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A platform business, looking to scale

CentralNic Group 3 July 2020 Update
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CentralNic Group

A platform business, looking to scale

Capital markets day

Software & comp services

3 July 2020

Price

87.25p

Market cap

£165m

£1.25/US$

Net debt (US$m) at 31 December 2019

75.0

Shares in issue

188.8m

Free float

46.1%

Code

CNIC

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

1.8

5.8

39.6

Rel (local)

1.5

(8.1)

66.8

52-week high/low

95.0p

40.0p

Business description

CentralNic Group is a leading global domain name services provider, operating through three divisions: Reseller (number two globally); Corporate; and SME. Services include domain name reselling, hosting, website building, security certification and website monetisation (added at the end of 2019).

Next events

H120 interim results

September 2020

Analysts

Richard Williamson

+44 (0)20 3077 5700

Russell Pointon

+44 (0)20 3077 5757

CentralNic Group is a research client of Edison Investment Research Limited

CentralNic’s capital markets day (CMD) on 24 June 2020 introduced the divisional management team and provided insight on each of the three key segments as they will report in FY20: Indirect (Wholesale, Registry); Monetisation (Team Internet); and Direct (Retail, Corporate). We have picked out what we believe are the four key themes from the CMD: FY20 performance, COVID-19 and seasonality; organic growth; M&A; and, pulling it all together, the benefit of scale. CentralNic continues to trade on an FY20 EV/EBITDA of 9.1x and a P/E of 15.8x, a material discount to its peer group, with our DCF indicating further share price upside. M&A could bring CentralNic’s multiples down further.

Year end

Revenue (US$m)

PBT*
(US$m)

EPS*
(c)

DPS
(c)

P/E
(x)

Yield
(%)

12/18

56.0

7.4

5.83

0.0

18.6

N/A

12/19

109.2

8.9

5.94

0.0

18.3

N/A

12/20e

202.5

18.9

6.87

0.0

15.8

N/A

12/21e

214.4

23.4

9.05

0.0

12.0

N/A

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

Investment case: Market leader in growth markets

CentralNic operates in a growing low-value, high-volume technology-enabled global market (total addressable market c US$30bn) where clients typically pay annual subscriptions upfront (c 100% cash conversion). Customers tend to be very sticky, and the longer they stay, the stickier they become (92% repeat revenues). CentralNic operates a leveraged ‘buy and build’ model, with organic growth supplemented by M&A, offering domain registry and related internet services to SMEs and corporates (it is the number two domain-name reseller globally).

CMD, M&A-driven platform business

In FY19, CentralNic completed four acquisitions, with revenues almost doubling from US$56.0m in FY18 to US$109.2m. Management intends to continue to make acquisitions, focusing on businesses with similar characteristics to CentralNic’s core businesses (recurring revenues, high customer stickiness) in the domain name space or adjacent markets. These will be integrated through a robust, automated M&A process, with a shared service approach as management pushes for higher value-added services to drive organic growth over the next three years. Management has visibility on a pipeline of future M&A deals consisting of hundreds of peers and competitors through sector insight and existing relationships.

Valuation: Organic upside supported by M&A

Despite an impressive historical growth track record (five-year revenue CAGR of 69%), being a resilient business with 90%+ recurring revenues and offering a proven management team with significant M&A experience, CentralNic continues to trade at a material discount to its global peers. As discussed in more detail in our recent initiation note, CentralNic’s shares trade on an FY20e P/E of 15.8x, a material discount to our global peer group, with our DCF highlighting further upside. As CentralNic consolidates a fragmented market of sub-scale, cash-generative business, we expect M&A to bring multiples down further.

Capital Markets Day: 24 June 2020

Summary: M&A, integration, cross-selling and scale

The capital markets event covered the benefits of scale, cross-selling and the integration of new businesses through a robust, automated M&A process. Management focused on the opportunities for the different service lines, highlighting a shared service approach as management pushes for higher value-added services to drive organic growth over the next three years.

Although Ben Crawford (CEO) and Michael Riedl (CFO) anchored the presentation, the stage was largely left to the heads of Wholesale (Robert Birkner), Retail (Marc McCutcheon) and the CEO of Team Internet (Markus Ostertag), showcasing the strength of the second tier of management.

Michael Riedl highlighted the limited impact of COVID-19, discussed current year performance and the impact of acquisitions, foreign exchange and seasonality on the business. Wrapping up, Ben Crawford introduced management’s approach to M&A, highlighting the benefits of increasing scale to the business.

In FY19 and H120, CentralNic has invested in its shared service platforms to ensure that future acquisitions can be integrated quickly and easily, minimising central costs and allowing the group to offer a similar suite of services to clients wherever they are based around the world.

Supported by bolt-on acquisitions, Ben reiterated his view of the growth prospects for the firm, with growth in absolute EBITDA being the driver, even if this includes acquisitions that temporarily dilute EBITDA margins. EBITDA margins are expected to improve as CentralNic scales.

Key themes from the CMD

FY20 segmental breakdown:

Indirect

Monetisation

Direct

Organic growth

FY20, COVID-19 and seasonality

M&A

The benefits of scale

Exhibit 1: FY20 segmental breakdown

Source: CentralNic CMD 24 June 2020

We recently published our initiation on CentralNic, Core internet infrastructure consolidator, where we outlined the buy and build opportunity for CentralNic in the domain name space. In FY19, CentralNic’s segmental reporting was broken down between Reseller, Small Business and Corporate. However, the acquisition of Team Internet, completed in December 2019, adds a further domain monetisation business line to the group. As such, the group has reorganised around three segments: Indirect (incorporating Wholesale and Registry), replacing the Reseller division; Monetisation (Team Internet); and Direct (Retail (previously Small Business) and Corporate).

Indirect division (Robert Birkner, head of Wholesale)

Wholesale: FY19 revenues US$61m, gross profit US$20m, 32% gross margin

The Indirect segment comprises CentralNic’s Wholesale and Registry businesses. As one of the world’s leading domain name reseller platforms, CentralNic supplies domain names to more than 29,000 reseller clients, with 10m domains under management (DUM). Significant client wins included Automattic, MarkMonitor and ZDNS, with annual renewal rates typically varying between 70% and 90%. CentralNic’s Indirect segment is second ranked globally (after Tucows).

The Wholesale segment operates platforms for resellers including registrars, domain investors, ISPs, hosting companies and corporates (Exhibit 2). It operates under the brands RRP Proxy, Hexonet, PartnerGate, TPP Wholesale, Toweb and GlobeHosting, and is the second largest global business by volume. To complement its domain name business, the group is starting to sell additional services such as DNS services, website builder, SSL certification and web apps, and plans to increasingly offer higher value-added services including Microsoft Office 365, G Suite, AWS hosting and website design and marketing to support future growth (Exhibit 3).

CentralNic’s Registry Solutions business operates a platform for registries of country-code top-level domains (ccTLDs) and new top-level domains (nTLDs). With over 115 top level domains (TLDs) using its registry platform, CentralNic’s Registry Solutions business is the leading registry provider for nTLDs, finishing 2019 with over 40% market share of nTLDs by volume.

Exhibit 2: Wholesale customers

Exhibit 3: Targeting additional services

Source: CentralNic CMD 24 June 2020

Source: CentralNic CMD 24 June 2020

Exhibit 2: Wholesale customers

Source: CentralNic CMD 24 June 2020

Exhibit 3: Targeting additional services

Source: CentralNic CMD 24 June 2020

Over the next three years, Wholesale intends to become the leading global domain wholesale platform with revenues of US$200m+. Currently c 80% of revenues come from c 20% of customers, but over the next three years, the goal is to diversify Wholesale’s customer base so that c 60% of revenues come from c 40% of customers, increasing the breadth and resilience of its customer base. Wholesale’s strategy involves offering an integrated, customer-focused, data-driven proposition, including developing a single master wholesale brand to provide better purchasing power and also differentiating CentralNic’s services by developing class-leading customer services.

Direct division (Marc McCutcheon, head of retail)

Retail: FY19 revenues US$38m, gross profit US$16m, 43% gross margin

CentralNic’s Retail segment is a rapidly growing challenger business, emerging from a field of largely domestic and regional competitors to become an increasingly influential global player. CentralNic provides domain names and value-added services (by way of a subscription model) to more than 340,000 small businesses around the world, leading to substantial recurring revenues.

The business operates through four platforms, for historical reasons: internet.bs, instra (onlydomains), domain discount 24 (Moniker) and iwantmyname. Retail signs up c 4,700 new customers per month, mainly through online advertising targeting local ccTLD domain searches. This leads to c 3,200 customer acquisitions each month at a customer acquisition cost (CAC) of around US$30 through Google ads. Upselling drives US$95 additional average revenue per user (ARPU) at 47% margin. The average customer lifetime is about three years, with a 72% renewal rate.

The Retail strategy is to move up the competitive pyramid (Exhibit 4), offering a wider range of services beyond its traditional domain name expertise. The intention is to focus on additional services rather than domains, driven by sales and marketing initiatives, to support a number of CentralNic’s brands to take a step up towards the top of the competitive pyramid. CentralNic’s shared services model and increasing scale should allow Retail increasingly to cut central costs, consolidating platforms as well as reducing duplicated regulation and compliance overheads, redeploying resources to focus on the growth of additional services.

This progression offers the potential for improved margins, but also provides a route to improved organic growth, expanding the total addressable market (TAM) from US$5bn (registry services) to US$30bn (including domain-related internet services). Management disclosed that reaching its internal target of 13.7% of sales from additional products would lead to 8% overall growth.

Exhibit 4: Retail division strategy

Source: CentralNic CMD 24 June 2020. Note: 1) Companies selling B2C domain names and services.

Monetisation division (Markus Ostertag, Team Internet CEO)

Monetisation: FY19 revenues US$74m, gross profit US$21m, 29% gross margin

In December 2019, CentralNic acquired Team Internet, a leading provider of monetisation services for domain investors, for a total consideration of US$48m in cash, c 4x FY19 EBITDA. Team Internet is the largest domain monetisation platform globally, by revenues.

Team Internet represents a significant change in business mix, bringing an ad-funded revenue stream to the group. Team Internet’s main business, ParkingCrew.com, is a highly automated (c US$1.6m revenues per employee) domain name monetisation service, with the majority of revenues derived from mobile. The remainder of the business is based around TONIC., an automated real-time bidding (RTB) ad-exchange platform, matching advertisers through a demand-side platform (DSP) (2bn+ bid opportunities per month) with publishers through a sell-side platform (SSP), generating 5m+ clicks per month. TONIC. evolved from Team Internet’s original domain monetisation technology.

Team Internet is important to the group’s strategy, as it opens CentralNic up to a new constituency, namely, domain name investors. Team Internet sells advertising on inactive domain names owned by investors that attract referral traffic from search engines, working with c 35,000 partners (investors, publishers and advertisers) to monetise 22m domains worldwide. After a business closes and its domains are acquired by investors, former customers continue to visit those domains; this represents a valuable target audience for competitors, reached through advertising provided by Team Internet.

Team Internet opens up cross-selling opportunities for the group, as well as offering potential synergies.

Exhibit 5: Monetisation division operates through two principal business lines

Source: CentralNic CMD 24 June 2020

Key themes from the CMD

Theme 1: Organic growth

Management has indicated that CentralNic has seen organic growth over the past couple of years of c 6% pa on average, with lower growth in more mature Western markets and higher growth in the Far East and emerging markets.

At the CMD, Michael Riedl went into more detail on organic growth, suggesting that the underlying organic growth rate between 2018 and 2019 (on a constant currency, life-for-like basis) was c 2%. However, he then went on to estimate that organic growth was 9% in Q119–Q120 based on the pro forma Q119 revenue estimate of US$51.8m. As this growth includes adverse foreign exchange movements (particularly weak euro and Australian dollar versus the US dollar) as well as other one-off items (eg the change to CNIC’s terms and conditions), on a constant currency, like-for-like basis, management estimates that growth was actually c 15% on an adjusted basis.

The group’s auditors are expected to report on the organic growth figure later in the year.

Exhibit 6: CentralNic’s growth estimates

Source: CentralNic CMD 24 June 2020. Note: 1) Includes adjustments for one-off revenue items and constant currency; not unaudited; 2) latest consensus revenue figure.

Theme 2: FY20 performance, COVID-19 and seasonality

Q120 revenues of US$56.4m (US$226m annualised revenue run-rate) highlight the impact of Team Internet on the group. These results demonstrate CentralNic’s defensive growth credentials, reporting adjusted EBITDA of US$8.1m (14.4% EBITDA margin) despite the onset of COVID-19. As highlighted in the FY19 revenue bridge (Exhibit 7), pro forma revenues for FY19 were US$200.6m (adjusted for intra-group revenues). With a consensus FY20e revenue forecast of US$200.4m (Exhibit 6), management is confident of its FY20 target, despite any impact from COVID-19.

Exhibit 7: FY19 pro forma revenue bridge

Source: CentralNic CMD 24 June 2020

In terms of seasonality, management provided a breakdown of pro forma FY19 revenues, suggesting that they would expect the FY20e breakdown to follow a similar pattern. This shows a stronger Q1 and Q4, each representing c 26% of annual revenues, with a weaker Q2 and Q3, each representing c 24% of annual revenues.

For H120, Edison forecasts revenues of US$99.1m, reflecting a slowdown in Q220 (typically the weakest quarter) over Q120 (implied Q2 revenue of c US$43m), as well as the impact of the COVID-19 pandemic, potentially affecting Team Internet’s ad-driven revenues. We then expect growth gradually to pick up again in H220, assuming a continuing global recovery from COVID-19, with H220 revenues of US$103.4m (+4.3% H2/H1) and FY20 revenues of US$202.5m.

Exhibit 8: FY19 pro forma quarterly revenue breakdown

Source: CentralNic CMD 24 June 2020. Note: 2) Before adjustments for one-off revenue items and constant currency.

Theme 3: M&A

Customers are very sticky in the domain business, given high levels of automation and high switching costs, with transfers between providers amounting to a small proportion of all transactions. This customer stickiness, combined with the high value and quality of earnings of existing customer books, makes the domain industry a very attractive and relatively low-risk industry in which to acquire businesses.

CentralNic’s acquisition strategy is focused on consolidating a fragmented market, particularly targeting secondary markets where competition is less intense and acquisition multiples are commensurately lower. Management has used acquisitions to acquire new talent and technology as well as customers and revenues, with acquisitions being integrated into the group, although retaining their brand independence and continuing to focus on their established markets.

Cost synergies are realised by consolidating technology platforms and support functions, but principally through platform convergence. New businesses are integrated into CentralNic’s existing two core platforms, CentralNicRegistry and RRP Proxy, freeing up development resource to focus on new projects and services.

In FY19, CentralNic completed four acquisitions. Management intends to continue to make further acquisitions, focusing on businesses with similar characteristics to CentralNic’s core businesses (recurring revenues, high customer stickiness) in the domain name space or adjacent markets. Given the nature of the industry, CentralNic’s existing business interacts with or overlaps with the majority of potential future M&A targets and management therefore has good visibility on a pipeline of future M&A deals (Exhibit 10).

Exhibit 9: M&A criteria

Exhibit 10: Extensive M&A pipeline

Source: CentralNic CMD 24 June 2020

Source: CentralNic CMD 24 June 2020

Exhibit 9: M&A criteria

Source: CentralNic CMD 24 June 2020

Exhibit 10: Extensive M&A pipeline

Source: CentralNic CMD 24 June 2020

Theme 4: The benefits of scale

To drive organic growth, management intends to increase cross-selling and up-selling across the group, capitalising on its existing domain business by raising the proportion of additional services it sells to customers. Services offered or to be offered include hosting, website building, security certification, domain monetisation, Office 365 sales and support and online brand protection.

To build scale, organic growth will be supplemented by M&A. By consolidating a highly fragmented industry landscape, the group is attempting to build a portfolio of businesses, acquired at reasonable valuation multiples and subsequently deliver value through platform integration, cost efficiencies and cross-selling.

The group has already invested in centralised services and platforms, and now, as CentralNic builds scale, it should be possible to quickly integrate future acquisitions, leveraging these centralised platforms to cut costs, offer a standardised suite of services to its whole client base and free up resources to invest in sales and marketing. As it scales, this platform business should deliver robust growth and enhanced EBITDA margins.

Exhibit 11: CentralNic’s business case

Source: CentralNic CMD 24 June 2020

Exhibit 12: Financial summary

2018

2019

2020e

2021e

2022e

Year end 31 December

IFRS

IFRS

IFRS

IFRS

IFRS

INCOME STATEMENT

US$000

US$000

US$000

US$000

US$000

Revenue

 

 

55,991

109,194

202,480

214,406

227,225

Cost of Sales

(30,080)

(66,419)

(135,662)

(143,652)

(152,241)

Gross Profit

25,911

42,775

66,818

70,754

74,984

EBITDA

 

 

9,146

17,921

30,670

31,952

34,156

Normalised operating profit

 

 

8,820

16,615

31,815

31,476

32,964

Amortisation of acquired intangibles

(5,600)

(8,299)

(9,454)

(9,626)

(9,807)

Exceptionals

(6,362)

(5,957)

-

-

-

Share-based payments

(469)

(2,878)

-

-

-

Reported operating profit

(3,611)

(519)

22,361

21,851

23,157

Net Interest

(1,430)

(7,754)

(7,078)

(7,078)

(7,076)

Joint ventures & associates (post tax)

45

74

-

-

-

Exceptionals

-

-

(5,800)

(1,000)

(700)

Profit Before Tax (norm)

 

 

7,435

8,935

18,936

23,399

25,188

Profit Before Tax (reported)

 

 

(4,996)

(8,199)

9,482

13,773

15,381

Reported tax

(1,428)

39

(5,043)

(5,171)

(5,628)

Profit After Tax (norm)

7,435

10,343

12,752

17,055

18,199

Profit After Tax (reported)

(6,424)

(8,160)

4,439

8,603

9,753

Minority interests

5

64

-

-

-

Discontinued operations

-

-

-

-

-

Net income (normalised)

7,440

10,407

12,752

17,055

18,199

Net income (reported)

(6,419)

(8,096)

4,439

8,603

9,753

Basic average number of shares outstanding (m)

127,515

127,515

175,084

185,516

188,546

EPS – basic normalised (c)

 

 

5.83

5.94

6.87

9.05

9.65

EPS – diluted normalised (c)

 

 

5.56

5.77

6.68

8.79

9.38

EPS – basic reported (c)

 

 

(5.03)

(4.62)

2.39

4.56

5.17

Dividend (c)

0.00

0.00

0.00

0.00

0.00

Revenue growth (%)

75.3

155.9

85.4

5.9

6.0

Gross Margin (%)

46.3

39.2

33.0

33.0

33.0

EBITDA Margin (%)

16.3

16.4

15.1

14.9

15.0

Normalised Operating Margin

15.8

15.2

15.7

14.7

14.5

BALANCE SHEET

Fixed Assets

 

 

132,321

217,544

214,878

206,614

198,250

Intangible Assets

127,267

206,055

198,620

191,138

183,603

Tangible and Right-of-use Assets

931

6,427

10,421

9,639

8,810

Investments & other

4,123

5,062

5,837

5,837

5,837

Current Assets

 

 

51,378

67,433

74,240

90,107

107,523

Stocks

3,906

491

506

1,072

1,136

Debtors

24,382

40,760

42,521

47,296

51,403

Cash & cash equivalents

23,090

26,182

31,213

41,739

54,984

Other

-

-

-

-

-

Current Liabilities

 

 

(62,443)

(78,767)

(78,796)

(78,849)

(78,906)

Creditors

(59,719)

(75,683)

(75,683)

(75,683)

(75,683)

Tax and social security

(452)

-

-

-

-

Short term borrowings

(2,272)

(3,084)

(3,113)

(3,166)

(3,223)

Other

-

-

-

-

-

Long Term Liabilities

 

 

(43,188)

(129,206)

(129,206)

(130,763)

(132,437)

Long term borrowings

(22,933)

(102,799)

(102,799)

(103,025)

(103,267)

Other long term liabilities

(20,255)

(26,407)

(26,407)

(27,739)

(29,170)

Net Assets

 

 

78,068

77,004

81,116

87,108

94,430

Minority interests

(5)

69

-

-

-

Shareholders' equity

 

 

78,063

77,073

81,116

87,108

94,430

CASH FLOW

PBT

(4,996)

(8,199)

9,482

13,773

15,381

Depreciation and amortisation

5,926

9,605

11,205

11,480

11,773

Share-based payments

469

2,878

-

-

-

Working capital

7,783

6,661

(1,776)

(5,341)

(4,172)

Exceptional & other

2,650

7,680

7,078

7,078

7,076

Tax

(3,015)

(2,309)

(5,043)

(5,171)

(5,628)

Net operating cash flow

 

 

8,817

16,316

20,947

21,819

24,430

Capex

(4,920)

(15,495)

(3,037)

(3,216)

(3,408)

Acquisitions/disposals

(27,568)

(63,840)

(5,800)

(1,000)

(700)

Net interest

(682)

(1,970)

(7,078)

(7,078)

(7,076)

Equity financing

30,869

2,133

-

-

-

Dividends

-

-

-

-

-

Other

-

-

-

-

-

Net Cash Flow

6,516

(62,856)

5,031

10,526

13,245

Opening net debt/(cash)

 

 

8,667

2,115

74,998

69,967

59,441

FX

(1,374)

(10,976)

-

-

-

Other non-cash movements

1,410

949

-

-

-

Closing net debt/(cash)

 

 

2,115

74,998

69,967

59,441

46,196

Source: Company accounts, Edison Investment Research

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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

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

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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

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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