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TXT e-solutions — Profitable growth

TXT e-solutions (Euronext STAR Milan: TXT)

Last close As at 21/12/2024

9.88

▲ −0.06 (−0.60%)

Market capitalisation

129m

More on this equity

Research: TMT

TXT e-solutions — Profitable growth

TXT e-solutions’ focus on long-term customer collaboration combined with recent fintech acquisitions has helped the company report revenue and profit growth over the first nine months of FY20 (9M20) despite pressure from COVID-19 restrictions. The company is focused on extending its product offering and broadening its market exposure, with the recent acquisition of HSPI adding consulting services and public sector customers to the Fintech division. We have revised our forecasts to reflect the acquisition and Q3 results, with normalised EPS upgrades of 3.9% in FY20e and 19.3% in FY21e.

Katherine Thompson

Written by

Katherine Thompson

Director

TMT

TXT e-solutions

Profitable growth

Q320 results

Software & comp services

10 November 2020

Price

€7.6

Market cap

€92m

Net cash (€m) at end Q320

31.9

Shares in issue

12.0m

Free float

43%

Code

TXT

Primary exchange

Borsa Italiana (STAR)

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(2.6)

(1.9)

(16.0)

Rel (local)

(3.3)

(2.4)

(0.4)

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 events

FY20 results

March 2021

Analyst

Katherine Thompson

+44 (0)20 3077 5730

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

TXT e-solutions’ focus on long-term customer collaboration combined with recent fintech acquisitions has helped the company report revenue and profit growth over the first nine months of FY20 (9M20) despite pressure from COVID-19 restrictions. The company is focused on extending its product offering and broadening its market exposure, with the recent acquisition of HSPI adding consulting services and public sector customers to the Fintech division. We have revised our forecasts to reflect the acquisition and Q3 results, with normalised EPS upgrades of 3.9% in FY20e and 19.3% in FY21e.

Year end

Revenue (€m)

PBT*
(€m)

EPS*
(€)

DPS
(€)

P/E
(x)

Yield
(%)

12/18

40.0

1.5

0.10

0.50

74.1

6.6

12/19

59.1

7.6

0.46

0.00

16.7

N/A

12/20e

67.2

6.1

0.35

0.10

21.7

1.3

12/21e

84.2

8.2

0.47

0.12

16.3

1.6

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

Profitable growth despite the pandemic

TXT reported revenue growth of 12.4% y-o-y for 9M20 and 2.0% y-o-y for Q320. Excluding the acquisition of MAC Solutions, which contributed €1.2m in Q320, revenues were 9.6% higher for 9M20 and 5% lower for Q320. Over 9M20, EBITDA and normalised EBIT increased 27.5% and 28.5% respectively, with a 14.1% increase in net income after minority interests. Despite the pressure on the aerospace and aviation markets due to COVID-19, the Aerospace & Aviation (A&A) division generated revenue growth of 8.4% for 9M20 and 1.4% for Q320. The Fintech division saw 20.6% growth over 9M20 (12% excluding MAC) whereas Q320 revenue was up 0.8% y-o-y and declined 19% once MAC was excluded, reflecting the delayed start to a major contract and shorter working hours in the software testing business.

HSPI acquisition drives earnings upgrades

We have revised our forecasts to reflect Q320 results and the recent acquisition of HSPI. This results in growth in our normalised EPS forecasts of 3.9% for FY20 and 19.3% for FY21. Net cash at the end of Q320 of €31.9m provides support to the company while COVID-19 uncertainty persists and funding for the company to consider further acquisitions.

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 EBIT margins above the peer group average. P/E multiples have been inflated versus peers due to the high level of net cash on the balance sheet. However, as acquisitions have used some of this cash and improved the profitability of the group, TXT is now trading at a small premium to peers for FY20e and at a 16% discount for FY21e. We expect the company will continue to seek earnings-enhancing acquisitions.

Review of Q320 results

Exhibit 1: 9M and Q3 results

€m

9M20

9M19

y-o-y

Q320

Q319

y-o-y

Revenues

47.8

42.5

12.4%

15.9

15.5

2.0%

Licences & maintenance

6.5

5.0

30.5%

2.1

2.1

3.4%

Services

41.3

37.5

10.0%

13.7

13.5

1.8%

Gross profit

21.5

19.0

13.2%

7.5

7.2

3.0%

Gross margin

44.9%

44.6%

0.3%

47.1%

46.6%

0.4%

EBITDA

6.1

4.8

27.5%

2.1

2.0

3.3%

EBITDA margin

12.8%

11.3%

1.5%

13.1%

12.9%

0.2%

Normalised EBIT

4.7

3.7

28.5%

1.6

1.6

-0.4%

Normalised EBIT margin

9.8%

8.6%

1.2%

10.0%

10.2%

-0.2%

Reported EBIT

3.4

2.2

51.5%

1.3

1.0

29.6%

Reported EBIT margin

7.1%

5.2%

1.8%

8.1%

6.3%

1.7%

Reported net income after minority interest

3.4

3.0

14.1%

0.8

0.9

-15.2%

Net cash

31.9

43.2

-26.1%

31.9

43.2

-26.1%

Source: TXT e-solutions

Group revenue grew 12.4% y-o-y over 9M20 and 2.0% for Q320. Stripping out MAC Solutions, 9M20 grew 9.6% y-o-y and Q320 declined 5% y-o-y. Software revenues increased 30.5% y-o-y for 9M20 and 3.4% for Q320. Services revenues were 10.0% higher y-o-y for 9M20 or 6.9% higher excluding MAC Solutions. For Q320, services revenues were 1.8% higher y-o-y or 7.4% lower excluding MAC Solutions.

Group gross margin was marginally ahead of prior year for 9M20. For Q320, gross margin of 47.1% was 50bp higher year-on-year reflecting a higher proportion of software revenues.

EBITDA increased 27.5% y-o-y for 9M20 and 3.3% y-o-y for Q320. We note that the company capitalised €0.3m of R&D costs in Q320, for the first time in many years. This relates to the iMole project; this is government funded and requires development costs to be capitalised as part of the grant terms. If this had been included in operating costs, EBITDA would have grown 21% for 9M20 (12.1% margin) and declined 10% for Q320 (11.3% margin).

TXT reported net financial income of €1.2m for 9M20 and €0.3m for Q320. In Q220, the company reported a €0.8m exceptional gain on the reduction in the earn-out for PACE. The remaining financial income results from the fair value accounting for the large proportion of the company’s cash balance held in multi-segment insurance funds (€68m at the end of Q3), which are marked to market. The reported tax rate for 9M20 was 20.6% and for Q320 was 43.5%. Overall, this resulted in a 14.1% increase in net income after minority interests for 9M20 and a 15.2% decline for Q320.

Exhibit 2: Net financial position

€m

FY19

H120

Q320

Cash & cash equivalents

11.4

17.0

20.0

Trading securities at fair value

87.3

77.6

67.9

Short-term bank debt

(17.4)

(20.7)

(23.1)

Short-term leases

(1.3)

(1.3)

(1.3)

Short-term earn outs

(6.6)

(1.6)

(1.6)

Long-term bank debt

(23.5)

(23.5)

(21.1)

Long-term lease debt

(4.5)

(4.0)

(3.8)

Long-term earn outs

(4.0)

(5.1)

(5.1)

Net cash

41.4

38.3

31.9

Source: TXT e-solutions

Net cash declined from the €38.3m reported at the end of H120 to €31.9m, mainly due to the payment of €5m for the MAC Solutions acquisition but also due to working capital requirements totalling €5.3m in Q3 as trade debtors increased substantially over the quarter. This was partially offset by the sale of treasury shares worth €2m. The company noted that the high level of trade debtors was due to delayed payment by several of the group’s largest customers and it does not represent a higher level of bad debt risk (some has since been received).

Divisional performance

Exhibit 3: Performance by division

Revenues (€m)

9M20

9M19

y-o-y

Q320

Q319

y-o-y

Aerospace & Aviation (A&A)

30.7

28.3

8.4%

9.8

9.7

1.4%

Software licences & maintenance

5.7

4.2

33.9%

1.9

1.7

9.9%

Services

25.0

24.1

3.9%

7.9

8.0

-0.5%

Fintech

17.1

14.2

20.6%

5.9

5.8

0.8%

Software licences & maintenance

0.9

0.8

11.5%

0.2

0.3

-26.9%

Services

16.3

13.4

21.1%

5.6

5.5

2.4%

Software licences & maintenance

6.5

5.0

30.5%

2.1

2.1

3.4%

Services

41.3

37.5

10.0%

13.7

13.5

1.8%

Source: TXT e-solutions

Aerospace & aviation (A&A) – resilient performance

The A&A division saw 8.4% revenue growth over 9M20 and 1.4% growth in Q320, all organic. Software licences grew 33.9% for 9M20 and 9.9% for Q320, while services revenue was 3.9% higher for 9M20 and down 0.5% for Q320. The higher proportion of software revenues generated a 42bp increase in gross margin for 9M20 to 45.4% and a 330bp increase for Q320 to 49.4%.

The A&A sector is under strong pressure because of COVID-19. Civil aviation has seen fleets grounded and there is likely to be a reduction in aircraft production in the medium to long term. In the short to medium term, the effect on TXT has been mitigated by the signing of subscription licences for software prior to the crisis, the focus on core processes for strategic clients (ie sector leaders even during the crisis) and new contract wins in the defence sector, which has not been particularly affected by the crisis. Management noted that over 9M20, it had generated revenue growth of 22% from the defence sector, 4% from civil aviation OEMs and even 2% growth from civil aviation airlines. As cargo airlines are still seeing strong demand, the company has started to focus on this area and is undertaking a trial with several large US cargo airlines.

As part of a strategy to diversify divisional revenues, around 15% of A&A revenues come from industrial manufacturing, automotive and transportation sectors; over 9M20 the division saw revenues from industrial customers decline 14%, mainly due to the effect of lockdowns that shut down production facilities. However, the company noted that it had signed its first Industry 4.0 contracts in the pharmaceutical and food & beverage sectors and has signed multi-million, multi-year publicly funded AI projects.

Fintech – focus of acquisitions

The Fintech division saw revenue growth of 20.6% for 9M20; this includes MAC Solutions’ contribution of €1.2m since it was acquired on 14 July; excluding MAC Solutions revenues grew 12% y-o-y. We note that Assioma was acquired on 1 May 2019 and was integrated with the existing TXT software testing business during 2019 making it impossible to disclose the Assioma contribution separately, therefore its contribution is included in organic revenues. For Q320, revenue was 0.8% higher year-on-year, although organic revenues declined 19% y-o-y. TXT Working Capital Solutions was acquired in Q220, but as a start-up, it is not yet generating revenue. We understand that the Q3 revenue decline was mainly due to reduced working hours within the software testing business and a delay to the start of a major contract that had previously been announced.

Until the MAC Solutions acquisition, this division had generated revenues solely in Italy. Thanks to MAC Solutions’ Swiss-based business, international revenues made up 7% of 9M20 revenues.

The Fintech gross margin grew 19bp y-o-y to 44.0% in 9M20 and, as a result of the underlying revenue decline, fell 327bp in Q320 to 44.2%.

After the quarter-end, TXT Risk Solutions signed a subscription contract to supply the Faraday platform to an Italian bank.

Acquisition of HSPI boosts fintech services

On 19 October, TXT announced that it had acquired HSPI SpA, an Italian IT services business specialising in digital transformation processes, buying a 92% shareholding but 100% of ordinary shares with voting rights. TXT paid €9.061m in initial cash consideration and will issue shares worth €2.515m. A final adjustment will be made for the net financial position of HSPI on the closing date. HSPI was owned 53.36% by Laserline, the business of Chairman Enrico Magni that also owns 25.6% of TXT, with the remaining 46.64% held by MFRBC and three manager shareholders. These managers will stay with the business and the shares they are to be issued (€2.3m of the total) will be restricted and released over three years.

HSPI has three offices in Italy and with 100 consultants, provides IT consulting services to large public and private Italian companies. Areas of specialism include cybersecurity, AI, data analytics, extended reality (XR), blockchain, IT governance and service management. Customers include Poste Italiana, INAIL, ARIA and ICCREA, and the deal provides the group with access to the public sector.

In 2019 HSPI generated revenue of €12m and an EBITDA margin of 15%. Trading during lockdown has been maintained at pre-COVID-19 levels and management expects to achieve flat revenues with a slightly lower margin in 2020. The price paid equates to a trailing price/sales multiple of 0.96x and a trailing price/EBITDA multiple of 6.4x (this compares to a trailing EV/EBITDA multiple of 8.8x for TXT).

Outlook and changes to forecasts

Management expects to report FY20 EBITDA at least 25% higher than in FY19, ie at least €8.75m. We have updated our forecasts to reflect Q320 results as well as the consolidation of HSPI from 19 October. For HSPI, we factor in revenue of €2.4m in Q420 and €12.0m in FY21 at a 14% EBITDA margin in FY20 and a 15% EBITDA margin 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)

66.8

67.2

0.7%

13.8%

73.0

84.2

15.4%

25.3%

Gross margin

43.2%

43.9%

0.6%

(2.3%)

44.4%

42.2%

(2.2%)

(1.6%)

Gross profit

28.9

29.5

2.1%

8.2%

32.4

35.6

9.8%

20.6%

EBITDA (€m)

7.8

8.1

4.4%

16.3%

8.5

10.5

23.9%

29.4%

EBITDA margin

11.7%

12.1%

0.4%

0.3%

11.7%

12.5%

0.9%

0.4%

Normalised EBIT (€m)

5.9

6.2

5.5%

15.1%

6.6

8.3

27.1%

33.8%

Normalised EBIT margin

8.8%

9.3%

0.4%

0.1%

9.0%

9.9%

0.9%

0.6%

Normalised net income (€m)

3.9

4.1

4.1%

(23.0%)

4.6

5.6

22.3%

36.8%

Normalised EPS (€)

0.34

0.35

3.9%

(23.0%)

0.39

0.47

19.3%

33.2%

Reported basic EPS (€)

0.28

0.30

4.7%

1003.8%

0.31

0.39

25.2%

30.3%

Net cash (€m)

37.6

28.0

(25.7%)

(32.5%)

41.2

30.9

(25.0%)

10.5%

Dividend (€)

0.10

0.10

0.0%

N/A

0.12

0.12

0.0%

20.0%

Source: Edison Investment Research


Exhibit 5: 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

67,225

84,204

Cost of sales

(18,954)

(20,224)

(22,289)

(31,825)

(37,735)

(48,653)

Gross profit

14,106

15,628

17,668

27,266

29,490

35,551

EBITDA

 

 

4,260

3,536

4,098

7,004

8,144

10,538

Operating Profit (before amort and except)

 

 

3,954

3,180

2,755

5,408

6,224

8,325

Amortisation of acquired intangibles

(264)

(439)

(610)

(1,142)

(1,365)

(1,365)

Exceptionals and other income

(557)

0

(300)

(713)

(350)

0

Other income

0

(69)

0

0

0

0

Operating Profit

3,133

2,672

1,845

3,553

4,509

6,960

Net Interest

48

(208)

(1,284)

2,194

(100)

(100)

Profit Before Tax (norm)

 

 

4,002

2,972

1,471

7,602

6,124

8,225

Profit Before Tax (FRS 3)

 

 

3,181

2,464

561

2,315

5,229

6,860

Tax

(661)

(710)

4

(1,867)

(1,464)

(1,921)

Profit After Tax (norm)

3,170

2,170

1,204

5,473

4,409

5,922

Profit After Tax (FRS 3)

2,520

1,754

565

448

3,765

4,939

Ave. Number of Shares Outstanding (m)

11.7

11.7

11.7

11.7

11.7

12.0

EPS - normalised (€)

 

 

0.271

0.186

0.102

0.456

0.351

0.467

EPS - normalised fully diluted (€)

 

 

0.271

0.186

0.102

0.456

0.351

0.467

EPS - (IFRS) (€)

 

 

0.475

5.874

0.048

0.027

0.296

0.385

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

43.9

42.2

EBITDA Margin (%)

12.9

9.9

10.3

11.9

12.1

12.5

Operating Margin (before GW and except) (%)

12.0

8.9

6.9

9.2

9.3

9.9

BALANCE SHEET

Fixed Assets

 

 

25,428

8,860

22,942

34,635

40,851

38,373

Intangible Assets

21,296

7,332

17,751

24,380

31,416

29,818

Tangible Assets

1,598

793

3,680

7,929

7,109

6,229

Other

2,534

735

1,511

2,326

2,326

2,326

Current Assets

 

 

37,085

109,426

134,674

127,052

105,892

107,861

Stocks

3,146

2,528

3,141

4,156

4,456

4,756

Debtors

26,369

17,215

16,992

24,150

28,588

35,808

Cash

7,570

89,683

114,541

98,746

72,848

67,296

Other

0

0

0

0

0

0

Current Liabilities

 

 

(21,051)

(13,612)

(29,366)

(43,129)

(40,145)

(44,400)

Creditors

(20,243)

(12,937)

(12,062)

(17,823)

(19,862)

(24,117)

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

77,485

81,220

CASH FLOW

Operating Cash Flow

 

 

10,676

119

2,039

(354)

5,444

7,273

Net Interest

105

(208)

(69)

3,102

(100)

(100)

Tax

(2,022)

379

(624)

(229)

(1,464)

(1,921)

Capex

(738)

(661)

(548)

(916)

(1,800)

(1,100)

Acquisitions/disposals

(5,403)

82,250

1,314

(2,178)

(13,861)

0

Financing

(828)

(6)

(7,208)

(4,287)

210

0

Dividends

(2,931)

(3,496)

(11,710)

(5,781)

0

(1,204)

Net Cash Flow

(1,141)

78,377

(16,806)

(10,643)

(11,571)

2,948

Opening net debt/(cash)

 

 

(8,259)

(5,371)

(87,320)

(60,355)

(41,412)

(27,961)

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)

(27,961)

(30,909)

Source: TXT e-solutions, Edison Investment Research


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.

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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

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.

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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).

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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