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Analyst Reports

The views, including financial forecasts, expressed by the analysts in their equities research are their own views and not necessarily reflective of the view of Citadel Group. By providing access to these reports on its website, Citadel Group does not validate those views not does it confirm the financial forecasts included in the equities research.

August 2018 Wilsons Analyst Report

We moderate our rating to HOLD with a revised price target of $7.40 per share. Citadel’s FY18 net profit was 15% ahead of our forecast, driven by a 5% beat on EBITDA. The upside came in large part from expertly managed contract execution, despite lower revenue intensity; pleasing organic and M&A-driven growth in Health; and a mix-shift towards scalable SaaS solutions.

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August 2018 Evans and Partners Analyst Report

CGL reported a mixed FY18 result with revenue growth below EAP and consensus while EBITDA/NPAT were ahead. Revenue/EBITDA/NPAT grew +10%/+13%/+39% yoy to $109m/$34m/$16m which was -8%/+3%/+13% vs EAP and -7%/+3%/+16% vs consensus.

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February 2018 Wilsons Analyst Report

We maintain a BUY rating with a revised price target of $7.38 per share. Optically, Citadel’s interim NPAT of $4.9m was a miss, reminding the market of the strong 2H bias to earnings. We have left out full-year EBITDA forecasts unchanged and we see yesterday’s 5% stock sell-off as a good opportunity to add to CGL holdings. Citadel is a recent addition to the Wilsons Conviction List. We like the company’s renewed focus on centralised R&D, which looks to exploit new IP across multiple verticals and support earnings quality and re-investment.

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February 2018 Evans and Partners Analyst Report

We stay Positive. With revenues skewed to the second half, execution risk to deliver FY earnings is elevated. Importantly for Citadel, new business momentum continues to build across strategic customer relationships and IP development. Furthermore, despite a multiple re-rate the past 6 months, valuation metrics are undemanding assuming management deliver on FY18/19 expectations.

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December 2017 Wilsons Analyst Report

We maintain a BUY rating with an upgraded price target of $7.50 per share. We attended Citadel’s recent Investor Day in Canberra and conducted a site visit to see its Charm Health oncology solution in action. The new culture of centralised leadership with a focus on R&D is feeding new IP into and across its industry verticals and this is generating a deep pipeline, particularly in Health and National Security.

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August 2017 Wilsons Analyst Report

We maintain a BUY rating with a revised price target of $6.26 per share. Citadel reported a 25% increase in profit with organic growth and operating cash flow the key standouts. Our EPS changes are positive across the forecast period, seeing further avenues for expansion across its key verticals including Defence, Health and Government.

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August 2017 Evans and Partners Analyst Report

We stay Positive. Rising Corporate and Government demand for secure content and data management across key verticals (eHealth, Defence/inner-agencies & government) underpins a healthy organic growth pipeline, with Citadel increasing its share of IT spend. Furthermore, the retention of key multi-year contracts ensures no contract renewals are up in FY18, as new contracts and product upsell/extension of services drive our +25% revenue growth estimate for the next 12 months.

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May 2017 Wilsons Analyst Report

We maintain a BUY rating with a revised price target of $6.01 per share. The Citadel Group has more defensible earnings growth and margins than most of its peers, yet it trades at a deep discount to the domestic and international technology solutions developers it so often beats for contracts. DCF valuation insists that a 2.5-point valuation re-rating is available on this stock over the next 12 months.

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April 2017 Evans and Partners Analyst Report

We maintain a Positive recommendation on Citadel Group (CGL) with a $6.04/share valuation. In this report we define the key business attributes that we consider fundamental to ascribing premium valuation multiples for IT service providers. We believe CGL is well positioned to continue growing its share of wallet managing sensitive and vulnerable data environments, including across smaller companies. Demand for Managed Service Providers that reduce IT complexity, improve cyber security and lower operational costs for corporations continues to grow.

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March 2017 Evans and Partners Analyst Report

We believe CGL is attractively priced at 13.4x FY18 PER as it delivers sustainable earnings growth & margin expansion, has a proven track record of customer renewals (incl. QLD Health) and efficient allocation of resources towards verticals in eHealth/Defence/state agencies that leverage its core competencies – managing secure content and collaboration in complex environments. We look for organic contract wins and revenue growth as the key catalyst for any positive re-rating in valuation multiples.

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February 2017 Wilsons Analyst Report

We maintain a BUY rating with a revised price target of $5.95 per share. Citadel’s Technology business achieved impressive margin development in 1H17, capturing variable upside from within its standing contract book, adding new contracts and reporting an exciting debut for the Kapish acquisition. Our EPS changes are positive across the forecast period, seeing further avenues for expansion across their key verticals including Defence, Health and Government. Our thesis remains one of valuation multiple uplift – Citadel’s IP and earnings quality should support valuations more akin to the larger international technology developers it so often beats for work.

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February 2017 Evans and Partners Analyst Report

Management are delivering well across existing contracts, maintaining cost control and building out a pipeline of new opportunities. Management don’t expect new contract wins to be dilutive to margins in 2H which is better than we expected.

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February 2017 WilsonHTM Analyst Report

1H17: Solid technology segment EBITDA beat; well set-up over forecast period.

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December 2016 WilsonHTM Analyst Report

We maintain a BUY rating with a revised price target of $6.00 per share. The first tranche of Citadel’s new federal agency contract has been disclosed, which supports $24.8m in revenue over the next two years. This contract is emblematic of what Citadel is setting out to achieve across key verticals including Defence, Health and Government. Our thesis remains one of valuation multiple uplift – that Citadel’s IP and earnings quality can support multiples more akin to the larger international technology developers it so often beats for work. The development of Kapish post-acquisition also appears on track and is another potential source of upside to our FY17-19 forecasts. (Read more link to attached).

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November 2015 WilsonHTM Analyst Report

We maintain a BUY rating with a revised price target of $5.91 per share. Citadel has decided to exit the Vocational Education and Training (VET) sector in response to unfavourable regulatory changes that take effect from early 2017. The withdrawal only has minor implications at the earnings forecast level, reducing EPS by 2.5% in FY17. In the longer term, we see this as a positive for group valuation, given the sectoral directions in which Citadel is headed. Government, knowledge and healthcare integration offer far more scope for differentiation and margin development over time, in our view. We understand that Citadel has continued to pick up new contracts since the FY16 update in August.

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August 2016 WilsonHTM Analyst Report

Citadel announced a 36% increase in net profit to $8.9m and rewarded holders with a 20% lift in dividends paid over FY16. It was a solid set of figures from the Technology division, with well-diversified EBITDA gains and higher profitability in evidence. We have our eyes peeled for any further details concerning the unnamed federal agency contract, for which we have implemented a small upgrade.

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August 2016 Evans and Partners Analyst Report

CGL reported FY16 earnings in line to slightly ahead of consensus expectations, however on lower than forecast revenues as operating leverage and cost control delivered stronger than expected margins. Group EBITDA rose +110% to $21.4m on revenue growth of +17%, with EBITDA margins rising to 25.9% from 14.1% in FY15.

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July 2016 WilsonHTM Analyst Report

Queensland Health’s re-tendering process for pathology laboratory information system services will soon close. Citadel Health is the long-standing incumbent and our view is that it is likely to be returned, notwithstanding strong competition. The outcome is expected to be announced in early 2017. We expect Citadel to report 21% EPS growth when it release its FY16 results, on or about the 22nd of August. Strong forecast growth again in FY17e, benefiting from Citadel’s pivot towards the healthcare vertical where more resources are being deployed. We maintain our BUY rating and $6.25 target price.

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June 2016 WilsonHTM Analyst Report

We are resuming research coverage of The Citadel Group (CGL) with a BUY rating and a new price target of $6.25 per share. The company is evolving rapidly into a premium provider of professional and managed service applications across nationally important and sensitive verticals such as defence, education and healthcare.

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May 2016 Evans and Partners Analyst Report

Kapish expands CGL’s “KNOW HOW” of Knowledge Management.

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