Boosting organic growth with US acquisition

Claranova 9 August 2019 Update
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Claranova

Boosting organic growth with US acquisition

Q4 revenue update

Software & comp services

9 August 2019

Price

€8.56

Market cap

€336m

$1.12:€1

Net cash (€m) at end H119

42.8

Shares in issue

39.2m

Free float

91%

Code

CLA

Primary exchange

Euronext Paris

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

8.1

2.0

(0.5)

Rel (local)

11.6

2.6

2.8

52-week high/low

€11.18

€5.20

Business description

Claranova consists of three businesses focused on mobile and internet technologies: Mobile (digital photo printing), Internet (consumer software) and IoT (Internet of Things). It is headquartered in Paris with operations in Europe, the US and Canada.

Next events

FY19 results

1 October

Analyst

Katherine Thompson

+44 (0)20 3077 5730

Claranova is a research client of Edison Investment Research Limited

Revenue growth accelerated in Q419, resulting in Claranova reporting revenue growth of 62% and organic revenue growth of 37% for FY19. Increased investment in customer acquisition was behind much of this growth. The company completed the acquisition of Personal Creations (PC) post year-end, adding a new range of personalised products to the PlanetArt business in the US. We have revised our forecasts to reflect recent trading, the PC acquisition and the recent reverse stock split.

Year end

Revenue (€m)

EBITDA
(€m)

PBT*
(€m)

Dil. EPS*
(€)

DPS
(€)

P/E
(x)

06/17

130.2

(5.0)

(6.6)

(0.18)

0.0

N/A

06/18

161.5

3.9

3.1

0.06

0.0

135.7

06/19e

262.3

14.2

10.9

0.23

0.0

37.3

06/20e

425.8

30.0

26.4

0.51

0.0

16.8

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

Investment in customer acquisition drives upside

Reported revenue growth accelerated to 73% in Q419, up from 69% in Q3, resulting in FY19 revenue growth of 62%, 3.3% ahead of our forecast. Revenue from both the mobile and internet businesses came in ahead of our forecasts, with constant currency organic growth of 40% and 14% respectively in FY19. The company noted that it had increased investment in growing its customer base in both businesses, which we believe was the key driver of revenue outperformance. The IoT business (1.2% of FY19 revenues) came in below our forecasts; we continue to view this business as in build-out mode.

Estimates revised to reflect trading plus M&A

We have revised our forecasts to reflect stronger revenue growth in Q419, increased investment in customer acquisition costs, the Personal Creations acquisition and the recent reverse stock split and bond issue. Overall, we raise our revenue forecast by 34% in FY20. We reduce our FY19 EBITDA forecast from €18.0m to €14.2m and maintain our FY20 forecast of €30.0m. Net cash reduces from €17.2m to €16.2m at the end of FY19 and from €44.6m to €28.7m at the end of FY20. The company will report full FY19 results on 1 October.

Valuation: Stronger revenue growth suggests upside

Reflecting the different business models and minority interests for each division, we continue to use a sum-of-the-parts approach to valuation. Based purely on peer group averages per division, we calculate a fair value of €12.9 per share. However, once multiples are adjusted to reflect our views on the growth and profitability of each division, this increases to €13.41 per share (up from €13.10). Milestones that could provide upside to our forecasts include the successful adoption of FreePrints in India; launch of the Payaware product; successful integration of Personal Creations and distributors reselling the myDevices platform in the US and China.

Q4 revenue update

Claranova reported Q419 revenue growth of 73% year-on-year, which resulted in FY19 revenue growth of 62%, 3.3% ahead of our forecast.

Exhibit 1: Q419 and FY19 divisional revenues

Revenues (€m)

Q419

Q418

y-o-y

FY19

FY18

y-o-y

y-o-y

reported

reported

Constant currency organic

Mobile

43.4

29.4

48%

176.1

122.0

44%

40%

Internet

22.5

7.5

200%

83.0

35.8

132%

14%

IoT

0.6

1.5

(60%)

3.2

3.7

(13%)

(17%)

Total

66.5

38.4

73%

262.3

161.5

62%

33%

Source: Claranova

Mobile: Another year of strong organic growth for PlanetArt

Exhibit 2: Mobile year-on-year revenue growth

Q119

Q219

Q319

Q419

FY19

Reported

45%

40%

49%

48%

44%

Constant currency organic

44%

37%

41%

N/A

40%

Source: Claranova

The Mobile business (PlanetArt) reported revenue growth of 44% for FY19, or 40% on a constant currency basis, and revenue growth of 48% for Q419. The company noted that it had invested substantially in growing its customer base, particularly in Europe. FY19 revenues were 2.2% ahead of our forecast (see Exhibit 4).

US online gifts business acquisition

At the end of June 2019, the company announced that it had made a bid to buy Personal Creations, the online gifts business of FTD Companies, Inc (FTD), for $18.1m in cash. The deal was approved on 31 July and the acquisition completed on 2 August. PC operates two websites (www.gifts.com, www.personalcreations.com), only in the US.

In CY17, PC generated revenues of $116m and in CY18 it was reported to have grown revenues by 9% to $126m. In CY18, EBITDA was slightly negative, after several profitable years. The company expects Personal Creations to generate positive EBITDA in the first year of ownership, albeit on potentially lower revenues, and sees synergies in terms of marketing and administrative costs. We would expect the management team to focus on integrating Personal Creations into PlanetArt and returning it to profitability before considering expansion beyond the US.

Shutterfly/Snapfish merger to alter the competitive landscape

In June, private equity firm Apollo Global Management announced that it planned to acquire Shutterfly for $51.0 per share in cash (total EV of $2.7bn). Shutterfly had been in the midst of a strategic review so news that it was being acquired was not totally unexpected. However, linked to this deal, Apollo announced it was also acquiring Snapfish, a competing photo printing business, and that it plans to merge the two businesses. The Snapfish acquisition is contingent on the completion of the Shutterfly acquisition. Snapfish is currently owned by District Photo, a large printing company that prints photos for its own brands (Snapfish and Truprint) as well as businesses such as Walgreens, Amazon and Tesco in the US and Europe. The price for this deal has not been disclosed, although press articles suggest a figure of $300m.

Shutterfly consists of three businesses, only one of which competes with PlanetArt in the US (Shutterfly Consumer). Shutterfly Consumer generated revenues of $972m in CY18 (-3% y-o-y). The business offers both web-to-print and mobile printing of both photos and personalised products, with mobile-generated business making up 32% of Shutterfly-branded revenues in its last quarterly results. Snapfish is active in the US and the UK, and also has a presence in France, Germany, Ireland, Italy, Australia and New Zealand. We understand that it has a higher mobile presence than Shutterfly.

We would expect that the initial focus for the combined business will be to merge the two businesses operationally while servicing the debt put in place to make the acquisitions. In the short-term, we do not expect PlanetArt to suffer from increased competition from the merged entity, although it is possible in the longer term.

Internet: acquisitions have helped to accelerate organic growth

Exhibit 3: Internet year-on-year revenue growth

Q119

Q219

Q319

Q419

FY19

Reported

101%

106%

136%

200%

132%

Constant currency

99%

107%

N/A

N/A

129%

Organic

3%

16%

22%

N/A

16%

Constant currency organic

N/A

N/A

20%

N/A

14%

Source: Claranova

The internet business (previously called Avanquest) saw reported growth of 132% for FY19 and 200% for Q419. Stripping out the businesses acquired in July 2018, the underlying business grew 16%, or 14% on a constant currency basis. We estimate that the acquired businesses grew at 38% compared to revenue generated in the year prior to acquisition. The company noted that it also invested significantly in this business in H219, to support the shift from one-off to subscription license sales. It believes this should have a positive impact in future periods. FY19 revenues were 6.8% ahead of our forecast.

IoT – still in build out mode

The IoT business (myDevices) reported a revenue decline of 13% for FY19 and 60% for Q419. As H218 included a one-off contribution from Sprint, the company noted that excluding this, revenues grew 56% in H219 versus H218. FY19 revenues were 15.8% below our forecast.

Changes to forecasts

We have revised our forecasts to take account of the following factors:

Revenues: we have increased FY19 and FY20 forecasts to reflect Q419 reported revenues as well as adding in Personal Creations for FY20.

EBITDA: based on comments about increased investment in the Mobile and Internet businesses in H219, we have increased our H219 and FY20 cost forecasts. We have also factored in the Personal Creations acquisition.

EPS: we have revised our forecasts to reflect the reverse stock split that took place on 1 August. For every ten shares held, shareholders were issued with one share, reducing the share count from 394.4m to 39.4m.

Debt: Claranova was committed to paying the final €17m payment for the acquired Canadian businesses by the end of FY19. It had always planned to finance this through debt (and we had modelled debt being put in place in Q419), and at the end of June the company announced it had issued bonds worth €19.7m (19,655 bonds with a nominal value of €1,000 per bond). The five-year bonds bear interest at 6% pa and are repayable on 27 June 2024. We have factored in payment for Personal Creations in FY20.

Exhibit 4: Revenue forecasts (€m)

FY19e

FY19a

Diff

y-o-y

FY20e old

FY20e new

Change

y-o-y

Mobile

172.4

176.1

2.2%

44.3%

225.7

325.5

44.2%

84.8%

Internet

77.7

83.0

6.8%

131.8%

84.9

95.7

12.7%

15.3%

IoT

3.8

3.2

-15.8%

-13.5%

7.3

4.6

-37.0%

43.8%

Total

253.9

262.3

3.3%

62.4%

317.9

425.8

33.9%

62.3%

Source: Claranova, Edison Investment Research

Exhibit 5: Changes to forecasts

€'m

FY19e

FY19e

FY20e

FY20e

Old

New

Change

y-o-y

Old

New

Change

y-o-y

Revenues

253.9

262.3

3.3%

62.4%

317.9

425.8

33.9%

62.3%

EBITDA

18.0

14.2

-21.3%

264.1%

30.0

30.0

0.0%

111.3%

EBITDA margin

7.1%

5.4%

-23.8%

3.0%

9.4%

7.0%

-25.3%

1.6%

Normalised operating profit

17.4

13.6

-22.0%

300.0%

29.5

29.5

0.0%

116.9%

Normalised operating profit margin

6.9%

5.2%

-1.7%

3.1%

9.3%

6.9%

-2.4%

1.7%

Reported operating profit

12.3

8.5

-31.1%

N/A

27.3

27.3

0.0%

221.2%

Reported operating margin

4.9%

3.2%

-1.6%

7.0%

8.6%

6.4%

-2.2%

3.2%

Normalised PBT

14.6

10.9

-25.3%

252.9%

26.7

26.4

-1.1%

141.1%

Reported PBT

9.5

5.8

-38.8%

N/A

24.5

24.2

-1.2%

313.9%

Normalised net income

11.6

9.0

-21.9%

244.0%

19.6

20.1

2.2%

122.0%

Reported net income

7.6

5.1

-33.2%

N/A

17.9

18.4

2.5%

259.5%

Normalised basic EPS (€)

0.03

0.23

680.6%

245.5%

0.05

0.51

922.5%

122.0%

Normalised diluted EPS (€)

0.03

0.23

692.0%

263.9%

0.05

0.51

937.4%

122.0%

Reported basic EPS (€)

0.02

0.13

568.0%

N/A

0.05

0.47

924.6%

259.4%

Net debt/(cash)

(17.2)

(16.2)

-5.8%

-56.7%

(44.6)

(28.7)

-35.6%

76.8%

Source: Edison Investment Research

Valuation

Exhibit 6: Sum-of-the-parts valuation

FY19e

FY20e

EV based on FY19e sales multiple (€m)

Minority
interest

Value to shareholders (€m)

EV/Sales multiple (x)

2.2

1.4

575.0

542.1

PlanetArt

2.3

1.2

396.2

7.1%

368.1

Avanquest

2.0

1.7

166.0

0.0%

166.0

myDevices

4.0

2.8

12.8

37.7%

8.0

Implied EV/EBITDA multiple (x)

PlanetArt

42.0

20.5

Avanquest

18.6

12.4

myDevices

N/A

N/A

Upside/(downside)

Net cash at end H119 (€m)

42.8

Equity value (€m)

525.9

Adjustments for acquisitions (€m)

(59.0)

Per share value (€)

13.41

57%

Adjusted net debt (€m)

(16.2)

No. of shares (m)

39.2

Source: Edison Investment Research

We have revised our sum-of-the-parts valuation to reflect our new forecasts. As the valuation is based on FY19 sales multiples, which excludes Personal Creations, we have included PC at its acquisition cost of $18m. We recognise that the purchase price was low on an EV/Sales basis (0.14x CY18) and would expect the new business to create more value over time as it is successfully integrated into PlanetArt and returns to profitability. We have reduced the revenue multiple used for IoT from 6x to 4x in FY19 reflecting the slower pace of growth than originally expected. This results in an increase in our valuation from €13.10 to €13.41 per share.

Catalysts for the share price to move towards this valuation include revenue contributions to PlanetArt from new geographic areas (eg India, Benelux), continued strong revenue and margin growth in the internet business, the successful launch of Payaware, returning Personal Creations to profitability and customer wins for myDevices.

We note that the Shutterfly deal values the business at a forward EV/Sales multiple of 1.25x (with forecast revenue growth of 10%), EV/EBITDA of 8.26x and P/E of 64.6x (based on consensus forecasts that have not changed since the offer was made in June). The offer price of $51.0 was at a 31% premium to the share price on the day prior to the start of press speculation about the deal.

Exhibit 7: Financial summary

€'m

2015

2016

2017

2018

2019e

2020e

30-June

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

INCOME STATEMENT

Revenue

 

 

93.1

117.4

130.2

161.5

262.3

425.8

EBITDA

 

 

(6.8)

(9.2)

(5.0)

3.9

14.2

30.0

Normalised operating profit

 

 

(11.4)

(16.0)

(5.8)

3.4

13.6

29.5

Amortisation of acquired intangibles

0.0

0.0

0.0

0.0

(0.2)

(0.2)

Exceptionals

15.6

(10.0)

0.4

(2.4)

(4.2)

0.0

Share-based payments

(0.0)

(0.1)

(4.8)

(7.1)

(0.7)

(2.0)

Reported operating profit

4.2

(26.1)

(10.1)

(6.1)

8.5

27.3

Net Interest

1.1

(1.7)

(0.9)

(0.3)

(2.7)

(3.1)

Joint ventures & associates (post tax)

0.0

(0.0)

0.0

0.0

0.0

0.0

Exceptionals

0.0

0.0

0.0

0.0

0.0

0.0

Profit Before Tax (norm)

 

 

(10.3)

(17.7)

(6.6)

3.1

10.9

26.4

Profit Before Tax (reported)

 

 

5.3

(27.8)

(11.0)

(6.4)

5.8

24.2

Reported tax

(0.6)

(0.8)

(0.4)

(1.8)

(1.3)

(5.6)

Profit After Tax (norm)

(10.9)

(18.5)

(7.0)

2.4

8.4

20.3

Profit After Tax (reported)

4.7

(28.6)

(11.4)

(8.2)

4.5

18.6

Minority interests

(8.1)

0.0

0.3

0.2

0.6

(0.2)

Discontinued operations

(3.2)

0.0

0.0

0.0

0.0

0.0

Net income (normalised)

(18.9)

(18.5)

(6.7)

2.6

9.0

20.1

Net income (reported)

(6.5)

(28.6)

(11.0)

(7.9)

5.1

18.4

Basic average number of shares outstanding (m)

6

38

38

39

39

39

EPS - basic normalised (€)

 

 

(3.27)

(0.49)

(0.18)

0.07

0.23

0.51

EPS - diluted normalised (€)

 

 

(3.27)

(0.49)

(0.18)

0.06

0.23

0.51

EPS - basic reported (€)

 

 

(1.13)

(0.76)

(0.29)

(0.20)

0.13

0.47

Dividend (€)

0.00

0.00

0.00

0.00

0.00

0.00

Revenue growth (%)

#DIV/0!

26.1

10.9

24.0

62.4

62.3

EBITDA Margin (%)

-7.3

-7.9

-3.8

2.4

5.4

7.0

Normalised Operating Margin

-12.3

-13.7

-4.4

2.1

5.2

6.9

BALANCE SHEET

Fixed Assets

 

 

15.7

3.0

2.0

1.3

74.6

90.4

Intangible Assets

12.0

1.5

0.9

0.5

73.0

88.8

Tangible Assets

0.6

0.5

0.3

0.2

1.0

1.0

Investments & other

3.1

1.1

0.7

0.6

0.6

0.6

Current Assets

 

 

48.0

25.5

28.1

79.1

84.2

106.5

Stocks

5.9

5.0

3.7

3.7

7.2

11.7

Debtors

4.8

4.7

4.3

4.9

8.6

14.0

Cash & cash equivalents

30.5

11.1

17.1

65.7

63.6

76.1

Other

6.9

4.7

2.9

4.8

4.8

4.8

Current Liabilities

 

 

(32.0)

(25.3)

(28.1)

(37.2)

(49.4)

(66.9)

Creditors

(26.9)

(24.5)

(26.6)

(35.4)

(47.6)

(65.1)

Tax and social security

(0.3)

(0.0)

(0.3)

(1.7)

(1.7)

(1.7)

Short term borrowings

(4.8)

(0.7)

(1.1)

(0.1)

(0.1)

(0.1)

Other

0.0

0.0

0.0

0.0

0.0

0.0

Long Term Liabilities

 

 

(2.4)

(1.1)

(0.7)

(29.0)

(89.3)

(89.3)

Long term borrowings

(1.8)

(0.6)

0.0

(28.1)

(47.3)

(47.3)

Other long term liabilities

(0.7)

(0.5)

(0.7)

(0.9)

(42.1)

(42.1)

Net Assets

 

 

29.3

2.1

1.3

14.2

20.1

40.7

Minority interests

0.0

0.0

(0.1)

(1.8)

(3.8)

(4.0)

Shareholders' equity

 

 

29.3

2.1

1.2

12.5

16.3

36.7

CASH FLOW

Op Cash Flow before WC and tax

(6.8)

(9.2)

(5.0)

3.9

14.2

30.0

Working capital

0.4

2.5

6.8

7.9

5.0

7.6

Exceptional & other

(3.8)

(4.3)

(2.2)

(5.2)

(8.4)

0.0

Tax

0.3

(0.3)

(0.0)

(1.2)

(1.3)

(5.6)

Net operating cash flow

 

 

(9.8)

(11.3)

(0.4)

5.5

9.4

32.1

Capex

(4.4)

(0.9)

(0.2)

(0.1)

(2.3)

(0.3)

Acquisitions/disposals

10.8

(0.4)

3.6

14.2

(23.8)

(16.2)

Net interest

(0.9)

(0.1)

(0.0)

(0.3)

(2.7)

(3.1)

Equity financing

33.2

(5.1)

1.9

2.0

(1.9)

0.0

Dividends

0.0

2.0

0.0

0.0

0.0

0.0

Other

0.1

0.1

0.1

(1.1)

0.0

0.0

Net Cash Flow

29.0

(15.7)

5.0

20.1

(21.3)

12.5

Opening net debt/(cash)

 

 

18.0

(23.9)

(9.8)

(16.0)

(37.5)

(16.2)

FX

0.1

(0.1)

(0.6)

0.4

0.0

0.0

Other non-cash movements

12.6

1.7

1.8

1.1

0.0

0.0

Closing net debt/(cash)

 

 

(23.9)

(9.8)

(16.0)

(37.5)

(16.2)

(28.7)

Source: Claranova, Edison Investment Research


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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

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

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

United States

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 [ Claranova and prepared and issued by Edison, in consideration of a fee payable by Claranova 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.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 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 Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

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

United States

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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