Proxama — Sale of Digital Payments division

Proxama — Sale of Digital Payments division

Proxama has today announced the sale of its Digital Payments division for up to £2m, less working capital and fees. The proceeds will be used to provide working capital to the mobile location data intelligence division, which becomes the exclusive focus of the group. In light of this, management is proposing to rename the group Location Sciences, subject to shareholder approval. Mark Slade, currently MD of this division, has replaced John Kennedy as CEO.

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Proxama

Sale of Digital Payments division

Media & technology

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1 November 2017

Price

0.030p

Market cap

£4m

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Share details

Code

PROX

Listing

AIM

Shares in issue

13.7bn

Business description

Following the October 2017 sale of its Payments division, Proxama completes its transition to focus on the development of its mobile location data intelligence products. This division, Location Sciences, is developing a suite of high-quality mobile location data products and associated AI powered audience attribution products in the UK. It is headquartered in London and has c 22 employees.

Bull

Location data is used across a wide and growing range of industries: city and transport planning, financial services and in mobile advertising where it is already behind 38% of ad impressions (BIA/ Kelsey), and increasingly used in advertising attribution.

Combination of very precise geolocation and beacon technology differentiates from peers.

Strategic value of mobile location intelligence groups increasingly recognised, eg acquisition of Placed by Snap.

Bear

While Proxama has been in existence for some time, Location Sciences is effectively a start–up. It is loss-making and additional funding may be required if revenues do not build as expected.

Potential risks around tightening data regulation, eg GDPR.

Competes against much larger, well-funded groups such as Foursquare and Cuebiq; although we note that there are also opportunities to partner with these US groups.

Analysts

Bridie Barrett

+44 (0)20 3077 5757

Katherine Thompson

+44 (0)20 3077 5730

Proxama is a research client of Edison Investment Research Limited

Proxama has today announced the sale of its Digital Payments division for up to £2m, less working capital and fees. The proceeds will be used to provide working capital to the mobile location data intelligence division, which becomes the exclusive focus of the group. In light of this, management is proposing to rename the group Location Sciences, subject to shareholder approval. Mark Slade, currently MD of this division, has replaced John Kennedy as CEO.

Sale of the Digital Payments division

Proxama has announced the sale of its Digital Payment division to LHH2 APS, the holding company for global payments software company, Cryptomathic, for up to £2m less working capital of approximately £300k and fees. This comprises £1m cash on completion and a further £1m over the course of the next 18 months subject to the completion of certain conditions relating to the fulfilment of existing contracts. While the strategic review of this division, which was completed in May this year, did not result in a sale at the time, given the group’s strategy to focus growth investment on the location data division, its ultimate divestment is a logical outcome.

Focus on Location Sciences

Following the sale, Proxama is focused exclusively on its Mobile Location Data and Intelligence division, where management sees an opportunity to rapidly scale. The proposed name change to Location Sciences reflects the new group structure. As with the £3.1m raised in July, the proceeds will be invested in engineering resources to improve platform and data science capabilities, as well as continuing to widen the group’s audience reach, targeting a five million cumulative audience and five billion data points by the year end. Given the change in the group structure, John Kennedy has stepped down as CEO and from the board. He has been replaced by Mark Slade, the current managing director of Location Sciences.

Early-stage company

Proxama offers investors the opportunity to invest in an early-stage company in the large and dynamic addressable market for location data in the UK. The group is in an investment phase and is loss-making. However, it has a strong balance sheet and the sale of the Digital Payments division enables the group to dedicate its resources exclusively to accelerate the pace of platform development in Location Sciences, in order to offer a full suite of location data products early in 2018. We believe the news on this front, as well as additional audience and data partnerships, are the key developments for assessing progress.

Historical financials

Year
end

Revenue
(£m)

EBITDA
(£m)

PBT
(£m)

EPS
(p)

P/E
(x)

EV/sales
(x)

12/15

2.5

(5.0)

(6.1)

(0.52)

N/A

0.9

12/16

1.8

(3.6)

(5.8)

(0.39)

N/A

1.3

Source: Proxama report and accounts

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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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Disclaimer

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2017 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Proxama and issued by Edison for publication globally. 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. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US 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. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and 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 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. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document.
A marketing communication under FCA rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research. Edison has a restrictive policy relating to personal dealing. 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. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. 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. 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 (ie 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. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited ("FTSE") (c) FTSE [2014]. "FTSE(r)" 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.

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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, 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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

CREALOGIX Group — Heavy investment is beginning to pay off

CREALOGIX’s strong momentum in FY17 reflects buoyant digital transformation trends across the European banking sector, notably in Germany, and the benefits of the group’s recent heavy investment to extend the product offerings into wider international markets. Results outstripped expectations, leading us to upgrade our revenue forecasts by 6-7%, while EBITDA rises by 23% in FY18 and 11% in FY19. Given the attractive industry dynamics, and with CREALOGIX ideally positioned to capitalise, the shares look attractive on c 17x our FY20 EPS.

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