You know, we would never ever wanna miss a number or downgrade or anything like that. So we're much better to have more conservative numbers in the market and beat them than the other way around. But at this stage, despite all of the things that are happening in the market today, we actually haven't been hurt. Now that's not to say we haven't seen any effects. Clearly, in 2020, for instance, suddenly, there was no sports betting.

43:04 Suddenly, there was no outdoor events. There was no airline travel and so on. And, clearly, we saw whole categories of advertising just wiped out temporarily. But, happily, we were able to plug those gaps with other types of advertising for antivirus, for Zoom, for, you know, government health programs and so on. So what we have seen is that it's actually very resilient. So if certain types of of customer acquisition or monetization tasks become difficult because of an externality, there tend to be others that step in. So so that's where we sit on that. New question from Charles.

43:50 Given that Germany is likely or is already in recession, how resilient is central, Nick, to this given the majority of its revenue is from Germany? Okay. I I think I need to correct is the wrong word, but let let let let's let's make things clearer here. Majority of our costs are in Germany. That's where the majority of our staff are in Germany and in Poland, probably equally affected by by by some of the inflationary events happening in the world at the moment. But our and and and the majority of our revenue is billed from Germany, but it's not actually from German customers.

44:38 Biggest market is The United States, followed by various European markets, and but we have customers in almost every single country in the world. So we have a much, much more diverse revenue base than than than you might imagine. And so, therefore, we and and that's one of the reasons that we report in US dollars because US dollars is our main currency. It's not euros. That's not where we make most of our money. So so clearly, we will be impacted by inflation, for instance, a recession in Germany as far as our staff, our offices, our our our our costs, our supply chain are concerned. But, certainly, we're not expecting it to hit our revenue particular.

45:26 Next question from Zach. One, within the online marketing division, can you elaborate on what percentage what percent, if any, is characteristic of recurring revenue, or is it mostly transactional in nature? Both. So, essentially, we're talking about the same customers or the same revenue partners, namely Google, Amazon, big advertising agencies, and so on. Remitting revenues to us on a utility style basis. So we're just continuously getting paid by the by these big partners. And so it's very much recurring in that we don't have to go out and find a new customer to pay us for every transaction.

46:12 It's just pumping massive volumes of transactions through through these very important relationships. Two, can you elaborate on the margin profile of the value added services within the online presence segment? I I guess the different products have different margins, not surprisingly. There are some things like local presence services, which can be essentially a 100% margin, where we have a company set up in a country where only local con companies are allowed to register domain names from that country. And so, hence, we have the fixed cost of running an office there or or or we having a registered company there.

46:57 And then and then we bank and retain the full amount for the local presence services so that money just drops to the bottom line through to us being a reseller for for another product. And so, obviously, that really depends on what that product is and what margins are available. But I'd say, typically, we're talking about margins comparable with domain names, although in some instances, it's more, and some, it's less. So thank you for those questions, Zach. Moving on to Steven. The online presence is truly recurring revenues, I e subscriptions that only churn at 2% or less. But are the online marketing revenues reoccurring, I repeat rather than recurring. Yeah. I think, yeah, that's more a matter of semantics.

47:50 So what they are is, as I said, they're they're revenue share with large partners, and they are like a utility in that we render a continuous service and get paid for the usage of that service. So we're not going out signing up new contracts for different types of revenues. So, yes, I think you could call it reoccurring or repeat or recurring as as you wanna define those terms. James, please, can you give some more color on the loss arising on changes in fair value of hedging instruments? I think it's it's it's pretty simple. We took out a big loan in euros.

48:37 We took out a hedge, which meant that that that no matter what happened to the euro currency versus our reporting currency of The US, we would owe exactly the predicted amount of money. So whether the euro increased or decreased in value, our exposure would not change. And so, essentially, the the the loss arising on changes in fair value of the hedging instruments is essentially completely matched with the gain arising from the drop in values of the euro. So, essentially, it's just a standard hedging instrument, the same as anybody else would use. No surprises in that.

49:25 Moving on to, Mason. Can you comment on how VGL's performance is meeting your pre acquisition expectations? It's meeting them. Happily, the business is performing exactly as we'd hoped. We have big plans for it, and, obviously, we haven't owned it for very long. And so, yeah, those plans are in early days. It's a Germany based company, but they're already well well advanced in adapting their technology to handle different languages because we are planning to enter different markets, and we're very happy with the progress to date. Next question. Can you quantify how much VGL has contributed to revenue in h one?

50:14 Michael, do you have a sense of that? $19,700,000. Oh, can you get more precise? Thank you. Alright. Back to. Are you seeing any impact of the economic weakness on on customer spend and pricing? Yeah. We are seeing some. It it's true. We're seeing some lower spending from from some customers in the countries you might imagine, like Germany and so on. But, yeah, happily, we're also seeing amazing growth. So so I think the growth is far, far overcompensating for any kind of negatives that we're seeing in the market at the moment. But but but, yes, there are some.

51:12 And, if we were a zero growth business, you know, we we could potentially be seeing be be suffering from that. But, happily, as a 100% growth business at the moment, we're we're not suffering from that. So then Charles asks, VGL was a substantial acquisition, but there is little mention of it in the presentation. Still early days, but how's the investment performing? Well, I I I think you've heard that. We we we're very happy with it. Moving on to Richard. Are you finding any difficulty in finding qualified staff to add your growth to add your growth? Finding? No. We're finding them, but it is it can be hard to hire them. It's a competitive marketplace. Certainly, the beginning of the year, it was a very competitive marketplace with a lot of wage inflation so on. But we do have an advantage of being a global company, so we are happy to hire people in different markets around the world, which is helpful.

52:19 We also, exactly, really welcome diversity and so on. So, yeah, we're we're we're bringing on and training people and so on that maybe other people wouldn't necessarily think of. So that's all all very helpful to us. But, clearly, right now, the tech sector is it's a big story of layoffs. Yeah. A lot of very good staff are being laid off by big companies. Clearly, any engineer that signed up for a crypto company has probably had their resume out there for a while, if not already on unemployment. So there's happily, there's a there's a decent employment pool. I think so we're we found it tougher at the beginning of the year. Now we're finding it easier to hire.

53:10 Onto Simon, and this is the last question posted at this point. How well can you defend a possible takeover in terms of share structure with directors, founders, and institutions? Well, I'd say between institutional shareholders and board members I mean, large institutions and board members, you know, It would certainly be possible. You know, we we we most of our shares are held by by directors and well, most of them are held by institutions, and then the second largest group would be directors. And every single one of those institutions, Michael and I know well, every single one of them, I pitched and they and they and they came on board. So we could certainly pick up the phone to to to to all of our largest invest but we're doing a lot. We're doing a 30 plus institutions on the share register.

54:13 So there isn't a lot of concentration. So yeah. So so if need be, I guess, we could make those calls. So it looks like that's the last question, Simon. So back to you, Jake. Perfect. Ben, Michael, thank you very much indeed for taking the time to address all those questions that came in from investors this afternoon. And, of course, if there are any further questions that are submitted today, we'll make these available to you immediately after the presentation has ended for you to review. And ladies and gentlemen, we'll publish all those responses where it's appropriate to do so on the investor meet company platform. Ben, perhaps before redirecting those on the call to provide you their feedback, which I know is particularly important to yourself and the company, if I could please just ask you for a few closing comments to wrap up with, that'd be great.

54:59 Thanks very much, Jake. Well, look. Firstly, thank you very much for for spending this past hour with us. I hope you found it informative. Clearly, for those who've been following the story, we've decided to share a little bit more detail about our online marketing business than we have in the past, particularly in order to explain, one, the the amazing scale of the opportunity we're facing. Secondly, the the the the fantastic technical solutions that we have found that can scale to the size of that opportunity and the business model, which we which, again, has just proven amazing in its ability to just drive our growth again and again and again up to this point that we're at today and beyond as well.

55:49 So we hope that that brings you guys much more clarity on what is driving this growth and much more comfort that we're just at the beginning of our voyage, and we'd be very excited to have you join us on it. So with that, thank you all very much. Thank you, Michael. Thank you, Jake, and, looking forward to catching up with you all again, next time we do this. Thank you. That's great. Ben, Michael, thank you once again for taking the time to update investors today. Could I please ask investors not to close this session? This will now be automatically redirected for the opportunity to provide your feedback in order that 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 Nick Group PLC, we would like to thank you for attending today's presentation.

56:39 That now concludes today's session. So good afternoon to you all.