2018 Half Year Results Darren Stanley - CEO Andrew Burns - CFO 19 - - PowerPoint PPT Presentation

19 February 2018

Darren Stanley - CEO Andrew Burns - CFO

2018 Half Year Results

Key outcomes for CGL

Strong sustainable growth across all key metrics

H1 FY18: Another record first half

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30.1m 21.3m 15.5m 24.2 9.6

$47.5m

total revenue

13%

$9.0m

profit before income tax

20%

10.1¢

earnings per share

29%

$4.9m

net profit attributable to members

32%

$13.1m

EBITDA

12%

$6.6m

net profit

23%

4.8¢/share 100% franked

dividends

Previous corresponding period: H1 FY17

Strategic rationale

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• Clear strategic focus on delivering repeatable IP into the National Security, Defence and Health industries domestically and

internationally

• Continued investment in software-as-a-service (SaaS) offerings to support clients pursuing ’secure cloud’ initiatives coupled with

fully managed solutions

• Ongoing investment in leading citizen-centric safety solutions for governments and large private enterprises with first

deployments expected in H2

• Delays in signing Government contracts in the first half and usual spending patterns which are biased towards the latter half of

the financial year give us confidence in a stronger second half

• More than 17,000 new users to be moved to Citadel’s cloud-based solutions in 2018
• Successfully growing Evolution laboratory information system (LIS) e-health solution which over 4,000 staff across Australia are

now using:

– Largest multi-site pathology LIS project in Victoria supporting Austin Health, Peter MacCallum and Melbourne Health – Upgraded Eastern Health to Evolution LIS solution extending their managed services contract to 2023

• Signed new long term SaaS contracts for information management with Queensland Department of Transport (6+6 years) and in

final contract negotiations with another large government agency for a 10 year term

• Won sole supplier for information management services to Melbourne City Council for 4 years and appointed by Deakin University

as its core content and collaboration supplier. This replicates the success of our Monash University contract with more

• pportunities in the pipeline in the tertiary education sector
• Completed integration of CHARM (acquired 14 September 2017) and commenced investment in product redevelopment to

provide fully cloud enabled solutions for Government and private providers

$62m in renewals / new contracts signed

Executing on our commitments

Growth trajectory continues

• Total revenue (sales + other income) up 12.7% to $47.5m

–

Strong revenue conversion on new contract wins

–

Continued progress of a new multi-year contract with an Australian Federal Government agency

–

Acquisition and integration of Charm

• Gross profit margin grew to 49.9%

–

Maintaining the focus on scalable software and managed service solutions

–

Incremental contract extensions reducing the effect of fixed expenses

• EBITDA up 12.3% to $13.1m

–

Ramping up investment in new software technologies and capabilities to drive the next phase of growth in SaaS solutions (e.g. Citadel-IX) as well as resources to support future growth

• NPAT up 22.8% to $6.6m

–

Effective tax rate of 26.3% reflecting the completion of the interest impact of the deferred consideration on PJA Solutions

–

Increase in depreciation and amortisation arising from additional R&D and additional amortisation from acquired intangibles arising from the Charm acquisition

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($m) H1 FY18 Restated* H1 FY17 Change Total Revenues 47.5 42.2 12.7% Gross Profit 23.7 20.1 17.7% Gross Profit margin 49.9% 47.6% EBITDA 13.1 11.7 12.3% EBITDA margin 27.6% 27.7% Depreciation & Amortisation 3.3 2.8 20.2% EBIT 9.8 8.9 9.8% Finance Costs 0.8 1.4 (44.4)% NPBT 9.0 7.5 20.4% Tax Expense 2.4 2.1 14.2% NPAT from Continuing Operations 6.6 5.4 22.8% NPAT from Discontinued Operations (1.2) (1.4) NR

Good growth in underlying performance

*In March 2017 the Group discovered accounting errors in relation to the recognition of accrued revenue for particular projects and customers. As a consequence, revenue was overstated by $1.9m for the half year ended 31 December 2016. The error was corrected for the year ended 30 June 2017 in the full year financial statements issued in August 2017. Additional systemic and manual controls have been put in place to address this risk.

Transaction highlights PJAS overview Strategic rationale Key outcomes for CGL

Strong results from continued operations

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• Good revenue growth through the execution of existing

contracts and the addition of new software and managed service contracts

• Continued investment in scalable software solutions and

talent

• Finalised Charm acquisition integration and commenced

investment in redeveloping the platform into a cloud-based product

Strategic rationale Key outcomes for CGL

Supports business investment and further growth initiatives

Strong balance sheet

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• Cash position at $19.2m

–

Payments for the Charm acquisition and the settlement of deferred consideration relating to previous acquisitions

–

Drawdown on the Group’s loan facilities to fund part of the acquisition payments

–

Net Debt $0.6m

• Trade & other receivables down to $11.1m from June

–

Strong collections from milestones occurring at or near 30 June 2017

• Intangible Assets increased by $6.2m

–

Continued investments in product development to extend the existing capability particularly around cloud-based offerings

–

Acquired intangible assets - CHARM ($m) 31 Dec 2017 30 Jun 2017 Cash 19.2 29.8 Trade & other receivables 11.1 17.1 Plant & equipment 7.2 6.2 Intangible assets 74.6 68.4 Other assets 21.2 9.3 Total assets 133.3 130.8 Debt 19.8 8.9 Trade & other payables 16.5 16.8 Other liabilities 19.1 29.6 Total liabilities 55.4 55.3 SHAREHOLDERS EQUITY 77.9 75.5

Continuing cashflow underpins business investment and dividends

Solid cashflow

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• Operating cashflow up $1.6m from H1 FY17

–

Operating cash is traditionally low in the H1

–

Revenue growth and improved margins driving the increase in operating cash pcp

–

Increased outflows from Tax and Interest have reduced the inflow

• Investing cash outflow increased to ($19.2m)

–

($12.8m) final deferred payments of the PJA Solutions acquisition

–

Net cash consideration for the Charm acquisition of ($4.5m)

–

Investments in plant and equipment including internally developed software and capabilities of ($1.8m)

• Financing cash inflow of $6.4m

–

Payment of dividends of ($5.4m)

–

Drawdown of $12.8m in borrowings to fund part of the investment payments, and ($2.3m) has been repaid ($m) H1 FY18 H1 FY17 Net cash inflow from operating activities 2.1 0.5 Net cash outflow from investing activities (19.2) (21.2) Net cash from financing activities 6.4 6.1 Net increase / (decrease) in cash from continuing operations (10.7) (14.6) Net (decrease) in cash from discontinued

• perations

(0.5) (1.0)

Transaction highlights PJAS overview

Increasing shareholder returns

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• Continued EPS and ROE growth resulting from a range
• f successful organic initiatives
• Kapish acquisition creating strong synergies
• Strong cash position enabling the maintenance of a

solid dividend distribution profile

• Ongoing investment in R&D and innovation programs

will boost organic growth

Key outcomes for CGL

Major contracts locked in for FY18

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• No major contracts are due for renewal in FY18
• New long term software and digital solutions contracts are currently in negotiation for FY18
• Managed service contracts are providing stable, recurring revenue streams, as well as an opportunity to upsell
• Queensland Health LIS contract is expected to expire in 2022
• High confidence in FY19 renewals based on current client requirements
• Strong ‘pipeline’ of net new implementation and managed services contracts

Key:

Initial contract Contract renewal #1 Contract renewal #2 Contract renewal #3 Contract negotiation 30 June

Strategic rationale Key outcomes for CGL

Acquisitions adding long term value

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Kapish

• Core team integration complete
• Successfully developed and launched the Citadel-IX platform within 12 months
• Developed a secure SaaS solution leading to contracts with >17000 seats

Charm

• Initial integration complete with minimal staff disruptions, platform redevelopment commenced
• Charm platform redevelopment ahead of schedule with first web version available in June 2018
• International expansion strategy in support of major customers commenced with senior management discussions
• FY18 Revenue and EBITDA impacted by lost key opportunity during transition. Pipeline now secured to replace this

revenue in FY19

• Additional resources added to the Citadel Health sales team with results expected in FY19

Scalable software solutions

• Citadel Information Exchange (Citadel-IX) combines Enterprise

Content Management (ECM), secure cloud-based technology, value add software, premium service management and expert ECM knowledge as a secure, scalable and robust solution

• Latest technology and software to support cloud-first strategies
• Connectivity anywhere, anytime and from any device
• Flexibility to use Citadel’s secure cloud platform or top tier

cloud providers

• Developed over 12 months
• First clients signed up with >17,000 users expected by

31 Dec 18 based on current clients

• Highly scalable
• Several additional large clients in the pipeline

Citadel-IX™

Note: A range of Citadel software solutions are shown in Appendices

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• Over the past 6 months, substantial investment undertaken to develop and sell new scalable software platforms (such as

Citadel-IX below) into our chosen markets

• Growing revenues to underpin additional investment

FLEXIBLE CLOUD FIRST

• Private community and public cloud
• ptions
• Scalable infrastructure with high

availability and disaster recovery

• Flexible pricing arrangements

MANAGED SERVICES

• Premium support and service

delivery for your ECM solution

• Complete range of ITIL compliance

support services and 24x7 monitoring and premium service

FLEXIBLE CLOUD FIRST

• Private Community and Public Cloud
• ptions
• Scalable infrastructure with high

availability and disaster recovery

• Flexible pricing arrangements

CONSULTING

• Included consulting services to assist

with a range of ongoing service

• Authorised training provider
• Custom applications and integration

solutions

Developing proprietary software

Transaction highlights

• 1. S overview

Strategic rationale Key outcomes for CGL

A growing customer base

• New enterprise information management clients including QLD Department Transport and Main Roads, NSW Department
• f Finance, Services and Innovation, NSW Office of Sport and Melbourne City Council. Expansion in local councils in

Queensland and Victoria for enterprise information management and collaboration services

• Replicating the success of the Monash program, Citadel has been selected by Deakin University as the core supplier of

integrated audio-visual, video conferencing and collaboration solutions including design and logistics support

• Expansion of our engagements with Australian Government Agencies for strategic integration, software development and

partnering services

• Expansion of the electronic document and records management solution for the Department of Defence and additional

content/collaboration solutions in RAAF Bases Amberley, Richmond and Edinburgh

• Strong execution has lead to expansion opportunities on the new Royal Adelaide Hospital Managed Service Arrangement

to support the hospital’s growing technology requirements

• Successful implementation of the Evolution laboratory information system (LIS) e-health solution into Austin Health, Peter

MacCallum and Melbourne Health hospitals, with additional opportunities being pursued nationally and internationally

• Upgraded Eastern Health to the Evolution LIS solution extending their managed services contract to 2023
• Successfully secured the first Health Enterprise Service Management (HESM) solution with Ballarat Health with other
• pportunities in the pipeline
• Well progressed with additional opportunities for Charm software solutions into new private health care providers which

we expect to close in H2

• Strong pipeline of opportunities for our leading citizen-centric safety solution with the first clients expected in H2

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Summary

H1 FY18: another record half year

• $62m of renewals/clients wins builds growth momentum
• Transition to scalable software solutions delivering results
• Strong growth across all key metrics (versus H1 FY17)
• Strong balance sheet (cash position) supports growth initiatives
• Increased portfolio of software products and solutions underpinning pipeline growth

Well positioned to deliver a strong FY result

• All major contracts locked for FY18, with confidence in FY19 renewals
• Substantial growth in pipeline including national and international innovative security and eHealth

solutions

• Delays in some new H1 contract commencements provide confidence in a stronger H2
• Further ability to drive growth from Kapish acquisition
• Continued move to Citadel-IX cloud-based offerings
• Further investment in new technologies to drive long term growth
• Continue to pursue attractive M&A opportunities as they arise

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Appendices – Citadel Software Solutions

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Citadel Social Safeguard A1 Citadel Assured Identity Management A2 Citadel SIEM A3 Citadel Cloud Exchange A4 Citadel Integrated Data Exchange A5 Citadel Media Exchange A6 Remote Care and Virtual Waiting Room A7 Health Enterprise Service Management A8 Auslab Evolution A9 Auscare A10 Charm Health A11 e-Blood A12

Citadel Social™ manages and catalogues all social media activity that a client produces and stores it directly in the Citadel-IX™ Secure Information Management Solution.

A1: Citadel Social Safeguard

• Monitors all forms of social media looking for potential threats to an organisations brand (through

impersonation, account hacking and attacks on reputation)

• Records all activity and applies rules to post to intervene if required
• Provided as a hosted solution and billed as a monthly service

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Citadel-AIM™ provides an overarching identity management service for ensuring agency compliance with the internal personnel security and privacy requirements of the Australian Government.

A2: Citadel Assured Identity Management

• Secure, accredited identity management service
• Single point of compliance reporting on identities
• Standardised identity processes and consistent

authorisation processes

• Automated workflows for aggregating and applying

identities

• Single point of identity creation – to government

standards

• Elimination of duplicate or languishing accounts
• HR-integrated account creation and provisioning

with active directory

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The Citadel-OverWatch™ platform provides security surveillance services for your

• network. With surveillance and precision response options, we detect malicious

activity to prevent cyber-attacks.

A3: Citadel SIEM

• Secure hosted solution to ingest all system, network and application logs
• Continuous monitoring of machine events, log management and retention
• Anomaly detection through timeframe pattern analysis
• Real time and regressive alerting option's, scheduled reporting, PCI-DSS compliance monitoring
• Security operations centre capability with event monitoring and incident handling, intrusion hunting team,

intelligence cell and forensic team

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Citadel-CX™ - Hyper convergence, virtualization, and the software-defined datacentre have enabled a fundamental advancement to how efficient, secure, flexible, and in turn – cost effective, cloud infrastructure can now be built and deployed.

A4: Citadel Cloud Exchange

• Powered by worlds leading IaaS Providers
• ASD Certified TOP SECRET protected Level
• Provision Infrastructure in minutes

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Citadel-IDX™ is a state-of-the-art highly scalable, fully managed, extensible big data platform.

A5: Citadel Integrated Data Exchange

• The Citadel-IDX™ platform runs on high performance, fully redundant scalable infrastructure from within an ASD

certified PROTECTED cloud for our government clients.

• The platform is a suite of best-in-class big data tools and technologies that have been integrated and extended to

meet the unique challenges of data fusion

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Citadel-MX ™ provides an advanced real-time communication media platform powering Government and citizen engagement.

A6: Citadel Media Exchange

• Secure scalable RTC Media Platform in the Cloud
• Media APIs for building advance video applications for WWW and smartphone platforms
• Group communication, transcoding, recording, mixing, broadcasting and routing of audio-visual flows
• Advance media processing capability including computer vision, video indexing, augmented reality and speech

analysis

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We provide a range of solutions that enable you to optimise, integrate and innovate across your health organisation through Citadel-HX™.

A7: Remote Care and Virtual Waiting Room

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Citadel-HESM™ harnesses the flexibility and scale of the ServiceNow Enterprise Cloud Platform to deliver innovative health workflow solutions.

A8: Health Enterprise Service Management

• Enables Health digital transformation
• Manage direct and Indirect care workflows
• Collect the information that matters to help drive positive clinical outcomes
• Identify opportunities to improve patient and employee care through real-time analytics
• Care co-ordination and collaboration
• Actively manage clinical risk and compliance

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Evolution is an Enterprise Class Laboratory Information Management System that seamlessly integrates with instruments and other systems and provides unrivalled flexibility to customise data fields, reference lists, user privileges, workflows and reports to your needs.

A9: Auslab Evolution

• Reliably manages pathology information for 30% of

Australians who have treatment in a public hospital

• Used by public health and forensic authorities to

manage environmental testing and evident tracking

• Used by over 3,000 clinicians every month
• Highly configurable to your organisations needs
• A fully integrated, smart technology system
• Proven to deliver increased efficiency, accuracy and

throughput

• A cost effective solution for your laboratory

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AUSCARE provides clinicians with intelligent views to assist in the management of their patient's clinical result information.

A10: Auscare

• Auscare includes the full workflow for the

clinician from paperless electronic ordering

• f diagnostic tests through to reviewing

and approving results reports, preparing clinical summaries and discharge summaries for patients

• Auscare also provides a specialist function

to positively identify a patient at the time a sample is being taken to further reduce errors in specimens collection & labelling

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The CHARM™ Oncology Solution is a patient centric solution utilised by multidisciplinary teams involved in the delivery of care to the oncology patient.

A11: Charm Health - Charm™

• Offers complete cancer treatment

management solution in one package

• Can be deployed in medical oncology and

radiation oncology information systems

• HL7 compliant and integrates with multiple

applications used in both private and public hospitals

• Reduces the risk of errors and improves
• utcomes for patients, while helping

service providers achieve their KPIs and improve cash flows

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e-Blood is a computer software system that enhances the operation of the transfusion laboratory, and ensures the safe and timely release of blood and other products to patients.

A12: e-Blood

• Comprehensive inventory management module and patient

management module

• Totally auditable with total patient history and antibody

register

• Remote release functionality and statistical management

module

• Secure separate stand alone database

The e-Blood blood banking system is a Laboratory Information System (LIS) specifically designed for blood banking. At its heart is a unique method of electronically cross matching that greatly improves the safety of transfusion practice, reduces blood wastage and increases laboratory efficiency.

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The information contained in this presentation prepared by The Citadel Group Limited (ASX:CGL) is not investment or financial product advice and is not intended to be used as the basis for making an investment decision. This presentation has been prepared without taking into account the investment objectives, financial situation or specific needs of any particular person. Potential investors must make their own independent assessment and investigation of the information contained in this presentation and should not rely on any statement or the adequacy or accuracy of the information provided. To the maximum extent permitted by law, none of the CGL Group of Companies, its directors, employees or agents accepts any liability, including, without limitation, any liability arising out of fault or negligence, for any loss arising from the use of the information contained in this presentation. In particular, no representation or warranty, express or implied, is given as to the accuracy, completeness or correctness, likelihood of achievement or reasonableness of any forecasts, prospects, statement or returns contained in this presentation. Such forecasts, prospects, statement or returns are by their nature subject to significant uncertainties and contingencies. Actual future events may vary from those included in this presentation. The statements and information in this presentation are made only as at the date of this presentation unless otherwise stated and remain subject to change without notice.

Important Notice and Disclosure

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Contacts

Darren Stanley, CEO Phone: +61 2 6124 0800 Mobile: +61 412 557 993 Email: darren.stanley@citadelgroup.com.au Ronn Bechler, Managing Director, Market Eye Phone: +61 3 9591 8901 Mobile: +61 400 009 774 Email: ronn.bechler@marketeye.com.au