Team Internet Group (LSE:TIG) — Q3 Investor Presentation

0:01 Good morning, ladies and gentlemen. Welcome to the Central Nick Group PLC Q3 Investor Presentation. Throughout this presentation, investors will be in listen only mode. Questions are encouraged and can be submitted at any time via the Q and A tab situated in the right hand corner of your screen. Just click q and a, scroll to the bottom, type in your question, and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company review all questions submitted today, and we'll publish responses where it's appropriate to do so. These will be available via our investment company dashboard, and you'll be notified once they're ready for your review. I'd also like to remind you

0:31 that this presentation is being recorded. Before we begin, I'd like to submit the following poll. I'd now like to hand you over to Ben Crawford, CEO, Michael Riedel, GROUP FD of Central NIC Group PLC. Good morning. Good morning, and thank you, and thanks everybody for attending today. So as mentioned, this is our results for the first nine months of of the year. And I think the headline number here is our organic growth number, which was 29% for the first nine months of the year. And and to give you a bit of color to that, we're a company of two halves. We have two separate lines of business, separate but related, the online presence business.

1:21 So that's where we sell, domain names, web addresses, email software, and so on. So all the basic tools to get a company online, and these are all a a subscription model, recurring revenue, businesses. So we're so, essentially, all of these services, you have to pay an annual fee to retain. And if you don't pay that fee, you lose them, meaning your website goes down, your email stops working. The, organic growth for that part of the business is 9% in the first nine months. As you can see there, we've calculated it, by, adding back for the one company we acquired in this segment during the course of of this year, we we added in the revenues that they earned in the first nine months of last year, before we owned them just to in order to measure a absolute like for like comparison of the businesses we are now with how they performed in the first nine months of last year.

2:23 And so that's the orange tip of that left hand, bar. The second part of our business is online marketing. So this is for people that already have their website and and need some tools to help them earn money. Essentially, we have tools for both of the business models for the Internet. On the one hand, for people that have high amounts of traffic. So this may be because they have a blog or a a news feed or something like that on which which is attracting traffic to their website. And what we do is we place advertising on their website, and we do that on an exclusive basis for around 20,000,000 websites. And, and because of that massive volume, we have a huge amount of data about the traffic and about what what kind of advertisers advertise on what types of traffic.

3:19 And, we have an artificial intelligence engine behind that, which is continuously optimizing to get those customers the highest amount of money they could get by matching them with the with the with the best high spending advertisers. And as we take a and we're on a revenue share, obviously, the better job we do for our customers, the better job we do for ourselves. Here again, you can see that we've, added back, or added in the nine months of trading from last year from before we owned two of the companies we we we've acquired in the last twelve months. And and that brings us to a 47% organic growth rate.

4:05 Obviously, you know, the best growth rate that we've ever had for any business, and there's a number of factors in that. So firstly, we're we're we're new to this industry relatively. We, we started buying, online marketing businesses only two years ago. And one of the reasons that they were so attractive was that, the growth rate the underlying growth rate of the online marketing segment is is 25%. And so, obviously, that's appealing, but we're actually doing even better than that. And before we get into more detail, it's worth talking about what the recurring revenue model here is.

4:51 And and here, it's a bit different. It's not an annual fee. It's, rolling contracts, and it's a kind of utility style, continuous billing. And this is because for those 20,000,000 websites where we have exclusive rights to their traffic, they all have ads on them, and people are pretty much continuously clicking on those ads. And so, essentially, we we bill those advertisers, and we collect the money, and we remit it to our partners, on a monthly basis. But we're actually, earning money constantly every day of the week. And similarly, on the other side where we work with the advertisers, these are companies that are, selling things online and trying to acquire customers to their websites. They have a marketing budget in order to do that, which they spend on advertising. And we using our tools, they can access a 100,000,000 different websites, and we can place ads on those websites for them.

5:55 And so the and so, and, again, there, we take we take a a, percentage of their online advertising spend. So there, again, they will test, make sure that we're doing a good job, that we're delivering them customers where they can get a decent return on investment. So if it cost them $10 to get a customer, but they make $30 profit from them. Obviously, what happens then is they set and forget. Essentially, they use our tools to generate a continuous stream of these customers coming to their website and buying from them. And so there again, it's a it's a repeat revenue model where we're continuously earning revenue, spending the marketing budgets for our customers, bringing them customers that that spend money on their websites.

6:48 And and so why are we doing better than the market? So a couple of things. One is we do have a, a a patented, technology that we launched, only at the beginning of last year, which, which has been a, a dramatic help to us, and that's in that media buying suite of products. So, essentially, it helps advertisers or online marketers gain access to all kinds of traffic that is difficult to find on the Internet. But the second thing is we'll see in the next slide is we've actually done an awful lot of work in reorganizing our company in order to drive organic growth. At the beginning of last year, we were, relatively small in our head office function. We've made quite a lot of acquisitions in each of our portfolio companies. It was relatively autonomous with the CEO.

7:45 We restructured about eighteen months ago and built a very significant head office function with a, IT services, with, HR, legal, group finance, including a a broader range of things, tax, sales tax, treasury, and so on, as well as a a product team, a project management team, and so on. So we did a a lot of senior hiring, and we introduced a lot of new systems and software, things like Salesforce, Zendesk, Jira, G Suite, and others. And so that was a significant, investment, but what it meant was that instead of needing a whole group of CEOs, all we really needed then was a group of commercial people that could drive the organic growth. We grouped our businesses, our our businesses into divisions. We put people in charge of them and and essentially, rewarding them for driving organic growth. And that has really paid off for us as a company, as you can see from the results.

8:54 And put simply, $10,000,000 of annualized investment has already produced $63,000,000 of additional revenues, above what we earned in the same period last year. One thing we need to consider carefully is did you know, is our growth related to COVID? I think the simple answer is no. We actually got mixed results during 2020 from COVID. It helped some of our businesses. It hindered others. But the thing that is clear is that as the restrictions related to COVID are relaxing and people are no longer having to come up with new Internet businesses from their home, they can go back to their old jobs, our growth's accelerated. So it's really very clear that our growth is much more an effect of us getting into online marketing and restructuring our business and really has little to do with COVID.

9:51 On the other hand, one external factor that does play a role is GDPR and the, moves by Apple and Google and others to restrict third party cookies. So, essentially, what these things are is restrictions on, use of private data, collecting private data, selling private data, and monitoring people's use of the Internet. And happily, our online marketing businesses never did any of those things. So we've always had privacy safe solutions, and no doubt the fact that our solutions are privacy safe has helped us and will continue to help us in future as some of our competitors are struggling with these new restrictions and regulations, which leave us completely unscathed.

10:42 When it comes to operations, really, there's two key points I'd like to draw to your attention. Firstly, we recently announced the hiring of Carsten Sjurup as our new chief technology and product officer. Carsten was, up until he started with us, the CIO of GoDaddy, the largest company in our industry, and, and he joined that through an acquisition. He was before that the CTO of Host Europe Group, a company very similar to ours that did 22 acquisitions, and and he was in charge of integration. They eventually sold for £1,500,000,000 to GoDaddy, a few years ago. So in coming to us, it's like he's coming back to to to the familiar smaller roll up strategy, type of business.

11:37 And and, obviously, he's extremely valued joiner as he's done this before and is probably, as far as integration's concerned in our industry, the the the the leading technological expert. One other point I'd raise about data, data science, and artificial intelligence. When we started to acquire online marketing businesses, they came with data scientists, with software developers who were specializing in artificial intelligence. And those technologies give us a real edge and help us optimize our performance in our online marketing businesses to the extent that we decided to move that expertise into our back office and head office function so that all of our businesses, could could benefit from that, and we could apply it to customer service and marketing and many other activities, to to essentially make us a more data driven and automation driven company than we've been before.

12:45 You can read the rest of the operational highlights, but I think those are the key ones. And so with that, I'll now hand over to Michael Reddle, our CFO, to take you through the financial highlights for the first nine months of the year. Thank you, Ben. And while on the first two slides, we've been very much focusing on how we grew the company, the good news is that all financial metrics starting with gross revenue down to operating profit and adjusted cash flow are all up materially. Gross revenue increased by two thirds to $282,000,000, net revenue by 60% to more than $85,000,000, adjusted EBITDA by nearly 50% to almost by almost 50 purse to $32,000,000.

13:36 But the two figures that that grew the most dramatically are the operating profit, which went from near breakeven to already high single digit million amount just for the first nine months of the year. And the adjusted cash flow has grown also faster than our gross revenue at 77% to more than $36,000,000 in the first nine months of this year.

14:05 Looking at looking at the income statement in a bit more detail, You may have noticed that that the gross margin reduced by roughly 2% given that revenue grew faster than net revenue. However, it is important to note here that this is not representative of margin erosion, but simply

14:33 a change of the blended gross margins for the different business mix. As you can tell from our from our most recent cost quarterly reports, our online presence segment has a gross margin of roughly 37%, and that is very stable in or that has been very stable over the last few quarters. And our online marketing business has a 26% average gross margin, which has also remained quite stable over the last few quarters. And the and the and and the decrease in the group gross margin is simply the result of the online marketing presence, which has a lower gross margin growing at 47% as compared to 9% of the other business, but but no erosion of the profitability in the two segments.

15:20 Secondly, and that's probably also very important, is that now finally our adjusted EBITDA starts translating into operating profit and also, of course, other metrics below EBITDA. And while the adjusted EBITDA has increased by $10,000,000 rounded from the first nine months last year to the first nine months of this year, the operating profit has increased by $8,000,000. However, when we look into the bridge and in part between the two and in particular, the single largest item, amortization of intangible assets, we see that just increase in amortization of intangible assets more than fully explains the the $2,000,000 variance between the increase in adjusted EBITDA and the increase in operating profit.

16:11 And the amortization of intangible assets is an accounting practice that particularly penalizes acquisitive companies like ours, where we would, after each acquisition, need to allocate a certain part of the purchase price to intangible assets like trademarks, customer bases, assembled workforce, and similar, and then write them off over over an assumed useful lifetime. However, our customers will still be around many years thereafter, and our trademarks will still be there, and our and the workforce is also still there. And and other than for for tangible assets, which undergo a physical wear and must be replaced at some time, here, there is never any replacement capital expenditure, neither this period nor in any future period.

17:01 And this is why this is an entire noncash accounting artifact. And as a matter of fact, all equity analysts who cover our stock adjust all the profit and analysis for this one item.

17:20 Moving from the balance sheet from from income statement to the balance sheet, we see that equity at book value now stands at pretty much exactly one and a half times our net debt.

17:37 So the so the so the balance sheet gearing comes down. Speaking about that debt itself, it has also reduced by more than $6,000,000 over the first nine months of this year despite the fact, that we've invested, roughly $15,000,000 in the two acquisitions completed this year and, and by honoring earn out agreements on prior year acquisitions. So the there is a very strong organic deleverage in the business, and net debt to EBITDA. If you just use the current market consensus now stands at roughly 1.8 times, so which so also this metric is coming down rather quickly despite us further investing a part of our organic cash flow into new acquisitions.

18:32 The question is where does this where does all this cash come from? So here on page eight, you see our cash flow of operations just as expressed under IFRS. No adjustments here. The cash flow of operations has almost doubled from the $13,500,000 in the first nine months last year to now almost $25,000,000, which is already, which is already more than for the entire financial year 2020. And, given that the cash flow statement is also impacted by our m and a activity, just like our income statement. We started roughly two years ago to also systematically provide an adjusted cash flow bridge in in in which we would basically normalize also our cash flow for the impact of m and a, which is not only which is not only the cost directly associated to m and a, like like legal fees for due diligence, etcetera, which have nothing to do with the day to day

19:36 operations of our businesses. But it also it also includes elements, like, for example, the settlement of of of acquired liabilities, which, of course, you would always deduct from the purchase price, but which whose settlements then count into the operating cash flow under IFRS. After these adjustments, we can actually present a very consistent picture, 108% cash conversion in 2019,115 in 2020, and now a 113% for the first nine months this year. And this is very important to us to demonstrate given that it it it demonstrates two points. First, that us venturing from online presence into online marketing did not have any any negative impact on our cash conversion ratio nor did the accelerated growth.

20:31 And and the the reason why the accelerated growth also doesn't change our cash conversion profile is that both businesses in online presence and online marketing work with negative networking capital balances, which means the growth is self financing itself. Let me maybe illustrate that with two examples. Our main product in online presence are domain names. For domain names, it is an industry standard that's domain names are being paid upfront. So the customers first pay us, then they can register the domain name, and then we pay our suppliers. So we always have we first get the money in, and then we pay it down the value chain. And in online marketing, it is not materially different because in online marketing, other than an unpaid dishwasher that Amazon can come and collect again, the delivered advertising be cannot be cannot be recovered anymore, and therefore, it's also in standard tier that they that the advertisers would first pay money to us.

21:34 We credit to the customer accounts. They can then run their advertising campaigns. And and then after the end of the campaign, we will determine which publisher. So that's the website that actually shows the ads, has delivered how many impressions, and then we will permit the revenue shares in the month thereafter. So while while the two services are different, the economics of the of the services are very, very comparable. With this, we come to the to the last slide of the financial section, which is some additional background on specific selected income statement items. So first of all, operational expenditure.

22:19 The operation expenditure has increased by a bit more than $20,000,000 from a low $30,000,000 amount to a low a low $50,000,000 amount. This $22,000,000 increase, though is for two thirds acquired operational expenditure through the free acquisition that we completed since the end of the comparative period last year. And one third is the prorated part of the $10,000,000 investment that Ben alluded to on the second slide of this presentation. Amortization of intangible assets, we already addressed at the occasion of discussing the bridge between adjusted EBITDA and operating profits, so an oil noncash item.

23:03 Third, non core operating expenses, these have now come down materially as as expressed as a percentage of our of our EBITDA. Again, for for memory, we basically have three main compartments in here. The first being acquisition cost, which would have been historically been considered as part of the acquisition cost of a target. This is all the cost for identifying the target, due due diligence, closing the deal, and and and and refinancing the transactions. The second part, integration, is basically all the cost that it takes to restructure the businesses to make part of the central ecosystem, which would then in in subsequent periods lead to operating leverage.

23:49 And the and and the third item, we call it other. Other is we used the euphemism of other because it was a a proper strategic review, which should not have which should not be misunderstood with the city code word for a sales process. So in the strategic review, given that CenturyLink was standing on one leg being online presence until late two thousand nineteen, it had then grown very quickly, a second equally strong leg of online marketing. And together with the board, we agreed to explore the specific merits and opportunities of both these businesses to determine how to allocate our future resources. And in essence or in a nutshell, the the outcome is that both business are great businesses, and and this is also why why the board has agreed for us to to nurture both businesses.

24:43 And you can see that in our deal flow this year, the acquisition of SafeBrands has strengthened the online presence business. The acquisition of OneDo has strengthened the online marketing business. And going forward, we would expect a similar to see a similar pattern. The last item to conclude, this is now a bit more forward looking. In 2019, The UK equity markets have been particularly particularly weak because of Brexit and many other factors. The and this is why that's time we chose to finance our acquisitions with with a bond, and I should maybe make the make this side remark here that we would only raise any debt or equity for acquisitions because we neither have huge investments in in intangible assets nor or nor would we need to pre finance any working capital balances.

25:42 So m and a is virtually ex the exclusive purpose of any fundraising. But in 2019, we then we then chose to rather go to the debt capital markets than to the equity capital markets Given the given the given the circumstance at the time and us being literally just a quarter of the current size looking at the run rate, we ended up with a 7% coupon, which still ranks quite well to other UK issuers at that time, like, Aston Martin who has to pay 12%, and I'm just mentioning them because we were raising equity in exactly the same two weeks as raising debt in exactly the same two weeks that we've been in the market. The the the good news here is that when we issued more bonds in the beginning of this year, we've been offered a premium on on what we need to repay to the bond investors, which lets which lets us estimate their their expected yield, which seems to be two to 3% lower than at the time when we first issued our bond.

26:43 And this becomes now particularly interesting given that given that there is a window for for refinancing, which opens in July next year. And, and we will, of course, need, to explore, our options at that time. And if if we if we can really crystallize this expectation from or this observation from the last fundraising, this could lead to interest savings between $2,500,000 per year and upwards, and, we will we will keep the market informed about our next steps on on this matter. With this, I hand back over to Ben who will run you through m and a, ESG, and strategic priorities.

27:36 Great. Thanks very much, Mark. So so in addition to this organic growth, we we have been and intend to continue to grow inorganically as well. We have an excellent track record, and and we have some real competitive advantages. And one of the key ones is that that we're a global company that does business with almost every other company in our industry in the world. And that means that, they know who we are. We have an existing relationship. We're able to observe them from close quarters and identify the great attractive growing companies.

28:17 And and that and, essentially, that has allowed us to approach companies and cut deals with them without them going into a formal auction process and saving significantly on adviser's fees and and so on, which, we we which is all very helpful in that we're clearly a valued buyer. What we love to do is deals that are immediately earnings accretive And and, certainly, we've never done any that aren't, where earnings accretion isn't within easy reach, for us. Now the other characteristics we're really looking for are recurring revenues, high cash conversion, and low churn. In other words, exactly the same investable characteristics we already enjoy as a company.

29:09 We wouldn't want to dilute the those those attractive characteristics. Whilst we we are looking at, at companies that bring us new products, for instance, we're not looking too far afield because we do like to have achievable synergies. Those synergies tend to fall into two buckets, the kind of low hanging fruit that we can do operationally, and then the technical integrations of platforms, which in our industry are complicated multiyear projects. But as I mentioned, now we have our our new CTO. We really have the the top man in our industry in terms of of of achieving those technical synergies.

29:55 And lastly, we do, because we do business in almost every country in the world, we have some visibility of the growth markets and the products that are working all over the world. And so we try to use our acquisitions to expand our market share in growth markets as well as to bring in new products that we can cross sell to our existing customers. Once we do acquire a company, our first integration priority is typically to switch their suppliers and back office functions to our core suppliers and core functions. That gives us more control over the businesses, and it enables us to benefit from the additional buying power that we have from those those businesses. Our second focus is actually growth. So it's not unusual for us to invest in businesses soon after we buy them in order to drive that growth.

30:46 Because as I mentioned, whilst we will achieve every synergy that's achievable, it can take years in our industry. And then lastly, even we if we achieve a synergy, we shut a platform down, migrate all of the customers over to another platform. That doesn't necessarily mean that we let all the staff go because it's a very competitive market for talented staff. And if they have some great software developers, engineers, and so we will typically keep them and throw them onto a project to drive our growth further. Now, moving to ESG, we're we're we're a little bit unusual in that we were the first domain company to ever announce that we were carbon neutral back in 2012 before we IPO ed. So it has been a focus of ours for a long time.

31:40 However, we did acquire a lot of companies that were not carbon neutral, and so it's taken a lot of effort and some offsets in order to bring us back to being carbon neutral where we are again today. We have an extremely diverse workforce, happily, and we consider diversity of that workforce to be a priority as we move forward. We have a grant project or a grant, program called the SKNIC Fund where we have now donated €600,000 in grants supporting initiatives around education, around cybersecurity, around accessibility for the disabled, and most recently, in combating fake news.

32:27 And then lastly, I guess inclusivity is actually really core to what we do as a company. Our mission, our mission statement is making the Internet everybody's domain, and we're succeeding in doing that in that we have one customers in almost every single country in the world. And and and what we do is very different from other tech companies. We're not, you know, giving them a passive experience, bringing them, you know, western culture and and taking their money out of the country. We're not, collecting their private data and selling it to other people. What we're selling them is the tools to build their own businesses online, And we believe that that in itself is instrumental and will continue to be in making the Internet more inclusive and representative of the world as a whole.

33:30 So this is our last slide, and it's, what our strategic plans and objectives are moving forward. So you've heard a lot about organic growth, not surprising that it's there at number one. And, we are growing we're using all the different levers for growth, winning new customers, upselling and cross selling our services to existing customers, launching new products, contracting with new suppliers. Operating leverage is very important to us, and it is something that we definitely see in our future with a few drivers for that. One being the integration savings that we've discussed through the technical integration programs that we're that we're undertaking. But secondly, and I'd say more importantly, is simply scale.

34:18 We're a platform business, and that means that our that particularly now that we've done a big kind of investment into into our our staff and systems, we we expect that spending to plateau whilst as we win new customers, sell more products, and so on, our revenues to increase. And indeed, if you look at our larger scale peers, the ones listed on Nasdaq, for instance, you will see that as as companies grow much bigger, their margins improve a lot in our business, and that's absolutely what we expect to see. M and A, of course, we will continue. We have a strong pipeline of attractively priced deals. We've already, done three this year, including two at four and a half times trailing EBITDA.

35:10 We're very good at finding great value deals and integrating them and growing them. So we would certainly be continuing to do that both on the online presence side and the online marketing side. And then lastly, when it comes to debt, as Michael has mentioned, our bond we'll be we'll be able to refinance our bond as early as July of next year. And based on our most recent experiences in the bond market, we are certain to get that interest rate down below 5% with obviously, results in savings and and additional cash conservation for us. And lastly, our net debt to EBITDA ratio, it's below two at the moment.

35:59 We know that's yeah. We from having spoken to to all of our institutional investors, we know that it's around their comfort level. We certainly aren't planning to increase below, above 2.5 times. And our interest rate coverage is well north of four times at the moment, and we would expect to continue it the same way. Obviously, lenders are very keen to talk to us and wanna lend us more money. The thing that's really restraining us here is understanding that our equity investors would, would would prefer to keep our debt levels low, and that's what we're doing. So, that concludes our presentation for our results for the first nine months of twenty twenty one. I think at this point, before we get any questions, I'll I'll hand back over to our.

36:49 That's great. Ben, Ben, thank you very much indeed. Ben Michael, thank you very much indeed for the presentation today. Ladies and gentlemen, do please continue to submit your questions using the Q and A tab situated in the right hand corner of your screen. But just while the team take a few moments to review those investor questions submitted already, I'd like to remind you the recording of the presentation along with a copy of the slides and the published q and a can be accessed via your investor dashboard on the investor meet company platform. I'd also like to remind you that your feedback is important to the company. And immediately after the presentation has ended, you'll be redirected for the opportunity to provide your feedback in order the team can better understand your views and expectations. Ben, Michael, I haven't given you a huge amount of time to have a look at those questions that have come through, so apologies. But and thank you to the investors for for submitting those. But if I may just ask you to click on that q and a tab, and where appropriate to do so, if you could read out the question and just give your response, that'd be fantastic.

37:40 Sure. Very good. Alright. Well, question one is Bob m. What is the biggest threat to your continued growth? I I I've read all the questions. They're all good. So thank you all, and thank you, Bob. Happily, we're in a recurring revenue lines of business, which means that it's very predictable from the customers we have now what kind of spend they will continue to have in future. It is a sticky industry, so that means it is a difficult task to win customers away from our competitors, but it's very difficult for them to win customers away from us as well. And that's because there's all kind of switching costs and complexities and so on.

38:35 So I'd say, yeah, that that is always a challenge to try and win customers away from competitors is is always difficult, although we we continue to do it. And our growth does depend on us being able to do that. But overall, the the people who are up for grabs are the new customers, the new entries. And happily, that's just continuing and continuing. So we don't really see that as a threat. I mean, interestingly, what happened when under COVID, it was reported, like, lots more people got onto the Internet and started doing web businesses and so on. But we actually found that was not a particular driver of of revenues for us because many of those people were, beginners, and they didn't spend much money. And many of them didn't do very well with their online businesses.

39:36 And so whilst I think some other companies, did cater those people, and so they had a peak, and now they're dropping a little bit. We've just kind of grew all the way through it because, I guess, we we we didn't take a big bet on those kind of COVID driven new customers, and that tends to be the same thing. The the main drivers of growth for us are so reliable. They're essentially the growth of the Internet as more and more people get on the Internet. Yeah. The as as ecommerce grows beyond the $4,000,000,000,000 mark, as online marketing grows beyond the $400,000,000,000 mark, and as online presence services grow beyond the $40,000,000 mark $40,000,000,000 mark, We kind of ride on that underlying growth.

40:32 So so I'm I'm not sure if that really answers the question, but that that that's essentially where we sit in the market. I'll I'll I I've got a lot of questions here, so I'll move on. Morgan b asked, do you think that, Unified ID solution two point o will become the new cookies? How does this impact on central NIC? It doesn't really impact on us. So, you know, UID two dot o is is essentially a a method where, where where advertisers track customers because the customers volunteer their their their data and attract by an email address exactly the same way that, say, social media works where you have a unique identifier, which is your email address.

41:19 That will obviously help us because it means everyone in the world will need email addresses, and that's certainly a product that we sell. But like I said, we have an alternative technology, which is contextual advertising, which doesn't doesn't rely on collecting data about the end users. It's more about collecting data about trends on the Internet. So saying if somebody passes through websites that contain these words, they're likely to buy product x and so on. So it's about big data and AI, and and we believe that that's a a equally viable and actually better and more proven solution than using people's email addresses to track them.

42:07 Next question is Andy m. Where do you see the operational gearing of the business coming through to drive bottom line growth? I think we did a little bit after your question with integration, and we just see it through scale. And and all you have to do is look at our bigger peers to see that the margins are better, as you get bigger because we're a platform business. Yeah. We could add a million new customers. We certainly wouldn't have to add a proportionate amount of staff by any means. Morgan b asked, what's your revenue growth rate margin guidance over the medium term? Thanks. I mean, obviously, that's not really something we can talk about as a list of business, but what we could say clearly is we're covered by Berenberg, by Edison, by Zeus, by Stifel.

43:11 Investix put something out about us too, and and, yeah, and those guys clearly have formed some some views about that. I should say, and we've made it clear that we're now trading at the top at at least at the top of the estimates that are out there in the market at the moment. And so, yeah, that that that can give you a bit of a sense of where we expect to land on those things. And I Michael, you look like you might wanna add something there or you Right. Basically, combining this this the question you just addressed and the question before. So I I think I I would invite every investor to not only look as at EBITDA as as expressed as a percentage of our gross revenue, but also to look at it as as a percentage of our of our net revenue or gross profit.

44:09 As we have explained, both our business have a systematically different gross margin, 37% for online presence, 26% for online marketing. So it might be that our or it's even more likely than not that our gross margin will grow or gross profit will grow not just as quickly as the gross profit. However, we already see the the operation gearing in in in action. If you if if you actually divide the the EBITDA we reported for the first half of the year by the by the net net revenue we reported for the first half, it is a lower figure than if you do the same math now for the forty two three. So the EBITDA is spread as expressed as a person of of net revenue is already coming up. So we're already in the in the in the profit accretive zone.

45:00 Very good. Thanks, Michael. So now, asks, are there any significant future integration savings that are yet to be reflected in the p and l? Yes. There are. I think once we have, more clarity on that, we'll we'll be sharing that with the market. As I mentioned, a lot of these projects are multi year projects, so it isn't a month to month change. But we certainly expect that to be another contributor to to our improved profitability in years to come. Next question from Russell g. Do you see you expanding the security division and product service provision?

45:45 If so, more organic or m and a? We we have a number of security products. One of the big areas for security at the moment is attacks on DNS, and that's an area where we do have a number of very useful products for for enterprise and SMB customers and indeed governments. We're we're currently working on kind of pulling them together into a more usable suite of products. So so in that, that would be organic. But, clearly, the, you know, the the the cybersecurity area is an allied area to ours and one which is, getting enormous budget.

46:32 And so, therefore, we do have a look at at at m and a prospects in that area. And and I guess if if the right company came along which fit in with it with us, we'd certainly have a look at at at bringing it into the fold. Because once we have the customer and they're buying their website, they're buying certain security products from us, You know, what yeah. If if it's something else which fits in nicely into that, of course, it would make sense to look at. Next question from Russell g. Do you foresee offering third party product service, say payment security, that you take a PA fee? Sure. Absolutely. I mean, most of the domain names that we sell are third party products. We don't own .com.

47:20 Yeah. We're one of the top 10 vendors of .com in the world, and so that is essentially our business model. Payment security is a is a interesting area. It's the whole world of payments. I mean, obviously, very competitive. But just I I I guess the thing is, as you've seen with our online presence business, essentially, we get one payment a year for our online presence services because it isn't really tied to to to the top line of our customer's business. It's just a fixed cost. Whereas with online marketing, we can get payments every single day. And so we're looking at other services like that, which we which basically move us up the up the the value chain and are able to drive more revenues and payments and payment security would certainly be an interesting one.

48:19 Next question. As in s, What's your goal for future EBITDA margins? Again, I'd point you to the to to to the the the analyst notes on us. And, again, remind you that our guidance to the market at the moment is we're at least at the top end of of of those of those numbers. Quentin b, as a consequence of your acquisitions, you will have large teams of software developers and other IT experts. Correct. Are you cognizant of the case? There will come a time when there is not as much need for continuously changing your platform and might need to cut back on the size and scope of those teams and thus reduce overhead.

49:07 Of course, that's a possibility. And and indeed, whilst, you know, we we we haven't done any, you know, large scale layoffs of any sort, We do, I'd say, continuously improve our teams, sometimes through replacing people, sometimes through training, and and and so on. As we do reduce the number of platforms, obviously, we simultaneously with that, we intend and plan to vastly increase our number of customers. And I'd say that is our that is our number one goal. Of course, we won't ever have people sitting around who are who are not needed in the company. We never have, and we and and we never will. So, obviously, yes, there are potential integration savings there, but, but but our main focus is more on growth than on, on cost cutting.

50:07 And and, obviously, it's paying off very well for us and our shareholders. Has another question. Excluding acquisitions, which of the two businesses do you expect to grow faster? Online marketing. Pretty much for the reason that I've said, it's driven by the business activities of our customers more than just the number of our customers. And and and with their success, we succeed. It's also the online presence market is a $40,000,000,000 market growing at maybe 5% a year. The online marketing segment is a $400,000,000,000 market growing at north of 20% a year. So we're we're also reflecting the market, although, obviously, beating it.

50:57 New question from Joshua n. Is there any reason the online marketing division won't continue to grow well ahead of the market growth? What do you see as your total addressable market with the current product set in the online marketing division, I e, assuming no additional m and a? Total addressable market is I mean so within online marketing, obviously, you have Google, which so in the 400 the $400,000,000,000 online marketing segment, you have a 160 plus billion sitting with Google. You've got another 80 $7,080,000,000,000 sitting with Facebook, and then we have Yahoo and and Amazon as a growing.

51:49 So, obviously, our total addressable market is not yeah. We don't look at taking customers away from those companies. What we look at is niches. And happily, those companies, we've heard it direct from our friends at Google. If a market if they can't earn a billion dollars in a market, they have no interest in it. And and and whilst maybe that threshold's a little bit lower for some someone like Yahoo, it still leaves us with many markets where we we with where we can potentially, win market share. I I would I would happily say that the the the leftover markets that we compete in are are it's difficult to define exactly, but at least $50,000,000,000 and up to a $100,000,000,000 of of total addressable market.

52:47 It's competitive. I'm not suggesting that we're gonna get there quick, but we certainly gaining on our competitors, and it's the great markets to be. David m asks, what geographic dimension is there in your m and a thought? I guess, essentially, where we've landed is whilst our corporate headquarters is London, Our engineering hub and is Germany and Poland. So, essentially, that that that part of Europe is where the vast majority of of our engineering and technology teams are. And then we have but we we have customers in almost every single country in the world.

53:33 And so they are serviced by sales offices, you know, all over the world in all different time zones. So when we make an acquisition, what we tend to do is push the technology back into that kinda European hub. But often, you know, if the company's in Canada, New Zealand, Slovakia, and what have you, have the local sales teams there to manage the local customer base. We have no being a global company and being a specialist m and a company, we're more interested in getting great value in acquisition, being able to drive growth in an acquisition, being able to integrate the acquisition.

54:21 As we do business all over the world, it doesn't matter to us so much what country that that's based in. Although, obviously, yeah, we have to pay attention to to issues around tax and, tax rates and so on. But as a global company, usually, we can manage all of that. John asks, can we see a significant acquisition after the expected bond refinancing next year? As you've said that you should see a significant reduction in interest cost. We're always interested in in significant acquisitions. You can't always time them exactly with, you know, with with with with other things is when they're available to be done.

55:12 We we we clearly roll up strategy. There are still fantastic opportunities of companies that are like us. Recurring revenue, high cash conversion, high growth, low churn businesses that, that we can actually drive more growth from and and integrate, make savings with. So as long as they remain out there, I think we'll be interested in them. But in terms of timing, yeah, like I said, we can't really control when that timing occurs. Ben, thank you. You you've covered every single question. So, Michael, thank you as as usual. You've been fantastic with the questions. Of course, if there are any further questions that do come through, the team will be able to review those, and we'll publish responses where appropriate to do so back on the platform.

56:00 And then perhaps before we just redirect the attendees to give us some feedback, if you could just give us a a closing snapshot just to conclude, that would be great. Absolutely. So Centrelink is a recurring revenue, high cash conversion business with low churn, growing organically at 29% per year with a fantastic opportunity to consolidate a market of other similar companies and and become one of the great tech companies based here in The UK. It's absolutely fantastic. Ben Michael, thanks again for updating investors today. Could I please ask investors not to close this session? It should be automatically redirected the opportunity to provide your feedback in order that the team can better understand your views and expectations. This will take only a few moments to complete and is greatly valued by the company.

56:55 On behalf of the management team of Centrionic Group PLC, we'd like to thank you for attending today's presentation. That concludes today's session. Thank you, and good morning. Thanks very much,