On track for full year expectations

Lighthouse Group 10 September 2018 Update
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Lighthouse Group

On track for full year expectations

H118 results

Financial services

10 September 2018

Price

33.4p

Market cap

£43m

Net cash (£m) at end June 2018

9.6

Shares in issue

127.7m

Free float (updated July 2018)

80%

Code

LGT

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(7.2)

16.8

88.2

Rel (local)

(2.3)

23.3

89.7

52-week high/low

38.7p

16.8p

Business description

Lighthouse comprises a diverse group of UK financial advice firms serving individuals and businesses. The main focus is on Middle Britain and contracts with 21 affinity groups are an important revenue and profit contributor. Wealth Advisory serves a high net worth client base, while Luceo Asset Management provides an in-house fund offering.

Next events

FY18 trading update

January 2019

Analyst

Andrew Mitchell

+44 (0)20 3681 2500

Lighthouse Group is a research client of Edison Investment Research Limited

First half results from Lighthouse indicate that it is on track to meet market expectations for the full year, while the strength of its business providing financial advice to members of affinity partners was underlined by its success in renewing all eight of the contracts that have come up for renewal this year. This now accounts for 19% of group revenue and there is good scope to increase penetration in this area. Part of the c £5m of cash the group has available for investment is likely to be allocated here.

Year end

Revenue (£m)

PBT
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

12/16

47.9

1.9

1.13

0.27

29.6

0.8

12/17

54.1

2.5

1.49

0.42

22.4

1.3

12/18e

55.7

2.8

1.61

0.60

20.7

1.8

12/19e

57.5

3.1

1.81

0.70

18.5

2.1

Note: *EPS are normalised and fully diluted, with tax credits excluded and a standard tax charge applied.

Operational gearing and growing dividend

H118 results showed total revenue up 5% but, excluding the legacy Communities (Network) division, the increase was 12%. Revenues from the higher-margin affinity business increased 20% and the proportion of customer-derived recurring revenue has increased to more than 50% of the total. Costs were held flat and reduced before share based payments, allowing pre-tax profit and diluted EPS to increase by 12% and 9% respectively. Reflecting the strong balance sheet with no debt, cash of £9.6m and a positive outlook, the interim dividend was increased by 67% to 0.20p.

Outlook

The market background for a UK financial advice firm such as Lighthouse is favourable given an ageing population, and increased choices and responsibility for pension accumulation and decumulation. Lighthouse is differentiated by its well-established affinity business, and investment in additional staff to develop this opportunity more rapidly could provide attractive returns in due course. Otherwise, Luceo Asset Management should continue to build towards a profitable scale and other in-house solutions for clients may be added where appropriate opportunities are seen. In the near term, Lighthouse reports that the second half has started well, continuing the trends seen in the first six months.

Valuation: Useful upside following recent correction

Our estimates are only marginally changed with earnings per share marginally increased. With limited changes in estimates, our DCF valuation is unchanged at c 44p, more than 30% above the current share price.

H118 results

Lighthouse reported good progress at the interim stage with revenue growth of 5% translating to a 12% increase in pre-tax profit. The recurring element of sales has continued to increase, now accounting for 51% of customer-derived revenue compared with 49% in the same period last year. The strength of the affinity business, including the level of service provided, has also been reaffirmed, with all eight contracts that have come up renewal this year (out of 21) being retained. The relationship with Unison has also been extended to include mortgage and protection advice. Revenue arising from these relationships increased by 20% and accounted for 19% of group and 51% of the National division’s revenues respectively.

Key points from the figures are highlighted below, and a profit and loss analysis is shown in Exhibit 1 (comparisons are with H117 unless stated).

Revenue increased by 5% but, excluding the legacy Communities division where revenue is contracting, growth would have been 12%.

Average revenue production per adviser increased from £117,000 to £124,000. This compares with £80,000 in H113: compound annual growth was 9.2% over the last five years.

The gross margin nudged slightly lower (26.8% versus 27.2%) with higher growth in affinity revenue resulting in an increase in introducer payments made to the partner organisations.

Cost discipline meant that operating expenses before share-based payments were reduced by 3%, allowing underlying EBITDA to increase by 26%. The underlying EBITDA margin increased from 5.1% to 6.1%.Unadjusted EBITDA and pre-tax profit increased by 16% and 12% respectively.

Fully diluted, adjusted EPS (assumes a full tax charge) increased by 10%.

The interim dividend has been increased by 67%, reflecting a strong balance sheet position and the board’s confidence in the outlook.

Exhibit 1: H118 P&L summary

£000s except where stated

H117

H217

H118

Change y-o-y %

Revenue

25,673

28,438

26,876

4.7

Cost of sales

(18,680)

(20,759)

(19,686)

5.4

Gross profit

6,993

7,679

7,190

2.8

Underlying operating expenses

(5,686)

(5,799)

(5,543)

(2.5)

Underlying EBITDA

1,307

1,880

1,647

26.0

Share-based payments

(39)

(346)

(183)

369.2

EBITDA

1,268

1,534

1,464

15.5

Depreciation and amortisation

(137)

(137)

(178)

29.9

Operating profit

1,131

1,397

1,286

13.7

Finance income

1

2

7

600.0

Finance costs

(7)

(3)

(29)

314.3

Profit before taxation

1,125

1,396

1,264

12.4

Taxation

0

200

0

Earnings

1,125

1,596

1,264

12.4

Basic EPS (p)

0.88

1.25

0.99

12.4

Dil EPS (p)

0.83

1.15

0.91

8.8

Adjusted EPS (p)

0.71

0.88

0.80

12.7

Dil adjusted EPS (p)

0.67

0.81

0.73

9.6

Dividend (p)

0.12

0.30

0.20

66.7

Source: Lighthouse, Edison Investment Research

The next table shows the segmental analysis of revenue and profit for the period. In the revenue analysis, the contrast between the National division (including the affinity business) and the gradual contraction of the Communities division (previously Network) is clear, while revenue growth in the Wealth Advisory division, serving high net worth clients, was strong at over 16%. Early-stage growth in the Luceo Asset Management business explains the rapid growth in Other segments revenue.

Exhibit 2: H118 segmental analysis

£000s

H117

H217

H118

Change y-o-y %

Revenue

National

9,248

10,592

10,064

8.8

Communities

11,774

12,678

11,295

(4.1)

Wealth Advisory

4,598

5,054

5,349

16.3

Other segments

53

113

168

217.0

Total revenue

25,673

28,437

26,876

4.7

Profit

National

2,537

2,862

2,531

(0.2)

Communities

1,191

1,800

1,263

6.0

Wealth Advisory

380

286

394

3.7

Other segments

(177)

(256)

(160)

(9.6)

Total segmental profit

3,931

4,692

4,028

2.5

Indirect operating expenses

(2,624)

(2,812)

(2,381)

(9.3)

Underlying EBITDA

1,307

1,880

1,647

26.0

Share-based payments

(39)

(346)

(183)

369.2

EBITDA

1,268

1,534

1,464

15.5

Source: Lighthouse, Edison Investment Research

Turning to segmental profits (now presented excluding indirect operating costs), the contribution from National was maintained. The result was held back by the fact that the prior year period benefited from a £0.11m credit relating to past regulatory fees and the current year bore the cost of further investment in the division’s infrastructure. The division still has the highest segmental profit margin at 25% compared with 11% for Communities and 7% for Wealth Advisory. Although Communities’ revenue declined as some members moved to being directly regulated, profit increased versus H117 as risks have been reduced and the advisers who have left have tended to be less profitable. Wealth Advisory profitability in recent periods has been affected by investment in the Lighthouse Pensions Trust (LPT) automatic enrolment offering, which now has nearly 6,000 members. A strategic review of this business is now underway as part of a wider exercise to focus on the key growth areas for the group. We assume that while costs may arise from implementing the results of the review, there could also be valuable ongoing savings (for example, EBITDA losses relating to LPT for FY16 and FY17 were over £0.5m a year). The loss in Other segments reflects uncovered costs in Luceo Asset Management. The AUM of the five risk-profiled funds of funds here increased from £37m to £53m during the period, with one fund reaching the break-even level of c £20m. The fee rate is 75bp, of which Lighthouse retains 23bp with the balance paid to the investment manager, Octopus and the ACD, FundRock , as part of cost of sales. At current rates of asset accumulation, the company indicates that the business is likely to move into profitability during 2019. Finally, in this table we note that indirect costs, not allocated to divisions, were 9% lower reflecting continued focus on operational efficiencies.

In Exhibit 3, we summarise the eight affinity partner contract renewals announced year to date, together with the extension of the Unison contract. The renewals involved full tender processes and Lighthouse indicates that its partners pay close attention to service levels delivered when considering proposals. So far, the business has not lost a renewal tender, which is attributed to the extensive experience the group has in this sector and the infrastructure it has established to support service delivery.

Exhibit 3: Lighthouse affinity partners new contract and renewals 2018 year to date

Organisation

Membership

Renewals/new contract

Notes

Education

Association of School and College Leaders (ASCL)

Over 19,000

3 yrs from 1 Sep 2018

Union

Healthcare professionals

FosterTalk

c 20,000

3 yrs from 1 May 2018

Not for profit company

Royal College of Nursing (via RCN Xtra)

c 435,000

3 yrs from 1 Mar 2018

Union

Public services

Public and Commercial Services (PCS)

c 200,000

3 yrs from 1 Jun 2018

Union

Multiple sectors

Unison

Over 1,300,000

Extends coverage to mortgage advice 30 Jan 2018

Union

Prospect

142,000

3 yrs from 1 Jun 2018

Union

Corporate and collectives

GFTU

c 260,000

2 yrs from 1 Mar 2018

General Federation of Trade Unions

Parliament Hill

Over 2,500,000

2 yrs from 1 Mar 2018

Benefit management for over 90 UK-based membership associations

Money Advice Service

N/A

1 yr from 15 Apr 2018

Govt. funded company with the objective of improving public understanding/management of financial affairs

Source: Lighthouse, TUC, affinity partner websites, Edison Investment Research

Outlook

We discussed the industry background and outlook for Lighthouse in our initiation note published in July this year. Key points included:

Progressive ageing of the UK population, partly driven by greater longevity, is likely to feed into a growing requirement for advice on saving and drawing down funds for retirement.

There is a substantial affluent and mass-affluent population.

The shift from defined benefit to defined contribution pensions, together with the pension freedoms introduced in 2015, has increased the complexity of choices individuals face.

Lighthouse strategy is focused on realising the opportunity provided by the affinity relationships it has established, achieving steady growth in wealth management and attracting additional funds into the Luceo Asset Management activity.

Lighthouse indicates that trading in the second half has started well, with adviser activity levels remaining good. The group has a positive view on achieving market expectations for the full year.

In discussing strategy, Lighthouse highlighted that it may now be appropriate to support development of the affinity business by investing some of its available cash (approximately £5m after regulatory requirements out of the £9.6m reported at the end of H118). Spending would be directed to recruiting additional field staff to liaise with partners and financial advisers to service rising client numbers. The ability to establish closer relations with partners should help generate additional fruitful leads from the six million individual members of the existing affinity organisations, while increased volume would require more advisers to service the new clients arising. Another use of cash could be to develop in-house specialist services or products to meet client needs. Acquisitions would also be considered where appropriate to achieve this, while management notes that prevailing pricing in the purchase of financial advisory firms has been generally unattractive in recent years so this seems less likely as a route for development.

In the next section, we discuss the modest changes we have made to our estimates.

Financials

The adjustments to our revenue, profit and earnings estimates are limited, with modest changes in the mix to reflect the first half results and to allow for changes in the format of divisional disclosure. PBT and EPS for both years are marginally higher. Ahead of further announcements, we have not allowed for any changes resulting from the current review of the LPT or a step-up in investment to support the affinity business in increasing its penetration of the membership base.

We have increased our dividend estimates following the significant increase in the interim payment. Based on a 40/60 split between interim and final we have assumed a final payment of 0.40p, giving 0.60p for FY18. On our estimates, dividend cover would be c 2.6x for both forecast years.

Exhibit 4: Estimate revisions

Revenue (£m)

PBT (£m)

EPS (p)

Dividend (p)

Old

New

% chg

Old

New

% chg

Old

New

% chg

Old

New

% chg

2018e

55.2

55.7

0.8

2.7

2.8

0.4

1.60

1.61

0.0

0.50

0.60

20.0

2019e

56.6

57.5

1.7

3.0

3.1

2.7

1.79

1.81

1.1

0.55

0.70

27.3

Source: Edison Investment Research

The balance sheet remains debt free and cash at the end of June stood at £9.6m compared with £8.7m at the end of 2017 and £8.1m at the end of H117. Lighthouse indicates that roughly half the cash is required to underpin regulatory requirements, leaving £5m available for group use, as noted above.

Valuation

We have updated our peer group table in Exhibit 5. This includes a broad selection of companies including financial advice companies, discretionary fund managers and wealth managers (which we have grouped separately). While each has different characteristics, we believe they are companies investors interested in the area of financial advice and retail investment may consider. Compared with what we have labelled the adviser/DFM average, Lighthouse trades on a lower or similar P/E rating for this year and next, while the traditional wealth managers trade on lower prospective multiples in most cases and on average.

Exhibit 5: Peer group comparison

Market capital (£m)

P/E current year (x)

P/E following year (x)

Trailing yield (%)

Lighthouse Group

42

20.6

18.3

1.3

AFH

157

21.2

14.7

1.2

Frenkel Topping

23

15.8

12.5

4.7

Harwood Wealth

102

23.2

18.3

2.2

Mattioli Woods

225

22.1

19.5

2.0

Mortgage Advice Bureau

332

25.1

21.5

3.3

St James's Place

5,865

23.7

19.5

4.8

Tatton

153

24.2

20.0

2.4

Tavistock Investments

17

40.6

10.5

-

Adviser/DFM average

24.5

18.0

2.9

Brewin Dolphin

985

15.8

14.0

4.7

Brooks Macdonald

296

20.5

17.1

2.3

Charles Stanley

188

17.3

12.7

3.0

Quilter

2,569

12.6

13.4

5.9

Rathbones

1,399

17.7

15.9

2.6

Wealth manager average

16.8

14.6

3.7

Source: Bloomberg, Edison Investment Research

Our discounted cash flow valuation factors in the estimates detailed in the financial summary (Exhibit 7) and, assuming long-term growth of 3% and a discount rate of 9%, gives a valuation of c 44p (unchanged).

Finally, we include a price performance table. This shows that Lighthouse has enjoyed the strongest performance in the peer group over 12 months and year to date as the market gave recognition to a modest rating and attractive investment case.

Exhibit 6: Recent share price performance (%)

Period

One month

Three months

12 months

From 12-month high

Year to date

Lighthouse Group

-3.5

10.1

84.8

-19.0

68.2

AFH

23.9

20.3

66.0

0.0

49.5

Frenkel Topping

-9.1

-38.8

-42.3

-48.9

-44.4

Harwood Wealth

-3.0

-1.5

6.6

-9.7

-8.5

Mattioli Woods

9.6

7.5

-0.3

-0.6

12.1

Mortgage Advice Bureau

11.5

5.9

49.4

-9.0

17.1

St James's Place

-4.2

-7.1

-3.0

-13.4

-9.6

Tatton

11.8

25.7

53.1

-2.1

43.5

Tavistock Investments

-11.0

6.6

-2.3

-23.5

0.0

Average

2.9

3.2

23.6

-14.0

14.2

Brewin Dolphin

-3.3

-6.5

-1.3

-13.0

-10.9

Brooks Macdonald

20.0

8.1

0.6

-4.9

16.4

Charles Stanley

1.4

7.2

-12.9

-13.5

-3.6

Quilter

-0.2

N/A

N/A

-8.4

N/A

Rathbones

5.1

1.4

1.1

-9.8

-0.7

Average

4.6

2.6

-3.1

-9.9

0.3

Source: Bloomberg

Exhibit 7: Financial summary

Year end 31 December (£000s)

2015

2016

2017

2018e

2019e

Profit and loss

National

16,074

15,717

19,840

21,368

23,184

Communities

23,978

23,780

24,452

23,181

22,181

Wealth Advisory

8,829

8,422

9,652

10,714

11,410

Other segments

0

0

166

409

731

Total revenue

48,881

47,919

54,111

55,672

57,506

Cost of sales

(34,057)

(33,452)

(39,439)

(40,625)

(41,551)

Gross profit

14,824

14,467

14,672

15,046

15,955

Underlying expenses

(13,214)

(12,180)

(11,485)

(11,530)

(12,146)

Underlying EBITDA

1,610

2,287

3,187

3,516

3,809

Share based payment

0

(79)

(385)

(385)

(385)

EBITDA

1,610

2,208

2,802

3,131

3,424

Depreciation and amortisation

(552)

(299)

(274)

(352)

(334)

Operating profit

1,058

1,909

2,528

2,779

3,091

Finance income

14

11

3

14

15

Finance costs

(206)

(27)

(10)

(32)

0

Profit before taxation

866

1,893

2,521

2,761

3,106

Taxation

0

750

200

0

(590)

Non-controlling interest

0

0

0

0

0

Earnings

866

2,643

2,721

2,761

2,516

Adjusted earnings

866

1,514

2,036

2,236

2,516

Basic EPS (p)

0.68

2.07

2.13

2.16

1.97

Dil EPS (p)

0.68

1.97

1.98

1.98

1.81

Adjusted EPS (p)

0.68

1.19

1.59

1.75

1.97

Dil adjusted EPS (p)

0.68

1.13

1.49

1.61

1.81

Dividends (p)

0.24

0.27

0.42

0.60

0.70

Dividend cover - dil adjusted EPS (x)

2.8

4.2

3.5

2.7

2.6

EBITDA margin (%)

3.3

4.6

5.2

5.6

6.0

Return on equity - adj earnings (%)

13.8

19.5

19.7

17.3

16.5

Balance sheet

Non-current assets

6,555

7,220

7,478

7,594

7,610

Intangible assets

5,284

5,230

5,131

5,231

5,229

Property, plant & equipment

1,271

1,240

1,397

1,412

1,431

Available for sale investment

0

0

0

0

0

Deferred tax asset

0

750

950

950

950

Current assets

21,655

17,505

16,920

17,601

19,579

Trade and other receivables

13,266

9,004

8,187

8,423

9,051

Cash and cash equivalents

8,389

8,501

8,733

9,178

10,529

Total assets

28,210

24,725

24,398

25,194

27,189

Current liabilities

17,254

12,307

11,635

10,150

10,148

Borrowings

34

34

0

0

0

Trade and other payables

10,629

9,268

8,789

8,450

8,448

Provisions

6,591

3,005

2,846

1,700

1,700

Non-current liabilities

4,395

3,454

1,076

850

750

Borrowings

439

405

0

0

0

Provisions

3,956

3,049

1,076

850

750

Total liabilities

21,649

15,761

12,711

11,000

10,898

Net assets

6,561

8,964

11,687

14,194

16,291

Cash flow

Operating profit

1,058

1,909

2,528

2,779

3,091

Depreciation and amortisation

552

299

274

352

334

Share-based payments

0

79

385

385

385

Change in receivables, payables

(2,415)

2,901

338

(575)

(629)

Change in provisions

2,270

(4,493)

(2,132)

(1,372)

(100)

Finance costs paid

(404)

(27)

(10)

(32)

0

Income taxes refunded/paid

0

0

0

0

(590)

Net cash flow from operating activities

1,061

668

1,383

1,537

2,490

Purchase of PPE

(119)

(126)

(307)

(243)

(200)

Purchase of intangibles

(69)

(88)

(25)

(225)

(150)

Finance income received

14

11

3

14

15

Net cash flow from investing activities

(174)

(203)

(329)

(454)

(335)

Dividends paid

(255)

(319)

(383)

(638)

(805)

Change in loans

(1,307)

(34)

(439)

0

0

Net cash flow from financing activities

(1,562)

(353)

(822)

(638)

(805)

Change in cash

(675)

112

232

445

1,351

Change in loans/other

1,505

34

439

0

0

Change in net cash

830

146

671

445

1,351

Closing net cash

7,916

8,062

8,733

9,178

10,529

Source: Lighthouse Group, Edison Investment Research

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Copyright 2018 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Lighthouse Group 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 Investment Research Pty Ltd (Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd (AFSL: 427484)) and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. 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 2018. “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 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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 4, 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 Pty Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2018 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Lighthouse Group 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 Investment Research Pty Ltd (Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd (AFSL: 427484)) and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. 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 2018. “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 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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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