Orders in industrial IoT/Qualcomm delays

Terranet 18 October 2017 Update
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TerraNet

Orders in industrial IoT/Qualcomm delays

H117 results

Software & comp services

18 October 2017

Price

SEK23.0

Market cap

SEK551m

Net cash (SEKm) at 30 June 2017

91.6

Shares in issue

24.0m

Free float

41%

Code

TERRNT

Primary exchange

Nasdaq First North

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(2.5)

(21.5)

N/A

Rel (local)

(5.5)

(21.2)

N/A

52-week high/low

SEK39.2

SEK17.2

Business description

TerraNet is an early commercialisation-stage software company with expertise in peer-to-peer communications. Its products encompass chip integration software, IoT, including connected cars and headsets, multimedia streaming, and GriDD, an innovative data capacity trading product.

Next events

Q317 earnings

15 November 2017

FY17 earnings

27 February 2018

Analysts

Anna Bossong

+44 (0)20 3077 5737

Bridie Barrett

+44 (0)20 3077 5700

TerraNet is a research client of Edison Investment Research Limited

TerraNet shares have performed strongly since the IPO, supported by a steady stream of new customer announcements and solid progress with our milestone targets. These included completing V2V and IoT software development kits as well as winning a pilot of its GriDD mobile data sharing app with Orange. TerraNet is also meeting leading Chinese mobile point of sale (mPoS) firms to promote a prospective new line in offline mPoS in the Chinese market. It is worth nothing, however, that delays in software releases by third parties have held up the roll-out of proximal connectivity services in China, putting back take-up of TerraNet’s software. This together with a slower than expected ramp up in revenues in H117 has led us to reduce our base case valuation range to SEK12.6-14.4/share.

Year end

Revenue* (SEKm)

EBITDA
(SEKm)

EPS**
(SEK)

Net operating
cash flow (SEKm)

Net debt/(cash) (SEKm)

EV/revenue (x)

12/15

0.4

(17.2)

(2.4)

(13.3)

(5.2)

1640.8

12/16

2.7

(25.0)

(3.2)

(22.6)

(4.1)

239.8

12/17e

6.5

(58.3)

(3.5)

(54.7)

(54.3)

98.5

12/18e

39.7

(70.7)

(3.2)

(70.1)

22.0

16.1

12/19e

121.2

(24.4)

(1.2)

(29.5)

60.8

3.8

Note: *External revenues excluding own work capitalised. **Normalised.

Large customer pipeline and new mPoS prospects

Management estimates potential licence revenues from the large and growing pipeline of new and existing customers at SEK25-150m. In China, with the proximal connectivity roll-out delayed, TerraNet is currently working to launch a new product, offline mPoS, using encrypted GriDD style tethering. If it is seen to be workable and secure, we see significant potential for the product given the rapid uptake of mPoS in China and the potential for it to assist merchants working outside network areas, as well as airlines undertaking passenger transactions.

Revenues in H117 reflect slow NRE ramp up

First half revenues (up 240% y-o-y to SEK2.6m) showed a lower than hoped ramp up in revenues, reflecting principally the trend in non-recurring engineering (NRE) revenues from clients. Cost savings on consultants limited the impact on EBITDA losses, up 195% to SEK29.0m. Cash burn (cash outflows from operations and investing) totalled SEK30.8m, leaving mid-year cash reserves of SEK92.9m. With the Qualcomm China project affected by delayed third-party software roll-outs, we have cut our revenue forecasts and increased our forecast EBITDA losses for 2017 and 2018 by 11% and 28%, respectively.

Valuation: DCF fair value range at SEK12.6-14.4/share

With the reduction in earnings expectations and delay to the Qualcomm China project, our base-case DCF valuation range has fallen from SEK13.4-15.2 to SEK12.6-14.4 per share. Our high-case DCF value has fallen SEK0.7 to SEK31.0 share. These valuations assume that TerraNet hits its key milestone targets and successfully commercialises its key product lines. We assume free cash flow break-even during 2020 with a funding requirement of SEK75m up to end-2020.

Business update

Terranet on track with our milestone targets, proximal connectivity apart

TerraNet has achieved most of the key milestone objectives identified in our first day of dealings note on 30 May 2017 (for a full milestones chart, see Exhibit 1 in Proximal solutions, multiple applications). Since that date, the company has completed its software development kit (SDK) with proof of concept for vehicle-to-vehicle (V2V) positioning (which operates without a base station with accuracy of 1-2 metres) and has begun work with potential clients on new feature development. The group has also completed its internet of things (IoT) SDK, and as with the V2F SDK, its full range of features will be developed together with potential clients (compared to our previous expectation of being already feature-complete). TerraNet believes that it has the potential to launch, license and sell its V2V technology in volume markets in two years.

Another important step was the announcement of a demo trial of the offline data capacity trading system, GriDD, with mobile telecom operator Orange. This fulfilled TerraNet’s plans to launch a trial with a network carrier in Q317. In the second quarter, TerraNet also launched a first beta version of the TOneFlix app for streaming high-definition video in India.

Looking forward, management’s expectation of the roll-out of proximal connectivity in China in Q417 now does not look realistic. This is because of delays in the release of software by a third party necessary to create demand for TerraNet’s proximal connectivity apps and SDKs. There is currently no clear timeline for the release of the third-party software, and therefore it is not certain when TerraNet will be in a position to market its software to Chinese internet firms and app developers.

Management now estimates that the current pipeline of existing and new customers has the potential to attract license revenues in the SEK25-150m range at full penetration. This is broadly in keeping with our forecasts for group revenues to reach c SEK120m by 2019.

Orange trial of GriDD-based mobile data sharing app

TerraNet and Orange Labs, part of the Orange telecoms group, launched a joint trial of TerraNet’s mobile data sharing app, based on its GriDD solution. The two companies have set up a test-bed at Warsaw University of Technology’s Faculty of Electronics and IT, allowing students to validate the solution and create usage scenarios. The trial is due for completion in October, but management has reported positive early outcomes and the commencement of discussions regarding potential market cooperation. Orange currently provides cellular services to 263 million people in 29 countries, giving significant potential scale to implementation if the trial is successful and the product is taken up by Orange. We see maximum revenue generation capacity if the service is sold directly to mobile operators, given the premium they are likely to pay to engender greater customer loyalty, rather than if it is launched in app form to the public.

Wide-ranging Alfa Laval product development brief

In July, TerraNet announced a cooperation with Swedish firm Alfa Laval, which is a global industry leader in heat transfer, separation and fluid-handling. Alfa Laval has agreed to pay SEK400k to TerraNet in return for it designing commercially viable use cases for the application of TerraNet’s communication technology to Alfa Laval’s products.

Alfa Laval’s products are used in the manufacturing of food, chemicals, pharmaceuticals, starch, sugar and ethanol. Its output also has applications in the nuclear power, engineering, mining and refinery sectors as well as treating wastewater and creating a comfortable indoor climate.

The products being assessed include network-independent streaming of high-definition video, sensor data communication using multi-hop technology, and fast positioning of objects indoors and outdoors. TerraNet has also been asked to produce hardware and undertake software demonstrations as part of the brief. We believe that this project has considerable potential. The broad range of Alfa Laval products and the ability to develop use cases from inside a company of this scope and sector specialisation gives rise to the potential for use cases with widespread applications as well as high-value niche services.

Communications services: New SEK2.2m order

Since releasing H117 results, TerraNet has announced a SEK2.2m order for integrating its software into an existing customer’s hardware. The unnamed client is a multinational conglomerate with a leading global position in intercom solutions. The software employs TerraNet’s off-cloud communication capabilities to increase productivity and safety in noisy environments such as transport hubs and construction sites, which follows TerraNet’s prior work for the company. The companies aim to launch the product on the global market within the next two years.

New offline mobile point of sale concept

TerraNet has developed and is currently building market interest in an offline mPoS (mobile point of sale) solution, combining the features of online payment transfers with the tethering features of its GriDD software. This is expected to enable parties to transact payments from distances of up to 50 metres in situations where one party or both parties are without network access. The transaction is finalised when one party connects to a network – the intention being that the transaction is considered “completed” prior to this point by virtue of the encrypted transaction data on their devices.

The TerraNet connectivity software is able to determine the distance between a merchant and nearby shopper and enable encrypted transactions to take place using the direct wireless contact between the merchant’s and shopper’s mobile devices. The ability to undertake transactions without the devices having to come into close proximity (10cm or less), as is the case with NFC and QR codes, also enables more frictionless transactions.

With many merchants, particularly throughout the developing world, working in markets and areas with unreliable or non-existent Wi-Fi or mobile networks, we believe that there is almost certain to be considerable demand for such an enabling service. Additionally, with countries such as China leading the way in the use of mobile payment technology, China represents an attractive market to launch the product.

Other use cases that would have significant applications in developed countries include inflight sales of goods and services where network disruption can lose airlines revenues.

We believe that the success of this software will depend heavily on banks and merchants being satisfied as to the security of the transactions conducted outside their networks. We would anticipate offline systems being particularly liable to cyber-attack. For this reason, we would expect a highly rigorous checking process and therefore a potential long track to market adoption.

With the product aimed at the Chinese market, we also note that patent protections in the Chinese market are not as strong as in other markets. This means that even if the product is adopted widely, TerraNet may not be able to fully or even partly monetise its success.

TerraNet has set up meetings with two leading internet players to progress the technology. The leaders in the smartphone QR code-based payments in China are Alibaba’s Alipay and WeChat Pay, which together hold 94% of the market.

Interim results review

TerraNet’s EBITDA losses doubled from SEK15.2m in H216 to SEK29.0m in H117, reflecting:

Strong growth in external revenue during the period, from SEK1.9m (H216) to SEK2.6m. Revenues remain exclusively non-recurring engineering work arising from the group’s work with potential clients.

Increased staff costs, up from SEK4.3m in H216 to SEK13.9m in H117. Staff numbers doubled to 18 over the course of H117, as the group geared up its marketing and sales effort as well as activities surrounding product launches and trials.

Other costs increased 48% h-o-h to SEK22.7m. This was driven by rising contractor numbers, up from 17 to 21 over the half year, part of an overall increase in costs related to business expansion. Helped by the improved funding from the IPO share issues, the group was able to reduce its overall reliance on consultants, with payments to consultants up SEK6.4m y-o-y vs employee cost increases of SEK10.1m.

Although the bulk of IPO costs (SEK9.3m) were written off against equity, we understand that some IPO-related costs were included in the other external costs of SEK1.3m, giving rise to a negative impact on EPS of up to 4.3% of the total.

Cash flow

Cash outflow from operations totalled SEK25.4m in H117 (H216: SEK8.1m), with operating losses of SEK29.1m partly offset by a SEK3.5m reduction in working capital. With the addition of SEK5.4m of capitalised development costs, total cash burn increased from SEK11.0m in H216 to SEK30.8m in the first half of the year. With SEK119.3m net cash derived from the share issues (including SEK88m from the IPO) in the first half of the year, the group experienced a total SEK88.5m increase in cash over the period.

Exhibit 1: Interim results review

IFRS, SEKm

H117

H116

Chg. %

H216

Q217

Q216

Chg. %

Q117

Q217

Earnings statement

 

 

 

 

 

 

 

 

 

External revenue

2.6

0.8

240.1

1.9

2.2

0.0

N/A

0.4

2.2

Total revenue

2.6

0.8

240.1

1.9

2.2

0.0

N/A

0.4

2.2

Cost of Sales

0.0

0.0

N/A

0.0

0.0

0.0

N/A

0.0

0.0

Gross profit

2.6

0.8

240.1

1.9

2.2

0.0

N/A

0.4

2.2

Staff

(13.9)

(3.8)

(268.3)

(4.3)

(8.3)

(1.6)

(409.5)

(5.6)

(8.3)

Other expenses

(22.7)

(9.4)

(140.8)

(15.3)

(12.4)

(5.4)

(127.3)

(10.3)

(12.4)

Total expenses

(36.5)

(13.2)

(177.2)

(19.6)

(20.7)

(7.1)

(192.1)

(15.9)

(20.7)

Own work capitalised

4.9

2.6

90.2

2.5

1.9

1.7

13.0

3.1

1.9

EBITDA

(29.0)

(9.8)

195.3

(15.2)

(16.6)

(5.4)

206.3

(12.4)

(16.6)

Amortisation and impairment of intangible assets

(0.1)

(0.1)

2.7

(12.4)

(0.1)

(0.1)

1.8

(0.1)

(0.1)

Normalised operating income

(29.1)

(9.9)

193.1

(27.7)

(16.6)

(5.5)

204.1

(12.4)

(16.6)

Operating income

(29.1)

(9.9)

193.1

(27.7)

(16.6)

(5.5)

204.1

(12.4)

(16.6)

Net finance costs

0.0

0.0

N/A

0.0

0.0

0.0

N/A

0.0

0.0

Normalised PBT

(29.1)

(9.9)

193.1

(27.7)

(16.6)

(5.5)

204.1

(12.4)

(16.6)

PBT

(29.1)

(9.9)

193.1

(27.7)

(16.6)

(5.5)

204.1

(12.4)

(16.6)

Profit after tax

(29.1)

(9.9)

193.1

(27.7)

(16.6)

(5.5)

204.1

(12.4)

(16.6)

EPS basic (SEK)

(1.7)

(1.0)

69.3

(2.21)

(0.9)

(0.6)

56.6

(0.8)

(0.9)

EPS diluted (SEK)

(1.7)

(1.0)

69.3

(2.21)

(0.9)

(0.6)

56.6

(0.8)

(0.9)

Adj EPS basic (SEK)

(1.7)

(1.0)

69.3

(2.21)

(0.9)

(0.6)

56.6

(0.8)

(0.9)

Adj EPS diluted (SEK)

(1.7)

(1.0)

69.3

(2.21)

(0.9)

(0.6)

56.6

(0.8)

(0.9)

Cash flow

 

 

 

 

 

 

 

 

 

Operating income

(29.1)

(9.9)

193.1

(27.7)

(16.6)

(5.5)

204.1

(12.4)

(16.6)

Amortisation of other intangibles

0.1

0.1

2.7

12.4

0.1

0.1

1.8

0.1

0.1

Changes in working capital

3.5

(4.5)

(179.2)

7.2

(0.3)

(4.0)

(92.3)

3.8

(0.3)

Tax paid

0.0

0.0

N/A

0.0

0.0

0.0

N/A

0.0

0.0

Total operating cash flows

(25.4)

(14.3)

78.4

(8.1)

(16.9)

(9.4)

79.5

(8.5)

(16.9)

Purchase of property, plant and equipment

0.0

0.0

N/A

0.0

0.0

0.0

N/A

0.0

0.0

Capitalised development costs

(5.4)

(2.6)

108.3

(3.0)

(2.3)

(1.7)

36.3

(3.1)

(2.3)

Total Investing cash flows

(5.4)

(2.6)

108.3

(3.0)

(2.3)

(1.7)

36.3

(3.1)

(2.3)

Dividends

0.0

0.0

N/A

0.0

0.0

0.0

N/A

0.0

0.0

Share repurchase/issue

128.6

16.9

660.6

12.5

100.7

13.2

663.9

28.0

100.7

Increase/decrease in borrowing

0.0

0.0

N/A

0.0

0.0

0.0

N/A

0.0

0.0

Interest paid

0.0

0.0

N/A

0.0

0.0

0.0

N/A

0.0

0.0

Other

(9.3)

0.0

N/A

(2.3)

(7.9)

0.0

N/A

(1.4)

(7.9)

Total Financing cash flow

119.3

16.9

605.6

10.2

92.8

13.2

604.0

26.5

92.8

Key data

 

 

 

 

 

 

 

 

 

Total cash burn (operating + Investing CF)

(30.8)

(16.9)

83.0

(11.0)

(19.2)

(11.1)

73.0

(11.7)

(19.2)

Net change in cash

88.5

0.1

157,878.6

(0.8)

73.6

2.1

3,395.2

14.9

73.6

Closing cash

92.9

5.2

1,672.2

4.4

92.9

5.3

1,657.2

19.3

92.9

Closing net debt (cash)

(91.6)

(5.0)

1,735.4

(4.1)

(91.6)

(5.0)

1,719.1

(19.3)

(91.6)

Source: TerraNet Holdings, Edison Investment Research

Revisions to forecasts

We have revised our forecasts, as shown in Exhibit 2, to reflect the slower than expected ramp-up in revenues across the group in H117 and the continuing reliance on non-recurring engineering revenues for the remainder of the year which are not expected to break-out of relatively low levels. Our non-recurring engineering revenue forecasts for H217 and 2018 are also affected by the expected delay to the roll-out of proximal connectivity software in China. We had incorporated a c SEK5m revenue contribution in H217 from non-recurring engineering services to internet and app development firms in China, which we have now moved out to 2018, on the assumption of a 12-month delay. Despite promising levels of interest from Chinese companies in meeting TerraNet to discuss its offline mPoS proposal, we have not incorporated any revenues from mPoS in our forecasts ahead of more serious expressions of interest after meetings.

Exhibit 2: Forecast revisions

SEKm

2016

2017e

2018e

2019e

Old

New

Change

Old

New

Change

Old

New

Change

Revenues*

2.7

16.1

6.5

-59.7%

55.2

39.7

-28.1%

123.8

121.2

-2.1%

EBITDA

(25.0)

(52.3)

(58.3)

11.4%

(55.2)

(70.7)

28.0%

(21.7)

(24.4)

12.2%

EBITDA margin

(9.4)

(3.2)

(9.0)

176.4%

(1.0)

(1.8)

77.9%

(0.2)

(0.2)

14.6%

Normalised operating profit

(37.6)

(59.4)

(65.4)

10.1%

(63.1)

(75.7)

20.1%

(29.1)

(26.7)

-8.4%

Normalised operating profit margin

(14.1)

(3.7)

(10.1)

173.0%

(1.1)

(1.9)

67.0%

(0.2)

(0.2)

-6.4%

Reported operating profit

(37.6)

(59.4)

(65.4)

10.1%

(63.1)

(75.7)

20.1%

(29.1)

(26.7)

-8.4%

Reported operating margin

(14.1)

(3.7)

(10.1)

173.0%

(1.1)

(1.9)

67.0%

(0.2)

(0.2)

-6.4%

Normalised PBT

(37.6)

(59.4)

(65.4)

10.1%

(63.0)

(75.7)

20.1%

(30.3)

(27.9)

-8.0%

Reported PBT

(37.6)

(59.4)

(65.4)

10.1%

(63.0)

(75.7)

20.1%

(30.3)

(27.9)

-8.0%

Normalised net income

(37.6)

(59.4)

(65.4)

10.1%

(63.0)

(75.7)

20.1%

(30.3)

(27.9)

-8.0%

Reported net income

(37.6)

(59.4)

(65.4)

10.1%

(63.0)

(75.7)

20.1%

(30.3)

(27.9)

-8.0%

Normalised basic EPS (SEK)

(3.2)

(3.1)

(3.5)

10.1%

(2.6)

(3.2)

20.1%

(1.3)

(1.2)

-8.0%

Normalised diluted EPS (SEK)

(3.2)

(3.1)

(3.5)

10.1%

(2.6)

(3.2)

20.1%

(1.3)

(1.2)

-8.0%

Reported basic EPS (SEK)

(3.2)

(3.1)

(3.5)

10.1%

(2.6)

(3.2)

20.1%

(1.3)

(1.2)

-8.0%

Dividend per share (SEK)

0.0

0.0

0.0

N/A

0.0

0.0

N/A

0.0

0.0

N/A

Cash flow from operations

(22.6)

(50.4)

(54.7)

8.5%

(55.6)

(70.1)

26.1%

(25.4)

(29.5)

15.9%

Cash burn (cash flow ops+investing)

(27.9)

(59.5)

(63.8)

7.2%

(61.5)

(76.0)

23.6%

(33.2)

(37.2)

12.1%

Net debt/(cash)

(4.4)

(59.5)

(54.3)

-8.8%

2.3

22.0

856.9%

37.1

60.8

64.1%

Source: Edison Investment Research. Note: *External revenues excluding own work capitalised.

Exhibit 3: Financial summary

SEKm

2015

2016

2017e

2018e

2019e

Year end 31 December

IFRS

IFRS

IFRS

IFRS

IFRS

INCOME STATEMENT

Revenue*

 

 

0.4

2.7

6.5

39.7

121.2

Employee and consultant expenses

(14.7)

(21.3)

(54.2)

(87.7)

(120.3)

Other operating expenses excl. D&A

(2.9)

(6.4)

(10.6)

(22.7)

(25.2)

EBITDA

 

 

(17.2)

(25.0)

(58.3)

(70.7)

(24.4)

Normalised operating profit

 

 

(18.0)

(37.6)

(65.4)

(75.7)

(26.7)

Amortisation of acquired intangibles

0.0

0.0

0.0

0.0

0.0

Exceptionals

0.0

0.0

0.0

0.0

0.0

Share-based payments

0.0

0.0

0.0

0.0

0.0

Reported operating profit

(18.0)

(37.6)

(65.4)

(75.7)

(26.7)

Net Interest

0.0

0.0

0.0

0.1

(1.2)

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)

 

 

(18.0)

(37.6)

(65.4)

(75.7)

(27.9)

Profit Before Tax (reported)

 

 

(18.0)

(37.6)

(65.4)

(75.7)

(27.9)

Reported tax

0.0

0.0

0.0

0.0

0.0

Profit After Tax (norm)

(18.0)

(37.6)

(65.4)

(75.7)

(27.9)

Profit After Tax (reported)

(18.0)

(37.6)

(65.4)

(75.7)

(27.9)

Minority interests

0.0

0.0

0.0

0.0

0.0

Discontinued operations

0.0

0.0

0.0

0.0

0.0

Net income (normalised)

(18.0)

(37.6)

(65.4)

(75.7)

(27.9)

Net income (reported)

(18.0)

(37.6)

(65.4)

(75.7)

(27.9)

Basic average number of shares outstanding (m)

7.5

11.7

18.9

24.0

24.0

EPS - basic normalised (SEK)

 

 

(2.40)

(3.22)

(3.46)

(3.16)

(1.16)

EPS - diluted normalised (SEK)

 

 

(2.40)

(3.22)

(3.46)

(3.16)

(1.16)

EPS - basic reported (SEK)

 

 

(2.40)

(3.22)

(3.46)

(3.16)

(1.16)

Dividend (SEK)

0.00

0.00

0.00

0.00

0.00

Revenue growth (%)

N/A

584.4

143.5

510.5

205.4

Gross Margin (%)

N/A

N/A

N/A

N/A

N/A

EBITDA Margin (%)

-4399.4

-937.8

-896.4

-178.2

-20.1

Normalised Operating Margin

-4608.4

-1407.9

-1005.6

-190.9

-22.0

BALANCE SHEET

Fixed Assets

 

 

30.3

23.3

26.0

27.1

31.9

Intangible Assets

30.2

23.3

26.0

27.1

31.9

Tangible Assets

0.0

0.0

0.0

0.0

0.0

Investments & other

0.0

0.0

0.0

0.0

0.0

Current Assets

 

 

6.8

7.3

55.3

8.5

21.1

Stocks

0.0

0.0

0.0

0.0

0.0

Debtors

1.6

2.3

0.8

4.3

13.3

Cash & cash equivalents

5.2

4.4

54.3

3.0

4.1

Other

0.0

0.6

0.2

1.2

3.7

Current Liabilities

 

 

(9.3)

(7.8)

(10.1)

(40.3)

(85.2)

Creditors

(3.4)

(5.9)

(8.0)

(12.1)

(15.9)

Tax and social security

(5.5)

0.0

0.0

0.0

0.0

Short term borrowings

0.0

(0.3)

0.0

(25.0)

(65.0)

Other

(0.4)

(1.6)

(2.1)

(3.2)

(4.2)

Long Term Liabilities

 

 

(3.1)

(2.7)

(2.7)

(2.7)

(2.7)

Long term borrowings

0.0

0.0

0.0

0.0

0.0

Other long term liabilities

(3.1)

(2.7)

(2.7)

(2.7)

(2.7)

Net Assets

 

 

24.6

20.0

68.5

(7.4)

(34.9)

Minority interests

0.0

0.0

0.0

0.0

0.0

Shareholders' equity

 

 

24.6

20.0

68.5

(7.4)

(34.9)

CASH FLOW

Op Cash Flow before WC and tax

(17.2)

(25.0)

(58.3)

(70.7)

(24.4)

Working capital

3.9

2.4

3.5

0.6

(5.1)

Exceptional & other

0.0

0.0

0.0

0.0

0.0

Tax

0.0

0.0

0.0

0.0

0.0

Net operating cash flow

 

 

(13.3)

(22.6)

(54.7)

(70.1)

(29.5)

Capex

(6.8)

(5.6)

(9.1)

(6.3)

(8.2)

Acquisitions/disposals

0.0

0.0

0.0

0.0

0.0

Net interest

0.0

0.0

0.0

0.1

(1.2)

Equity financing

21.3

29.4

128.1

0.0

0.0

Dividends

0.0

0.0

0.0

0.0

0.0

Other

0.0

(2.3)

(14.0)

0.0

0.0

Net Cash Flow

1.3

(1.1)

50.2

(76.3)

(38.8)

Opening net debt/(cash)

 

 

(3.9)

(5.2)

(4.1)

(54.3)

22.0

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)

 

 

(5.2)

(4.1)

(54.3)

22.0

60.8

Source: TerraNet accounts, Edison Investment Research. Note: *External revenues excluding own work capitalised.

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

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

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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

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

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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