ADS-TEC Energy — Progressing to plan

ADS-TEC Energy (NASDAQ: ADSE)

Last close As at 21/12/2024

USD13.94

−0.06 (−0.43%)

Market capitalisation

USD718m

More on this equity

Research: Industrials

ADS-TEC Energy — Progressing to plan

ADS-TEC supplies intelligent energy storage and management systems supporting the energy transition, including electric vehicle (EV) charging. While the EV rate of adoption has slowed, the H124 results (sales +107%) demonstrate the benefits of ADS-TEC’s broader end-market applications and corporate customer base. With a positive EBITDA in the period, the group appears to be approaching operational cash positive, which we see as marking the transition to a sustainable growth company.

David Larkam

Written by

David Larkam

Analyst, Industrials

Industrials

ADS-TEC Energy

Progressing to plan

Interim results

Alternative energy

16 September 2024

Price

$12.9

Market cap

$665m

Net cash at 30 June 2024

€9.0m

Shares in issue

50.6m

Free float

55.8%

Code

ADSE

Primary exchange

Nasdaq

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

2.4

17.3

70.5

Rel (local)

(2.2)

13.7

35.9

52-week high/low

US$13.3

US$6.2

Business description

ADS-TEC Energy makes battery storage-based energy platforms. These buffer systems enable consistent, high-power delivery for systems such as EV charging.

Next events

Q3 results

TBC

Analyst

David Larkam

+44 (0)20 3077 5700

ADS-TEC Energy is a research client of Edison Investment Research Limited

ADS-TEC supplies intelligent energy storage and management systems supporting the energy transition, including electric vehicle (EV) charging. While the EV rate of adoption has slowed, the H124 results (sales +107%) demonstrate the benefits of ADS-TEC’s broader end-market applications and corporate customer base. With a positive EBITDA in the period, the group appears to be approaching operational cash positive, which we see as marking the transition to a sustainable growth company.

Year end

Revenue (€m)

PBT*
(€m)

EPS*
(c)

DPS
(c)

P/E
(x)

Yield
(%)

12/22

26.4

(13.6)

(33.1)

0.0

N/A

N/A

12/23

107.4

(26.9)

(56.5)

0.0

N/A

N/A

12/24e

199.6

(0.3)

(2.6)

0.0

N/A

N/A

12/25e

310.9

22.5

28.6

0.0

41.0

N/A

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

Positive first half financials

Revenue in H124 of €79.3m was up 107% y-o-y. Gross profit was €15.7m (gross margin of 19.8%) against a loss in the previous year. Growth in operating expenses was contained to 12%, with the increase due to higher R&D expenses, providing positive leverage, leading to an operating loss of €5.0m compared to a loss of €20.0m for the previous year. Adjusted EBITDA (management core KPI) was a positive €3.6m, up strongly from the €14.3m loss the previous year, also marking the first half year period of positive EBITDA. Cash outflow pre financing for the half year was €5.4m, significantly down from €31.7m, benefiting from an improved profit performance along with a contained working capital increase (€5.5m) and lower fixed asset investment. Liquidity remains healthy with cash and cash equivalents of €23.0m and €14.0m of short-term borrowings. The outlook remains positive, with management guiding to further sales growth in the second half and positive EBITDA for the full year.

Growth demonstrates the strength of the model

Sales growth was achieved despite EV sales in the group’s key German market (c 75% of revenue) declining 16.4% in the first half. This demonstrates the strength of the business, with large and financially strong corporate customers committed to long-term plans. It also demonstrates the versatility of the product, serving a range of electricity storage and buffeting requirements as renewable electricity grows and stresses the transmission grids, providing a broader sector exposure than EV charging. The company reported a 295% increase in its paying customer base and expects to grow from 18 in 2023 to c 53 in 2024/25.

Valuation

The shares are trading around our DCF-based $12.80 valuation from our initiation note. Nevertheless, we see potential catalysts to drive this higher: rolling forward our DCF at the year end, with positive cash generation possible in FY25 or FY26 and the maturing of the group reducing the risk profile and hence the discount factor.

Interim results

Financials

Revenue growth was 107%, with positive drop through increasing the gross profit to €15.7m, a gross margin of 19.8%, up from a gross loss of €0.5m the previous year. SG&A costs were stable, although R&D increased as new products moved into production, limiting the scope for such expenses to be capitalised. The overall operating loss reduced from €20m to €5m. The financing charge increases were due to the required revaluation of warrants at the higher share price at the period end.

Exhibit 1: P&L highlights (€k)

H123

H124

Revenue

38,276

79,263

Cost of sales

(38,807)

(63,590)

Gross profit/(loss)

(531)

15,673

R&D expense

(1,659)

(4,102)

SG&A

(16,284)

(15,883)

Other

(1,518)

(648)

Operating profit

(19,992)

(4,960)

Financing costs

(10,800)

(39,413)

Net financial result

(30,792)

(44,373)

Source: ADS-TEC Energy

A core management KPI is underlying EBITDA, which management has previously guided to be positive for the full year. Adjusting for stock-based compensation and stock write-downs (these refer back to pre-IPO), the company reported its first full half-year period of positive EBITDA.

Exhibit 2: EBITDA reconciliation (€k)

H123

H124

Operating profit

(19,992)

(4,960)

Depreciation

2,417

3,561

EBITDA

(17,575)

(1,399)

Stock-based compensation

529

2,003

Inventory write-downs

2,699

2,969

Adjusted EBITDA

(14,347)

3,573

Source: ADS-TEC Energy

Net cash outflow pre-financing was €5.4m, significantly down from €31.7m the previous year. Working capital was contained given the rise in sales, with a €5.5m outflow. Capex was also significantly lower and is expected to remain so for the year.

Exhibit 3: Cash flow (€k)

H123

H124

EBITDA

(17,575)

(1,399)

Stock based compensation

529

2,003

Working capital

(10,582)

(5,504)

FX gains and other

159

651

Cash from operations

(27,469)

(4,249)

Capex and investment in intangibles

(4,249)

(720)

Interest

6

(420)

Net cash generation before financing

(31,712)

(5,389)

Proceeds/repayment from loans

11,805

(4,618)

Share and other equity issuance

4,810

Lease repayments

(449)

(643)

Net cash flow

(20,356)

(5,840)

Source: ADS-TEC Energy

The group finished the half with €23m of cash and equivalents along with €14m of borrowings. It is worth noting the revaluation of the warrants to €54.7m, up from €21.6m at 31 December 2023, reflecting a remeasurement due to the increase in the share price over the period. This non-cash accounting has increased the liabilities, leading to negative equity in the balance sheet.

Exhibit 4: Balance sheet (€k)

Assets

Liabilities

Equity

Intangible assets

23,062

Warrant liabilities

54,658

Property plant & equipment

6,194

Other provisions

6,125

Right to use assets

4,697

Lease liabilities

3,631

Other

185

Other provisions

2,155

Non-current assets

34,138

Non-current liabilities

66,569

Inventories

38,685

Contract liabilities

6,921

Trade & other receivables

32,448

Trade and other payables

35,466

Cash

23,691

Loans and borrowings

14,065

Other

227

Lease liabilities and other provisions

8,040

Current assets

95,051

Current liabilities

64,492

Total assets

129,189

Total liabilities

131,061

(1,872)

Source: ADS-TEC Energy

Operations

The growth in revenues demonstrates a positive period in terms of deliveries. Given the travails in the German EV market, with sales down 16.4% in the first half as government incentives reduced, this performance highlights two key aspects of the group’s model:

ADS-TEC operates in the higher-voltage (150–350kW) charging market. Hence its customer base is corporate and not domestic. Corporates are looking to build an infrastructure network either for their own vehicle fleet or for third-party charging. Their plans are longer term and not materially affected by short-term changes to the EV market.

ADS-TEC products meet a range of electricity storage and buffeting requirements, as renewable electricity grows and stresses the transmission grid. Hence it has broader application and financial models than a pure EV charger.

These factors are highlighted by the customer breakdown by category in Exhibit 5.

Exhibit 5: End customer profile

Source: ADS-TEC Energy

Key for the group’s long-term growth trajectory is the adoption of new clients. The acquisition time for corporate clients is longer, given their requirements for due diligence and testing, but they offer greater long-term opportunities, including servicing, upgrades etc. Management aims to grow from 18 corporate clients in 2023 to c 53 in 2024/5 (from a single client in 2020). Progress in the first half included a partnership with Caverion to supply its ChargePost and ChargeBox solutions across Norway, Denmark and Sweden. ADS-TEC is also extending its partnership with Porsche, becoming the preferred service partner for all Porsche dealer locations across Europe and North America.

Outlook

Management remains positive, with further growth in sales expected in the second half and positive EBITDA for the full year. We note that the European economy, and in particular Germany, has been soft, which could have an impact on the timing of orders and deliveries, albeit there did not appear to be any significant evidence of this in the first half.

Exhibit 6: Financial summary

Year end 31 December

€m

2022

2023

2024e

2025e

2026e

INCOME STATEMENT

Revenue

 

26.4

107.4

199.6

310.9

443.7

Cost of Sales

(30.9)

(97.3)

(152.9)

(227.4)

(317.1)

Gross Profit

(4.5)

10.0

46.6

83.4

126.6

EBITDA

 

(29.3)

(16.6)

10.0

36.4

66.3

Operating profit (before amort. and excepts.)

(33.7)

(26.1)

0.9

25.0

55.7

Amortisation of acquired intangibles

0.0

0.0

0.0

0.0

0.0

Share-based payments

(2.8)

(1.0)

(1.0)

0.0

0.0

Reported operating profit

(36.4)

(27.1)

(0.1)

25.0

55.7

Net Interest

20.1

(0.8)

(1.1)

(2.4)

(2.4)

Exceptionals

0.0

0.0

0.0

0.0

0.0

Profit Before Tax (norm)

 

(13.6)

(26.9)

(0.3)

22.5

53.2

Profit Before Tax (reported)

 

(16.3)

(27.9)

(1.3)

22.5

53.2

Reported tax

(2.6)

0.0

0.1

(5.6)

(13.3)

Profit After Tax (norm)

(16.1)

(27.7)

(1.3)

14.5

37.5

Profit After Tax (reported)

(18.9)

(27.9)

(1.2)

16.9

39.9

Minority interests

0.0

0.0

0.0

0.0

0.0

Net income (normalised)

(16.1)

(27.7)

(1.3)

14.5

37.5

Net income (reported)

(18.9)

(27.9)

(1.2)

16.9

39.9

Average Number of Shares Outstanding (m)

48.8

49.0

50.6

50.6

50.6

EPS - normalised (c)

 

(33.1)

(56.5)

(2.6)

28.6

74.1

EPS - normalised fully diluted (c)

 

(32.9)

(42.2)

(2.0)

21.0

54.3

EPS - basic reported (c)

 

(38.7)

(56.9)

(2.4)

33.4

78.9

Dividend (c)

0.00

0.00

0.00

0.00

0.00

BALANCE SHEET

Fixed Assets

 

34.2

43.7

53.0

52.1

47.8

Intangible Assets

22.1

28.6

35.1

41.2

46.9

Tangible Assets

5.4

7.3

9.2

6.8

9.0

Investments & other

6.7

7.7

8.8

4.2

(8.1)

Current Assets

 

105.3

94.0

115.9

142.1

187.1

Stocks

53.1

35.3

54.7

72.4

85.1

Debtors

17.7

29.4

49.2

59.6

79.0

Cash & cash equivalents

34.4

29.3

12.0

10.1

23.0

Other

0.0

0.0

0.0

0.0

0.0

Current Liabilities

 

(42.4)

(46.2)

(67.7)

(87.3)

(99.3)

Creditors

(39.3)

(43.1)

(64.6)

(84.2)

(96.2)

Short term borrowings including lease liabilities

(0.8)

(0.8)

(0.8)

(0.8)

(0.8)

Other

(2.2)

(2.2)

(2.2)

(2.2)

(2.2)

Long Term Liabilities

 

(16.3)

(28.1)

(38.1)

(28.1)

(20.1)

Long term borrowings

(2.6)

(14.4)

(24.4)

(14.4)

(6.4)

Other long term liabilities

(13.7)

(13.7)

(13.7)

(13.7)

(13.7)

Net Assets

 

80.7

63.4

63.2

78.8

115.4

Minority interests

0.0

0.0

0.0

0.0

0.0

Shareholders' equity

 

80.7

63.4

63.2

78.8

115.4

CASH FLOW

Op Cash Flow before WC and tax

(22.0)

(19.2)

10.0

37.4

67.3

Working capital

(25.9)

9.9

(17.7)

(8.6)

(20.0)

Exceptional & other

(9.9)

(0.5)

(1.0)

(1.0)

0.0

Tax

0.0

0.0

0.0

(2.3)

(5.3)

Operating Cash Flow

 

(57.8)

(9.8)

(8.6)

25.6

41.9

Capex (including capitalised R&D)

(11.1)

(15.4)

(17.5)

(15.1)

(18.6)

Acquisitions/disposals

0.0

0.0

0.0

0.0

0.0

Net interest

(0.2)

(0.8)

(1.1)

(2.4)

(2.4)

Equity financing

0.0

9.0

0.0

0.0

0.0

Other

0.0

0.0

0.0

0.0

0.0

Net Cash Flow

(69.1)

(16.9)

(27.3)

8.0

20.9

Opening net debt/(cash)

 

(92.2)

(31.0)

(14.0)

13.2

5.2

FX

10.0

0.0

0.0

0.0

0.0

Other non-cash movements

(2.1)

0.0

0.0

0.0

0.0

Closing net debt/(cash) including lease liabilities

(31.0)

(14.0)

13.2

5.2

(15.7)

Property lease liabilities

3.5

3.5

3.5

3.5

3.5

Closing net debt/(cash)

 

(34.5)

(17.5)

9.8

1.7

(19.2)

Source: Company accounts, Edison Investment Research


General disclaimer and copyright

This report has been commissioned by ADS-TEC Energy and prepared and issued by Edison, in consideration of a fee payable by ADS-TEC Energy. 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

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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.

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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

General disclaimer and copyright

This report has been commissioned by ADS-TEC Energy and prepared and issued by Edison, in consideration of a fee payable by ADS-TEC Energy. 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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Research: Real Estate

Attacq — FY24 distributable income outperforms

Attacq is a diversified real estate investment trust (REIT), which generates revenue from a ZAR22.9bn investment property portfolio made up of shopping centres, collaboration hubs (offices), logistics, hotels and data centres in South Africa. It also taps into its huge land bank and 1.4 million sqm of bulk with development rights in various sectors to build residential properties for sale. Attacq’s gross revenue for FY24 increased 6.9% to ZAR2.6bn, largely bolstered by rental income growth of 8.8% to ZAR2.5bn. Distributable income per share (DIPS) came in at 86.2c, up 19.9% y-o-y, above management’s previous guidance. Attacq has provided DIPS guidance of 103.4c for FY25, which implies an 82.7c dividend per share, given the 80% payout ratio. The stock is trading at a price to NAV multiple of 0.7x, with a dividend yield of 5.3% and a shareholder yield of 31.8% (sum of dividend yield, share buyback yield and net debt repayment yield). The share buyback and net debt repayment yields are 0.6% and 25.9%, respectively, although the shareholder yield has benefited from asset sales.

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