AUME at a high, investing in products, services

Record 28 November 2017 Update
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Record

AUME at a high, investing in products, services

H118 result

Financial services

28 November 2017

Price

48.5p

Market cap

£97m

Net cash and money market instruments at 30 Sept 2017 (£m)

26.3

Shares in issue

199.1m

Free float

32%

Code

REC

Primary exchange

LSE

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

4.2

3.3

53.7

Rel (local)

5.9

3.3

41.0

52-week high/low

52.5p

30.8p

Business description

Record is a specialist independent currency manager that provides a number of products and services, including passive and dynamic hedging, and a range of currency for return strategies, including funds and customised segregated accounts.

Next events

Q3 trading update

January 2018

Analysts

Andrew Mitchell

+44 (0)20 3681 2500

Martyn King

+44 (0)20 3077 5745

Record is a research client of Edison Investment Research Limited

Record is differentiated from conventional asset managers by its focus on currency markets where it benefits from its independent status and over 30 years of experience. Passive hedging services account for more than half of revenues but its offering is increasingly bespoke. This has pushed costs up but should help secure additional and retain existing mandates. The valuation remains below average in comparison with UK asset managers and the distribution policy is attractive for those seeking income.

Year end

Revenue (£m)

PBT*
(£m)

EPS*
(p)

DPS**
(p)

P/E
(x)

Yield
(%)

03/16

21.2

7.0

2.54

1.65

19.1

3.4

03/17

23.0

7.9

2.90

2.00

16.7

4.1

03/18e

24.6

8.1

3.13

2.30

15.5

4.7

03/19e

25.2

8.4

3.34

2.42

14.5

5.0

Note: *PBT and EPS for FY16 exclude non-controlling interests related to seed investments which are also excluded from subsequent years following a change in presentation. EPS are diluted and ** DPS excludes special dividends.

H118 results

Record had already reported the level of AUME at end September in its Q2 update, also signalling that costs were increasing as investment in headcount was made to deliver enhanced service and to cater for regulatory change, notably EMIR. There were therefore few surprises in the first half figures. AUME reached $61.2bn, a new high, with currency moves being the main positive driver in the half year. Flows were negative but, at $1bn, this was equivalent to less than 2% of the total. Fee margins were broadly stable by segment with mix changes resulting in a small reduction in the average versus H117. The operating margin was down two points to 31% reflecting the increase in costs but pre-tax profits were still up 6% and, helped by the £10m tender offer during the period, diluted earnings per share increased by 14% from H117.

Outlook

Currency volatility has remained relatively subdued recently but the uncertainties in the macroeconomic and geopolitical climate continue to generate concerns over possible adverse tail events so conditions remain favourable for Record to market its services to potential clients. Work to broaden the product range, including collateral management and increase customisation should be helpful. Meanwhile the longer-term track record for the currency for return strategies may allow this and the multi-product areas to increase AUME and revenue.

Valuation: Yield and multiples appealing

Record shares are up by c 50% over 12 months but still trade on earnings and EBITDA multiples below the average for UK asset managers. This combined with an attractive yield (over 6% for FY18e, including our estimated special dividend) suggest scope for further re-rating.

Company profile

Founded in 1983 by chairman Neil Record, the company’s main activity is the provision of currency hedging services to clients, including public and private defined benefit pension schemes and other institutional investors. Currency for return, multi-product and related services are the other contributors to revenue.

In H118, passive hedging accounted for 54% of management fees. Passive hedging mandates tend to be sticky and revenues from these clients broadly cover Record’s operating expenditure before variable remuneration and one-off costs related to the tender offer. Record emphasise that passive hedging is far from being a commoditised service with requirements including strong expertise in execution, operational efficiency and ability to customise the offering with related activities such as collateral management. Dynamic hedging also targets systematic reduction of currency risk while seeking to modify the level of hedging to allow clients to gain some benefit from weakness in their own currency. Currency for return strategies aim to exploit stable inefficiencies in currency markets and include a number of strategies such as forward rate bias, emerging market currencies, momentum and value. The multi-product category includes mandates where hedging and return-seeking strategies are combined on a bespoke basis.

We have collated Record’s detailed disclosure analysing AUME and management fee exposure in Exhibit 1.

Exhibit 1: Record profile in numbers (H118)

Analysis by strategy

AUME %

Management fees %

Fees bp

Dynamic hedging

7.4

23%

14

Passive hedging

84.5

54%

3

Currency for return

2.8

7%

17

Multi-product

4.9

16%

18

Cash

0.4

N/A

N/A

Total

100.0

100

5.2

Value

$61.2bn

£12.0m

Client analysis

Number (by financial year)

Type

% AUME

Concentration

% fees

2013

44

Public pension funds

42

Top 10

76

2014

48

Corporate pension funds

41

Next 10

16

2015

55

Foundations & trusts

8

Balance

8

2016

58

Investment/private funds

6

2017

59

Insurance / corporate

3

H118

59

100

100

Geographical analysis

AUME progression ($bn)

By Country

AUME %

2013

34.8

Switzerland

60

2014

51.9

UK

16

2015

55.4

US

11

2016

52.9

Other

13

2017

58.2

100

H118

61.2

Underlying asset class exposure of dynamic and passive hedging AUME (%)

Dynamic

Passive

Est. % of hedging fees

Equity

96

30

50

Fixed income

-

42

29

Other

4

28

21

100

100

100

Source: Record, Edison Investment Research. Note: based on H118 figures.

The first section underlines the predominance of hedging for both AUME and fees despite the relatively low fee rate applied in passive hedging. The client analysis shows that while the number of clients has been stable recently it has increased noticeably since 2013. Reflecting the institutional nature of Record’s market there is quite a high concentration of fees from the top 10 clients (76%). The third section highlights the importance of Switzerland as a market (primarily for hedging services) and the progression of AUME in recent years. Finally, the analysis of exposure of the dynamic and passive hedging mandates to different underlying asset classes shows that, on our estimate, roughly 50% of hedging fees are related to equity assets and 30% to fixed income assets.

Half-year results

Following Record’s Q218 update released in October, which gave details of changes in AUME and commentary highlighting the investment being made in headcount (see note), the first-half results for the period to end September were in line with expectations. Revenue was up 14% while, reflecting increased costs, the operating margin was two points lower at 31% versus 33% in H117. Even so, pre-tax profits increased by 6% while the ordinary dividend per share was raised by 39%. Key points from the figures are summarised below.

AUME in dollar terms increased from $58.2bn at end March to $61.2bn at end September (+5.2%). AUME in sterling terms was down slightly (-2.1%), reflecting dollar weakness. There was a net outflow of $1bn in the half year including $1.7bn for dynamic hedging and $0.3bn for passive hedging. There was a $0.6bn positive flow into currency for return. FX and market moves together with a small scaling effect on mandates with volatility targets had a material positive impact of $4bn, equivalent to 7% of opening AUME (see Exhibit 2).

Client numbers at 59 were unchanged from the end of March, down from 61 at the end of H117 but, on a longer view, have increased from 48 in 2014.

Revenue was £12.2m, vs £10.7m in H117 (+14%). There were no performance fees in the period. Within management fees of £12m the main contributor to growth was passive hedging with an increase of 14% while the strongest percentage growth was recorded in currency for return (+76%) broadly reflecting the increase in average AUME between the two periods.

Fee margins are indicated to be stable (see top right section of Exhibit 1) although mix changes between and within categories does result in movements in the averages. The overall average we calculate for H118 is 5.2bps compared with 5.4bps for the prior year period or 5.3bps for H217.

Administrative costs increased by 19% vs H117 or 2% compared with H217. Personnel costs increased by 18% as headcount rose (to 80 vs the FY17 average of 73) to support innovation and enhanced products. There have also been costs arising from regulatory changes including EMIR and related collateral requirements and to a lesser extent MiFID II. New office leases in the UK and US together with the opening of a small office in Zurich contributed to a rise in non-personnel costs. There were £0.2m of one-off costs related to the tender offer in the period.

Earnings per share (diluted) increased from 1.33p in H117 to 1.52p (+14%).

Exhibit 2: Analysis of change in AUME

Year end March

Q417

Q118

Q218

Q118

Q218

H118

$bn

AUME

AUME

AUME

Net flows

Net flows

Net flows

Dynamic hedging

6.3

5.0

4.5

-1.1

-0.6

-1.7

Passive hedging

48.2

50.3

51.7

0.2

-0.5

-0.3

Currency for return

1.0

1.6

1.7

0.6

0.0

0.6

Multi-product

2.5

2.8

3.0

0.3

0.0

0.3

Cash

0.2

0.2

0.3

0.0

0.1

0.1

Total AUME/Flows

58.2

59.9

61.2

0.0

-1.0

-1.0

Scaling effect

0.0

0.1

0.1

Markets

-0.7

2.0

1.3

FX effects

2.4

0.2

2.6

Total change in AUME

1.7

1.3

3.0

Source: Record, Edison Investment Research

An interim dividend of 1.15p was declared compared with 0.825p last year; this will be paid on 22 December. The thinking behind this increase was that the £10m tender offer in July this year resulted in a c 10% reduction in the share capital and the board wished to preserve the total payment with an addition to maintain its progressive dividend policy. The second half payment is expected to match the first half and the board will consider the return of earnings in excess of the ordinary dividend after allowing for increased capital requirements. On our estimates this could allow a special dividend of up to 0.85p giving a total payment of 3.15p for FY18.

The next table shows performance figures for currency for return strategies. This shows mixed performance in H118 with positive performances from emerging markets and currency value more than offset by negative performances in the remaining strategies within the multi-strategy product. Nevertheless, returns since inception remain positive across all strands with the diversified multi-strategy performance in particular offering an interesting track record of positive returns and moderate volatility from a strategy with a low correlation to equity indices.

Exhibit 3: Performance

Fund name

Gearing

Half year return

Return SI pa

Volatility SI pa

Inception

FTSE FRB10 Index Fund

1.8

-1.40%

1.73%

7.21%

Dec-10

Emerging Market Currency Fund

1.0

3.16%

1.54%

6.35%

Dec-10

Index/Composite returns

 

 

 

 

 

FTSE Currency FRB10 GBP excess return

 

-0.73%

2.28%

4.59%

Dec-87

Currency Value

 

0.70%

2.78%

3.02%

Jul-12

Currency Momentum

 

-2.85%

1.08%

3.70%

Jul-12

Record Multi-Strategy (USD excess gross return)

 

-1.02%

2.04%

2.41%

Jul-12

Source: Record plc. Note: SI = since inception.

Following the appointment of new auditors the first half figures were marked by a presentational change relating to seed investments in three funds that are consolidated in the accounts. External investments in these funds are now shown as financial liabilities on the balance sheet rather than a non-controlling interest. Gains and losses attributable to external investors in these funds are no longer included in operating profits and there is no figure on the profit and loss account relating to non-controlling interests. Gains or losses relating to the seed funds previously included within revenue are now shown within the other income or expense line. On restating last year’s figures there is no change in the earnings or equity attributable to ordinary shareholders.

Outlook

The uncertain global macroeconomic and geopolitical background continue to create a generally favourable backdrop for Record’s conversations with potential hedging clients even when currency volatility remains relatively low (see Exhibit 4).

Exhibit 4: Implied volatility for one year at the money options CHF and EUR versus USD

Source: Bloomberg. Note: CHF = Swiss franc, EUR = euro, USD = US$.

The company note that although clients and potential clients may acknowledge the value of maintaining a hedge even when there are periods of base currency weakness, the persistence of cash outflows to retain this position while near-term currency gains could have been realised can act as a deterrent in markets such as the US where hedging tends to be viewed more tactically. For the moment therefore the US may prove a less fertile source of mandates while Europe (given euro strength) is more promising.

At the time of the results Record noted that some smaller clients might cease hedging following the introduction of EMIR (European Market Infrastructure Regulation) at the beginning of 2018. This is because of the requirement it brings for the posting and hence management of collateral for deliverable forward foreign exchange contracts, adding to the cost and administration involved. Since then Record has highlighted that these requirements may now be amended before their introduction, but has also confirmed it does not expect the revenue impact to be material in either case.

Under a licencing agreement Record continues to provide WisdomTree Investments with signals used to hedge currency exposures dynamically for WisdomTree’s rules-based indices. This is included within other currency services income (£0.25m H118) and, while not large currently, could with the addition of other clients, become a more significant contributor to revenue.

Financials

As shown below there has been very little change in our revenue, profit and EPS estimates following the first half figures. Further details are shown in the financial summary (Exhibit 7). We have increased our ordinary dividend assumptions by 10% following the declaration of a 1.15p interim. There is a marginal increase in our estimated total dividends (now 3.15p and 3.36p for FY18 and FY19 respectively) as the assumed special dividend has been correspondingly reduced to retain earnings cover.

Exhibit 5: Earnings revisions

 

Revenue (£m)

% chg.

PBT (£m)

% chg.

EPS (p)

% chg.

DPS (p)

% chg.

 

Old

New

 

Old

New

 

Old

New

 

Old

New

 

03/18e

24.6

24.6

0%

8.1

8.1

1%

3.11

3.13

1%

2.10

2.30

10%

03/19e

25.0

25.2

1%

8.2

8.4

1%

3.30

3.34

1%

2.20

2.42

10%

Source: Record, Edison Investment Research. Note: dividend excludes any special payment

Valuation

We have updated our comparative table showing the P/E and EBITDA multiples for Record in the context of UK fund managers.

Exhibit 6: Earnings and EBITDA multiples for UK fund managers

Price
(local)

Market capitalisation
(£m)

P/E
(x)

EV/EBITDA
(x)

Ashmore

365.5

2,605

17.4

11.3

City of London Inv Group

405.0

109

10.6

8.1

Impax Asset Management

158.8

203

28.5

42.2

Janus Henderson

36.1

5,441

15.2

12.7

Jupiter

578.5

2,648

16.6

13.4

Liontrust

504.0

250

18.1

18.4

Man Group

194.6

3,205

12.1

Loss

Polar Capital

478.0

444

15.2

19.1

Schroders

3,425.0

9,136

16.5

16.4

Average

16.7

17.7

Record

48.5

97

15.9

8.2

Source: Bloomberg, Edison Investment Research. Note: Using calendar 2017 estimated earnings and last reported EBITDA. Priced as at close 27 November 2017.

This shows that even though Record shares are up c 50% over the last 12 months they are still trading on multiples below the average for the UK fund managers shown. With a balance sheet that remains strong following the tender offer and a distribution policy that means that earnings are set to be largely distributed there appears to be scope for further re-rating.

.

Exhibit 7: Financial summary

£'000s

 

2015

2016

2017

2018e

2019e

March

 

 

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

 

 

 

 

 

 

 

Revenue (underlying)

 

 

20,865

21,246

22,952

24,587

25,156

Revenue

 

 

21,057

21,134

22,952

24,587

25,156

Operating expenses

 

 

(13,521)

(14,344)

(15,365)

(16,581)

(16,910)

Other income/(expense)

157

49

0

Operating Profit (before amort. and except.)

 

 

7,536

6,790

7,744

8,055

8,246

Finance income

 

 

146

143

112

65

110

Profit Before Tax

 

 

7,682

6,933

7,856

8,119

8,357

Taxation

(1,708)

(1,523)

(1,540)

(1,624)

(1,671)

Minority interests

 

 

(192)

131

0

0

0

Attributable profit

 

 

5,782

5,541

6,316

6,495

6,685

 

 

 

Normalised revenue (underlying)

 

 

20,865

21,246

22,952

24,587

25,156

Operating expenses (excl. dep'n and amortisation)

 

 

(13,206)

(14,023)

(15,023)

(16,231)

(16,585)

Normalised EBITDA

 

 

7,659

7,223

7,929

8,356

8,571

Depreciation and amortisation

 

 

(315)

(321)

(342)

(350)

(325)

Other income/(expense)

157

49

0

Normalised Operating profits

 

 

7,344

6,902

7,744

8,055

8,246

Finance income

 

 

146

143

112

65

110

Profit Before Tax (norm)

 

 

7,490

7,045

7,856

8,119

8,357

 

 

 

Normalised revenue/AUME (excl. perf fees) bps

 

 

6.2

6.0

5.2

5.2

5.2

Normalised operating margin (%)

 

 

35.2

32.5

33.7

32.8

32.8

 

 

 

Average Diluted Shares Outstanding (m)

 

 

218.4

217.9

218.0

207.5

200.1

Basic EPS (p)

 

 

2.66

2.55

2.91

3.15

3.36

EPS - diluted (p)

 

 

2.65

2.54

2.90

3.13

3.34

Dividend per share (p)

 

 

1.65

1.65

2.00

2.30

2.42

Special dividend per share (p)

 

 

0.00

0.00

0.91

0.85

0.94

Total dividend (p)

 

 

1.65

1.65

2.91

3.15

3.36

 

 

 

BALANCE SHEET

 

 

Fixed Assets

 

 

3,273

423

1,228

1,212

1,087

Intangible Assets

 

 

504

299

245

145

70

Tangible Assets

 

 

129

81

881

811

761

Investments

 

 

2,567

0

0

0

0

Deferred tax assets

 

 

73

43

102

256

256

Current Assets

 

 

37,053

40,541

44,247

34,882

35,488

Debtors

 

 

6,324

5,695

6,972

7,059

7,199

Cash

 

 

12,010

21,720

19,120

13,990

14,457

Money market instruments

 

 

18,100

13,020

18,102

13,304

13,304

Other

 

 

619

106

53

529

529

Current Liabilities

 

 

(4,522)

(3,256)

(8,644)

(9,314)

(9,380)

Creditors

 

 

(2,949)

(2,372)

(3,013)

(3,353)

(3,419)

Financial liabilities

(4,779)

(4,761)

(4,761)

Other

 

 

(1,573)

(884)

(852)

(1,200)

(1,200)

Net Assets

 

 

35,804

37,708

36,831

26,780

27,195

Minority interests

 

 

3,876

4,019

0

0

0

Net assets attributable to ordinary shareholders

 

31,928

31,928

33,689

36,831

26,780

No of shares at year end

 

 

217.5

217.2

221.4

199.1

199.1

NAV per share p

14.7

15.5

16.6

13.5

13.7

CASH FLOW

 

 

Operating Cash Flow

 

 

6,472

5,509

7,107

7,290

6,827

Capex

 

 

(128)

(29)

(899)

(130)

(150)

Cash flow from investing activities

 

 

0

(39)

(189)

(50)

(50)

Dividends

 

 

(3,266)

(3,750)

(3,592)

(6,839)

(6,270)

Other financing activities

 

 

(2,571)

7,737

(5,163)

(5,373)

110

Other

 

 

0

282

136

(27)

0

Net Cash Flow

 

 

507

9,710

(2,600)

(5,130)

467

Opening cash/(net debt)

 

 

11,503

12,010

21,720

19,120

13,990

Other

 

 

0

0

0

0

0

Closing net (debt)/cash

 

 

12,010

21,720

19,120

13,990

14,457

Closing net debt/(cash) inc money market instruments

30,110

34,740

30,110

34,740

37,222

 

 

 

AUME

 

 

Opening ($'bn)

 

 

51.9

55.4

52.9

58.2

58.29

Net new money flows

 

 

2.9

(1.4)

3.1

(1.0)

0.0

Market/other

 

 

0.6

(1.1)

2.2

1.1

1.1

Closing ($'bn)

 

 

55.4

52.9

58.2

58.3

59.4

Source: Company accounts, Edison Investment Research

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 Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2017 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Record 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 Investments 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 2017. “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 Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2017 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Record 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 Investments 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 2017. “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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