Accelerating growth with M&A

TXT e-solutions 15 March 2019 Update
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TXT e-solutions

Accelerating growth with M&A

FY18 results

Software & comp services

15 March 2019

Price

€9.01

Market cap

€105m

Net cash (€m) at end FY18

60.4

Shares in issue

11.6m

Free float

45%

Code

TXT

Primary exchange

Borsa Italiana (STAR)

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(5.6)

12.0

(15.6)

Rel (local)

(10.1)

1.3

(9.0)

52-week high/low

€13.5

€7.7

Business description

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

Next events

Q119 results

10 May 2019

Analyst

Katherine Thompson

+44 (0)20 3077 5730

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

Group organic revenue growth in FY18 was driven by double-digit growth of the aerospace business. TXT started to invest some of its substantial cash pile in H218, acquiring two Italian businesses in the fintech space. This investment should provide growth opportunities for the Banking & Finance business. Increased investment in sales and R&D in FY19 reduces our normalised EPS forecast by 15.5%; we introduce a forecast for 21% EPS growth in FY20. The company continues to assess targets in both business lines and has net cash of €60m available to fund acquisitions.

Year end

Revenue (€m)

PBT*
(€m)

EPS*
(€)

DPS
(€)

P/E
(x)

Yield
(%)

12/17

35.9

3.0

0.19

1.00

48.5

11.1

12/18

40.0

1.5

0.10

0.50

87.6

5.5

12/19e

46.0

3.8

0.23

0.13

38.6

1.4

12/20e

49.5

4.6

0.28

0.15

31.9

1.7

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

FY18 results: Organic revenue growth of 7.5%

TXT reported revenue growth of 11.4% year-on-year in FY18, of which 7.5% was organic. The Aerospace, Aviation and Automotive (AAA) business grew 12% (all organic), while the underlying Banking & Finance business declined 8.6% before the contribution of €1.4m of revenues from the Cheleo acquisition. While gross profit was marginally better than expected, higher commercial and R&D costs resulted in lower than expected EBITDA. Net finance costs were affected by fair value losses on the funds in which the company invested its cash in H218, resulting in normalised EPS 46% below our forecast. The company announced a €0.5 annual dividend, well ahead of our €0.16 forecast.

Outlook: Organic plus acquisitive growth

Management expects to report revenue growth in Q119 (organic plus Cheleo) and EBITDA broadly in line with Q118. We have revised our forecasts to reflect slightly higher revenues that are outweighed by higher sales and R&D costs, resulting in a 15.5% decline in our normalised EPS forecast. TXT continues to assess potential targets in both business lines. In AAA, we believe that the focus is on adding niche software and internationalising the business. In Banking & Finance, we believe the business is seeking to add technology to widen its product offering with a focus on European customers.

Valuation: Factors in accretive acquisitions

TXT is trading on EV multiples that are at a small discount to peers – EBITDA margins are broadly in line with peers, although EBIT margins are lower. As the company has not yet deployed most of the cash from the sale of TXT Retail, its P/E multiples are inflated versus peers. We expect this premium to reduce as the company makes earnings-enhancing acquisitions.

Review of FY18 results

Exhibit 1: FY18 results highlights

FY17a

FY18e

FY18a

diff

y-o-y

Revenues (€m)

35.9

39.8

40.0

0.4%

11.4%

Gross margin

43.6%

44.3%

44.2%

(0.1%)

0.6%

Gross profit

15.6

17.6

17.7

0.2%

13.1%

EBITDA (€m)

3.5

4.3

4.1

(4.1%)

15.9%

EBITDA margin

9.9%

10.7%

10.3%

(0.5%)

0.4%

Normalised EBIT* (€m)

3.2

2.8

2.8

(0.8%)

(13.4%)

Normalised EBIT* margin

8.9%

7.0%

6.9%

(0.1%)

(2.0%)

Normalised net income (€m)

2.2

2.2

1.2

(46.1%)

(44.5%)

Normalised EPS (€)

0.19

0.19

0.10

(46.0%)

(44.7%)

Reported basic EPS (€)

5.87

0.15

0.05

(67.8%)

(99.2%)

Net cash (€m)

87.3

69.6

60.4

(13.3%)

(30.9%)

Dividend (€)

1.00

0.16

0.50

212.5%

(50.0%)

Source: TXT e-solutions. Note: *Excludes amortisation of acquired intangibles (€0.6m) and exceptional costs relating to acquisitions (€0.3m).

TXT reported FY18 revenues and gross profit substantially in line with our forecast. Excluding €100k of transaction-related costs in Q4 (which we treat as exceptional), underlying opex was €220k higher than forecast, with each cost line ahead of our forecasts in Q4. The company increased investment in software development within the Aerospace, Aviation and Automotive (AAA) business and added sales headcount to commercialise the recently acquired fintech solutions in the Banking & Finance (B&F) business.

In H218, the company invested the majority of its cash balance (from a combination of the TXT Retail disposal and the €40m long-term debt taken out in Q3) in multi-segment insurance funds, some of which are marked to market. In FY18, market volatility resulted in a €0.97m reduction in value of these investments (most of the decline occurred in Q4), contributing the majority of the €1.28m net finance cost. The company noted that it has regained nearly all of this loss in the year to date.

As noted at the half year, the company saw a €0.2m R&D tax credit – this completely offset the reported full-year tax charge.

The combination of higher opex and the loss on the cash investments resulted in net income and EPS (both reported and normalised) below our forecasts.

The company closed the year with a net cash balance of €60.4m (end FY17 €87.3m). The majority of the reduction over the year was from the combination of the following items:

Special dividend of €1 per share – €11.7m.

Share buybacks – €4.6m.

Recognition of lease debt (IFRS 16) – €2.8m.

Acquisition of Cheleo – €5.1m. Net investing cash flow from this acquisition in FY18 was positive as initial consideration of €1.1m was offset by the €2.5m cash acquired with the business. The company also recognised the €4.9m liability to acquire the remainder of the business – Laserline exercised its put option in January 2019 and TXT bought out the remaining 49% stake. In addition, TXT recognised a €1.4m liability for contingent consideration based on FY19 results.

Acquisition of TXT Risk Solutions – €1.6m.

General working capital requirements - €1.1m.

The company announced a €0.5 dividend per share for the year. This comes after a special dividend of €1.0 per share was paid out for FY17. The dividend is not covered by earnings in FY18, but at a total cost of €5.8m, is easily funded out of the company’s large net cash balance.

Business update

Divisional performance

The table below shows divisional performance in FY18. Clearly the AAA division saw strong growth. The original B&F software testing business saw a decline in activity, mainly due to the merger of Banco Popolare and BPM. Cheleo contributed €1.4m in revenues since it was acquired at the beginning of August, split €0.4m in License & Maintenance revenues and €1.0m in Service revenues.

Exhibit 2: Divisional revenue split

Revenues (€m)

FY17

FY18

y-o-y

Aerospace, Aviation & Automotive (AAA)

27.8

31.1

12.0%

Banking & Finance (B&F)

8.1

8.8

8.7%

- Original business

8.1

7.4

(8.6%)

- Cheleo

0

1.4

N/A

Source: TXT e-solutions

Management changes

Triggered by Laserline acquiring a 25% stake in TXT last year, the management structure of the group has changed. The owner of Laserline, Enrico Magni, was elected to the board last year and towards the end of 2018 took on the role of TXT group CEO. The previous CEO, Marco Guida, is now CEO of the AAA division. We understand that Mr Guida will continue to build the AAA business, including seeking out suitable acquisition targets, while Mr Magni will focus on the B&F business, where he is also seeking to acquire.

Outlook and changes to forecasts

Management expects revenues to accelerate in Q119 from the combination of organic growth and the inclusion of Cheleo. EBITDA is expected to be roughly flat versus Q118 (which was €1.18m).

We have revised our forecasts to reflect slightly stronger revenues and better gross margins in the services element of the Cheleo business. On the cost side, we have factored in higher commercial costs as the business adds sales headcount to grow the new fintech businesses, and higher R&D costs reflecting the development of new software in the AAA business. Overall, the higher cost base outweighs the higher gross profit, resulting in a reduction in normalised EPS of 15.5% in FY19. We have introduced a forecast for FY20 factoring in 7.7% revenue growth, 22.6% growth in normalised EBIT and 20.8% growth in normalised EPS. We have reduced our dividend forecast based on the lower EPS, assuming a payout ratio of 67–75%.

Exhibit 3: Changes to forecasts

FY19e old

FY19e new

change

y-o-y

FY20e new

y-o-y

Revenues (€m)

44.9

46.0

2.3%

15.1%

49.5

7.7%

Gross margin

44.4%

45.2%

0.8%

1.0%

45.2%

(0.0%)

Gross profit

20.0

20.8

4.2%

17.7%

22.4

7.7%

EBITDA (€m)

5.8

5.1

(13.1%)

24.0%

5.9

15.5%

EBITDA margin

13.0%

11.1%

(2.0%)

0.8%

11.8%

0.8%

Normalised EBIT (€m)

4.2

3.5

(17.9%)

26.3%

4.3

22.6%

Normalised EBIT margin

9.4%

7.6%

(1.9%)

0.7%

8.6%

1.0%

Normalised net income (€m)

3.3

2.7

(16.7%)

126.0%

3.3

20.8%

Normalised EPS (€)

0.28

0.23

(15.5%)

127.3%

0.28

20.8%

Reported basic EPS (€)

0.25

0.17

(31.6%)

261.3%

0.22

27.9%

Net cash (€m)

71.3

57.7

(19.1%)

(4.4%)

60.2

4.3%

Dividend (€)

0.17

0.13

(23.5%)

(74.0%)

0.15

15.4%

Source: Edison Investment Research

Valuation

TXT is trading on EV multiples that are at a small discount to peers – EBITDA margins are broadly in line with peers, although EBIT margins are lower. As the company has not yet deployed the cash from the sale of TXT Retail, its P/E multiples are inflated versus peers. We expect this premium to reduce as the company makes earnings-enhancing acquisitions.

Exhibit 4: Peer group financial performance and valuation metrics

Company

Share price

Market cap

Rev growth

EBIT margin

EBITDA margin

EV/Sales (x)

EV/EBITDA
(x)

P/E* (x)

Div yield (%)

m

CY

NY

CY

NY

CY

NY

CY

NY

CY

NY

CY

NY

CY

NY

TXT

€9.01

€ 105

15.1%

7.7%

7.6%

8.6%

11.1%

11.8%

1.0

0.9

8.8

7.6

38.6

31.9

1.4

1.7

European Engineering and IT services companies

AKKA Technologies

€60.90

€ 1,232

20.5%

5.3%

7.3%

8.1%

9.5%

10.2%

0.8

0.8

8.8

7.8

14.6

12.4

1.7

2.0

Alten

€94.95

€ 3,201

11.4%

6.2%

9.9%

9.9%

10.6%

10.7%

1.3

1.2

12.2

11.4

17.2

15.9

1.2

1.2

Altran

€10.03

€ 2,569

9.9%

5.5%

11.4%

12.1%

14.6%

15.1%

1.2

1.1

8.2

7.5

12.2

10.4

2.3

2.7

AtoS

€83.90

€ 8,937

9.0%

3.2%

10.4%

10.6%

14.1%

14.5%

1.0

1.0

7.3

6.9

9.1

8.4

2.2

2.4

Cap Gemini

€106.9

€ 17,822

7.1%

5.4%

12.3%

12.6%

14.4%

14.6%

1.4

1.3

9.8

9.2

16.5

15.0

1.8

1.9

Devoteam

€105.8

€ 879

17.6%

12.1%

11.1%

11.1%

12.1%

12.2%

1.1

1.0

9.2

8.2

18.9

16.8

1.6

1.8

ESI Group

€23.40

€ 139

6.3%

4.3%

8.2%

9.3%

9.9%

10.9%

1.1

1.1

11.6

10.0

19.9

16.0

0.0

0.0

Exprivia

€1.24

€ 64

2.8%

3.4%

4.5%

5.0%

7.7%

8.0%

0.5

0.5

6.3

5.8

10.3

6.9

0.0

0.0

Reply

€56.60

€ 2,110

12.5%

8.8%

12.6%

12.9%

14.0%

14.2%

1.8

1.6

12.8

11.6

20.5

18.5

0.8

0.8

SciSys

£158.5

£47

5.4%

4.0%

9.2%

9.3%

11.1%

11.3%

0.8

0.8

7.6

7.2

11.9

11.8

1.6

1.8

Sopra Steria

€104.0

€ 2,128

5.3%

3.9%

7.5%

8.2%

9.3%

9.8%

0.6

0.6

6.6

6.0

10.2

8.7

2.3

2.7

Average

9.8%

5.6%

9.5%

9.9%

11.6%

12.0%

1.1

1.0

9.1

8.3

14.7

12.8

1.4

1.6

(Discount)/premium to peers

(9%)

(11%)

(4%)

(9%)

163%

149%

3%

5%

Source: Edison Investment Research, Refinitiv (as at 14 March). Note: *Uses normalised EPS.


Exhibit 5: Financial summary

€'000s

2014

2015

2016

2017

2018

2019e

2020e

Year end 31 December

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

54,410

61,540

33,060

35,852

39,957

45,971

49,521

Cost of sales

(26,455)

(29,189)

(18,954)

(20,224)

(22,289)

(25,181)

(27,131)

Gross profit

27,955

32,351

14,106

15,628

17,668

20,790

22,390

EBITDA

 

 

5,324

6,659

4,260

3,536

4,098

5,080

5,867

Operating Profit (before amort and except)

 

 

4,284

5,820

3,954

3,180

2,755

3,480

4,267

Amortisation of acquired intangibles

(285)

(285)

(264)

(439)

(610)

(960)

(960)

Exceptionals and other income

1,468

0

(557)

0

(300)

0

0

Other income

0

(740)

0

(69)

0

0

0

Operating Profit

5,467

4,795

3,133

2,672

1,845

2,520

3,307

Net Interest

(249)

(151)

48

(208)

(1,284)

300

300

Profit Before Tax (norm)

 

 

4,035

5,669

4,002

2,972

1,471

3,780

4,567

Profit Before Tax (FRS 3)

 

 

5,218

4,644

3,181

2,464

561

2,820

3,607

Tax

(1,046)

(762)

(661)

(710)

4

(790)

(1,010)

Profit After Tax (norm)

3,226

4,739

3,170

2,170

1,204

2,722

3,288

Profit After Tax (FRS 3)

4,172

3,882

2,520

1,754

565

2,031

2,597

Average Number of Shares Outstanding (m)

11.5

11.7

11.7

11.7

11.7

11.6

11.6

EPS - normalised (€)

 

 

0.281

0.406

0.271

0.186

0.103

0.234

0.282

EPS - normalised fully diluted (€)

 

 

0.276

0.403

0.271

0.186

0.103

0.234

0.282

EPS - (IFRS) (€)

 

 

0.364

0.333

0.475

5.874

0.048

0.174

0.223

Dividend per share (c)

0.23

0.25

0.30

1.00

0.50

0.13

0.15

Gross margin (%)

51.4

52.6

42.7

43.6

44.2

45.2

45.2

EBITDA Margin (%)

9.8

10.8

12.9

9.9

10.3

11.1

11.8

Operating Margin (before GW and except) (%)

7.9

9.5

12.0

8.9

6.9

7.6

8.6

BALANCE SHEET

Fixed Assets

 

 

18,019

18,132

25,428

8,860

22,942

21,072

18,952

Intangible Assets

15,078

14,692

21,296

7,332

17,751

16,763

15,775

Tangible Assets

1,249

1,361

1,598

793

3,680

2,798

1,666

Other

1,692

2,079

2,534

735

1,511

1,511

1,511

Current Assets

 

 

34,892

38,946

37,085

109,426

134,674

121,449

117,259

Stocks

1,820

2,075

3,146

2,528

3,141

3,441

3,741

Debtors

20,768

27,791

26,369

17,215

16,992

19,549

21,059

Cash

12,304

9,080

7,570

89,683

114,541

98,458

92,459

Other

0

0

0

0

0

0

0

Current Liabilities

 

 

(17,451)

(18,349)

(21,051)

(13,612)

(30,086)

(27,062)

(28,170)

Creditors

(15,297)

(17,528)

(20,243)

(12,937)

(12,782)

(14,658)

(15,766)

Short term borrowings

(2,154)

(821)

(808)

(675)

(17,304)

(12,404)

(12,404)

Long Term Liabilities

 

 

(6,491)

(5,105)

(7,180)

(4,781)

(41,184)

(32,684)

(24,184)

Long term borrowings

(1,685)

0

(1,391)

(1,688)

(36,882)

(28,382)

(19,882)

Other long term liabilities

(4,806)

(5,105)

(5,789)

(3,093)

(4,302)

(4,302)

(4,302)

Net Assets

 

 

28,969

33,624

34,282

99,893

86,346

82,774

83,858

CASH FLOW

Operating Cash Flow

 

 

5,404

2,412

10,676

119

2,039

4,099

5,165

Net Interest

(249)

(151)

105

(208)

(69)

300

300

Tax

(1,344)

(1,461)

(2,022)

379

(624)

(790)

(1,010)

Capex

(615)

(763)

(738)

(661)

(526)

(440)

(440)

Acquisitions/disposals

0

0

(5,403)

82,250

1,314

(4,900)

0

Financing

(597)

2,215

(828)

(6)

(7,227)

0

0

Dividends

(2,615)

(2,678)

(2,931)

(3,496)

(11,710)

(5,855)

(1,514)

Net Cash Flow

(16)

(426)

(1,141)

78,377

(16,803)

(7,586)

2,501

Opening net debt/(cash)

 

 

(8,575)

(8,465)

(8,259)

(5,371)

(87,320)

(60,358)

(57,672)

HP finance leases initiated

0

0

0

0

(2,788)

0

0

Other

(94)

220

(1,747)

3,572

(7,371)

4,900

0

Closing net debt/(cash)

 

 

(8,465)

(8,259)

(5,371)

(87,320)

(60,358)

(57,672)

(60,173)

Source: Edison Investment Research, TXT e-solutions

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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

Neither this document and associated email (together, the "Communication") constitutes or form part of any offer for sale or subscription of, or solicitation of any offer to buy or subscribe for, any securities, nor shall it or any part of it form the basis of, or be relied on in connection with, any contract or commitment whatsoever. Any decision to purchase shares in the Company in the proposed placing should be made solely on the basis of the information to be contained in the admission document to be published in connection therewith.

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 (nor will such persons be able to purchase shares in the placing).

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

The Investment Research is a publication distributed in the United States by Edison Investment Research, Inc. Edison Investment Research, Inc. is registered as an investment adviser with the Securities and Exchange Commission. Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a) (11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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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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 2019 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2019. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd who holds an Australian Financial Services Licence (Number: 427484). 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

Neither this document and associated email (together, the "Communication") constitutes or form part of any offer for sale or subscription of, or solicitation of any offer to buy or subscribe for, any securities, nor shall it or any part of it form the basis of, or be relied on in connection with, any contract or commitment whatsoever. Any decision to purchase shares in the Company in the proposed placing should be made solely on the basis of the information to be contained in the admission document to be published in connection therewith.

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 (nor will such persons be able to purchase shares in the placing).

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

The Investment Research is a publication distributed in the United States by Edison Investment Research, Inc. Edison Investment Research, Inc. is registered as an investment adviser with the Securities and Exchange Commission. Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a) (11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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