Growing on all fronts

TXT e-solutions 18 November 2019 Update
Download PDF

TXT e-solutions

Growing on all fronts

Q319 results

Software & comp services

18 November 2019

Price

€9.77

Market cap

€115m

Net cash (€m) at end Q319

43.2

Shares in issue

11.8m

Free float

45%

Code

TXT

Primary exchange

Borsa Italiana (STAR)

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

19.4

19.3

24.0

Rel (local)

13.2

1.6

0.4

52-week high/low

€10.0

€7.7

Business description

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

Next events

FY19 results

March 2020

Analyst

Katherine Thompson

+44 (0)20 3077 5730

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

TXT e-solutions reported a strong performance in Q319, with double-digit organic revenue growth in both divisions boosted by the contribution from Assioma and TXT Risk. For 9M19, normalised operating profits doubled year-on-year with margin expansion of 230bp. We have raised our FY19 and FY20 EPS forecasts to reflect Q3 performance. Recent fintech acquisitions have been integrated and are helping to accelerate the growth and profitability of the Banking & Finance division. With a significant amount of cash remaining on the balance sheet, we expect the company to make further targeted acquisitions.

Year end

Revenue (€m)

PBT*
(€m)

EPS*
(€)

DPS
(€)

P/E
(x)

Yield
(%)

12/17

35.9

3.0

0.19

1.00

52.6

10.2

12/18

40.0

1.5

0.10

0.50

95.0

5.1

12/19e

59.2

7.1

0.41

0.13

23.6

1.3

12/20e

65.5

6.6

0.38

0.15

25.7

1.5

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

Q3: Strong organic growth boosted by acquisitions

TXT reported 61.5% revenue growth in Q319, with 29% growth from the Aerospace, Aviation and Automotive (AAA) division (all organic) and 178% growth from the Banking & Finance (B&F) division, of which 134% was contributed by the Assioma and TXT Risk acquisitions. Software revenues made up 19% of Q319 revenues and 14% of 9M19 revenues, driving an improved gross margin versus Q318 and 9M18. Normalised EBIT increased 209% y-o-y in Q319 resulting in a normalised EBIT margin of 10.2% (Q318: 5.4%). Net cash at the end of Q319 of €43.2m was marginally lower than the previous quarter.

Raising estimates on stronger growth

We have revised our estimates to reflect the strong contribution in Q319. Higher revenues for FY19 and FY20 outweigh increased operating expenses, helped by higher than expected net financial income in FY19 and a lower tax rate for both years (from 31% to 28%). We raise our FY19 normalised EPS by 24% and FY20 by 17%.

Valuation: Accretive acquisitions to drive upside

On the back of Q3 results, the stock has gained 8%, and is up 20% from recent lows in mid-October and early September. On EV/sales and EV/EBIT multiples, TXT is trading in line with its peer group for FY19 and at a small discount in FY20, with EBITDA and EBIT margins slightly below the group average in FY19, increasing to the average by FY20. While the company still holds a high level of cash (we forecast net cash of €50m by the end of FY19), it continues to trade at a premium to peers on a P/E basis. Further acquisitions of earnings-enhancing businesses should reduce this premium.

Review of Q319 results

Exhibit 1: 9M19/Q319 results highlights

€m

9M19

9M18

y-o-y

Q319

Q318

y-o-y

Revenues

42.5

28.6

48.6%

15.5

9.6

61.5%

Licenses & maintenance

6.0

3.7

62.4%

3.0

1.3

129.5%

Services

36.6

25.0

46.6%

12.5

8.3

50.7%

Gross margin

44.6%

44.3%

0.3%

46.6%

43.6%

3.0%

EBITDA

4.9

3.0

65.3%

2.0

0.9

119.0%

EBITDA margin

11.6%

10.4%

1.2%

12.9%

9.5%

3.4%

Normalised EBIT

3.8

1.9

100.5%

1.6

0.5

208.5%

Normalised EBIT margin

8.9%

6.6%

2.3%

10.2%

5.4%

4.9%

Reported net income after MI

3.0

1.0

202.2%

0.9

0.1

598.4%

Net cash

43.2

64.8

(33.4%)

43.2

64.8

(33.4%)

Source: TXT e-solutions, Edison Investment Research

Exhibit 2: Revenues by division

Revenues (€m)

9M19

9M18

y-o-y

Q319

Q318

y-o-y

Aerospace, Aviation & Automotive (AAA)

28.3

22.7

24.8%

9.7

7.5

29.0%

Banking & Finance (B&F)

14.2

5.9

139.7%

5.8

2.1

177.7%

- Original business plus Cheleo

9.0

5.9

51.9%

3.0

2.1

43.6%

- Assioma & TXT Risk

5.2

0

N/A

2.8

0

N/A

Source: TXT e-solutions

Strong organic growth from both divisions

TXT reported a strong performance in Q319. Group revenues increased 61.5% y-o-y, with organic revenue growth of 32%. Assioma (acquired 1 May 2019) and TXT Risk (acquired 6 November 2018) contributed a combined €2.8m to revenues in Q319.

Revenues from software licences, subscriptions and maintenance increased 130% y-o-y to €3.0m in Q319, including a €0.35m contribution from the Assiopay subsidiary of Assioma. Services revenues increased 51% y-o-y to €12.5m, including an estimated €2.4m contribution from Assioma. This implies services revenues grew at an organic rate of 23% y-o-y.

Looking at the performance by division, the AAA business grew 25% over 9M19 and 29% in Q319. This was all organic growth. At the start of Q319, the business signed several contracts in North America, which have contributed to the step up in revenues in both software and services.

The B&F business grew 140% over 9M19 and 178% in Q319. On an organic basis, the business grew 44% in Q319. Organic growth for 9M19 was 17% (after also excluding Cheleo revenues for both periods). This division is made up of the existing software testing business, augmented by the acquisitions of Cheleo in August 2018, TXT Risk in November 2018 and Assioma in May 2019. The company is making good progress in integrating the acquired businesses and is starting to see progress in cross-selling.

Improving profitability

The increasing contribution of software to group revenues has resulted in an increase in gross margin in Q319 versus Q318. Despite higher investment in R&D and commercial costs, Q319 EBITDA and normalised EBIT margins improved on a year-on-year basis. On a 9M19 basis, margins also improved, smoothing out the effects of seasonality. We have treated €0.7m of operating costs as exceptional as they relate to reorganisation of the group.

The company continues to hold a large proportion of its cash (€81m) in multi-segment insurance funds that are marked to market. This generated a further €0.3m in financial income in Q319, after net financial income of €1.8m was reported in H119.

For 9M19 the company used a 28% tax rate, down from the 31% used for H119. This resulted in an increase in reported net income (after minority interest) of more than 200% for 9M19 and nearly 600% for Q319.

Net cash at the end of Q319 was €43.2m compared to €44.2m at the end of H119. This is after taking account of lease financing of c €5m, bank debt of c €39m and c €7m owed for deferred consideration and earn-outs.

Outlook and changes to forecasts

The company expects revenue growth to accelerate in Q419, both in terms of organic growth and the acquired businesses. Q419 EBITDA is expected to show improvement compared to Q418.

We have revised our forecasts as follows:

Revenues: we have slightly changed our assumptions for the mix between software and services.

Gross profit: with a higher contribution from software revenues, we have increased our gross profit forecasts for FY19 and FY20.

Operating costs: we have increased our R&D and commercial cost forecasts from Q419 to reflect the higher level in Q319.

Net financial income: we have factored in the Q3 reported financial income. We do not factor in future income/expense related to marking-to-market the short-term investments.

Tax: we have reduced our assumption for the effective tax rate from 31% to 28% for FY19/20.

Normalised EPS: overall, the changes above result in a 23.7% increase in FY19 normalised EPS and 17.2% for FY20. We note that EPS shows a small decline from FY19 to FY20 – this is due to the large net financial income contribution in FY19, which we have not factored into FY20 estimates. A better measure of underlying business performance, normalised EBIT is forecast to increase 81.8% y-o-y in FY19 and 26.6% in FY20.

Exhibit 3: Changes to forecasts

FY19e
old

FY19e new

change

y-o-y

FY20e
old

FY20e new

change

y-o-y

Revenues (€m)

57.4

59.2

3.1%

48.2%

64.4

65.5

1.6%

10.5%

Gross margin

43.1%

45.3%

2.3%

1.1%

43.0%

45.8%

2.8%

0.5%

Gross profit (€m)

24.7

26.9

8.6%

52.0%

27.7

30.0

8.2%

11.7%

EBITDA (€m)

5.8

6.6

13.9%

60.5%

7.2

8.0

10.9%

22.1%

EBITDA margin

10.1%

11.1%

1.0%

0.8%

11.2%

12.3%

1.0%

1.2%

Normalised EBIT (€m)

4.3

5.0

17.4%

81.8%

5.7

6.3

11.8%

26.6%

Normalised EBIT margin

7.4%

8.5%

1.0%

1.6%

8.8%

9.7%

0.9%

1.2%

Normalised net income (€m)

3.9

4.9

23.7%

303.5%

3.8

4.5

17.3%

(7.7%)

Normalised EPS (€)

0.34

0.41

23.7%

303.5%

0.32

0.38

17.2%

(8.3%)

Reported basic EPS (€)

0.26

0.28

9.0%

483.9%

0.27

0.32

19.9%

14.2%

Net cash (€m)

50.3

50.1

(0.4%)

(17.0%)

53.2

53.9

1.2%

7.5%

Dividend (€)

0.13

0.13

0.0%

(74.0%)

0.15

0.15

0.0%

15.4%

Source: Edison Investment Research

Valuation

On the back of Q3 results, the stock has gained 8%, and is up 20% from recent lows in mid-October and early September. On EV/sales and EV/EBIT multiples, TXT is trading in line with its peer group for FY19 and at a small discount in FY20, with EBITDA and EBIT margins slightly below the group average in FY19, increasing to the average by FY20. While the company still holds a high level of cash (we forecast net cash of €50m by the end of FY19), it continues to trade at a premium to peers on a P/E basis. Further acquisitions of earnings-enhancing businesses should reduce this premium

Exhibit 4: Peer group financial and valuation performance

Company

Share price

Market cap

Rev growth

EBIT margin

EBITDA margin

EV/sales (x)

EV/EBIT (x)

P/E (x)

Dividend yield

m

CY

NY

CY

NY

CY

NY

CY

NY

CY

NY

CY

NY

CY

NY

TXT

€ 9.77

€ 115

48.2%

10.5%

8.5%

9.7%

11.1%

12.3%

1.2

1.1

14.2

11.2

23.6

25.7

1.3%

1.5%

European IT services companies

AKKA Technologies

€ 60.40

€ 1,222

21.0%

5.5%

8.2%

8.6%

10.6%

10.9%

1.0

0.9

11.7

10.7

12.3

11.0

1.9%

2.2%

Alten

€ 100.7

€ 3,413

15.2%

7.9%

9.8%

10.0%

11.2%

11.3%

1.4

1.3

13.9

12.7

18.3

16.6

1.0%

1.0%

Altran

€ 14.16

€ 3,629

11.1%

5.7%

11.4%

12.2%

15.4%

15.8%

1.6

1.5

14.3

12.7

16.6

14.4

1.6%

1.8%

AtoS

€ 73.00

€ 7,950

-5.7%

2.2%

9.9%

10.2%

14.9%

15.3%

1.0

1.0

10.6

10.1

8.8

8.1

2.2%

2.5%

Cap Gemini

€ 106.55

€ 17,778

7.3%

4.8%

12.1%

12.3%

15.4%

15.4%

1.4

1.4

11.8

11.1

16.5

15.1

1.8%

1.9%

Devoteam

€ 84.10

€ 699

16.9%

9.2%

9.9%

10.3%

10.6%

11.0%

1.0

0.9

10.0

8.8

17.0

14.4

1.3%

1.6%

ESI Group

€ 30.30

€ 180

1.5%

7.8%

6.3%

7.6%

9.2%

10.7%

1.6

1.5

25.7

19.8

42.0

30.5

0.0%

0.0%

Exprivia

€ 0.80

€ 41

-10.1%

7.9%

2.9%

4.3%

6.4%

7.6%

0.5

0.4

16.9

10.4

40.0

8.0

0.0%

0.0%

Reply

€ 66.50

€ 2,481

13.4%

8.5%

12.5%

12.7%

15.1%

15.3%

2.1

1.9

16.9

15.3

23.6

21.4

0.7%

0.8%

Sopra Steria

€ 132.10

€ 2,706

8.5%

5.2%

7.4%

8.2%

10.5%

11.1%

0.8

0.8

11.2

9.6

13.9

11.3

1.7%

2.1%

Average

7.9%

6.5%

9.0%

9.6%

11.9%

12.4%

1.2

1.2

14.3

12.1

20.9

15.1

1.2%

1.4%

(Discount)/premium to peers

(4%)

(7%)

(1%)

(8%)

13%

70%

Source: Edison Investment Research, Refinitiv (as at 18 November)

Exhibit 5: Financial summary

€'000s

2014

2015

2016

2017

2018

2019e

2020e

Year end 31 December

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

54,410

61,540

33,060

35,852

39,957

59,221

65,455

Cost of sales

(26,455)

(29,189)

(18,954)

(20,224)

(22,289)

(32,370)

(35,475)

Gross profit

27,955

32,351

14,106

15,628

17,668

26,851

29,980

EBITDA

 

 

5,324

6,659

4,260

3,536

4,098

6,576

8,030

Operating Profit (before amort and except) 

4,284

5,820

3,954

3,180

2,755

5,009

6,342

Amortisation of acquired intangibles

(285)

(285)

(264)

(439)

(610)

(960)

(960)

Exceptionals and other income

1,468

0

(557)

0

(300)

(1,205)

0

Other income

0

(740)

0

(69)

0

0

0

Operating Profit

5,467

4,795

3,133

2,672

1,845

2,844

5,382

Net Interest

(249)

(151)

48

(208)

(1,284)

2,100

300

Profit Before Tax (norm)

 

 

4,035

5,669

4,002

2,972

1,471

7,109

6,642

Profit Before Tax (FRS 3)

 

 

5,218

4,644

3,181

2,464

561

4,944

5,682

Tax

(1,046)

(762)

(661)

(710)

4

(1,384)

(1,591)

Profit After Tax (norm)

3,226

4,739

3,170

2,170

1,204

5,119

4,782

Profit After Tax (FRS 3)

4,172

3,882

2,520

1,754

565

3,560

4,091

Average Number of Shares Outstanding (m)

11.5

11.7

11.7

11.7

11.7

11.7

11.8

EPS - normalised (€)

 

 

0.281

0.406

0.271

0.186

0.103

0.415

0.380

EPS - normalised fully diluted (€)

 

 

0.276

0.403

0.271

0.186

0.103

0.415

0.380

EPS - (IFRS) (€)

 

 

0.364

0.333

0.475

5.874

0.048

0.282

0.322

Dividend per share (€)

0.23

0.25

0.30

1.00

0.50

0.13

0.15

Gross margin (%)

51.4

52.6

42.7

43.6

44.2

45.3

45.8

EBITDA Margin (%)

9.8

10.8

12.9

9.9

10.3

11.1

12.3

Operating margin (before GW and except) (%)

7.9

9.5

12.0

8.9

6.9

8.5

9.7

BALANCE SHEET

Fixed Assets

 

 

18,019

18,132

25,428

8,860

22,942

30,935

28,727

Intangible Assets

15,078

14,692

21,296

7,332

17,751

24,163

23,175

Tangible Assets

1,249

1,361

1,598

793

3,680

5,261

4,041

Other

1,692

2,079

2,534

735

1,511

1,511

1,511

Current Assets

 

 

34,892

38,946

37,085

109,426

134,674

124,925

123,136

Stocks

1,820

2,075

3,146

2,528

3,141

3,441

3,741

Debtors

20,768

27,791

26,369

17,215

16,992

25,184

27,835

Cash

12,304

9,080

7,570

89,683

114,541

96,299

91,560

Other

0

0

0

0

0

0

0

Current Liabilities

 

 

(17,451)

(18,349)

(21,051)

(13,612)

(30,086)

(31,196)

(33,140)

Creditors

(15,297)

(17,528)

(20,243)

(12,937)

(12,782)

(18,792)

(20,736)

Short term borrowings

(2,154)

(821)

(808)

(675)

(17,304)

(12,404)

(12,404)

Long Term Liabilities

 

 

(6,491)

(5,105)

(7,180)

(4,781)

(41,184)

(38,084)

(29,584)

Long term borrowings

(1,685)

0

(1,391)

(1,688)

(36,882)

(33,782)

(25,282)

Other long term liabilities

(4,806)

(5,105)

(5,789)

(3,093)

(4,302)

(4,302)

(4,302)

Net Assets

 

 

28,969

33,624

34,282

99,893

86,346

86,580

89,139

CASH FLOW

Operating Cash Flow

 

 

5,404

2,412

10,676

119

2,039

3,394

7,024

Net Interest

(249)

(151)

105

(208)

(69)

2,100

300

Tax

(1,344)

(1,461)

(2,022)

379

(624)

(1,384)

(1,591)

Capex

(615)

(763)

(738)

(661)

(548)

(620)

(440)

Acquisitions/disposals

0

0

(5,403)

82,250

1,314

(6,500)

0

Financing

(597)

2,215

(828)

(6)

(7,227)

(931)

0

Dividends

(2,615)

(2,678)

(2,931)

(3,496)

(11,710)

(5,781)

(1,532)

Net Cash Flow

(16)

(426)

(1,141)

78,377

(16,825)

(9,723)

3,761

Opening net debt/(cash)

 

 

(8,575)

(8,465)

(8,259)

(5,371)

(87,320)

(60,336)

(50,113)

HP finance leases initiated

0

0

0

0

(2,788)

(2,500)

0

Other

(94)

220

(1,747)

3,572

(7,371)

2,000

(0)

Closing net debt/(cash)

 

 

(8,465)

(8,259)

(5,371)

(87,320)

(60,336)

(50,113)

(53,874)

Source: TXT e-solutions accounts, Edison Investment Research


General disclaimer and copyright

This report has been commissioned by TXT e-solutions and prepared and issued by Edison, in consideration of a fee payable by TXT e-solutions. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

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

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

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by TXT e-solutions and prepared and issued by Edison, in consideration of a fee payable by TXT e-solutions. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

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

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

Share this with friends and colleagues

You may be interested in