Esker 1

Accelerating growth in new contracts

Esker 28 March 2019 Update
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Esker

Accelerating growth in new contracts

FY18 results

Software & comp services

28 March 2019

Price

€68.00

Market cap

€372m

$1.13:€1

Net cash (€m) at end FY18

16.6

Shares in issue

5.5m

Free float

68%

Code

ALESK

Primary exchange

Euronext Growth Paris

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

2.9

17.8

26.5

Rel (local)

1.8

3.1

22.8

52-week high/low

€70.7

€50.8

Business description

Esker provides end-to-end document automation solutions, offering on-demand and on-premise delivery models. In FY18, the business generated 56% of revenues from Europe, 38% from the US and the remainder from Asia and Australia.

Next events

Q119 revenues

16 April

Analyst

Katherine Thompson

+44 (0)20 3077 5730

Esker is a research client of Edison Investment Research Limited

Esker reported another year of double-digit revenue growth in FY18 and expects to repeat this in FY19. The company continues hiring to drive and support growth, resulting in operating margins undershooting its 15% target. We have revised our forecasts to reflect the higher level of investment. The 68% growth in the value of contracts signed in FY18 (up from 45% in FY17) supports the sustained growth of the business.

Year end

Revenue (€m)

PBT*
(€m)

EPS*
(€)

DPS
(€)

P/E
(x)

Yield
(%)

12/17

76.1

10.7

1.32

0.32

51.6

0.5

12/18

86.9

12.2

1.64

0.36

41.5

0.5

12/19e

99.1

14.4

1.81

0.39

37.5

0.6

12/20e

112.7

17.8

2.19

0.43

31.1

0.6

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

FY18 results confirm strong revenue & profit growth

Esker reported FY18 revenue growth of 14% (16% in constant currency, cc). SaaS-related revenues grew 18% (20% cc), whereas licence-based DPA revenues declined 4% (-1% cc) and legacy product revenues declined 8% y-o-y (-7% cc). Normalised operating profit grew 13% y-o-y, although higher than expected operating costs resulted in a normalised operating margin of 13.7% versus our 15.4% forecast. Higher than expected contract wins towards the end of Q4 resulted in the payment of higher sales commissions (which are expensed immediately) whereas revenue from these multi-year contracts made almost no contribution in FY18. Normalised diluted EPS grew 24.4%, and was 3.7% below our forecast. Net cash of €16.6m at the end of FY18 was 65% higher than a year ago.

Growth in contract base gives good visibility

The company saw contracts worth €21.5m signed in FY18, 68% higher than in FY17. With contracts typically signed for three years, this gives the company good revenue visibility. Management expects to generate double-digit revenue growth in FY19 and is targeting 20% growth of SaaS-related revenues with operating margins in the region of 15%. We have revised our forecasts to reflect a higher cost base entering FY19; we reduce our FY19 normalised EPS forecast by 4.4% (10.6% growth y-o-y) and introduce a forecast for 20.6% growth in FY20.

Valuation: Reflects high levels of recurring revenue

On a P/E basis, Esker continues to trade at a premium to global DPA software peers and French small-cap software peers. As SaaS-related revenues make up 87% of group revenues, we believe it is more relevant to consider US SaaS software companies: Esker trades at a discount on all valuation metrics. We view Esker’s operating model as sitting somewhere between low-growth, high-profitability on-premise software businesses and US SaaS companies’ high-growth, high-investment operating model, aiming for a happy medium of double-digit revenue growth while achieving mid-teen operating margins. In our view, high levels of recurring revenue, a strong balance sheet and a focus on investing to maintain growth warrant a premium valuation.

Review of FY18 results

Exhibit 1: FY18 results highlights

€m

FY17a

FY18e

FY18a

change

y-o-y

Revenues

76.1

86.9

86.9

(0.1%)

14.2%

EBITDA

16.4

19.8

18.5

(6.2%)

13.0%

EBITDA margin

21.6%

22.7%

21.3%

(1.4%)

(0.2%)

Normalised EBIT

10.5

13.4

11.9

(10.8%)

12.9%

Normalised EBIT margin

13.9%

15.4%

13.7%

(1.6%)

(0.2%)

Reported EBIT

9.8

13.1

11.5

(11.7%)

17.7%

Reported EBIT margin

12.9%

15.0%

13.3%

(1.7%)

0.4%

Normalised PBT

10.7

13.7

12.2

(11.1%)

14.1%

Normalised net income

7.3

9.9

9.1

(7.3%)

25.5%

Normalised diluted EPS (€)

1.32

1.70

1.64

(3.7%)

24.4%

Reported basic EPS (€)

1.28

1.79

1.64

(8.5%)

28.0%

Diluted basic EPS (€)

1.22

1.66

1.59

(4.7%)

30.3%

Net cash

10.0

15.5

16.6

7.3%

65.5%

DPS (€)

0.32

0.36

0.36

0.0%

12.5%

Source: Esker, Edison Investment Research

Double-digit growth for fifth year in a row

As Esker had previously reported Q4 revenues, FY2018 revenues were in line with expectations. Revenues grew 14% in FY18, the fifth year of double-digit growth. On a constant currency basis, revenues grew 16% y-o-y. Recurring revenues made up 78% of total revenues, flat in percentage terms versus last year.

Exhibit 2: Revenues by type

€m

FY17

FY18

y-o-y

SaaS

51.4

61.0

18.6%

Maintenance

8.0

6.9

(13.6%)

Consulting

14.4

16.5

14.9%

Licences

1.6

1.6

(5.1%)

Hardware

0.6

0.9

43.6%

Total

76.1

86.9

14.2%

SaaS-based DPA revenues

64.4

75.8

17.7%

Licence & maintenance-based DPA revenues

8.1

7.8

(3.7%)

Legacy products

3.6

3.3

(8.3%)

Total

76.1

86.9

14.2%

Source: Esker

SaaS revenues grew 19% y-o-y to make up 70% of revenues. Maintenance revenues continued to decline, reflecting the gradual decline in perpetual licence sales, which now make up only 2% of revenues. Consulting revenues grew 15%, reflecting the growth in new contracts signed.

Looking at all SaaS-based DPA revenues (including consulting), growth was 18% over the year, or 20% on a constant currency basis.

Higher investment in headcount reduces profit growth

EBITDA came in €1.4m lower than our forecast. Staff costs were €0.9m/1.8% higher than forecast and other operating costs were €0.9m/3.9% higher than forecast, partially offset by higher other income (€1.3m versus our €1.0m forecast).

The business increased headcount by 15% over the year to end FY18 with 580 employees. Average headcount increased 13% y-o-y. R&D and consulting headcount made up 56% of the overall increase. More recently the company started increasing investment in sales and marketing headcount.

As the proportion of costs that are US-dollar denominated is lower than the proportion of revenues generated in US dollars, the weakening of the dollar versus the euro (average 1.18 in FY18 vs 1.13 in FY17) had a €0.48m negative impact on operating profit.

New contract wins increase costs in short term but boost recurring revenue base

Contracts worth €21.5m were signed in FY18, 68% higher than in FY17, which in turn was 45% higher than FY16. As the company has noted before, this value represents several years of revenues (typically three), whereas all the costs incurred in winning this business are charged in the period the contracts were signed. The total amount of revenue typically generated from a contract is roughly double the level originally contracted, owing to volume-based revenues. This gives the company good revenue visibility. Esker highlighted that sales towards the end of Q4 were higher than expected, resulting in higher than expected pay-out of sales commission, but very little impact on revenues yet. In total, Esker paid out €1.1m more in sales commissions in FY18 than it did in FY17.

The company saw a small increase in the contribution from the Neopost JV, from €232k in FY17 to €317k in FY18. As expected, the tax rate decreased due to tax cuts enacted in the US.

Normalised net income was 7.3% below our forecast and diluted normalised EPS came in 3.7% lower – the difference was due to a lower than forecast dilutive share count.

The company had a net cash balance of €16.6m at the end of FY18, up 65.5% y-o-y. It generated operating cash inflow of €15.6m, and paid out €1.8m in dividends and €8.1m in capex.

Business update

Recent contract announcement highlights potential in Asia

In February, the company announced that Fuji Xerox would market Esker’s accounts payable automation solution as part of its offering to optimise accounts payable management processes in Japan, and soon Australia, Hong Kong and Singapore. Esker and Fuji Xerox already work together in New Zealand where customers in the construction, retail, business and education sectors have signed up to use Esker’s accounts payable solution.

Fuji Xerox is a 75/25 joint venture between FUJIFILM and Xerox; its direct sales force covers Japan and the Asia-Pacific region including China. Esker generated 4% of its revenues in Asia Pacific/Australia in FY18. As the agreement also includes Fuji Xerox providing consulting, implementation and support to customers that choose to buy the software, this agreement could accelerate Esker’s penetration of this region without Esker incurring substantial sales and consulting costs in the region.

Continuing to develop the channel

To accelerate the pace at which it can sign up new customers, Esker has started to build a network of channel partners. Last year, the company signed a partnership with Optima ECM Consulting in the US and with systems integrator Viveris in France. Ideally, these companies will start as implementation partners, but could end up as resellers. Esker has started training partners in France, with some implementation projects already underway.

Outlook and changes to forecasts

Management confirmed it is targeting 20% recurring organic growth (ie growth in SaaS revenues) with operating margins in the region of 15%, while continuing to invest in sales, consulting and R&D.

We have made minimal changes to our FY19 revenue forecast and we introduce a forecast for 13.8% growth in FY20. We have increased our cost base to reflect costs incurred in FY18 and a faster hiring rate. This reduces our FY19e normalised EBIT margin from 15.3% to 14.1%; however, as the company is targeting 15% margins we could see upside to our forecast. For FY20, we forecast growth in the margin to 15.4%. This results in normalised diluted EPS growth of 10.6% in FY19 and 20.6% in FY20. We expect continued strong cash generation and a net cash position of €32.0m by the end of FY20.

Exhibit 3: Changes to forecasts

€m

FY19e old

FY19e new

change

y-o-y

FY20e

y-o-y

Revenues

99.0

99.1

0.1%

14.1%

112.7

13.8%

EBITDA

22.2

21.0

(5.4%)

13.2%

24.8

18.2%

EBITDA margin

22.4%

21.2%

(1.2%)

(0.2%)

22.0%

0.8%

Normalised EBIT

15.2

14.0

(7.9%)

17.4%

17.4

24.4%

Normalised EBIT margin

15.3%

14.1%

(1.2%)

0.4%

15.4%

1.3%

Reported EBIT

14.9

13.7

(8.0%)

18.7%

17.1

25.0%

Reported EBIT margin

15.0%

13.8%

(1.2%)

0.5%

15.2%

1.4%

Normalised PBT

15.5

14.4

(7.1%)

18.3%

17.8

23.7%

Normalised net income

11.2

10.4

(7.1%)

13.5%

12.8

23.7%

Normalised dil. EPS (€)

1.89

1.81

(4.4%)

10.6%

2.19

20.6%

Reported basic EPS (€)

1.99

1.84

(7.8%)

12.4%

2.24

22.0%

Diluted basic EPS (€)

1.86

1.77

(4.5%)

11.9%

2.15

21.0%

Net cash

22.3

23.7

6.3%

43.2%

32.0

34.9%

DPS (€)

0.39

0.39

0.0%

8.3%

0.43

10.3%

Source: Edison Investment Research

Valuation

On a P/E basis, Esker continues to trade at a premium to global DPA software peers and French small-cap software peers. As SaaS-related revenues make up 87% of group revenues, we believe it is more relevant to consider US SaaS software companies: Esker trades at a discount on all valuation metrics. We view Esker’s operating model as sitting somewhere between low-growth, high-profitability on-premise software businesses and US SaaS companies’ high-growth, high-investment operating model, aiming for a happy medium of double-digit revenue growth while achieving mid-teen operating margins. In our view, high levels of recurring revenue, a strong balance sheet and a focus on investing to maintain growth warrant a premium valuation.

Exhibit 4: Peer group multiples

Company

Share

Market

Rev growth

EBIT margin

EBITDA margin

EV/Sales (x)

P/E (x)

price

cap (m)

CY

NY

CY

NY

CY

NY

CY

NY

CY

NY

Esker

€ 68.00

€ 372.2

14.1%

13.8%

14.1%

15.4%

21.2%

22.0%

3.6

3.2

37.5

31.1

Software companies with DPA software offerings

Basware

€ 23.40

€ 338.8

5.1%

9.9%

-8.8%

(5.1%)

1.3%

2.9%

2.4

2.2

N/A

N/A

Bottomline

$48.33

$2,087.6

8.6%

11.2%

19.6%

20.9%

24.9%

25.9%

4.6

4.1

31.1

26.3

Coupa

$90.40

$5,373.8

25.9%

25.2%

1.7%

6.3%

5.5%

10.8%

16.0

12.7

1234.8

279.3

ITESoft

€ 3.10

€ 19.1

(1.2%)

7.5%

10.8%

0.6

11.5

OpenText

$50.27

$13,511

5.2%

0.6%

34.8%

35.9%

38.4%

39.6%

4.0

3.9

16.9

16.1

Average

8.7%

11.7%

11.0%

14.5%

16.2%

19.8%

5.5

5.7

19.8*

21.2*

Median

5.2%

10.5%

7.5%

13.6%

10.8%

18.3%

4.0

4.0

16.9*

21.2*

French small-cap software companies

Axway Software

€ 11.30

€ 236

1.0%

1.6%

8.1%

9.9%

10.2%

12.0%

0.9

0.8

16.4

15.3

Claranova

€ 0.73

€ 289

18.7%

17.7%

9.8%

10.8%

10.1%

11.4%

0.9

0.7

13.7

10.4

ESI Group

€ 23.20

€ 139

2.6%

6.3%

5.3%

8.2%

7.4%

9.9%

1.2

1.1

39.7

19.7

Harvest

€ 85.50

€ 121

10.0%

9.9%

22.0%

25.0%

23.3%

26.2%

3.6

3.2

26.1

21.0

Lectra

€ 21.70

€ 692

6.6%

4.4%

14.2%

14.6%

16.9%

17.5%

2.0

1.9

21.9

20.4

Linedata Service

€ 29.60

€ 212

(1.4%)

3.8%

16.6%

17.0%

25.3%

25.5%

1.6

1.6

10.5

10.1

Sidetrade

€ 58.60

€ 83

4.6%

17.1%

7.1%

10.8%

10.3%

3.1

2.6

51.4

Average

6.0%

8.7%

11.9%

13.7%

14.8%

17.1%

1.9

1.7

25.7

16.1

Median

4.6%

6.3%

9.8%

10.8%

10.3%

14.7%

1.6

1.6

21.9

17.5

Source: Edison Investment Research, Refinitiv. Note: Priced at 25 March; *excludes Basware and Coupa.

Exhibit 5: SaaS companies financial and valuation metrics

Name

Market cap (m)

EV in reporting currency (m)

Sales Growth CY (%)

Sales Growth NY (%)

EBITDA margin CY (%)

EBITDA margin NY (%)

EBIT margin CY (%)

EBIT margin NY (%)

EV/ Sales CY (x)

EV/ Sales NY (x)

P/E CY (x)

P/E NY (x)

Salesforce.Com

124,517

123,351

20.7

19.5

24.2

25.0

18.3

19.6

7.7

6.4

58.4

46.9

Workday

42,420

41,846

25.9

22.7

19.0

20.9

12.4

14.3

11.8

9.6

115.2

86.7

ServiceNow

43,538

42,702

31.5

28.1

26.8

28.1

21.2

23.1

12.4

9.7

77.6

56.3

Atlassian

26,305

25,497

37.1

27.8

26.5

26.9

20.5

21.3

21.3

16.7

134.5

107.9

Twilio

16,007

15,696

65.6

32.2

3.7

5.6

0.7

3.1

14.6

11.0

1320.5

482.1

Paycom Software

10,616

10,605

25.8

22.4

40.6

41.7

35.4

36.8

14.9

12.2

57.3

45.2

Ultimate Software Group

10,460

9,692

19.7

19.3

24.2

24.7

20.1

20.7

7.1

5.9

52.7

43.5

Okta

9,096

8,804

33.8

30.6

-9.7

-2.8

-11.9

-4.1

16.5

12.6

Nm

Nm

Zendesk

8,974

9,006

34.0

29.6

7.0

10.1

2.1

6.2

11.2

8.7

289.7

125.5

HubSpot

6,819

6,546

26.9

23.7

12.1

14.0

7.4

9.7

10.1

8.1

145.9

100.7

Proofpoint

6,636

6,405

21.8

21.0

15.3

16.5

11.3

13.3

7.3

6.1

72.7

53.3

Coupa Software

5,374

5,227

25.9

25.2

5.5

10.8

1.7

6.3

16.0

12.7

1234.8

279.3

Paylocity

4,525

4,421

21.8

21.0

28.2

29.3

20.5

21.8

9.6

7.9

67.5

52.5

Blackbaud

3,696

4,051

4.9

5.3

20.1

20.7

17.0

16.3

4.5

4.3

34.4

31.0

FireEye

3,386

3,232

6.6

7.4

9.9

12.6

5.2

8.3

3.6

3.4

88.9

53.7

Cornerstone OnDemand

3,157

3,103

4.8

13.8

22.1

26.7

14.0

17.7

5.5

4.8

54.8

37.4

Qualys

3,223

2,936

15.4

16.3

38.4

39.4

29.7

30.9

9.1

7.8

44.2

37.6

Mimecast

2,735

2,767

29.6

23.7

15.8

17.9

7.8

10.2

8.1

6.6

167.7

90.5

Box

2,752

2,648

15.4

16.0

6.7

9.4

-0.2

4.3

3.8

3.3

Nm

110.1

LivePerson

1,803

1,737

15.3

19.2

3.9

8.4

-2.1

2.9

6.0

5.1

Nm

221.2

Kinaxis

2,053

1,357

23.7

18.1

24.5

25.7

19.5

19.3

7.3

6.2

52.2

42.0

Upland Software

873

1,136

31.3

4.6

36.6

38.0

34.9

31.3

5.8

5.5

19.2

18.4

Average

24.4

20.3

18.2

20.5

13.0

15.2

9.7

7.9

125.7

112.5

Median

24.7

21.0

19.6

20.8

13.2

15.3

8.6

7.2

63.0

53.5

Source: Refinitiv. Note: Priced at 25 March.

Exhibit 6: Financial summary

€'000s

2014

2015

2016

2017

2018

2019e

2020e

Year end 31 December

French GAAP

French GAAP

French GAAP

French GAAP

French GAAP

French GAAP

French GAAP

PROFIT & LOSS

Revenue

 

 

46,061

58,457

65,990

76,064

86,871

99,079

112,716

EBITDA

 

 

8,979

13,405

14,871

16,399

18,529

20,979

24,794

Operating Profit (before amort and except)

 

 

5,700

9,257

9,934

10,547

11,911

13,979

17,394

Amortisation of acquired intangibles

0

(302)

(200)

(300)

(300)

(300)

(300)

Exceptionals and other income

53

(245)

(474)

(456)

(88)

0

0

Other income

0

0

0

0

0

0

0

Operating Profit

5,753

8,710

9,260

9,791

11,523

13,679

17,094

Net Interest

220

(6)

(108)

(110)

(57)

100

100

Profit Before Tax (norm)

 

 

5,920

9,312

9,949

10,669

12,171

14,396

17,811

Profit Before Tax (FRS 3)

 

 

5,973

8,765

9,275

9,913

11,783

14,096

17,511

Tax

(1,323)

(2,292)

(2,950)

(3,148)

(2,940)

(3,947)

(4,903)

Profit After Tax (norm)

4,609

6,877

6,785

7,281

9,135

10,365

12,824

Profit After Tax (FRS 3)

4,650

6,473

6,325

6,765

8,843

10,149

12,608

Ave. Number of Shares Outstanding (m)

4.8

5.0

5.3

5.3

5.4

5.5

5.6

EPS - normalised (c)

 

 

97

138

128

138

169

188

228

EPS - normalised fully diluted (c)

 

 

90

131

122

132

164

181

219

EPS - (GAAP) (c)

 

 

97

130

120

128

164

184

224

Dividend per share (c)

24.00

30.00

30.00

32.00

36.00

39.00

43.00

Gross margin (%)

N/A

N/A

N/A

N/A

N/A

N/A

N/A

EBITDA Margin (%)

19.5

22.9

22.5

21.6

21.3

21.2

22.0

Operating Margin (before GW and except) (%)

12.4

15.8

15.1

13.9

13.7

14.1

15.4

BALANCE SHEET

Fixed Assets

 

 

12,552

25,184

28,324

37,912

39,635

40,292

40,666

Intangible Assets

7,709

19,603

22,381

26,673

28,096

29,253

30,227

Tangible Assets

4,470

4,985

5,158

7,115

7,050

6,550

5,950

Other

373

596

785

4,124

4,489

4,489

4,489

Current Assets

 

 

33,894

36,110

42,024

42,823

49,016

58,922

68,514

Stocks

93

161

101

176

147

147

147

Debtors

15,110

18,073

19,523

21,253

25,551

27,688

31,499

Cash

17,559

16,295

21,338

20,632

22,794

30,563

36,344

Other

1,132

1,581

1,062

762

524

524

524

Current Liabilities

 

 

(19,827)

(24,789)

(28,299)

(26,206)

(30,072)

(32,272)

(34,730)

Creditors

(19,827)

(24,789)

(28,299)

(26,206)

(30,072)

(32,272)

(34,730)

Short term borrowings

0

0

0

0

0

0

0

Long Term Liabilities

 

 

(5,113)

(7,317)

(7,657)

(14,909)

(10,810)

(8,310)

(5,810)

Long term borrowings

(5,113)

(7,317)

(7,657)

(13,716)

(9,318)

(6,818)

(4,318)

Other long term liabilities

0

0

0

(1,193)

(1,492)

(1,492)

(1,492)

Net Assets

 

 

21,506

29,188

34,392

39,620

47,769

58,631

68,640

CASH FLOW

Operating Cash Flow

 

 

9,245

14,307

15,331

17,311

18,366

21,043

23,441

Net Interest

310

(27)

(127)

(75)

63

100

100

Tax

(1,075)

(1,165)

(1,456)

(2,053)

(2,795)

(3,947)

(4,903)

Capex

(4,028)

(3,909)

(7,021)

(9,304)

(7,792)

(7,957)

(8,074)

Acquisitions/disposals

22

(11,700)

(335)

(7,551)

(264)

0

0

Financing

(694)

1,324

480

(345)

785

0

0

Dividends

(877)

(1,208)

(1,550)

(1,633)

(1,756)

(2,070)

(2,282)

Net Cash Flow

2,903

(2,378)

5,322

(3,650)

6,607

7,169

8,282

Opening net debt/(cash)

 

 

(11,961)

(12,446)

(8,978)

(13,681)

(10,011)

(16,576)

(23,745)

HP finance leases initiated

(2,293)

(1,090)

(645)

0

0

0

0

Other

(125)

0

26

(20)

(43)

(0)

0

Closing net debt/(cash)

 

 

(12,446)

(8,978)

(13,681)

(10,011)

(16,576)

(23,745)

(32,026)

Source: Esker, Edison Investment Research

General disclaimer and copyright

This report has been commissioned by Esker and prepared and issued by Edison, in consideration of a fee payable Esker. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the Edison analyst at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2019 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2019. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd who holds an Australian Financial Services Licence (Number: 427484). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

Neither this document and associated email (together, the "Communication") constitutes or form part of any offer for sale or subscription of, or solicitation of any offer to buy or subscribe for, any securities, nor shall it or any part of it form the basis of, or be relied on in connection with, any contract or commitment whatsoever. Any decision to purchase shares in the Company in the proposed placing should be made solely on the basis of the information to be contained in the admission document to be published in connection therewith.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document (nor will such persons be able to purchase shares in the placing).

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

The Investment Research is a publication distributed in the United States by Edison Investment Research, Inc. Edison Investment Research, Inc. is registered as an investment adviser with the Securities and Exchange Commission. Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a) (11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by Esker and prepared and issued by Edison, in consideration of a fee payable Esker. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the Edison analyst at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2019 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2019. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd who holds an Australian Financial Services Licence (Number: 427484). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

Neither this document and associated email (together, the "Communication") constitutes or form part of any offer for sale or subscription of, or solicitation of any offer to buy or subscribe for, any securities, nor shall it or any part of it form the basis of, or be relied on in connection with, any contract or commitment whatsoever. Any decision to purchase shares in the Company in the proposed placing should be made solely on the basis of the information to be contained in the admission document to be published in connection therewith.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document (nor will such persons be able to purchase shares in the placing).

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

The Investment Research is a publication distributed in the United States by Edison Investment Research, Inc. Edison Investment Research, Inc. is registered as an investment adviser with the Securities and Exchange Commission. Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a) (11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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