Confident outlook

Claranova 11 April 2019 Update
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Claranova

Confident outlook

H119 results

Software & comp services

11 April 2019

Price

€0.83

Market cap

€325m

$1.13/€

Net cash (€m) at end H119

42.8

Shares in issue

392.0m

Free float

91%

Code

CLA

Primary exchange

Euronext Paris

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

18.7

24.7

(7.5)

Rel (local)

14.1

10.8

(8.8)

52-week high/low

€1.12

€0.52

Business description

Claranova consists of three businesses focused on mobile and internet technologies: PlanetArt (digital photo printing), Avanquest (consumer software) and myDevices (Internet of things). It is headquartered in Paris with operations in Europe, the US and Canada.

Next events

Q3 revenue update

14 May

Analyst

Katherine Thompson

+44 (0)20 3077 5730

Claranova is a research client of Edison Investment Research Limited

In H119, strong organic growth from PlanetArt and Avanquest combined with recent acquisitions resulted in 55% group revenue growth year-on-year. Over the same period EBITDA increased 283% to generate a 7.8% margin, and the group reported positive net income for the first time in several years. Management unveiled ambitious five-year growth targets and is focused on achieving these through a combination of geographic expansion, innovative new products and services and targeted M&A.

Year end

Revenue (€m)

EBITDA
(€m)

PBT*
(€m)

EPS*
(€)

DPS
(€)

P/E
(x)

06/17

130.2

(5.0)

(6.6)

(0.02)

0.0

N/A

06/18

161.5

3.9

3.1

0.01

0.0

131.6

06/19e

248.9

18.0

14.6

0.03

0.0

28.8

06/20e

306.8

29.8

26.5

0.05

0.0

17.0

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

Good performance across all divisions in H119

Organic revenue growth of 35% for H119 was driven by 41% growth for PlanetArt, 11% for the original Avanquest business and 75% growth for myDevices. In addition, the Canadian businesses acquired in July 2018 contributed a further 20% of growth. Despite strong investment in marketing during H1, the higher margin acquisitions and strong organic growth resulted in EBITDA growing 283% y-o-y and the EBITDA margin increasing from 3.2% to 7.8% y-o-y. On a normalised basis, operating profit increased from €2.5m (2.8% margin) to €10.6m (7.6% margin). We have revised our forecasts for FY19 and FY20 to reflect stronger revenues for PlanetArt and Avanquest and a small increase in EBITDA in both years.

Innovation at the heart of growth

PlanetArt continues to expand geographically while introducing new higher-margin products. Avanquest is developing new ways to monetise internet traffic and is about to launch a new secure payment service called Payaware. myDevices is expanding the number of channel and technology partners it works with to accelerate adoption of its solutions. Combining organic growth with selected acquisitions by Avanquest, management believes the group can grow revenues by more than 30% per annum to reach revenues of €600m by FY23.

Valuation: Better growth boosts valuation

Reflecting the different business models and minority interests for each division, we use a sum-of-the-parts approach to valuation. Based purely on peer group averages per division, we calculate a fair value of €1.08 per share. However, once multiples are adjusted to reflect our views on the growth and profitability of each division, this increases to €1.28 per share (up from €1.11, mainly driven by higher estimates). Milestones that could provide upside to our forecasts include: successful adoption of FreePrints in India; growth of the acquired Adaware business; and distributors reselling the myDevices platform in the US and China.

Review of H119 results

Exhibit 1: Claranova H119 results highlights

€m

H119

H118

Revenues

139.6

89.9

EBITDA

10.9

2.8

D&A

(0.3)

(0.3)

Normalised EBIT

10.6

2.5

Share-based payments

0.3

(1.2)

Exceptional items

(4.2)

(1.1)

Acquired amortisation

(0.1)

0.0

Reported EBIT

6.6

0.2

Net finance cost

(2.4)

0.0

Reported PBT

4.2

0.2

Tax

(2.7)

(0.8)

Profit after tax

1.5

(0.6)

Minority interest (MI)

0.1

0.3

Net income after MI

1.6

(0.3)

Net cash/(debt)

42.8

43.2

Source: Claranova, Edison Investment Research

Claranova reported strong revenue growth of 55% year-on-year for H119 (54% in constant currency). Excluding the acquisitions made in July 2018, the group saw 35% organic revenue growth. This resulted in growth in EBITDA from €2.8m in H118 to €10.9m in H119 and EBITDA margins expanding from 3.2% to 7.8% over the same period.

As the CEO and CFO decided not to take the 18.185m bonus shares allocated to them in November 2018, a €2.9m credit reflecting this reversal offset the €2.6m charge for the period, resulting in a €0.3m credit for share-based payments. Instead they were awarded special bonuses totalling €2.7m accounted for in shareholders’ equity. Exceptional items mainly consisted of costs relating to the acquisitions in July. Net finance cost also included acquisition-related costs as well as costs relating to the ORNANEs issued in June 2018.

For the first time in many years, the group reported a profit at the net income level.

In H119, the company paid out €9.2m (net of cash acquired) for the three Canadian businesses. Net cash was essentially flat year-on-year.

Divisional focus

Exhibit 2: Divisional revenues and EBITDA

€m

Revenues

EBITDA

EBITDA margin

H119

H118

H119

H118

H119

H118

PlanetArt

97.8

69.2

6.6

3.7

6.8%

5.4%

Avanquest

40.1

19.7

6.1

1.2

15.3%

6.0%

myDevices

1.7

1.0

(1.9)

(2.1)

N/A

N/A

Total

139.6

89.9

10.9

2.8

7.8%

3.2%

Source: Claranova

PlanetArt – European growth accelerating

PlanetArt saw 41% year-on-year revenue growth in H119 and EBITDA of €6.6m with a 6.8% margin, up from €3.7m and a 5.4% margin in H118. During H119, PlanetArt launched the FreePrints service in India. This has had limited impact on revenues to date, but the app has been downloaded more than 500,000 times, signifying strong interest in the service. The business also widened its product offering with the launch of Photo Tiles in June 2018 (already downloaded 1.2m times), and we expect further new high-margin product offerings to come.

The company noted that marketing spend increased 62% y-o-y in H119, with a particular focus on Europe. The company gave a split by geography, noting that revenues from Europe had increased to 40% of the total from 34% a year ago, which equates to 66% growth in European revenues (see Exhibit 3). In Q319, PlanetArt launched FreePrints in the Netherlands and Belgium. In Belgium, the app was developed to work in both French and Flemish. FreePrints is now available in 10 countries on three continents.

While growth in the US was lower than in Europe, this was against a backdrop of a highly competitive market in the US. In the US, the largest competitor to PlanetArt, Shutterfly, has struggled to grow its consumer photo printing business, and in Q4 only 27% of Shutterfly-branded revenues were generated via mobile. It has been slow to develop the mobile side of the business leaving room for FreePrints to gain significant market share. To try to regain some of this lost ground, Shutterfly ramped up advertising spend in Q418. Despite this, PlanetArt grew 28% y-o-y in the US in H119. We note also that Shutterfly’s CEO recently left and the company is in the midst of a strategic review.

Exhibit 3: Geographic revenue split

PlanetArt revenues €m

H119

H118

Growth

US

58.7

45.7

28%

Europe

39.1

23.5

66%

US

60%

66%

Europe

40%

34%

Source: Claranova (geo split), Edison Investment Research (revenue estimates)

Avanquest – acquisitions boost profitability

The division saw 104% revenue growth year-on-year, of which 11% was organic growth. The performance of the original Avanquest business was better than we expected, as the division had seen revenue declines for the last three years. EBITDA for the original business was €1.7m with a 7.8% margin, up from a 6.0% margin a year ago. The acquired businesses contributed revenues of €18.2m, EBITDA of €4.4m with a 24% margin and saw organic growth of 23% y-o-y. With the benefit of the higher-margin acquisitions, divisional EBITDA margins increased to 15.3% from 6.0% a year ago. On an annual basis, we expect the acquisitions to take the Avanquest business from EBITDA margins in the low single-digit percentages to margins in the mid-teens.

The company went into much more detail on how it expects to generate revenues in this division now that it has the benefit of the recent acquisitions. As a re-cap, the division generates revenues in four different ways:

Paid-for products. For the existing Avanquest business, most software is sold on a one-off licence basis. The business is looking to move to a subscription model for some products, eg OneSafe PC Cleaner, where the customer is likely to need to use the software on an ongoing basis. Other products, such Architect 3D are more suited to a one-off purchase as they tend to be linked to one-off projects. Soda PDF was based on a one-off licence fee, but is now being converted to a subscription licence model.

Freemium products/services. The original Avanquest business offered a few freemium products, including Photo Editor by InPixio and InstaCards. Adaware offers its anti-virus software on a freemium basis; the paid version of the software is subscription-based.

Advertising/traffic-based. Adaware’s Web Companion tool is a browser add-in for secure browsing, ad-blocking and identifying phishing sites. As the software diverts browsers such as Firefox to search services provided by Google or Bing, Web Companion earns a revenue share based on the searches pushed to these search providers. Adaware’s software installer tool is used by websites that offer software downloads. When a consumer decides to download software, they first download a small file onto their PC. Once clicked on, an executable file runs to fully download the software. In the process, the user is prompted to accept and install other complementary software products. If the user accepts any of these additional software products, Adaware will earn a commission from the third-party software provider.

Transaction-based. Upclick sells its services on a business-to-business basis. Merchants sign up to use the platform on a per-transaction basis.

The company presented this in a slightly different way, providing examples of how traffic to its sites can be monetised. Where originally Avanquest would only earn revenues in the first category, it has developed multiple ways to earn revenues from internet traffic, particularly in light of consumers’ increasing reluctance to pay directly for software or services. So where it would previously earn on average $1 from each visitor to its sites, it can now earn more like $2.63 per visitor. Bearing in mind the cost of acquiring this traffic, Avanquest can now make more profit, or pay more to acquire additional traffic.

Exhibit 4: Traffic monetisation methods

Direct sales

Indirect sales of products, services & advertising

Customer targeting

Renewals

Monetisation method

Convert 2% of visitors to buy own IP or third-party software with average value of $50

Convert free software customers to paid products; earn search fees from Adaware; earn referral fees for third-party software installation

$3.00 lifetime value (LTV) per email address

Re-target existing customers to renew or upgrade software products, or download free products

Revenue per visit

$1

$0.85

$0.15

$0.63

Source: Claranova

New secure payments service developed

The company announced that it has developed a new service for Adaware called Payaware. This is designed to provide a secure and private way to make purchases online. The user registers with Payaware and provides details of a debit or credit card. Using the Payaware browser, when a user wants to pay for an item online, they press the Payaware button. This provides a one-time use card number that auto-fills in the payment page. By providing the one-time use number, even if it is intercepted it cannot be used again for another transaction. The transaction will show up on the user’s credit card statement as a Payaware transaction. Via a separate dashboard, the user can log in and view all transactions made in this way.

In terms of monetisation, the service is free to the user; Payaware acts as the card issuer and therefore earns the issuer fee from the merchant. The transactions use the traditional card networks so Visa/Mastercard continue to earn their transaction fees. The merchant does not see any difference in the process. This service will initially be launched in the US.

myDevices – continues to add partners

myDevices saw a 75% revenue increase year-on-year and a reduction in EBITDA losses from €2.1m to €1.9m. During H119, it continued to sign up partners to sell and distribute its technology. In September 2018, it signed up Alibaba Cloud and Ingram Micro. In October 2018, ARM and myDevices partnered to combine the myDevices IoT in a Box with ARM’s Pelion IoT platform. In February, myDevices announced that it was working with Microsoft so that LoRaWAN sensors could connect and send data to Microsoft Azure, enabling advanced analytics and business intelligence.

During January and February, myDevices carried out another investment round: Claranova invested $3m and Semtech $3m, taking the Claranova ownership of myDevices from 68.6% to 62.26%.

Outlook and changes to forecasts

Ambitious five-year outlook

Management unveiled the growth outlook for the group on a longer-term basis, targeting revenues of €600m in five years with an EBITDA margin of 10%. This broadly splits into €200m for Avanquest, at a 15–20% margin, and €400m for PlanetArt. As myDevices is at such an early stage, its revenue has not been included in this target. The table below shows the compound annual growth rates required to hit these targets. The company expects to be able to reach the targets for PlanetArt through organic growth, whereas Avanquest’s target is likely to combine acquisitions and organic growth.

Exhibit 5: Revenue targets – five-year view

€m

FY18

FY19e

FY23e

FY18–23

FY19–23

CAGR

CAGR

PlanetArt

122

166

400

27%

25%

Avanquest

36

71

200

41%

30%

Total

158

237

600

31%

26%

Source: Claranova, Edison Investment Research

Corporate changes to broaden appeal

At the upcoming EGM, management proposes to change the company’s legal form to a Societas Europaea and to undertake a reverse stock split to reduce volatility and make the share more attractive to international investors.

Changes to forecasts

We have revised our FY19 and FY20 forecasts to reflect the following:

Revenues: we have increased our revenue forecasts for Avanquest and PlanetArt to reflect strong H119 performance. We have forecast a slower growth in myDevices revenues.

EBITDA: we have increased costs at a similar rate to revenues, to reflect higher marketing costs. This results in an increase to our EBITDA forecasts of 6.4% in FY19 and 4.6% in FY20.

Minority interest: the Avanquest acquisitions have been accounted for in a different way than we had expected based on implementation of IFRS 9. As Claranova only acquired 50.01% of the three Canadian businesses in July, we accounted for this by fully consolidating the businesses and subtracting the 49.99% minority interest in the income statement. The acquisitions have instead been fully consolidated, with the potential amount due to the vendors for the remaining 49.99% treated as a long-term liability of €41.2m. Our revised income statement no longer subtracts the Avanquest minority interest. We have also increased the minority interest due for myDevices from H219.

Exhibit 6: Changes to estimates

€'m

FY19e

FY19e

FY20e

FY20e

Old

New

Change

y-o-y

Old

New

Change

y-o-y

Revenues

234.6

248.9

6.1%

54.1%

274.8

306.8

11.6%

23.2%

EBITDA

16.9

18.0

6.4%

361.5%

28.5

29.8

4.6%

65.6%

EBITDA margin

7.2%

7.2%

0.3%

4.8%

10.4%

9.7%

-6.3%

2.5%

Normalised operating profit

16.4

17.4

6.1%

411.8%

28.1

29.3

4.4%

68.4%

Normalised operating profit margin

7.0%

7.0%

0.0%

4.9%

10.2%

9.6%

-0.7%

2.6%

Reported operating profit

11.0

12.3

12.1%

N/A

26.1

27.1

3.9%

120.3%

Reported operating margin

4.7%

4.9%

0.3%

8.7%

9.5%

8.8%

-0.7%

3.9%

Normalised PBT

13.6

14.6

7.4%

371.0%

25.3

26.5

4.7%

81.2%

Reported PBT

8.2

9.5

16.3%

N/A

23.3

24.3

4.2%

155.3%

Normalised net income

8.1

11.5

42.8%

338.6%

15.4

19.5

26.6%

69.0%

Reported net income

3.9

7.6

95.2%

N/A

13.8

17.8

28.4%

134.0%

Normalised basic EPS (€)

0.02

0.03

42.7%

340.6%

0.04

0.05

26.3%

68.9%

Normalised diluted EPS (€)

0.02

0.03

48.2%

357.4%

0.04

0.05

31.2%

68.9%

Reported basic EPS (€)

0.01

0.02

95.0%

N/A

0.04

0.05

28.2%

133.9%

Net debt/(cash)

(21.7)

(16.6)

-23.5%

-55.8%

(44.9)

(43.0)

-4.3%

159.4%

Source: Edison Investment Research

Valuation

We have revised our sum-of-the-parts valuation to reflect our new revenue forecasts and the different accounting treatment for the Avanquest minority interests. We have used the same revenue multiples for each division and treat the long-term liability for the acquisitions as equivalent to debt. This results in an increase in our per share valuation from €1.11 to €1.28. Catalysts for the share price to move towards this valuation include revenue contributions to PlanetArt from new geographic areas (eg India, Benelux), continued strong revenue and margin growth in Avanquest, the successful launch of Payaware and customer wins for myDevices.

Exhibit 7: Sum-of-parts valuation

FY19e

FY20e

EV based on FY19e sales multiple (€m)

MI

Value to shareholders (€m)

EV/Sales multiple

2.2

1.8

555.8

519.9

PlanetArt

2.3

1.8

380.4

7.1%

353.4

Avanquest

2.0

1.8

151.9

0.0%

151.9

myDevices

6.0

3.2

23.4

37.7%

14.6

EV/EBITDA multiple

PlanetArt

34.8

21.9

Avanquest

14.7

12.3

myDevices

N/A

N/A

€m

Upside/(downside)

Net cash at end H119

42.8

Equity value (€m)

503.7

Cost of acquisition

(59.0)

Per share value (€)

1.28

55%

Adjusted net cash

(16.2)

No. of shares (m)

392.0075

Source: Edison Investment Research


Exhibit 8: Financial summary

€'m

2015

2016

2017

2018

2019e

2020e

30-June

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

INCOME STATEMENT

Revenue

 

 

93.1

117.4

130.2

161.5

248.9

306.8

EBITDA

 

 

(6.8)

(9.2)

(5.0)

3.9

18.0

29.8

Normalised operating profit

 

 

(11.4)

(16.0)

(5.8)

3.4

17.4

29.3

Amortisation of acquired intangibles

0.0

0.0

0.0

0.0

(0.2)

(0.2)

Exceptionals

15.6

(10.0)

0.4

(2.4)

(4.2)

0.0

Share-based payments

(0.0)

(0.1)

(4.8)

(7.1)

(0.7)

(2.0)

Reported operating profit

4.2

(26.1)

(10.1)

(6.1)

12.3

27.1

Net Interest

1.1

(1.7)

(0.9)

(0.3)

(2.8)

(2.8)

Joint ventures & associates (post tax)

0.0

(0.0)

0.0

0.0

0.0

0.0

Exceptionals

0.0

0.0

0.0

0.0

0.0

0.0

Profit Before Tax (norm)

 

 

(10.3)

(17.7)

(6.6)

3.1

14.6

26.5

Profit Before Tax (reported)

 

 

5.3

(27.8)

(11.0)

(6.4)

9.5

24.3

Reported tax

(0.6)

(0.8)

(0.4)

(1.8)

(2.2)

(5.6)

Profit After Tax (norm)

(10.9)

(18.5)

(7.0)

2.4

11.2

20.4

Profit After Tax (reported)

4.7

(28.6)

(11.4)

(8.2)

7.3

18.7

Minority interests

(8.1)

0.0

0.3

0.2

0.3

(0.9)

Discontinued operations

(3.2)

0.0

0.0

0.0

0.0

0.0

Net income (normalised)

(18.9)

(18.5)

(6.7)

2.6

11.5

19.5

Net income (reported)

(6.5)

(28.6)

(11.0)

(7.9)

7.6

17.8

Basic average number of shares outstanding (m)

58

375

375

394

392

392

EPS - basic normalised (€)

 

 

(0.33)

(0.05)

(0.02)

0.01

0.03

0.05

EPS - diluted normalised (€)

 

 

(0.33)

(0.05)

(0.02)

0.01

0.03

0.05

EPS - basic reported (€)

 

 

(0.11)

(0.08)

(0.03)

(0.02)

0.02

0.05

Dividend (€)

0.00

0.00

0.00

0.00

0.00

0.00

Revenue growth (%)

#DIV/0!

26.1

10.9

24.0

54.1

23.2

EBITDA Margin (%)

-7.3

-7.9

-3.8

2.4

7.2

9.7

Normalised Operating Margin

-12.3

-13.7

-4.4

2.1

7.0

9.6

BALANCE SHEET

Fixed Assets

 

 

15.7

3.0

2.0

1.3

74.6

74.2

Intangible Assets

12.0

1.5

0.9

0.5

73.0

72.6

Tangible Assets

0.6

0.5

0.3

0.2

1.0

1.0

Investments & other

3.1

1.1

0.7

0.6

0.6

0.6

Current Assets

 

 

48.0

25.5

28.1

79.1

64.1

94.0

Stocks

5.9

5.0

3.7

3.7

6.8

8.4

Debtors

4.8

4.7

4.3

4.9

8.2

10.1

Cash & cash equivalents

30.5

11.1

17.1

65.7

44.3

70.7

Other

6.9

4.7

2.9

4.8

4.8

4.8

Current Liabilities

 

 

(32.0)

(25.3)

(28.1)

(37.2)

(46.1)

(54.9)

Creditors

(26.9)

(24.5)

(26.6)

(35.4)

(44.3)

(53.1)

Tax and social security

(0.3)

(0.0)

(0.3)

(1.7)

(1.7)

(1.7)

Short term borrowings

(4.8)

(0.7)

(1.1)

(0.1)

(0.1)

(0.1)

Other

0.0

0.0

0.0

0.0

0.0

0.0

Long Term Liabilities

 

 

(2.4)

(1.1)

(0.7)

(29.0)

(69.7)

(69.7)

Long term borrowings

(1.8)

(0.6)

0.0

(28.1)

(27.6)

(27.6)

Other long term liabilities

(0.7)

(0.5)

(0.7)

(0.9)

(42.1)

(42.1)

Net Assets

 

 

29.3

2.1

1.3

14.2

22.9

43.6

Minority interests

0.0

0.0

(0.1)

(1.8)

(4.1)

(5.0)

Shareholders' equity

 

 

29.3

2.1

1.2

12.5

18.8

38.6

Source: Claranova, Edison Investment Research

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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

General disclaimer and copyright

This report has been commissioned by Claranova and prepared and issued by Edison, in consideration of a fee payable by Claranova. 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

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