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TXT e-solutions — Entering the Swiss fintech market

TXT e-solutions (Euronext STAR Milan: TXT)

Last close As at 04/11/2024

9.88

▲ −0.06 (−0.60%)

Market capitalisation

129m

More on this equity

Research: TMT

TXT e-solutions — Entering the Swiss fintech market

TXT reported flat organic revenues in Q220 and 6% organic growth for H120, despite the disruption caused by COVID-19. Normalised EBIT was 44% higher y-o-y in Q220 and 51% higher for H120. The company took its first step to internationalise its fintech business with the €5m acquisition of a Swiss IT services business in July. We have revised our forecasts to reflect the acquisition and lower underlying operating costs, resulting in upgrades to our normalised EPS forecasts (+29% FY20, +6% FY21).

Katherine Thompson

Written by

Katherine Thompson

Director

TMT

TXT e-solutions

Entering the Swiss fintech market

H120 results

Software & comp services

11 August 2020

Price

€8.15

Market cap

€96m

Net cash (€m) at end-H120

38.3

Shares in issue

11.7m

Free float

45%

Code

TXT

Primary exchange

Borsa Italiana (STAR)

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

8.2

5.8

(1.2)

Rel (local)

8.5

(6.1)

2.0

52-week high/low

€10.66

€4.63

Business description

TXT e-solutions provides IT, consulting and R&D services to aerospace, aviation, automotive, banking and finance customers.

Next event

Q320 results

5 November 2020

Analysts

Katherine Thompson

+44 (0)20 3077 5730

TXT e-solutions is a research client of Edison Investment Research Limited

TXT reported flat organic revenues in Q220 and 6% organic growth for H120, despite the disruption caused by COVID-19. Normalised EBIT was 44% higher y-o-y in Q220 and 51% higher for H120. The company took its first step to internationalise its fintech business with the €5m acquisition of a Swiss IT services business in July. We have revised our forecasts to reflect the acquisition and lower underlying operating costs, resulting in upgrades to our normalised EPS forecasts (+29% FY20, +6% FY21).

Year end

Revenue (€m)

PBT*
(€m)

EPS*
(€)

DPS
(€)

P/E
(x)

Yield
(%)

12/18

40.0

1.5

0.10

0.50

79.5

6.1

12/19

59.1

7.6

0.46

0.00

17.9

0.0

12/20e

66.8

5.9

0.34

0.10

24.1

1.2

12/21e

73.0

6.8

0.39

0.12

20.8

1.5

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

Respectable Q2 performance despite COVID-19

COVID-19 has not yet had a material impact on TXT’s results: H120 revenues saw 19% growth (5.9% organic) and normalised EBIT increased 51% over the same period, increasing the margin by 2pp to 9.7%. Meanwhile, the company continues to expand its fintech division and has made the first step to internationalise this business with the €5m acquisition of a Swiss IT services business focused on the banking sector. Net cash of €38.3m at the end of H120 provides ample funds for additional acquisitions.

Upgrading estimates

While in the medium term demand from civil aviation and automotive customers is likely to be weaker, other segments such as defence and digital industry could compensate, and TXT is focusing on developing expertise in areas such as artificial intelligence, remote training and support, and cybersecurity. For Q320, management expects to report organic revenue growth and EBITDA growth on a year-on-year basis. We have revised our forecasts to reflect a lower cost base for the rest of FY20 and for FY21, and we have included MAC Solutions from 14 July. This results in a revenue upgrade of 3.6% in FY20 and 7.3% in FY21, and a normalised EPS upgrade of 28.8% in FY20 and 5.5% in FY21.

Valuation: Discount to peers

TXT continues to trade at a large discount to its peer group on an EV/sales and EV/EBIT basis, with revenue growth at the top end of the group and margins in line with peer group averages. P/E multiples continue to be inflated versus peers due to the €38m of net cash on the balance sheet. We expect the company will continue to seek earnings-enhancing acquisitions.

Review of H120 results

Exhibit 1: Financial highlights, Q220 and H120

€m

y-o-y

Q120

Q220

H120

Q119

Q219

H119

Q120

Q220

H120

Revenues

16.3

15.9

32.1

11.9

15.1

27.0

36.8%

4.9%

18.9%

Licences & maintenance

2.3

2.1

4.4

1.5

1.4

2.9

50.2%

47.5%

48.8%

Services

14.0

13.7

27.7

10.4

13.7

24.1

34.8%

0.4%

15.3%

Gross profit

7.3

6.7

14.0

5.2

6.5

11.7

39.5%

3.5%

19.5%

Gross margin

44.7%

42.6%

43.7%

43.9%

43.1%

43.5%

0.9%

(0.6%)

0.2%

EBITDA

2.0

2.1

4.0

1.3

1.5

2.8

52.1%

38.8%

45.0%

EBITDA margin

12.1%

13.1%

12.6%

10.9%

9.9%

10.3%

1.2%

3.2%

2.3%

Normalised EBIT

1.5

1.6

3.1

1.0

1.1

2.1

58.5%

43.9%

50.7%

Normalised EBIT margin

9.4%

10.0%

9.7%

8.1%

7.3%

7.6%

1.3%

2.7%

2.0%

Reported EBIT

1.2

0.9

2.1

0.7

0.5

1.2

61.0%

79.7%

68.8%

Reported EBIT margin

7.2%

5.9%

6.5%

6.1%

3.4%

4.6%

1.1%

2.4%

1.9%

Reported net income

0.3

2.5

2.7

1.4

0.7

2.2

(82.3%)

232.2%

25.7%

Net cash

42.1

38.3

38.3

61.1

44.2

44.2

(31.1%)

(13.3%)

(13.3%)

Source: TXT e-solutions

TXT reported 4.9% revenue growth in Q220, which, after the very strong growth in Q120, resulted in H120 revenue growth of 18.9%. Q2 revenues on a like-for-like basis were flat. Gross profit increased by a similar amount to revenue in H120. Lower operating costs such as significantly reduced travel costs, lower admin costs, and lower sales and marketing costs, resulted in a 38.8% y-o-y increase in EBITDA in Q220 and a 45.0% increase in H120. Of the €1.3m increase in H120, €0.6m was from the Assioma acquisition and the remainder organic growth. TXT noted that investment in TXT Risk Solutions and TXT Working Capital Solutions had a €0.5m negative impact on EBITDA in Q2.

The normalised EBIT margin increased by 2.7pp y-o-y in Q220 and 2.1pp y-o-y in H120 as a result of the lower cost base. The company took a €0.35m one-off charge for restructuring in Q220. Net financial income of €0.9m in H120 was the combination of two things: as we have previously written, the company holds a large proportion of its cash balance in multi-segment insurance funds (€78m at the end of Q1), which are marked to market. Due to the market turmoil prompted by COVID-19, these funds reduced in value by €0.7m in Q120 but had regained their value in Q220. The company also reported a €0.8m one-off credit in Q220 for the reduction in an earn-out payment (see below for more detail).

The tax rate for H120 was 8.8%, affected by the one-off credit relating to the PACE earn-out, although we have maintained our 28% forecast for FY20 and FY21.

Exhibit 2: Net cash reconciliation

€m

FY19

H120

Cash and cash equivalents

11.4

17.0

Trading securities at fair value

87.3

77.6

Short-term bank debt

(17.4)

(20.7)

Short-term leases

(1.3)

(1.3)

Short-term earn-outs

(6.6)

(1.6)

Long-term bank debt

(23.5)

(23.5)

Long-term lease debt

(4.5)

(4.0)

Long-term earn-outs

(4.0)

(5.1)

Net cash

41.4

38.3

Source: TXT e-solutions

In H1, the company generated €0.8m cash from operations, after paying €1.2m to the retiring chairman, which was accrued in H219. €1.8m was spent buying back shares during H1 and €0.5m on capex. Net cash declined by €3.1m over the period. A new €2.7m earn-out was recorded for the acquisition of TXT Working Capital Solutions. The PACE and Cheleo earn-outs were paid during H1, totalling €5.9m. Although this would ordinarily have no impact on the net cash position, the final payout for PACE was €0.8m lower than originally accrued.

Exhibit 3: Divisional revenues

€m

y-o-y

Q120

Q220

H120

Q119

Q219

H119

Q120

Q220

H120

Aerospace & Aviation

10.5

10.3

20.9

8.9

9.8

18.6

18.8%

5.8%

12.0%

Software licences & maintenance

2.0

1.8

3.8

1.3

1.2

2.5

52.5%

48.6%

50.6%

Services

8.6

8.5

17.1

7.6

8.5

16.1

13.1%

-0.2%

6.0%

Fintech

5.7

5.5

11.2

3.0

5.4

8.4

89.5%

3.2%

34.3%

Software licences & maintenance

0.3

0.3

0.6

0.2

0.2

0.4

36.9%

41.3%

39.1%

Services

5.4

5.2

10.7

2.8

5.1

7.9

93.7%

1.6%

34.0%

Software licences & maintenance

2.3

2.1

4.4

1.5

1.4

2.9

50.2%

47.5%

48.8%

Services

14.0

13.7

27.7

10.4

13.7

24.1

34.8%

0.4%

15.3%

Source: TXT e-solutions

Aerospace & Aviation (A&A) – still reporting organic growth

In Q220, the A&A division saw 5.8% organic revenue growth, with a 48.6% increase in software revenues (this reflects licence deals signed in H219) and effectively flat revenues from services. Based on the stronger performance in Q120, this results in 12.0% growth for H120, with 50.6% growth in software revenues and 6.0% growth in services revenues. The company noted that it had recently signed a multi-year contract within the defence sector for its virtual pilot training platform.

PACE call option exercised for remaining 21%

In June, TXT acquired the remaining 21% of PACE for €5.1m. The company had previously 100%-consolidated the acquisition and treated the option to acquire the remaining 21% as debt. At the end of FY19, the liability (included in short-term debt) was revalued from €1.7m to €5.9m to reflect client wins in 2019. The difference of €0.82m was reported in the income statement in Q220 as a one-off credit.

Fintech – growing beyond Italy

As TXT acquired Assioma on 30 April 2019, Q2 revenue growth of 3.2% was a combination of one extra month of Assioma and the underlying business showing a slight decline. For H120, revenue growth of 34.3% came from 39.1% growth in software revenues and 34.0% growth from services. On a like-for-like basis, revenue growth declined 3.8% in H120.

Expanding into the Swiss market with MAC acquisition

In June, the company announced that it had agreed to acquire MAC Solutions, a Swiss IT services company with a focus on the banking market, for CHF5.4m/€5.0m in cash. The agreement includes a clawback clause of up to CHF2.2m, depending on EBITDA achieved over 2020–22 and this amount will sit in escrow for three years. The deal completed on 13 July and MAC Solutions has been consolidated from 14 July. In late July, TXT sold 224,604 treasury shares at €9/share for €2.0m, so that the sole shareholder of MAC Solutions, Alberto Franceschini, could exchange the part of the sales proceeds sitting in escrow for TXT shares. This makes him a 1.7% shareholder of TXT.

MAC Solutions has been in operation for more than 20 years, specialising in the supply and integration of financial software, and developing custom software and apps for local banking customers. In 2019, MAC generated revenue of CHF4.8m and EBITDA of CHF1.08m (22.5% margin) – this excludes consulting activities that TXT is not acquiring. This implies a trailing EV/sales multiple of 1.1x and EV/EBITDA of 5.0x (compared to 1.0x and 8.1x, respectively, for TXT).

MAC Solutions is based in Chiasso, Switzerland, close to the Italian border. TXT already has a Swiss subsidiary based in Chiasso focused on the aerospace market and this acquisition is a move to expand the fintech division outside of Italy. TXT noted that during lockdown, MAC Solutions’ business has remained at normal levels.

Outlook and changes to forecasts

The company noted that, despite the inevitable impact that COVID-19 has had on the civil aviation, automotive and manufacturing sectors, the immediate transition to remote working ensured continuity for its customers, and its specialised skills in digital transformation have enabled it to grow volumes and margins compared to H119. Management will continue to invest in R&D and acquisitions to increase the range of expertise it can offer and is continuing its share buyback plan. For Q320, management expects organic revenue growth and EBITDA growth y-o-y.

We have revised our forecasts to reflect:

■

consolidation of MAC Solutions from 14 July;

■

lower operating costs based on lower expenses incurred in Q220; and

■

share count adjusted for the treasury shares sold to the MAC Solutions vendor.

Overall, this results in a 30% increase in FY20 normalised EPS and a 6% increase in FY21.

Exhibit 4: Changes to forecasts

FY20e old

FY20e new

change

y-o-y

FY21e old

FY21e new

change

y-o-y

Revenues (€m)

64.4

66.8

3.6%

13.0%

68.0

73.0

7.4%

9.3%

Gross margin

44.7%

43.2%

(1.5%)

(2.9%)

46.6%

44.4%

(2.2%)

1.1%

Gross profit

28.8

28.9

0.2%

5.9%

31.7

32.4

2.3%

12.2%

EBITDA (€m)

6.5

7.8

21.0%

11.4%

8.0

8.5

6.7%

9.0%

EBITDA margin

10.0%

11.7%

1.7%

(0.2%)

11.7%

11.7%

(0.1%)

(0.0%)

Normalised EBIT (€m)

4.7

5.9

25.9%

9.1%

6.2

6.6

5.6%

11.1%

Normalised EBIT margin

7.3%

8.8%

1.6%

(0.3%)

9.1%

9.0%

(0.1%)

0.1%

Normalised net income (€m)

3.1

3.9

28.5%

(26.1%)

4.3

4.6

5.8%

16.5%

Normalised EPS (€)

0.26

0.34

28.8%

(25.9%)

0.37

0.39

5.5%

15.9%

Reported basic EPS (€)

0.19

0.28

51.2%

954.7%

0.30

0.31

4.1%

8.9%

Net cash (€m)

42.5

37.6

(11.4%)

(9.1%)

46.0

41.2

(10.5%)

9.5%

Dividend (€)

0.10

0.10

0.0%

N/A

0.12

0.12

0.0%

20.0%

Source: Edison Investment Research

Valuation

TXT continues to trade at a discount to peers on EV multiples. Due to the high net-cash balance, the stock trades at a premium on a P/E basis, although this is reducing as the company makes acquisitions.

Exhibit 5: Peer financial and valuation metrics

Company

Share price

Market cap

Rev growth

EBIT margin

EBITDA margin

EV/sales

EV/EBIT

P/E

Div yield

€

€m

CY

NY

CY

NY

CY

NY

CY

NY

CY

NY

CY

NY

CY

NY

TXT

8.15

96

13.2%

9.2%

8.9%

9.0%

11.7%

11.7%

0.9

0.8

10.0

9.0

24.1

20.8

1.2%

1.5%

European IT services companies

AKKA Technologies

16.46

370

-5.8%

5.7%

0.5%

4.6%

5.7%

9.0%

0.4

0.3

65.9

7.1

N/A

8.9

0.0%

1.1%

Alten

67.95

2,327

-8.0%

6.1%

5.8%

8.1%

8.1%

9.8%

1.0

0.9

17.3

11.6

22.0

14.7

1.3%

1.3%

AtoS

73.66

8,163

-2.5%

0.8%

7.8%

8.6%

13.5%

14.2%

0.9

0.9

11.5

10.5

10.5

9.8

1.9%

2.1%

Cap Gemini

111.30

19,002

12.0%

8.0%

10.5%

11.2%

14.3%

14.7%

1.3

1.2

12.1

10.6

17.6

15.1

1.5%

1.8%

Devoteam

98.10

824

-0.3%

4.3%

8.8%

9.8%

11.2%

11.5%

1.1

1.0

12.4

10.7

23.5

18.5

0.9%

1.1%

ESI Group

38.30

228

42.5%

5.1%

5.1%

6.8%

11.7%

11.3%

1.9

1.8

36.8

26.3

46.7

37.6

0.0%

0.0%

Reply

88.50

3,336

5.2%

9.4%

12.2%

12.9%

15.3%

15.7%

2.6

2.4

21.1

18.4

30.6

26.6

0.6%

0.7%

Sopra Steria

133.40

2,740

-1.8%

4.1%

5.8%

7.0%

9.9%

10.8%

0.8

0.8

14.4

11.4

16.9

13.3

1.4%

1.6%

Average

5.2%

5.4%

7.1%

8.6%

11.2%

12.1%

1.2

1.2

24.0

13.3

19.7

18.1

0.9%

1.2%

(Discount)/premium to peers

(29%)

(31%)

(58%)

(32%)

22%

15%

30%

21%

Source: Edison Investment Research, Refinitiv (as at 10 August 2020)

Exhibit 6: Financial summary

€'000s

2016

2017

2018

2019

2020e

2021e

Year end 31 December

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

33,060

35,852

39,957

59,091

66,769

72,968

Cost of sales

(18,954)

(20,224)

(22,289)

(31,825)

(37,898)

(40,582)

Gross profit

14,106

15,628

17,668

27,266

28,871

32,386

EBITDA

 

 

4,260

3,536

4,098

7,004

7,803

8,504

Operating Profit (before amort and except)

 

 

3,954

3,180

2,755

5,408

5,897

6,552

Amortisation of acquired intangibles

(264)

(439)

(610)

(1,142)

(1,365)

(1,365)

Exceptionals and other income

(557)

0

(300)

(4,145)

470

0

Other income

0

(69)

0

0

0

0

Operating Profit

3,133

2,672

1,845

121

5,002

5,187

Net Interest

48

(208)

(1,284)

2,194

0

250

Profit Before Tax (norm)

 

 

4,002

2,972

1,471

7,602

5,897

6,802

Profit Before Tax (FRS 3)

 

 

3,181

2,464

561

2,315

5,002

5,437

Tax

(661)

(710)

4

(1,867)

(1,401)

(1,522)

Profit After Tax (norm)

3,170

2,170

1,204

5,473

4,246

4,898

Profit After Tax (FRS 3)

2,520

1,754

565

448

3,602

3,915

Average Number of Shares Outstanding (m)

11.7

11.7

11.7

11.7

11.7

11.7

EPS - normalised (€)

 

 

0.271

0.186

0.102

0.456

0.338

0.391

EPS - normalised fully diluted (€)

 

 

0.271

0.186

0.102

0.456

0.338

0.391

EPS - (IFRS) (€)

 

 

0.475

5.874

0.048

0.027

0.283

0.308

Dividend per share (€)

0.30

1.00

0.50

0.00

0.10

0.12

Gross margin (%)

42.7

43.6

44.2

46.1

43.2

44.4

EBITDA Margin (%)

12.9

9.9

10.3

11.9

11.7

11.7

Operating Margin (before GW and except) (%)

12.0

8.9

6.9

9.2

8.8

9.0

BALANCE SHEET

Fixed Assets

 

 

25,428

8,860

22,942

34,635

40,165

37,948

Intangible Assets

21,296

7,332

17,751

24,380

30,716

29,351

Tangible Assets

1,598

793

3,680

7,929

7,123

6,271

Other

2,534

735

1,511

2,326

2,326

2,326

Current Assets

 

 

37,085

109,426

134,674

127,052

115,362

113,373

Stocks

3,146

2,528

3,141

4,156

4,456

4,756

Debtors

26,369

17,215

16,992

24,150

28,394

31,030

Cash

7,570

89,683

114,541

98,746

82,512

77,587

Other

0

0

0

0

0

0

Current Liabilities

 

 

(21,051)

(13,612)

(29,366)

(43,129)

(40,030)

(41,584)

Creditors

(20,243)

(12,937)

(12,062)

(17,823)

(19,747)

(21,301)

Short term borrowings

(808)

(675)

(17,304)

(25,306)

(20,283)

(20,283)

Long Term Liabilities

 

 

(7,180)

(4,781)

(41,903)

(36,538)

(29,113)

(20,613)

Long term borrowings

(1,391)

(1,688)

(36,882)

(32,029)

(24,604)

(16,104)

Other long term liabilities

(5,789)

(3,093)

(5,021)

(4,509)

(4,509)

(4,509)

Net Assets

 

 

34,282

99,893

86,347

82,020

86,383

89,124

CASH FLOW

Operating Cash Flow

 

 

10,676

119

2,039

(354)

5,184

7,122

Net Interest

105

(208)

(69)

3,102

0

250

Tax

(2,022)

379

(624)

(229)

(1,401)

(1,522)

Capex

(738)

(661)

(548)

(916)

(1,100)

(1,100)

Acquisitions/disposals

(5,403)

82,250

1,314

(2,178)

(4,800)

0

Financing

(828)

(6)

(7,208)

(4,287)

210

0

Dividends

(2,931)

(3,496)

(11,710)

(5,781)

0

(1,174)

Net Cash Flow

(1,141)

78,377

(16,806)

(10,643)

(1,907)

3,575

Opening net debt/(cash)

 

 

(8,259)

(5,371)

(87,320)

(60,355)

(41,412)

(37,625)

HP finance leases initiated

0

0

(2,788)

(2,500)

(2,700)

0

Other

(1,747)

3,572

(7,371)

(5,800)

820

(0)

Closing net debt/(cash)

 

 

(5,371)

(87,320)

(60,355)

(41,412)

(37,625)

(41,200)

Source: TXT e-solutions, Edison Investment Research

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This report has been commissioned by TXT e-solutions and prepared and issued by Edison, in consideration of a fee payable by TXT e-solutions. 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.

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New Zealand

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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

1,185 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

1,185 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

General disclaimer and copyright

This report has been commissioned by TXT e-solutions and prepared and issued by Edison, in consideration of a fee payable by TXT e-solutions. 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 2020 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2019. “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.

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

The Investment Research is a publication distributed in the United States by Edison Investment Research, Inc. Edison Investment Research, Inc. is registered as an investment adviser with the Securities and Exchange Commission. 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

1,185 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

1,185 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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