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Quartery report of R22 Group
for Q1 2019/2020 fiscal yearended September 30, 2019
Poznań, November 15, 2019
Summary and key events3
Agneda
Description and prospects for the development of business segments9
Financial results35
Shares and shareholding 43
Group authorities47
Corporate governance51
SUMMARY
CONSISTENT GROWTH OF THE R22 GROUP
SUMMARY 4
Revenue [m PLN] Adjusted EBITDA* [m PLN] Numer of customers [thous.]
6.78.1
12.9
Q1 17/18 Q1 18/19 Q1 19/20
* EBITDA excluding one-off costs
23.1
31.0
44.4
Q1 17/18 Q1 18/19 Q1 19/20
121
194
243
15
Q1 17/18 Q1 18/19 Q1 19/20 Acquisitions
2.1x
COMMENT OF THE MANAGEMENT BOARD
SUMMARY 5
Ladies and Gentlemen,
We have the pleasure of presenting you the Quarterly Report for 1Q of the
financial year 2019/2020, in which can once again boast of a very impressive
growth rate. During the past quarter we have achieved record results, both in terms
of revenues and profits. These results are due to the hard work of the entire R22
team. Above all, this includes an increase in sales to present clients, acquisition of
new clients and the completion of acquisitions in the CEE region. What is
particularly important is that our efforts translate both into an increase in the scale
our business and its profitability.
In 1Q we launched our operations on the Croatian market and we begun
consolidating two additional Romanian companies as a result of agreements signed
in the previous financial year. Today, we are the leading player on the Polish hosting
and domain market, the second largest player on the Croatian market and the
undisputed leader on the Romanian market. We are well on our way to reach our
goal of building a leader of the Central and Eastern Europe region. We want to reach
that position based on hosting services and domain sales, around which we have
developed a full range of services and tools which address corporate needs in
terms of Internet presence and communications with potential and present clients.
We are achieving that goal both thanks to dynamic organic growth and new
acquisitions. Even now, we are working on new transactions, since we want to
strengthen our position in the countries we already operate in and enter new
markets.
In 1Q of the 2019/2020 financial year, we have completed minority shareholder
buyout in the hosting segment. With this move we have not only made a step
towards reaching a 100% stake in this segment and simplifying the group’s
structure, but we have also made an excellent investment, boosting our stake in the
fastest growing hosting company.
In recent months we were able to share our profits, for the first time ever, with
our shareholders. We have completed that process in two stages. The first was the
stock buyback conducted at the turn of June and July 2019. The stock buyback was
settled on July 3. The second stage was the dividend, which the General Meeting of
Shareholders has approved after the end of the period covered by this report. The
first-ever dividend, totaling PLN 0.3 per share was paid on October 22. According to
the dividend policy adopted in September, in the following years the Managing
Board of R22 will be recommending to shareholders payment of at least 30% of
consolidated net profit attributable to the parent company while increasing the
nominal amount of dividend payment.
Moving next to financial results, it is worth noting the record adjusted EBITDA
totaling PLN 12.9m. That figure is 60% higher than the year before and 20% higher
than in the previous quarter. Factors, which contributed to higher EBITDA included
dynamically growing sales, which rose 43% on a year-on-year basis and totaled PLN
44.4m and higher effectiveness. Dynamic increase in both hosting and omnichannel
segment both contributed, with a 120% EBITDA increase in the latter segment.
Our goal is to build a strong, international position of R22 Group by offering
comprehensive services and instruments for the digitization of business processes,
particularly communications, marketing and sales. We thank our employees, clients
and shareholders who are helping us grow and reach that goal.
Respectfully yours,
Jakub Dwernicki
OVER 40% GROWTH OF REVENUE AND OVER 50% GROWTH OF EBITDA
SUMMARY
Selected consolidated financial data
[thous. PLN] Q1 18/19 Q1 19/20 Change
Sales revenues 31 031 44 437 43%
EBIT 5 280 8 438 60%
Adjusted EBITDA* 8 074 12 918 60%
One off-expenses 175 516 195%
Exclusion of the impact of IFRS 16 on EBITDA - -665
Adjusted EBITDA without the impact of IFRS 16 8 074 12 253 52%
Net profit 3 698 4 868 32%
Net profit of shareholders of the parent company
2 744 3 366 23%
6
Consistent increase in revenue and profits as a result of organic growth
(optimization of the offer, increase of customer satisfaction, sale of
additional services, increase of ARPU) and implementation of acquisitions
One-off costs related to the preparation and implementation of acquisitions
on the Romanian and Croatian hosting and domain market, preparation of
buying out minority shares in the hosting
8.19.0
10.010.8
12.9
Q1 18/19 Q2 18/19 Q3 18/19 Q4 18/19 Q1 19/20
Adjusted EBITDA [m PLN]
*bez uwzględnienia kosztów jednorazowych
31.0
37.2 37.340.1
44.4
Q1 18/19 Q2 18/19 Q3 18/19 Q4 18/19 Q1 19/20
Revenue [m PLN]
HIGH CAPACITY TO GENERATE CASH
SUMMARY
Selected consolidated financial data
[thous. PLN] Q1 18/19 Q1 19/20 Change
Net cash from operating activities 7 410 10 675 44%
Acquisition of property, plant and equipment and intangible assets
-1 545 -1 216 -21%
Payment of liabilities arising from financial leases -584 -1 458 150%
Unlevered FCF 5 280 8 001 52%
Repayment of credits and loans -2 365 -2 469* 4%
Interest paid -748 -934 25%
Cash surplus 2 167 4 598 112%
7
Ability to generate high cash surplus.
Relatively low investment outlays.
30.09.2018 30.09.2019
Net debt 50 242 124 857 +149%1.6
2.42.2
30.09.2018 30.09.2019 30.09.2019***
Net debt / EBITDA**
Dynamic increase in cash generated from operating activities and
unlevered FCF. High conversion of EBITDA to cash flows from operating
activities (83%) and to unlevered FCF (62%).
Increase in net debt related to foreign acquisitions and the acquisition of
minority shares in H88.
** Annualized quarterly EBITDA*** Senior debt excluding the subordinated loan from Fundusz Ekspansji
Zagranicznej FIZAN (PFR TFI)
* Excluding investment loan repayment by Vercom S.A. in the amount of PLN 3,299 thous.on July 1, 2019. At the same time, a current account loan of PLN 5m was launched.
KEY EVENTS
SUMMARY
June 15, 2019Entry on the Croatian hosting and domain market
R22, through its indirect subsidiary H88 Hosting d.o.o., has taken control over the Croatian company Avalon d.o.o. upon the payment of the first
tranche for the transaction. Share purchase agreement was signed on June 11, 2019 and its value totaled EUR 1.85m.
Avalon is the second-largest company on the Croatian market for hosting and domain services, with a 17% market share.
8
June 1, 2019Buyout of minority stakes in the hosting segment
The company and its subsidiary, Vercom S.A., have signed a share disposal agreement with TCEE Fund III S.C.A. SICAR concerning the execution of
the first stage of minority shareholder buyout in the hosting segment. Based on the agreement, R22 S.A. and Vercom S.A. each acquired 7.07% stakes
in H88. The transaction, for a total of EUR 3.8m, was financed with a bank loan.
June 3, 2019Stock buyback
R22 conducted a stock buyback following the decision of its shareholders. The transaction was settled on July 3, 2019 and as a result, H88 SA, a
subsidiary, acquired 80,000 of R22’s shares at PLN 25 apiece.
September 9, 2019Adoption of a dividend policy
The Managing Board of R22 has adopted a dividend policy in which it will recommend to the Shareholders Meeting a dividend payment
representing at least 30% of R22 Group’s consolidated net profit attributable to parent company while increasing the nominal amount of dividend
per share.
October 22, 2019Dividend payment
Pursuant to a decision of the General Meeting of Shareholders and an earlier Managing Board recommendation, R22 shareholders received a PLN
4.23m dividend payment, representing a dividend of PLN 0.3 per share. The dividend was paid from profits for 2018/2019 financial year.
BUSINESS SEGMENTS
DESCRIPTION AND PROSPECTS FOR THE DEVELOPMENT
COMPREHENSIVE SERVICES FOR ENTERPRISES – ALMOST 260 THOUS. CUSTOMERS
DESCRIPTION OF THE ACTIVITY OF R22 GROUP
~260 thous. customers
80%are business customers, mainly SME sector
10
R22 Group provides comprehensive services for enterprises in the field of on-line presence and automation of business processes, in particular communication, marketign and sales.
The basic service of R22 in this area is hosting, around which R22 builds a wide portfolio of services and tools that respond to the needs of companies related to digitization and automation of communication.
Hosting
Domains
Voice
SMS / Mobile
Push notifications
RCS
ENTERPRISES AND INDIVIDUAL CLIENTS
Marketing automation
BUSINESS SEGMENTS OF R22 GROUP
DESCRIPTION OF THE ACTIVITY OF R22 GROUP
Almost 260 thous. serviced clients
11
since 1999 since 2008 since 2005
HOSTING AND DOMAINS OMNICHANNEL COMMUNICATION TELECOMMUNICATION
H88 Group offers hosting services, internet domain registrations around the world and data transfer security
services
Vercom offers platforms and tools for automating marketing and
communication with clients (includingmobile messages , SMS, emails)
Oxylion is a provider of radio, cable and fiber optic Internet, VoIP and HD television. It has 1,300 transmitters
and 100 km of optical fiber
STRUCTURE OF THE CAPITAL GROUP AS AT SEPTEMBER 30, 2019
DESCRIPTION OF THE ACTIVITY OF R22 GROUP
Changes in the Capital GroupChanges in the Group (including acquisition of companies operating in the field of hosting on the Romanian and Croatian market, merger of subsidiaries
in the area of hosting and omnichannel) were presented and described in the consolidated financial statements.
On March 15, 2019, R22 has signed an agreement with TCEE Fund III S.C.A. SICAR, thanks to which its stake in H88 may increase to 100%. On July 1, 2019,
R22 purchased 15,324 shares of H88, while Vercom purchased 15,323 shares; after this transaction R22 has 78.64% shares of H88 and Vercom has 7.12%
shares. The second stage of the transaction may be executed by February 10, 2020. The transaction was described in the consolidated financial statements.
12
RedGroup Sp. z o.o.
NIRO Media Sp. z o.o.
78.64% 98.73%71.65*%
100%
100%
Rockdrop Holdings Ltd.
30%
45%25%
H88 S.A. Vercom S.A. Oxylion S.A.
Appchance Group Sp. z o.o.
User.com Sp. z o.o.
39.01%
22.03%
Kei.pl Sp. z o.o.
100%
GĂZDUIRE WEB S.R.L.
100%
100%
S.C. WEB CLASS IT S.R.L.
NET DESIGN S.R.L.
100%
60%
H88 HOSTING S.R.L.
H88 HOSTING D.O.O.100%
HostvisionS.R.L.
ROSPOT S.R.L.
100%
31%
Avalon D.O.O.100%
Top Level Hosting S.R.L.
Blugento S.A.
100%
100%
7.12%
*At present, R22 S.A. has a 60.12% stake in Vercom S.A., with treasury shares representing 16.08% (treasury stock will be canceled pursuant to a decision of Vercom’s GM on September 2019) and Vercom S.A.’s Managing Board owning a 23.8% stake.
Appchance Sp. z o.o.21.26%
78,.4%
HOSTING
HOSTING OUTSOURCING IS THE ONLY ECONOMICALLY JUSTIFIED OPTION FOR MOST COMPANIES
DESCRIPTION OF THE ACTIVITY OF R22 GROUP – HOSTING
The object of the hosting segment's activity is to provide server space and provide
services in order to maintain certain electronic content on the Internet and to sell
and maintain Internet domains and SSL certificates in the subscription model.
In the hosting segment, one can point to three interdependent areas of revenue
generation:
• Strictly hosting operations, carried out in the form of shared hosting, VPS (Virtual
Private Server), dedicated servers;
• Sale of internet domains and their transfer;
• Other services, so-called VAS (Value Added Services), including, among others:
SSL certificates, SEO & SEM, AntiDDOS protection
Share in the revenues of the Hosting Segment in Q1 2019/2020
37%
23%
14%
26%
14
USER CONTENTS DOMAIN(+SSL)
SERVER
SHARED HOSTINGDOMAINS
VAS (i.a. SSL) VPS (CLOUD)
AND DEDICATED SERVER
ADJUSTED FINANCIAL RESULTS OF THE HOSTING SEGMENT
DESCRIPTION OF THE ACTIVITY OF R22 GROUP – HOSTING
Almost 50% increase in revenue yoy - resulting primarily from the increase
in sales of web hosting services (by 105% yoy).
The beneficial effect on the result was the acquisition of new customers,
increased sales of additional services, growth in ARPU and acquisitions
on Romanian and Croatian markets.
About 50% increase in EBITDA
Raising profitability due to synergy and optimization activities
One-off costs include transaction costs related to acquisitions and
purchase of minority shares in H88, i.e. mainly due diligence, legal and
transaction advisory related
[thous. PLN] 30.09.2018 30.09.2019
Net debt 41 595 83 299
[thous. PLN] Q1 2018/2019 Q1 2019/2020 Change
Sales revenue 13 883 20 723 49%
EBIT 3 862 4 159 8%
Amortization and depreciation
1 468 -2 478 -269%
EBITDA 4 330 6 637 53%
One-off costs -175 -185 6%
Adjusted EBITDA 4 505 6 822 51%
Margin 32,4% 32,6%
Exclusion of the impact of IFRS 16 on EBITDA
-364
Adjusted EBITDA without the impact of IFRS 16
4 505 6 458 43%
CapEx 728 1 476 103%
CapEx % 5,2% 7,1%
15
Higher CAPEX level this year compared to last year was due to one-time
factors: the buyout of perpetual licenses for hosting software (savings in
future operating expenses) and spending on new servers as a result of the
integration of companies in Poland.
An increase in debt level as a result of new acquisitions in CEE region.
SELECTED KPI OF HOSTING SEGMENT
DESCRIPTION OF THE ACTIVITY OF R22 GROUP – HOSTING
WZROST ORGANICZNY+X% klientów
65
120
17849
58
7 15
FY 17/18 FY 18/19 Q1 19/20 Acquisition
Number of hosting customers (thous.)
Organic growth Acquisition
151
242299
67
54
1840
FY 17/18 FY18/19* Q1 19/20** Acquisition
Number of domains (thous.)
Organic growth Acquisition
197234 240
FY 17/18 FY 18/19 Q1 19/20
LFL (Cash)
62
66 67
FY 17/18 FY 18/19 Q1 19/20
MSSF
ARPU LTM – hosting ARPU domains***
16
Increase in the number of customersthanks to organic activities and acquisition.
Further increase of APRU hosting servicesand domains
Taking into account the acquisitions made,the Group has approximately 200 thous.hosting clients and almost 360 thous.domains.
Stable churn, below the market average:Hosting 17,0%Domains 28,5%
High level of customer service and clientsatisfaction. Stable NPS and First TimeResponse indices.
* Including 23.5 thous. domains in the promotion for PLN 0** Including 31.9 thous. domains in the promotion for PLN 0*** ARPU excluding free domains
FOREIGN EXPANSION – CENTRAL AND EASTERN EUROPE
DESCRIPTION OF THE ACTIVITY OF R22 GROUP – HOSTING 17
As a result of the acquisition of six companies, H88 HOSTING SRL has gained a strong position as a leader in the Romanian hosting and domains market, achieving
almost 25% of its shares in it.
Companies belonging to the Group service approx. 50,000 customers, reaching approx. EUR 5m of annual revenue (estimated market size of approx. EUR 20m).
Development of the R22 Group in the CEE region
Business markets R22
The Group begun its international expansion in the financial year 2018/2019 by
taking over three companies on the Romanian domain and hosting market. In 2019
the Group continued the acquisition process in Romania while beginning its activities
on the Croatian market by taking over the second largest payer in that country.
The transactions are financed with bank debt (50%), with PFR TFI debt financing and
own resources each accounting for approximately 25%.
As a result of the takeover of Avalon D.O.O., the second largest player on the Croatian market, H88 HOSTING D.O.O., became the no. 2 company on the local
hosting and domain market, with an approximately 17% market share.
July 9, 2019 H88 HOSTING D.O.O. and R22 S.A. concluded with the Foreign
Expansion Fund FIZ AN managed by PFR Towarzystwo Funduszy Inwestycyjnych
S.A. EUR 0.9m loan agreement. The loan is targeted for acquisitions on the Croatian
market.
The only security for the contract is R22’s guarantee that all obligations under the
contract will be fulfilled if the borrower, H88 HOSTING D.O.O. fails to perform these
obligations.
The loan was granted for a period of six years, with a repayment date not later than
December 31, 2025 and not earlier than one year from the payment of its first
tranche. Interest is payable every six months. The loan interest rate corresponds to
the following formula: EURIBOR 6M + margin.
The results achieved in the Q1 2019/2020 by companies acquired in this period
On May 7, 2019, an indirect subsidiary Net Design S.R.L. has signed an agreement to
acquire a 100% stake in Hostvision S.R.L. for a total of EUR 1.2m split into four
tranches.
On July 3, 2019, the first tranche (EUR 800,000) was paid and the ownership of 100%
of Hostvision shares transferred. The second tranche (EUR 100,000) will be paid
within 6 months of the day the contract is signed.
On May 17, 2019, an indirect subsidiary H88 Hosting S.R.L. has signed an
agreement to acquire a 100% stake Top Level Hosting S.R.L. for EUR 1.87m.
Payment and the transfer of ownership was made on July 9, 2019.
On June 11, 2019, H88 Hosting d.o.o., an indirect subsidiary, has signed an
agreement to acquire a 100% stake in Avalon d.o.o. for a total price of EUR 1.85m
split into two payments.
On July 15, 2019, the first tranche (EUR 1.75 million) was paid and the ownership of
100% of Avalon shares transferred.
Avalon is the second largest player on the Croatian hosting and domain market.
The company has sales of approximately EUR 0.8m, which gives it a 17% market
share. The company trades under Avalon and Webmedia brands.
FOREIGN EXPANSION – CENTRAL AND EASTERN EUROPE
DESCRIPTION OF THE ACTIVITY OF R22 GROUP – HOSTING
Acquisition of Hostvision S.R.L.
Acquisition of Avalon D.O.O.
18
Acquisition of Top Level Hosting S.R.L.
Loan agreement with Fundusz Ekspansji Zagranicznej
The results of the companies acquired in 2019/2020
[PLN thous.] Hostvision S.R.L.Top Level Hosting
S.R.L.Avalon D.O.O.
Sales revenue 640 568 946
EBITDA 136 255 325
Net profit 82 199 190
Buyout of minority stake in hosting segment
DESCRIPTION OF THE ACTIVITY OF R22 GROUP – HOSTING
Buyout of minority stake in H88
On July 1, 2019, R22 and Vercom S.A. have signed an agreement on the disposal of
shares of H88. Based on that agreement, R22 acquired 15,234 shares of H88 while
Vercom purchased 15,233 shares of H88, paying EUR 3.4m each. As a result of the
transaction, R22 holds 78.64% shares of H88 while Vercom has a 7.12% stake. The
transaction was financed with a bank loan that the company referred to in its
current report no. 16/2019 on June 25, 2019.
At the same time R22 and Vercom S.A. have a call option (based on Exit Agreement
which the company referred to in its current report no. 4/2019 on March 15, 2019)
to purchase the remaining shares owned by the fund (30,646 shares) for EUR 6.8m.
The call option may be executed by February 10, 2020 by submitting a statement on
the acceptance of a sale offer made by TCEE Fund III S.C.A.
The company’s goal is to execute the call option and to acquire the remaining
shares of H88 by February 10, 2020. The transaction will be financed using debt
financing; discussions with banks concerning such financing are ongoing.
R22’s Managing Board also intends to acquire H88 shares now held by Vercom S.A.
Consequently, on September 13, 2019, the General Meeting of Shareholders of
Vercom S.A. has decided to launch a stock buyback and to cancel Vercom’s shares
owned by R22. R22 will then use the funds received from the sale of shares of
Vercom S.A., to purchase the 7.12% stake in H88 from Vercom S.A.
19
OMNICHANNEL COMMUNICATION
VERCOM – ONE OF THE FASTEST GROWING TECHNOLOGY COMPANY
DESCRIPTION OF THE ACTIVITY OF R22 GROUP – OMNICHANNEL COMMUNICATION 21
Email Automation
Services in the field of e-mail marketing and marketing automationWe increase the deliverability of transactional e-mails sent by our clients.
SMS/Mobile Automation
We provide a platform and tools for mass communication in SMS, MMS, VMS, Push, Chatbot Messenger, WhatsApp and Viber channels - both for marketing purposes and for facilitating the execution of transactions by our clients.
No. 1 among systems combining E-MAIL & MOBILE communication in Poland
Comprehensive range of tools and solutions for automating communication
Marketing Automation
We provide modern tools that automate and integrate marketing and communication with users, that facilitate sales management and increase its efficiency.
Digital marketing
We run effective online campaigns using our databases and technologies.
WYNIKI FINANSOWE SEGMENTU OMNICHANNEL COMMUNICATION
DESCRIPTION OF THE ACTIVITY OF R22 GROUP – OMNICHANNEL COMMUNICATION
Almost 50% increase in revenue - the effect of organic acquisition of new
customers and upsell of new services, which translated into an increase
in the number of messages sent
Low CAPEX related mainly to the development of a new, common, unified
service panel allowing clients to use all the platforms (Redlink, SerwerSMS,
EmailLabs) in one place
Low net debt to EBITDA ratio, an increase vs. previous quarter and on a y-o-y
basis as a result of raising debt financing for the acquisition of H88 shares
(these shares will be sold to R22)
[thous. PLN] Q1 2018/2019 Q1 2019/2020 Change
Sales revenue 13 686 20 431 49%
EBIT 1 995 4 640 133%
Amortization and depreciation
-381 -581 52%
EBITDA 2 376 5 221 120%
One-off costs 0 -187 -
Adjusted EBITDA 2 376 5 408 128%
Margin 17,4% 26,5%
Exclusion of the impact of IFRS 16 on EBITDA
-104
Adjusted EBITDA without the impact of IFRS 16
2 376 5 304 123%
CapEx 452 386 -15%
CapEx % 3,3% 1,9%
[thous. PLN] 30.09.2018 30.09.2019
Net debt -4 450 15 849
22
Over two fold increase in EBITDA - improvement in margins as a result of
the implementation of optimisation activities, the use of experience from
the hosting segment and the introduction of new services Reopen and
Push
SELECTED KPI OF OMNICHANNEL COMMUNICATION SEGMEMNT
DESCRIPTION OF THE ACTIVITY OF R22 GROUP – OMNICHANNEL COMMUNICATION
Structure and dinamic of revenue
Dynamic revenue growth, especially in the area of SaaS platforms (+ 45% y / y) and performance marketing (183% y / y)
Increase in shipment volumes due to a constantly growing customer base, increase in shipment volumes and ARPU
23
0.44 0.56 0.59
Q1 17/18 Q1 18/19 Q1 19/20
Subscriptions [m PLN]
0.62 0.60
1.69
Q1 17/18 Q1 18/19 Q1 19/20
Performance Marketing [m PLN]
11.18 12.52
18.13
Q1 17/18 Q1 18/19 Q1 19/20
SaaS platform – sends [m PLN]
SELECTED KPI OF OMNICHANNEL COMMUNICATION SEGMEMNT
DESCRIPTION OF THE ACTIVITY OF R22 GROUP – OMNICHANNEL COMMUNICATION
Communicatin platforms
112.4100.7
124.9
0,0
20,0
40,0
60,0
80,0
100,0
120,0
140,0
Q1 17/18 Q1 18/19 Q1 19/20
24.923.1
26.5
0,0
5,0
10,0
15,0
20,0
25,0
30,0
Q1 17/18 Q1 18/18 Q1 19/20
Monthly ARPU (PLN) of SME segment(without subscription and performance marketing)
WZROST ORGANICZNY+X% klientów
121 151194
0
50
100
150
200
250
Q1 17/18 Q1 18/19 Q1 19/20
Number of custmers – Enterprise
Monthly ARPU (thous. PLN) of Enterprise segment(without subscription and performance marketing)
6 3406 750
7 230
5 800,0
6 000,0
6 200,0
6 400,0
6 600,0
6 800,0
7 000,0
7 200,0
7 400,0
Q1 17/18 Q1 18/19 Q1 19/20
Number of customers – SME [thous.]
24
Dynamic y-o-y growth in Enterprise andSME customer numbers
15% ARPU increase in the Enterprisesegment on the year-on-year basis,continuation of quarterly ARPU growth inthe Enterprise segment and a simultaneousincrease in profit margins
Material y-o-y ARPU growth accompaniedby an increase in profit margins
KEY DEVELOPMENT PROJECTS
DESCRIPTION OF THE ACTIVITY OF R22 GROUP – OMNICHANNEL COMMUNICATION
Appchance Redlink Mobile Push
It has been a year since R22 and Appchance started to work together. The group
backed the Appchance team not just in terms of finances, but also by sharing its
know-how and experience in managing and scaling up a business. R22 Group has
helped to better leverage the potential of the software house’s team, boosting the
scope of operations and growth rate. For R22, the key value is the collaboration on
new projects, acquisition of strong competence in mobile segment and the
development of human resources. Thanks to these factors we were able to expand
the portfolio of the services offered precisely in the field of mobile technologies.
We are collaborating effectively by leveraging current customer databases, we are
delivering joint projects and upselling each other’s services. During this period we
have managed to, for example, expand the relationship with one retail chain that
was using our text message-based communications services earlier. Thanks to
effective cross-selling, Appchance was selected as the provider of a mobile app,
which additionally gave us an opportunity to implement a Mobile Push solution and
transactional e-mail messages (EmailLabs) at that client’s application. We are
preparing to execute additional similar projects.
The year 2019 saw the debut of Red Link Mobile Push, group’s communications
automation solution in the mobile channel. This service can be used to transmit
messages to the users of Android and iOS-based mobile apps. Push messages
possess much more extensive, interactive functionalities and message-building
abilities compared to traditional text messages. It is possible to add graphics, films
and animations, as well as to use action buttons which may lead to any part of the
app - all of these combine to make Push messages highly effective, with very high
performance ratios. The open rate (OR) stands at 60-70% vs. 10-15% in emails and
8-12% Click Through Rate vs. 2-3% in e-mails.
In terms of implementations that are already completed, we can highlight the
implementation and ongoing work for large retail chains and for a restaurant chain.
Our developers are working hard to implement a common, unified panel for various
multichannel communications services offered by Vercom. We are planning to
complete this project in 1Q 2020.
The new panel will give us an opportunity for cross-selling activities among our
current clients in an even more effective manner. One extra benefit for our clients
will be having all the various tools and services in one place.
We are also working on a Web Push solution, which will allow us to reach a new
client category.
New control panel
25
TELECOMMUNICATION
EXPOSURE TO ATTRACTIVE MARKET SEGMENTS OF TELECOMMUNICATION
DESCRIPTION OF THE ACTIVITY OF R22 GROUP – TELECOMMUNICATION
INTERNET (B2C) CLOUD TELEPHONY (B2B)
▪ The Group's structure resulted from eight acquisitions over a three-year period
▪ Internet access provided via radio and fixed links
▪ Radio technology dedicated to areas hard to reach
▪ Low cost for the user + no transfer limit + high service quality
Areas of activity
Oxylion position in R22 Group
▪ A wide range of technologically advanced services
▪ Sales mainly to resellers, integrators and business clients
▪ The SME market and individual clients operated by the IPFON brand
▪ Services integrated with many IT systems (CRM, ERP, etc.)
ATTRACTIVE SEGMENTS OF THE
TELECOMMUNICATIONS MARKETSTABLE SOURCE OF CASH
PREDICTABILITY OF REVENUE AND CASH FLOWINFRASTRUCTURE AND KNOW-HOW
USED IN THE GROUP
27
FINANCIAL RESULTS OF TELECOMMUNICATION SEGMENT
DESCRIPTION OF THE ACTIVITY OF R22 GROUP – TELECOMMUNICATION
[thous. PLN] Q1 2018/2019 Q1 2019/2020 Change
Revenue 3 624 3 450 -5%
EBIT 634 626 -1%
Amortization and depreciation
-712 -848 19%
EBITDA 1 346 1 474 10%
Margin 37,1% 42,7%
Exclusion of the impact of IFRS 16 on EBITDA
-132
Adjusted EBITDA without the impact of IFRS 16
1 346 1 342 -0%
CapEx 433 536 24%
CapEx % 11,9% 15,5%
Stable EBITDA with decreasing revenues caused by the decrease in the
traffic of the largest customer (with low margin).
Low capital expenditures
Capital expenditures significantly below the depreciation value
Stable net debt level y / y
At the end of Q1 2019/2020, PLN 13.4 million net debt
Increase in segment profitability
[thous. PLN] 30.09.2018 30.09.2019
Net debt 13 280 13 376
28
SUBSCRIBER DATA OF TELECOMMUNICATINSEGMENT
DESCRIPTION OF THE ACTIVITY OF R22 GROUP – TELECOMMUNICATION
WZROST ORGANICZNY+X% klientów
21 287 21 233 21 205 21 116 20 939
Q1 18/19 Q2 18/19 Q3 18/19 Q4 18/19 Q1 19/20
Number of ISP customers – average in the period
37,9 37,8 38,7 38,9 39,6
Q1 18/19 Q2 18/19 Q3 18/19 Q4 18/19 Q1 19/20
790895
737607 604
Q1 18/19 Q2 18/19 Q3 18/19 Q4 18/19 Q1 19/20
Monthly ARPU ISP [PLN] Monthly ARPU VoIP [PLN]
445 444 437 433 434
Q1 18/19 Q2 18/19 Q3 18/19 Q4 18/19 Q1 19/20
Number of VoIP customers
29
A decrease in the number of clients, whileimproving the ARPU of ISP services
Stable number of clients and ARPU of VoIPsegment
GROWTH PROSPECTS
Maintaining growth rate using organic
growth and acquisitions while retaining
financial stability
Foreign expansion in the CEE region
Further integration of the companies acquired and
building synergies, upselling products (including SSL
and omnichannel communication products),
expansion to new countries.
Leveraging present customer base
Optimizing the offering, ARPU growth,
cross-selling, product and technology
development
Portfolio development
Further development of the group’s offer to include
complementary solutions and cross-selling
GROWTH PROSPECTS
GROWTH PROSPECTS 31
Our goal is to become the leader of Central and Eastern Europe
LEVERAGING PRESENT CUSTOMER BASE
GROWTH PROSPECTS
• Consolidation of marketing and communications strategy at Group R22 level over
the longer term - complete solutions for all clients active in online space and
those wishing to communicate effectively with their clients. In the short- and
medium-term in particular, the group is planning to consolidate its brands and
marketing strategy in the hosting segment (planned for 2020), giving it an
opportunity it utilize current marketing budgets in a more effective manner,
acquiring new clients and supporting other efforts to increase the ARPU, i.e.
greater cross-selling among the existing segments and using opportunities to
upsell to clients and a further unification of the offering both in Poland and on
new markets.
• Key goal for the upcoming months is the continuation of efforts to retain
customer base in the existing fields of activity and at least maintaining the
monthly ARPU.
• Within the segment, the group will be controlling closely CAPEX levels and will
limit it to the necessary minimum, sufficient to ensure stability of the services
provided. All new investments will be preceded by an analysis of potential
investments returns over a short period of time.
32
• Continuing changes in the service portfolio related to service unification and price
increases of both hosting and domain services and omnichannel communication
services.
• Cross-selling products and services offered by R22 Group.
• Increasing sales of additional services, including SSL certificates.
• Further development of EmailLabs and Redlink platforms, particularly in the field
of analytics and big data.
• Development of new Reopen platform – a real time marketing tool which uses big
data and machine learning. Its main purpose is to boost customer engagement,
maintain customer loyalty, optimize and raise effectiveness of the message for
clients.
• Use of companies acquired by R22 to sell additional and new group products -
User.com (new markets for e-mail and text messaging services), Appchance
(push- and RCS-based solutions).
• The Group also plans to develop platforms supporting the currently offered tools.
The main areas of interest are primarily e-mail, retargeting and lead generation .
• Development of Blugento – a tool for creating and running online stores.
Commercialization on international markets, including cross-sell to R22 clients.
MARKETING STRATEGYARPU BOOST
PRODUCT DEVELOPMENT
MAINTAINING ARPU AND A DECLINE IN CAPEX FOR TELCO SEGMENT
LEVERAGING PRESENT CUSTOMER BASE / GROWTH IN CEE REGION
GROWTH PROSPECTS
INTEGRATION OF ACQUIRED COMPANIES
The hosting segment development model, apart from organic growth, is based on
acquiring customers through acquisitions. Thanks to the acquisition of competitive
brands and their effective consolidation, a rapid growth of the business scale is
possible. Apart from natural benefits in the form of an additional customer base,
individual companies bring additional value in the form of know-how, human
competencies, fixed assets and potential for cost optimization.
Key acquisition synergies:
• Start of the implementation of the new CRM system, rolled out as a result of
R&D efforts, at the Hekko brand. All brands will migrate to the new CRM system
in a longer timeframe.
• The process of integrating the hosting platforms is ongoing. Two such
platforms will be in use eventually, a proprietary one and one based on Direct
Admin.
• Optimizing the cost of licenses: purchase of LiteSpeed perpetual licenses for
approximately PLN 160,000, which produces significant cost-savings in the
future periods. Additionally, cPanel and vmWare licenses were optimized in
Romania.
• A detailed plan for the integration of the companies in Romania was developed.
The plan is to integrate them into a single legal entity by the end of the year
2020, with a high degree of operating and technological integration while
retaining separate brands.
• In the first half of 2018/2019 fiscal year, the R22 Group started operating on the
Romanian hosting and domain name market. Thanks to the acquisition of three
companies with a strong position in the local market, the Group gained over 15%
of shares and a leading position in the local market.
• In May 2019, R22 made three further acquisitions of companies with
approximately 8% market share. Thanks to their implementation, the Group
strengthened its leading position, with a market share of almost 25%.
• In June 2019, R22 signed an agreement to take over the second largest copmany
of the Croatian market Avalon D.O.O., thanks to which it obtained about 17%
market share. The acquisition of control took place on July 15, 2019.
• The group is taking steps to integrate these targets, extract cost synergies and
increase the effectiveness of sales-related efforts.
• The group wants to develop sales of other services and tools from its portfolio,
particularly those of omnichannel communications platform by leveraging human
resources and infrastructure acquired in Romania and Croatia.
• In the mid-term, the group may pursue further acquisitions that will boost its
market share on individual markets.
• As part of the acquisition on the Romanian market, the Group expects
optimization at the level of cooperation between the acquired companies on the
local market (back-office area, customer service and infrastructure utilization)
and thanks to cooperation with Polish Group companies - among others use of
analytical solutions, modern CRM and sales of omnichannel communication
tools on the Romanian market.
33
CEE HOSTING MARKET
FOREIGN EXPANSION
GROWTH PROSPECTS
ACQUISITIONS AND GROWTH OF FOREIGN SALES IN HOSTING AND OMNICHANNEL COMMUNICATION SEGMENTS
• The group intends to grow further through acquisitions, but since it has raised
less funding than expected during the IPO, it may seek a higher than originally
planned leverage. On a temporary basis it may increase its debt to EBITDA ratio
to approximately 3x.
• In 2018/2019 the Group started its expansion into the Romanian market. As a
result of the acquisition of a total of 6 companies, H88 HOSTING SRL is the
leader in hosting and domain market, with almost 25% market share.
• The group also wants to use assets acquired on the Romanian market to boost
the sales of its omnichannel communication services. This expansion model will
be duplicated on other markets.
• In May 2019 the group has entered the Croatian market by acquiring the second
largest player on the local market. R22 is analyzing and talking with other entities
which could strengthen its position on that market.
• At present, the group is actively seeking and holding discussions with other
potential targets on the European market active in hosting and text message/
e-mail space.
• Aside from searching for acquisitions in the current fields of Group’s activities,
R22 is also in talks over investments and acquisitions of companies possessing
products which are complementary with the Group’s portfolio in terms of
digitization and automation of business processes.
34
Development of the R22 Group in the CEE region
R22 presence markets Potential direction of development
FINANCIAL RESULTS
CONSOLIDATED P&L – R22 GROUP
FINANCIAL RESULTS 36
[thous. PLN] Q1 2018/2019 Q1 2019/2020 Change
Sales revenue 31 031 44 437 43%
Other operating revenue 143 2 -99%
Amortization and depreciation -2 619 -3 964 51%
External services -18 282 -24 622 35%
Costs of employee benefits -4 270 -5 800 36%
Use fo materials and consumption of energy -517 -869 68%
Value of sold goods and materials 0 0 -
Taxes and charges -150 -399 166%
Other operational expenses -109 -287 163%
Profit / (loss) on sale and liquidation of tangible fixed assets
53 -60 -213%
Profit on operating activity (EBIT) 5 280 8 438 60%
Net financial cost -829 -1 666 101%
Share in profits of associates accounted for using the equity method
0 -162 -
Profit before taxes 4 451 6 610 48%
Income tax -753 -1 742 131%
Net profit 3 698 4 868 32%
- attributable to the shareholders of the parent 2 744 3 366 23%
- attributable to non-controlling shares 954 1 502 57%
Factors impacting financial results
• Organic growth of profits and sales, particularly in the omnichannel and hosting
segment
• Acquisition and consolidation of the companies on Croatian and Romanian market,
which took place in past 12 months.
• An increase in profitability in the hosting segment by extracting post-acquisition
synergies from earlier targets, including in particular pricing and service offering
changes and cost synergies.
• An increase in profitability of the omnichannel communications segment thanks to
higher ARPU and an increase in sales of high value-added services, such as Redlink
Mobile Push.
• An increase in amortization and depreciation driven mainly by amortization of
intangible assets booked as part of price allocation of the payments made for
Romanian and Croatian companies, particularly customer relationships at these
companies. Higher amortization does not lead to additional expenses and has no
negative impact on operating cash flow. It will not lead to replacement CAPEX now
or in the following quarters.
• An increase of other operating expenses, mainly due to write-offs of trade
receivables
• An increase in financing expenses as a result of higher debt taken up to finance
acquisitions on the Romanian and Croatian markets
• There were no unusual events affecting the result on operations.
CONSOLIDATED BALANCE SHEET – ASSETS – R22 GROUP
FINANCIAL RESULTS
The most significant changes in the asset structure[thous. PLN] 30.06.2019 30.09.2019 Change
Tangible fixed assets 26 543 27 175 2%
Rights to use the assets 0 8 961 -
Intangible assets and goodwill 182 832 204 903 12%
Investments in affiliates 9 445 12 121 28%
Other assets 125 150 20%
Assets due to deferred income tax 5 186 5 886 13%
Fixed assets 224 131 259 196 16%
Trade receivables 13 889 14 537 5%
Derivatives 2 541 2 596 2%
Loans granted 1 270 695 -45%
Financial assets measured at fair value 268 279 4%
Cash and cash equivalents 15 624 10 872 -30%
Other assets 3 078 2 997 -3%
Current assets 36 670 31 976 -13%
Total assets 260 801 291 172 12%
• The Right to Use Assets were accounted for as a result of the application of IAS
16 for the first time; these include primarily the rights to use office space and the
server room.
• An increase in intangible assets and goodwill is mainly due to acquisitions of
Romanian hosting companies made in Q1 2019/2020 and the consequent
recognition of assets, mainly customer relations and company goodwill.
• Loans as at September 30, 2019 are primarily short-term bridge loans made to
employees and contractors as employee benefits. Employees repaid a significant
part of them in Q1 2019/2020.
• An increase in investments in associated entities relates to investments in
Blugento.
• The decline in cash held is due to the buyback of own stock (PLN 2m) and the
outflow of own cash for the takeover of Avalon (Croatia).
37
CONSOLIDATED BALANCE SHEET – EQUITY AND LIABILITIES – R22 GROUP
FINANCIAL RESULTS
The most significant changes in the structure of liabilities[thous. PLN] 30.06.2019 30.09.2019 Change
Basic capital 284 284 0%
Own shares 0 -2 060 -
Retained earnings and other capital 79 452 87 408 10%
Exchange differences on the translation of foreign operations -191 -1 127 490%
Capital from valuation of hedging instruments -278 0 -100%
Equity attributable to equity holders of the parent 79 267 84 505 7%
Non-controlling shares 15 103 10 872 -28%
Equity capital 94 370 95 377 1%
Liabilities for loans, borrowings and bonds 64 125 105 712 65%Liabilities due to financial leasing 2 963 10 630 259%
Liabilities due to contracts with clients 148 153 3%
Deferred income tax 16 741 17 089 2%
Other liabilities 64 61 -5%
Long-term liabilities 84 041 133 645 59%
Liabilities for loans, borrowings and bonds 13 119 14 879 13%Liabilities due to financial leasing 1 879 4 499 139%Derivatives 402 9 -98%Trade liabilities 13 539 12 499 -8%Liabilities due to contracts with clients 14 670 17 419 20%Income tax liabilities 1 149 2 457 114%Liabilities for employee benefits 1 699 1 673 -2%
Liabilities measured at fair value 268 279 4%
Other liabilities 32 507 5 487 -83%
Reserves 3 158 2 949 -7%
Short-term liabilities 82 390 62 150 -25%
Total liabilities 166 431 195 795 18%
Total equity and liabilities 260 801 291 172 12%
• Discussion of changes in own equity is found in the List of Changes in Own
Equity in the Consolidated Financial Statement
• The increase in financial leasing liabilities is due to the application, for the
first time ever, of IAS 16. This has led to the disclosure of liabilities related
to office space and server room rentals.
• The increase in liabilities related to customer agreements is mainly due to
takeovers in the hosting segment on the Romanian and Croatian markets.
• The increase in other liabilities results from the recognition of a liability for
the purchase of minority shares in the hosting segment.
• The increase in corporate income tax due to simplified advance income tax
payments accompanied by a dynamic growth of financial results
38
CONSOLIDATED CASH FLOW STATEMENT – R22 GROUP
FINANCIAL RESULTS
The most significant changes in cash flowsQ1 18/19 Q1 19/20 Change
Net profit for the reporting period 3 698 4 868 32%
Adjustments, including i.a.: 4 024 7 080 76%
- Amortization and depreciation 2 619 3 964 51%
- Income tax 753 1 742 131%
- Interest cost 705 1 297 84%
Change in inventories, receivables, liabilities and other assets - total
186 -552 -
Cash generated on operating activities 7 908 11 396 40%
Tax paid -498 -721 45%
Net cash from operating activities 7 410 10 675 44%
Interest received 21 0 -100%
Loans granted -400 467 -
Acquisition of units -3 941 -18 700 374%
Investments in affiliates 0 -2 790 -
Proceeds from sale of tangible fixed assets 4 0 -100%
Purchase of tangible fixed assets and intangible assets -1 545 -1 216 -21%
Net cash from investign activities -5 861 -22 239 279%
Purchase of own shares 0 -2 060 -
Acquisition of non-controlling interests 0 -29 660
Proceeds from taking loans and borrowings 0 46 692
Repayment of loans and credits -2 365 -5 768 144%
Interest paid -748 -934 25%
Payments of liabilities under financial leasing agreements -584 -1 458 150%
Net cash from financing activities -3 698 6 812 -
Total net cash flow -2 149 -4 752 121%
Cash and cash equivalents at the beginning of the period 15 797 15 624 -1%
Cash and cash equivalents at the end of the period 13 648 10 872 -20%
• Dynamic increase in operating cash flows accompanying the increase in
operating cash and a higher profit to operating cash flow conversion rate driven
by, on the one hand, high rate of amortization of intangibles and legal assets and
on the other by the increasing share of the hosting segment in overall sales,
based mainly on pre-paid model.
• In the cash flow statement, an important item is the acquisition of units in
investment cash flows constituting expenditure on the acquisition of Top Level
Hosting S.R.L., Hostvision S.R.L. and Avalon D.O.O., as well as an investment in
an associate - Blugento SA.
• The other expenses, listed below, were paid for from current operating cash
flows:
• Purchase of fixed assets and intangibles, the increase is due primarily to
spending on development work on the new service panel for the
omnichannel segment, CRM implementation and the purchase of perpetual
server licenses in the hosting segment.
• Changes in financial cash flows arise from the following factors
• An increase in interest paid due to additional debt taken up to finance the
acquisition of Romanian and Croatian companies and minority shareholder
buyout in the hosting segment.
• An increase in leasing payments is due mainly to the implementation of IAS
16.
39
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY – R22 GROUP
FINANCIAL RESULTS
Basic capitalR22 S.A.
Retained earningsand other capital Own shares
Exchange differences on the translation of
foreign operations
Capital from valuation of
hedging instruments
Capital attributableto non-controlling
shares Equity
As at July 1, 2019 284 79 452 -191 -278 15 103 94 370
Net profit 3 366 1 502 4 868
Other comprehensive income -936 278 58 -600
Total income in the period 3 366 -936 278 1 560 4 268
Transactions with owners included directly in equity
Purchase of R22 S.A. shares by H88 S.A. -2 060 -2 060
Performance of a forward contract for the acquisition of non-controlling interests in H88 S.A. -389 -389
Net assets attributable to non-controlling interest in Hostvision S.R.L. 28 28
Impact of IFRS 16 on the result from previous years -737 -103 -840
Net assets attributable to non-controlling interest in Vercom S.A. -800 800 0
Net assets attributable to non-controlling interest in H88 S.A. 6 156 -6 156 0
As at September 30, 2019 284 87 408 -2 060 -1 127 - 10 872 95 377
40
EFFECT OF IFRS 16 ON RESULTS - R22 GROUP
FINANCIAL RESULTS 41
The IFRS 16 Leasing standard entered into force for annual periods
beginning in 2019. The R22 Group has implemented IFRS 16 from
the financial year beginning on July 1, 2019.
With regard to lessees, the new standard eliminates the current
distinction between financial and operating leases. The inclusion
of operating leases in the consolidated financial statements will
result in the recognition of a new asset (the right to use the leased
asset) and a new liability (liability to make a lease payment).
Leasing rights to use assets will be subject to redemption, while
interests will accrue on liabilities. This will result in higher costs in
the initial phase of the leasing, even if its parties have agreed on
fixed annual fees.
The position regarding new standards and interpretations of IFRS
can be found in note 29 of the Consolidated Financial Statements.
The tables present calculations of the impact of the IFRS 16
standard on the results for Q1 2019/2020 fiscal year.
Impact of IFRS 16 Result according to IAS 17 Result according to IFRS 16
Q1 18/19 Q1 19/20 Q1 18/19 Q1 19/20 Q1 18/19 Q1 19/20
Depreciation and amortisation -506 -578 -2 619 -3 386 -3 125 -3 964
External services 581 665 -18 282 -25 287 -17 701 -24 622
EBIT 75 87 5 280 8 351 5 355 8 436
Net financial costs 0 -110 -829 -1 556 -829 -1 666
Net profit 75 -23 3 698 4 891 3 773 4 868
EBITDA 581 665 7 899 11 737 8 480 12 402
Impact of IFRS 16 Result according to IAS 17 Result according to IFRS 16
30.06.2019 30.09.2019 30.06.2019 30.09.2019 30.06.2019 30.09.2019
Assets
Intangible assets 9 540 8 961 0 0 9 540 8 961
Equity and liabilities
Retained earnings ane -841 -864 79 452 88 272 78 611 87 408
Long-term liabilities due to operational leasing
8 108 7 140 2 963 3 490 11 071 10 630
Short-term liabilities due to operational leasing
2 273 2 685 1 879 1 814 4 152 4 499
FACTORS MATERIAL FOR GROUP DEVELOPMENT
FINANCIAL RESULTS
Risk factors which may affect the Group in the followingquarters
R22 Group has a well-established position on the Polish hosting and domain, as well
as text message-based, mobile and e-mail mass communications markets. At the
same time the group is developing its activities on new markets, both through
acquisitions of local entities (Romanian and Croatian hosting and domain segment)
and through organic growth of its Polish subsidiaries on foreign markets (e.g.
User.com, Appchance). The markets on which R22 Group operates are
characterized by strong growth rates and are impacted by many internal and
external factors, which, in the future, may affect the Group’s financial and market
situation.
Key risk factors which may impact the Group over a timeframe that extends into the
next quarter and beyond include the following:
• Effectiveness of achieving operating, sales-related and cost synergies arising
from previous acquisitions
• The effectiveness of new acquisitions
• An increase or a decline in customer confidence and the variability of the churn
rate
• Risks and opportunities relating to the relatively rapid technological changes and
innovations on the IT market.
• Actions taken by competitors
• The economic, business and political situation in Poland, Romania, Croatia and in
countries in which the group will be developing its activities
• Inflation and FX fluctuations of the currencies of countries, in which the group is
active and whose currencies it is using (PLN, RON, HRK, USD, EUR).
• An increase or a decline in the demand for shared hosting services, dedicated
hosting, Internet domains and additional, related services
• An increase or a decline in the demand for multichannel, digital mass
communications services
• Situation on the e-commerce and m-commerce market.
• The ability to retain and attract new employees. The ability to effectively allocate
employee competence and know-how and to motivate the staff.
• Ensuring the compliance with GPRD and with other legal regulations.
• Potential hacker attacks, the ability to ensure data safety and the stability of the
services offered.
• Interest rate changes
42
SHARES AND SHAREHOLDING
SHARES AND SHAREHOLDING
SHARES AND SHAREHOLDING
Shareholders holding at least 5% of votes at the General Meeting
As at the date of this report, the Company's share capital amounts to PLN 283,600
and is divided into 14,180,000 shares with a nominal value of PLN 0.02 each.
Shareholders holding at least 5% of the number of votes at the General Meeting as
at September 30, 2019 and as at the date of publication of this report:
September 30, 2019 November 15, 2019
ShareholderNumber of
shares / votes atthe GM
% of shares in the share capital / votes
at the GM
Number of shares / votes at
the GM
% of shares in the share capital / votes
at the GM
Shareholders' agreement*, including:
8,802,138 62.07% 8,802,138 62.07%
Jacek Duch 4,310,001 30,.9% 4,310,001 30.39%
Jakub Dwernicki 2,482,178 17.50% 2,482,178 17.50%
Robert Dwernicki 1,838,317 12.96% 1,847,144 13.03%
Sebastian Górecki 171,642 1.21% 171,642 1.21%
Norges Bank 722,563 5.10% 722,563 5.10%
Rockbridge TFI 712,198 5.02% 712,198 5.02%
H88 S.A. 80,000 0.56% 80,000 0.56%
Other shareholders 3,863,101 27.24% 3,863,101 27.24%
44
30.4%
17.5%13.0%
1.2%
5.1%
5.0%0.6%
27.2%
Shareholding structure as at Nevember 15, 2019
Jacek Duch
Jakub Dwernicki
Robert Dwernicki
Sebastian Górecki
Norges Bank
Rockbridge TFI
H88 S.A.
Other shareholders
*Jacek Duch, Jakub Dwernicki, Robert Dwernicki, Sebastian Góreckiare in agreement due to the agreement of all the Issuer'sshareholders concluded on August 18, 2017, regulating the corporategovernance principles in the Company, as well as the rights andobligations of the Shareholders in the scope of owning, purchasingand selling shares in the Company, the principles of taking up sharesin the increased share capital of the Company, as well as specifyingthe terms of cooperation of the Shareholders, including in particularthe rules for maintaining a lasting policy towards the Company andthe consistent voting on general meetings of the Company, includingwithin the meaning of Art. 87 para. 1 point 5) of the Act on PublicOffer.
SHARES AND SHAREHOLDING
SHARES AND SHAREHOLDING
Changes in the shareholder structure
On July 3, 2019, as a result of the settlement of R22 stock buyback program by H88,
Jakub Dwernicki has sold 15,281 R22 shares while Jacek Duch has sold 26,435
shares.
On July 11, 2019, Jacek Duch has acquired 871 shares of R22.
On July 16, 2019, Jacek Duch has acquired 14,900 shares of R22.
On July 17, 2019, Oslo-headquartered Norges Bank’s stake in R22 has exceeded 5%
threshold on the General Meeting of Shareholders. According to its notification
Norges Bank has 722,563 shares and votes at the General Meeting, representing
5.1% of the initial equity and the total number of votes.
The buyback of 80,000 of R22’s shares by H88, a consequence of the buyback offer
made on June 18, 2019 to sell R22’s shares at PLN 25 apiece, up to a maximum of
80,000 shares of R22 representing 0.56% of outstanding stock was settled on July
3, 2019. Shareholders were able to tender their shares between June 21 and June
28, 2019.
The buyback of R22’s shares by H88, a subsidiary, was approved by R22’s
Extraordinary Shareholders’ Meeting on June 12, 2019.
On July 30, 2019, Jakub Dwernicki has acquired, free of charge, a call option
entitling him to request the sale of all or part of R22 shares owned by an investor
(the investor being a shareholder of R22) at the price of the call option. At the same
time Jakub Dwernicki gave the investor a put option which entitles him to request
the sale of all or part of R22’s shares held by that investor at the price of the put
option. Both options involve 47,900 shares of R22.
On August 1, 2019, Jakub Dwernicki has acquired, free of charge, a call option
entitling him to request the sale of all or part of R22 shares owned by an investor
(the investor being a shareholder of R22) at the price of the call option. At the same
time Jakub Dwernicki gave the investor a put option which entitles him to request
the sale of all or part of R22’s shares held by that investor at the price of the put
option. Both options involve 23,833 shares of R22.
Aside from the above call and put options involving Jakub Dwernicki, the company
has no knowledge of other agreements which may result in the changes in share
holdings among its shareholders.
45
Company shares held by the Management Board and the Supervisory Board
Stock buyback
Name Position September 4, 2019 November 15, 2019
Jacek Duch Chairman of the SB 4,310,001 4,310,001
Jakub Dwernicki President of MB 2,482,178 2,482,178
Robert Stasik Vicepresident of MB 73,586 74,086
Agreements which may lead, in the future to changes in the share holdings among shareholders and bondholders
SHARES AND SHAREHOLDING
SHARES AND SHAREHOLDING
R22 at the WSE
Shares of R22 have been listed on the Warsaw Stock Exchange since December 29,
2017.
After March 15, 2019 session, R22 shares were added to the sWIG80 and sWIG80TR
indices. The company’s shares are also part of WIG, WIG-Poland and WIGTECH
indices.
At the end of Q1 2019/2020 fiscal year, R22 stock price was at the same level as at
the end of the previous financial year, while from the beginning of 2019 calendar
year until November 15, the stock price gained 30.2%.
The price of R22 stock on the WSE vs. sWIG80 index.
According to R22’s dividend policy, the Managing Board will be recommending
to the General Meeting of Shareholders a dividend payment totaling at least
30% of R22 group’s consolidated net profit attributable to the parent company,
with a simultaneous increase of the nominal value of dividend per share.
While making its recommendation on the allocation of net profits, the
Managing Board of R22 will be taking into consideration the current and
expected financial and liquidity situation of R22 and the R22 Group, as well as
current and future liabilities.
The dividend policy was adopted by R22’s Managing Board on September 9,
2019. The final decision on the amount of dividend paid will be made by R22’s
General Meeting.
On October 22, 2019, R22’s shareholders have received the first ever dividend
in the company’s history for the year 2018/19. According to the decision of the
General Meeting held on October 8, 2019, the dividend totaled PLN 4.23m, or
PLN 0.30 per share, with October 15, 2019 as the record date.
R22’s treasury stock held by H88, a subsidiary, did not take part in the
allocation of profits for 2018/2019. R22 has no preferred stock.
46
Dividend policy
I II III IV V VI VII VIII IX X XI XII I II III IV V VI VII VIII IX X XI
2018 2019
R22 - volume R22 sWIG80
Dividend
GROUP AUTHORITIES
THE MANAGEMENT BOARD OF R22
GROUP AUTHORITIES 48
JAKUB DWERNICKI
President of the Management Board
ROBERT STASIK
Vicepresident of the Management Board
Founder and main managing person of R22 and the president of H88 S.A. Earlier,
the president of Inotel S.A. - a telecommunications company as well as the
originator and chief strategy engineer of Oxylion. The main author of the strategy of
acquisition of hosting businesses under H88.
Member of the Board, Chief Financial Officer A graduate of the University of
Economics in Poznań, holder of the CIMA diploma. He has been associated with
R22 Group for 9 years, in the role of Chief Financial Officer since 2014. Previously,
he worked in the financial departments of Good Food Products and Samsung
Electronics.
THE SUPERVISORY BOARD
GROUP AUTHORITIES
Composition of the Supervisory Board
JACEK DUCH
Chairman of the Supervisory Board
In 1970 he graduated from the Warsaw University of Technology. During his
doctoral studies he worked at Nixdorf Computer in Germany and then
as a researcher at PSI AG in Berlin. In the years 1978-1993 he worked for Digital
Equipment Corporation (DEC) where he led projects including in Munich, Vienna and
Paris. He supervised the creation of the DEC branch in the countries of Central
Europe, including Poland. From 1993 to 1998, he was the head of Oracle Polska and
then served on the management boards of Prokom Software S.A. and Prokom
Internet S.A., as well as numerous supervisory boards, among others Postdata S.A.,
Bank Pocztowy S.A., PVT a.s, numerous Asseco companies. He has extensive
experience in both technical software engineering and management in international
and Polish IT groups.
MAGDALENA DWERNICKA
Member of the Supervisory Board
In 2002, she graduated from the University of Agriculture in Poznań, in 2003 and
2004 she graduated from Marketing Business Management and Human Resources
Management at the Academy of Economic Development. In 2003-2004 she
participated in a series of trainings in the field of implementation and settlement of
projects implemented under the European Social Fund organized by PARP. She
worked in 2007-2012 as a PR specialist in Telepuls “Spider” Sp. z o.o. S.K.A. based
in Poznań, in the years 2012 - 2017 as Ogicom “Spider” Sp. z o.o. S.K.A. (currently
H88 S.A.) based in Poznań as an EU Projects Specialist.
WOJCIECH CELLARY
Member of the Supervisory Board (independent)
Professor, a long-time researcher at the Poznan University of Technology.
Subsequently: assistant, assistant professor, associate professor and professor at
the Institute of Computer Science at the Poznań University of Technology. He also
held such functions as the head of the Department of Information Technology at the
University of Economics in Poznań, the head of the Data Base scientific team and
the Vice-Rector for Science at the Franco-Polish Higher School of New Information
and Communication Technologies in Poznań.
He is the author of over 150 scientific articles, 10 books, 28 chapters in books. In
addition, he is the editor of 15 books and a co-author of three European patents.
WŁODZIMIERZ OLBRYCHT
Member of the Supervisory Board (independent)
In 1981 he graduated from the Szczecin University of Technology, he is a graduate
of many courses with an economic profile. He started his professional experience in
“Termofracht” Szczecin Sp. z o.o. and PPUiRM “Transocean” Szczecin. In the years
1992-1995 he worked as deputy manager for sales, supply and logistics of STATOIL
Poland, in 1996-1998 as a procurement and logistics manager at AMOCO Poland
Petroleum Products, then as a customer order fulfillment advisor for the Central and
Eastern European market in LYONDELL Chemical based in Vienna. In the years
2001-2003 as the president of the board and general director in Anwim Sp. z o.o.,
and in the years 2003-2010 as the president of the board and general manager in
Mazeikiu Nafta Trading House Sp. z o.o.
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THE SUPERVISORY BOARD
GROUP AUTHORITIES
KATARZYNA NAGÓRKO
Member of the Supervisory Board (independent)
In 1999, she graduated from finance and banking at the University of Economics in
Poznań, then post-graduate studies in tax management at the University of
Economics in Wroclaw. She holds the title of “Fellow of the Association of Chartered
Certified Accountants”, the diploma of “Member of the Association of Chartered
Certified Accountants”, PRINCE 2, ALTKOM certificates in the field of project
management. Currently President of the Management Board at HistaPharma Sp. z
o.o.
In 2019/2020, there were no changes in the composition of Management Board and
Supervisory Board of R22.
50
Changes in the Management Board and Supervisory Board
OTHER INFORMATIONS
Transactions with related entities were presented and described in unconsolidated
and consolidated financial statements.
The company’s Management Board has not published financial forecasts for the
2019/2020 financial year.
As of September 30, 2019, the group had 324 employees calculated on a full-time
basis. In the course of Q1 2019/2020 financial year, the average employment
totaled 327 employees.
There were no changes in the basic company and group management policies in the
2019/2020 financial year.
In Q1 2019/2020 financial year, R22 Group has signed:
- loan agreement with FIZAN Foreign Expansion Fund to finance foreign
expansion, which is described on page 19.
In Q1 2019/2020, the company has guaranteed the fulfillment of all obligations
towards the FIZAN Foreign Expansion Fund arising from contracts with H88 Hosting
D.O.O., in the event of their failure by the borrowers.
OTHER INFORMATIONS
INNE INFORMACJE
Changes in basic company and group management policies
Information about material transactions with related entities
There were no other material changes in the basic company and group
management policies during the reporting period.
R22 group has yet to settle advance payments made to SOPOL Solewodzińscy sp. j.
totaling PLN 517,000 for the provision of services. According to an agreement on
the provision of services signed with SOPOL Solewodzińscy sp. j., R22 group has
charged SOPOL Solewodzinscy a contractual penalty totaling PLN 1,100,000 for the
failure by SOPOL Solewodzińscy sp.j. to provide the minimum daily capacity for text
messages as per contractual terms. Proceedings to issue a payment order were
initiated on July 2, 2018. The contractual penalty has not been booked as a profit
until there is a strong likelihood of the actual collection. A court bailiff at the District
Court in Mikołów has initiated enforcement proceedings against the properties
owned by the partners of SOPOL Solewodzińscy sp. j. Additionally, R22 Group has a
judicial mortgage of PLN 1,396,208.04 on a property owned by SOPOL
Sowoledzińscy sp. j. in order to secure its claims arising from the above contractual
penalty.
Aside from the above, R22 group has no other material proceedings before courts,
arbitration bodies or the institutions of public administration relating to claims by
R22 and its subsidiaries.
Description of material court proceedings
Financial forecast
52
Employment
Company and group management policies
Material agreement
Sureties and guarantees
SIGNATURES OF THE BOARD MEMBERS
Date of preparation and approval for publication of the Quarterly Report of R22 Group for Q1 2019/2020 financial year ended September 30, 2020: November 15, 2019.
Date of publication of the Quarterly Report of R22 Group for Q1 2019/2020 financial year ended September 30 2019: November 18, 2019.
Jakub DwernickiCEO
Robert StasikCFO
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