Growth accelerates in Q2

TXT e-solutions 6 August 2019 Update
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TXT e-solutions

Growth accelerates in Q2

H119 results

Software & comp services

6 August 2019

Price

€8.36

Market cap

€98m

Net cash (€m) at end H119

44.2

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

(0.6)

(12.2)

(14.3)

Rel (local)

5.0

(7.8)

(10.0)

52-week high/low

€10.26

€7.70

Business description

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

Next events

Q3 results

7 November 2019

Analyst

Katherine Thompson

+44 (0)20 3077 5730

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

TXT reported strong organic revenue growth in both divisions in Q219, which combined with the contribution from recent acquisitions, translated into strong growth in EBIT and improved EBIT margins year-on-year. Recent acquisitions have been integrated and provide the potential for cross-selling in the banking & finance division, while the aerospace business has seen significant contract wins in North America. We have revised our forecasts to reflect stronger revenues, higher operating costs and higher tax rates in FY19 and FY20.

Year end

Revenue (€m)

PBT*
(€m)

EPS*
(€)

DPS
(€)

P/E
(x)

Yield
(%)

12/17

35.9

3.0

0.19

1.00

45.0

12.0

12/18

40.0

1.5

0.10

0.50

81.3

6.0

12/19e

57.4

6.1

0.34

0.13

24.9

1.6

12/20e

64.4

6.0

0.32

0.15

25.8

1.8

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

Strong organic growth in Q219

TXT reported year-on-year revenue growth of 57% for Q219, of which 26% was organic. The recent Cheleo and Assioma acquisitions contributed revenue of €3.0m in Q219. On a divisional organic revenue basis, the Aerospace, Aviation & Automotive division grew 25% and Banking & Finance 33% in Q219. Gross margins were lower on a year-on-year basis due to the higher mix of services revenues. Normalised EBIT grew 108% y-o-y, generating a margin of 7.3%, up from 5.5% a year ago. Net cash at the end of H119 was €44.2m, reflecting the payment of dividends and the acquisition of Assioma in H119.

Positive outlook

Management expects continued organic revenue growth in Q319 and improved EBITA versus Q318. We have revised our forecasts to reflect stronger services revenues in FY19 and FY20, higher operating expenses and a higher tax rate (to match the rate reported in H119). These changes, combined with movements in the value of short-term investments, result in a 9.5% upgrade to FY19 normalised EPS and a 5.8% reduction in FY20 EPS.

Valuation: Accretive acquisitions to drive upside

TXT is trading at a discount to its peer group on EV/Sales and EV/EBITDA multiples, with EBITDA and EBIT margins slightly below the group average. While the company still holds a high level of cash (we forecast €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 H119 results

Exhibit 1: Q219 and H119 results highlights

€m

Q219

Q218

y-o-y

H119

H118

y-o-y

Revenues

15.1

9.6

57.3%

27.0

19.0

42.0%

Licenses and maintenance

1.4

1.2

18.4%

2.9

2.4

24.9%

Services

13.7

8.4

62.9%

24.1

16.7

44.5%

Gross margin (%)

43.1%

43.8%

(0.7%)

43.5%

44.4%

(1.0%)

EBITDA

1.5

0.9

68.9%

2.8

2.1

34.7%

EBITDA margin (%)

9.9%

9.2%

0.7%

10.3%

10.9%

(0.6%)

Normalised EBIT

1.1

0.5

108.4%

2.1

1.4

50.0%

Normalised EBIT margin (%)

7.3%

5.5%

1.8%

7.6%

7.2%

0.4%

Reported net income

0.7

0.3

100.9%

2.1

0.9

139.5%

Net cash

44.2

74.0

(40.3%)

44.2

74.0

(40.3%)

Source: TXT e-solutions

TXT reported year-on-year revenue growth of 57.3% for Q219, compared with 26.5% in Q119, resulting in 42% growth for H119. Organic growth in Q219 was 26% y-o-y (Q119 17%), with a further €3.0m contribution in Q2 from the Cheleo and Assioma acquisitions (consolidated from 1 August 2018 and 1 May 2019, respectively).

Revenues from software licenses and maintenance increased 18.4% y-o-y in Q219 while revenue from services increased 62.9% y-o-y. Of the €3.0m acquired revenue contributed in Q219, €2.8m was reported within the services segment. The company noted that it had won important new contracts in the aerospace business, mainly in North America, which should provide further benefits to near-term results.

Gross margin reduced in both Q219 and H119 reflecting the higher proportion of lower margin services revenues compared to last year. Normalised EBIT more than doubled in Q219 and was 50% higher for H119, reflecting the contribution from the acquired businesses. We have treated €346k of reorganisation costs in H119 as exceptional.

In FY18, the company invested the majority of its excess cash in multi-segment insurance funds, which are marked to market. In H218, these were revalued downwards resulting in a net financial expense of €1.3m in FY18. Through the course of 2019 the assets have increased in value and the company reported net financial income of €1.8m for H119.

Net cash at the end of Q219 had reduced to €44.2m from €60.4m at the end of FY18, reflecting payment of the dividend in May (€5.8m), payment to acquire Assioma (€5.6m), purchase of treasury shares (€1m) and newly capitalised leases (€2.2m).

Exhibit 2: Divisional revenues

Revenues (€m)

H119

H118

y-o-y

Aerospace, Aviation & Automotive (AAA)

18.6

15.2

22.7%

Banking & Finance (B&F)

8.4

3.8

119.0%

- Original business

4.5

3.8

18.2%

- Cheleo & Assioma

3.9

0

N/A

Source: TXT e-solutions

On a divisional basis, growth in the AAA division was all organic. Organic growth in the B&F division was similarly strong, boosted by a €3.9m contribution from acquisitions in H119. In Q219, growth in AAA was 25% (all organic) and 196% for B&F (33% organic).

Management changes

In Q2, Marco Guida, CEO of the AAA division and previously group CEO, resigned and has since left the business. Daniele Misani, who has worked his entire career at TXT, has been appointed to this role and also the board.

The CFO, Paolo Matarazzo, resigned in July and will leave TXT at the end of September. Stepping into this role is Eugenio Forcinito, who has worked closely with Paolo at TXT for many years.

Outlook and changes to forecasts

In Q319, the company expects further revenue growth, both organic and from acquisitions, and for Q319 EBITA to be significantly ahead of Q318.

We have revised our forecasts to reflect Q2 results (Exhibit 3). As services revenues saw strong growth in H119, we have increased our services revenue forecasts for the remainder of FY19 and for FY20. We have also increased our operating cost forecasts to reflect increased investment across all cost lines. Based on the 31% tax rate achieved in H119, we have increased our tax rate forecast from 28% to 31% in FY19 and FY20. In FY19, these changes result in a 9.5% increase in normalised EPS. In FY20, the increase in the tax rate outweighs the small increase in normalised EBIT, resulting in a 5.8% decrease in normalised EPS. We note that our normalised EPS forecasts include net financial income of €1.8m in FY19, reflecting the upward valuation of short-term investments in H119, whereas in FY20 we have a €0.3m net financial income forecast reflecting a modest return on cash (as we do not attempt to estimate the likely valuation of the short-term investments). This somewhat skews the growth of EPS in both years.

Exhibit 3: Changes to forecasts

(€m)

FY19e old

FY19e new

change

y-o-y

FY20e old

FY20e new

change

y-o-y

Revenues

54.3

57.4

5.8%

43.7%

61.2

64.4

5.3%

12.2%

Gross margin (%)

42.8%

43.1%

0.3%

(1.2%)

42.2%

43.0%

0.8%

(0.0%)

Gross profit

23.2

24.7

6.5%

40.0%

25.8

27.7

7.3%

12.0%

EBITDA

5.5

5.8

5.9%

40.9%

7.3

7.2

(0.3%)

25.4%

EBITDA margin (%)

10.1%

10.1%

0.0%

(0.2%)

11.9%

11.2%

(0.6%)

1.2%

Normalised EBIT

3.9

4.3

9.3%

54.9%

5.6

5.7

0.6%

32.9%

Normalised EBIT margin (%)

7.2%

7.4%

0.2%

0.5%

9.2%

8.8%

(0.4%)

1.4%

Normalised net income

3.6

3.9

9.2%

226.1%

4.1

3.8

(6.2%)

(2.7%)

Normalised EPS (€)

0.31

0.34

9.5%

226.3%

0.34

0.32

(5.8%)

(3.2%)

Reported basic EPS (€)

0.25

0.26

4.4%

435.7%

0.29

0.27

(6.2%)

3.8%

Net cash

50.1

50.3

0.5%

(16.6%)

53.2

53.2

0.1%

5.8%

Dividend (€)

0.13

0.13

0.0%

(74.0%)

0.15

0.15

0.0%

15.4%

Source: Edison Investment Research

Valuation

Exhibit 4: Peer group valuation multiples

Company

Share

Market

Rev growth

EBIT margin

EBITDA margin

EV/Sales

EV/EBITDA

P/E

Div yield

price

cap m

CY

NY

CY

NY

CY

NY

CY

NY

CY

NY

CY

NY

CY

NY

TXT

€ 8.36

€ 98

43.7%

12.2%

7.4%

8.8%

10.1%

11.2%

0.9

0.8

9.4

7.5

24.9

25.8

1.6%

1.8%

AKKA Technologies

€ 61.90

€ 1,253

21.5%

5.3%

8.4%

8.8%

10.2%

10.6%

0.8

0.8

8.3

7.5

12.4

10.9

1.8%

2.0%

Alten

€ 107.1

€ 3,623

14.5%

7.3%

9.8%

9.9%

10.6%

10.7%

1.4

1.3

13.1

12.1

19.5

17.7

0.9%

1.0%

Altran

€ 14.35

€ 3,680

11.0%

5.6%

11.2%

12.0%

14.8%

15.3%

1.5

1.4

10.3

9.4

16.8

14.5

1.6%

1.9%

AtoS

€ 70.24

€ 7,653

(5.8%)

2.0%

9.9%

10.3%

14.5%

14.8%

1.0

1.0

7.0

6.8

8.6

8.0

2.3%

2.5%

Cap Gemini

€ 112.0

€ 18,696

7.5%

5.3%

12.1%

12.3%

15.4%

15.4%

1.4

1.3

9.1

8.6

17.2

15.6

1.7%

1.8%

Devoteam

€ 105.6

€ 878

18.7%

11.5%

11.0%

11.1%

11.9%

12.1%

1.1

1.0

9.2

8.1

18.9

16.7

1.2%

1.4%

ESI Group

€ 30.40

€ 181

1.8%

8.0%

6.1%

6.9%

8.5%

9.7%

1.5

1.4

17.3

14.1

36.6

27.6

0.0%

0.0%

Exprivia

€ 0.99

€ 51

0.0%

3.4%

4.2%

4.7%

7.5%

7.8%

0.5

0.4

6.0

5.7

9.9

6.2

0.0%

0.0%

Reply

€ 53.3

€ 1,990

13.7%

8.5%

12.7%

12.9%

14.6%

14.7%

1.7

1.5

11.5

10.5

18.8

17.1

0.9%

1.0%

Sopra Steria

€ 114.0

€ 2,336

7.9%

5.1%

7.2%

8.2%

10.4%

11.2%

0.7

0.6

6.5

5.7

11.8

9.5

2.0%

2.5%

Average

9.1%

6.2%

9.2%

9.7%

11.9%

12.2%

1.2

1.1

9.8

8.9

17.0

14.4

1.2%

1.4%

(Discount)/premium to peers

(18%)

(22%)

(4%)

(16%)

46%

79%

24%

28%

Source: Edison Investment Research, Refinitiv (as at 5 August 2019)

TXT is trading at a discount to its peer group on EV/Sales and EV/EBITDA multiples. While the company still holds a high level of cash (we forecast €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.

Recent M&A highlights the attraction of outsourced IT services

In June, CGI announced that it had made a cash offer for Scisys at 254.15p per share. This valued the company at a market cap of £78.9m. Based on consensus forecasts at the time, this equates to a FY19 EV/Sales multiple of 1.3x and a FY19 P/E of 19.0x, above the average of the peer group. Scisys was forecast to generate an EBIT margin of 8.9% in FY19 and revenue growth of 5.8%.


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

57,426

64,417

Cost of sales

(26,455)

(29,189)

(18,954)

(20,224)

(22,289)

(32,697)

(36,708)

Gross profit

27,955

32,351

14,106

15,628

17,668

24,730

27,708

EBITDA

 

 

5,324

6,659

4,260

3,536

4,098

5,776

7,241

Operating Profit (before amort and except)

 

 

4,284

5,820

3,954

3,180

2,755

4,269

5,673

Amortisation of acquired intangibles

(285)

(285)

(264)

(439)

(610)

(960)

(960)

Exceptionals and other income

1,468

0

(557)

0

(300)

(346)

0

Other income

0

(740)

0

(69)

0

0

0

Operating Profit

5,467

4,795

3,133

2,672

1,845

2,963

4,713

Net Interest

(249)

(151)

48

(208)

(1,284)

1,800

300

Profit Before Tax (norm)

 

 

4,035

5,669

4,002

2,972

1,471

6,069

5,973

Profit Before Tax (FRS 3)

 

 

5,218

4,644

3,181

2,464

561

4,763

5,013

Tax

(1,046)

(762)

(661)

(710)

4

(1,476)

(1,554)

Profit After Tax (norm)

3,226

4,739

3,170

2,170

1,204

4,187

4,122

Profit After Tax (FRS 3)

4,172

3,882

2,520

1,754

565

3,286

3,459

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

0.335

0.325

EPS - normalised fully diluted (€)

 

 

0.276

0.403

0.271

0.186

0.103

0.335

0.325

EPS - (IFRS) (€)

 

 

0.364

0.333

0.475

5.874

0.048

0.258

0.268

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

43.1

43.0

EBITDA Margin (%)

9.8

10.8

12.9

9.9

10.3

10.1

11.2

Operating Margin (before GW and except) (%)

7.9

9.5

12.0

8.9

6.9

7.4

8.8

BALANCE SHEET

Fixed Assets

 

 

18,019

18,132

25,428

8,860

22,942

30,995

28,907

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

5,321

4,221

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

123,872

121,569

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

24,421

27,394

Cash

12,304

9,080

7,570

89,683

114,541

96,010

90,434

Other

0

0

0

0

0

0

0

Current Liabilities

 

 

(17,451)

(18,349)

(21,051)

(13,612)

(30,086)

(30,636)

(32,816)

Creditors

(15,297)

(17,528)

(20,243)

(12,937)

(12,782)

(18,232)

(20,412)

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)

(37,584)

(29,084)

Long term borrowings

(1,685)

0

(1,391)

(1,688)

(36,882)

(33,282)

(24,782)

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

86,647

88,575

CASH FLOW

Operating Cash Flow

 

 

5,404

2,412

10,676

119

2,039

3,496

6,149

Net Interest

(249)

(151)

105

(208)

(69)

1,800

300

Tax

(1,344)

(1,461)

(2,022)

379

(624)

(1,476)

(1,554)

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)

(1,531)

Net Cash Flow

(16)

(426)

(1,141)

78,377

(16,825)

(10,012)

2,924

Opening net debt/(cash)

 

 

(8,575)

(8,465)

(8,259)

(5,371)

(87,320)

(60,336)

(50,324)

HP finance leases initiated

0

0

0

0

(2,788)

(2,500)

0

Other

(94)

220

(1,747)

3,572

(7,371)

2,500

0

Closing net debt/(cash)

 

 

(8,465)

(8,259)

(5,371)

(87,320)

(60,336)

(50,324)

(53,248)

Source: TXT e-solutions, Edison Investment Research


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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 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

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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