Maintaining a growth focus

Walker Greenbank 13 October 2017 Update
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Walker Greenbank

Maintaining a growth focus

H118 results

Care & household goods

13 October 2017

Price

227p

Market cap

£161m

Net debt (£m) at end July 2017

5.2

Shares in issue

70.9m

Free float

92%

Code

WGB

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(5.8)

(0.2)

12.1

Rel (local)

(7.9)

(2.6)

3.1

52-week high/low

241.5p

195.5p

Business description

Walker Greenbank is a luxury interior furnishings group combining specialist design skills with high-quality upstream manufacturing facilities. Leading brands include Harlequin, Sanderson, Morris & Co, Scion, Anthology, Zoffany and Clarke & Clarke.

Next events

H118 DPS 0.69p ex dividend

20 October 2017

H118 DPS paid

17 November 2017

Analysts

Toby Thorrington

+44 (0)20 3077 5721

Roger Johnston

+44 (0)20 3077 5722

Walker Greenbank is a research client of Edison Investment Research Limited

Progress from organic and acquired operations was clearly visible in H118, slightly tempered by subdued UK Brands performance at the period end. Strong dividend growth, prospective cash generation and international developments all send positive signals for future prospects. Save for slightly improved dividend expectations, our headline estimates are unchanged and we believe Walker Greenbank offers investors above-average growth exposure.

Year end

Revenue (£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

01/16

87.8

8.9

11.6

2.9

19.6

1.3

01/17

92.4

10.4

12.9

3.6

17.6

1.6

01/18e

114.7

14.3

16.1

4.5

14.1

2.0

01/19e

119.7

15.2

17.0

5.6

13.4

2.5

Note: *PBT and EPS (fully diluted) are normalised, excluding exceptional items and LTIP charges.

Positive H1 signals

H118 results showed good growth in revenue and EBIT at both divisional and group levels. Trading highlights included a strong maiden first half contribution from Clarke & Clarke, further development of Brands’ activities in international markets and confirmation that Standfast & Barracks has put post-flood disruption firmly behind it. The 25% y-o-y uplift in DPS provided a positive marker regarding management’s view of future prospects. Walker Greenbank’s net debt position was slightly better than at the end of January 2017 and the company is on track to significantly reduce borrowings by the end of FY18 on our estimates.

Good growth expected, balance sheet flexibility

As noted following the pre-close update, UK demand appeared to soften towards the period end; this needs to be monitored but the latest five weeks in H2 – leading into a traditionally strong trading period – provides more encouragement. We have made adjustments to the composition of our estimates; there is no net change to headline revenue, EBIT, PBT or EPS estimates while we have nudged up our dividend growth expectations. No further insurance-related costs, proceeds or capex are anticipated. With a neutral balance sheet position at the end of FY18 and cash generation expected thereafter, Walker Greenbank retains plenty of financial flexibility for investment and/or acquisitions to enhance earnings growth and investor returns alongside a prospective 25% three-year DPS CAGR.

Valuation: Regaining momentum

Walker Greenbank’s share price has eased back from pre-results highs but remains up (c 8%) ytd. Our estimates factor in three-year CAGRs (2017-20) of 10.5% for normalised EPS. Consequently, the current-year P/E and EV/EBITDA multiples of 14.1x and 9.2x decline by FY20 to 12.6x and 8.3x, respectively. We believe that confirmation of firmer UK trading will allow the share price to regain forward momentum. Dividend yield is becoming an increasingly attractive part of the investment case.

H118 results overview

Walker Greenbank reported revenue and EBIT progress in both divisions; Brands was boosted by a maiden H1 contribution from Clarke & Clarke, while Manufacturing confirmed its good recovery from a flood-affected prior year. International demand (including Licensee income) was generally firmer than the UK, though some improvement has been noted here latterly. With unchanged headline estimates we continue to expect an ungeared balance sheet position by the end of FY18.

Exhibit 1: Walker Greenbank divisional & interim splits

Year-end January (£m)

H117

H217

FY17

H118

H118

H118

% change

% change

reported

CER l-f-l*

Group revenue

41.8

50.5

92.4

54.3

29.7%

N/A

Brands

33.8

42.8

76.6

45.2

33.4%

N/A

UK

18.8

23.8

42.5

23.5

25.1%

-2.6%

Overseas

14.0

17.6

31.6

20.3

45.6%

2.7%

Licensing

1.1

1.5

2.6

1.3

21.1%

17.9%

Manufacturing

15.0

17.1

32.0

16.1

7.5%

N/A

UK

6.2

6.0

12.2

7.3

17.4%

17.4%

Overseas

1.8

1.7

3.5

1.8

1.6%

N/A

Inter company

-7.0

-9.3

-16.3

-7.0

Group operating profit (reported)

3.6

6.3

9.8

5.5

55.2%

N/A

Brands

3.6

5.6

9.2

6.0

65.7%

N/A

Manufacturing

0.2

0.9

1.0

0.5

184.5%

N/A

Central items**

-0.2

-0.2

-0.4

-1.0

Source: Edison Investment Research, Walker Greenbank data. Note: *Underlying, adjusted for FX movements and the Clarke & Clarke part-year contribution (from October 2016). **Loss of profits figures of £1.6m and £2.8m included in central items in H117 and FY17 and £1.1m in H118, respectively.

Brands: Internationally recognised heritage and contemporary, premium and mid-market, wall covering and furnishing brands (Sanderson, Morris & Co, Harlequin, Zoffany, Scion, Anthology, Clarke & Clarke, Studio G).

Clarke & Clarke (acquired October 2016) has bedded into the group well, contributing £10.3m revenue in H1 generated both in the UK and overseas. Management estimates growth to have been c 10% against the pre-acquisition prior year and it launched 11 new collections in H118 (seven Clarke & Clarke, four Studio G). The benefits of group UK and some overseas distribution arrangements will also have contributed to increased profitability and the overall 250bp uplift in divisional operating margin (to 13.2%). Studio G is to enter the US market by launching 11 new collections during H218. Among existing operations, the heritage brands (Sanderson, Morris & Co, together c 26% of H118 divisional revenue) put in the strongest y-o-y performance benefitting from collections launched in the prior year and significant international exposure. Harlequin and the associated Scion and Anthology brands (c 35% H118 revenue) and Zoffany (c 13%) saw more mixed trading being generally ahead in export markets including currency effects but lower y-o-y in the UK. Overall, the UK accounts for around half of divisional sales geographically and the performance of larger customers and internet channels is being somewhat diluted by softer demand among smaller accounts and slower contract/commercial activity. During H1, these existing brands were brought together under the Style Library umbrella with an aligned, cross-brand sales team. The US is the division’s largest international market and appears to have the greatest momentum currently while some variation has been apparent in western Europe. Brand licensing has broadened the furnishings offering (eg into blinds, bedding, giftware) in the UK and overseas to create profitable additional revenue streams and also raise awareness for the core wallcoverings and fabrics lines. FY17 was a particularly active year for establishing new licencees which are now contributing to Licensing revenue growth. Further agreements have been made in China for the local market and India for export to the US which should also gather momentum into FY19.

Manufacturing: Two locations, Anstey (wallcoverings) and Standfast & Barracks (fabrics), that produce high-end furnishings with output split broadly equally between the group Brands division and third parties.

This division manufactures for in-house brands (just under half of expected revenues) and also for third-party customers, largely based in the UK. In contrast to the Brands division, Manufacturing saw a much stronger relative performance in the UK (revenue +17.4% y-o-y) and more modest export growth (+1.6%), with internal sales value unchanged from the prior year. H117 activity levels (ie six months to July 2016) included the initial flood recovery period at Standfast & Barracks (S&B) so y-o-y comparisons are influenced by this.

Third-party sales rose by c 32% at S&B. There would have been clear limitations in meeting external demand in the prior year and revenues generated by domestic UK and export customers rose strongly (+47.3% and +24.3% respectively) in H118. We believe the former effect reflected a rebound from depressed H116 levels, including re-print runs and new collections launched. As expected, owing to market and price point segmentation, only a limited amount of work has been undertaken internally for Clarke & Clarke and this is likely to remain the case. In overseas markets, especially in Europe, new accounts with mid and upper level converters (ie fabrics into finished products) boosted export sales and relative sterling weakness will have been beneficial here. Digitally printed fabric sales continue to grow strongly and account for a significant proportion of S&B sales.

Anstey experienced a 7.6% drop in revenue in H118, seeing softness in both UK sales (-2.2% y-o-y) and in exports (-15.4%) to external customers. While new collection launches (both internal and third-party ranges) have been positive for revenue development, the level of re-print activity on existing collections is understood to have been at lower levels. UK performance is likely to reflect similar end market demand characteristics to those seen in the Brands division. The smaller export segment performance is more attributable to fewer customer collection launches compared to the prior year. Other developments at Anstey include the launch of an in-house paint capability in September. This includes a move to in-house tinting and distribution of complementary colours to the Sanderson and Zoffany ranges underpinned by a switch to a new paint supplier, PPG. We see this as a logical move which enables the provision of an enhanced customer service and support faster growth of another product line.

The overall profitability of manufacturing operations improved on a reported basis (by c £0.3m to £0.5m equivalent to a 3.1% EBIT margin). Loss-of-profits insurance proceeds have been consistently reported within central items and amounted to £1.1m in H118 compared to £1.6m in H117. Improving underlying performance and receding insurance payments (which are not expected to recur from H218 onwards) give a clear indication that the flood effects have now passed through. Lastly, we note that both Anstey and S&B are both well-invested in digital printing technologies and account for c 10% and c 40% of total revenues respectively. S&B is to install a third line – a high-speed digital pigment printer – to augment its existing capability. Printing technology continually evolves; a strength of Manufacturing operations at both locations is the range of capabilities – including more traditional methods – which allow new ranges to be developed using a broad range of materials and substrates. As the dominant scale producer of wallcoverings and fabrics in the UK, this represents a strong competitive position.

Expect ungeared balance sheet at the end of FY18

Walker Greenbank ended July with £5.2m net debt, slightly below the level at the start of the year. A tail of cash flows (both in and out) related to reparation and loss of profits reimbursements following the December 2015 flood at Standfast & Barracks again featured; we believe that these were broadly in balance in the first six months and, with the possible exception of capex (see below), H1 group cash flow was fairly representative of normal underlying trading.

Positive operating cash flow: EBITDA rose by over £2m to £7.5m compared to the prior year and the maiden H1 contribution from Clarke & Clarke will have been a significant contributor to this. Non-trading items absorbed £1.8m cash; pension scheme payments accounted for half of this amount, the remainder being some restructuring spend and a small net outflow relating to flood reparation costs. (In H117, there was a beneficial timing of insurance receipts relative to costs incurred.) The typically seasonal net working capital outflow in H118 was in line with the prior year at £4m; we also note that the composition was similar to H116 ie prior to flood-related variances seen in the intervening period. Overall, £1.7m operating cash inflow was generated in the period.

Free cash flow normalising: Following the acquisition of Clarke & Clarke, interest and tax payments were both ahead of the prior year, and by £0.3m at £1.2m in aggregate. Post flood activities have distorted the profile of capital spending over the last 18 months from a combination of restoration and replacement activity and associated insurance policy receipts. Given that full production was resumed at Standfast & Barracks during 2016, spend in this area naturally tapered down in H118 to £2.1m gross (ie £1.7m PPE, £0.4m intangibles) versus £3.4m in H117 (and £6.7m in FY17). Specific items of spend included the Chelsea Harbour showroom. Net capex spend was reduced by the receipt of £1.8m representing the final insurance receipt for replacement equipment. After all of the aspects, overall free cash flow was marginally positive and equated to the reduction of net debt in the trading period. Dividend cash outflows (ie current year interim and prior year final) have historically all fallen into H2 and this profile is ongoing in FY18. No cash was paid as deferred consideration for Clarke & Clarke in H118 although 1.117m new shares were issued in June (at 206.5p)

Cash outlook: Our estimates project an effectively ungeared balance sheet by the year end after a strong expected H2 cash inflow and no further insurance-related costs or receipts. We expect top line growth to require some working capital investment, interest costs to decline after FY18, cash tax to be broadly in line with the P&L charge and for capex spend to be in the £3-3.5m range. The resulting £8-10m free cash flow comfortably funds a rising dividend profile and at the same time increases financial flexibility for further investment and/or acquisitions.

Estimates maintained, dividend growth expectation nudged up

Outlook for the remainder of FY18: We expect international markets to remain better than the UK. The US in particular – with additional momentum from a new design showroom (in Chicago) and the launch of Studio G ranges – appears to have good prospects. Additionally, increased licensing activity will build the company’s presence in China and Russia. UK Brands did show a soft end to H118; this division is now recovering against tough prior year comps (due to flood-related order backlog work through) and we understand that order intake in the latest five weeks trading has been up 4-5% y-o-y. We are cognisant of the risks of extrapolating a short period forward but the timing of this uptick is significant, coming ahead of what is traditionally the busiest selling period.

No headline changes in updated estimates: No change to our headline revenue, EBIT, PBT or EPS estimates. Behind these figures, we have made some adjustments to the expected mix based on H118 performance which, by definition net off against each other. Specifically within Brands, Clarke & Clarke has stronger momentum than we had previously modelled, benefitting both revenue and EBIT contributions. Among the pre-existing brands, we have made smaller upward adjustments to our Sanderson and Licensing revenues and small downward adjustments to Harlequin and Zoffany. Faster dividend growth projected: We had previously projected FY18 dividend growth of 15%; now, given the H118 increase of c 25%, we have raised our expected full year increase to 25%. Additionally, the two subsequent years also now show progress of 25% pa, and a three-year CAGR at the same level. Over this time period, dividend cover reduces from 3.6x to a still healthy 2.6x on our estimates.

Exhibit 2: Financial summary

£m

2013

2014

2015

2016

2017

2018e

2019e

2020e

January

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

 

 

 

 

 

 

 

 

 

 

Revenue

 

 

75.7

78.4

83.4

87.8

92.4

114.7

119.7

124.2

Cost of Sales

 

 

(30.2)

(30.3)

(32.7)

(35.9)

(36.2)

(45.9)

(47.9)

(49.7)

Gross Profit

 

 

45.5

48.1

50.7

52.0

56.2

68.8

71.8

74.5

EBITDA

 

 

8.6

9.7

10.7

11.8

13.4

18.0

19.1

20.0

Operating Profit (before GW, except. & LTIP)

6.6

7.5

8.3

9.1

10.6

14.6

15.4

16.1

Operating Profit (before GW and except.) - reported

5.8

6.5

7.3

8.2

9.8

13.6

14.4

15.1

Net Interest

 

 

(0.2)

(0.2)

(0.2)

(0.2)

(0.2)

(0.3)

(0.2)

(0.1)

Intangible Amortisation - acquired

 

 

0

0

0

0

(0.3)

(1.1)

(1.1)

(1.1)

Pension net finance charge

(0.7)

(0.9)

(0.8)

(0.7)

(0.5)

(0.7)

(0.7)

(0.7)

Exceptionals

 

 

0

0

0

0

(1.8)

(0.5)

0.0

0.0

Other

 

 

0

0

0

0

0.0

0.0

0.0

0.0

Profit Before Tax (norm)

 

 

6.4

7.3

8.1

8.9

10.4

14.3

15.2

16.0

Profit Before Tax (FRS 3)

 

 

4.9

5.5

6.3

7.3

7.0

11.1

12.5

13.3

Tax

 

 

(1.0)

(0.5)

(1.2)

(1.5)

(1.6)

(2.5)

(2.7)

(2.7)

Profit After Tax (norm)

 

 

5.4

6.6

6.9

7.5

8.6

11.8

12.5

13.3

Profit After Tax (FRS 3)

 

 

4.0

5.0

5.1

5.9

5.4

8.6

9.8

10.6

 

 

 

 

 

 

 

 

 

 

 

Average Number of Shares Outstanding (m)

 

57.5

58.5

59.3

60.0

62.7

70.2

71.0

71.4

EPS - normalised (p) FD

 

 

9.4

10.7

11.2

11.6

12.9

16.1

17.0

18.0

EPS - FRS 3 (p)

 

 

6.9

8.6

8.6

9.8

8.6

12.3

13.8

14.8

Dividend per share (p)

 

 

1.5

1.9

2.3

2.9

3.6

4.5

5.6

7.0

 

 

 

 

 

 

 

 

 

 

 

Gross Margin (%)

 

 

60.1

61.3

60.8

59.2

60.8

60.0

60.0

60.0

EBITDA Margin (%)

 

 

11.4

12.4

12.8

13.4

14.6

15.7

16.0

16.1

Operating Margin (before GW and except.) (%)

7.7

8.3

8.8

9.3

10.7

11.9

12.0

12.1

 

 

 

 

 

 

 

 

 

 

 

BALANCE SHEET

 

 

 

 

 

 

 

 

 

 

Fixed Assets

 

 

18.5

21.1

21.5

18.9

47.5

47.4

46.2

44.7

Intangible Assets

 

 

6.7

7.3

7.2

7.1

31.6

31.5

30.2

29.0

Tangible Assets

 

 

9.8

11.7

12.7

11.7

15.8

15.9

15.9

15.7

Investments

 

 

2.0

2.2

1.6

0.1

0.0

0.0

0.0

0.0

Current Assets

 

 

32.6

35.3

37.1

40.3

51.3

59.8

60.4

67.9

Stocks

 

 

16.8

18.4

22.0

18.1

30.3

32.4

33.8

35.1

Debtors

 

 

12.8

13.9

14.1

19.3

15.5

17.7

18.4

19.0

Cash

 

 

2.9

2.8

1.0

2.9

1.5

6.6

5.1

10.7

Other

 

 

0.1

0.2

0.0

0.0

 

 

 

 

Current Liabilities

 

 

(17.3)

(19.4)

(20.7)

(19.4)

(34.8)

(37.1)

(32.0)

(33.6)

Creditors

 

 

(16.9)

(19.0)

(20.3)

(19.0)

(28.0)

(30.3)

(32.0)

(33.6)

Short term borrowings

 

 

(0.4)

(0.4)

(0.4)

(0.4)

(6.8)

(6.8)

0.0

0.0

Long Term Liabilities

 

 

(9.6)

(10.2)

(10.9)

(4.5)

(12.7)

(10.2)

(7.3)

(4.4)

Long term borrowings

 

 

(1.4)

(0.9)

(0.6)

(0.2)

0.0

0.0

0.0

0.0

Other long term liabilities

 

 

(8.2)

(9.2)

(10.4)

(4.3)

(12.7)

(10.2)

(7.3)

(4.4)

Net Assets

 

 

24.2

26.9

26.9

35.3

51.3

59.9

67.3

74.6

 

 

 

 

 

 

 

 

 

 

 

CASH FLOW

 

 

 

 

 

 

 

 

 

 

Operating Cash Flow

 

 

6.0

6.2

3.5

7.1

12.4

12.3

15.1

16.1

Net Interest

 

 

(0.2)

(0.2)

(0.2)

(0.1)

(0.2)

(0.3)

(0.2)

(0.1)

Tax

 

 

(0.0)

(0.0)

(0.0)

(0.6)

(2.3)

(2.5)

(2.7)

(2.7)

Capex

 

 

(3.1)

(4.7)

(3.2)

(2.5)

(6.7)

(3.5)

(3.5)

(3.5)

Acquisitions/disposals

 

 

0.0

0.0

0.0

0.0

(27.1)

0.0

0.0

0.0

Financing

 

 

(0.1)

(0.0)

(0.4)

(0.1)

18.3

1.8

0.0

0.0

Dividends

 

 

(0.7)

(0.9)

(1.1)

(1.4)

(1.8)

(2.7)

(3.3)

(4.2)

Net Cash Flow

 

 

1.8

0.3

(1.5)

2.3

(7.4)

5.1

5.4

5.6

Opening net debt/(cash)

 

 

0.7

(1.2)

(1.5)

(0.0)

(2.3)

5.3

0.2

(5.1)

HP finance leases initiated

 

 

0.0

0.0

0.0

0.0

(0.0)

0.0

0.0

0.0

Other

 

 

0.0

0.0

0.0

0.0

(0.2)

0.0

0.0

0.0

Closing net debt/(cash)

 

 

(1.2)

(1.5)

(0.0)

(2.3)

5.3

0.2

(5.1)

(10.7)

Source: Company accounts, Edison Investment Research. Note: This note calculates EV/EBITDA multiples using last reported net debt.

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Copyright 2017 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Walker Greenbank and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.
Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2017. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2017 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Walker Greenbank and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.
Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2017. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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