Developing in line with expectations

Severfield 6 December 2018 Update
Download PDF

Severfield

Developing in line with expectations

H119 results

Construction & materials

 

6 December 2018

Price

71.6p

Market cap

£218m

Net cash (£m) at end September 2018

25

Shares in issue

303.9m

Free float

100%

Code

SFR

Primary exchange

LSE

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

2.3

(7.7)

(0.6)

Rel (local)

5.3

(0.8)

5.8

52-week high/low

88.2p

64.6p

Business description

Severfield is a leading UK structural steelwork fabricator operating across a broad range of market sectors. An Indian facility currently undertakes structural steelwork projects for the local market and is fully operational.

Next events

H119 DPS 1.0p ex dividend

13 December 2018

H119 DPS to be paid

11 January 2019

Analyst

Toby Thorrington

+44 (0)20 3077 5721

Severfield is a research client of Edison Investment Research Limited

Well-flagged H119 results contained few surprises with a solid UK performance backed by gathering momentum in the Indian JV. Order book and margin development will continue to be tracked closely; management commentary on this and market developments have been consistently good and existing guidance is unchanged. We believe that Severfield’s well-financed, market-leading position will continue to be beneficial and steady growth in earnings and dividends is an attractive proposition for investors.

Year end

Revenue (£m)

PBT* (£m)

EPS* (p)

DPS** (p)

P/E (x)

Yield** (%)

03/17

262.2

20.3

5.7

2.3

12.6

3.2

03/18**

274.2

24.0

6.5

4.3

11.0

6.0

03/19e

279.2

25.0

6.8

2.8

10.5

3.9

03/20e

285.9

27.3

7.4

3.0

9.7

4.2

Note: *PBT and EPS are normalised, excluding pension net finance costs, intangible amortisation and exceptional items. **FY18 DPS includes a 1.7p special dividend.

UK steady, India growing

Severfield’s first half results were comparable to the prior year and slightly ahead overall at the PBT and EPS levels with an 11% increase in the interim dividend declared. Behind the headline numbers, UK revenues grew 9% with stable underlying EBIT margins, while associate operations made a stronger contribution y-o-y. Within this, the Indian JV has clear revenue and order book momentum and capacity expansion there should get underway this year. Severfield ended H119 with £25m net cash.

Pursuing profitable opportunities

While general nervousness regarding the UK economic outlook remains – especially on a short-term view – Severfield’s breadth of capabilities is continuing to provide healthy pipeline opportunities. As ever, rigour in project selectivity and execution will determine financial performance; in the context of the wider construction sector its recent record is very good in this regard. Management has flagged a more even split of profitability in FY19 compared to FY18 and existing, pre-results guidance has been maintained. Based on this and H1 performance, we have made no changes to our estimates.

Valuation: Attractive business attributes

Severfield’s share price has traded in a fairly broad 62p to 89.4p range YTD and currently sits right in the middle after rallying from a low in October. It is down slightly more than the FTSE All Share Index since the beginning of the year (-10% versus -9% respectively) and, as our estimates have not changed during 2018, the current year P/E and EV/EBITDA have compressed to 10.5x and 6.4x, respectively. A longer UK order book might benefit sentiment in our view, but the company’s record in building margins while retaining a prudent balance sheet position and investing in some higher growth areas, including India, represent sound fundamental reasons to invest.

H119 results overview

In the context of existing guidance and a flagged more even split to FY19 profitability, H119 results were well framed in advance. In the event, UK operations achieved revenue growth with stable underlying margins. In addition, associate interests (ie the Indian JV and CMF) together contributed c £0.7m to group PBT, versus £0.3m in H118, and Severfield declared an 11% uplift in the interim dividend. The company ended H119 with £25m net cash on the balance sheet.

UK operations: Stable performance, changing order book mix

Exhibit 1: Severfield interim splits

Year end March, £m

H118

H218

FY18

H119

H119 v H118

Group revenue

137.1

137.1

274.2

149.1

8.7%

Group operating profit – reported

12.7

10.2

22.9

12.5

-1.7%

Operating margin %

9.3%

7.4%

8.3%

8.4%

-90bp

Group operating profit – adjusted*

13.5

11.1

24.5

12.8

-5.5%

Operating margin – adjusted %*

9.8%

8.1%

8.9%

8.6%

-120bp

Order book**

245

242

230

Source: Company, Edison Investment Research. Note: *Reported operating profit is adjusted for share-based payments and estimated pension net finance costs. Neither profit line includes any contribution from JV/associates. **At date of reporting results.

Severfield’s order book has settled in the £230–245m range over the past 18 months, down from a large-project intake peak of £315m in November 2016. This did not preclude almost 9% headline revenue progress in the first half of FY19 and we understand this was largely volume driven with pricing considered to have been stable during the period. A 90bp reduction in the headline operating margin catches the eye but adjusting the y-o-y comparator for unusual items (being asset disposal profits and favourable contract completion outcomes, which together contributed c £1.5m), suggests that underlying margins remained stable at around 8.4%.

Although the UK order book has shortened, this reflects project mix (ie more smaller, shorter cycle projects and fewer larger, longer ones) rather than a reduction in demand as such. For example, the value of commercial office work on hand has remained robust due to securing a number of mid-sized and regional jobs as some major schemes (eg 22 Bishopsgate) approach completion. The transport segment saw the largest subsector order increase with several airport and highway bridge contracts. Management maintains that contracted and potential pipeline projects represent high-quality workflows and remains confident that current operating margins are sustainable.

Indian operations: Growing order book supports capacity investment

Exhibit 2: Indian JV (JSSL or JSW Severfield Structures) interim splits

Year end March, £m

H118

H218

FY18

H119

H119 v H118

Revenue*

21.8

26.8

48.6

31.8

45.9%

Operating profit*

2.0

2.5

4.5

2.2

11.0%

Operating margin %

9.2%

9.3%

9.3%

7.0%

-90bp

Source: Company. Note: *Total entity performance. Severfield equity accounts its 50% share of PAT.

As shown in Exhibit 3 below, the Indian JV order book has risen to record levels, standing at £124m at the end of November and this has driven sequential revenue growth in the last two six month periods. Operating profit growth was constrained by the dominance of industrial segment work in the mix, although still rose by 10% y-o-y. The repayment of term debt in July 2017 (partly partner- funded) reduced entity interest costs by £0.7m y-o-y and, after taking tax into account, Severfield’s share of PAT rose by £0.3m to £0.4m in H119. The bigger picture appears to include growing acceptance of steel-framed construction methods versus traditional concrete ones, bringing both faster build rates and potentially scope for more iconic building structures. Healthcare/hospitals appear to be a particularly active subsector and new city plans also represent good opportunities.

Exhibit 3: Severfield: Indian JV reported order book development

Source: Company data

The latest order book includes a c 22,000 tonne office steelwork package and this is driving an increasing share of higher-margin commercial work (now up to 30% of the total from 20% previously) although industrial is also clearly growing. A new hall containing two further fabrication lines will add c 30,000 tonnes (or c 50%) to existing capacity at Bellary. The total capital cost of £16m is to be equally funded by equity and debt. Severfield will be injecting its £4m share during the current financial year and construction of the new facility is expected to be complete before the end of FY20.

Generating and deploying cash

Net cash at the end of September stood at c £25m, down from £33m at the beginning of the year (and £31m at the end of H118). Underlying EBITDA was comparable to the prior year at £14.7m but the primary operational difference was a c £10m working cash outflow versus sub £1m in the equivalent H118 period. This was partly explained by an unwinding of c £1.3m advance payments on hand at year-end, although was more driven by a timing and revenue increase-related swing in receivables absorbed c £8m in H119. After a £1m tax payment and c £2m net capex, the net result of these features was a £1m free cash inflow. This, together with existing cash balances, went towards funding c £10m cash dividend payments (split equally between the declared FY18 final and special DPS). After taking into account £1.7m of equity proceeds relating to employee share schemes, the overall net cash outflow approached £8m in the first half.

Cash outlook: we project a partial reversal in working capital performance during H2, subject to the usual project timing caveats. The company is on track to spend up to £7m capex in the current year with ongoing investment in operational efficiency targeted. This sum excludes the £4m Indian JV investment mentioned above, which is also now in our estimates. Hence our anticipated year-end 2019 net cash position of c £31m represents a modest y-o-y reduction. Bearing in mind that the year includes c £5m special dividend payments, capex at 1.6x depreciation and JV expansion funding, it is clear the company is able to both reinvest in the business and provide good returns to shareholders while at the same time maintain a prudent balance sheet funding position.

No change to our guidance or estimates

Management has retained existing FY19 guidance and our estimates for FY19 and beyond are unchanged. We may be slightly conservative on the Indian JV contribution based on current run rates and new capacity feeding in from FY21 depending on ramp up rates following commissioning. Otherwise, we anticipate modest reported operating margin accretion (from 8.3% in FY18 to 9.1% by FY21) on compound revenue growth in the order of 2% across our estimate horizon. In the absence of acquisitions or further special dividend declarations, the group net cash position will have risen to in excess of £50m by the end of FY21, under our estimates.

Exhibit 4: Financial summary

£m

2011

2012

2013

2014

2015

2016

2017

2018

2019e

2020e

2021e

Year end 31 March

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

12m to Dec

12m to Dec

15m to Mar

12m to Mar

12m to Mar

12m to Mar

12m to Mar

12m to Mar

12m to Mar

12m to Mar

12m to Mar

PROFIT & LOSS

Revenue

 

 

267.8

256.6

318.3

231.3

201.5

239.4

262.2

274.2

279.2

285.9

292.5

Cost of Sales

(246.9)

(268.8)

(330.9)

(217.8)

(186.7)

(219.6)

(236.3)

(244.9)

(249.0)

(253.2)

(258.9)

Gross Profit

20.9

(12.2)

(12.7)

13.5

14.9

19.8

25.9

29.3

30.3

32.7

33.6

EBITDA

 

 

19.5

(13.6)

(13.6)

12.0

13.6

18.9

25.7

29.0

30.2

32.9

34.1

Operating Profit - Edison

 

 

15.0

(17.7)

(18.6)

8.4

10.0

15.2

22.1

25.4

26.1

28.3

29.0

Net Interest

(1.6)

(1.6)

(2.0)

(0.6)

(0.5)

(0.2)

(0.2)

(0.2)

(0.2)

(0.2)

(0.1)

Associates

(2.5)

0.2

(0.3)

(3.0)

(0.2)

(0.2)

0.5

0.9

1.1

1.2

1.3

SBP

(0.3)

(0.0)

(0.1)

(0.2)

(0.5)

(1.1)

(2.0)

(2.0)

(2.0)

(2.0)

(2.0)

Intangible Amortisation

(2.7)

(2.7)

(3.5)

(2.7)

(2.6)

(2.6)

(2.6)

(1.3)

0.0

0.0

0.0

Pension Net Finance Costs

(0.5)

(0.5)

(0.6)

(0.5)

(0.5)

(0.5)

(0.5)

(0.5)

(0.5)

(0.5)

(0.5)

Exceptionals

(0.6)

(1.0)

(3.8)

(5.3)

(5.9)

(0.9)

0.8

0.0

0.0

0.0

0.0

Profit Before Tax (norm) - Edison

 

10.6

(19.1)

(20.9)

4.5

8.8

13.7

20.3

24.0

25.0

27.3

28.1

Profit Before Tax (norm)

 

 

10.1

(19.6)

(21.5)

4.0

8.3

13.2

19.8

23.5

24.5

26.8

27.6

Profit Before Tax (FRS 3)

 

 

6.8

(23.3)

(28.9)

(4.1)

(0.2)

9.6

18.1

22.2

24.5

26.8

27.6

Tax

(0.9)

3.9

5.7

1.4

0.3

(1.0)

(2.7)

(4.1)

(4.4)

(4.8)

(5.0)

Profit After Tax (norm)

7.7

(16.2)

(17.9)

3.1

7.4

11.4

17.0

19.5

20.6

22.5

23.2

Profit After Tax (FRS 3)

5.8

(19.4)

(23.1)

(2.6)

0.1

8.6

15.3

18.0

20.1

22.0

22.7

Average Number of Shares Outstanding (m)

89.3

89.3

89.3

295.8

297.5

297.5

298.9

299.7

301.7

303.5

303.5

EPS - normalised (p) - Edison

 

 

4.51

(9.42)

(10.42)

1.05

2.47

3.84

5.70

6.52

6.83

7.40

7.64

EPS - normalised (p)

 

 

4.21

(9.72)

(9.45)

0.88

2.31

3.67

5.53

6.35

6.66

7.24

7.47

EPS - FRS 3 (p)

 

 

3.41

(11.33)

(13.49)

(0.89)

0.05

2.89

5.13

6.02

6.66

7.24

7.47

Dividend per share (p)

5.0

1.5

0.8

0.0

0.5

1.5

2.3

4.3

2.8

3.0

3.3

Gross Margin (%)

7.8

-4.8

-4.0

5.8

7.4

8.3

9.9

10.7

10.8

11.4

11.5

EBITDA Margin (%)

7.3

-5.3

-4.3

5.2

6.7

7.9

9.8

10.6

10.8

11.5

11.7

Operating Margin - Edison (%)

5.6

-6.9

-5.8

3.6

4.9

6.4

8.4

9.2

9.3

9.9

9.9

BALANCE SHEET

Fixed Assets

 

 

156.9

155.6

154.9

147.7

145.1

149.3

148.3

154.5

162.6

166.7

170.3

Intangible Assets

72.9

70.4

69.8

64.6

61.8

59.2

56.3

54.8

54.7

54.7

54.7

Tangible Assets

79.6

76.2

76.1

74.1

76.6

77.4

78.9

81.2

83.8

86.2

88.0

Investments

4.4

8.9

8.9

9.0

6.7

12.7

13.1

18.5

24.1

25.8

27.5

Current Assets

 

 

100.5

69.8

80.5

72.2

76.3

75.1

107.1

99.2

101.2

114.0

127.1

Stocks

9.1

7.1

8.2

5.8

4.8

5.3

7.8

9.6

10.8

11.0

11.2

Debtors

89.2

61.2

71.6

60.8

64.6

50.7

66.5

56.4

59.1

61.0

62.9

Cash

2.3

1.4

0.7

5.5

6.9

19.0

32.8

33.1

31.3

42.0

53.0

Current Liabilities

 

 

(103.6)

(97.0)

(112.5)

(57.9)

(59.7)

(58.2)

(78.7)

(66.1)

(66.4)

(67.8)

(69.1)

Creditors

(70.3)

(66.1)

(70.9)

(52.7)

(59.5)

(58.1)

(78.5)

(65.9)

(66.3)

(67.7)

(69.0)

Short term borrowings

(33.3)

(30.9)

(41.7)

(5.2)

(0.2)

(0.2)

(0.2)

(0.2)

(0.1)

(0.1)

(0.1)

Long Term Liabilities

 

 

(21.6)

(21.7)

(20.4)

(18.5)

(21.1)

(17.9)

(22.5)

(18.7)

(18.1)

(18.1)

(18.1)

Long term borrowings

(0.3)

(0.3)

(0.2)

(0.0)

(0.6)

(0.4)

(0.2)

(0.0)

0.0

0.0

0.0

Other long term liabilities

(21.3)

(21.4)

(20.2)

(18.5)

(20.5)

(17.5)

(22.3)

(18.6)

(18.1)

(18.1)

(18.1)

Net Assets

 

 

132.3

106.6

102.4

143.4

140.6

148.2

154.2

169.0

179.4

194.8

210.2

CASH FLOW

Operating Cash Flow

 

 

(5.4)

12.9

3.1

2.1

11.4

24.8

27.4

22.9

26.0

31.3

32.6

Net Interest

(2.0)

(1.3)

(1.7)

(0.8)

(0.8)

(0.2)

(0.1)

(0.2)

(0.1)

(0.1)

(0.1)

Tax

(3.7)

(2.7)

(2.3)

0.4

(1.0)

(0.9)

(2.4)

(3.9)

(4.6)

(4.4)

(4.8)

Capex

(1.5)

(0.2)

(1.4)

(1.5)

(1.3)

(4.3)

(5.3)

(5.4)

(6.7)

(7.0)

(7.0)

Acquisitions/disposals

(0)

(2)

(3.0)

(3.5)

(1.7)

(4.1)

(0.4)

(5.5)

(4.5)

(0.5)

(0.5)

Financing

0

0

0.0

44.8

0

0

0

0

2

0

0

Dividends

(3.6)

(4.5)

(4.5)

0.0

0.0

(3.0)

(5.1)

(7.5)

(13.4)

(8.6)

(9.3)

Net Cash Flow

(16.3)

1.7

(9.7)

41.5

6.7

12.4

14.0

0.4

(1.7)

10.6

11.0

Opening net debt/(cash)

 

 

15.0

31.3

31.3

41.2

(0.3)

(6.1)

(18.4)

(32.4)

(32.9)

(31.2)

(41.8)

HP finance leases initiated

0.0

0.1

0.0

(0.2)

(0.3)

(0.2)

(0.2)

(0.2)

(0.1)

0.0

0.0

Other

(0)

(0)

(0)

0.2

(0.6)

0.2

0

0

0

(0)

0

Closing net debt/(cash)

 

 

31.3

29.7

41.2

(0.3)

(6.1)

(18.4)

(32.4)

(32.9)

(31.2)

(41.8)

(52.8)

Source: Severfield accounts, Edison Investment Research

 

General disclaimer and copyright

This report has been commissioned by Severfield and prepared and issued by Edison, in consideration of a fee payable by Severfield. 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 Edison analyst 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 2018 Edison Investment Research Limited (Edison). All rights reserved 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.

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd who holds an Australian Financial Services Licence (Number: 427484). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

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

United Kingdom

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

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document (nor will such persons be able to purchase shares in the placing).

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

United States

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

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, 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 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by Severfield and prepared and issued by Edison, in consideration of a fee payable by Severfield. 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 Edison analyst 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 2018 Edison Investment Research Limited (Edison). All rights reserved 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.

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd who holds an Australian Financial Services Licence (Number: 427484). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

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

United Kingdom

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

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document (nor will such persons be able to purchase shares in the placing).

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

United States

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

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, 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 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Share this with friends and colleagues