Esker 1

Moderating growth expectations for FY20

Esker 31 March 2020 Update
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Esker

Moderating growth expectations for FY20

FY19 results

Software & comp services

31 March 2020

Price

€92.0

Market cap

€516m

$1.10/£

Net cash (€m) at end FY19

21.0

Shares in issue

5.6m

Free float

68%

Code

ALESK

Primary exchange

Euronext Growth Paris

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(10.7)

0.0

34.9

Rel (local)

10.0

37.5

66.5

52-week high/low

€114.0

€68.5

Business description

Esker provides end-to-end document automation solutions, offering on-demand and on-premise delivery models. In FY19, the business generated 57% of revenues from Europe, 38% from the US and the remainder from Asia and Australia.

Next events

Q1 revenue update

14 April 2020

Analyst

Katherine Thompson

+44 (0)20 3077 5730

Esker is a research client of Edison Investment Research Limited

Esker reported FY19 revenue growth of 20%; higher than expected investment in headcount limited the increase in normalised EBIT to 7% yoy. High recurring revenues (80%) and strong order intake in FY19 (+47%) provide good visibility for FY20 and beyond. During the COVID-19 crisis, the business is providing services remotely, and while Q1 transaction volumes have not been materially affected we expect this to change in Q2. Reflecting weaker SaaS volumes and delays in signing new business in Q2, we have reduced our FY20 revenue and EPS forecasts.

Year end

Revenue (€m)

PBT*
(€m)

Diluted EPS*
(€)

DPS
(€)

P/E
(x)

Yield
(%)

12/18

86.9

12.2

1.64

0.41

56.1

0.4

12/19

104.2

13.6

1.76

0.45

52.3

0.5

12/20e

114.8

14.7

1.73

0.50

53.1

0.5

12/21e

132.9

17.9

2.07

0.55

44.4

0.6

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

FY19: Another year of growth and investment

As previously reported, Esker saw 20% revenue growth in FY19 (18% in constant currency), with 21% constant currency growth in SaaS-related revenues and 80% recurring revenues. Higher than expected investment in headcount to support customers and channel partners and drive new business resulted in normalised operating profit and EPS below our forecast. The value of committed contracts increased 47% y-o-y – these contracts will contribute to revenues over the next three years. Net cash at year-end increased 27% y-o-y to €21m.

Reflecting potential COVID-19 impact in FY20

The majority of the business is working remotely with no disruption to service. Volumes processed by the platform had not been affected by COVID-19 restrictions as at the reporting date, but we expect there could be some weakness over the coming quarter or two. Esker may see some delay in winning new business and consulting work over the next two quarters but continues to expect double-digit revenue growth in FY20. We have revised our forecasts to reflect slower revenue growth in FY20, although we still expect growth of 10%. We have cut FY20 revenue by 4.5% and EPS by 21.4%. We forecast revenue growth of 15.8% and EPS growth of 19.7% in FY21.

Valuation: Recurring revenues limit downside

The stock is down 19% from its peak in February. While it continues to trade at a premium to document automation software and French software peers on EV/sales and P/E multiples, it is trading more in line with US SaaS software companies, which likewise have high recurring revenues, high growth and web-based delivery.

Review of FY19 results

Exhibit 1: FY19 results highlights

€m

FY18

FY19e

FY19

diff

y-o-y

Revenues

86.9

104.2

104.2

0.0%

19.9%

EBITDA

18.2

22.2

20.0

(9.7%)

9.7%

EBITDA margin

21.0%

21.3%

19.2%

(2.1%)

(1.8%)

Normalised EBIT

11.9

14.9

12.8

(14.6%)

7.1%

Normalised EBIT margin

13.7%

14.3%

12.3%

(2.1%)

(1.5%)

Reported EBIT

11.5

14.7

12.4

(16.2%)

7.6%

Reported EBIT margin

13.2%

14.2%

11.9%

(2.3%)

(1.4%)

Normalised PBT

12.2

15.6

13.6

(13.4%)

11.3%

Normalised net income

9.1

10.8

10.0

(7.0%)

10.1%

Normalised diluted EPS (€)

1.64

1.89

1.76

(6.7%)

7.3%

Reported basic EPS (€)

1.64

1.92

1.80

(6.3%)

9.8%

Reported diluted EPS (€)

1.59

1.86

1.72

(7.6%)

8.2%

Net cash

16.6

21.4

21.0

(1.5%)

26.9%

DPS (€)

0.41

0.45

0.45

0.0%

9.8%

Source: Esker accounts, Edison Investment Research

Esker reported a revenue update for FY19 in January, at which point we had upgraded our forecasts to reflect stronger than expected revenue growth. Revenues grew 20% on a reported basis and 18% on a constant currency basis. Recurring revenues made up 80% of the total. SaaS revenues and related consulting activities totalled €94m, +21% y-o-y and making up 90% of revenues compared to 87% in FY18. On a constant currency basis, SaaS revenues grew 23% whereas consulting revenues only grew 11%. New hires were still being trained up to undertake implementation services and other consultants were involved in training channel partners.

The company hired at a faster rate than we had forecast, with 681 heads at year-end compared to our forecast for headcount of 663. Average headcount for the year of 642 was 3.2% ahead of our forecast. Staff costs before capitalisation of development costs totalled €60.0m compared to our €58.8m forecast and other operating costs were €1.0m higher than forecast. The company noted that it saw a couple of one-off expenses (€0.25m increase in the pension reserve due to a lower cost of capital and €0.4m increase in bad debt provisions for accounts in France and Italy) although we have not treated these as exceptional. The combination of higher operating costs resulted in EBITDA and EBIT below our forecasts. Esker achieved a normalised EBIT margin of 12.3% and a reported EBIT margin of 11.9%.

The company reported a €0.5m contribution from the joint venture with Quadient (previously called Neopost), 65% higher year-on-year. The company incurred tax at a rate of 26% on reported PBT, lower than our forecast 31% rate. Overall, this resulted in normalised diluted EPS 6.7% below our forecast, and 7.3% higher than a year ago.

Net cash at year-end increased to €21.0m – this includes cash of €6.2m invested for more than one year that is reported within fixed assets.

Order intake provides revenue visibility

The committed value of contracts signed totalled €27.2m in FY19, 47% higher than in FY18. The committed value includes only the fixed monthly subscription fee; on top of this Esker will earn variable transaction fees depending on the volume of documents processed. Typically, the full value of a three-year contract will be double that of the committed value. Esker charges acquisition costs (mainly sales and marketing) to the income statement when the contract is signed/renewed rather than recognising them over the life of the contract.

By geography, bookings in the Americas grew by 75%, Asia-Pacific by 59%, Europe by 47% and France by 13%.

Investing in customer and channel partner support

Overall headcount increased 18% y-o-y. In FY19, the company expanded its customer experience team, investing an additional €1m by increasing the size of the team by 28%. This team is focused on the existing customer base to ensure effective retention and upselling. Other significant increases in headcount were seen for consulting (+23%) and sales and marketing (+20%). As the company is keen to attract channel partners, particularly to undertake implementation of contracts, part of the increase in consulting headcount was to train and support channel partners. The most promising partners currently are KPMG Netherlands, Cegid in France and Fuji Xerox in Asia-Pacific. In fact, the company recently announced that in addition to reselling accounts payable solutions, Fuji Xerox was extending its partnership to reselling accounts receivable solutions.

Outlook and changes to forecasts

Managing through the COVID-19 crisis

From a supply perspective, Esker has enacted its business continuity plans, with the majority of its staff working from home. In the case of staff required to run its mail facilities, it is undertaking all necessary safety precautions.

From a demand perspective, the company has not seen any reduction in volumes processed through its platform. This may seem counterintuitive considering the general disruptions to the global supply chain. However, the company noted that it has a number of customers in the food manufacturing and pharmaceutical industries, and those customers are seeing an increase in business and hence invoices that need processing. It is also worth noting that because Esker’s software is cloud-based, end customer staff are able to use the software while working from home.

However, as the number of countries instituting lockdowns grows by the day, it is likely that volumes will be negatively affected for Q2 at least. The company noted that it may prove difficult to sign up new business over the next quarter or two, as customers focus on their own issues and as face-to-face meetings will not be possible while restrictions are in place. This would reduce consulting revenues for those projects and new SaaS revenues a quarter or two after signing up, depending on the length of the implementation process.

Company guidance still positive

Despite coronavirus, the company expects double-digit revenue growth and to grow profit in FY20 (in January it had said it expected to grow revenues to at least €120m in FY20, equating to growth of at least 15%). It is targeting operating profitability of 13–15%. With 80% recurring revenue and a €21m net cash balance, we believe the company is well-positioned to manage its way through COVID-19 related disruption.

Forecast changes

We have revised our forecasts to reflect higher headcount at the start of the year, lower new business in Q2 and Q3 and lower SaaS volumes in Q2. We note that we are not forecasting reported operating margins at the level the company is aiming for. Our forecasts assume that the company continues hiring through the course of FY20, albeit it a slower pace than in FY19 (FY20e headcount +10%, FY19: +18%). If it decides in the current environment to slow the pace of hiring, this should have a positive effect on operating profitability for FY20 and FY21, although this could have a longer-term impact on revenue growth.

Exhibit 2: Changes to forecasts

€m

FY20e old

FY20e new

change

y-o-y

FY21e new

y-o-y

Revenues

120.1

114.8

(4.5%)

10.2%

132.9

15.8%

EBITDA

26.0

22.0

(15.5%)

9.8%

25.9

17.8%

EBITDA margin

21.6%

19.1%

(2.5%)

(0.1%)

19.5%

0.3%

Normalised EBIT

18.0

14.0

(22.3%)

9.8%

17.2

22.9%

Normalised EBIT margin

15.0%

12.2%

(2.8%)

(0.0%)

13.0%

0.7%

Reported EBIT

17.7

13.7

(22.7%)

10.7%

16.9

23.4%

Reported EBIT margin

14.7%

11.9%

(2.8%)

0.1%

12.7%

0.8%

Normalised PBT

18.7

14.7

(21.5%)

8.6%

17.9

21.8%

Normalised net income

12.9

10.2

(21.5%)

1.1%

12.4

21.8%

Normalised diluted EPS (€)

2.20

1.73

(21.4%)

(1.5%)

2.07

19.7%

Reported basic EPS (€)

2.24

1.75

(21.8%)

(2.7%)

2.10

20.2%

Reported diluted EPS (€)

2.16

1.69

(21.8%)

(1.6%)

2.03

20.2%

Net cash

27.8

26.1

(6.1%)

24.1%

31.9

22.0%

DPS (€)

0.50

0.50

0.0%

11.1%

0.55

10.0%

Source: Edison Investment Research

Valuation

Exhibit 3 below shows Esker’s comparative valuation vs its main peers.

Exhibit 3: Peer group valuation metrics

Company

Share

Market

Rev growth

EBIT margin

EBITDA margin

EV/Sales

P/E

price

Cap m

CY

NY

CY

NY

CY

NY

CY

NY

CY

NY

Esker

€ 92.0

€ 516

10.2%

15.8%

12.2%

13.0%

19.1%

19.5%

4.3

3.7

53.1

44.4

Software companies with DPA software offerings

Basware

€ 18.60

€ 265

6.1%

10.3%

0.3%

5.5%

10.4%

14.3%

2.0

1.8

-27.1

-137.5

Bottomline

$35.05

€ 1,542

6.5%

9.9%

17.0%

17.9%

22.4%

23.2%

3.4

3.1

26.2

22.5

Coupa

$146.47

€ 9,495

25.3%

25.6%

5.0%

7.8%

8.3%

13.2%

19.4

15.5

440.9

243.6

ITESoft

€ 2.26

€ 14

0.0%

0.0%

2.5%

4.7%

8.1%

10.2%

0.6

0.6

45.2

7.1

OpenText

$45.95

€ 12,442

9.7%

9.3%

33.9%

35.1%

36.7%

38.3%

3.7

3.4

11.5

10.0

Proactis

£0.17

€ 16

-6.7%

8.3%

6.9%

7.5%

24.0%

23.4%

1.2

1.1

8.3

6.1

Tungsten Corp

£0.26

€ 32

2.9%

4.6%

-5.4%

1.0%

7.3%

13.1%

1.0

1.0

-15.1

85.8

Average*

6.3%

9.7%

8.6%

11.4%

16.7%

19.4%

4.5

3.8

22.8

11.4

Median

6.1%

9.3%

5.0%

7.5%

10.4%

14.3%

2.0

1.8

11.5

10.0

French small-cap software companies

Axway Software

€ 15.00

€ 309

2.1%

3.5%

8.9%

12.6%

10.9%

14.4%

1.2

1.1

17.2

11.8

Claranova

€ 4.59

€ 179

63.6%

17.7%

5.9%

7.4%

6.4%

8.0%

0.4

0.3

18.1

9.9

ESI Group

€ 28.50

€ 168

47.1%

5.1%

6.4%

7.7%

11.0%

12.0%

1.5

1.4

29.3

20.7

Lectra

€ 13.96

€ 444

-5.0%

9.5%

10.1%

13.5%

15.2%

18.2%

1.3

1.2

14.8

14.3

Linedata Service

€ 19.70

€ 129

-1.0%

4.2%

16.0%

16.1%

25.6%

24.7%

1.2

1.2

7.7

6.5

Sidetrade

€ 56.20

€ 79

6.6%

17.1%

5.1%

1.3%

8.2%

4.7%

2.9

2.5

Average

18.9%

9.5%

8.7%

9.8%

12.9%

13.7%

1.4

1.3

17.4

12.6

Median

4.4%

7.3%

7.7%

10.1%

10.9%

13.2%

1.3

1.2

17.2

11.8

US SaaS software companies

Average

23.9%

21.5%

6.0%

8.8%

11.9%

14.5%

10.3

8.2

116.5

81.5

Median

23.8%

22.2%

6.6%

8.5%

12.9%

13.3%

8.3

7.1

51.1

45.8

Source: Edison Investment Research, Refinitiv (30 March). Note: *Average P/E excludes Basware, Coupa and Tungsten.

Exhibit 4: Financial summary

€'000s

2014

2015

2016

2017

2018

2019

2020e

2021e

Year end 31 December

French GAAP

French GAAP

French GAAP

French GAAP

French GAAP

French GAAP

French GAAP

French GAAP

PROFIT & LOSS

Revenue

 

 

46,061

58,457

65,990

76,064

86,871

104,174

114,759

132,944

EBITDA

 

 

8,979

13,405

14,871

16,399

18,237

20,011

21,974

25,878

Operating Profit (before amort and except) 

5,700

9,257

9,934

10,547

11,913

12,762

14,018

17,222

Amortisation of acquired intangibles

0

(302)

(200)

(300)

(344)

(344)

(344)

(344)

Exceptionals and other income

53

(245)

(474)

(456)

(88)

(62)

0

0

Other income

0

0

0

0

0

0

0

0

Operating Profit

5,753

8,710

9,260

9,791

11,481

12,356

13,674

16,878

Net Interest

220

(6)

(108)

(110)

(57)

268

100

100

Profit Before Tax (norm)

 

 

5,920

9,312

9,949

10,669

12,173

13,553

14,718

17,922

Profit Before Tax (FRS 3)

 

 

5,973

8,765

9,275

9,913

11,741

13,147

14,374

17,578

Tax

(1,323)

(2,292)

(2,950)

(3,148)

(2,940)

(3,402)

(4,456)

(5,449)

Profit After Tax (norm)

4,609

6,877

6,785

7,281

9,125

10,046

10,156

12,366

Profit After Tax (FRS 3)

4,650

6,473

6,325

6,765

8,801

9,745

9,918

12,129

Average number of shares outstanding (m)

4.8

5.0

5.3

5.3

5.4

5.5

5.7

5.8

EPS - normalised (c)

 

 

97

138

128

138

169

182

179

215

EPS - normalised fully diluted (c)

 

 

90

131

122

132

164

176

173

207

EPS - (GAAP) (c)

 

 

97

130

120

128

164

180

175

210

Dividend per share (c)

24

30

30

32

41

45

50

55

Gross margin (%)

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

EBITDA Margin (%)

19.5

22.9

22.5

21.6

21.0

19.2

19.1

19.5

Operating Margin (before GW and except) (%)

12.4

15.8

15.1

13.9

13.7

12.3

12.2

13.0

BALANCE SHEET

Fixed Assets

 

 

12,552

25,184

28,324

37,912

39,635

47,201

48,601

49,501

Intangible Assets

7,709

19,603

22,381

26,673

28,096

29,323

30,823

32,023

Tangible Assets

4,470

4,985

5,158

7,115

7,050

10,434

10,334

10,034

Other

373

596

785

4,124

4,489

7,444

7,444

7,444

Current Assets

 

 

33,894

36,110

42,024

42,823

49,016

52,022

62,855

71,193

Stocks

93

161

101

176

147

185

185

185

Debtors

15,110

18,073

19,523

21,253

25,551

30,015

32,070

37,151

Cash

17,559

16,295

21,338

20,632

22,794

21,357

30,135

33,392

Other

1,132

1,581

1,062

762

524

465

465

465

Current Liabilities

 

 

(19,827)

(24,789)

(28,299)

(26,206)

(30,072)

(34,300)

(36,168)

(39,376)

Creditors

(19,827)

(24,789)

(28,299)

(26,206)

(30,072)

(34,300)

(36,168)

(39,376)

Short term borrowings

0

0

0

0

0

0

0

0

Long Term Liabilities

 

 

(5,113)

(7,317)

(7,657)

(14,909)

(10,810)

(8,276)

(5,776)

(3,276)

Long term borrowings

(5,113)

(7,317)

(7,657)

(13,716)

(9,318)

(6,516)

(4,016)

(1,516)

Other long term liabilities

0

0

0

(1,193)

(1,492)

(1,760)

(1,760)

(1,760)

Net Assets

 

 

21,506

29,188

34,392

39,620

47,769

56,647

69,512

78,042

CASH FLOW

Operating Cash Flow

 

 

9,245

14,418

15,944

17,311

18,324

20,290

21,787

24,005

Net Interest

310

(27)

(127)

(75)

63

352

100

100

Tax

(1,075)

(1,165)

(1,456)

(2,053)

(2,795)

(3,329)

(4,456)

(5,449)

Capex

(4,028)

(3,909)

(7,021)

(9,304)

(7,789)

(10,958)

(9,700)

(9,900)

Acquisitions/disposals

22

(11,700)

(935)

(7,551)

(225)

(523)

0

0

Financing

(694)

1,324

467

(345)

785

1,449

0

0

Dividends

(877)

(1,208)

(1,550)

(1,633)

(1,756)

(2,237)

(2,653)

(2,999)

Net Cash Flow

2,903

(2,267)

5,322

(3,650)

6,607

5,044

5,078

5,757

Opening net debt/(cash)

 

 

(11,961)

(12,446)

(8,978)

(13,681)

(10,016)

(16,576)

(21,041)

(26,119)

HP finance leases initiated

(2,293)

(1,090)

(645)

0

0

0

0

0

Other

(125)

(111)

26

(15)

(48)

(579)

(0)

0

Closing net debt/(cash)

 

 

(12,446)

(8,978)

(13,681)

(10,016)

(16,576)

(21,041)

(26,119)

(31,876)

Source: Esker accounts, Edison Investment Research


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Copyright: Copyright 2020 Edison Investment Research Limited (Edison).

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 Esker and prepared and issued by Edison, in consideration of a fee payable by Esker. 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 2020 Edison Investment Research Limited (Edison).

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

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