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Lookers — Record FY21, but challenges remain

Lookers (LN: LOOK)

Last close As at 23/04/2024

74.70

▲ −7.80 (−9.87%)

Market capitalisation

GBP279m

More on this equity

Research: Industrials

Lookers — Record FY21, but challenges remain

Lookers’ FY21 adjusted PBT was even more of a record than we had anticipated. Revenue growth in all the main segments was augmented by strong used car margins and improvements in the new car segment, which drove group gross margins up 180bp to an exceptional 12.8%. The positive demand and supply dynamics look set to continue for the time being. Used car prices may stay high for some time but as they plateau margins may moderate, compounded by inflationary cost factors. In addition, high energy prices are pressurising household and business budgets with increasing vehicle usage costs, which may start to reduce demand. However, FY22 looks set to return to at least the level of pre-pandemic highs while not matching the exceptional FY21 performance.

Andy Chambers

Written by

Andy Chambers

Director, Industrials

Industrials

Lookers

Record FY21, but challenges remain

FY21 results

Automotive retail

11 April 2022

Price

86p

Market cap

£337m

Adjusted net cash (£m) at 30 December 2021 (excluding lease liabilities)

3.0

Shares in issue

391.8m

Free float

79%

Code

LOOK

Primary exchange

LSE

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

4.1

16.2

20.0

Rel (local)

(5.4)

16.0

11.6

52-week high/low

101p

56p

Business description

Lookers is one of the largest UK motor vehicle retailers, with its new car operations supported by the strength of used and aftersales activities. It now operates 153 franchises, representing 33 marques from 100 sites around the UK and Ireland, with strong regional presences in Northern Ireland, Scotland, the South East and across northern England.

Next events

AGM

31 May 2022

Analyst

Andy Chambers

+44 (0)20 3077 5700

Lookers is a research client of Edison Investment Research Limited

Lookers’ FY21 adjusted PBT was even more of a record than we had anticipated. Revenue growth in all the main segments was augmented by strong used car margins and improvements in the new car segment, which drove group gross margins up 180bp to an exceptional 12.8%. The positive demand and supply dynamics look set to continue for the time being. Used car prices may stay high for some time but as they plateau margins may moderate, compounded by inflationary cost factors. In addition, high energy prices are pressurising household and business budgets with increasing vehicle usage costs, which may start to reduce demand. However, FY22 looks set to return to at least the level of pre-pandemic highs while not matching the exceptional FY21 performance.

Year end

Revenue (£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

12/20**

3,700

13.7

2.97

0.00

29.0

0.0

12/21

4,051

90.1

19.95

2.50

4.3

2.9

12/22e

4,231

53.0

10.88

3.00

7.9

3.5

12/23e

4,370

60.0

12.03

3.30

7.2

3.8

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

FY21 sees Lookers back on the road

Lookers delivered record profits in FY21 with group revenue up 9% to £4.05bn (FY20: £3.70bn) and gross profit margin rising to an exceptional 12.8% (FY20 11.1%), largely reflecting strong used vehicle margins. Underlying profit before tax of £90.1m (FY20 restated: £13.7m) was ahead of our £86.0m expectation, and year-end adjusted net cash was £3.0m (FY20 net debt £40.7m). On 25 March 2022 Lookers completed the sale and leaseback of its site in Battersea, which generated cash of £28m, further bolstering the strong balance sheet. The board is reinstating dividends, proposing a FY21 payment of 2.5p per share.

Implementing strategy as challenges remain

Management says momentum remained strong through Q122. However, the challenges of vehicle supply constraints and inflationary pressures are being compounded by uncertainties caused by the war in Ukraine, as well as the impact of rising costs on household and business budgets. We expect Lookers’ profitability to fall back towards historical levels as used prices plateau and margins moderate. At the same time the evolved strategy is being implemented, which should help to control costs and create new profitable revenue opportunities. Management is also preparing for the transition to electric vehicles, as well as an expected trend to agency arrangements with a number of brand partners. Capital investment is increasing to support the strategic initiatives.

Valuation: Undemanding rating

The single-digit FY23e P/E rating of 7.2x remains undemanding despite the strength of the share price. Our capped DCF valuation of 183p per share suggests some opportunity still exists, assuming markets start to recover next year.

FY21 results

Exhibit 1: Lookers FY21 results summary

Year to December (£m)

FY20

FY21

% change

Revenues

3,699.9

4,050.7

9.5%

Group gross profit

411.0

516.6

25.7%

Gross margin

11.1%

12.8%

EBITDA

95.0

165.1

73.8%

Depreciation

(47.4)

(45.9)

-3.2%

EBITA (underlying)

47.6

119.2

150.4%

Amortisation

(4.8)

(5.0)

4.2%

OPBIT (underlying)

42.8

114.2

166.8%

Exceptional items

(12.2)

(0.1)

Financial Items

(29.1)

(24.1)

-17.2%

Pre-tax profit (underlying)

13.7

90.1

557.7%

Taxation

(2.7)

(11.6)

Tax rate

19.1%

12.9%

Net income (underlying)

11.6

78.5

576.7%

EPS (p) – reported

(1.2)

15.6

N/M

EPS (p) – underlying fully diluted

2.97

19.95

575.1%

DPS (p)

0.00

2.50

Adjusted net debt/(cash)

40.7

(3.0)

Source: Company reports

Lookers’ performance in FY21 was a record by a considerable degree. Group revenue was up 9% to £4.05bn (FY20: £3.70bn), with the gross profit margin rising to an exceptional 12.8% (FY20: 11.1%), largely reflecting the buoyancy of used vehicle margins though new car margins also improved. Underlying profit before tax of £90.1m (FY20 restated: £13.7m) was ahead of our £86.0m forecast, and year-end adjusted net cash (excluding leases) was £3.0m (FY20 net debt: £40.7m). Adjusted net cash (excluding leases) has been bolstered in Q122 by the sale and leaseback of its VW site in Battersea for £28m before costs, generating a property profit of c £18m. A right-of-use asset of around £19m replaces the fixed asset book value of £10m. The board is reinstating dividends and proposes a FY21 dividend of 2.5p per share, ahead of our 2.0p estimate.

New car margins improve as supply constraints continue

In the new car segment Lookers outperformed in the retail market with registrations rising 9.7% versus the 7.4% increase in UK retail registrations. Fleet sales were flat which was a modest underperformance of the total market car fleet and van registrations combined, which rose 2.0%. The outcome reflected Lookers’ more selective approach to some fleet business. Overall unit sales increased 3.9%, broadly in line with the total UK market increase of 4.1%.

Exhibit 2: Lookers new car segment performance

2020

2021

% change

UK registrations

Car retail

747,507

802,504

7.4%

Car fleet

883,557

844,677

-4.4%

Vans

292,657

355,380

21.4%

Total market

1,923,721

2,002,561

4.1%

Lookers (units)

Retail

35,226

38,657

9.7%

Fleet (incl. vans)

51,329

51,310

0.0%

Total

86,555

89,967

3.9%

Source: SMMT, company reports

The new car average selling price rose 5.0% to £20,743 (FY20: £19,748), which left revenues up 9.2%. With the constrained new vehicle supply being directed to more profitable channels, gross margin increased to 7.4% (6.6%). It is worth noting that Lookers saw the BEV (battery electric vehicle) share of its total registrations increase to 16.1% from 10.2% in FY20, ahead of the market mix of 11.2% and indicating Lookers is well advanced on the growing segment aided by its Polestar franchise. The year-end new vehicle order book was a record for the group of almost 20,000 vehicles.

Exceptional year for used car prices and margins

Market conditions in the used segment remained strong through the year with an 8% rise in average selling prices on volumes up 6% at 83,141 units (78,341). Revenues rose 14.6% and gross profit margins increased to 8.8% (FY20: 6.6%).

The aftersales performance remained robust despite a number of challenges, including lower new car registrations and tightening labour markets. Revenues grew by 11.8% to £429,3m and gross margin only fell marginally to 42.5% (FY20: 42.9%) reflecting the sales mix.

The smaller leasing business also made progress with an exceptional H22 performance reflecting strong residual values. While revenue fell by 8% the gross profit contribution increased 18%.

Exhibit 3: Lookers half yearly analysis

Year-end December (£m)

2020

2021

% change

 

H120

H220

FY20

H121

H221

FY20

H120

H220

FY

New Car

705.0

1,004.3

1,709.3

1,027.5

838.7

1,866.2

46%

-16%

9%

Used Car

770.3

1,008.8

1,779.1

1,044.8

993.9

2,038.7

36%

-1%

15%

Aftersales

162.1

221.7

383.8

211.3

217.9

429.2

30%

-2%

12%

Leasing

59.4

89.0

148.4

79.3

57.6

136.9

34%

-35%

-8%

Intra-group sales

(126.2)

(194.5)

(320.7)

(209.7)

(210.6)

(420.3)

66%

8%

31%

Revenues

1,570.6

2,129.3

3,699.9

2,153.2

1,897.5

4,050.7

37%

-11%

9%

New Cars

42.7

66.5

109.2

66.6

64.7

131.3

56%

-3%

20%

Used Car

43.5

74.4

117.9

89.8

90.5

180.3

106%

22%

53%

Aftersales

69.0

95.6

164.6

92.4

89.8

182.2

34%

-6%

11%

Leasing

7.2

12.1

19.3

8.8

14.0

22.8

22%

16%

18%

Group gross profit

162.4

248.6

411.0

257.6

259.0

516.6

59%

4%

26%

New Car

6.1%

6.6%

6.4%

6.5%

7.7%

7.0%

Used Car

5.6%

7.4%

6.6%

8.6%

9.1%

8.8%

Aftersales

42.6%

43.1%

42.9%

43.7%

41.2%

42.5%

Leasing

12.1%

13.6%

13.0%

11.1%

24.3%

16.7%

Group gross margin

10.3%

11.7%

11.1%

12.0%

13.6%

12.8%

Source: Company reports

Outlook

The UK automotive market still faces a mixture of positive and negative supply and demand issues, which have persisted since lockdown was lifted. The lack of new car availability and sales has led to increased demand for high quality used cars. However, availability is being squeezed by the historic drops in new car sales and deferrals of replacing cars coming off personal contract purchase, or PCP, and leasing contracts. The supply issue has affected both retail and business buyers. The positive impact on margin achievement for new car transactions was surpassed by the used car segment as prices rose at unprecedented rates to exceptional levels. There are reports of some used car prices exceeding new car prices. Certainly, the amount of used vehicle value depreciation has been significantly reduced and seems unlikely to reverse quickly. Demand has to date remained healthy, with buyers sometimes opting for used cars or retaining existing vehicles rather than waiting for the extended lead times that new car supply constraints have caused.

We now expect used car prices to remain firm through 2022 as new vehicle supply issues persist. Used supply is likely to face extended issues as lower pandemic period new car sales start to be reflected in 2023. However, used margins may start to moderate as input prices rise and used prices plateau.

While vehicle demand following the first lockdown that ended in June 2020 was initially driven by a switch from public transport, subsequent transactions were supported by increases in savings and disposable income as a result of constraints on other spending opportunities during the pandemic (eg overseas travel, entertainment etc).

What is apparent from March 2022 car registrations is that the UK market remains depressed by the lack of new car supply due to the global chip shortages. The registration levels achieved are very low compared to pre-pandemic levels and we do not expect quarterly new car sales for Lookers to change considerably as the year progresses, despite it entering the year with a record order bank.

There is a risk that the inflationary pressures from higher energy prices may have a double negative influence on vehicle demand. Household and business budgets are being squeezed by higher electricity and gas bills as well as other cost inflation. In addition, the increase in petrol prices is making personal transport more expensive, which could reverse the trend away from public transport as people live more readily with the virus.

Within that environment Lookers will pursue its evolved strategy. The six pillars are:

■

Operational optimisation across the operations remains the cornerstone of the strategy. It incorporates financial product penetration, purchasing power benefits, tight control of working capital and inventory management, increasing aftersales penetration on used vehicles, and enhancing lead generation and conversion in both new and used cars.

■

Leveraging technology and digitalisation in its multichannel offering is a key enabler. It includes standardising key platforms. The harmonisation of the DMS (the dealer management system) should complete in H123 and a £6m sales transformation programme is also underway to materially improve the customer relationship management process, data analytics and AI utilisation. The initiatives should improve efficiencies and reduce costs.

■

Expanding OEM relationships: seeking selective infill opportunities with the existing 32 brand partners, increasing engagement with new EV market entrants building on the success with Polestar, and preparing for transitions to agency models for some partners.

■

Increasing used vehicle penetration lifting share by adding to its existing franchise channel and 11 standalone used vehicle centres. It is seeking to add a Lookers Cube concept with a multi franchise, multi service facility on large five-acre sites. Two proof-of-concept evaluation leasehold sites each costing £15–20m in capex are being sought in Lookers’ heartlands with four more expected to follow.

■

Developing aftersales revenues by adding services to recapture margin currently paid away (eg cosmetic repairs), as well as increasing penetration of service plans in used and new vehicles segments. Lookers is already training service technicians for EVs, with 25% already accredited.

■

Leveraging corporate leasing and fleet capabilities. The three currently independent businesses are being consolidated into Lookers Vehicle Solutions with a fleet of around 12,000 vehicles providing purchasing and other synergistic opportunities. It also supports new product developments including a subscription offering. All de-fleeting activity will be directed internally to retain more of the disposal margin within the group.

Earnings revisions

While FY21 turned out to be a remarkably profitable one, we remain cautious about the outlook for FY22 despite the persistence of positive use car pricing dynamics. Inflationary pressures and the supply/demand factors previously discussed are likely to be exacerbated by the energy crisis, as well as uncertainties regarding the impact on supply of Russia’s invasion of Ukraine.

We expect to see new car registrations remain relatively flat on Q122, which themselves are depressed on historic pre-pandemic levels. As there were no lockdowns in early 2022 we do not expect the surge in market sales seen in Q221, which reflected the return of active showroom demand. In addition, we expect the squeeze on used car margins to be reflected progressively during the year.

We have reduced our sales estimate for FY22 but increased our gross margin compared to our previous forecast, which leads to only marginal changes to our previous underlying PBT forecast. We note that the level of profitability while well below FY21 is close to pre-pandemic highs.

Management is restoring dividends and the new policy is expected to be progressive with a level of earnings cover in the range of 3.5x to 4.5x. In 2022 we expect the dividend to be paid as an interim and final with a ratio of 1:2 and for a full year payment of 3.0p per share.

We also publish our FY23 estimates for the first time, expecting only a modest 3% increase in revenues to £4.37bn with underlying PBT rising 13% y-o-y to £60.0m.

Exhibit 4: Lookers earnings revisions

Year to December (£m)

2021e

2021a

 

2022e

2022e

 

2023e

Prior

Reported

% change

Prior

New

% change

New

Revenues

New

1,961.5

1,866.2

-4.9%

2,094.4

1,994.3

-4.8%

2,054.2

Used

2,188.3

2,038.7

-6.8%

2,232.1

2,079.5

-6.8%

2,141.9

Aftersales

429.9

429.2

-0.2%

442.8

442.1

-0.2%

455.3

Leasing

160.3

136.9

-14.6%

165.1

141.0

-14.6%

145.2

Intra group

(409.1)

(420.3)

2.7%

(406.3)

(425.8)

4.8%

(426.6)

Group revenues

4,330.9

4,050.7

-6.5%

4,528.0

4,231.0

-6.6%

4,370.0

 

 

 

 

 

 

 

EBITDA

180.6

165.1

-8.6%

150.4

128.3

-14.7%

137.8

Underlying EBITA

120.7

119.2

-1.2%

86.4

81.8

-5.4%

88.7

Underlying OPBIT

115.3

114.2

-1.0%

81.1

76.8

-5.3%

83.7

Underlying PBT

86.0

90.1

4.8%

51.4

53.0

3.0%

60.0

 

 

 

 

 

 

 

EPS - underlying fully diluted (p)

17.36

19.95

14.9%

10.36

10.88

5.0%

12.03

DPS (p)

2.00

2.50

25.0%

3.30

3.00

-9.1%

3.30

Net debt/(cash)

(8.5)

(3.0)

-64.7%

16.9

(32.4)

n.m.

(47.0)

Source: Edison Investment Research

Exhibit 5: Financial summary

£m

2020*

2021

2022e

2023e

Year end 31 December

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

3,699.9

4,050.7

4,231.0

4,370.0

Cost of Sales

(3,288.9)

(3,534.1)

(3,723.3)

(3,845.6)

Gross Profit

411.0

516.6

507.7

524.4

EBITDA

 

 

95.0

165.1

128.3

137.8

Operating Profit (before amort. and except.)

 

 

47.6

119.2

81.8

88.7

Intangible Amortisation

(4.8)

(5.0)

(5.0)

(5.0)

Exceptionals

(12.2)

(0.1)

18.0

0.0

Other

(1.6)

(2.0)

(2.0)

(2.0)

Operating Profit

29.0

112.1

92.7

81.7

Net Interest

(21.2)

(16.1)

(15.8)

(15.6)

Profit Before Tax (norm)

 

 

13.7

90.1

53.0

60.0

Profit Before Tax (FRS 3)

 

 

1.5

90.0

71.0

60.0

Tax

(6.1)

(28.8)

(13.5)

(12.6)

Profit After Tax (norm)

11.6

78.5

42.9

47.4

Profit After Tax (FRS 3)

(4.6)

61.2

57.5

47.4

Average Number of Shares Outstanding (m)

390.1

391.1

391.8

391.8

EPS

 

 

2.97

20.07

10.95

12.10

EPS - normalised fully diluted (p)

 

 

2.97

19.95

10.88

12.03

EPS - (IFRS) (p)

 

 

(1.18)

15.65

14.67

12.10

Dividend per share (p)

0.00

2.50

3.00

3.30

Gross Margin (%)

11.1

12.8

12.0

12.0

EBITDA Margin (%)

2.6

4.1

3.0

3.2

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

1.3

2.9

1.9

2.0

BALANCE SHEET

Fixed Assets

 

 

714.4

702.2

714.5

726.1

Intangible Assets

190.1

187.2

192.2

197.2

Tangible Assets

399.9

399.3

395.7

413.0

Right of use asset

124.4

115.7

126.6

115.9

Investments

0.0

0.0

0.0

0.0

Current Assets

 

 

1,063.0

762.4

797.6

841.3

Stocks

655.2

511.9

524.6

541.9

Debtors

150.7

136.0

138.0

144.1

Cash

243.0

103.9

123.9

143.9

Other

14.1

10.6

11.1

11.4

Current Liabilities

 

 

(1,029.9)

(813.2)

(732.0)

(748.4)

Creditors

(913.0)

(729.6)

(732.0)

(748.4)

Short term borrowings

(116.9)

(83.6)

0.0

0.0

Long Term Liabilities

 

 

(464.6)

(281.8)

(364.9)

(369.2)

Long term borrowings

(166.8)

(17.3)

(91.5)

(96.9)

Lease liabilities

(145.5)

(136.8)

(146.8)

(146.8)

Other long term liabilities

(152.3)

(127.7)

(126.6)

(125.5)

Net Assets

 

 

282.9

369.6

415.3

449.8

CASH FLOW

Operating Cash Flow

 

 

68.2

114.6

78.0

89.2

Net Interest

(24.3)

(21.2)

(16.1)

(15.8)

Tax

(6.1)

(28.8)

(13.5)

(12.6)

Capex

(16.8)

(17.4)

(33.3)

(34.0)

Acquisitions/disposals

0.0

0.0

28.0

0.0

Financing

0.0

0.0

0.0

0.0

Dividends

0.0

0.0

(13.7)

(12.1)

Other

(2.2)

(3.5)

0.0

0.0

Net Cash Flow

18.8

43.7

29.4

14.6

Opening net debt/(cash)

 

 

59.5

40.7

(3.0)

(32.4)

HP finance leases initiated

0.0

0.0

0.0

0.0

Other

0.0

0.0

(0.0)

0.0

Closing net debt/(cash)

 

 

40.7

(3.0)

(32.4)

(47.0)

Net financial Liabilities

186.2

133.8

114.4

99.8

Source: Company reports, Edison Investment Research. Note: *Restated.


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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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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 2022 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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