Recurring revenue jumps 48%

CREALOGIX Group 28 March 2019 Update
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CREALOGIX Group

Recurring revenue jumps 48%

Interim results

Software & comp services

28 March 2019

Price

CHF98.00

Market cap

CHF136m

Net cash (CHFm) at 31 December 2018

0.0

Shares in issue

1.39m

Free float

37%

Code

CLXN

Primary exchange

Switzerland

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(3.0)

(10.9)

(43.4)

Rel (local)

(2.7)

(22.2)

(47.9)

52-week high/low

CHF172

CHF93

Business description

CREALOGIX Group provides digital banking technology solutions to banks, wealth managers and other financial services companies. The company’s suite of solutions includes online and mobile banking, digital payments, digital learning and security.

Next events

Final results

17 September

AGM

28 October

German Equity Forum

25–27 November

Analysts

Richard Jeans

+44 (0)20 3077 5700

Katherine Thompson

+44 (0)20 3077 5730

CREALOGIX Group is a research client of Edison Investment Research Limited

Recurring revenue grew by 48% to represent 44% of H1 sales, reflecting an ongoing shift to SaaS and the acquisition of Elaxy BS&S. However, due to uncertainties over the timing of new contracts and the magnitude of the shift to SaaS, management has reduced its FY19 EBITDA guidance and deferred its long-term projections until later in the year. We have cut our EBITDA forecasts by 25% in FY20 and by 26% FY21. Nevertheless, the digital banking industry dynamics remain attractive and pure-play CREALOGIX has a strong pipeline. In our view, CREALOGIX is uniquely positioned in this industry and is an attractive play on digital banking.

Year
end

Revenue (CHFm)

PBT*
(CHFm)

EPS*
(CHF)

DPS
(CHF)

P/E
(x)

Yield
(%)

06/17

74.9

5.0

2.59

0.50

37.8

0.5

06/18

87.1

5.0

2.39

0.25

41.0

0.3

06/19e

107.3

3.5

1.67

0.75

58.8

0.8

06/20e

115.4

8.1

4.16

1.25

23.6

1.3

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

Interim results: 28% local currency revenue growth

H1 revenues grew by 29% to CHF51.0m, including a 1% benefit from currency movements and full period contributions from Innofis and Elaxy BS&S, which were acquired in January 2018 and July 2018 respectively. Recurring revenue grew by 48% to CHF22.3m to represent 44% of H1 group revenue. Sales outside Switzerland represented 64% of total revenue, up from 58% in H118. The EBITDA margin fell by 470bp to 6.4% but was an improvement on the H218 margin of 5.6%.

Digital banking remains in a strong growth phase

CREALOGIX has been benefiting from the open banking wave. PSD2, which came into force in January 2018, is driving the digital transformation of the financial industry across the EU. Additional rules that require banks to provide open interfaces, or APIs, for authorised third-party providers came into effect in mid-March 2019. APIs are key to creating a digital ecosystem for customers.

Forecast changes: EBITDA cut 25/26% in FY20/FY21

Company guidance remains for FY19 revenues to exceed CHF100m while H2 EBITDA guidance is now for at least the H1 level. We have cut our revenues by 3% in FY19 to CHF107.3m, with FY20 and FY21 coming back by 5% and 7%. We have also cut our EBITDA margins, hence EBITDA falls by 37% in FY19, 25% in FY20 and by 26%in FY21. These cuts reflect the delayed contracts and the ongoing shift to SaaS. We now forecast the group to end FY19 with net cash of CHF4.5m after the refinancing of the remaining convertible bonds in November.

Valuation: 10% revenue CAGR with 10%+ operating margins would imply substantial upside

A DCF scenario incorporating 10% organic revenue CAGR over 2019–29e falling thereafter to 2%, operating margins of 10% from FY22e along with a 9% WACC would suggest a valuation of CHF148 per share, c 51% above the current share price. Increasing the margin to 15% from FY25e lifts the value to CHF209 p/sh.

Interim results: Switch to SaaS continues

H1 revenues grew by 28% to CHF51.0m at constant currencies, along with a 1% benefit from currency movements and full period contributions from Innofis and Elaxy BS&S, which were acquired in January 2018 and July 2018 respectively. The company did not provide organic growth figures as the new businesses are integrated and difficult to detangle. However, based on our initial forecasts of c CHF10m annual revenues for each of these acquired business, along with some modest growth at Innofis, this would suggest that H1 organic revenue growth was broadly flat.

Nevertheless, this organic growth is also clouded by the decline in (one-off) licence revenue as customers increasingly move to SaaS. We note that a CHF1m traditional perpetual licence deal would typically generate CHF1m plus 20% maintenance revenue in the first year while on a SaaS basis this would be c CHF450k (ie, CHF1,800/4) , proportionate for the period. A new SaaS contract signed on the first day of last month of the financial year will only generate CHF38k of revenue in the first financial year. However, the SaaS model is more lucrative over the long-term, breaking even after four years and generating significantly more revenue thereafter (ie CHF450k per annum compared with CHF200k per year for the perpetual licence model).

There were delays in new contract wins in H1, which management says, reflect the significantly increased deal size that CREALOGIX is signing and the longer sales cycles associated with these deals. Meanwhile the uncertainly over Brexit has been deferring decision making in the UK. Despite these issues, CREALOGIX has a strong pipeline but there are uncertainties over the timing and form (SaaS or traditional) of new deals. CREALOGIX is in negotiation with Tier 1 banks and is optimistic it will close several deals in the next few months. As a number of these are likely to be on a traditional licence basis, licensing fees are expected to recover in H2, while the form of other deals are yet to be decided and these decisions will have a significant bearing on revenues and profits.

Given the ongoing shift to the SaaS revenue model, CREALOGIX did not publish its long-term guidance in the latest results (previously >20% annual revenue growth and >15% medium term EBITDA margin) and management will review these numbers with the final results.

Nine open-banking customers were signed up during the period, of which three were new customers. Most new customers continue to choose the SaaS option, which involves lower upfront revenues, but greater revenues over the term of the contract. Consequently, this reduces the current period revenues and profitability.

Revenues in Switzerland grew by 9% while Europe grew by 30%. Spain-based Innofis, which is focused on Islamic banking, made a slow start after its acquisition, as we reported with the FY18 results, due to management focus on acquisition procedures and integration. However, management is pleased with the progress. The group is also shifting work handled by contractors in Switzerland to new permanent roles in Spain, which results in significant cost savings, but there were duplicate costs in H1 as this transition is being made. There will be c 20 new roles in place by the end of June. The group’s headcount rose by 65% over the 12 months to stand at 688 at end December, reflecting the acquisitions of Innofis and Elaxy BS&S.

Hosting and Saas services revenue jumped 184% to CHF7.6m, which includes c 50% of Elaxy BS&S revenues – Elaxy BS&S has added a significant hosting business to the group. Recurring revenue (Hosting/SaaS plus maintenance) expanded by 48% to CHF22.3m to represent 44% of H1 group revenue. Sales outside Switzerland represented 64% of total revenue, up from 58% in H118. The gross margin slipped by 360bp to 73.6%, reflecting the change in the product mix. The EBITDA margin fell from 11.1% in H118 to 6.4% in H119 but was an improvement on the H218 margin of 5.6%.

Exhibit 1: Half-by-half analysis

2018e

2019e

2020e

CHF000’s

H1a

H2a

FY

H1a

H2e

FY

FY

Services

15,163

17,326

32,489

20,499

20,454

40,953

45,074

Goods

1,327

1,901

3,228

2,519

1,881

4,400

4,400

Hosting and SaaS services

2,680

3,215

5,895

7,604

7,786

15,390

17,325

Maintenance

12,391

14,347

26,738

14,693

14,744

29,437

30,725

Licensing fees

8,109

10,685

18,794

5,706

11,450

17,156

17,856

Total Revenue

39,670

47,474

87,144

51,021

56,315

107,336

115,379

Gross profit

30,616

36,661

67,277

37,567

45,098

82,665

88,701

Gross Margin

77.2%

77.2%

77.2%

73.6%

80.1%

77.0%

76.9%

Opex before depn & amortisation

(26,231)

(34,016)

(60,247)

(34,310)

(41,343)

(75,653)

(77,688)

Adjusted EBTDA

4,385

2,645

7,030

3,257

3,755

7,012

11,013

EBITDA Margin

11.1%

5.6%

8.1%

6.4%

6.7%

6.5%

9.5%

Depreciation

(680)

(909)

(1,589)

(1,218)

(1,382)

(2,600)

(2,600)

Adjusted operating profit

3,705

1,736

5,441

2,039

2,373

4,412

8,413

Operating Margin

9.3%

3.7%

6.2%

4.0%

4.2%

4.1%

7.3%

Associates

(323)

303

(20)

(274)

0

(274)

0

Net interest

(332)

(97)

(429)

(311)

(339)

(650)

(300)

Edison Profit Before Tax (norm)

3,050

1,942

4,992

1,454

2,034

3,488

8,113

Amortisation of acquired intangibles

(872)

(2,072)

(2,944)

(2,567)

(2,833)

(5,400)

(5,400)

Profit before tax

2,178

(130)

2,048

(1,113)

(799)

(1,912)

2,713

Source: CREALOGIX (historics), Edison Investment Research (forecasts)

Cash fell over the six months, primarily due to the CHF8.9m acquisition of Elaxy BS&S along with a free cash outflow of CHF2.1m (CHF2.8m outflow in H118). There was a CHF4.8m working capital outflow – we note that December is the low point is the cash flow cycle with most maintenance revenue collected in January - and increased capital investment of CHF1.6m that mainly related to investment in IT infrastructure in Switzerland (CHF1.1m). In addition, we note the group spends c 20% of revenues on R&D, all of which is expensed as incurred. Net assets declined due to the statutory loss and currency movements. The outstanding convertible bonds are due in October and the company plans to refinance them. These bonds convert at CHF104.5 which is slightly above the current share price.

Exhibit 2: Capital structure

CHF000s

31/12/16

30/06/17

31/12/17

30/06/18

30/12/18

Cash & ST securities

(29,433)

(33,775)

(30,366)

(20,692)

(8,589)

Short-term borrowings

0

0

0

0

0

Long-term borrowings

0

0

0

0

0

Convertible bonds

24,260

23,154

14,054

9,291

8,560

Net cash

(5,173)

(10,621)

(16,312)

(11,401)

(29)

Assumed ELAXY FS&S deferred payment

2,387

2,387

2,387

2,387

2,387

Adjusted net debt (cash)

(2,786)

(8,234)

(13,925)

(9,014)

2,358

Net assets

27,124

29,515

41,464

71,053

67,226

Debt/equity

(10.3%)

(27.9%)

(33.6%)

(12.7%)

3.5%

Source: CREALOGIX

Forecasts: Revenues and EBITDA cuts

Company guidance is for FY19 revenues to exceed CHF100m and H2 EBITDA of at least the H1 level. Consequently, we have eased our revenues by 3% in FY19 to CHF107.4m, with FY20 and FY21 coming back by 5% and 7% to CHF115.4m and CHF122.0m respectively. We have cut our EBITDA margins by 360bp in FY19, 260bp in FY20 and 280bp in FY21, but we continue to forecast the margin to expand as the SaaS revenue book gains scale. Hence our EBITDA falls by 37% in FY19 to CHF7.0m, 25% in FY20 to CHF11.0m and by 26% in FY21 to CHF13.4m. We have reallocated Elaxy BS&S to the appropriate revenue types, which primarily affected hosting (c 50% of revenues), but is also reflected in services. We have shifted our goods (hardware) forecasts higher, due to significantly higher than expected sales in H1, but these are related to one-off contracts and we continue to forecast this category to flatline, albeit from a higher level. Associates represents Qontis and we have adjusted FY19 associates for the CHF274k loss although we assume breakeven going forward. We have maintained our interest costs and tax rate assumptions. We now forecast the group to end FY19 with net cash of CHF4.5m (previously CHF10.3m), which rises to CHF11.1m at end FY20 and to CHF16.7m at end FY21. We now assume the remaining convertible bonds will be refinanced in November with debt.

Exhibit 3: Forecast changes

Old

New

Change

Old

New

Change

Old

New

Change

Year end 30 June

2019e

2019e

(%)

2020e

2020e

(%)

2021e

2021e

(%)

Revenues (CHF'000s)

 

 

 

 

 

 

Licensing fees

23,570

17,156

(27)

26,230

17,856

(32)

28,916

18,630

(36)

Maintenance

30,450

29,437

(3)

32,550

30,725

(6)

34,860

31,140

(11)

Hosting and SaaS services

7,020

15,390

119

8,640

17,325

101

9,990

19,525

95

Services

36,006

40,953

14

40,300

45,074

12

44,109

48,314

10

Goods

3,119

4,400

41

2,807

4,400

57

2,807

4,400

57

Elaxy BS&S

10,000

0

(100)

10,500

0

(100)

10,973

0

(100)

Total Group revenues

110,164

107,336

(3)

121,027

115,379

(5)

131,654

122,009

(7)

Growth (%)

26.4

23.2

 

9.9

7.5

 

8.8

5.7

 

Gross profit

85,232

82,665

(3)

94,195

88,701

(6)

103,145

94,247

(9)

Gross margin (%)

77.4

77.0

 

77.8

76.9

 

78.3

77.2

 

Opex before depn & amortisation

(74,121)

(75,653)

2

(79,499)

(77,688)

(2)

(84,983)

(80,839)

(5)

EBITDA

11,111

7,012

(37)

14,696

11,013

(25)

18,162

13,408

(26)

EBITDA margin (%)

10.1

6.5

 

12.1

9.5

 

13.8

11.0

 

Normal depreciation

(2,400)

(2,600)

8

(2,350)

(2,600)

11

(2,300)

(2,500)

9

Adjusted operating profit

8,711

4,412

(49)

12,346

8,413

(32)

15,862

10,908

(31)

Operating margin (%)

7.9

4.1

 

10.2

7.3

 

12.0

8.9

 

Growth (%)

60.1

(18.9)

(131)

41.7

90.7

117

28.5

29.7

4

Associates

0

(274)

 

0

0

 

0

0

 

Net interest

(650)

(650)

0

(100)

(300)

200

100

(100)

(200)

Profit before tax norm

8,061

3,488

(57)

12,246

8,113

(34)

15,962

10,808

(32)

Amortisation of acquired intangibles

(5,300)

(5,400)

2

(5,300)

(5,400)

2

(5,300)

(5,400)

2

Profit before tax

2,761

(1,912)

(169)

6,946

2,713

(61)

10,662

5,408

(49)

Total taxation

(2,257)

(1,053)

(53)

(3,429)

(2,272)

(34)

(4,469)

(3,026)

(32)

Minority interest

(123)

(123)

0

(67)

(67)

0

(75)

(75)

0

Net income

381

(3,089)

(911)

3,450

374

(89)

6,118

2,307

(62)

Statutory EPS (CHF)

0.27

(2.23)

(911)

2.41

0.27

(89)

4.14

1.66

(60)

Adjusted EPS (CHF)

4.09

1.67

(59)

6.10

4.16

(32)

7.72

5.55

(28)

P/E - Adjusted EPS

 

58.8

 

23.6

 

17.6

Source: Edison Investment Research

Exhibit 4: Financial summary

CHF'000s

2016

2017

2018

2019e

2020e

2021e

Year end 30 June

Swiss GAAP

Swiss GAAP

Swiss GAAP

Swiss GAAP

Swiss GAAP

Swiss GAAP

PROFIT & LOSS

Revenue

 

63,317

74,858

87,144

107,336

115,379

122,009

Gross Profit

51,693

59,695

67,277

82,665

88,701

94,247

EBITDA

 

3,696

7,304

7,030

7,012

11,013

13,408

Adjusted Operating Profit

 

2,264

5,916

5,441

4,412

8,413

10,908

Amortisation of acquired intangibles

(2,634)

(1,799)

(2,944)

(5,400)

(5,400)

(5,400)

Exceptionals

0

0

0

0

0

0

Operating Profit

(370)

4,117

2,497

(988)

3,013

5,508

Associates

517

(21)

(20)

(274)

0

0

Net Interest

(630)

(936)

(429)

(650)

(300)

(100)

Profit Before Tax (norm)

 

2,151

4,959

4,992

3,488

8,113

10,808

Profit Before Tax (Statutory)

 

(483)

3,160

2,048

(1,912)

2,713

5,408

Tax

(130)

(1,751)

(1,350)

(1,053)

(2,272)

(3,026)

Profit After Tax (norm)

2,021

3,208

3,642

2,435

5,841

7,782

Profit After Tax (Statutory)

(613)

1,409

698

(2,965)

441

2,382

Minority interest

(270)

(360)

(681)

(123)

(67)

(75)

Net income (norm)

1,751

2,758

2,944

2,311

5,774

7,707

Net income (Statutory)

(883)

1,049

17

(3,089)

374

2,307

Average Number of Shares Outstanding (m)

1.06

1.06

1.23

1.39

1.39

1.39

EPS - normalised (CHF)

 

1.65

2.59

2.39

1.67

4.16

5.55

EPS - Statutory (CHF)

 

(0.83)

0.99

0.01

(2.23)

0.27

1.66

Dividend per share (CHF)

0.00

0.50

0.25

0.75

1.25

1.75

Gross Margin (%)

81.6

79.7

77.2

77.0

76.9

77.2

EBITDA Margin (%)

5.8

9.8

8.1

6.5

9.5

11.0

Op Margin (before GW and except.) (%)

3.6

7.9

6.2

4.1

7.3

8.9

BALANCE SHEET

Fixed Assets

 

28,910

26,430

62,506

65,689

59,651

53,825

Intangible assets and deferred tax

21,004

18,119

54,330

57,430

52,030

46,630

Tangible Assets

1,595

1,385

1,363

1,446

808

382

Investments & pensions

6,311

6,926

6,813

6,813

6,813

6,813

Current Assets

 

48,275

52,495

49,576

48,755

58,067

65,796

Stocks

3,661

3,419

5,950

7,329

7,878

8,331

Debtors

17,119

15,301

22,934

28,248

30,365

32,110

Cash

27,495

33,775

20,692

13,179

19,824

25,356

Current Liabilities

 

(24,752)

(24,219)

(29,704)

(45,510)

(48,917)

(51,860)

Creditors

(24,752)

(24,219)

(29,704)

(36,810)

(40,217)

(43,160)

Short term borrowings

0

0

0

(8,700)

(8,700)

(8,700)

Long Term Liabilities

 

(27,331)

(25,191)

(11,325)

(2,034)

(2,034)

(2,034)

Long term borrowings

(24,141)

(23,154)

(9,291)

0

0

0

Other long term liabilities

(3,190)

(2,037)

(2,034)

(2,034)

(2,034)

(2,034)

Net Assets

 

25,102

29,515

71,053

66,901

66,767

65,727

CASH FLOW

Operating Cash Flow

 

1,281

9,735

3,388

7,012

11,590

14,018

Net Interest

5

(616)

(455)

(650)

(300)

(100)

Tax

(144)

(1,273)

(421)

(700)

(942)

(2,190)

Capex

(486)

(862)

(1,117)

(2,683)

(1,961)

(2,074)

Acquisitions/disposals

(9,350)

(346)

(11,814)

(8,892)

(700)

(2,387)

Financing

1,504

(215)

(2,447)

0

0

0

Dividends

0

0

(559)

(342)

(1,041)

(1,735)

Net Cash Flow

(7,190)

6,423

(13,425)

(6,255)

6,646

5,532

Opening net debt/(cash)

 

(10,815)

(3,354)

(10,621)

(11,401)

(4,479)

(11,124)

Other

(271)

844

14,205

(667)

0

0

Closing net debt/(cash)

 

(3,354)

(10,621)

(11,401)

(4,479)

(11,124)

(16,656)

Source: CREALOGIX (historics), Edison Investment Research (forecasts). Note: The FY19 and FY20 acquisition outflows represents the final payments for Elaxy BS&S and MBA respectively with a final payment for Elaxy FS&S expected in FY21. We have treated the convertible bond conversions in FY18 in the Other category.


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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 CREALOGIX Group and prepared and issued by Edison, in consideration of a fee payable by CREALOGIX Group. 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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