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discoverIE Group — Back in growth mode

discoverIE Group (LSE: DSCV)

Last close As at 22/11/2024

GBP6.40

▲ −22.00 (−3.32%)

Market capitalisation

GBP617m

More on this equity

Research: TMT

discoverIE Group — Back in growth mode

discoverIE’s FY21 results confirmed that measures taken to manage the business through the pandemic minimised the impact on profitability and reduced gearing significantly. Strong order intake in H221 has returned the business to organic growth and the company continues to make higher-margin acquisitions in the Design & Manufacturing (D&M) business. We lift our underlying EPS forecast by 5.3% for FY22.

Katherine Thompson

Written by

Katherine Thompson

Director

TMT

discoverIE Group

Back in growth mode

FY21 results

Tech hardware & equipment

9 June 2021

Price

857.5p

Market cap

£767m

€1.16:$1.42:£1

Net debt (£m) at end FY21

47.2

Shares in issue

89.5m

Free float

96%

Code

DSCV

Primary exchange

LSE

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

11.1

28.2

62.7

Rel (local)

11.4

20.7

43.7

52-week high/low

859p

463p

Business description

discoverIE is a leading international designer, manufacturer and supplier of customised electronics to industry, supplying customer-specific electronic products and solutions to original equipment manufacturers.

Next events

Q122 trading update

29 July 2021

Analyst

Katherine Thompson

+44 (0)20 3077 5730

discoverIE Group is a research client of Edison Investment Research Limited

discoverIE’s FY21 results confirmed that measures taken to manage the business through the pandemic minimised the impact on profitability and reduced gearing significantly. Strong order intake in H221 has returned the business to organic growth and the company continues to make higher-margin acquisitions in the Design & Manufacturing (D&M) business. We lift our underlying EPS forecast by 5.3% for FY22.

Year end

Revenue (£m)

PBT*
(£m)

Diluted EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

03/20

466.4

34.6

31.8

3.0

27.0

0.3

03/21

454.3

32.6

27.0

10.2

31.8

1.2

03/22e

498.0

35.3

28.6

10.7

30.0

1.2

03/23e

513.0

37.2

29.7

11.0

28.8

1.3

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

FY21 beats forecasts

discoverIE beat our recently upgraded forecasts for FY21, with underlying operating profit and EPS ahead by 3.9% and 6.9% respectively due to higher-than-expected gross margin, and lower-than-expected finance costs and tax. Measures taken during H121 combined with higher-margin D&M acquisitions in H221 helped limit the operating margin decline to only 0.3pp despite a 2.6% revenue decline for FY21. Net debt reduced by £14m in the year as a result of cost control (opex and capex) and lower working capital, after paying £21m for two acquisitions in H2.

Upgrading estimates

Order momentum started to improve in H221 and discoverIE returned to organic revenue growth in the last two months of H2. So far this year, the company is trading ahead of the same period in FY20 and FY21 on an organic basis. We have revised our forecasts to reflect the post year-end acquisition of CPI for £8m and higher revenue in both divisions. We raise our FY22 underlying EPS forecast by 5.3% (4.1% y-o-y growth) and introduce a forecast for EPS growth of 4.4% in FY23.

Valuation: D&M key to margin growth

The stock is trading at a c 7% discount to its peer group on an FY22e P/E basis – the discount has widened from 2% when we last wrote in April. Aside from the continuing recovery in customer demand, we view the key trigger for earnings and share price upside to be progress in increasing the weighting of the business towards the higher-growth, higher-margin D&M business (organically and via acquisition), which in turn should move the company closer to its 12.5% medium-term operating margin target. The stock is supported by a dividend yield of 1.2%.

Review of FY21 results

Exhibit 1: FY21 results highlights

£m

FY21e

FY21a

diff

y-o-y

Revenues

453.6

454.3

0.2%

(2.6%)

Design & manufacturing

298.8

296.6

(0.7%)

(0.4%)

Custom supply

154.7

157.7

1.9%

(6.4%)

Gross margin

33.7%

34.2%

0.5%

0.6%

EBITDA

47.9

48.4

1.1%

(4.9%)

EBITDA margin

10.6%

10.7%

0.1%

(0.3%)

Underlying operating profit

33.9

35.2

3.9%

(5.1%)

Underlying operating margin

7.5%

7.7%

0.3%

(0.2%)

Normalised operating profit

35.5

36.3

2.3%

(6.7%)

Normalised operating margin

7.8%

8.0%

0.2%

(0.4%)

Normalised PBT

31.5

32.6

3.4%

(5.8%)

Normalised net income

23.6

24.9

5.2%

(10.0%)

Normalised diluted EPS (p)

25.6

27.0

5.2%

(15.2%)

Underlying diluted EPS (p)

24.3

26.0

6.9%

(13.8%)

Reported basic EPS (p)

14.0

13.5

(3.3%)

(20.6%)

Dividend per share (p)

10.4

10.2

(2.4%)

241.8%

Net (debt)/cash

(53.7)

(47.2)

(12.0%)

(23.0%)

Net debt/EBITDA (x)

1.2

1.1

Source: discoverIE, Edison Investment Research

We recently upgraded our forecasts on the back of the year-end trading update in April. FY21 results came in marginally higher than forecast at the revenue level and 4% ahead at the underlying operating profit level. H221 revenue increased 10% half-on-half and returned to organic growth for the last two months of the year.

Gross margin was 0.5pp higher than forecast and 0.6pp higher year-on-year, mainly due to higher-margin acquisitions, resulting in gross profit 1.6% higher than forecast. This was partially offset by slightly higher than forecast operating expenses, resulting in an underlying operating profit margin 0.2pp ahead of our forecast. In response to the pandemic, the company reduced operating costs by 2% on an organic basis and 4% compared to the H220 run rate.

One-off costs of £3.4m included £2.0m for acquisitions and a £1.4m one-off charge for the legacy pension fund. Net finance costs of £3.7m were below our £4.0m forecast. The tax rate of 29.4% on a reported basis compared to our 25% forecast, higher due to acquisition-related costs that do not attract tax relief. On underlying PBT, the tax rate of 23.7% was slightly below our 25% forecast. Overall, this resulted in underlying diluted EPS 6.9% ahead of our forecast and normalised diluted EPS 5.2% ahead.

Year-end net debt reduced 23% y-o-y to £47.2m, reflecting strong operating cash flow conversion of 141%, due to lower working capital requirements and a lower ratio of working capital to sales (13.1% vs 14.4% in FY20), cost cutting and reduced spending on manufacturing facilities (maintenance only). Year-end gearing declined to 1.1x, well below the target range of 1.5–2.0x, even after spending £21.2m on the acquisitions of Phoenix and Limitor in H2.

The company announced a final dividend of 7.0p, resulting in a 10.15p dividend for the full year, marginally below our 10.4p forecast, and 6% higher than the full year dividend for FY19.

Divisional performance

Performance by division is shown in Exhibit 2. The D&M division reported flat revenue y-o-y and a 1% decline on a constant currency basis. Stripping out the effects of the Phoenix and Limitor acquisitions, the division saw an organic constant currency revenue decline of 4%. The underlying margin of 12.7% was marginally lower than the 12.8% reported in FY20 and flat y-o-y on a constant currency basis. Organic order intake declined 18% y-o-y in H121 and rebounded to growth of 10% y-o-y in H221, resulting in a 4% decline y-o-y for FY21. On a regional basis, Germany and Rest of Europe saw organic growth (3% and 1% respectively), while the UK was down 15%, the Nordics were down 8% and North America was down 17%.

The CS division reported a 6% revenue decline y-o-y, or 8% on a constant currency organic basis. The underlying operating margin declined from 4.3% in FY20 to 3.6% in FY21. On a half-yearly basis, organic CER revenue was down 10% y-o-y in H121 improving to a 6% decline in H221. Orders of £173m were flat y-o-y with a book-to-bill of 1.09:1; H121 orders declined 16% y-o-y and rebounded to 16% growth in H221, up 40% h-o-h.

Exhibit 2: Performance by division

£m

FY21

FY20

FY20 CER

Reported y-o-y

CER* y-o-y

Organic CER y-o-y

Design & manufacturing (D&M)

296.6

297.9

299.7

0%

(1%)

(4%)

Custom distribution (CS)

157.7

168.5

171.3

(6%)

(8%)

(8%)

Total revenues

454.3

466.4

471.0

(3%)

(4%)

(6%)

Underlying operating profit

Design & manufacturing

37.7

38.1

38.2

(1%)

(1%)

Custom distribution

5.6

7.3

7.4

(23%)

(24%)

Unallocated

(8.1)

(8.3)

(8.3)

(2%)

(2%)

Total operating profit

35.2

37.1

37.3

(5%)

(6%)

Underlying operating margin

Design & manufacturing

12.7%

12.8%

12.7%

(0.1%)

(0.0%)

Custom distribution

3.6%

4.3%

4.3%

(0.8%)

(0.8%)

Total operating margin

7.7%

8.0%

7.9%

(0.2%)

(0.2%)

Source: discoverIE. Note: *Constant exchange rate.

Review of KSIs and KPIs

In the exhibits below, we summarise the company’s performance according to its key strategic and performance indicators.

Exhibit 3: Key strategic indicators (KSIs)

FY15

FY16

FY17

FY18

FY19

FY20

FY21

FY25 target

Increase Design & Manufacturing revenue

37%

48%

52%

57%

61%

64%

65%

>75%

Increase underlying operating margin

4.9%

5.7%

5.9%

6.3%

7.0%

8.0%

7.7%

12.5%

Build sales beyond Europe

12%

17%

19%

19%

21%

27%

28%

40%

Sales from target markets

N/A

N/A

56%

62%

66%

68%

70%

85%

Source: discoverIE

The company made progress in FY21 towards three of the KSI targets. D&M continued to increase as a percentage of total revenue. We expect further D&M acquisitions will be required to achieve the 75% target in FY25; post year-end, the company acquired Control Products Inc (CPI), a US-based sensors business, for £8m on a debt-free, cash-free basis. Sales from target markets increased to 70% of total revenue and 75% of D&M revenue. The company estimates that target markets declined 3% in FY21 compared to a 9% decline for other markets. This helped the group to limit the organic group decline to 6%. Despite the effect of COVID-19, particularly in H121, the underlying operating margin only declined 0.3pp in FY21 and we expect it to expand again from FY22. In H121, the margin declined to 7.3% before recovering to 8.2% in H221.

Exhibit 4: Key performance indicators (KPIs)

FY15

FY16

FY17

FY18

FY19

FY20

FY21

Target

Sales growth: CER

36%

14%

6%

11%

14%

8%

(4%)

Sales growth: D&M organic

9%

3%

-1%

11%

10%

5%

(4%)

Sales growth: organic

3%

3%

-1%

6%

8%

2%

(6%)

Well ahead of GDP

Underlying EPS growth

31%

10%

13%

16%

22%

11%

(14%)

>10%

Dividend growth

11%

6%

6%

6%

6%

N/A - only interim paid

6%

Progressive

ROCE*

12.0%

11.6%

13.0%

13.7%

15.4%

16.0%

14.5%

>15%

Operating cash flow generation

104%

100%

136%

85%

93%

106%

141%

>85% of underlying operating profit

Free cash flow generation

22%

64%

101%

58%

94%

104%

157%

>85% of underlying profit after tax

Carbon emissions

(6%)

50% reduction to CY25

Source: discoverIE. Note: *Underlying operating profit as a percentage of net assets plus net debt, annualising acquisitions.

We discuss revenue, dividend and operating cash flow performance above. Underlying EPS declined 14% from a combination of higher share count (equity issued in H220), the impact of COVID-19 and higher tax rates.

ROCE fell below the target for the year, but on a half-yearly basis recovered to 15.6% in H221 from 12.7% in H121.

Strong operating cash flow conversion generated strong free cash flow. The company is aiming to become self-funding for acquisitions. The pause in M&A in H121 contributed to the reduction in gearing at year-end.

Carbon emissions declined 19% in CY20 on a like-for-like basis excluding acquisitions made in CY20. Adjusted to normalise for the impact of COVID-19, carbon emissions reduced by 6%.

Outlook and changes to forecasts

The company closed the year with an order book of £181m (c 80% due for delivery within 12 months), up 15% CER and 11% on an organic basis. H121 orders declined 18% y-o-y, with a book-to-bill of 0.91:1. In H221, orders were 12% higher y-o-y on an organic basis and 40% higher h-o-h, resulting in a book-to-bill of 1.19:1 for H2 and 1.05:1 for FY21. Design wins declined 15% y-o-y, with H121 down 19% y-o-y and H221 down 12% y-o-y but up 3% h-o-h. Design wins in target markets made up 90% of D&M wins and 60% of CS wins.

Management noted that FY22 has started well with organic sales growth ahead of the same period in FY21 and FY20, and orders running ahead of sales across all territories.

We have revised our forecasts to reflect the CPI acquisition and stronger revenue in FY22, which results in an upgrade to our underlying operating profit and EPS forecasts of 5.2% and 5.3% respectively. Factoring in the CPI acquisition and assuming that working capital requirements grow with revenue and expansion investment in manufacturing facilities is resumed, we forecast net debt of £59.4m by the end of FY22, equivalent to gearing of 1.3x.

Exhibit 5: Changes to forecasts

£m

FY22e old

FY22e new

Change

y-o-y

FY23e new

y-o-y

Revenues

489.0

498.0

1.8%

9.6%

513.0

3.0%

Design & manufacturing

325.0

330.5

1.7%

11.4%

341.3

3.3%

Custom supply

164.0

167.5

2.2%

6.2%

171.7

2.5%

Gross margin

33.8%

33.8%

0.0%

(0.4%)

33.8%

0.0%

EBITDA

50.3

52.1

3.7%

7.7%

54.2

3.9%

EBITDA margin

10.3%

10.5%

0.2%

(0.2%)

10.6%

0.1%

Underlying operating profit

36.1

37.9

5.2%

7.8%

39.9

5.1%

Underlying operating margin

7.4%

7.6%

0.2%

(0.1%)

7.8%

0.2%

Normalised operating profit

37.9

39.7

5.0%

9.5%

41.7

4.9%

Normalised operating margin

7.7%

8.0%

0.2%

(0.0%)

8.1%

0.1%

Normalised PBT

33.4

35.3

5.6%

8.2%

37.2

5.5%

Normalised net income

25.1

26.5

5.6%

6.3%

27.5

4.1%

Normalised diluted EPS (p)

27.2

28.6

5.0%

5.9%

29.7

4.1%

Underlying diluted EPS (p)

25.7

27.1

5.3%

4.1%

28.3

4.4%

Reported basic EPS (p)

14.2

14.7

3.8%

8.8%

16.7

13.2%

Dividend per share (p)

10.7

10.7

0.0%

5.4%

11.0

2.8%

Net (debt)/cash

(54.9)

(59.4)

8.3%

25.9%

(52.6)

(11.5%)

Net debt/EBITDA (x)

1.3

1.3

1.1

Source: Edison Investment Research

Valuation

Exhibit 6: Peer valuation metrics

EV/sales (x)

EV/EBITDA (x)

EV/EBIT (x)

P/E (x)

Dividend yield (%)

CY

NY

CY

NY

CY

NY

CY

NY

CY

NY

discoverIE

1.7

1.6

15.9

15.3

20.8

19.9

30.0

28.8

1.2

1.3

Diploma

5.0

4.6

24.0

22.4

27.8

25.5

35.0

32.5

1.3

1.4

Electrocomponents

2.2

2.1

16.1

14.3

19.6

17.1

25.5

22.2

1.6

1.8

Gooch & Housego

2.9

2.8

18.0

16.4

27.4

23.3

38.5

33.0

0.9

0.9

TT electronics

1.2

1.1

10.4

9.1

16.4

12.9

17.9

14.5

2.2

2.5

XP Power

4.4

4.2

17.9

16.6

22.9

20.7

27.7

26.1

1.7

1.8

Avon Rubber

3.4

2.7

14.7

11.1

21.2

14.9

33.2

24.4

1.1

1.4

Halma

7.8

7.4

31.7

29.1

37.7

34.2

47.3

42.8

0.7

0.7

Spectris

2.8

2.7

14.2

13.0

18.3

16.5

23.4

20.8

2.2

2.3

Spirax-Sarco Engineering

7.3

6.9

25.8

24.3

30.3

28.6

41.2

38.7

1.0

1.1

Average

4.1

3.8

19.2

17.4

24.6

21.5

32.2

28.3

1.4

1.5

Premium/(discount) to average (%)

(59.6)

(57.9)

(17.2)

(11.9)

(15.4)

(7.7)

(6.7)

1.8

(10.6)

(16.7)

Source: Edison Investment Research, Refinitiv (as at 7 June)

The stock is trading at a c 7% discount to its peer group on an FY22e P/E basis – the discount has widened from 2% when we last wrote in April. Aside from the continuing recovery in customer demand, we view the key trigger for earnings and share price upside to be progress in increasing the weighting of the business towards the higher-growth, higher-margin D&M business (organically and via acquisition), which in turn should move the company closer to its 12.5% medium-term operating margin target. The stock is supported by a dividend yield of 1.2%.

Exhibit 7: Financial summary

£m

2018

2019

2020

2021

2022e

2023e

Year end 31 March

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

387.9

438.9

466.4

454.3

498.0

513.0

Cost of Sales

(261.2)

(293.9)

(309.7)

(299.0)

(329.7)

(339.6)

Gross Profit

126.7

145.0

156.7

155.3

168.3

173.4

EBITDA

 

 

29.3

37.0

50.9

48.4

52.1

54.2

Operating Profit (before am, SBP and except.)

 

25.2

31.8

38.9

36.3

39.7

41.7

Operating Profit (before am. and except.)

 

24.5

30.6

37.1

35.2

37.9

39.9

Amortisation of acquired intangibles

(4.9)

(5.9)

(9.0)

(11.1)

(11.6)

(11.6)

Exceptionals

(2.3)

(2.0)

(4.3)

(3.4)

(4.0)

(3.6)

Share-based payments

(0.7)

(1.2)

(1.8)

(1.1)

(1.8)

(1.8)

Operating Profit

17.3

22.7

23.8

20.7

22.3

24.7

Net Interest

(2.6)

(3.4)

(4.3)

(3.7)

(4.5)

(4.5)

Profit Before Tax (norm)

 

 

22.6

28.4

34.6

32.6

35.3

37.2

Profit Before Tax (FRS 3)

 

 

14.6

19.3

19.5

17.0

17.8

20.1

Tax

(4.0)

(4.7)

(5.2)

(5.0)

(4.6)

(5.2)

Profit After Tax (norm)

17.1

21.5

27.6

24.9

26.5

27.5

Profit After Tax (FRS 3)

10.6

14.6

14.3

12.0

13.2

14.9

Ave. Number of Shares Outstanding (m)

70.8

73.0

84.0

88.8

89.5

89.5

EPS - normalised & diluted (p)

 

 

23.0

28.4

31.8

27.0

28.6

29.7

EPS - underlying, diluted (p)

 

 

22.3

27.2

30.2

26.0

27.1

28.3

EPS - IFRS basic (p)

 

 

15.0

20.0

17.0

13.5

14.7

16.7

EPS - IFRS diluted (p)

 

 

14.2

19.4

16.5

13.0

14.2

16.1

Dividend per share (p)

9.0

9.6

3.0

10.2

10.7

11.0

Gross Margin (%)

32.7

33.0

33.6

34.2

33.8

33.8

EBITDA Margin (%)

7.6

8.4

10.9

10.7

10.5

10.6

Operating Margin (before am, SBP and except.) (%)

6.5

7.2

8.3

8.0

8.0

8.1

discoverIE adjusted operating margin (%)

6.3

7.0

8.0

7.7

7.6

7.8

BALANCE SHEET

Fixed Assets

 

 

136.4

149.2

236.4

245.0

243.5

233.9

Intangible Assets

107.2

119.7

182.2

191.2

188.0

176.8

Tangible Assets

23.4

24.4

46.3

45.9

47.6

49.2

Deferred tax assets

5.8

5.1

7.9

7.9

7.9

7.9

Current Assets

 

 

165.9

179.1

197.4

183.6

185.4

192.4

Stocks

58.1

66.2

68.4

67.7

74.8

77.0

Debtors

84.6

88.7

90.1

84.9

96.9

99.8

Cash

21.9

22.9

36.8

29.2

12.0

13.8

Current Liabilities

 

 

(94.0)

(96.0)

(103.6)

(107.8)

(114.9)

(118.0)

Creditors

(87.6)

(94.3)

(94.0)

(102.2)

(109.3)

(112.4)

Lease liabilities

0.0

0.0

(5.3)

(4.8)

(4.8)

(4.8)

Short term borrowings

(6.4)

(1.7)

(4.3)

(0.8)

(0.8)

(0.8)

Long Term Liabilities

 

 

(81.5)

(97.6)

(129.7)

(112.0)

(99.2)

(86.2)

Long term borrowings

(67.9)

(84.5)

(93.8)

(75.6)

(70.6)

(65.6)

Lease liabilities

0.0

0.0

(14.7)

(16.7)

(16.1)

(15.5)

Other long-term liabilities

(13.6)

(13.1)

(21.2)

(19.7)

(12.5)

(5.1)

Net Assets

 

 

126.8

134.7

200.5

208.8

214.8

222.1

CASH FLOW

Operating Cash Flow

 

 

21.7

30.0

48.0

57.2

37.8

50.1

Net Interest

(2.6)

(3.4)

(3.7)

(3.1)

(3.9)

(3.9)

Tax

(3.7)

(3.8)

(6.4)

(7.2)

(8.8)

(9.7)

Capex

(4.3)

(5.4)

(6.3)

(3.9)

(8.5)

(8.5)

Acquisitions/disposals

(25.4)

(22.4)

(73.6)

(20.5)

(13.1)

(5.0)

Financing

(1.5)

0.1

53.9

(6.6)

(6.7)

(6.7)

Dividends

(6.2)

(6.7)

(8.1)

(2.8)

(9.1)

(9.6)

Net Cash Flow

(22.0)

(11.6)

3.8

13.1

(12.2)

6.8

Opening net cash/(debt)

 

 

(30.0)

(52.4)

(63.3)

(61.3)

(47.2)

(59.4)

HP finance leases initiated

0.0

0.0

0.0

0.0

0.0

0.0

Other

(0.4)

0.7

(1.8)

1.0

0.0

(0.0)

Closing net cash/(debt)

 

 

(52.4)

(63.3)

(61.3)

(47.2)

(59.4)

(52.6)

Source: discoverIE, Edison Investment Research


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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

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

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General disclaimer and copyright

This report has been commissioned by discoverIE Group and prepared and issued by Edison, in consideration of a fee payable by discoverIE Group. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: 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 and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. 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.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, 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 securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. 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, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2021 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

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. 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 (i.e. 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.

United Kingdom

This document is prepared and provided by Edison 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.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison 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. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

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

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, 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

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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