Centralnic : Final Results

CentralNic Group plc

('CentralNic' or 'the Company' or 'the Group')

Final results

for the year ended 31 December 2015

CentralNic (AIM: CNIC), the internet platform that derives revenue from the worldwide sales of internet domain names, today announces its audited results for the year ended 31 December 2015.

The Company's full Annual Report is also being published and sent to shareholders today, and the Company's Annual General Meeting will be held on 28 June 2016 at the offices of DWF LLP, 20 Fenchurch Street, London, EC3M 3AG at 10.00am.

CentralNic continues to grow its Wholesale, Retail, and Enterprise Divisions through winning contracts to distribute high quality Top Level Domains (the new alternatives to .com and .co.uk), enhancing geographical coverage, licensing software to large companies, selling premium domain names, and pursuing acquisition opportunities.

Financial highlights

* Excludes share based payments expense of £316,199 and acquisition costs and non-recurring fees of £828,705

** Excludes share based payments expense of £316,199, acquisition costs and non-recurring fees of £828,705 and acquired amortisation charges, in relation to the assets of Internet.BS, of £354,799

· Revenue increased by 71% to £10.39 million (2014: £6.07 million). All three divisions (Retail, Wholesale and
Enterprise) saw growth in revenue, while total billings (including our partners' shares) increased 172% to £26.87m (2014: £9.89m) due to high levels of demand for new Top-Level domains.

· Adjusted EBITDA of £3.25 million (2014: £1.72 million) reflected the gross profit growth across each of CentralNic's three divisions, with minimal increase in operating costs. The retail EBITDA contribution increased to £0.17 million (2014: loss £0.01 million) reflecting a full year effect and growth of Internet.BS (acquired in 2014). The wholesale EBITDA contribution increased by 12% to £1.40 million (2014: £1.26 million) reflecting the increase in volumes of new TLDs. The Enterprise division EBITDA contribution was £2.61 million (2014: £1.41 million) from premium domain name trading and software licensing. Central overheads were £0.93m (2014: £0.94m).

· Profit before taxation of £1.45 million (2014: £0.52 million) reflected £1.53 million growth in Adjusted EBITDA predominantly offset by acquisition costs and non-recurring fees, which totalled £0.83 million (2014: £0.47 million). The vast majority of the costs related to the Instra Group acquisition completed in January 2016, a complex transaction involving overseas jurisdictions and a broad scope of due diligence. Adjusted profit before taxation, excluding acquired amortisation charges, the acquisition deal fees and the share based payments expense was £2.95 million (2014: £1.39 million).

· Net cash-flow from operating activities increased significantly to £5.69 million (2014: £1.41 million). This reflected favourable working capital movements of £3.19 million during the year, relating to cash received in advance to satisfy demand for new gTLD's.

· Net cash was £19.06 million at the end of the year (2014: £3.06 million). The cash balance at the year-end was
boosted by the equity raise of £9.40 million (after fees) during December 2015, with a view to completing the
acquisition of the Instra Group. The initial cash consideration of £14.56 million for the Instra Group was settled in January 2016, funded by the year-end cash balance and a £3.50 million debt facility which was drawn in January 2016.

Operational highlights

· A successful year proving the scalability of the group with revenues growing by 71% to £10.39 million
(2014: £6.07 million) and adjusted EBITDA growing by 89% to £3.25 million (2014: £1.72 million).

· All three divisions experienced growth in both revenues and profits.

· First full year of trading from retailer Internet.BS contributed £3.33 million of revenue to the Retail
division, representing 21% revenue growth over the run rate pre-acquisition.

· Wholesale Division was ranked as the world's Number One new TLD registry services provider by
volume, increasing market share from below 20% to above 23%, with five Top-Level Domains ('TLDs') in
the top 20, and 14 TLD launches in 2015.

· Enterprise revenues included £3.22 million (2014: £1.61 million) of premium domain name sales along
with a registry licence sale to a major telecommunications operator, the first revenues post-launch from
Dot Brand clients and the first domain name management software sale under CentralNic's ownership.

Post year end

· Acquisition of Instra Group completed on 14 January 2016 for a total consideration of £16.02 million (£14.56 million cash, £1.46 million equity) subject to adjustment for working capital. Instra Group generated unaudited revenue of £7.86 million and Adjusted EBITDA of £1.18 million in the year ended 30 June 2015.

· Cash consideration for the Instra Group acquisition was funded by the equity placing in December 2015 together
with the draw-down of a secured debt facility in January 2016 comprising a £3.50 million secured term loan
(amortising over a three year period) and from existing cash balances.

· New Top-Level Domains (TLDs) contracted but not launched during 2015: .contact, .forum, .pid, .realty; while
the .store TLD launched in April 2016.

· Unprecedented scaling of Wholesale business with 100% increase in volumes from two million to four million
between November 2015 and April 2016.

Commenting on the results, Mike Turner, Chairman of CentralNic, said:

'2015 was a positive year for the Group, with progress made in terms of increasing the scale of the business. While the Instra Group acquisition was completed in early January 2016, much of the diligence had been completed during the second half of 2015, culminating in the fund raising and General Meeting that took place at the end of the year. I was delighted to see the Group execute this acquisition, with high levels of support from shareholders and other stakeholders. The Instra Group acquisition is transformational for the Group, providing access to new markets, additional products, a strong customer base, well established brands and an exciting white label offering.

'The opportunity in our market is considerable, with the continuing roll out of new Top-Level Domains and enduring demand for established generic and country code Top-Level Domains presenting the Group with retail and wholesale opportunities across the majority of the world's markets. Indeed, while the world's internet users are still less than half of the global population, the industry is set to continue growing, especially with increasing access to mobile data devices across emerging markets.

'There is still work to be done to transform our business but we have demonstrated positive steps with the acquisition and integration of Instra.

'Assuming continued progress in all areas of our business, at this stage of the year we remain confident in the outlook for 2016.'

-Ends-

For further information:

About CentralNic Group plc

CentralNic (LSE: CNIC) is a London-based AIM-listed company which earns revenues from the worldwide sales of internet domain names over its proprietary technology platform. These domain names are sold on an annual subscription basis and paid for by customers upfront, making CentralNic a cash-generative business with annuity revenue streams.

CentralNic comprises three business lines within the domain name industry. It operates a global wholesale network, supplying domain names to over 1,500 vendors in 77 countries. CentralNic is the exclusive wholesaler for over 30 new Top-Level Domain extensions (the new alternatives to .com and .net), including .xyz, .site, .online, .website, and .space which are ranked among the top twenty most subscribed new Top-Level Domain extensions. Almost one in four of all domains registered under new TLDs globally uses the CentralNic platform, ranking CentralNic as the leading global supplier with over four million of these domains under management.

CentralNic is also a leading global domain name retailer, with retail websites including internetbs.net, buydomains.london and domain.luxury, as well as most recently instra.com and others following its acquisition of global domain name retailer Instra Group. Additionally, via its enterprise programme, CentralNic supplies domain names (including high-value premium domain names), software and services directly to large corporations and governments.

For more information please visit:www.centralnic.com

Chairman's Statement

In September 2015 I was delighted to accept the role of Chairman of the CentralNic Group, and since that date I have been pleased to see the Group's transition into a larger and more diverse business, notably with a significant retail presence. At this stage of the Group's development, in a consolidating market, step-changes in scale are clearly attractive as we seek to improve the Group's capabilities and quality of earnings, creating and maintaining value for our shareholders.

2015 was a positive year for the Group, with progress made in terms of increasing the scale of the business. While the Instra Group acquisition was completed in early January 2016, much of the diligence had been completed during the second half of 2015, culminating in the fund raising and General Meeting that took place at the end of the year. I was delighted to see the Group execute this acquisition, with high levels of support from shareholders and other stakeholders. The Instra Group acquisition is transformational for the Group, providing access to new markets, additional products, a strong customer base, well established brands and an exciting white label offering. Along with my Board colleagues, I look forward to delivering the opportunities provided by the acquisition.

It was also noteworthy that our Retail division's Internet.BS, a domain retailer which CentralNic acquired in June 2014, enjoyed 21% organic revenue growth in 2015, its first full year of earnings under CentralNic. Part of the strategy for Internet.BS was to expand the range of products offered to customers, in particular as new generic Top-Level Domains were launched onto the market. In total 49 new TLDs were added to the Internet.BS online store during the year, with pleasing results.

In 2015 the roll out of the new Top-Level Domains accelerated. This is the largest change in the industry since the earliest days of the internet, and it means there are more choices for domain name consumers than ever before. Indeed it is one of the reasons that expansion of our Retail business is strategically attractive given so many different domains to supply.

Our Wholesale business also benefitted from the expansion, with 14 new gTLDs launched during 2015. Alongside these launches, the .xyz domain continued occupying the market-leading position by volume, with CentralNic's systems and processes scaling admirably to cater for very high levels of demand, especially from Asian markets.

I was very pleased to welcome new Board members shortly after my own appointment, namely new Executive Director and CEO of the Retail division, Desleigh Jameson from Instra Group, as well as a new Non-Executive Director, Iain McDonald, who is also now the Audit Committee Chair. These appointments have strengthened the Board and its sub-committees, which I see as vital to ensuring the business is well governed. I would also like to thank former Board members, Robert Pooke and my predecessor, John Swingewood, for their services to the business over the preceding years.

I believe it is important to regularly review the Group's strategy, to ensure it remains best-suited in a rapidly evolving business environment to deliver our ambitious growth plans while striving for performance improvements. As our markets, capabilities and products evolve so must our strategy and I look forward to working with the Board and the Executives to realise our strategic goals and objectives, not least to ensure we maintain focus on the opportunities of most value to the Group as well as managing a business of growing scale.

Performance

I am pleased to report that the Group's financial performance was in line with expectations, with a further year of significant growth in revenues and Adjusted EBITDA.

The Group's net revenue grew by over 70%, reflecting a full year of revenues from a growing Internet.BS, trading valuable premium domain names on the secondary market and steady organic growth in the Wholesale business. Adjusted EBITDA also grew by 89% to £3.25million (2014: £1.72million) reflecting the growth in revenues. Net cashflow from operating activities improved to £5.69 million (2014: £1.41 million) reflecting the working capital dynamics associated with the new Top-Level Domains and the strong cash-generative business model.

In terms of divisional performance, it was particularly encouraging to see the Retail business revenues growing to £3.41m, an increase of 120% over the prior year (2014: £1.55m) or 21% on a proforma basis. The growth included the first full year of Internet.BS revenues combining with growth in the underlying run rate, boosted by strong demand for .com domain names and the addition of market-leading new gTLDs such as .xyz and .site. This was pleasing in the context of a market which continues to exhibit low levels of awareness of the new domain names available.

The Group's Enterprise division also continued to make progress, with substantial premium domain name sales combining with the launch of our clients' Dot Brand Top-Level Domains and a significant software licence sale to a Telecommunications operator, to deploy for their new Dot Brand domain registry. The Board regards larger corporates as an attractive segment, where we believe the Group can add considerable value in satisfying a number of corporate clients' domain name requirements. This segment will form a key focus for the business in the coming years.

The year also saw the first sale of the DomiNIC Domain Management software under CentralNic's ownership, a modest sale to a banking institution to assist them in securely managing their domain portfolio. Progress with DomiNIC has been slower than expected in terms of converting a pipeline of opportunities and is an area of focus for the Board. Unlocking the potential of DomiNIC should be further enabled by the acquisition of dnsXperts UG that we completed during 2015, the developers/implementers of the DomiNIC software.

In the Wholesale business, it was encouraging to see net revenue growing to £3.13 million, an increase of 10% compared to the previous year (2014: £2.83 million). The mix of business in this division continues to evolve, with higher volumes coming from the new gTLDs but with a lower average sale price than the lower volume SLDs. A balanced portfolio approach is required, while recognizing that market demand is more geared to the generic Top-Level Domains, such as .xyz and .website. We recognize the need to continue our successful strategy of scaling up activity levels in this division to sustain growth. Our ability to scale proves we are a strong competitor, which should serve us well in the potential future application rounds of new gTLDs.

Dividend

While it remains the intention of the Group to generate income returns for investors, in the future as part of a progressive and commercially prudent dividend policy, due to the continued expansion opportunities within the sector the Directors do not propose a final dividend in 2015.

Outlook

The outlook is encouraging, with the continuing roll out of new Top-Level Domains and enduring demand for established generic and country code Top-Level Domains presenting the Group with retail and wholesale opportunities across the majority of the world's markets. Indeed, while the world's internet users are still less than half of the global population, the industry is set to continue growing, especially with increasing access to mobile data devices across emerging geographic territories.

While it is probably fair to say there is an ongoing 'awareness shortfall' regarding the additional consumer choices presented by the new Top-Level Domains, adoption in the year by high profile brands, such as Google's new parent Alphabet who adopted abc.xyz, did stimulate additional demand for .xyz domain names as well as media interest. We would expect further coverage in the future as other so called 'super brands' start launching and using their own TLDs.

The acquisition of the Instra Group brought a step change in Group revenues and resources from January 2016. The Group recognises the need to integrate the businesses well, in turn delivering synergies and generating new revenue streams as well as benefitting from exposure to faster growing developing geographic markets.

The Group is also focussed on domain-related services for larger corporate customers in its Enterprise division. It will be a high priority item for the business to unlock the potential of the corporate market segment for domain names and related services.

The amount of change in the business is significant, with activity levels high across each of our three divisions and with our mergers and acquisitions programme continuing to bring considerable benefits and present new and interesting opportunities to the Group. I would like to take this opportunity to thank staff across the enlarged group for their dedication to CentralNic and for the passion they have for their industry. I would also particularly like to thank our existing and new investors who have supported our team during a transformational period for the Group.

There is still work to be done to transform our business but we have demonstrated positive steps with the acquisition and integration of Instra.

Assuming continued progress in all areas of our business, at this stage of the year we remain confident in the outlook for 2016.

Mike Turner, Chairman

25 May 2016

Chief Executive Officer's Report

In 2015 CentralNic's growth strategy was validated not only by the strong results delivered, but also by the strategic successes across the business.

Performance Overview

CentralNic delivered continued promising growth: achieving billings of £26.87 million (a 172% increase over 2014), £10.39 million in revenues (up 71% over 2014) and EBITDA of £3.25 million (an increase of 89% over 2014). All three of our divisions - Wholesale, Retail and Enterprise - experienced profitable growth above 10% based on their respective EBITDA contributions.

Our strategic successes were equally notable. In 2015 the world's largest company, Alphabet (the newly-launched holding company for Google), selected and now uses a CentralNic-powered domain name abc.xyz as the address for its official website. In 2015 CentralNic emerged as the world's leading wholesaler of domains using new Top-Level Domains. We grew our retail business Internet.BS, with revenues growing organically by 21% in its first full year under our ownership. We won our first client for DomiNIC, our domain name management software, and achieved initial revenues from licensing our software to a Dot Brand registry operator.

At the end of the year the Group had cash balances of £19.06 million (2014: £3.06 million) reflecting the equity placing in December (in readiness for the completion of the acquisition of the Instra Group in January 2016) combining with favourable working capital movements as a result of demand for the new gTLDs.

Wholesale Division

With revenues of £3.13 million (2014: £2.83 million) in its Wholesale Division, CentralNic emerged as the world's leading wholesaler (or 'Registry Backend Provider') of domain names using new gTLDs. CentralNic had more retailers actively selling its new gTLDs than any competitor; it was the first wholesaler to achieve the two million domains under management milestone; and it finished the year with more new gTLD domains under management than any competitor, including five new TLDs in the ranks of the Top Twenty sellers, from a total universe of around 800 launched by CentralNic and its peers. (Source: industry statistics website ntldstats.com)

A number of factors are contributing to the success of CentralNic's Wholesale division. These include our proven ability to win new business, with nine of the TLDs we launched originally contracted to competitors, and another, .COOP, migrated onto our platform after we won the contract through an open tender.

Our focus on emerging markets, especially China, which predates our IPO in 2013, has proven prescient, as the Chinese market for domain names experienced growth unprecedented anywhere in the world during 2015. China continues to be our largest market for new registration volumes globally, whilst our core recurring renewal revenues are spread around the world, mitigating our exposure to future fluctuations in any individual market.

CentralNic wholesales a wide range of TLDs from higher priced restricted domains like .reit (for Real Estate Insurance Trusts) and .tickets to mass market generic domain names priced affordably for emerging markets, such as .xyz, .online, .website, .site and .space, which are all in the top twenty best-selling new TLDs by volume.

.xyz continues to be the clear leader among all new Top-Level Domains, finishing the year with 1.8 million domains under management. .xyz is also the new TLD with the highest number of websites built on it, attracted by the .xyz brand which has become synonymous with 'new' and 'cool.' .xyz customers include not only the official website of Alphabet, but also Facebook's Mark Zuckerberg who used the domain http://stream.hacktv.xyz/qandawithmark-ext to post a video of one of his town hall meetings, and the co-founders of Skype, whose new business of supplying robots for deliveries, can be found at starship.xyz.

CentralNic's Wholesale Business is agile and is able to scale to satisfy market demand. Prior to the launch of the new TLDs, CentralNic's Wholesale business had been reliant on SLDs such as .uk.com. Whilst these domains continue to contribute to revenues and profits, the mix of revenues is evolving towards the new TLDs due to market demand, and we expect it to continue to evolve as we take advantage of new opportunities.

Retail Division

CentralNic's Retail Division revenues in 2015 were £3.41 million (2014: £1.55 million). Internet.BS, the domain name retailer acquired by CentralNic in June 2014, experienced growth by over 100,000 domains under management in 2015, an increase of 17%. This growth was achieved in the context of a highly competitive market with aggressive new entrants seeking to win customers in the domain name investor/web professionals category. The Retail division also launched new dedicated websites for the TLDs .reit, .cymru, .wales and .bank. Accent Media (in which CentralNic holds a minority equity stake) launched the .tickets TLD to a responsive industry with early clients including all teams in the US National Football League, Major League Baseball and National Basketball Association, Formula 1, English Premier League teams, and popular music artists such as Adele and U2 among others.

Significant management and Retail division resources were deployed during 2015 on the acquisition of Instra Group, which completed in January 2016. This deal enhances CentralNic's quality of earnings by increasing the amount of recurring revenues as a percentage of total earnings. Instra gives CentralNic access to a new customer base of corporate and SME customers. Moreover it enhances CentralNic's capabilities with the proven skills required to profitably enter emerging markets and to satisfy customers' needs for almost any domain name.

Enterprise Division

CentralNic's Enterprise Division continued to grow in 2015, with revenues of £3.86 million (2014: £1.69 million). Our premium domain name business performed well with revenue of £3.22 million achieved during the year (2014: £1.61 million). And with our assistance a number of corporate clients completed the ICANN processes required to obtain their own Dot Brand Top-Level Domains, with the objective of launching these in 2016.

CentralNic also secured the first enterprise clients for our domain name registry and workflow automation software products, which enable enterprise customers to manage domain name related services internally, rather than relying on more expensive outsource service providers. To ensure the ongoing support of this software, CentralNic acquired dnsXperts in 2015, a small German technology company specialising in domain name related development and support.

Investor market activity

CentralNic was active in the investor market in 2015, conducting one fund raise to accommodate an institutional investor seeking to join our share register, and a second towards funding the Instra acquisition. We are delighted that a number of funds new to the Company have elected to invest in our business, and we thank our investors for their continued support.

Outlook

I am delighted to report a number of major steps forward in 2016. Our Wholesale business was the first to cross the three million new TLD domains under management mark in February 2016 and four million new TLD domains under management milestone in April 2016. We also announced that CentralNic is the exclusive global wholesaler for the new TLD .store, which was launched in April 2016. We completed the acquisition of Instra in January 2016 and have made good progress with the integration of this business.

Demand for value-priced new TLDs continues in China, where CentralNic's Wholesale Division has a leading position. In addition to enjoying continued growth in this sector, CentralNic has a healthy pipeline of new TLD clients with industry-specific domains to launch in 2016 and beyond. Additionally, the industry regulator ICANN has commenced a review of the new TLD programme as a first step towards opening future rounds of applications - meaning future opportunities for CentralNic.

Continuing demand from emerging markets and for industry-specific and country-specific TLDs is expected to continue to drive growth in our Retail division, which is among the leading vendors of domains ranging from .law for lawyers to .ae for the United Arab Emirates.

Increased concern in the corporate world about cyber-security is likely to lead to increased demand for expertise on vulnerabilities in the areas of domain names and DNS. CentralNic recognises the need to adapt its enterprise services to compete in this area of online security and protection. Strategic plans are underway to supplement its existing services with additional offerings to position it to win business in this segment.

And the earliest stages of the new engagement of enterprise with domain names is starting to emerge, with companies like Barclays Bank, BNP Paribas, BMW and Google starting to use their own Top-Level Domains. We expect to see these Dot Brand initiatives gain momentum from 2016, including with the introduction of Internet of Things applications, which could also create entirely new opportunities for CentralNic.

CentralNic has proven its ability to identify and exploit growth opportunities in the domain name industry, by winning clients, launching new businesses and successfully acquiring and integrating other businesses. This dynamic and agile approach to a rapidly evolving market has driven CentralNic's 71% revenue growth in 2015, and we fully anticipate it will continue to serve the Group equally well in the future.

Ben Crawford, Chief Executive

25 May 2016

CENTRALNIC GROUP PLC

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended 31 December 2015

All amounts relate to continuing activities.

*Earnings before interest, tax, depreciation and amortisation, non-trading items and non-cash charges.

**Restatement of 2014 reflects reallocation of merchant fees from administrative expenses to cost of sales.

CENTRALNIC GROUP PLC

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 31 December 2015

CENTRALNIC GROUP PLC

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 31 December 2015

· Share capital represents the nominal value of the company's cumulative issued share capital.

· Share premium represents the cumulative excess of the fair value of consideration received for the issue of shares in excess of their nominal value less attributable share issue costs and other permitted reductions.

· Retained earnings represent the cumulative value of the profits not distributed to shareholders, but retained to finance the future capital requirements of the CentralNic Group.

· Share based payments reserve represents the cumulative value of share based payments recognised through equity.

· Foreign exchange translation reserve represents the cumulative exchange differences arising on group consolidation.

· Foreign currency hedging reserve represents the effective portion in the fair value of derivatives.

CENTRALNIC GROUP PLC

CONSOLIDATED STATEMENT OF CASHFLOWS

For the year ended 31 December 2015

CENTRALNIC GROUP PLC

NOTES TO FINANCIAL STATEMENTS

1. Basis of preparation

The financial statements are measured and presented in sterling (£), unless otherwise stated, which is the currency of the primary economic environment in which the entities operate. They have been prepared under the historical cost convention, except for financial instruments that have been measured at fair value through profit and loss.

The financial statements have been prepared on the going concern basis, which assumes that the Group will continue to be able to meet its liabilities as they fall due for the foreseeable future. The financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the EU ('IFRS') issued by the International Accounting Standards Board ('IASB'), including related interpretations issued by the International Financial Reporting Interpretations Committee ('IFRIC').

The Directors have reviewed forecasts and budgets for the coming year having regard to both the macroeconomic environment in which the group operates, historic and current industry knowledge and contracted trading activities and the future strategy of the Group. As a result of that review the Directors consider that it is appropriate to adopt the going concern basis of preparation.

2. Segment analysis

CentralNic is an independent global domain name service provider. It provides wholesale, retail and enterprise services and it is the owner and registrant of a portfolio of domain names, which it uses as SLD domain extensions. Management reviews the activities of the CentralNic Group in the segments disclosed below.

CENTRALNIC GROUP PLC

NOTES TO FINANCIAL STATEMENTS

The geographical locations of the non-current assets are primarily located in Europe (including UK) and ROW. The total non-current assets of the Europe segment at 31 December 2015 were £3,073,000 (2014: £4,188,000) and the total non-current assets of the ROW segment were £3,842,000 (2014: £4,007,000).

3. Revenue

The CentralNic Group's revenue is generated from the following geographical areas:

Enterprise including premium domain name sales by nature are subject to annual variation depending on customer demand.

Consultancy and other services previously disclosed separately are now included in the appropriate division.

The following table shows customers that represented 10% or more of the wholesale domain sales:

No single customer contributes greater than 10% or more of the retail domain sales.

The enterprise including premium domain name sales were principally driven by premium domain name sales of £3,221,000 (2014: £1,612,000) of which £3,079,000 was made to one customer (2014: £1,610,000 to one customer)

CENTRALNIC GROUP PLC

NOTES TO FINANCIAL STATEMENTS

4. Income tax expense

A reconciliation of the current income tax expense applicable to the profit before taxation at the statutory tax rate to the current income tax expense at the effective tax rate of CentralNic is as follows:

The Company provides for income taxes on the basis of its income for financial reporting purposes, adjusted for items that are not assessable or deductible for income tax purposes, in accordance with the regulations of domestic tax authorities.

The effective rate of tax for the year is 37.7% (2014: 30.1%), when excluding the impact of the non-cash share based payments expense the effective rate of tax for the year is 31.0% (2014: 21.0%).

In the UK, the applicable statutory tax rate for 2015 is 20% (2014: 21%).

In the USA, federal taxes are due at 34% on taxable income. Under California tax legislation an additional 8.84% of state tax is due on taxable income.

In Germany, federal taxes are due at 15% on taxable income. With an additional 5.5% solidarity surcharge due on the income tax. A community business tax of c.17% is also levied with rates determined by the municipality.

CENTRALNIC GROUP PLC

NOTES TO FINANCIAL STATEMENTS

5. Earnings per share

Earnings per share has been calculated by dividing the consolidated profit after taxation attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during the period.

Diluted earnings per share has been calculated on the same basis as above, except that the weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares (arising from the Group's share option scheme and warrants) into ordinary shares has been added to the denominator. There are no changes to the profit (numerator) as a result of the dilutive calculation.

CENTRALNIC GROUP PLC

NOTES TO FINANCIAL STATEMENTS

6. Investments

The Company owns less than 20% of the following undertakings which are incorporated in the United Kingdom (UK):

The Company owns more than 50% of the following undertakings which are incorporated in the United Kingdom, USA, the Commonwealth of The Bahamas, Germany, Australia and New Zealand:

* The acquisition of dnsXperts UG was completed on 1 July 2015.

** These companies were incorporated during the year for the purpose of acquiring the entire share capital of the Instra Group. The acquisition was completed in January 2016, see note 12.

CENTRALNIC GROUP PLC

NOTES TO FINANCIAL STATEMENTS

7. Share capital

The Company's issued and fully paid share capital is as follows:

On 17 June 2015 the Company raised £2,300,000 (gross of fees) via a placing of 5,750,000 new ordinary shares of 0.1 pence each at 40 pence per share. A share premium was created on the issue of these shares totalling £2,294,250.

On 29 December 2015 the Company raised £10,000,000 (gross of fees) via a placing of 25,000,000 new ordinary shares of 0.1 pence each in connection with the acquisition of the Instra Group at 40 pence per share. A share premium was created on the issue of these shares totalling £9,975,000.

The Company has no authorised share capital.

8. Trade and other receivables

As of 31 December 2015, trade receivables of £209k (2014: nil) were past due but not impaired. These primarily relate to one customer for whom there is considered a low risk of default. Deferred costs reflect the wholesale cost of domain names in the Internet.BS retail business. Supplier payments on account reflect payments to domain name registries for use against future wholesale domain purchases within the Internet.BS retail business.

The loan to third party of £102k at 31 December 2014 related to dnsXperts UG and was converted to equity on acquisition of dnsXperts UG by Centralnic Ltd on the 1 July 2015.

The prepaid finance costs relate to the debt facility agreement signed on 8 December 2015.

Deferred receivables represent amounts due from Jabella Group Limited, a shareholder during the period. Amounts due from Jabella Group Limited were interest free until 31 August 2013, from which time the balance accrued interest at 2% above LIBOR (2015: £18,032; 2014: £17,502). The loan was granted in August 2011 for an initial term of five years, the balance is currently £729,268. The directors consider the loan to be fully recoverable. The directors consider that the fair value of this receivable is not materially different from the carrying value.

CENTRALNIC GROUP PLC

NOTES TO FINANCIAL STATEMENTS

9. Trade and other payables and accruals

10. Business combinations

On 9th of February 2015 the Group acquired a 45% stake in dnsXperts UG ('dnsXperts') an entity which provides services in connection with a product owned by CentralNic Ltd called DomiNIC (a domain management software solution which originated in German-speaking Countries), by converting a loan of €60,000 (£47,785) into equity. At this point it is considered that the CentralNic Group does not exert a significant influence over dnsXperts UG and has therefore classified the investment in associate using the equity method.

The following table summarises the financial information of dnsXperts as included in its own financial statements, adjusted for fair value adjustments at acquisition and differences in accounting policies. The table also reconciles the summarised financial information to the carrying amount of the CentralNic Group's interest in dnsXperts. The information includes the results of dnsXperts only for the period from 9 February 2015 to 30 June 2015, because dnsXperts became a wholly owned subsidiary on 1 July 2015.

On 1st of July 2015 the Group acquired the remaining 55% stake of dnsXperts UG by converting a loan of €110,000 (£86,341), with accrued interest of €11,297 (£8,588) and a cash consideration of €50,000 (£35,554). The rationale for completing the full acquisition of dnsXperts UG was to expand and complement existing services offered by the Enterprise Division and to enable the Group to utilise technical expertise within dnsXperts UG.

CENTRALNIC GROUP PLC

NOTES TO FINANCIAL STATEMENTS

The CentralNic Group elected to measure the non-controlling interest in the acquiree at the proportionate share of its interest in the acquiree's identifiable net assets at fair value.

The following table summarises the consideration to acquire the share capital of dnsXperts UG and the fair value of the assets and liabilities at the acquisition date in line with group accounting policies.

The deferred cash consideration was paid on the 19 February 2016. The exchange rate used in the above table was the spot rate at 1 July 2015 of €1.40633/£ for the fair values and the prevailing exchange rate when the initial loans were made.

The re-measurement to fair value of the CentralNic Group's existing 45% interest in dnsXperts resulted in a gain of £15,881 (£28,144 less the £12,263 carrying amount of the equity accounted investee at the date of acquisition). This amount has been included in finance income.

The gross amount of trade receivables which is £21,000 is approximately at its fair value. None of the trade receivables have been impaired and it is expected that the full contractual amounts can be collected.

From the date of acquisition, the acquired group contributed revenue of £268,000 and net loss of £65,000 to the Group's result. If the acquisition had taken place at the beginning of the year, Group revenue and loss for the 2015 year would have been £484,000 and £149,000 respectively.

CENTRALNIC GROUP PLC

NOTES TO FINANCIAL STATEMENTS

11. Share Options and Warrants

Share Options

The share option scheme, which was adopted by CentralNic during 2013, was established to reward and incentivise the executive management team and staff for delivering share price growth.

The share option scheme is administered by the Remuneration Committee.

There were 1,144,000 options granted during 2015, no options were granted in 2014. Out of the 4,604,583 outstanding options (2014: 3,556,000), 2,019,583 options (2014: 968,895) were exercisable. Options exercised in 2015 resulted in 75,834 shares (2014: nil) being issued at a weighted average price of 10p each. In addition 14,583 options lapsed during the year.

A charge of £316,199 (2014: £222,269) has been recognised in the statement of comprehensive income for the year relating to these options.

These fair values were calculated using the Black Scholes option pricing model. The inputs into the model were as follows:

Options are exercisable in accordance with the contracted vesting schedules. The expected volatility was determined with reference to similar entities trading on AIM.

Details of the share options outstanding at the year end are as follows:

* weighted average exercise price.

The weighted average remaining contractual life of the options outstanding at the statement of financial position date is 8.0 years.

CENTRALNIC GROUP PLC

NOTES TO FINANCIAL STATEMENTS

Warrants

On 12 August 2013, CentralNic Group executed a warrant instrument to create and issue warrants to Zeus Capital to subscribe for an aggregate of 1,772,727 ordinary shares. The warrants will expire six years after admission and were exercisable after the first anniversary of admission (2 September 2014) at the placing price of 55p. The ordinary shares to be allotted and issued on the exercise of any or all of the warrants will rank for all dividends and other distributions declared after the date of the allotment of such shares but not before such date and otherwise pari passu in all respects with the ordinary shares in issue on the date of such exercise allotment.

These fair values were calculated using the Black Scholes warrant pricing model. The inputs into the model were as follows:

A charge of £675,409 was recognised in the share premium account in 2013.

CENTRALNIC GROUP PLC

NOTES TO FINANCIAL STATEMENTS

12. Post balance sheet events

On 14 January 2016 CentralNic Group completed the acquisition of the entire issued share capital of the companies forming the Instra Group for a total consideration of AU$33 million, consisting AU$30 million in cash and AU$3 million in shares in CentralNic Group plc, plus a cash adjustment for working capital at completion.

The following table summarises the consideration to acquire the share capital of the Instra Group and the provisional fair value of the assets and liabilities at the acquisition date in line with group accounting policies.

The fair value of the 3,656,450 ordinary shares issued as part of the consideration paid was based on the 40 pence per share achieved in the placing of the 29 December 2015. The mid-market foreign exchange rate used was as at 12 noon on 13 January 2016 being the business day pre-completion.

AU$5m of the cash consideration has been placed in to an escrow account and will be released to the vendor over 5 years in equal instalments on the anniversary of the completion date.

The cash consideration was funded by the equity placing of the 29 December 2015, together with a new secured debt facility comprising a £3.5m term loan with the remainder from existing cash balances held by the Group.

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