CentralNic Group plc

At a glance

Our small-cap software index slipped 1.1% over the week, which compared with a 4.6% slide in the large-cap software index and a 2.8% fall in the FTSE-100.

(), the technology services group, was the only large-cap software gainer, surging after upgrading its outlook in a brief trading update ahead of interim results this Wednesday. Also among large caps, Group PLC (), the provider of digital technology solutions, dipped 7% after posting an inline trading update, which follows the blow-out trading update in July.

Small-cap tech news roundup

Last week saw final results from (), interim results from CentralNic Group PLC () and a commercial announcement from Seeing Machines Ltd (). Meanwhile, () has initiated a formal sale process and strategic review.

• CentralNic, the provider of internet domain names and related services, grew first-half (H1) revenues by 124% to US$111.3mln, which included 18% organic growth supplementing growth provided by acquisitions including Team Internet, which was acquired at the end of 2019. This compares with 15% organic growth for the first quarter (Q1), and hence indicating acceleration in Q2. The organic growth rate was boosted by the Monetisation division – substantially the Team Internet acquisition – which surged by 38%. Revenues from the Indirect sales division grew by 9% organically while Direct fell 1% on this basis. Adjusted underlying earnings (EBITDA) jumped by 64% to US$15.1mln or rose 16% on an organic basis to US$14.9mln. The change in the mix led to a decline in gross margin since Monetisation has lower margins than the other two divisions. Recurring revenues jumped to 96% of the total from 92% in H119 (first half of 2019) and cash conversion was 138% in Q2. The group ended the period with net debt of US$76.4mln, up slightly from US$75.0mln at end-FY19 (full-year 2019), which is after the completion of the earn-out for the Team Internet acquisition with a €2.7mln payment in Q2.
• Redcentric, the managed service provider, has announced a broad strategic review. This involves a formal sale process that could result in a sale of the company; however, the strategic review includes other potential options regarding organic growth and/or potential acquisitions.
• Seeing Machines, the computer vision technology company, has announced a three-pillar product strategy targeting the automotive original equipment manufacturers’ (OEM) market. This involves the introduction of Seeing Machines’ Occula Neural Processing Unit to its FOVIO chip, which will reduce the computational load by 50% while delivering the same level of functionality. Consequently, this provides OEMs with significant capacity to include additional features. The company can also provide its algorithms via its embedded Driver Monitoring Engine (e-DME) software product. Meanwhile, Occula is available for license, in ASIC form, to semiconductor companies for integration with automotive compute platforms.
• NCC Group, the cybersecurity and resilience adviser, reported a 5.2% increase in FY20 revenues on a like-for-like basis to £263.7mln. Assurance revenue rose by 6.3% while Software Resilience (Escrow) revenue dipped 1.3%. Adjusted EBITDA fell by 5.7% on the same basis to £41.2mln. The group ended the period with net debt of £4.2mln. The final dividend is maintained at 3.15p. The company says that Q1 trading is ahead of the prior year, though noting the soft prior year comparator.

Small-cap software & services market roundup

Small-cap software drifted back last week in sympathy with the US tech-led sell-off in the equity markets. Our small-cap software leaders index slipped by 1.1% over the week, which compared with a 4.6% decline in large-cap software and a 2.8% fall in the FTSE-100.

Redcentric led small-cap gainers, rising 11% after announcing a strategic review that could result…