GENTRACK GROUP LIMITED — M&A Activity 2017

Mar 28, 2017

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GENTRACK GROUP LTD (GTK) ACQUISITION OF JUNIFER 28 MARCH 2017

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www.gentrack.com
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IMPORTANT NOTICE

This announcement contains forward-looking statements. All forward looking statements reflect views only as at the date of this announcement, and should not be taken to be forecasts or predictions that those events will occur. Forward-looking statements often include words such as “may”, “could”, “estimates”, “anticipate", "expect", "plan” or other similar words in connection with discussions of future operating or financial performance. Similarly statements that describe the objectives, plans, goals or expectations of Gentrack Group Limited (“GTK”) or any of its wholly-owned subsidiaries (together with GTK the “Gentrack Group”) may be forward looking statements.

Forward-looking statements are opinion only and are based on management's and directors’ current expectations and assumptions regarding Gentrack’s business and performance, the economy and other future conditions, circumstances and results. As with any projection or forecast, forward-looking statements are subject to inherent risks and uncertainties, including changes in circumstances. Gentrack’s actual results may vary materially from those expressed or implied in its forward-looking statements and deviations are both normal and to be expected. None of Gentrack, any member of the Gentrack Group or their respective directors, officers, employees or advisers or any other person referred to in this announcement, make any representation or warranty (express or implied) as to the accuracy or likelihood of fulfilment of any forward looking statement or assumption, or any events or results expressed or implied in any forward looking statements.

In this presentation, a reference to “Gentrack” is to GTK or, where the context requires, the Gentrack Group.

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TRANSACTION OVERVIEW_

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• Gentrack has entered an unconditional agreement to acquire Junifer Systems Ltd ("Junifer") for an Enterprise Value of NZ$74.6m (£42.0m)

• Junifer is a market leading utility Customer Information and Billing system provider for energy retailers in the UK with 25 existing customers

• Combined with Gentrack, the Group will be a market leader for billing and customer management for energy and water utilities in the UK

• The management of Junifer will join the Gentrack UK management team to lead the combined business in the UK

• The acquisition is to be funded via:

• NZ$35.5m (£20m) placement to HgCapital (a leading investor in application software businesses) at NZ$3.72 per share

• NZ$5.3m (£3m) placement to Junifer vendors (who are ongoing managers) at NZ$3.65 per share

• Remainder to be funded via new bank debt and cash

• Gentrack expects the acquisition to be accretive in FY2017 and to drive increased growth in earnings in FY2018 and beyond

• Settlement is expected to occur on 1 April 2017

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OVERVIEW OF JUNIFER SYSTEMS_

• Market leading provider of customer information and billing software to utilities in the UK

• Since going live with its first energy supplier in 2012, Junifer has grown its customer base to 25 utility customers

• Junifer's technology provides new independent utilities with a cost effective, pre-configured SAAS solution to support market entry

• End-to-end lifecycle product management software: integrated customer on-boarding, registration, billing and collection processing

• Multi-utility capabilities covering energy (electricity and gas), water and telecommunications

• Product designed for residential, SME and commercial and industrial customers

• The three founders and three key executives of Junifer are all investing in Gentrack and will remain as part of the management team for

• the combined UK business

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JUNIFER UTILITY LIFE -CYCLE MANAGEMENT SOLUTION_

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STRATEGIC RATIONALE_

• This acquisition positions Gentrack as a leader in the UK for utility billing and customer information systems

• Junifer has grown rapidly to establish itself as a leading solution for start up utilities in the UK

• Combined with Gentrack, the Group has 32 out of 50 energy utilities in the UK - predominantly outside the "Big 6" large incumbent retailers

• Immediately delivers Gentrack a full range of product functionality from SAAS billing for new entrant energy and water retailers, to cloud hosted and on premise solutions for the largest utilities

• the combined product offering of Gentrack Velocity and Junifer CIS is well positioned for the continuing growth of Independent energy retailers, smart metering and new utility business models, and the introduction of retail competition for commercial and industrial water consumers

• Independent retailers in the UK are expected to grow their market share from c.15% currently to c.30% by 2020[1]

• Junifer has a largely SAAS model with 55% recurring revenue

• Gentrack will take Junifer CIS into other markets as a cost effective preconfigured solution for new entrant and SME retailers

• Junifer CIS has already been adapted for the New Zealand market

• 1.Source: Ofgem (UK regulator), Citi group and Cornwall Consulting

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Notes

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FINANCIAL IMPACT_

• Junifer is forecast to achieve revenue of £10.8m and EBITDA of £4.2m in the 2017 calendar year[1]

• Junifer will contribute approximately six months earnings to Gentrack in FY2017

• acquisition settlement is expected to occur on 1 April 2017

• Gentrack expects the acquisition to be earnings per share accretive in FY2017, and to drive increased growth in earnings in FY2018 and

• beyond

• On a Pro Forma basis, assuming Gentrack had owned Junifer for the entire FY2017 period, it estimates the acquisition would be

• approximately 10% earnings per share accretive

• Gentrack (excluding Junifer) re-iterates its long term guidance of 10%+ revenue and EBITDA growth, albeit results may be impacted by the

• timing of projects

Notes

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1.Different to Gentrack’s financial year end of 30 September 2017

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TRANSACTION FINANCING_

• Enterprise value of NZ$74.6m (£42.0m) represents 10x EV / CY2017 EBITDA[2]

• The Junifer acquisition will be funded by:

• a placement of NZ$35.5m to HgCapital at NZ$3.72 per share (2% premium to the 5-day VWAP[3] ) which will equate to 11.4% of Gentrack shares following the transaction

• a placement of NZ$5.3m to Junifer vendors at NZ$3.65 per share (the 5- day VWAP[3] )

• NZ$30.2m drawdown of debt facilities

• NZ$8.0m cash

• Gentrack has arranged a debt facility of NZ$42.5m through ASB bank and a NZ$5m working capital facility

Enterprise value	£42.0m / NZ$74.6m
Purchase price4	£44.0m / NZ$78.1m
Sources
Placement to HgCapital (£20m)	NZ$35.5m
Junifer vendors (£3m)	NZ$5.3m
New debt (£17m) Cash (£4.5m)	NZ$30.2m NZ$8.0m
Total	NZ$79.0m
Uses
Enterprise value (£42m)	NZ$74.6m
Cash acquired (£2m)	NZ$3.5m
Transaction costs (estimated)	NZ$0.9m
Total NZ$79.0m

Notes

1. Based on the NZD/GBP foreign exchange rate of 0.5632

2. the NZ$30.2m of debt will be drawn in GBP (£17m) to form a natural hedge against increased UK assets and earnings

3. Different to Gentrack’s financial year end of 30 September 2017

4. 5-day VWAP calculated at Monday 27 March

5. Excluding estimated transaction costs of NZ$0.9m

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OVERVIEW OF HgCAPITAL_

• HgCapital is a leading global investor in application software businesses, with c. £9bn in funds under management

• It has invested in more than 25 "platform" software businesses and more than 200 "bolt-on" acquisitions over the last 20 years

• It has deep investment expertise in renewable energy, smart energy management and utility billing software

• HgCapital’s Senior Partner, Nic Humphries, led the investment and will join the Gentrack Board from 27 April 2017

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TIMETABLE_

Announcement	28 March 2017
HgCapital placement settlement	30 March 2017
Junifer vendor placement settlement	1 April 2017
Junifer acquisition settlement	1 April 2017

• The Junifer vendors have agreed to a 24-month voluntary escrow arrangement which restricts them from trading their shares before 1 April 2019

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