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discoverIE Group — FY24 demonstrates resilient business model

discoverIE Group (LSE: DSCV)

Last close As at 02/07/2024

GBP6.71

— 0.00 (0.00%)

Market capitalisation

GBP662m

More on this equity

Research: TMT

discoverIE Group — FY24 demonstrates resilient business model

In a difficult trading environment, with customers in the largest target market in a digestion phase after widespread supply chain disruption, discoverIE reported strong underlying operating profit growth and margin expansion. Despite higher net finance costs and currency headwinds, underlying EPS increased 5% y-o-y (+10% at constant exchange rates). We forecast modest growth in FY25 and FY26 and continued margin expansion in line with company targets and expect further M&A to boost growth.

Katherine Thompson

Written by

Katherine Thompson

Director

TMT

discoverIE Group

FY24 demonstrates resilient business model

FY24 results

Electrical components

10 June 2024

Price

727p

Market cap

£701m

€1.18/$1.28/£

Net debt (£m) at end FY24

104.0

Shares in issue

96.4m

Free float

96%

Code

DSCV

Primary exchange

LSE

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(1.1)

4.3

(20.4)

Rel (local)

(0.5)

(2.4)

(26.3)

52-week high/low

938p

593p

Business description

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

Next events

AGM

26 July 2024

Analyst

Katherine Thompson

+44 (0)20 3077 5700

discoverIE Group is a research client of Edison Investment Research Limited

In a difficult trading environment, with customers in the largest target market in a digestion phase after widespread supply chain disruption, discoverIE reported strong underlying operating profit growth and margin expansion. Despite higher net finance costs and currency headwinds, underlying EPS increased 5% y-o-y (+10% at constant exchange rates). We forecast modest growth in FY25 and FY26 and continued margin expansion in line with company targets and expect further M&A to boost growth.

Year
end

Revenue
(£m)

PBT*
(£m)

Diluted EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

03/23

448.9

46.3

35.2

11.45

20.7

1.6

03/24

437.0

48.2

36.8

12.00

19.8

1.7

03/25e

453.1

49.9

37.3

12.50

19.5

1.7

03/26e

466.7

52.4

39.0

13.00

18.6

1.8

Note: *PBT and EPS as per discoverIE’s underlying metric (excludes amortisation of acquired intangibles and exceptional items).

Progress towards FY25 margin target

In FY24, discoverIE reported a 3% revenue decline, a 1% increase at constant exchange rates (CER) and a 1% decline in organic revenue. Despite this, underlying operating profit was 10% higher, helped by higher-margin acquisitions but more materially by internal efficiencies. The underlying operating margin reached 13.1% (+1.6pp y-o-y) and management believes the company is on track to hit its 13.5% target for FY25. Underlying diluted EPS was 5% higher year-on-year after higher net finance costs and currency headwinds. After five acquisitions totalling £83m during the year, gearing stood at 1.5x at year-end, at the bottom end of the company’s target range.

Outlook: Design wins support organic growth

So far this year, discoverIE is trading in line with management’s expectations and management maintains its 13.5% operating margin target for FY25. Strong growth in design wins provide the foundation for revenue growth when customer inventory unwinds are complete and order growth returns. We maintain our FY25 forecasts and introduce forecasts for FY26. The company has an active M&A pipeline and pointed to a similar pace of activity in FY25 as in FY24, with c £80m in funding headroom for acquisitions from credit facilities and internal cash generation.

Valuation: Order growth to trigger upside

The stock trades at a 17% discount to its broader UK industrial technology peer group on FY25e P/E and at a larger discount to peers with a similar decentralised operating model (such as Halma and Spirax). Considering that the earnings outlook has been maintained and discoverIE continues to make excellent progress towards its margin targets, we believe this discount is overdone. The focus on strategic growth markets should reduce cyclicality compared to the wider market and we expect the company to continue to seek higher-margin acquisitions in the fragmented electronics market.

Review of FY24 results

Exhibit 1 summarises performance during FY24.

Exhibit 1: FY24 results highlights

£m

FY23

FY24e

FY24

Diff

y-o-y

Revenues

448.9

435.2

437.0

0.4%

(2.7%)

EBITDA

65.4

71.8

71.1

(1.0%)

8.7%

EBITDA margin

14.6%

16.5%

16.3%

(0.2%)

1.7%

Underlying operating profit

51.8

56.4

57.2

1.4%

10.4%

Underlying operating margin

11.5%

13.0%

13.1%

0.1%

1.6%

Normalised operating profit

54.3

58.8

59.5

1.2%

9.6%

Normalised operating margin

12.1%

13.5%

13.6%

0.1%

1.5%

Underlying PBT

46.3

47.2

48.2

2.0%

4.1%

Normalised PBT

48.8

49.6

50.5

1.7%

3.5%

Normalised net income

36.1

36.8

37.9

2.8%

4.9%

Normalised diluted EPS (p)

36.7

37.4

38.5

3.1%

4.9%

Underlying diluted EPS (p)

35.2

35.6

36.8

3.4%

4.5%

Reported basic EPS (p)

22.3

21.9

16.2

(26.2%)

(27.5%)

Dividend per share (p)

11.5

12.1

12.0

(0.8%)

4.8%

Net (debt)/cash

(42.7)

(104.1)

(104.0)

(0.1%)

143.6%

Net debt/EBITDA (x)

0.7

1.5

1.5

Source: discoverIE, Edison Investment Research

FY24 revenue came in marginally ahead of our forecast (the April trading update had confirmed a revenue decline of 3%), declining by 2.7% y-o-y. At CER, revenue was 1% higher and, excluding acquisitions, was down by 1%. Underlying operating profit came in 1.4% ahead of our forecast, up 10% y-o-y or 16% CER, and the underlying operating margin increased 1.6pp y-o-y to 13.1%. Net finance costs increased 64% y-o-y due to higher levels of debt and higher interest rates. The operating profit upside to our forecast flowed through to PBT and underlying net income, with underlying diluted EPS 3.4% ahead of our forecast and ahead of the top end of the consensus range (35.6–36.3p). The company announced a final dividend of 8.25p to make a full year dividend of 12.0p, just below our 12.1p forecast and 5% higher y-o-y. Year-end net debt of £104.0m was in line with our forecast, resulting in gearing of 1.5x at year-end, at the bottom end of the company’s 1.5–2.0x target range.

Reported EPS included £9.8m of one-off costs, of which £5.9m relates to an agreed disposal. The company decided to sell off part of the Santon business (roughly half in revenue terms) as it was underperforming and looked unlikely to recover. It agreed to sell the solar switches business and the Netherlands-based manufacturing line for a total of £7m in net cash after costs, which is due to be received in FY25. In FY24, it recorded the assets as held for sale (totalling £6.7m) and incurred costs of £5.9m relating to the disposal (of which £2.4m were cash costs and £2.7m was for write-downs of intangible assets). It expects to report a profit on disposal of £2m in FY25.

Divisional performance

Exhibit 2 summarises divisional revenue, operating profit and order progression in FY24.

Exhibit 2: Divisional performance

£m

FY24

FY23

Reported
year-on-year

CER
year-on-year

Organic CER
year-on-year

Orders CER
year-on-year

Revenues

Magnetics & Controls

265.1

280.8

(6%)

0%

(2%)

(7%)

Sensing & Connectivity

171.9

168.1

2%

4%

2%

(11%)

Total revenues

437.0

448.9

(3%)

1%

(1%)

(8%)

Underlying operating profit

Magnetics & Controls

40.6

38.4

6%

12%

Sensing & Connectivity

28.9

25.6

13%

15%

Unallocated

(12.3)

(12.2)

1%

1%

Total operating profit

57.2

51.8

10%

16%

Underlying operating margin

Magnetics & Controls

15.3%

13.7%

1.6pp

Sensing & Connectivity

16.8%

15.2%

1.6pp

Total operating margin

13.1%

11.5%

1.6pp

Source: discoverIE

Group underlying operating profit benefited from growth in profitability in both divisions as well as practically flat unallocated costs year-on-year. At constant exchange rates, underlying operating profit would have increased 16% y-o-y. Underlying operating margins increased by 1.6pp for both divisions.

During FY24, discoverIE made five acquisitions totalling £83m – with two previously reported and three smaller bolt-ons:

■

Silvertel – acquired in August 2023 for £21m and added to the Magnetics & Controls division.

■

2J Antennas Group – acquired in September 2023 for £45m and combined with Antenova to create a new cluster for industrial wireless connectivity within the Sensing & Connectivity division.

■

Shape – acquired in January for £7.9m. Shape is a US-based designer and manufacturer of specialty transformer equipment and joined the Noratel cluster in the Magnetics & Controls division.

■

DTI – acquired in March for £6.6m of initial consideration, with £3.2m additional consideration contingent on performance over the next three years. US-based DTI produces customised data collection products for original equipment manufacturers (OEMs) and joined the Beacon cluster in the Magnetics & Controls division.

■

IKN – acquired in March for £2.5m of initial consideration and £0.3m of contingent consideration. IKN, based in Norway, supplies products and services for data centres, networking and cabling systems. IKN joined the Foss cluster in the Sensing & Connectivity division.

Update on KSIs and KPIs

Exhibit 3: Key strategic indicators (KSIs)

FY18

FY19

FY20

FY21

FY22

FY23

FY24

FY25 target

Increase underlying operating margin

6.3%

7.0%

8.0%

7.7%

10.9%

11.5%

13.1%

13.5%*

Build sales beyond Europe

19%

21%

27%

28%

40%

40%

41%

45%

Sales from target markets

62%

66%

68%

70%

76%

77%

75%

85%

Reduce carbon emissions – scope 1 & 2 from CY21

35%

47%

65%

Source: discoverIE. Note: *Medium-term target 15%.

Exhibit 4: Key performance indicators (KPIs)

FY18

FY19

FY20

FY21

FY22

FY23

FY24

Target

Sales growth: CER

11%

14%

8%

(4%)

27%

15%

1%

Well ahead of GDP

Sales growth: continuing organic

11%

10%

5%

(4%)

14%

10%

-1%

Underlying EPS growth

16%

22%

11%

(8%)

20%

20%

5%

>10%

Dividend growth

6%

6%

N/A – only interim paid

6%

6%

6%

5%

Progressive

ROCE*

13.7%

15.4%

16.0%

14.5%

14.7%

15.9%

15.7%

>15%

Operating cash flow generation

85%

93%

106%

128%

101%

94%

103%

>85% of underlying operating profit

Free cash flow generation

58%

94%

104%

136%

102%

95%

102%

>85% of underlying profit after tax

Source: discoverIE. Note: *Return on capital employed; includes annualisation of acquisitions made in the year.

Reviewing the company’s performance versus its key strategic indicator (KSI) and key performance indicator (KPI) targets:

■

Revenue growth: while organic revenue growth declined during FY24, we note that over the period FY18–24, discoverIE achieved an organic revenue CAGR of 7% through-cycle, which was well ahead of GDP growth over the same period. Management highlighted that the business model is designed to grow faster than GDP during periods of strong economic activity and to be resilient in weaker trading environments.

■

Target markets: the percentage of revenue from target markets will vary depending on the growth rates of the individual verticals and the revenue composition of acquisitions, which often have a higher proportion of revenue from non-core markets on acquisition. During FY24, organic revenue from target markets declined by 2% compared to 3% growth for non-target markets. Within the target markets, Industrial and connectivity (29% of revenue) was down 19% as several large OEMs worked through excess inventory. The three other target markets (46% of revenue) showed growth: Medical was up 5%, Renewables was up 15% and Transport was up 22%. In non-target markets (25% of revenue), Space and aeronautics grew by 21% whereas Other declined by 12%.

■

Sales outside of Europe: this is gradually increasing towards the 45% target. Again, this will depend on the rate of growth in different countries and the geographic composition of acquisitions. In FY24, the business saw organic growth from North America (+20%) and the UK (+3%) while all other geographies declined (Asia -15%, or -1% if one large customer that is destocking is excluded, Nordics flat, Germany -7% and Rest of Europe -9%).

■

Underlying operating margins: as well as benefiting from higher-margin acquisitions (which contributed roughly a quarter of the 1.6pp margin increase), the company has undertaken a series of measures to improve operating efficiency. This includes consolidating manufacturing facilities, moving production to lower-cost regions (eg from the UK and US to Hungary, from the US to Mexico), increasing capacity in low-cost regions (India, China and Thailand), sharing facilities, product re-engineering and cross-selling.

■

Returns: the company generated a return on capital employed (ROCE) of 15.7% for FY24, ahead of the 15% target. Excluding acquisitions, ROCE was 17.8%, up 1.9pp y-o-y.

■

Cash generation: the company beat its targets for operating cash and free cash flow generation, we estimate partly due to lower working capital requirements as revenue declined. We would expect the ratios to reduce as and when business picks up.

Outlook and changes to forecasts

The company received orders worth £390m in FY24, down 11% on a reported basis and down 8% CER. The order book stood at £175m at year-end, equating to around four-and-a-half months of sales, down from the peak of seven months of sales at the end of H123. Book-to-bill for the year was 0.89x, with a small improvement in H224 at 0.91x versus 0.87x in H124. Once customers in the largest target market have worked through their excess inventory, we would expect order intake to move back into growth. Management indicated that the book-to-bill ratio could move above one in H225.

The company won designs with an estimated lifetime value (ELV) of £337m in FY24, up 23% y-o-y, showing improved confidence from the customer base and providing support for longer-term organic growth. 90% of design wins are from target markets.

Trading so far in Q125 has been in line with management’s expectations, noting that Q125 will have a tough comparison period. Management expects that H125 revenue will exceed H224 revenue and that FY25 will see a normal seasonal weighting (a revenue split of 48/52 for H1/H2). It expects to meet its 13.5% underlying operating margin target in FY25 (H224 margin was 13.4%) and its 15.0% medium-term target.

Our FY25 forecasts are substantially unchanged and we introduce forecasts for modest growth in FY26 with risk to the upside.

Exhibit 5: Changes to forecasts

£m

FY25e old

FY25e new

Change

y-o-y

FY26e new

y-o-y

Revenues

453.1

453.1

(0.0%)

3.7%

466.7

3.0%

EBITDA

76.6

75.1

(2.0%)

5.6%

77.6

3.4%

EBITDA margin

16.9%

16.6%

(0.3%)

0.3%

16.6%

0.1%

Underlying operating profit

60.9

61.0

0.2%

6.6%

63.4

4.0%

Underlying operating margin

13.4%

13.5%

0.0%

0.4%

13.6%

0.1%

Normalised operating profit

63.3

63.4

0.2%

6.5%

65.8

3.9%

Normalised operating margin

14.0%

14.0%

0.0%

0.4%

14.1%

0.1%

Underlying PBT

49.9

49.9

0.0%

3.5%

52.4

5.1%

Normalised PBT

52.3

52.3

0.0%

3.5%

54.8

4.8%

Normalised net income

38.5

38.5

0.0%

1.7%

40.4

4.8%

Normalised diluted EPS (p)

38.9

39.1

0.5%

1.5%

40.8

4.3%

Underlying diluted EPS (p)

37.1

37.3

0.5%

1.4%

39.0

4.5%

Reported basic EPS (p)

23.1

22.9

(0.8%)

41.9%

24.8

7.9%

Dividend per share (p)

12.5

12.5

0.0%

4.2%

13.0

4.0%

Net (debt)/cash

(88.5)

(89.0)

0.6%

(14.4%)

(74.1)

(16.7%)

Net debt/EBITDA (x)

1.3

1.3

1.0

Source: Edison Investment Research

Exhibit 6: Financial summary

£m

2020

2021

2022

2023

2024

2025e

2026e

Year end 31 March

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

297.9

302.8

379.2

448.9

437.0

453.1

466.7

EBITDA

 

 

43.6

44.0

56.1

65.4

71.1

75.1

77.6

Normalised operating Profit (before am, SBP and except.)

31.6

31.9

44.8

54.3

59.5

63.4

65.8

Underlying operating Profit (before am. and except.)

29.8

30.8

41.4

51.8

57.2

61.0

63.4

Amortisation of acquired intangibles

(9.0)

(11.1)

(14.0)

(15.8)

(16.2)

(17.0)

(17.0)

Exceptionals

(4.3)

(2.6)

(6.5)

(1.4)

(9.8)

(3.0)

(3.0)

Share-based payments

(1.8)

(1.1)

(3.4)

(2.5)

(2.3)

(2.4)

(2.4)

Operating Profit

16.5

17.1

20.9

34.6

31.2

41.0

43.4

Net Interest

(4.3)

(3.6)

(3.8)

(5.5)

(9.0)

(11.1)

(11.0)

Profit Before Tax (norm)

 

 

27.3

28.3

41.0

48.8

50.5

52.3

54.8

Profit Before Tax (FRS 3)

 

 

12.2

13.5

17.1

29.1

22.2

29.9

32.4

Tax

(3.3)

(4.0)

(7.4)

(7.8)

(6.7)

(7.9)

(8.5)

Profit After Tax (norm)

21.8

21.6

30.8

36.1

37.9

38.5

40.4

Profit After Tax (FRS 3)

8.9

9.5

9.7

21.3

15.5

22.0

23.9

Discontinued operations

5.4

2.5

15.5

0.0

0.0

0.0

0.0

Net income (norm)

21.8

21.6

30.8

36.1

37.9

38.5

40.4

Net income (FRS 3)

14.3

12.0

25.2

21.3

15.5

22.0

23.9

Ave. Number of Shares Outstanding (m)

84.0

88.8

93.0

95.4

95.8

95.9

96.4

EPS - normalised & diluted (p)

 

 

25.1

23.4

32.1

36.7

38.5

39.1

40.8

EPS - underlying, diluted (p)

 

 

24.4

22.4

29.4

35.2

36.8

37.3

39.0

EPS - IFRS basic (p)

 

 

17.0

13.5

27.1

22.3

16.2

22.9

24.8

EPS - IFRS diluted (p)

 

 

16.5

13.0

26.3

21.7

15.8

22.3

24.1

Dividend per share (p)

2.97

10.15

10.80

11.45

12.00

12.50

13.00

EBITDA Margin (%)

14.6

14.5

14.8

14.6

16.3

16.6

16.6

Normalised operating margin (before am, SBP and except.) (%)

10.6

10.5

11.8

12.1

13.6

14.0

14.1

discoverIE underlying operating margin (%)

10.0

10.2

10.9

11.5

13.1

13.5

13.6

BALANCE SHEET

Fixed Assets

 

 

236.4

244.6

326.5

335.9

381.0

363.1

352.4

Intangible Assets

182.2

190.8

263.3

272.0

329.5

307.7

292.9

Tangible Assets

46.3

45.9

45.4

44.4

41.1

45.0

49.1

Deferred tax assets

7.9

7.9

17.8

19.5

10.4

10.4

10.4

Current Assets

 

 

197.4

183.6

266.2

249.8

287.7

298.0

313.2

Stocks

68.4

67.7

77.8

90.0

80.1

94.8

97.7

Debtors

90.1

84.9

78.0

74.6

88.8

81.4

83.8

Cash

36.8

29.2

108.8

83.9

110.8

120.8

130.7

Current Liabilities

 

 

(103.6)

(107.8)

(190.3)

(151.2)

(185.4)

(184.6)

(187.3)

Creditors

(94.0)

(102.2)

(114.2)

(107.3)

(101.0)

(100.2)

(102.9)

Lease liabilities

(5.3)

(4.8)

(4.7)

(4.0)

(5.7)

(5.7)

(5.7)

Short term borrowings

(4.3)

(0.8)

(71.4)

(39.9)

(78.7)

(78.7)

(78.7)

Long Term Liabilities

 

 

(129.7)

(112.0)

(112.0)

(130.9)

(181.7)

(170.8)

(159.9)

Long term borrowings

(93.8)

(75.6)

(67.6)

(86.7)

(136.1)

(131.1)

(126.1)

Lease liabilities

(14.7)

(16.7)

(16.4)

(14.8)

(14.4)

(14.4)

(14.4)

Other long term liabilities

(21.2)

(19.7)

(28.0)

(29.4)

(31.2)

(25.3)

(19.4)

Net Assets

 

 

200.5

208.4

290.4

303.6

301.6

305.7

318.4

CASH FLOW

Operating Cash Flow

 

 

48.0

56.8

42.5

52.1

66.0

61.9

70.1

Net Interest

(3.7)

(3.1)

(3.3)

(4.8)

(7.7)

(10.6)

(10.5)

Tax

(6.4)

(7.2)

(7.1)

(9.0)

(12.5)

(13.7)

(14.4)

Capex

(6.3)

(3.9)

(6.2)

(5.6)

(4.9)

(9.2)

(9.5)

Acquisitions/disposals

(73.6)

(20.5)

(46.8)

(25.1)

(82.8)

5.0

(2.0)

Financing

53.9

(6.6)

47.2

(7.5)

(9.3)

(6.6)

(6.6)

Dividends

(8.1)

(2.8)

(9.4)

(10.5)

(11.2)

(11.7)

(12.2)

Net Cash Flow

3.8

12.7

16.9

(10.4)

(62.4)

15.0

14.9

Opening net cash/(debt)

 

 

(63.3)

(61.3)

(47.2)

(30.2)

(42.7)

(104.0)

(89.0)

HP finance leases initiated

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Other

(1.8)

1.4

0.1

(2.1)

1.1

(0.0)

0.0

Closing net cash/(debt)

 

 

(61.3)

(47.2)

(30.2)

(42.7)

(104.0)

(89.0)

(74.1)

Source: discoverIE, Edison Investment Research


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London │ New York │ Frankfurt

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London │ New York │ Frankfurt

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London, WC1R 4PS

United Kingdom

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 £60,000 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 2024 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.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

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