Claranova — Adapting to post-pandemic normal

Claranova comprises three distinct businesses taking advantage of high-growth areas of internet and mobile technology: personalised e-commerce (PlanetArt), consumer software (Avanquest) and IoT (myDevices). Key investment considerations are as follows:

We forecast 7% group revenue growth for FY22 and 11% for FY23. We forecast group EBITDA (pre-IFRS 16) of €39.0m for FY22 (7.7% margin), rising to an 8.3% margin in FY23. With limited capex requirements, this translates into normalised operating margins of 7.3% in FY22e and 7.9% in FY23e, and EPS growth (on a normalised basis) of 23.9% in FY22e and 25.2% in FY23e.

Taking into account the differing growth trajectories and profitability of each division, as well as the different levels of minority investment in each, we use a sum-of-the-parts approach to valuation and estimate a fair value of €10.46 per share.

In addition to the usual competitive pressures and the requirement to keep abreast of technology, our forecasts and the share price are sensitive to the pace and success of geographic expansion for PlanetArt, supplier dependence for PlanetArt, changes to search engine policies for the Avanquest business, integration of acquisitions, and the US dollar/euro and sterling/euro exchange rates.

Claranova is a group consisting of three businesses focused on mobile and internet technologies with high growth potential. After a long period of restructuring and refocusing the business, the group is demonstrating strong revenue growth and improving profitability.

Claranova was originally founded in 1984 as a consumer software publisher called BVRP Software. In 1996, the company changed its name to Avanquest and listed on Euronext. From 2007 to 2012, it acquired multiple businesses. By 2013, growth had slowed and the company was loss-making – the decision was taken to restructure the business. The company raised €34.5m in equity in June 2015 through the issue of 345m shares at €0.10 per share. Also in FY15, it wrote off €10.7m of debt and converted €2.6m of debt to equity. As part of the restructuring, the company sold off a number of non-core businesses and restructured the remaining businesses into three divisions:

In 2017, Claranova organised each division into its own legal entity – this enabled the company to seek out minority investors in each of the divisions in order to accelerate growth. At the same time, it changed the company name from Avanquest to Claranova. Reflecting its growth ambitions, the company has made acquisitions in the gifting and software space over the last three years. In October, the company bought out the minority interests in the Avanquest division – see page 11 for further detail.

Claranova manages and co-ordinates a portfolio of majority-owned interests in digital companies with strong growth prospects. The three divisions share a common vision: empowering people through innovation by providing simple and intuitive digital solutions that facilitate everyday access to the very best of technology. The company provides autonomy for each of its activities, with experienced entrepreneurs running each business, while providing strategic guidance and managing commercial or financial partnerships at the group level. The company has an investment horizon of five to 10 years for each business, depending on its maturity, with possible exit strategies including IPO, merger and partial or entire sale to financial or trade buyers.

The company is focused on driving the growth and profitability of each business. In 2019, it unveiled its ambitious five-year growth plan, which targets group revenues growing from €162m in FY18 to €700m by FY23 and a group EBITDA margin of 10% by FY23, through a combination of organic and acquisitive growth.

PlanetArt is building a personalised e-commerce business. It started by exploiting the popularity of photography on smartphones – its FreePrints business enables consumers to order prints of their photos directly from their smartphones in a simple and cheap fashion. It has shown rapid growth, particularly in the UK and the US, and over the last three years has expanded across Europe. It has grown its product offering to include a wider range of customised products, helped by the acquisitions of online personalised gift providers Personal Creations and CafePress in the US. The business is focused on integrating CafePress and developing a comprehensive personalised e-commerce service that combines the photo printing and gifting businesses.

Avanquest is focused on developing proprietary software. It recently transitioned its licence model for the majority of products from one-off to subscription-based, which temporarily suppressed revenue growth and margins, but we expect positive momentum in both now that this transition is complete.

Finally, the myDevices IoT platform is at an early stage of commercialisation. The business is focused on broadening the distribution channels for its technology and is seeing accelerating numbers of installations by end-customers. As this division is still in the early stages of revenue generation, it has not been included in the five-year growth targets for the group.

Claranova is headed up by Pierre Cesarini, chairman & CEO. Mr Cesarini joined the company in May 2013 to effect the restructuring of the group. He is supported by the management team: Jean-Yves Quentel (CFO), Roger S Bloxberg (CEO PlanetArt), Todd Helfstein (president PlanetArt), Eric Gareau (CEO Avanquest) and Kevin Bromber (CEO myDevices).

The group is overseen by a board made up of seven members: Pierre Cesarini, Chahram Becharat, Viviane Chaine-Ribeiro, Christine Hedouis, Francis Meston, Luisa Munaretto, and Jean Loup Rousseau.

Historically, PlanetArt focused on providing photo printing services to consumers. With the acquisition of Personal Creations in August 2019, the business widened its offering into the market for mass customisation of consumer products, or what it calls ‘personalised e-commerce’. The division aims to provide easy-to-use services with a focus on value for money. The longer-term goal is to fully integrate photo printing and customised gifts to provide a comprehensive personalised e-commerce service.

Several years ago, the company identified photo printing as an area ripe for innovation. It entered the market with Web-to-Print (a number of websites that offer printing services) before launching FreePrints in 2013. FreePrints is focused on printing photos using apps on mobile devices. The two businesses share the same fulfilment infrastructure and marketing teams. The majority of the division’s revenues are currently generated in the US and the UK, with a growing contribution from continental Europe.

The FreePrints app (called FreePrints) is available for use on Apple and Android mobile devices in 15 countries. The app allows customers to print photos that are saved on the mobile device or stored on popular websites such as Facebook, Instagram, Flickr and Dropbox. The offer varies by country. For example, in Europe, customers are offered 500 free prints per year, or 45 free prints per month, for which they pay postage only. In the UK, this works out at up to £4 per order; in Europe, it costs up to €6. In the US, the offer is for 1,000 free prints per year, or 90 per month. The free prints offer is for prints of 6” x 4”/15cm x 10cm – if a customer wants larger prints, different-shaped prints (eg square), borders, duplicates or different finishes, these are available for an additional charge. Once an order is placed, customers are then offered extra printing services, such as customised mugs, fridge magnets or T-shirts. Building on the success of the FreePrints app, additional apps have since been launched:

All of the apps charge for printing on a per-job basis with no subscription required. Overall, 70–85% of monthly revenues come from returning customers; the average order value is in the range €7–8. Through the acquisition of Personal Creations (see below), PlanetArt also offers the apps created by Sincerely.com: ink cards, easytiles and postagram. There have been more than 55 million downloads of the FreePrints app and nearly 3.5 billion photos printed to date.

In FY19, the FreePrints app was launched in Belgium, India and the Netherlands, in FY20, in Austria and Poland, and in FY21 in Luxembourg. In all cases, the photo printing app is launched first and, depending on demand, photobook, tile and card apps are introduced later.

FreePrints aims to maintain its app store ratings at as close to 5/5 as possible as this is a key factor in consumers’ decision-making when downloading apps. Currently, it is rated at 4.8/5 on the Apple App Store and 4.9/5 on Google Play. This compares favourably with competitors which receive lower average review scores on significantly fewer reviews. The business also aims to maintain high rankings within both app stores, as this also influences consumers’ propensity to download.

Web-to-Print was the original photo printing service that has been offered by the company since the acquisition of SimplytoImpress in 2010. The business operates through four dedicated websites and generates most of its business in the US.

Although called Web-to-Print, the majority of orders come from mobile browsers (rather than mobile apps). The business is very seasonal, with a large volume peak in November to December covering Thanksgiving and Christmas. This business typically has a higher order value ($70–80) than the FreePrints business. Customers tend to order less frequently than for FreePrints, typically once a year.

In August 2019, Claranova acquired Personal Creations, the online gifts business of FTD Companies (FTD), for $18.1m in cash. Personal Creations operates two websites in the US (www.personalcreations.com, www.gifts.com). It differs from the original PlanetArt services in that it does not depend on customer photos for personalisation. When acquired, Personal Creations did not have a mobile app. PlanetArt focused on integrating Personal Creations during FY20 and it now shares the PlanetArt back office. Personal Creations was launched in the UK in H121 in a test phase.

In 2020, the business launched the FreePrints Gifts app to provide a free customised gift each month, in the same manner as the other FreePrints apps. Users can also access a large catalogue of products that they can personalise. The app is currently only available in the US but the business intends to launch this app in Europe in due course. In FY21, the app was downloaded 1.2 million times.

In September 2020, PlanetArt acquired the assets of CafePress from Shutterfly for an undisclosed amount. CafePress is an online personalised product company headquartered in Kentucky, US. CafePress products are developed almost entirely by third-party content contributors and sold via CafePress websites in the US, the UK, Canada and Australia as well as via custom stores that can be set up by any user. CafePress is a licensee of hundreds of high-profile properties including Hasbro and Marvel. We see scope for Claranova to create cost synergies by integrating CafePress with PlanetArt’s back office functions and possibly using the Personal Creations manufacturing facility. PlanetArt does not currently operate in Canada or Australia so CafePress could offer an entry into those markets.

In July 2021, PlanetArt acquired certain assets of Minneapolis-based I See Me! from the McEvoy Group (www.iseeme.com). I See Me! publishes more than 60 personalised children’s books as well as other products for children such as colouring books, puzzles and growth charts. These can be customised via its website with information such as the child’s name and birthday. I See Me! had previously worked with Personal Creations, and PlanetArt highlighted the potential to leverage its broader product catalogue to create other customisable products for I See Me! customers. Financial details of the transaction were not disclosed.

Ultimately, the division wants to offer a comprehensive personalised e-commerce service, where consumers can buy a wide variety of items that can be customised in some way. This would not be restricted to gifting, but would also include items for consumers’ own use, such as clothing or household items.

Since the advent of the smartphone more than 10 years ago, consumers have increasingly shifted from taking photos using digital cameras to using their phones for the majority of their photography. This shift is only likely to continue as smartphone manufacturers constantly improve the camera technology on phones. Mobile apps for photo printing are designed to make the process of printing out the photos taken by mobiles simple and cheap.

In 2018, Future Market Insights estimated that the market for global photo printing and merchandise was worth $16.9bn in 2018 and is likely to grow at a CAGR of 2.6% to reach $22bn by 2028. This masks the shift in distribution channels – in 2018 c 49% of the value was expected to be generated from online services, forecast to grow to 55% by 2028, which implies a CAGR of 3.9%. Within this category, we expect a continuing shift from web-based to mobile app-based printing.

The global market for personalised gifts is much larger than the photo printing market. A Research and Markets report from 2020 estimates that the market was worth $25.8bn in 2020 (of which $7.6bn is in the US) and will grow at a CAGR of 7.7% over the seven years to 2027. Non-photo personalised gifts (c two-thirds of the market this year) are expected to grow at a CAGR of 7.1% over the same period.

FreePrints competes against large, multinational companies such as Snapfish, Photobox and CEWE, as well as local players such as Lalalab in France and Bob Books in the UK. Web-to-Print competes against services from larger online players such as Shutterfly, Photobox and Vistaprint, as well as services offered by pharmacies and retailers such as Walmart, Walgreens, Boots and Tesco, and by specialist photography companies such as Snappy Snaps and Jessops.

We note that the printing business has no legacy film printing services and does not own any printing or retail facilities, unlike many of its competitors. This affords it the flexibility to enter new markets at lower cost and with less risk.

In the personalisation market, Claranova competes against greetings card businesses (American Greetings, Card Factory, Hallmark Cards, funkypigeon.com, Moonpig.com), photo printing companies such as Cimpress and Snapfish, specialist providers (eg Not On The High Street in the UK, society6 in the US, Minted in the US, Personalization Mall in the US, Things Remembered in the UK/US, Zazzle in the US) and e-commerce retailers such as Etsy.

The division targets revenue growth from a combination of growing the customer base and encouraging the existing customer base to order more frequently and buy a wider range of products. The acquisitions of Personal Creations and CafePress bring a whole new range of products that could be sold into FreePrints, and vice versa.

Advertising costs are almost completely variable, with spend being dialled up or down depending on the cost of advertising at any given time, and the availability of cash. The division’s experience is that this has a direct relationship with the number of new users acquired.

To win new customers, the division focuses its advertising on Facebook, Google Ads, TikTok, Twitter and other channels. Occasionally, the company buys TV advertising, and during the pandemic took advantage of much cheaper TV ad rates. To retain and encourage existing customers to spend, the business sends app notifications and emails with special offers and runs a loyalty programme. It also has a ‘refer a friend’ scheme. The business makes use of the FreePrints customer base to sell the Photobooks, Photo Tiles, Cards and Gifts services.

The division outsources all photo printing to one printer in the US, one in the UK and one in the Czech Republic. As the mobile app service is less seasonal, it can provide good volumes through the year, not just at Christmas time. During the Christmas peak, it can push delivery out from five to 10 days to ensure stable pricing. The company has built the IT systems to manage high volumes and if a new country is added, the system can manage localisation.

Personal Creations has a facility in Illinois, US, where items are customised. CafePress does not have any manufacturing facilities, outsourcing product manufacturing and customisation. As the business launches personalised e-commerce outside of the US, the intention is to work with manufacturing partners rather than vertically integrating.

In September 2017, a group of investors including Cap Investissement, the family office of Groupe Riccobono (a French industrial printer), invested €11.4m in PlanetArt in return for a 7.1% stake. An additional €0.8m was invested in April 2018, for a total minority investment of 7.7%.

The business has grown rapidly since launch and moved into EBITDA profitability in FY18. Sales growth has been driven by geographic and product expansion and more recently by the acquisitions of Personal Creations and CafePress. Cost of sales consists of printing costs, the cost of items such as mugs or T-shirts, shipping costs and payment processing fees. Operating costs include variable costs such as marketing spend, and others that are more fixed in nature: support, marketing staff (staff in the US as well as several people in Paris to manage European marketing), developers, general admin and share of corporate costs (based on revenues). We note that the business hires temps to cover increased support demands during the seasonal peak of the Web-to-Print business in November and December, which results in higher staff costs in H1.

In FY21, divisional revenues grew 21% y-o-y, or 12% on an organic basis. The strength of the euro versus the dollar reduced reported growth rates: constant currency growth was 28% or 18% on an organic basis. Revenue in Q421 declined 7% on a constant currency, organic basis (4% reported decline) as volumes dropped post lockdown. In Q122, revenue declined a further 17% (8% reported) through a combination of lower online activity and Apple’s new privacy rules (see Post-lockdown hangover). The division achieved an EBITDA margin of 6.8% in FY21, up from 4.5% in FY20, as the company spent less on customer acquisition and Personal Creations moved to operational profitability. We note that this included a €4.2m benefit from the forgiveness of a PPP loan in the US, so the underlying margin was more like 5.7%.

We forecast a return to growth in Q222, the busiest quarter for PlanetArt, assuming that the company manages to adjust its customer acquisition strategy to compensate for the privacy restrictions in Apple’s iOS 14.6 update. We expect growth to accelerate in H222 due to weaker comparison periods (lockdowns started to lift in the first half of CY20, particularly from the spring). We expect profitability to increase further, partly due to higher volumes and partly due to management of marketing costs.

Avanquest is a consumer-focused online software business operating in three key verticals (photo editing, pdf, security/privacy). As well as selling software online, Avanquest monetises the traffic that visits its online properties via advertising, commission and transaction-based fees.

Claranova has been developing and selling consumer-focused software since the company was founded in the 1980s. It currently sells a mixture of third-party software and own-IP software, with a focus on building up its proprietary software business. Up to the end of FY18, the company sold products that broadly fell within one of the following four categories:

Software was typically from less well-known brands and does not include household names such as Adobe, Microsoft or Norton. In July 2018, Avanquest acquired 50.1% of a group made up of three Canadian businesses: Adaware, Lulu Software and Upclick. All software IP is proprietary. The acquired businesses have kept their existing business models and brands. We detail below the products offered by each business:

While Avanquest continues to sell third-party software, the focus now is very much on building the proprietary software side of the business.

The legacy business used to have more in-house developers but refocused many of them on PlanetArt to develop the photo-printing services. The division therefore has a number of legacy products and uses freelancers to keep them up to date. It also has a number of niche products where it has looked at the most commonly used functionality of popular software such as Photoshop, and developed a simplified version so that a consumer can use the software without being an expert in eg InPixio. As noted earlier, the acquired businesses own their software IP.

Product development is now focused around three core areas based on the main proprietary solutions:

During FY21, Avanquest acquired PDFescape to strengthen its pdf product line. PDFescape has integrated Soda PDF technology into its desktop solution since 2016 and has more than a million visitors to its site each month. No financial details were disclosed, but we estimate that it was not material in terms of revenue.

The division generates revenues in four different ways:

The business sells across Europe and North America through the Avanquest and Micro Application websites, affiliates (either via a traditional distributor model, or paid on a revenue share of units sold) and sub-licensing. The business only has limited retail activity in Germany and a larger presence in the US (combined making up less than 20%of divisional revenues and decreasing).

The market for consumer software is made up of:

Avanquest falls into this last category, along with companies such as Avast, Kape, Foxit Software and Nitro Software. Avast and Kape both sell cybersecurity and PC hygiene tools and have been actively buying software providers in the space. Foxit and Nitro both sell pdf software.

The company views one of the division’s key skills as marketing, with unique expertise in acquiring customers online that was bolstered by the Canadian acquisitions. Using the acquired businesses’ expertise in generating and monetising web traffic, the division has already managed to return to organic growth. The acquisitions also marked a shift in the division’s strategy towards developing proprietary software, which offers higher margin potential.

The business is keen to increase the level of recurring revenue, mainly through offering software on a subscription basis, and is already seeing the benefits of this shift: recurring revenues made up 58% of divisional revenues in FY21 compared to 46% in FY20. The division would also consider additional acquisitions, targeting profitable companies with high levels of web traffic.

Exhibit 5 shows the quarterly revenue progression over the past three years; this business sees a seasonal peak in Q2 (ie calendar Q4). Costs of sale include the cost of products (ie royalties paid to third-party software providers), bank fees, distribution costs for physical goods and server hosting. Operating costs include advertising, marketing, administrative and R&D. The division operates with single IT, marketing and finance teams.

In FY21, Avanquest reported a small revenue decline of 3% (all organic) and revenue was flat on a constant currency basis. The FY21 EBITDA margin of 12.4% grew from the 7.9% achieved in FY20 as the transition of customers to a subscription licensing model was completed. Management has suggested that 20% pa growth rates for products such as pdf should be achievable and ultimately EBITDA margins in the region of 20% should be attainable. We note that Q122 revenue grew by 18% y-o-y (14% in constant currency), showing an acceleration in growth compared to 2% in Q421, in our view reflecting underlying growth in demand now that the switch to subscription licensing is complete. Our forecasts reflect mid-teens revenue growth for FY22 and FY23. We assume that this growth translates to EBITDA margin expansion over the forecast period.

As a result of the acquisitions in 2018, there were significant minority interests in the division. These were bought out at the end of October (see Simplifying the corporate structure for detail). The vendors remain with the business and are Claranova shareholders and are therefore motivated to drive the performance of the division.

Claranova has developed a management platform for IoT applications. Its IoT in a Box turnkey solution is designed to enable businesses and consumers to monitor assets remotely.

myDevices monetises the platform by selling its IoT in a Box solutions on a B2B basis through telecom operators, system integrators and other resellers. The standard IoT in a Box solution comprises a gateway (the link to the cellular/LoRa network or ethernet), sensors (positioned as required on the customer’s premises (send data back to the gateway on a regular basis using the LoRaWAN protocol) and apps (mobile or web-based to control the network, to monitor the network and to provide alerts as required). Exhibit 7 shows how a typical IoT network is structured.

The solution is designed to be plug-and-play. The user first downloads the myDevices app, then plugs in the gateway and scans a QR code on the gateway, which registers it on to the network. Then all sensors are scanned via QR code to add them to the network and positioned where necessary. Within the app, the user then edits operating ranges for each sensor, so that SMS and/or email alerts can be sent if any sensor operates outside of the target range. The user can schedule regular reports and can access detailed sensor history via the app. The app also provides the ability to visualise the location of every sensor.

Customers can ask for the IoT in a Box solution to be customised, using the gateway and sensors of choice. myDevices works with a number of hardware suppliers to ensure a wide range of gateways and sensors are available to suit every requirement.

myDevices has already developed white-label solutions for applications such as temperature and humidity monitoring, property monitoring, air quality monitoring, rodent control and personal safety with multiple versions available for a variety of different users, eg restaurants, supermarkets, commercial buildings, holiday rentals, perishable food manufacturing and healthcare. Customers include Chevron, Chick-fil-A, Engie, Hilton, P&G, Rio Tinto and Sodexo. The business has developed seven vertical-specific websites to help market the solutions.

The LoRa radio frequency protocol was designed by chip-maker Semtech, which then founded the LoRa alliance in 2015. The LoRa alliance is dedicated to the standardisation of low-power, wide area networks and the global promotion of the LoRaWAN open standard. myDevices is a member of the LoRa alliance, alongside 500 other members including chip manufacturers, gateway and sensor manufacturers, software companies, system integrators and telecom companies. In 2017, Semtech invested $3m in myDevices in return for a 13% stake and invested a further $3m in 2019. In July 2020, both Claranova and Semtech invested further in myDevices for an undisclosed amount.

A large proportion of the IoT market is dominated by enterprises spending on applications in the manufacturing, automotive, logistics, utilities and smart cities sectors. The consumer IoT market includes applications such as wearables (eg Fitbit, Apple Watch) and domestic automation (eg Nest temperature controls, Ring home security). myDevices is positioned somewhere between the two markets, with a focus on simplifying the use of IoT for SMEs.

As this is effectively a start-up business, myDevices is taking a flexible approach to monetising its technology. It is working with mobile network operators (MNOs), distributors, resellers, system integrators and other partners.

Exhibit 9 shows the quarterly revenue progression over the past three years. As customers pay to use myDevices on a per-device subscription basis, revenues are building up slowly, but as customers become familiar with the platform, the expectation is that they will want to use the service for more devices in more locations. Revenue in FY19 and FY20 included one-off revenues from the Sprint relationship.

Headcount includes support engineers as well as staff to manage the relationships with MNOs and distributors. The company does not anticipate growing headcount materially unless there is a significant uplift in demand. The division uses Amazon Web Services for storage of all data uploaded to the platform. We model a small increase in the cost base and flat revenue in FY22, with a small increase in revenue in FY23 as distributor partners win more customers and existing customers expand their usage.

In addition to the usual competitive pressures and the requirement to keep abreast of technology, our forecasts and the share price are sensitive to the following factors:

Claranova reported Q421 and FY21 revenue on 4 August – see Simplifying the corporate structure for details on divisional performance at the revenue level. Revenue grew 15% y-o-y on a reported basis, 21% on a constant currency basis and 14% on an organic, constant currency basis. The company had previously indicated that it expected to nearly double EBITDA in FY21 compared to FY20. Reported EBITDA (before accounting for lease payments according to IFRS 16) of €34.2m was 96% higher y-o-y and marginally below our €34.6m forecast (see Exhibit 11). Adding back lease payments of €3.6m in the year, EBITDA according to IFRS 16 was €37.8m. Normalised operating profit of €32.3m was 105% higher y-o-y and €1m lower than our forecast due to higher-than-expected depreciation and slightly higher operating costs. Net finance costs of €6.8m were higher than our €5.6m forecast, mainly due to higher-than-expected foreign exchange losses. These were the main reasons for normalised diluted EPS 9.6% below our forecast. The company closed the year with net cash of €25.3m, 4% higher than we forecast and 82% higher y-o-y.

Management had already commented on the slowdown in volumes in PlanetArt (see Post-lockdown hangover) and expected a group revenue decline of 5% y-o-y in Q122. On 9 November, Claranova reported Q122 revenue of €88m, down 2% on a reported basis and down 10% on an organic, constant currency basis. While Avanquest growth accelerated to 18% y-o-y (14% constant currency), PlanetArt revenue declined 8% y-o-y to €64m and was 17% lower on an organic, constant currency basis (ie excluding CafePress and I See Me revenue). myDevices revenue declined 8% y-o-y (down 7% in constant currency).

Our FY22 forecasts are broadly unchanged, other than to increase our profitability forecasts for Avanquest. We have slightly increased our depreciation forecast and we have factored in the dilution from the issue of shares to the Avanquest minority interests, reducing our normalised diluted EPS forecast. We introduce FY23 forecasts that factor in revenue growth of 10.9% and a company adjusted EBITDA margin of 8.3%. The company continues to work towards its target of revenue of €700m and an EBITDA margin of 10% for FY23, noting that this is likely to be achieved through a combination of organic growth and acquisition.

In Exhibit 13, we show Claranova’s valuation and operating metrics versus four peer groups: personalised e-commerce companies, online software publishers, IoT companies and French software companies. As Claranova is a combination of the first three groups and there are material minority investors in each business, we use a sum-of-the-parts approach to fully capture the value of the group.

We use average peer multiples for reference, adjusting them to reflect our views on the growth and profitability prospects for each division. In Exhibit 14, our sum-of-the-parts valuation is based on adjusted FY22e EV/sales multiples by division. The EV/sales multiple for FY23e and the EV/EBITDA multiples for FY22e and FY23e are implied based on the EV/sales multiple used for FY22e. For PlanetArt, we use an FY22e multiple of 0.9x, unchanged from our last note. For Avanquest, we use the value implied by the minority interest buyout, which equates to an FY22e EV/Sales multiple of 1.5x. We have reduced the multiple for myDevices from 4x to 2x reflecting slower than previously anticipated growth. This results in a new valuation of €10.46 per share, marginally down from €10.55 when we last wrote. Clearly, this valuation implies material upside to the current share price. Factors that could start to close this valuation gap include: