Crossject — A reinforced cash position

Crossject — A reinforced cash position

Crossject recently announced that it has received regulatory approval to launch the bioequivalence study for Zeneo Midazolam (being developed for the acute treatment of epileptic seizures) in healthy volunteers. This puts the company on track for the expected H218 EU filing and the H119 US filing. Due to this milestone, Crossject has received €2.9m from Bpifrance as part of the Programme des Investissements d’Avenir (PIAVE). Also, the company has successfully completed a €5m rights offering.

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Written by

Crossject

A reinforced cash position

Financial and
development update

Pharma & biotech

7 April 2017

Price

€5.02

Market cap

€44m

Net debt (€m) at 31 December 2016

1.4

Shares in issue

8.8m

Free float

60.26%

Code

ALCJ

Primary exchange

Euronext

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

0.1

10.8

(50.0)

Rel (local)

(3.0)

5.6

(58.2)

52-week high/low

€10.0

€4.4

Business description

Crossject has several programmes in development based on its proprietary needle-free injection system, ZENEO. The first to market will be Zeneo Sumatriptan, which the company expects to be commercialised in 2019. Over the course of 2019 and 2020, the company expects to launch proprietary versions of six other products on its ZENEO platform.

Next events

Completion of Sumatriptan bioequivalence study

H217

Completion of Midazolam bioequivalence study

H217

Midazolam or Sumatriptan US partnership

2017

Analysts

Maxim Jacobs

+1 646 653 7027

Nathaniel Calloway

+1 646 653 7036

Crossject is a research client of Edison Investment Research Limited

Crossject recently announced that it has received regulatory approval to launch the bioequivalence study for Zeneo Midazolam (being developed for the acute treatment of epileptic seizures) in healthy volunteers. This puts the company on track for the expected H218 EU filing and the H119 US filing. Due to this milestone, Crossject has received €2.9m from Bpifrance as part of the Programme des Investissements d’Avenir (PIAVE). Also, the company has successfully completed a €5m rights offering.

Year end

Revenue (€m)

PBT*
(€m)

EPS*
(€)

DPS
(€)

P/E
(x)

Yield
(%)

12/15

2.4

(6.7)

(0.85)

0.0

N/A

N/A

12/16

1.4

(7.3)

(0.85)

0.0

N/A

N/A

12/17e

2.9

(5.4)

(0.44)

0.0

N/A

N/A

12/18e

0.0

(9.6)

(0.85)

0.0

N/A

N/A

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

Zeneo Midazolam targets under-served market

Currently, there is only one at-home treatment approved in the US for the acute treatment of epileptic seizures, a rectal gel version of diazepam, which is part of the benzodiazepine class along with midazolam. Otherwise, patients need to be taken to the hospital if their seizures do not end by themselves.

Pipeline expected to progress in 2017

By the end of 2017, the company expects to complete bioequivalence studies for Zeneo Midazolam, Sumatriptan and Epinephrine/Adrenaline (by its partner) with Naloxone and Hydrocortisone studies to follow soon thereafter. Crossject has already successfully completed bioequivalence studies for Zeneo Methotrexate.

An additional focus on partnerships

Crossject recently announced that it is working with a London-based advisory company with a presence in North America and a history of successful business development deals to license Zeneo Sumatriptan for the treatment of acute migraines in the US and Canada. Additionally, the company has enlisted Bionest Partners, a healthcare-focused consulting firm, to prepare a commercial assessment for Zeneo Midazolam for use in business development activities.

Valuation

We have adjusted our valuation to €87.4m or €9.91 per share, from €68.2m or €9.91 per share. Our total valuation increased mainly due to rolling forward our NPVs to 2017, extending our expected patent protection to 2036 following the announcement of new patents, a higher net cash balance following the successful €5m rights offering and the €2.9m milestone payment related to Midazolam that was received from PIAVE. This was mitigated by a higher share count as the rights offering was dilutive. Between now and projected profitability in 2020, we forecast a total funding need of €20m (previously €35m).

Investment summary

Crossject’s proprietary needle-free injection platform, ZENEO, can be used for up to 200 drugs (both small molecule and biologic) that it has identified, although currently the company is focusing mainly on acute treatments where the speed of treatment is an important factor for patients.

Exhibit 1: Crossject pipeline

Product

Indication

Expectation for submission (EU)

Expectation for submission (US)

Notes

Sumatriptan

Acute migraine

H118

H218

Bioequivalence study expected to be completed in 2017

Midazolam

Acute epilepsy seizures

H218

H119

Bioequivalence study given regulatory go-ahead and expected to be completed in 2017

Epinephrine/Adrenaline

Anaphylactic shock

H218

H119

Bioequivalence study expected to be completed in 2017

Methotrexate

Rheumatoid arthritis

H218

H120

Bioequivalence study completed

Hydrocortisone

Acute adrenal insufficiency

H218

H119

Bioequivalence study expected to be completed in 2017

Naloxone

Opioid overdose

H218

H119

Expect to confirm formulation and pre-stability studies and receive regulatory authorization for bioequivalence studies

Apomorphine

Parkinson’s disease

H119

H120

Expect to confirm formulation and pre-stability studies

Source: Crossject

Zeneo Midazolam for the acute treatment of epileptic seizures

Crossject recently announced that it has received regulatory approval to launch the bioequivalence study for Zeneo Midazolam (being developed for the acute treatment of epileptic seizures) in healthy volunteers. This puts it on track for the expected H218 EU filing and the H119 US filing.

According to the Centers for Disease Control (CDC), 2.9 million people have active epilepsy in the United States. The prevalence of epilepsy in Europe is 3.4 million with 20-30% having more than one seizure per month.1 The average seizure lasts less than two minutes2 but the longer a seizure does last the harder it is to stop with treatment and the greater the likelihood of complications. For seizures lasting 10-29 minutes, only 43% cease without treatment and once they reach 30 minutes in length (officially known as status epilepticus), only 7% cease without treatment, with 19% of affected patients dying.3

  Forsgren L. et al., European Journal of Neurology 2005 Apr;12(4)245-53

  Alford E et al., Journal of Pediatric Pharmacology and Therapeutics 2015;20(4):260-289

  DeLorenzo R. et al., Epilepsia 1999 Feb;40(2):164-9

Optimally, the patient would be treated at home as the trip to the hospital can waste very valuable time. However, only one at-home treatment is approved in the US, a rectal gel version of diazepam, which is part of the benzodiazepine class along with midazolam. While rectal diazepam does work quickly, it is not patient friendly as it involves injecting a liquid inside the rectum of a patient while they are having a seizure, which may be convulsive. Nevertheless, rectal diazepam achieved over $100m in sales before going generic in 2010.

In Europe, a buccal form of midazolam, known as Buccolam, is marketed by Shire. It is a liquid that needs to be inserted slowly into the space between the gum and cheek, possibly not the most convenient way to administer a drug to someone with a convulsive seizure. According to EvaluatePharma, sales in 2015 were $18m, though Shire does not disclose sales specifically for that product, given its small size.

Crossject’s Zeneo Midazolam should have a similar profile to intramuscular and buccal midazolam, with a 5-10 minute onset but short duration of action, ideal for home use. It may even have an advantage over intramuscular auto-injectors in penetrating the muscle in high BMI patients, which it recently demonstrated in a positive 97-patient MRI study.

We currently assume approval in the US and EU in 2020 for the product, with pricing of €100 and €25 per dose, respectively (approximately the average price of Buccolam in Europe). Peak sales are estimated at €50.8m in the US (8% peak penetration) and €6.8m in the EU (12% peak penetration). Our penetration estimates are conservative due to the competitive and genericised nature of the market. We believe Crossject will require a marketing partner in the different regions. In terms of milestones, we model €2m upfront/approval milestones for EMA and FDA approval and a further €4m in commercial milestones. We estimate royalties of 20% for both the US and EU.

Valuation

We have adjusted our valuation to €87.4m or €9.91 per share, from €68.2m or €9.91 per share. Our total valuation increased mainly due to rolling forward our NPVs to 2017, extending our expected patent protection to 2036 following the announcement of four new patents, a higher net cash balance following the successful €5m rights offering and the €2.9m milestone payment related to Midazolam that was received from PIAVE. This was mitigated by a higher share count as the rights offering was dilutive. We expect to review our valuation upon completion of bioequivalence studies as well as the announcement of partnerships, especially in the US market.

Exhibit 2: Crossject valuation table

Product

Main indication

Probability of success

Launch year

WW peak sales (€m)

Patent protection

Royalty

rNPV
(€m)

Methotrexate

Rheumatoid arthritis

30%

2020

€100

2036

20%

€8.8

Sumatriptan

Acute migraine

60%

2019

€82

2036

20%

€13.8

Adrenaline

Anaphylactic shock

60%

2020

€133

2036

25% US, 20% EU

€34.8

Midazolam

Acute epileptic seizures

60%

2020

€58

2036

20%

€9.7

Hydrocortisone

Acute adrenal crisis

60%

2020

€9

2036

20%

€0.7

Naloxone

Opioid overdose

60%

2020

€14

2036

20%

€1.1

Apomorphine

Parkinson's disease

30%

2020

€53

2036

20%

€11.9

Total

 

 

 

 

€80.8

Cash and cash equivalents (Q416 + rights offering + PIAVE payment) (€m)

€6.52

Total firm value (€m)

€87.36

Total basic shares (m)

8.81

Value per basic share (€)

€9.91

Stock options (12/2016e, m)

0.62

Weighted average exercise price (€)

€2.68

Cash on exercise (€m)

€1.67

Total firm value (€m)

€89.03

Total number of shares (m)

9.4

Diluted value per share (€)

€9.44

Source: Edison Investment Research, Crossject reports

Financials

As of Q416, the company had €2.6m in cash. Subsequent to the end of the quarter, the company received a €2.9m milestone payment for the advancement of Midazolam and has also announced the completion of a €5m rights offering. We have lowered our expectations for SG&A expenses in 2017 and 2018 by €1.9m and €2.0m per year, respectively, due to continued control on that expense line. Between now and projected profitability in 2020, we forecast a total funding need of €20m (previously €35m). Note that we are not assuming recurring grants and subsides (such as around €3m in additional milestone payments from Bpifrance), other than R&D credits, at this stage for FY18 and beyond.

Exhibit 3: Financial summary

2014

2015

2016e

2017e

2018e

Year end 31 December

French GAAP

French GAAP

French GAAP

French GAAP

French GAAP

PROFIT & LOSS

Revenue

 

 

1,744

2,370

1,427

2,900

0

Cost of Sales

0

(0)

0

0

0

Gross Profit

1,744

2,369

1,427

2,900

0

R&D Expenses

(2,421)

(3,077)

(4,384)

(4,800)

(5,520)

SG&A and Other Expenses

(3,388)

(4,808)

(2,630)

(2,841)

(3,068)

EBITDA

 

 

(4,066)

(5,516)

(5,587)

(4,741)

(8,588)

Operating Profit (before GW and except.)

 

(5,108)

(7,013)

(7,291)

(4,741)

(8,588)

Intangible Amortisation

0

0

0

0

0

Other

(0)

0

0

0

0

Exceptionals

0

0

0

0

0

Operating Profit

(5,108)

(7,013)

(7,291)

(4,741)

(8,588)

Net Interest

(36)

(19)

(38)

(659)

(1,058)

Other

(160)

299

(429)

0

0

Profit Before Tax (norm)

 

 

(5,334)

(6,720)

(7,329)

(5,399)

(9,646)

Profit Before Tax (FRS 3)

 

 

(5,304)

(6,732)

(7,758)

(5,399)

(9,646)

Tax

968

1,045

1,095

1,440

1,656

Deferred tax

0

0

0

0

0

Profit After Tax (norm)

(4,366)

(5,675)

(6,234)

(3,959)

(7,990)

Profit After Tax (FRS 3)

(4,336)

(5,687)

(6,663)

(3,959)

(7,990)

Average Number of Shares Outstanding (m)

6.7

6.7

7.3

9.0

9.4

EPS - normalised (c)

 

 

(65.64)

(85.33)

(85.19)

(43.99)

(85.36)

EPS - FRS 3 (€)

 

 

(0.65)

(0.86)

(0.91)

(0.44)

(0.85)

Dividend per share (c)

0.0

0.0

0.0

0.0

0.0

BALANCE SHEET

Fixed Assets

 

 

5,521

5,936

9,252

9,704

10,048

Intangible Assets

2,327

2,330

2,506

2,506

2,506

Tangible Assets

888

1,727

5,636

6,089

6,432

Other

2,305

1,878

1,109

1,109

1,109

Current Assets

 

 

12,853

7,943

4,997

9,811

6,477

Stocks

0

761

398

398

398

Debtors

1,926

1,991

1,966

1,966

1,966

Cash

10,927

5,139

2,634

7,447

4,114

Other

0

52

0

0

0

Current Liabilities

 

 

(2,907)

(3,261)

(3,321)

(2,566)

(2,566)

Creditors

(2,907)

(3,261)

(2,566)

(2,566)

(2,566)

Short term borrowings

0

0

(755)

0

0

Long Term Liabilities

 

 

(982)

(1,820)

(4,645)

(9,645)

(14,645)

Long term borrowings

0

0

(3,235)

(8,235)

(13,235)

Other long term liabilities

(982)

(1,820)

(1,409)

(1,409)

(1,409)

Net Assets

 

 

14,484

8,797

6,284

7,304

(685)

CASH FLOW

Operating Cash Flow

 

 

(3,163)

(4,796)

(4,403)

(2,607)

(6,528)

Net Interest

0

0

0

0

0

Tax

0

0

0

0

0

Capex

(4,770)

(1,805)

(6,065)

(1,805)

(1,805)

Acquisitions/disposals

0

0

0

0

0

Financing

17,873

0

3,961

4,980

0

Dividends

0

0

0

0

0

Other

0

483

(252)

(755)

0

Net Cash Flow

9,940

(6,118)

(6,759)

(187)

(8,333)

Opening net debt/(cash)

 

 

(2,468)

(10,927)

(5,139)

1,357

788

HP finance leases initiated

0

0

0

0

0

Exchange rate movements

0

0

0

0

0

Other

(1,481)

330

264

755

0

Closing net debt/(cash)

 

 

(10,927)

(5,139)

1,357

788

9,122

Source: Edison Investment Research, Crossject reports

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 Crossject and prepared 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”) © FTSE 2017. “FTSE®” 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.

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London +44 (0)20 3077 5700

280 High Holborn

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New York +1 646 653 7026

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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 Crossject and prepared 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”) © FTSE 2017. “FTSE®” 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

245 Park Avenue, 39th Floor

10167, 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

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Research: Financials

S&U — Strong growth, cautious approach

S&U’s FY17 results showed continued strong growth in motor finance receivables with an increase of 33%. Competition has had some effect on cost of sales and mix change has been reflected in an expected increase in impairments but pre-tax profit growth was still above 20% and the outlook remains encouraging. The Aspen Bridging finance pilot may provide another avenue for growth while it is reassuring that management is taking a prudent approach in this new area.

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