Attractive business drivers are sustained

SNP Schneider-Neureither & Partner 23 August 2018 Update
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SNP Schneider-Neureither & Partner

Attractive business drivers are sustained

Interim results

Software & comp services

23 August 2018

Price

€18.10

Market cap

€99m

Net debt (€m) at 30 June 2018

35.8

Shares in issue

5.5m

Free float

53.0

Code

SHF

Primary exchange

Frankfurt (Xetra)

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(21.7)

(48.1)

(47.9)

Rel (local)

(20.6)

(44.9)

(48.6)

52-week high/low

€37.40

€16.4

Business description

SNP Schneider-Neureither & Partner is a software and consulting business focused on supporting customers in implementing change, and rapidly and economically tailoring IT landscapes to new situations. It has developed a proprietary software suite, CrystalBridge and Transformation Backbone with SAP LT (T-B), which automatically analyses and applies and tracks changes in IT systems

Next events

Q3 results

30 October 2018

German Equity Forum

26-28 November 2018

Analysts

Richard Jeans

+44 (0)20 3077 5700

Katherine Thompson

+44 (0)20 3077 5730

While SAP S/4HANA transformation project deferrals impacted on H1 performance, SNP remains confident that there will be a recovery in H2 and beyond. SAP, the Walldorf-based software giant, has been successfully selling its S/4HANA business suite, but we understand these sales are predominantly for small customers and many large enterprises have been deferring data transformations to S/4HANA. However, SNP remains highly confident that the wave of S/4HANA transformations is building up and believes it is the best-placed participant to deliver on this wave of projects with its sophisticated software-based approach using the CrystalBridge platform. We have cut our forecasts towards the top of the reduced guidance range. While the shares look punchy on c 26x our FY19e earnings, the rating could fall quickly as new projects come through.

Year end

Revenue
(€m)

PBT*
(€m)

EPS*
(c)

DPS
(c)

P/E
(x)

Yield
(%)

12/16

80.7

6.4

109.7

39.0

16.5

2.2

12/17

122.3

0.2

(7.4)

0.0

N/A

0.0

12/18e

137.9

(4.1)

(57.3)

0.0

N/A

0.0

12/19e

153.4

5.9

70.4

30.0

25.7

1.7

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

Interim results: H1 organic growth was 2%

H1 revenue grew by 35% to €65.0m, including 2% organic growth, along with €16.0m from acquisitions. The group swung to an EBITDA loss of €1.7m from positive EBITDA of €1.3m in H117 (SNP’s methodology). The numbers were below expectations, as outlined in the SNP preliminary results release in late July. Net debt increased by €3.2m over the three months to close at €35.8m at end-June. All regions, except for the US, grew significantly. Due to the low utilisation rates in the US, 25 jobs were eliminated in the US in Q1. While the book-to-bill ratio slipped to 0.79x in Q2, the group headed into H2 with a healthy backlog of €63.3m. The group’s alliance with IBM Services to target the SAP S/4HANA transformation market has begun well, with €1m of orders and a €45m pipeline already in place.

Forecasts: FY19 and FY20 revenues come back 7%

We have cut our revenue forecasts by 9% in FY18 and 7% in FY19 and FY20. We forecast the group to generate a small profit in H218, but to be loss-making overall in FY18. Our adjusted EPS forecasts come back by 56% in FY19 and by 34% in FY20. We now forecast the group to end FY18 with net debt of €42.8m (previously €35.9m), which eases to €40.9m at end-FY19 and falls to €34.9m at end-FY20.

Valuation: Strong growth play in the ERP space

The stock trades on c 26x in FY19e falling to c 13x in FY20e. Our discounted cash flow valuation (based on c 7% organic revenue CAGR over 10 years, 10% WACC, 14.8% long-term margin and 2% terminal growth) is €32/share, c 77% above the current share price. Increasing the organic revenue CAGR to 10% increases the valuation to c €44/share, while a 15% CAGR takes the valuation to c €73/share, with other variables remaining constant.

SNP Schneider-Neureither & Partner is a research client of Edison Investment Research Limited

Interim results: 2% organic growth in both Q1 and Q2

H1 revenue grew by 35% to €65.0m, including 2% organic growth, along with €16.0m from the acquisitions of Innoplexia, SNP Poland and Adepcon. The group swung to an EBITDA loss of €1.7m from positive EBITDA of €1.3m in H117 (SNP’s methodology). On our methodology calculations, these numbers were a €2.1m loss and a €1.2m profit respectively. The loss was due to a poor performance in the US, and included €1.8m of restructuring expenses, while the DACH region generated moderate profits and other areas delivered normal levels of profitability.

These numbers were below the expectations affirmed at the time of the Q1 results in late April, and in late July SNP issued preliminary results and cut its FY18 revenue guidance to €135-140m from €150-155m, with a slightly negative EBIT margin (previous guidance was mid-single digits). The EBIT margin in H2 is expected to be “positive, single digit” while FY18 EBITDA is expected to be in the lower to mid-single digit millions of euros. SNP is very confident that there will be a rebound in proprietary software sales in H2 and has implemented a price increase. Management remains committed to its “over-riding medium-term target for structural profitability growth”.

The primary reason for the expectations miss was the deferral of many S/4HANA projects, as a result of lengthening planning and proof-of-concept (POC) phases. This resulted in lower capacity utilisation for Professional Services, which was exacerbated by heavy recruitment in late 2017, along with reduced proprietary software licence revenue. H1 utilisation rates were c 73-74% against a normal level of c 80%. Revenues from the M&A-driven side (eg mergers, carve-outs) also disappointed, which we believe reflects the lumpiness of deals as well as the senior-level changes in the sales team. Additionally, the company said that pipeline conversion rates have been lower than normal at c 40%, from 50%, which was due to the current high level of market engagement.

Exhibit 1: Quarterly analysis

€000s

FY16

Q117

Q217

Q317

Q417

FY17

Q118

Q218

Q3-Q418

FY18e

FY19e

Professional services

66,640

19,089

22,151

25,936

31,157

98,333

25,441

26,867

52,543

104,851

117,267

Cloud

 

 

 

 

 

 

424

565

1,011

2,000

2,190

Licences

11,982

1,733

3,042

5,935

8,389

19,099

3,697

3,888

15,219

22,804

24,971

Maintenance

2,063

776

1,237

1,140

1,758

4,911

1,991

2,172

4,076

8,239

9,022

Total revenue

80,685

21,598

26,430

33,011

41,304

122,343

31,553

33,492

72,850

137,895

153,449

Other operating income*

1,228

235

295

171

1,217

1,918

833

1,015

 

 

 

Cost of materials

(8,276)

(2,260)

(3,244)

(7,037)

(6,674)

(19,215)

(5,135)

(5,346)

 

 

 

Personnel costs

(47,207)

(14,657)

(15,511)

(18,849)

(22,455)

(71,472)

(21,363)

(23,010)

 

 

 

Other operating expenses

(17,811)

(6,692)

(6,461)

(7,156)

(9,626)

(29,935)

(7,183)

(7,875)

 

 

 

Impairments on receivables etc

 

 

 

 

 

 

 

(225)

 

 

 

Other taxes

(95)

(28)

(277)

(32)

(196)

(533)

(118)

(137)

 

 

 

Op costs (before depreciation)

(72,161)

(23,402)

(25,198)

(32,903)

(37,572)

(119,075)

(32,966)

(35,578)

(68,658)

(137,202)

(141,960)

Adjusted EBITDA

8,524

(1,804)

1,232

108

3,732

3,268

(1,413)

(2,086)

4,191

692

11,489

Depreciation*

(1,010)

(344)

(390)

(493)

(528)

(1,755)

(808)

(936)

(1,744)

(3,488)

(4,274)

Adjusted operating profit

7,514

(2,148)

842

(385)

3,204

1,513

(2,221)

(3,022)

2,447

(2,796)

7,215

Operating Margin

9.3%

(9.9%)

3.2%

(1.2%)

7.8%

1.2%

(7.0%)

(9.0%)

3.4%

(2.0%)

4.7%

Net interest

(1,137)

(577)

(181)

(218)

(351)

(1,327)

(287)

(351)

(662)

(1,300)

(1,300)

Edison profit before tax (norm)

6,377

(2,725)

661

(603)

2,853

186

(2,508)

(3,373)

1,785

(4,096)

5,915

Amortisation of acq'd intangs*

(657)

(250)

(300)

(350)

(1,121)

(2,021)

(400)

(400)

(800)

(1,600)

(1,600)

Associates

8

0

(1)

12

(35)

(24)

0

0

0

0

0

Earnings before tax

5,728

(2,975)

360

(941)

1,697

(1,859)

(2,908)

(3,773)

985

(5,696)

4,315

New orders and backlog

 

 

 

Incoming orders

95,600

24,400

33,200

37,400

35,700

130,700

40,900

26,300

 

 

 

Quarterly revenues

80,685

21,598

26,430

33,011

41,304

122,343

31,553

33,492

 

 

 

Book-to-bill ratio

1.18

1.13

1.26

1.13

0.86

1.07

1.30

0.79

 

 

 

Backlog

 

40,800

48,500

62,200

61,300

 

70,200

63,300

 

 

 

Source: Company accounts, Edison Investment Research. Note: *Quarterly amortisation of acquired intangibles is estimated data.

The S/4HANA project deferrals related to the complexity of SAP S/4HANA and clients choosing to wait for a greater “maturity level” of S/4HANA before planning a full transition. In light of feedback from its customers, SNP is confident that this is now happening and many customers are close to proceeding. SNP estimates that there are c 50,000 enterprises that need to transition to S/4HANA and believes that a tsunami of transformations is building up.

SAP S/4HANA was launched in 2015, and while SAP has had great success with its new fourth-generation Enterprise Resource Planning (ERP) suite, with more than 8,900 customers, up 41% over the year. Nevertheless, we understand that most of these are small customers that are not in SNP’s targeted market. SNP has not yet booked, nor is it aware of any competing large-scale S/4HANA transformations. However, some of SNP’s largest customers are looking to transition to S/4HANA using SNP’s T-B software and SNP says it is currently engaged in more than 20 SAP S/4HANA POCs that relate to large enterprise customers. Consequently, SNP expects the average deal size to rise significantly over the next 12 months. SNP says the number of POCs has been growing strongly. It estimates that a typical large-scale transformation to SAP S/4HANA would take around five years to implement, and believes it can reduce the project duration to around two to three years through using its highly automated Bluefield template-based approach.

Measures have been taken to improve the efficiency of the business, including cost reductions, working capital improvements and targeting customers at a higher management level. A key goal is to improve the value proposition and, in wake of the landmark $6m Hewlett-Packard carve-out, seek to take a higher share of M&A project costs. At the lower end, SNP is working on a strategy to target SMEs using a partner model. The US business had not been meeting expectations and hence 25 jobs were eliminated in Q1, leaving c 75 jobs in the US. The group had 1,350 employees at end-June, up from 1,341 at year end, but down from 1,363 as at end March. Further headcount reductions are not anticipated, as skilled employees are hard to recruit, and the company highlights that it has a revenue problem rather than a cost problem.

All regions, except for the US, grew significantly. The share of revenues from DACH (Germany Austria and Switzerland) countries slipped from 61% to 50%, with the increase predominantly due to the acquisitions in Poland and South America. The UK grew revenues by 20%, while Asia was flat, and the US fell by 8%. The South American business, which was acquired in mid-2017, is in good health, and this business is now being adapted to sell SNP’s proprietary software and transformation consultancy. China and South-East Asia are growing. However, SNP is cautious about selling its software in Asia due to potential piracy reasons, and it highlights the primary focus regions as Germany, the UK, US and Switzerland.

Software sales grew by 31% organically, while professional services declined by 6% on this basis. Software sales included €4.2m of low-margin software resales (€0.5m in H117). Licence sales grew by 59% to €7.6m, but excluding resales, SNP’s proprietary software licence sales fell by 21% to €3.4m. Also included in the software category was €1.0 of cloud services, which came to SNP with the BCC acquisition, and maintenance revenues, which more than doubled to €4.2m. The S/4HANA project delays were reflected in the 6% organic decline in professional services and the 21% decline in the proprietary software sales. Transformation Backbone revenues rose by 32%, including maintenance revenues, while Data Provisioning & Masking jumped by 54% and Interface Scanner rose by 13%.

Management is bullish on its global alliance with IBM Services, which is targeting the SAP S/4HANA transformation market. The alliance is targeting IBM’s huge customer base and SNP emphasises that due to the huge number of S/4HANA projects, these can only be achieved using an automated approach. SNP has already trained the IBM Services sales team on the SNP Bluefield approach and it says the pipeline is growing by the week. SNP has already received c €1m of orders and a €45m pipeline is in place (of which half is licences and half consultancy). Initially, SNP will be handing the services work, but over time it will train IBM’s staff while booking the software revenue.

Management changes

Henry Göttler, head of Asian operations, left the business in April. David Kenneson resigned from his position as chief revenue officer in July after joining in January. The group is switching back to an MD model and is seeking a CEO in the US and a chief operating officer for the group. Dr Uwe Schwellbach was appointed chief financial officer in July. Dr Schwellbach is responsible for finance and HR.

Cash flow and balance sheet

The group continues to maintain healthy cash balances following its capital-raising last year. SNP recently amended the presentation of its accounts, with financial liabilities now including acquisition liabilities (see our previous update note). The H1 operating cash outflow was €5.3m (implying a €0.6m outflow in Q2) and, after net capex of €2.0m, the free cash outflow was €7.1m. The group paid €7.0m in acquisition payments during the half. Group’s net debt increased by €3.2m over the quarter to €35.8m. There is also a small pension deficit that we have included in our DCF valuation.

Exhibit 2: Financial position

€m

31-Dec-17

31-Mar-18

30-Jun-18

Cash

(33.9)

(24.3)

(18.5)

Current financial liabilities

11.2

7.4

6.3

Non-current financial liabilities

49.5

49.5

48.0

Net debt/(cash)

26.8

32.6

35.8

Pension deficit

1.5

1.6

1.6

Adjusted net debt/(cash)

28.4

34.2

37.4

Source: Company accounts

Forecasts: FY19 and FY20 revenues come back 7%

We have cut our revenue forecasts by 9% in FY18 to €137.9m and 7% in FY19 and FY20 to €153.4m and €166.6m respectively. We forecast the group to generate a small profit in H218, mainly due to a strong rebound in proprietary software sales and benefits from the restructuring programme, but to be loss-making overall in FY18. Given the growing number of S/4HANA POCs, we would expect revenues from these projects to start flowing from FY19. Our adjusted EPS forecasts come back by 56% in FY19 and by 34% in FY20. Our dividend forecasts shift back by one year and we now forecast no dividend in FY18 (previously 30c), 30c in FY19 (40c) and 40c in FY20 (50c). We now forecast the group to end FY18 with net debt of €42.8m (previously €35.9m), which eases to €40.9m (€30.8m) at end-FY19 and falls to €34.9m (€21.5m) at end-FY20.

Exhibit 3: Forecast changes

2018e

2019e

2020e

 

Old

New

Change (%)

Old

New

Change (%)

Old

New

Change (%)

Revenue

 

 

 

 

 

 

Professional services

114,957

104,851

(8.8)

125,556

117,267

(6.6)

136,149

127,158

(6.6)

Cloud

1,800

2,000

11.1

1,971

2,190

11.1

2,149

2,388

11.1

Software licences

27,671

22,804

(17.6)

30,300

24,971

(17.6)

33,035

27,224

(17.6)

Software maintenance

6,821

8,239

20.8

7,469

9,022

20.8

8,143

9,836

20.8

Total software

34,492

31,043

(10.0)

37,769

33,992

(10.0)

41,178

37,060

(10.0)

Group revenue

151,249

137,895

(8.8)

165,297

153,449

(7.2)

179,476

166,606

(7.2)

Growth (%)

23.6

12.7

 

9.3

11.3

 

8.6

8.6

 

Professional services contribution

5,748

0

(100.0)

8,387

4,691

(44.1)

10,157

8,265

(18.6)

Cloud contribution

90

100

11.1

132

146

11.1

160

178

11.1

Software contribution

7,556

3,104

(58.9)

11,536

8,498

(26.3)

13,607

10,192

(25.1)

Non-segment-related expenses

(6,000)

(6,000)

0.0

(6,120)

(6,120)

0.0

(6,242)

(6,242)

0.0

Operating expenses

(143,855)

(140,690)

(2.2)

(151,362)

(146,234)

(3.4)

(161,794)

(154,214)

(4.7)

Capitalisation of dev costs (net)

(32)

(32)

0.0

(32)

(32)

0.0

(32)

(32)

0.0

Adjusted operating profit (EBIT)

7,394

(2,796)

(137.8)

13,935

7,215

(48.2)

17,682

12,393

(29.9)

Operating profit margin (%)

4.9

(2.0)

 

8.4

4.7

 

9.9

7.4

 

Growth (%)

(1,555.1)

(284.8)

 

88.5

(358.1)

 

26.9

71.8

 

Net interest

(1,200)

(1,300)

8.3

(1,000)

(1,300)

30.0

(800)

(1,100)

37.5

Profit before tax norm

6,194

(4,096)

(166.1)

12,935

5,915

(54.3)

16,882

11,293

(33.1)

Amortisation of acquired intangibles

(1,600)

(1,600)

0.0

(1,600)

(1,600)

0.0

(1,600)

(1,600)

0.0

Profit before tax

4,594

(5,696)

(224.0)

11,335

4,315

(61.9)

15,282

9,693

(36.6)

Taxation

(1,858)

1,229

(166.1)

(3,880)

(1,775)

(54.3)

(5,065)

(3,388)

(33.1)

Non-controlling interests

(267)

(267)

0.0

(289)

(289)

0.0

(312)

(312)

0.0

FRS 3 net income

2,469

(4,734)

(291.8)

7,166

2,252

(68.6)

9,906

5,993

(39.5)

Adjusted EPS (c)

74.3

(57.3)

(177.0)

160.1

70.4

(56.1)

210.2

138.7

(34.0)

P/E - Adjusted EPS

 

N/A

 

25.7

 

13.0

Source: Edison Investment Research


Exhibit 4: Financial summary

€'000s

2015

2016

2017

2018e

2019e

2020e

Year end 31 December

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

56,236

80,685

122,343

137,895

153,449

166,606

Cost of sales

0

0

0

0

0

0

Gross Profit

56,236

80,685

122,343

137,895

153,449

166,606

EBITDA

 

 

5,484

8,524

3,268

692

11,489

16,923

Adjusted Operating Profit*

 

 

4,222

7,514

1,513

(2,796)

7,215

12,393

Amortisation of acquired intangibles

0

(657)

(2,021)

(1,600)

(1,600)

(1,600)

Exceptionals

356

0

0

0

0

0

Associates

(3)

8

(24)

0

0

0

Operating Profit

4,575

6,865

(532)

(4,396)

5,615

10,793

Net Interest

(828)

(1,137)

(1,327)

(1,300)

(1,300)

(1,100)

Profit Before Tax (norm)

 

 

3,394

6,377

186

(4,096)

5,915

11,293

Profit Before Tax (FRS 3)

 

 

3,747

5,728

(1,859)

(5,696)

4,315

9,693

Tax

(1,195)

(1,517)

(807)

1,229

(1,775)

(3,388)

Profit After Tax (norm)

2,198

4,860

(620)

(2,867)

4,141

7,905

Profit After Tax (FRS 3)

2,552

4,211

(2,666)

(4,467)

2,541

6,305

Minority interest

0

(147)

234

(267)

(289)

(312)

Adjustments for normalised earnings

0

0

0

0

0

0

Net income (norm)

2,198

4,713

(386)

(3,134)

3,852

7,593

Net income (FRS 3)

2,552

4,064

(2,431)

(4,734)

2,252

5,993

Average Number of Shares Outstanding (m)

3.7

4.3

5.2

5.5

5.5

5.5

EPS - normalised (c)

 

 

58.8

109.7

(7.4)

(57.3)

70.4

138.7

EPS - normalised & fully diluted (c)

 

 

58.8

109.7

(7.4)

(57.3)

70.4

138.7

EPS - FRS 3 (c)

 

 

68.3

94.6

(46.8)

(86.5)

41.1

109.5

Dividend per share (c)

34.00

39.00

0.00

0.00

30.00

40.00

Gross Margin (%)

100.0

100.0

100.0

100.0

100.0

100.0

EBITDA Margin (%)

9.8

10.6

2.7

0.5

7.5

10.2

Adjusted Operating Margin (%)

7.5

9.3

1.2

(2.0)

4.7

7.4

BALANCE SHEET

Fixed Assets

 

 

15,243

30,109

75,171

74,188

72,501

70,504

Intangible Assets

11,675

24,179

67,012

65,380

63,748

62,115

Tangible Assets

1,999

3,161

5,187

5,836

5,782

5,417

Other

1,570

2,769

2,972

2,972

2,972

2,972

Current Assets

 

 

29,996

58,424

78,614

58,271

60,182

65,506

Stocks

0

371

371

418

466

506

Debtors

16,084

25,652

43,781

44,346

49,348

53,579

Cash

13,769

31,914

33,877

12,921

9,783

10,836

Current Liabilities

 

 

(13,703)

(32,631)

(40,531)

(40,517)

(44,862)

(48,353)

Creditors

(11,101)

(14,523)

(29,295)

(29,281)

(33,626)

(37,117)

Short term borrowings

(2,602)

(18,108)

(11,236)

(11,236)

(11,236)

(11,236)

Long Term Liabilities

 

 

(15,513)

(7,327)

(53,157)

(45,583)

(40,583)

(35,583)

Long term borrowings

(12,344)

(5,531)

(49,487)

(44,487)

(39,487)

(34,487)

Other long term liabilities

(3,169)

(1,796)

(3,670)

(1,096)

(1,096)

(1,096)

Net Assets

 

 

16,024

48,575

60,097

46,358

47,238

52,074

CASH FLOW

Operating Cash Flow

 

 

1,879

1,005

(5,316)

35

10,754

16,122

Net Interest

(167)

53

(798)

(1,300)

(1,300)

(1,100)

Tax

(554)

(412)

(1,366)

1,147

(1,656)

(3,162)

Capex

(1,779)

(3,451)

(5,234)

(4,137)

(4,220)

(4,165)

Acquisitions/disposals**

(3,228)

(5,923)

(28,783)

(11,701)

(1,716)

0

Shares issued

0

30,129

18,293

0

0

0

Dividends

(483)

(1,264)

(1,932)

0

0

(1,642)

Net Cash Flow

(4,332)

20,137

(25,136)

(15,956)

1,862

6,053

Opening net debt/(cash)

 

 

(3,431)

1,176

(8,275)

26,847

42,802

40,940

Other

(275)

(10,686)

(9,985)

0

0

()

Closing net debt/(cash)

 

 

1,176

(8,275)

26,847

42,802

40,940

34,888

Source: Source: Company accounts, Edison Investment Research. Note: *Includes exceptional costs in FY17 and FY18. **Includes additional payments for Adepcon in FY18 and FY19, and final payments for RSP, Astrums/Hartung and Harlex in FY18.

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Pty Limited (Edison Aus) [46085869] is the Australian subsidiary. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2018 Edison Investment Research Limited. All rights reserved. This report has been commissioned by SNP Schneider-Neureither & Partner and prepared and issued by Edison for publication globally. 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. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Investment Research Pty Ltd (Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd (AFSL: 427484)) and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US 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. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and 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 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. This document is provided 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.
Edison has a restrictive policy relating to personal dealing. 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. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. 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. 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 (ie 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. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2018. “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.

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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, 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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Pty Limited (Edison Aus) [46085869] is the Australian subsidiary. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2018 Edison Investment Research Limited. All rights reserved. This report has been commissioned by SNP Schneider-Neureither & Partner and prepared and issued by Edison for publication globally. 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. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Investment Research Pty Ltd (Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd (AFSL: 427484)) and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US 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. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and 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 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. This document is provided 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.
Edison has a restrictive policy relating to personal dealing. 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. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. 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. 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 (ie 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. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2018. “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.

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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, 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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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