2018 Half Year Results Darren Stanley - CEO Andrew Burns - CFO 19 February 2018
H1 FY18: Another record first half Strong sustainable growth across all key metrics 30.1m $9.0m $47.5m 10.1¢ profit before income total revenue earnings per share tax 15.5m $4.9m 21.3m 13% 20% 29% net profit attributable to 4.8¢/share $13.1m members $6.6m 100% franked 32% 24.2 9.6 EBITDA net profit 23% dividends 12% Key outcomes for CGL Previous corresponding period: H1 FY17 2
Executing on our commitments $62m in renewals / new contracts signed • 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: Strategic rationale – 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 opportunities in the pipeline in the tertiary education sector • Completed integration of CHARM (acquired 14 September 2017) and commenced investment in product redevelopment to 3 provide fully cloud enabled solutions for Government and private providers
Growth trajectory continues Good growth in underlying performance • Total revenue (sales + other income) up 12.7% to $47.5m – Strong revenue conversion on new contract wins – Restated* Continued progress of a new multi-year contract with an ($m) H1 FY18 Change H1 FY17 Australian Federal Government agency – Acquisition and integration of Charm Total Revenues 47.5 42.2 12.7% • Gross profit margin grew to 49.9% Gross Profit 23.7 20.1 17.7% – Maintaining the focus on scalable software and managed Gross Profit margin 49.9% 47.6% service solutions – EBITDA 13.1 11.7 12.3% Incremental contract extensions reducing the effect of fixed expenses EBITDA margin 27.6% 27.7% • EBITDA up 12.3% to $13.1m Depreciation & Amortisation 3.3 2.8 20.2% – Ramping up investment in new software technologies and EBIT 9.8 8.9 9.8% capabilities to drive the next phase of growth in SaaS solutions Finance Costs 0.8 1.4 (44.4)% (e.g. Citadel-IX) as well as resources to support future growth NPBT 9.0 7.5 20.4% • NPAT up 22.8% to $6.6m Tax Expense 2.4 2.1 14.2% – Effective tax rate of 26.3% reflecting the completion of the NPAT from Continuing Operations 6.6 5.4 22.8% interest impact of the deferred consideration on PJA Solutions – NPAT from Discontinued Increase in depreciation and amortisation arising from (1.2) (1.4) NR Operations additional R&D and additional amortisation from acquired *In March 2017 the Group discovered accounting errors in relation to the recognition of accrued intangibles arising from the Charm acquisition 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. 4
Strong results from continued operations PJAS overview Transaction highlights • Good revenue growth through the execution of existing Strategic rationale contracts and the addition of new software and managed service contracts • Continued investment in scalable software solutions and Key outcomes for talent CGL • Finalised Charm acquisition integration and commenced investment in redeveloping the platform into a cloud-based product 5
Strong balance sheet Supports business investment and further growth initiatives • Cash position at $19.2m ($m) 31 Dec 2017 30 Jun 2017 – Payments for the Charm acquisition and the settlement of deferred consideration relating to previous acquisitions 19.2 29.8 Cash – Drawdown on the Group’s loan facilities to fund part of the Trade & other receivables 11.1 17.1 acquisition payments – 7.2 6.2 Plant & equipment Net Debt $0.6m • Intangible assets 74.6 68.4 Trade & other receivables down to $11.1m from June – 21.2 9.3 Other assets Strong collections from milestones occurring at or near 30 June 2017 Total assets 133.3 130.8 • Intangible Assets increased by $6.2m 19.8 8.9 Debt – Continued investments in product development to extend the Trade & other payables 16.5 16.8 existing capability particularly around cloud-based offerings Strategic rationale 19.1 29.6 Other liabilities – Acquired intangible assets - CHARM Total liabilities 55.4 55.3 77.9 75.5 SHAREHOLDERS EQUITY Key outcomes for CGL 6
Solid cashflow Continuing cashflow underpins business investment and dividends • Operating cashflow up $1.6m from H1 FY17 ($m) H1 FY18 H1 FY17 – Operating cash is traditionally low in the H1 – Revenue growth and improved margins driving the increase 2.1 0.5 Net cash inflow from operating activities in operating cash pcp Net cash outflow from investing activities (19.2) (21.2) – Increased outflows from Tax and Interest have reduced the 6.4 6.1 Net cash from financing activities inflow Net increase / (decrease) in cash from • Investing cash outflow increased to ($19.2m) (10.7) (14.6) continuing operations – Net (decrease) in cash from discontinued ($12.8m) final deferred payments of the PJA Solutions (0.5) (1.0) acquisition operations – 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 7
Increasing shareholder returns PJAS overview Transaction highlights • Continued EPS and ROE growth resulting from a range of 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 8
Major contracts locked in for FY18 • No major contracts are due for renewal in FY18 30 June Key: • New long term software and digital solutions contracts are currently in negotiation for FY18 Initial contract Key outcomes for • Contract renewal #1 Managed service contracts are providing stable, recurring revenue streams, as well as an opportunity to upsell Contract renewal #2 CGL • Queensland Health LIS contract is expected to expire in 2022 Contract renewal #3 Contract negotiation • High confidence in FY19 renewals based on current client requirements • 9 Strong ‘pipeline’ of net new implementation and managed services contracts
Acquisitions adding long term value 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 Strategic rationale • 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 Key outcomes for • Additional resources added to the Citadel Health sales team with results expected in FY19 CGL 10
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