Team Internet Group (LSE:TIG) — Preliminary Results

0:01 Good afternoon, ladies and gentlemen, and welcome to the Central NIC Group PLC investor presentation. That's just situated on the right hand corner of your screen. Please just simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company will review all questions submitted today and publish responses where it is appropriate to do so. Before we begin, I would like to submit

0:33 the following poll. And if you could give that your kind attention, I'm sure the company would be most grateful. And I now like to hand you over to CEO, Michael Riedel. Good afternoon, sir. Thank you, Jake, and thank you all, for being here today. So this is the, 2022 end presentation of Centronic. With me today is our group CFO, Billy Green, and together, we are going to take you through the following agenda, which is, first, a few of the highlights of the year just ended. Secondly, a description of what CenturyLink does. Third, Billy will then take you through the more detailed discussion of the financial results, and we are then going to wrap up in a strategy and outlook section towards the end of this presentation.

1:30 So today, you're meeting a refreshed management team. However, both Billy and I have been with the company for many years. I've been with specific constituent of the of the group back to 2011 and as an investor back to 2007. And, Billy has been my right hand as as a finance expert for many years. And the the two new appointments stand on the one hand for experience given that we both know the business and its constituents since many years, but it also stands for continuity.

2:15 However, continuity with the twist as we will lay out to you towards the end of this presentation.

2:25 Those who know Centrelink for a while will know that Centrelink never stands still, and the team that you're seeing now has already been delivering quite a few changes to the organization in the last year. Six acquisitions have been completed in 2022. And, also, in October last year, we refinanced the bond that we had first issued back in 2019 through two hundred fifty million dollar senior facility agreement. And we've also been working not only at acquisitions, but strategic partnerships, and we are very happy to announce that we've been chosen as a premium partner by WHMCS, the leader in web hosting automation, which would give us additional impulses for our online presence business.

3:15 And all this has not gone unnoticed. This is why the Feet has included us into their Feet 1,000, Europe's fastest growing companies list, but not only somewhere in that list, but among the top 50 of the tech community. And also, FTSE has included us into the AIM 100 and AIM UK 50 index this year. However, this is at least my personal opinion, the biggest accomplishment of 2022 we see on the next page, which is that as a group, we've delivered 60% organic growth in 2022, which is which is the blend of the 86% organic growth of the online marketing business, which has grown from 2021 pro form a revenue of $316,000,000 to $587,000,000 in the year just ended, and stable performance in the online presence business, which grew from $149,000,000 to $156,000,000.

4:22 And in both cases, the growth is the function of strong value propositions, which drive this growth. And on the following few slides, we are going to present to you how exactly we create value and why the business is growing. Starting with online marketing, which is the newer of our two businesses. In online marketing, Centric helps online consumers make informed choices, which is an evergreen purpose. Online consumers will still be around in thirty years from today, and they will still need help in making choices also thirty years from today. And here is how we do this today.

5:09 We create consumer journeys that converts gender interest media users into high conviction online consumers, and we will show an example of that to you on the next page. We engage with the consumers by offering contact points on social media, publisher websites, and search engines in the form of ads for broad categories. We then educate the online consumer through easy to understand advertorials and review websites. And because leading aggregators have chosen to work with us, we have commercial inventory at our fingertips that very closely matches the consumer's intent. And then last but not least, I would say, probably even most importantly, set is CenturyLink is particularly good at this due to machine learning on billions of consumer interactions annually, which provides us with superb insights into the of online consumers.

6:12 So how does this look like in real life?

6:17 Again, this is one example that we've chosen for one source of traffic, and we will show to you later what source of traffic we use. This is an x this is an example starting on Facebook as a very prominent social media platform where we edit where we're advertising for a fast Internet plan. However, we are promoting many hundreds of different verticals, so this is just one example. So here you see that Centric places an ad for this very broad category, fast Internet plan on Facebook. And if one of the users engaging is interested in this product category, they would then click on our link. From there, we take them to our own website where we would show a brief article about what to look for before buying a fast Internet plan.

7:14 And so here, the consumer learns everything they need to know to make a confident purchase decision later on. And embedded in this article, you would then find four options where the consumer can actually you, can actually choose how to continue the journey, almost like interactive TV, where you would then choose a certain route. Either you want, like, an ultra fast Internet plan or discount Internet plan or whatever your interest might be. And this is artificial intelligence that actually proposes the four different categories that we use here.

7:51 From here, the user would then be sent to a second survey page where, again, based on the choice that the consumer has just made, we would then present another three to four categories of related keywords. And, also, this choice is then, again, put together by our algorithm on the fly specifically for this one consumer engaging with us in this very minute. And once the consumer clicks on the subcategory that matches its intent the closest, we would then put one single ad in the center of the screen. Of course, you can scroll down where we'll then show two or three alternatives, but we would then we would then show the advertiser that we believe is the best pick for this specific customer at this time. And then here in this example, the visitor then ended up on the website of T Mobile.

8:52 And,

8:53 but, again, this is just an example. In a different journey, we might have proposed AT and T, to the customer. And then, again, in the more than 300 different verticals that we would would have proposed, could have been an insurance company, a bathroom renovation company, a dentist, whatsoever. Here, we are really very here, we have a really very broad setup of verticals in which we operate. Then in 2022, through the acquisition of VGL in the beginning of last year, we've taken it one step further where we don't only match a consumer with a specific merchant. Here, we are actually recommending a product, the actual merchandise that we recommend the customer to buy.

9:43 And in this in this customer journey, the starting point is normally a search on on any search engine. And in this example, the user has searched for the best kitchen blender. And from here, we would then refer the customer to a page where we would show the 10 most relevant kitchen blenders in that are that are shippable to his or her address. And within these options, we would identify what is the best kitchen blender in our own independent opinion, and we employ a large array of freelance journalists for this purpose. We would identify the most affordable and combining the first two factors, the best price quality ratio, and we would also identify the best seller product.

10:36 And most consumers are very happy to adopt one of these four strategies to make their choice of a product. And once the user clicks on this ad, they are then being forwarded to an ecommerce partner where they can actually buy this specific merchandise. And if and when the customer proceeds to the checkout, we would then make money in the form of commission payment from our ecommerce partner.

11:10 So why while both customer journeys are different in the detail, they have a common denominator, which is that we create value for online consumers through noise reduction and privacy. So the consumer only sees the most relevant ads. We would filter out any kind of malicious ads. They are always in control. The process only proceeds if they do a click, and they have all the information at hand to make a confident choice once they come to the merchant and must decide whether or not to buy something. And while we create the value for the online consumer, we capture the value through our partnerships with merchants who appreciate the preinformed high intent online consumer

12:04 who have the propensity to convert more frequently and to return goods goods less often. It also helps them because we expand their reach beyond their domain of media buying expertise, and they reward us for it by paying a fee for the referral or commission for a completed transaction.

12:28 So this is what we do in online marketing. And in online presence in online presence, we are also matching consumers and products, but we're doing it more directly.

12:44 So we connect to different registries who manage either country codes like .sk, new top level domains like .xyz, or the classic ones like .com. And we also connected to a set of security and on online productivity tool providers like Microsoft three sixty five or different SSL certificate authorities and make them available to large resellers, among them the largest hosting companies in the world, a broad array of retail customers, 250,000 give or take, and and also hundreds of large international brands. Here, we're just giving three examples, Mercedes Benz, Johnson and Johnson, Rolex, who would advise on what domain names to register to protect their trademarks against cyber squatters taking their direct trademarks or typos or deviations

13:44 of it. And the interesting thing about this business is that it is subscription revenues because you can never own a domain name outright. You would always need to renew it.

13:58 And this makes this business so sticky. Only 2% of customers globally change a provider each year. So here, most of the money comes through the door again and again, year after year.

14:18 Over these so as we've now explained what the two segments do, over these two segments, Sentry creates a vibrant and symbiotic ecosystem. Why symbiotic? Because in the end, there are no losers. It's a win win win situation.

14:36 So we we identify customers on native networks like Taboola and Outbrain on social media like Facebook and Taboola Facebook and TikTok. We we we find them as visitors of expired domain names or on search engines and make them available to merchants who either advertise on search engines or on or partners of our ecommerce ecommerce aggregators like amaz like Amazon or our affiliate at at advertisers. And and on the demand side, people are better off because we are an additional advertiser who makes them earn more money.

15:23 And also on the supply side, we also help people because they reach customers that they could have otherwise not reached. So in the end, everyone is better off with us than without us. And the same applies to the online presence business where we connect

15:38 the long tail of all of all domain name registries, which are which are many hundreds, and other value added service providers to a broad array again of of of reselling partners who will either not have had access to the product or if you look on the supply side, who would have had access to this to the supply channel. And this is how we extract $177,000,000 of value creation out of this total revenue of $728,000,000. And if the question is, are you particularly good at this? The answer is yes. As as demonstrated by the KPIs on this page,

16:24 what you can see here on the left hand side of this chart is that the number of consumers who have engaged on a customer journey with us has increased by 76% from 2,600,000,000 in 2021 to 4,600,000,000 in 2022. So just do the math. We are we're talking about more than 100 engagements a second. And, at the same time, through the through further training of our algorithms, we've been able to to increase the value that extract from each 1,000 sessions from $76 to a $105. And

17:08 because we are good on both components, both attracting more and more consumers into our customer journeys and at the same time, delivering more value from them, this together makes the growth rates that we've seen in 2022. And with this, I hand over to to Billy, who will have a more detailed discussion of the financial results with you.

17:37 Thank you, Michael. So just looking at a couple of a couple of the financial operating metrics, which indicate the progress Centronic has made from 2021 into 2022. Those of you who followed the company for a number of years will have seen the very impressive levels of growth in terms of gross revenue and what we refer to as net revenue, which is gross profit in a in a IFRS perspective. So both on a gross revenue and

18:07 a net revenue or gross profit gross profit perspective, growth has been double digit and then some for the last several years. What's particularly pleasing in terms of 2022 set of results is the conversion of that strong revenue growth into a very high level of adjusted EBITDA growth and indeed going below that further down the P and L, the immense growth in operating profit from £12,400,000 in 2021 to £33,600,000 in 2022.

18:39 It's certainly something that's been more of a focus for the company in the last couple of years since Michael brought me on board is to convert very strong revenue and gross profit growth into bottom line profitability. And the continuing growth in operating leverage in adjusted EBITDA and in operating profit and operating profit conversion as well as the generation of cash, our key strategic priorities for the company have been in 2022 and continue to be even more in focus to 2023.

19:11 So looking at the p and l in slightly more detail, you'll see there the growth metrics are very strong, flowing right away from the revenue growth down to a very strong level of operating profit growth. And the overall impact of that is that it leads to the to increased strength of our balance sheet despite making six acquisitions during 2022, which obvious which obviously needed to be funded and required an equity raise in the in in the early part of the year and and needed an increase in our debt facility

19:43 later in the year despite those six acquisitions, which naturally lead to an to to a modest increase in our level of gross in debt. You'll see that because cash growth outstripped the growth in debt because our business is cash generative and and then some, You'll see that the net debt position is that the company's net debt decreased from 81,400,000 as of 12/31/2021 to 56,600,000 at 12/31/2022.

20:10 And we have budgeted and targeted ourselves with a further decline in the net debt over the course of 2023. So that is, again, a very important strategic priority. The cash flow in more detail, you'll you'll see there that as I've already alluded to a couple of times, the company's cash generation has been strong, continues to be strong, and that that manifests itself in the company's continued high cash conversion. The company continues to convert operating profit into cash at above a 100% at an adjusted cash conversion level. The continued the continued above a 100% delivery of cash conversion is something that that continues to indicate that we're putting even more structure and discipline in place because naturally, as the business grows and as gross profit grows, we're needing to invest some cash in terms of working capital needs of the business. But we're able to manage that and manage working capital on the on on the supply side, on the prepayment side so that we are able to to generate cash conversion in excess of a 100%. And that is something that it's been it's been a good level to to keep to, and we're targeted to stick to that above a 100% in 2023.

21:25 Just one further slide in terms of financials just to to pull out another couple of highlights that make me feel a bit more comfortable as I step into the group CFO role, taking over from Michael in terms of the finances of the group. A couple of the a couple of the items that I'm I'm pleased to see that the company made progress,

21:44 and I contributed to that progress in 2022, and we are we are targeted to continue making progress in 2023. You'll see there that the level of core operating expenses or overheads, there was a fairly significant increase from 2021 to 2022, primarily for two reasons. One of which is as we continue to be acquisitive from an m and a perspective in 2021 and into 2022. Naturally, any business we acquire leads to a a modest increase in the operating expenses of the group.

22:15 Naturally, whenever we look at an m and a target, one of the key things we look at is making sure that any increases to the to the core overhead base of the business is comfortably covered by immediately accretive earnings impact, I e I a gross profit contribution that sufficiently covers those operating expenses. The other elements within core operating expenses that may be less obvious is that as Centronic has been in an investment phase for most of my time in the company, I joined in late twenty nineteen as Michael alluded to, and I was with the company throughout twenty twenty and twenty one and into the first half of twenty two. The company was still investing in creating, developing new products, new platforms, finding the right talent. So you'll see twenty twenty two's cost base and annualize the full year impact of great talent that join the group in 2021.

23:05 So as we reach the point at which we're very comfortable with talent we have in the group and we are in less of an investment phase, we will see the growth rate in terms of core operating expenses decrease in 2023 compared to 2022 because there is less of that full year impact, fewer employees hired in the second half of twenty twenty two. A couple of other well, one other one other cost area that we're that that we continue to focus on is what we call non core operating expenses. These are classified outside adjusted EBITDA. They represent the nonrecurring expenses that that we spend on m and a activities, so professional fees, integration costs of integrating those newly acquired businesses, as well as restructuring and strategic reviews.

23:55 That cost category decreased from 2021 into 2022. And that's particularly pleasing because with the increase from 2021 to '22 in m and a activity, you would expect, all things being equal, the level of noncore operating expenses to increase. So the fact that even given that higher activity, the absolute dollar value of expense decreased is something that is quite pleasing to me in terms of the structure and the discipline of the business not to spend money on those non core operating expenses unless we're sure that it's being used in for for the right return. The final point in terms of detail on the finances, the company was successful in refinancing and repaying its euro denominated bond in October 2022. The new financing that we're taking out, the facilities agreement that Michael referred to earlier, is at a lower coupon rate, and that indicates that we are continuing to manage the company's the company's leverage and the company's balance sheet position is being managed to a very high extent. It's it's clearly a key focus of the business, ensuring that not only we're profitable at an operating profit level, but that we're getting value for the money that we're borrowing. So continued focus on finance costs and further down the p and l as we move into 2023.

25:11 And with that, I will hand back to Michael to review the strategy and the outlook for the group. Thank you, Billy. And in a nutshell, our strategic priority is to create a virtuous circle. And what do I mean with that? First, we start with organic growth, which includes customer wins, growing existing customers, cross selling our services, and launching new products and contracting with new suppliers. And we've we've shown a lot of success on this item in 2022. And as we are very disciplined with our cost, the growth then translates into operating leverage as demonstrated by our EBITDA margin as a percent of gross profit going up from 39% to 48% or if you express it as a cost ratio instead of spending 61¢ of every dollar of gross profit, last in the last year, we only spent 52¢.

26:21 And, this this is a mechanic that we expect to continue to work in 2023 and going forward. And this increasing profitability and with it also cash flow then allows us to obtain competitive cost of capital. And through the refinancing that we've done in the last year, the the the margin that we pay on top of market interest rates diminished from 7% to 2.75. It was more than cut in half. And the next item that we are now working on is also getting our share price in check and balance, which is which is the other big component of the cost of capital. And here and here, we're now in a in a luxurious situation that we have, on the one hand, record cash flow, and on the other hand, through the success on the m and a pipeline in 2022, we've closed most of the of the very important strategic white spots, which leaves us some headroom to, in earnest, give money back to shareholders.

27:34 And we've already executed on this first through a share buyback, commenced on the thirtieth of December last year. And as you would have seen in the r and s release just this morning, the board now feels so confident into the maturity and the and the size of the business that it will propose to the AGM to be held in late April to adopt a maiden dividend of 1p per share. And it should be clearly understood that this is the commencement of a dividend policy, not a one off dividend. And as we get as as we as we get our cost of equity and cost of debt more competitive, this then allows us to do additional focus bolt on m and a to still enhance the great business that we already own.

28:26 However, any acquisition must compare, to the returns of a share buyback because what is the company that Billy and I know the best? Obviously, the Centronic and buying any other company must come at the risk premium. However, as already demonstrated before the year end, we were already able to complete one transaction that gives us well north of 20% cash flow return on investment. So clearly meeting that gating factor. And, as we come along these opportunities in the coming year, we will also feel obliged to deliver them for the benefit of the company and the shareholders. And then these acquisitions would then again feed back into the organic growth as we remove inefficiencies in the value chain or, or, again, commence cross selling of the different products. And this way, we would then make this a virtuous circle rather than just being four unconnected boxes.

29:32 As as as a summer as a summary or as an outlook and a summary of an outlook, we have significantly outperformed the 2022 analyst forecast, and the board has expressed its confidence in in us in our company outlook for 2023. So what's going to come next? On the March 27, we are going to release our audited annual report. And at that point in time, we will also send out the notice of meeting in which there will be a proposed resolution, which is to adopt a 1p dividend per share. And, again, at the risk of repeating myself, this is meant as as a commencement of a policy, not as a one off distribution.

30:22 And with that, we come to the recap slide. Centrelink's Centrelink's purpose at this stage is helping online consumers make informed choices. And while this is the group purpose, we are still operating in two highly attractive markets. First, high growth digital advertising, which we refer to as the online marketing segment, and domain name management solutions, which we refer to as the online presence segment. In online marketing, we create value by creating privacy safe and AI generated online consumer journeys that converts general interest online media users into high confident consumers through advertorial and review websites.

31:13 And in online presence, we are critical constituent of the global online presence and productivity tool ecosystem where we serve as the primary distribution channel for a wide range of digital products. Both businesses have one in common, which is high quality earnings. In online presence, the revenue is all subscription based. And in online marketing, we have utility style revenues where just like for electricity plant, every morning, people are getting up or switching on the light. The same happens with us. Every morning, people appear at the office, start surfing the web, and creating revenue for us and our partners in the process.

32:00 And the market, which we address here, is a growing one. Online marketing has a more than decade long 20% CAGR delivering constant growth in in good times and bad times. And just as importantly, we've also proven that we can scale if the opportunities are there. So while while we almost doubled the online marketing in the course of 2022, At no time, our servers came down, and we were just securely delivering on the opportunity that we had. And as a combination of these great investment criteria, we were then able to deliver the financials that Billy has just presented, $728,000,000 of revenue, $86,000,000 of adjusted EBITDA, 60% organic growth, strong and consistent cash generation north of 100%, and all that with no net debt to EBITDA being down to sub than one times, which together, I hope you will agree, make CenturyLink a compelling investment story.

33:17 With this, we then come to our q and a session. Michael, Billy, if I may just jump back in there, 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 right hand corner of your screen. But just while the team take 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. Billy, Michael, we did receive a number of pre submitted questions ahead of today's event. And as you can see in the q and a tab, we've also received a number of questions throughout your presentation this afternoon as well. So firstly, thank you to all of those on the call for taking the time to submit their questions. And, Michael, Billy, if I could just hand back to you to respond to those where it's appropriate to do so, and then I'll pick up from you at the end. Thank you. Yes. Certainly. The first pre submitted question I could see is one which I will answer if that's okay with Michael.

34:16 And the question is, could you give us guidance for the next three to five years? And, naturally, any guidance that that we either consider internally or that we issue externally is subject to to intense scrutiny. But in terms of where we expect things to things to go for the next three to five years, eve even if online presence and online marketing levels of growth within those markets are not at the same levels experienced over the next couple of years, even if they are not at those levels, we do expect our market share to grow within each of those segments. So we are we are targeted at the and and we specifically budgeted for significant growth in 2023 and then into 2024.

35:02 It is perhaps more more more difficult to talk about three to five years. But even if we see those those overall rates of industry growth leveling off a bit, we have we have plans with internally to internationalize and to grow our product base so that we can continue to grow our market share. So our guidance for the next three to five years, it's going to be cycles of continued growth. But going back to what I was saying earlier about the operating cost base, the overhead base of the business, it's important for us that regardless of level of revenue and gross profit growth, that we continue to improve our operating margins. And that's something that's more within our control. So profitable growth rather than chasing revenue growth is is is is very much the the watchword.

35:51 Thank you, Billy. Are you thinking of doing another share buyback given how cheap the shares are? So we intend we intend to formulate the capital allocation strategy and, which will be part of the annual report to release today in a month. And while while we currently don't have any immediate plans for a share buyback, I would expect that share buybacks will be will be a systematic component of this capital allocation strategy more than to follow as part of the annual report. Then, can you explain how Centric is able to grow at much higher rates compared to its peers like System one.

36:47 As as we explained here, a lot depends a lot depends on artificial intelligence, and it's a multi it's a multistage process. And so part of the equation will be that our algorithm seem to be to be performing better than the ones of our competitors, which just gives us more which just gives us more efficiency in the chain. And if we if we make more money on on the final merchants, can also pay more money for buying the traffic, so it very quickly becomes a virtuous circle. Plus, then the other difference is that that that we are very much an open platform, which happily which happily admits other parties to our to our platform so that we don't only rely on artificial intelligence, but also on some kind of swarm intelligence where we have local media buying partners all over the world for just many markets, very smart about how to place the ads on the right media.

37:59 So then can you talk about the concentration you have on the online marketing side? I don't really feel that we have a lot of concentration. So most of most of our money comes is being paid through the leading search engine. However, it is it is ultimately coming from thousands of of different online advertisers who are advertising in hundreds of different verticals. So when you when you look through our aggregating partner, we have absolutely no no custom concentration. There there there are even hardly any verticals which make up much more than 1% of our revenue.

38:49 And within these verticals, we then again have a very a very broad number of of of consumers as apologies, of advertisers. So this is this is not really a concentration issue that gives us that gives us sleepless nights. And we are very happy to working with the with the world market leaders because they just secure that we have the access to the broadest number of of of merchants so that you could always pick make the best pick what merchants we would present to which consumer. Then the market seems disappointed with the outlook for the company.

39:37 Well, she'll answer these next couple of questions related to the outlook, Michael, because I think they're quite closely related. So the main question there is, is your expectation for 2023 revenue growth to be less than double digit? And that is related to a to a question about the outlook for the company. Our expectation for 2023 revenue growth and indeed gross profit growth is for the company to be at least high single digit growth, but we cannot be confident in or guarantee or articulate any higher than that, which is why we would only very rarely forecast double digit growth. So double digit growth is what we're targeting in terms of our budget that we set to the business that the business needs to achieve. But in terms of in terms of the figures that we we we we believe the market should be following, we we we could only aim for high single digit, and any more than that is going to need some of the new products, new new templates that we're developing to come to market. And whilst as we can't always guarantee the timing of that because the development cycle can sometimes takes a bit of time.

40:45 It's we're we're we're being more prudent in our forecasting at this time. Right. And and may maybe if I if I may add here. So the the forecasts are are very conservative. And, also, when we start into 2022, the forecast compared to 2021 was not much different than the forecast that we're currently seeing in the market, and then we slip and then we simply smashed it. And the great thing is we're addressing a super big market, so we only need a very, very few breakthroughs in order to deliver to deliver numbers much higher than the forecast than now. But in the in the current environment where most of our peers are rather struggling with with revenue with revenues dropping, we we believe it's it's the right we we don't we don't we don't correct the analysts, and we will just do our best to smash the the forecast again as we progress through the year.

42:02 So online advertising rates have dropped dramatically over 2022. And but despite the despite the online rate advertising rates dropping dramatically, we still delivered this fantastic financial year 2022. So it's it is not it is not something that we are afraid of. It's just something to which we adopt. And that's maybe also one of the specialties of Centrionic, what makes Centrionic so resilient because we are not a fully integrated company. We can nimbly move if if the crowd is moving from Facebook to TikTok. We just follow the crowd. If certain verticals if certain verticals drop brutally and others stay stable, we can we can reshuffling for which verticals we're doing advertising.

42:58 And we're also not we're also not relying on selling a specific product as long as there is one provider one good provider for fast Internet plans, just referring to the first example that we showed to you, and as long as there is one provider who's still trying to sell his merchandise on Amazon, we are we are we are we are good, and and the AI then makes that we automatically, literally every second, reshuffle how much money we allocate to which platform, to which vertical, and how exactly we monetize it. And this is why despite the the dropping click prices on the Internet, we still make very good money.

43:51 The next question primarily relates to administrative costs and how those have trended in q four twenty twenty two versus q three twenty twenty two. And the question relates to why administrative costs increased. The main underlying factor is actually a noncash, nonoperating point. In terms of amortization and impairment of goodwill, there are additional charges that we've that we annually assess our cash generating units, and we assess our use of economic lives of intangible assets, mainly acquired intangible assets that have been brought into the business as a result of acquisitions over many years. So it's that cost category in which we see the largest increase from q three into q four.

44:40 The operating cost base of the business, as I alluded to earlier, is is not forecast to increase significantly in 2023, and we have a much smaller full year impact in 2023 of companies acquired in 2022 because the most material acquisition that that Centronic made in 2022 was in March 2022. So therefore, there is already a full year's worth of overhead cost there. So we shouldn't see any significant cost increases, operating cost increases in 2023. I think the next question is to do with online online marketing and the customer makeup, and I think Michael's addressed that already. And then there's a question about the profit before tax for the cup for the company being $14,800,000, whereas the profit after tax is $2,100,000.

45:31 And there's two factors there in terms of why if one was to calculate an effective tax rate, an effective tax charge based on the tax charge divided by PBT, it would look like an unusual metric. In most of the jurisdictions in which we operate, particularly the jurisdictions in which we have material profits, some of the operating costs that you see, such as amortization of intangible assets, the item I referred to earlier, that's increased in 2022. Those are usually added back and aren't taken as a tax deduction. So a more realistic effects effective tax rate and the metric we look at internally is the tax charge divided by operating profit. And at those levels, the the the tax charge is more easy to understand. The other point I would add is that Centrelink has been fairly acquisitive over the last few years. We've acquired businesses in lots of different jurisdictions and geographies. And in some of those jurisdictions, we have been consistently profitable, whereas in other of those jurisdictions, we we have been there there have been inconsistencies between periods of profitability and periods of loss. And therefore, it's only really by looking at the tax charge by country and the profit before tax by country that one can one really makes sense of that tax charge. So there are those two factors, geography and add backs that you need to consider in terms of the tax charge for the year.

47:02 So you've made six acquisitions 2022. What are you seeing in terms of valuation expectations? We see it we see continuous deal flow. Many people have been restraining themselves 2022 and now just come out of the cover. And we see that is a very positive news that people have reconsidered the pricing estimates, and we now see a huge number of very reasonably priced transactions. And and we will we will basically assess them against the criteria that we've just laid out. They must re they must return a higher cash flow, return on investment than buying back our own shares, and we are very confident that we will find a few opportunities that will actually meet this criteria.

48:01 So then on the the value per thousand sessions grew by 30%, it is basically it is basically the product of how many people actually follow through the entire chain and what our reward is at the end of the chain. And both factors both factors have evolved positively. And, however, we can't disclose any more detail given that there are other competitors who would love to see the statistics. I'm I'm pretty sure they they would become quite pale if they would actually see the underlying metrics, but, unfortunately, we can't put them into the public domain. The next question is then again on m and a. I think I've addressed this with the answer to the prior m and a question.

48:53 And then, again, we have an accounting question. Yes. So the next question the next question is about it says in in the fourth quarter, amortization of intangible assets roughly doubled from previous quarter's run rate. What caused it? Was there any one off impairment? And that enables me to expand slightly on the answer I gave earlier about the increase in admin expenses. There was one nonrecurring impairment charge, the first impairment charge that the company has recorded during certainly during my time with the company dating back to 2019. And that's due to the annual reassessment we make of the company's cash generating units. There are some some units in some jurisdictions where in order to in order to get the platforms to the right level, we have invested in some additional people, some additional technology resources locally in order to build that business to a profitable future.

49:47 And in a DCF model, if you add more cost in the short term to generate additional profitability in the long term with with with a discount rate and interest rates currently are not very helpful to us in terms of the the discount rates that we apply in that exercise, that has led to a modest impairment. So there's been an impairment charge of 3,500,000 US dollars that's been applied to one of our CGUs, and that has led to a one off nonrecurring spike in amortization and amortization and impairment of intangibles is the is the exact line item. So that is something that the run rate going forward will reduce back down to the levels experienced up to and including q three twenty twenty two. The next question that's coming is is is is on a different topic.

50:38 I see you are both still in different locations. Are there any reasons why you were not together? And do you lose anything as a company by not being together? And the answer the answer to that is as a as a management team, Michael and I are actually geographically much closer together than than the board has been in in in recent years. The the board prior to me joining was based in one director was based outside of Europe. Michael's always been based in Luxembourg, but traveling quite a a lot within Continental Europe and to The UK. And then the and then the other executive director was based outside The UK as well. The fact that Michael's in Luxembourg and I'm in London is that we're close enough that we can be together physically quite often. Naturally, we're not together all the time because in terms of the the the cost, the time, the ESG impact of travel, we try not to travel every week, for example.

51:32 But but later this week, we will be in the same place to work on strategy. So we feel that we have a good amount of face time, not only with each other, but also with the other senior leaders within the business who who tend to be concentrated mainly in The UK and in Continental Europe. So between Michael and I, we are close not only to the city, to the market, but also to our material operating companies in Germany and in Poland. So I think it's quite a good geographical balance. I certainly feel more comfortable with it than I did with the the previous board of directors. Right. So more than 40% of global staff is concentrated in Germany and roughly 25% in Poland. And that naturally, I need to be close to the people. Most of them are in Continental Europe, and and and Billy, as the new face to the city, is close to the city.

52:24 In any case, it is as he's described. We are now much closer to the epicenter than than we ever were. Mhmm. The next the next question, do you write intangible assets to Xero on a straight line basis? Yes. We do. Aside from, as I indicated earlier, annual impairment reviews and exercises, which were a normal part of the the the application of GAP in any company, intangibles are written to zero on a straight line basis. So and the and the moat in online marketing is largely data. We've now gone over the last two years, when you added two figures together, we had we had more than 7,000,000,000 consumer interactions on which we were able to train our algorithms.

53:17 And for anyone trying to replicate what we do, this would be the big modes that they have to jump over Because when you when you first start out, try your first ad, place it somewhere on Facebook and hope you will make money, it will be a bloodbath. And only because we've, over a decade, refined this and collected more and more data, we are we are we are able to extract the money from from what we do to the on that scale as we do, and that's our mode. The next question relates relates to guidance in terms of amounts we expect for deferred contingent consideration payments in respect of prior acquisitions.

54:04 Given that given that acquisitions made in the course of 2020 and '21 and 2022 have, in all cases, exceeded the expectations that we had at the time we we did the deals to to buy those companies, we we're expecting deferred contingent consideration payments to be slightly higher than was accounted for at the date of those acquisitions. The guidance is that the level of deferred consideration payments will be in excess of $10,000,000 in each of in each of the next two years. So material amounts, but in most cases, we those are payments that are being made not only to former owners of those companies that we acquired, but also to, in some cases, current management. So it is it is it is the best reason. One of the best reasons I could think of to release cash is to reward people for the the, in some cases, stellar performance that they've delivered since they joined the group.

55:10 Right. So just conscious of time. So the buy the buyback the the buyback that we've done in January has already been completed, but which doesn't preclude us from from doing additional share buybacks in the course of the year. Then price increases in online presence. We are we're constantly reviewing our pricing power in all businesses and and and and given that quite a few players in the online presence business have raised their prices recently, We will, of course, review our position again very soon. The and the main competitors here in what we do specifically in the online presence business is a Canadian company called Two Cows who's also having a mix of a mix of reseller business where they sell where they sell through larger hosting companies and and also have a retail arm. So these these are the guys with whom we benchmark ourselves each year.

56:24 And, when you would look at their figures, they they don't have 4% organic growth in 2022. So we're we're beating them on growth very clearly. Yeah. Then the then the share price, it's not really the company who does the share price. It's the shareholders who make it. And but we but we understand the frustration and with and today's attempt to explain in more detail what we actually do to demonstrate what Centrelink is and does, hopefully hopefully, will help to close that expectation gap that we have. And whether we would consider going private is not really our choice. As a public company, you're always on the block for sale. Any morning, we could receive a letter from somebody, but today, we didn't receive any letter somebody, and and we haven't for the last couple of years.

57:22 It's not really our decision. One important point, the question has come through. We note that the online marketing business in North America is a small percentage of the business. Will you aim to expand through expansions in The US? The US or North America is actually not a small proportion of our business. The mandatory disclosure that we make in the notes, the accounts of the of of the geographical segments of business, we are obliged to make that disclosure on the basis of the the country that the that the immediate customer is based in, not the end consumer. So you'll see there's a footnote underneath that table which indicates that the the a large proportion getting on for 50% of the underlying consumer base of the business is in North America. So there's a difference there between the gap disclosure we're obliged to make versus the real underlying operating strength of the business, and a lot of our under the our end consumers are based in North America.

58:33 Correct. Maybe going to some questions that we have not indirectly addressed. If Microsoft being a JGPT disrupt search, will it affect your marketing business? We don't we're actually an early adopter of AI in general, and and we're also now experimenting with generative AI to automate the content part of our business, and we see a lot of potential here. And, however, if now Microsoft would catch up to Google, and that would then mean that less that the advertiser on Google will find get less traffic through Google search, which will which will actually put us into a better position.

59:24 But, again, when you look at the current relative market share between Google and Microsoft, it is a long catch up story. And and and and and just and and just alone will, I hope, not close the gap. But if it does, we are prepared. And this is this is, this is why we're looking why why we are why we are following this very closely, but we don't see it as a as a risk that would disrupt our business. Move to bigger exchange to be seen. That's the question then, of course, goes into the same ballpark. For now, the a market has been treating us well.

1:00:10 And so the main markets would probably be the first step, but currently, there are no there are no concrete plans to move the to move the segment. We will first try to better explaining what CenturyLink does and see how this will work out over the next couple of weeks and months. So how do you rate your competition? Competition, all respected peers, all all very smart people. And as in every industry, you just need to stay on top and try to innovate a little bit faster than the others to stay ahead of them. So same thing applies to us.

1:01:03 Biggest biggest short term big biggest short term risks, I I think we already we already seen major risk crystallizing like like a drop in advertising rates, and we're still we're still doing great. So it's it's it's hard it's hard to see that any that that it could actually it's 2023 could get much worse than much, much worse than 2022. So for us, we we rather consider this the current situation as business as usual, at least in comparison to 2022, in particular, the seventh the second half of it. There's a question there about increase in payables. Literally, why have payables increased so much? Just to bear in mind that as as the business grows, a lot of our particularly our cost of sales payables relate to revenue shares.

1:01:54 So So as our as our as our revenue and our gross profit increases, we will naturally see a fairly significant most years, I would probably expect an increase in payables of tens of millions if the business is growing at the rates it's been growing. So it's not that there's any particular change in vendor mix. It's really to do with increases in amounts we're passing through to our valued business partners. Exactly. And payments as every business will just grow with the amount of business that you transact. Yeah. So how many potential acquisitions? Two or two or three are currently going through due diligence? I cannot remember any time at CenturyLink where not at least one company was in some form of due diligence, either just internal due diligence or with with external due diligence of, the same still holds true, but we've described the gating criteria that we've now added to have an even more selective deal flow, than in the past.

1:02:58 And then the last question, defensibility of this business model. I think we already addressed that just by by us being one of the big guys in the specific thing that we do. We have a big moat through more relevant data than than anyone else who's who's doing the same thing or similar things as we do. And it's, of course, our mission to to use the data to further refine our business and and and make it make it make the gap between us and our competitors just as large or even larger than it was in 2022. Michael, Billy, if I may just jump back in there. Thank you very much indeed for being so generous of your time. I'm addressing all of those questions that came in from investors this afternoon. And, of course, if there are any further questions that do come through, we'll make these available to you immediately after the presentation has ended for you to review.

1:03:59 So then add any additional responses, where it's appropriate to do so. Michael, perhaps before just 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. Very happy too. One of the most formidable challenges that I inherited when taking the office of CEO of Centrelink was that people always said, I understand what you do in online presence, but we don't understand what we do in online marketing. And now that online marketing represents almost 80% of our revenue, that is, of course, a challenge. And we hope that we have made some progress on this by by lifting the hood and allowing a glimpse at what we do rather than describing it as a marketplace.

1:04:51 But the most important message here is that the purpose that we've defined, helping online consumers, making informed choices, is an evergreen. Also, in thirty years from today, they will still be online consumers. Also, in thirty years from today, they will still need to make choices. And also in thirty years, they might need some help in making that choice. And the way how we deliver on this purpose might evolve over time, and yet it is never going to go away. And this is this is this is why I expect that CentrEx will still be around in thirty years from today. Michael, that's great. And Billy as well, thank you once again for updating investors this afternoon.

1:05:43 Could I please ask investors not to close this session as you'll now be automatically redirected for the opportunity to provide your feedback in order that the management team can best 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 would like to thank you for attending today's presentation. That now concludes today's session. So good afternoon to you all. Thank you.