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On the front foot

Checkit 29 April 2021 Update
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Checkit

On the front foot

FY21 results

Software & comp services

29 April 2021

Price

62.0p

Market cap

£39m

Net cash (£m) at end FY21

11.5

Shares in issue

62.4m

Free float

56.2%

Code

CKT

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

17.0

21.9

64.8

Rel (local)

13.2

14.1

33.7

52-week high/low

58.5p

30.0p

Business description

Checkit optimises the performance of people, processes and physical assets with connected digital solutions. It is headquartered in Cambridge, UK and has its operations centre in Fleet, UK.

Next events

Q122 trading update

May 2021

Analyst

Katherine Thompson

+44 (0)20 3077 5730

Checkit is a research client of Edison Investment Research Limited

Checkit’s results confirm that FY21 was a game of two halves: in H1 it coped with COVID-19 disruption and kept costs and cash burn under control; H2 saw the return to more normal trading while working on business transformation to lay the groundwork for future growth. Despite the pandemic, FY21 revenue grew 3% y-o-y and ARR grew 46% y-o-y. So far in FY22, the company has expanded operations in the US and ramped up its sales and marketing efforts. We have revised our forecasts to reflect faster growth in ARR combined with higher sales and marketing spend.

Year end

Revenue (£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

EV/Sales
(x)

01/20

9.8

(6.4)

(4.0)

0.0

N/A

2.8

01/21

13.2

(3.1)

(5.2)

0.0

N/A

2.1

01/22e

15.2

(4.5)

(7.2)

0.0

N/A

1.8

01/23e

17.8

(2.7)

(4.3)

0.0

N/A

1.5

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

FY21: Transforming the business

Despite COVID-19 restrictions making it harder to undertake certain customer projects in H121, Checkit reported 3% revenue growth (on a normalised basis) for FY21. A combination of new business wins, shifting existing customers from one-off to subscription contracts and better pricing resulted in growth in annualised recurring revenue (ARR) of 46% y-o-y. The EBITDA loss of £2.5m for FY21 was reduced from the £4.9m in FY20 due to good cost control and initial benefits from the group’s business transformation programme, while the company maintained spending on product development during the year.

FY22: Hitting the accelerator

According to management, FY22 started well. Checkit has strengthened its presence in the US with an acquisition and the hire of a country MD, and has decided to accelerate its sales and marketing efforts to take advantage of the opportunity it sees to sell its workflow management and monitoring software globally. We have revised our forecasts to reflect faster growth in ARR driven by the higher sales and marketing spend. We forecast ARR growth of 34% in FY22 and 50% in FY23, with EBITDA of -£3.9m in FY22 (from -£2.4m previously) and -£2.0m in FY23. We forecast net cash of £3.5m by the end of FY23.

Valuation: Sum of parts suggests upside

On an EV/sales multiple of 1.8x for FY22e and 1.5x for FY23e, Checkit trades at a significant discount to the UK software sector (6.5x current year sales). On a sum-of-the-parts basis attributing EV/sales multiples that better reflect the performance and prospects for each division, we estimate that the stock is significantly undervalued. For example, using a 4x FY22e multiple for Checkit Connect and 1x for Checkit BEMS would result in a valuation of 83p per share (see page 4 for details).

Review of FY21 results

Exhibit 1: Checkit FY21 results highlights

£m

FY20a*

FY21e

FY21a

Diff

y-o-y

Revenues

9.8

13.2

13.2

0.0%

34.7%

Gross profit

2.6

4.8

4.7

-1.1%

80.8%

Gross margin

26.5%

36.0%

35.6%

-0.4%

9.1%

EBITDA

(4.9)

(2.5)

(2.5)

-1.8%

-49.0%

EBITDA margin

-50.0%

-19.3%

-18.9%

0.4%

31.1%

Normalised operating profit

(6.5)

(3.3)

(3.1)

-7.4%

-52.3%

Normalised operating profit margin

-66.3%

-25.4%

-23.5%

1.9%

42.8%

Reported operating profit

(9.2)

(4.1)

(5.3)

29.4%

-42.4%

Reported operating margin

-93.9%

-31.0%

-40.2%

-9.1%

53.7%

Normalised PBT

(6.4)

(3.3)

(3.1)

-7.4%

-51.6%

Reported PBT

(9.1)

(4.1)

(5.3)

29.4%

-41.8%

Normalised net income

(6.4)

(3.3)

(3.1)

-7.4%

-51.6%

Reported net income

80.8

(3.2)

(4.4)

37.6%

N/A

Normalised basic & diluted EPS (p)

(4.0)

(5.4)

(5.2)

-3.7%

30.8%

Reported basic & diluted continuing EPS (p)

(5.6)

(6.6)

(8.3)

25.8%

48.2%

Reported basic & diluted EPS (p)

50.2

(5.2)

(7.2)

39.0%

N/A

Net debt/(cash)

(14.3)

(11.5)

(11.5)

0.0%

-19.6%

Source: Checkit. Note: *Checkit has restated FY20 results to reflect changes to intangibles accounting treatment. Further detail below.

Exhibit 2: Revenue performance

Revenue

FY20 normalised*

FY20a

FY21a*

Checkit Connect

6.0

4.8

6.7

Recurring

3.9

3.2

5.1

Non-recurring

2.1

1.6

1.6

Checkit BEMS - all non-recurring

6.8

5.0

6.5

Total revenue

12.8

9.8

13.2

Recurring

30.5%

32.7%

38.6%

Non-recurring

69.5%

67.3%

61.4%

Revenue growth (y-o-y)

Checkit Connect

13%

Checkit BEMS

(5%)

Total

3%

Revenue growth – recurring

33%

Revenue growth – non-recurring

(9%)

Source: Checkit. *Note: FY21 growth is with respect to FY20 normalised revenue, which treats Checkit UK Ltd as owned for the whole of FY20 (acquired on 14 May 2019).

Checkit’s trading update in February provided detail on the expected divisional split of revenue and the mix between recurring and non-recurring revenue for FY21 and this has not changed (see Exhibit 2). Revenue was therefore in line with our forecasts, with gross profit just slightly lower. EBITDA was in line and normalised operating loss was slightly smaller than expected due to lower than expected depreciation. One-off charges in FY21 totalled £0.9m (£0.8m restructuring costs, £0.1m costs related to the Tutela acquisition). There was zero tax charge in the year and a £0.3m deferred tax credit with losses carried forward of more than £15m for use against future profits. Net cash at year-end was £11.5m.

The company noted that annualised recurring revenue (ARR) was £5.7m at year-end, an increase of 46% y-o-y. The increase was the result of:

£0.7m in new business, particularly from the NHS and food retail sector;

£0.6m conversion of healthcare contracts from a combination of recurring revenues with one-off revenues to a subscription-based agreement; and

£0.5m from pricing changes.

Explanation of FY20 restatements

In FY20, the company took the decision in the light of COVID-19 uncertainty to write down goodwill and acquired intangibles to zero, resulting in impairment charges totalling £7.3m. In addition, it decided to write down previously capitalised development costs to zero, resulting in a further charge of £2.3m. This resulted in a qualified audit opinion for FY20. In FY21, management has revisited this policy and decided to reinstate both the goodwill and acquired intangible balances, although it has retained the write-down of the capitalised development costs. This reduces one-off charges in FY20 from £10.3m to £1.7m and increases amortisation of acquired intangibles from zero to £1.3m in FY21.

Certain costs in the FY20 income statement have since been classified as relating to discontinued operations and have been stripped out of continuing operations (total £0.4m).

As development costs incurred in FY21 did not meet the criteria for capitalisation, they were expensed in the income statement (£2.5m, flat y-o-y).

Business update

Despite the disruption caused by COVID-19 during FY21, the company made good progress in its strategy to grow its SaaS software business and convert certain one-off contracts to subscription-based contracts.

FY21: Costs managed, product development ongoing

In H121, costs were monitored closely and staff furloughed where they were not able to undertake work at client sites. Employees also took voluntary pay cuts. This allowed the company to control cash consumption, with net cash declining only £0.9m in H121. In H221, furloughed staff returned to work, and despite further lockdowns, more customer sites were open for implementation work. For FY21, operating costs before depreciation and amortisation totalled £7.2m, helped by £0.4m from the government job retention scheme. This compares to £7.5m in FY20, which only included 8.5 months of the Checkit UK acquisition.

Product development continued throughout the year to enhance the three software solutions. New or improved features for the Connected Workflow Management (CWM) solution include teamworking (which allows more than one team member to work on the same workflow at the same time), providing contextual information (eg instruction manuals, guides), Checkpoint extension (adding flexibility to Checkpoint, which links workflow to assets or locations) and label printing. Across the whole software offering, Checkit has made available business intelligence and recommendations and added multi-language capabilities.

The company also implemented a transformation plan to shape the business to better support its goal to be a global SaaS provider. This process will be ongoing in FY22 and includes integrating Salesforce into operations in H222.

FY22: Pressing the accelerator

Post year-end, Checkit acquired Tutela in the US (see our update note published on 11 February 2021), hired Steve Peck as managing director to head up the US operations and ramped up its sales and marketing effort, including the hire of Kit Kyte as chief commercial officer.

The company recently announced that it had added self-service capability to sensor network installation – this should help with international expansion as it removes the need for implementation teams (either in-house or partners) in all geographies and helps when travel restrictions are in place. Future product development includes:

The integration of CWM with its Connected Automated Monitoring (CAM) and Connected Building Management (CBM) software, such that an alarm raised by sensors monitored within CAM or CBM can trigger a workflow within CWM.

Process sharing across company boundaries. This is particularly useful for franchises, where franchise owners want to standardise and monitor the processes of franchisees.

The business has now shifted its focus to customer acquisition with the goal of replicating its success in Europe in the US.

Outlook and changes to forecasts

Management noted that FY22 has started well and will provide a further update in its Q122 trading update due in May. We have revised our forecasts to reflect faster expected growth in ARR as well as a step-up in sales and marketing spend in FY22. We introduce forecasts for FY23 showing an acceleration in ARR growth as a result of this increased spend on customer acquisition.

Exhibit 3: Changes to forecasts

£'m

FY22e

FY23e

Old

New

Change

y-o-y

New

y-o-y

Revenues

15.1

15.2

0.6%

14.9%

17.8

17.1%

Gross profit

5.6

5.7

0.7%

20.5%

8.1

42.9%

Gross margin

37.3%

37.3%

0.0%

1.7%

45.5%

8.2%

EBITDA

(2.4)

(3.9)

59.9%

55.5%

(2.0)

-48.4%

EBITDA margin

-16.1%

-25.6%

-9.5%

-6.7%

-11.3%

14.3%

Normalised operating profit

(3.2)

(4.5)

38.9%

44.7%

(2.7)

-39.7%

Normalised operating profit margin

-21.4%

-29.6%

-8.2%

-6.1%

-15.2%

14.3%

Reported operating profit

(3.6)

(6.2)

70.4%

16.7%

(3.1)

-49.8%

Reported operating margin

-24.1%

-40.8%

-16.7%

-0.6%

-17.5%

23.3%

Normalised PBT

(3.2)

(4.5)

38.9%

44.7%

(2.7)

-39.7%

Reported PBT

(3.6)

(6.2)

70.4%

16.7%

(3.1)

-49.8%

Normalised net income

(3.2)

(4.5)

38.9%

44.7%

(2.7)

-39.7%

Reported net income

(3.6)

(6.2)

70.4%

40.6%

(3.1)

-49.8%

Normalised basic & diluted EPS (p)

(5.2)

(7.2)

38.9%

38.2%

(4.3)

-39.7%

Reported basic EPS (p)

(5.8)

(9.9)

70.4%

38.5%

(5.0)

-49.8%

Net debt/(cash)

(7.1)

(5.1)

-29.0%

-56.1%

(3.5)

-31.3%

ARR

6.9

7.6

10.9%

34.2%

11.5

50.0%

Source: Edison Investment Research

Valuation

With Checkit not expected to hit full-year EBITDA profitability within our forecast period, comparison with peer multiples is restricted to EV/sales multiples. Checkit trades at a significant discount to UK software peers (on average 6.5x current year forecasts), in our view reflecting its current loss-making position and mix of recurring versus non-recurring business. Currently, around half of Checkit’s revenues could be considered as SaaS-based (ie Checkit Connect revenues), but we expect this proportion to increase over time as Checkit Connect grows more quickly than Checkit BEMS. Within Checkit Connect, we also expect recurring revenues to increase as a proportion of divisional revenues, which should also be more highly valued.

Looking at the business on a sum-of-parts basis, in the table below we show the potential valuation on the basis of a range of multiples for each part of the business. Using a multiple of 4x FY22e sales for Checkit Connect (at a discount to UK software peers and well below larger US SaaS peers) and 1x for Checkit BEMS (reflecting limited growth prospects for this part of the business) would suggest a fair value of 83p per share, well ahead of the current share price of 62.0p.

Exhibit 4: Sum-of-parts per share valuation (pence) based on EV/sales multiples

Checkit Connect multiple (x)

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

Checkit BEMS multiple
(x)

0.2

34

48

61

75

88

102

116

129

0.4

36

50

63

77

91

104

118

131

0.6

38

52

66

79

93

106

120

133

0.8

41

54

68

81

95

108

122

136

1.0

43

56

70

83

97

111

124

138

1.2

45

58

72

86

99

113

126

140

1.4

47

61

74

88

101

115

128

142

Source: Edison Investment Research


Exhibit 5: Financial summary

£m

2019

2020

2021

2022e

2023e

31-January

IFRS

IFRS

IFRS

IFRS

IFRS

INCOME STATEMENT

Revenue

 

 

1.0

9.8

13.2

15.2

17.8

Cost of Sales

(1.0)

(7.2)

(8.5)

(9.5)

(9.7)

Gross Profit

0.0

2.6

4.7

5.7

8.1

EBITDA

 

 

(2.3)

(4.9)

(2.5)

(3.9)

(2.0)

Normalised operating profit

 

 

(4.4)

(6.5)

(3.1)

(4.5)

(2.7)

Amortisation of acquired intangibles

(0.1)

(1.0)

(1.3)

(1.3)

(0.4)

Exceptionals

0.0

(1.7)

(0.9)

(0.4)

0.0

Share-based payments

0.0

0.0

0.0

0.0

0.0

Reported operating profit

(4.5)

(9.2)

(5.3)

(6.2)

(3.1)

Net Interest

0.0

0.1

0.0

0.0

0.0

Joint ventures & associates (post tax)

0.0

0.0

0.0

0.0

0.0

Exceptionals

0.0

0.0

0.0

0.0

0.0

Profit Before Tax (norm)

 

 

(4.4)

(6.4)

(3.1)

(4.5)

(2.7)

Profit Before Tax (reported)

 

 

(4.5)

(9.1)

(5.3)

(6.2)

(3.1)

Reported tax

0.0

0.1

0.3

0.0

0.0

Profit After Tax (norm)

(4.4)

(6.4)

(3.1)

(4.5)

(2.7)

Profit After Tax (reported)

(4.5)

(9.0)

(5.0)

(6.2)

(3.1)

Minority interests

0.0

0.0

0.0

0.0

0.0

Discontinued operations

8.6

89.8

0.6

0.0

0.0

Net income (normalised)

(4.4)

(6.4)

(3.1)

(4.5)

(2.7)

Net income (reported)

4.1

80.8

(4.4)

(6.2)

(3.1)

Basic average number of shares outstanding (m)

178

161

62

62

62

EPS - basic normalised (p)

 

 

(2.5)

(4.0)

(5.2)

(7.2)

(4.3)

EPS - diluted normalised (p)

 

 

(2.5)

(4.0)

(5.2)

(7.2)

(4.3)

EPS - basic reported (p)

 

 

2.3

50.2

(7.2)

(9.9)

(5.0)

Dividend (p)

0.00

0.00

0.00

0.00

0.00

Revenue growth (%)

N/A

880.0

34.7

14.9

17.1

Gross Margin (%)

0.0

26.5

35.6

37.3

45.5

EBITDA Margin (%)

-230.0

-50.0

-18.9

-25.6

-11.3

Normalised Operating Margin

-440.0

-66.3

-23.5

-29.6

-15.2

BALANCE SHEET

Fixed Assets

 

 

5.0

8.5

6.8

7.7

7.3

Intangible Assets

2.9

7.3

6.0

6.8

6.2

Tangible Assets

1.7

1.2

0.8

0.9

1.1

Investments & other

0.4

0.0

0.0

0.0

0.0

Current Assets

 

 

19.5

19.8

17.5

11.2

9.8

Stocks

4.3

1.7

1.1

1.2

1.3

Debtors

5.1

3.4

4.4

4.8

5.1

Cash & cash equivalents

10.1

14.3

11.5

5.1

3.5

Other

0.0

0.4

0.5

0.1

0.0

Current Liabilities

 

 

(7.9)

(5.6)

(5.9)

(6.7)

(8.0)

Creditors

(7.6)

(5.1)

(5.6)

(6.4)

(7.7)

Tax and social security

(0.3)

0.0

0.0

0.0

0.0

Short term borrowings

0.0

0.0

0.0

0.0

0.0

Other

0.0

(0.5)

(0.3)

(0.3)

(0.3)

Long Term Liabilities

 

 

(0.3)

(1.3)

(0.8)

(0.8)

(0.8)

Long term borrowings

0.0

0.0

0.0

0.0

0.0

Other long-term liabilities

(0.3)

(1.3)

(0.8)

(0.8)

(0.8)

Net Assets

 

 

16.3

21.4

17.6

11.4

8.3

Minority interests

0.0

0.0

0.0

0.0

0.0

Shareholders' equity

 

 

16.3

21.4

17.6

11.4

8.3

CASH FLOW

Op Cash Flow before WC and tax

(2.3)

(4.9)

(2.5)

(3.9)

(2.0)

Working capital

(0.5)

(1.0)

0.3

0.3

1.0

Exceptional & other

9.1

5.3

(0.7)

(0.4)

0.0

Tax

(0.5)

(0.5)

0.0

0.0

0.0

Net operating cash flow

 

 

5.8

(1.1)

(2.9)

(4.0)

(1.0)

Capex

(2.2)

(0.3)

(0.3)

(1.8)

(0.3)

Acquisitions/disposals

1.3

84.2

0.3

(0.2)

0.1

Net interest

0.0

0.1

0.0

0.0

0.0

Equity financing

0.0

(77.9)

0.5

0.0

0.0

Dividends

0.0

0.0

0.0

0.0

0.0

Other

0.0

(0.8)

(0.4)

(0.4)

(0.4)

Net Cash Flow

4.9

4.2

(2.8)

(6.4)

(1.6)

Opening net debt/(cash)

 

 

(5.2)

(10.1)

(14.3)

(11.5)

(5.1)

FX

0.0

0.0

0.0

0.0

0.0

Other non-cash movements

0.0

0.0

0.0

0.0

0.0

Closing net debt/(cash)

 

 

(10.1)

(14.3)

(11.5)

(5.1)

(3.5)

Source: Checkit, Edison Investment Research

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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

1185 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

1185 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 Checkit and prepared and issued by Edison, in consideration of a fee payable by Checkit. 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 2021 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

1185 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

1185 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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