Resilient with a renewed focus on growth

Record 1 July 2020 Update
Download PDF

Record

Resilient with a renewed focus on growth

FY20 results

Financial services

1 July 2020

Price

39.25p

Market cap

£78m

Net cash (£m) at end March 2020 excluding seed fund cash of £4.3m

18.0

Shares in issue

199.1m

Free float

56%

Code

REC

Primary exchange

LSE

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

6.7

47.6

21.3

Rel (local)

5.2

34.4

44.3

52-week high/low

41.20p

26.30p

Business description

Record is a specialist independent currency manager that provides a number of products and services, including passive and dynamic hedging, and a range of currency for return strategies, including funds and customised segregated accounts.

Next events

Q121 trading update

17 July 2020

Analysts

Andrew Mitchell

+44 (0)20 3681 2500

Martyn King

+44 (0)20 3077 5745

Record is a research client of Edison Investment Research Limited

Record delivered full year results matching expectations with assets under management equivalent (AUME) slightly ahead as positive inflows more than offset the impact of market moves and fee margins were broadly stable. The group also demonstrated its operational resilience and expertise to clients during the onset of COVID-19 and accompanying volatility. Looking ahead, the group has a fresh focus on growth and to support this is investing in a measured way in IT and its staff.

Year end

Revenue (£m)

PBT
(£m)

EPS*
(p)

DPS**
(p)

P/E
(x)

Yield
(%)

03/19

25.0

8.0

3.25

2.30

12.1

5.9

03/20

25.6

7.7

3.26

2.30

12.0

5.9

03/21e

23.7

5.7

2.37

2.30

16.6

5.9

03/22e

24.0

5.6

2.33

2.30

16.8

5.9

Note: *EPS is diluted. **DPS excludes special dividends.

FY20 results in line with expectation

The AUME figure of $58.6bn for end March had already been announced and was up 2.3% versus FY19 (or +7.5% in sterling terms to £47.3bn). Revenue was £25.6m (+2.4%) while administrative expenses rose 6.2% reflecting investment in technology and increased personnel costs. This left pre-tax profit at £7.7m (-3%) and basic EPS, after a reduced tax charge, at 3.26p (3.27p). The ordinary dividend for the year was unchanged at 2.30p while a special dividend of 0.41p (0.69p) is to be paid giving a total dividend of 2.71p (2.99p).The group remains committed to its policy of paying out excess earnings subject to capital and investment requirements.

Creating the conditions for growth

Looking forward, CEO Leslie Hill, who took up her role in February, seeks to bring a new energy and vigour to the business with a greater focus on growth. The group sees the cornerstones of its strategy as: quality client experience; technology and innovation; and talent development. The group will continue to develop new products but with an emphasis on meeting client needs including areas such as environmental, social and corporate governance (ESG), impact investing and incorporation of frontier markets into products. Investment in technology will be required and has the potential to deliver services more efficiently and generate rapid paybacks. On talent development there will be more staff training and a plan to secure succession within the business by giving earlier responsibility to those with talent.

Valuation: Trading on below peer multiples

Our FY21 EPS estimate is increased by 11% largely reflecting the post-March equity market recovery. Otherwise, we exclude potential net new money flows and performance fees, as before. Compared with a group of asset-manager peers (Exhibit 7), Record trades on below average prospective P/E and EV/EBITDA multiples and offers a higher yield.

Record in brief

Founded in 1983 by Chairman Neil Record, the company is a well-established, independent provider of currency hedging services, acting as an agent for clients, including private and public defined benefit pension schemes, foundations and other institutional investors. Record also offers currency for return, multi-product and related services.

The passive hedging product seeks to provide cost-effective reduction of exposure to currency risk for clients’ international portfolios. To counter competitive pressures from large banks, Record tailors its service to meet customer requirements and may include additional services as part of its offering. Its enhanced passive hedging service provides the same risk mitigation but aims to exploit structural inefficiencies in currency markets to deliver an enhanced outcome. Dynamic hedging also targets systematic reduction of currency risk while seeking to modify the level of hedging to allow clients to gain some benefit from weakness in their own currency. Currency for return strategies aim to exploit stable inefficiencies in currency markets and include a number of strategies: forward rate bias, emerging market currencies, momentum, value and, recently introduced, range-trading and dynamic macro currency (managed with a more discretionary approach). The multi-product category includes mandates where hedging and return-seeking strategies are combined on a bespoke basis.

Exhibit 1 sets out an analysis of Record’s AUME, fee income, clients and asset class exposure. Within this we would highlight the institutional nature of the client base, the importance of Swiss clients, the contribution of more than 50% to fees from passive hedging and the longevity of clients.

Exhibit 1: Record profile in numbers (FY20 except where shown)

Analysis by strategy

AUME (%)

Management fees (%)*

Est. average fee rate (bp)**

Dynamic hedging

4.3

17.3

16

Passive hedging

85.8

52.0

3

Currency for return

4.4

8.6

9

Multi-product

5.1

22.2

19

Cash

0.3

N/A

N/A

Total

100.0

100.0

5

Value

$58.6bn

£23.1m

Client analysis

Number (by financial year)

Type

% AUME

Concentration

% fees

Longevity (years)

% AUME

2015

55

Corporate pension funds

41

Top 10

71

0-1

5

2016

58

Public pension funds

39

Next 10

19

1-3

10

2017

59

Foundations & trusts

9

Balance

10

3-6

9

2018

60

Other

11

6-10

40

2019

65

>10

36

2020

72

100

100

100

Geographical analysis

By country

% fees

By base currency

% AUME

AUME progression

($bn)

Switzerland

45

Swiss franc

55

2015

55.4

US

24

Sterling

13

2016

52.9

UK

9

US dollar

11

2017

58.2

Other

22

Euro

15

2018

62.2

100

Other

6

2019

57.3

100

2020

58.6

Underlying asset class exposure of dynamic and passive hedging AUME (%)

Dynamic

Passive

Estimated % of hedging fees

Equity

90

28

43

Fixed income

0

39

29

Other

10

33

27

100

100

100

Source: Record, Edison Investment Research. Notes: *Management fee excluding performance fees. **Fee rate is our own calculation and within each strategy there will be a range of mandate types and fee structures/levels. Rounding may mean some columns do not sum.

FY20 results

AUME and management fees

As announced in the April Q420 trading update, Record’s AUME increased by $1.3bn (+2.3% in US dollars or +7.5% in sterling terms) during FY20. This was despite a $3.2bn negative market move for the year including a $4.5bn decrease in the final quarter as COVID-19 affected markets and the value of assets underlying AUME (see exposure of hedging AUME in the final section of Exhibit 1). There were net inflows of $4.6bn with most of this accounted for by passive hedging mandates. The average level of multi-product AUME in the second half benefited from a short-term tactical mandate of $1bn that was initiated in Q320 and ended in Q420.

Based on reported quarter-end figures we calculate that average US dollar AUME for the group was marginally lower than in FY19. However, sterling-denominated average AUME increased by 3% and this accounted for most of the 3.7% increase in group management fees with small changes in mix and hence average management fees making up the balance. Within management fees, the 13% reduction in dynamic hedging fees reflected a c 18% fall in average AUME in this area (in sterling terms), which largely resulted from discretionary profit-taking undertaken by Record on behalf of a client in FY19. Similarly, the near 19% increase in multi-product fees benefited from the boost to average AUME from the tactical mandate mentioned above.

Exhibit 2: AUME movements and management fees

Year end March

AUME movements ($bn)

End period AUME ($bn)

Average AUME ($bn)

Management fees (£000)

FY19

FY20

FY19

FY20

% change

FY19

FY20

% change

FY19

FY20

% change

Dynamic hedging

(0.7)

0.2

3.1

2.5

-19.4

4.1

3.2

-20.9

4,598

3,995

-13.1

Passive hedging

(4.6)

4.1

48.2

50.3

4.4

50.7

50.5

-0.4

11,610

12,026

3.6

Currency for return

0.9

0.3

2.7

2.6

-3.7

2.3

2.9

23.8

1,775

1,982

11.7

Multi-product

0.0

0.0

3.0

3.0

0.0

3.0

3.4

12.6

4,325

5,130

18.6

Cash & futures

(0.1)

0.0

0.3

0.2

-33.3

0.3

0.3

4.5

Total

(4.5)

4.6

57.3

58.6

2.3

60.3

60.2

-0.2

22,308

23,133

3.7

Markets

2.3

(3.2)

FX and scaling

(2.7)

(0.1)

Total change

(4.9)

1.3

Opening AUME

62.2

57.3

Closing AUME

57.3

58.6

Source: Record, Edison Investment Research

Key points from the income statement

The profit and loss for FY20 is set out in Exhibit 3. Our comments on key areas are below, with comparisons with FY19 unless stated.

Total management fees increased by 3.7% mainly as a result of higher average AUME (in sterling terms), as set out above.

Total revenue rose 2.4% with performance fees crystallised of £1.8m versus £2.3m.

Fee margins on a like-for-like basis were broadly stable and we calculate the average fee margin for the group was effectively unchanged at 4.9bp per year, although this compares with c 6bp for FY16 and FY17 reflecting the margin pressure that has been seen in the industry, particularly for passive products.

Costs increased by 6.2% with investment in IT to support continued client service enhancement and efficiency together with higher staff costs reflecting higher fixed remuneration and senior staff recruitment/promotion, including a new head of global sales. Variable compensation was higher as a percentage of pre-bonus operating profit at 31.4% (30.1%) but was little changed in absolute terms. The variable payment percentage may range between 25% and 35%.

This left pre-tax profit 3.2% lower, while tax relief relating to research and development spending trimmed the tax charge to 18% (20%) so that profit after tax was only down 0.9%.

The ordinary dividend for the year was unchanged at 2.30p, while a special dividend of 0.41p (0.69p) is to be paid, giving a total dividend of 2.71p (2.99p). The board targets a dividend at least covered by earnings and takes into account anticipated increases in costs and regulatory capital requirements, which for FY21 are equivalent to a net increase of 0.55p per share (EPS of 3.26p less 0.55p gives 2.71p).

Exhibit 3: P&L analysis

£000

FY19

FY20

change

Dynamic hedging

4,598

3,995

-13.1%

Passive hedging

11,610

12,026

3.6%

Currency for return

1,775

1,982

11.7%

Multi-product

4,325

5,130

18.6%

Management fees

22,308

23,133

3.7%

Performance fees

2,333

1,819

-22.0%

Other investment services income

332

611

84.0%

Total revenue

24,973

25,563

2.4%

Cost of sales

(385)

(255)

-33.8%

Gross profit

24,588

25,308

2.9%

Administrative expenses

(16,704)

(17,741)

6.2%

Other income/expense

(8)

82

N/A

Operating profit

7,876

7,649

-2.9%

Net finance income

113

88

-22.1%

Profit before tax

7,989

7,737

-3.2%

Taxation

(1,559)

(1,365)

-12.4%

Profit after tax

6,430

6,372

-0.9%

Diluted EPS (p)

3.25

3.26

0.4%

DPS (p)

2.99

2.71

-9.4%

Tax rate

20%

18%

Source: Record

Exhibit 4 shows the performance measures for the multi-strategy currency for return fund and dynamic macro currency and multi-strategy composites. The multi-strategy fund and composite have both been adversely affected by the particularly sharp market falls in the final quarter, while the fund in addition is also affected by a weak initial period following its launch in 2018. In contrast the dynamic macro currency strategy performed well in the recent period of market weakness adding to its track record of strength in episodes of market stress. The strategy is managed by John Floyd, an experienced FX professional, and its investment process is more discretionary than Record’s existing, primarily quantitatively driven strategies, and therefore provides valuable diversification.

Exhibit 4: Currency for return investment performance to 31 March 2020

Gearing

FY20 return

Return SI pa

Volatility SI pa

Inception

Fund

Record Currency Multi-Strategy Fund

4.5–6.0

-7.82%

-5.42%

9.11%

Feb-18

Composite returns

Dynamic Macro Currency

4.20%

4.25%

9.30%

Jan-04

Record Multi-Strategy composite

-3.84%

0.60%

3.14%

Jul-12

Source: Record. Note: Record Currency Multi-Strategy Fund is on a pounds sterling base and net of fees, while Record Multi-Strategy Composite and Record Dynamic Macro Currency are on a US dollar base and show excess returns gross of fees. SI: since inception.

Record has also reported the performance of the enhanced passive hedging programme relative to a fixed tenor benchmark (using a representative account). This showed a negative FY20 return of 0.05% but a still positive since-inception (October 2014) annual return of 0.09%. This longer-term performance is material in the context of Record’s average passive hedging management fee margin of 0.03% per year though, following recent underperformance, there is likely to be ground to be regained before further performance fees are earned on these mandates.

Strategy

CEO Leslie Hill seeks to bring fresh energy and a renewed focus on growth to the group. The cornerstones of the group’s strategy are set out as: quality client experience; technology and innovation; and talent development.

The group will continue to deliver a high-quality service to clients and here recent volatility has underlined the value of its experience and relationships in the market at a time when liquidity on electronic platforms dried up and banks returned to their role as key liquidity providers in the FX market.

Record has already been following a strategy of innovation and customisation to counter fee pressure but will now place greater emphasis on developing new products to meet customers’ own identified needs (already mentioned here are ESG/impact investing and adding frontier currencies to emerging market products). This should help diversify revenues and help protect margins.

Continued investment in technology will be required with updating of legacy systems, deployment of third-party services and use of AI are areas of interest that will be pursued on a step-by-step basis to contain risks and ensure that value is delivered. The planned spending (£0.2m ongoing and c £0.3m project spend this year) has the potential to deliver services such as passive hedging and spot FX execution more efficiently and generate rapid paybacks enabling staff to focus on higher-value tasks and the capacity to deal with increased volume.

On talent development there will be greater focus on staff training and securing succession within the business by giving those with talent more responsibility earlier than may have happened previously.

Outlook, estimate changes

The market has seen a significant spike in currency volatility between the euro, US dollar and Swiss franc (Exhibit 5) as a result of COVID-19. This has underlined the benefits of strategies to mitigate currency risks and maintaining a favourable backdrop for Record’s conversations with existing and potential clients. As noted above, Record’s experience and its ability to maintain services during a period of market disruption is likely to have been beneficial in underpinning the stickiness of its hedging client base. Although volatility has subsided to some extent, the ebb and flow of economic and health-related news may well mean further periods of increased volatility.

Exhibit 5: Implied volatility for Swiss franc and euro vs US dollar

Source: Bloomberg. Note: implied volatility for one year at the money options.

As previously, our forecasts do not assume either AUME inflows or outflows beyond those already announced. Similarly, we do not assume any performance fees until these have been crystallised and announced. Normally we only allow for a modest element of prospective performance-driven growth in the equity market exposed dynamic and passive hedging AUME (2% and 1% per annum). However, on this occasion we have allowed for the sharp bounce back in equity markets since the end of March (the MSCI All World Index is up approaching 20%) adjusting for this in proportion to the equity market exposure. Otherwise, we have made small adjustments to assumed fee margins based on implied values for FY20 and updated sterling/US dollar exchange rates. Our cost assumptions are increased to allow for the higher personnel and IT costs described above. For our new FY22 forecast we note that our zero net new money assumption may prove conservative in the light of the group’s renewed focus on growth although, if this proves fruitful, we would not be surprised to see our cost assumption for that year, before variable compensation, rise as well as revenue. Further details of our estimates are shown in the financial summary (Exhibit 8).

Exhibit 6: Estimate changes

 

Revenue (£m)

PBT (£m)

EPS (p)

DPS (p)*

 

Old

New

Change

Old

New

Change

Old

New

Change

Old

New

Change

03/20

25.1

25.6

2%

7.8

7.7

0%

3.17

3.26

3%

2.30

2.30

0%

03/21e

22.2

23.7

7%

5.2

5.7

11%

2.14

2.37

11%

2.30

2.30

0%

03/22e

24.0

5.6

2.33

2.30

Source: Edison Investment Research. Note: *Dividend excludes any special payment.

The group figure for net cash and money market instruments managed as cash was £22.3m (FY19: £23.7m). Stripping out the cash held by seed funds (non-controlling interests) gives an own cash figure of £18.0m (£17.9m).

Valuation

An updated version of our valuation table, which shows Record in the context of a group of UK asset managers, is shown below. Record is differentiated by its role as a specialist currency manager but its fees are primarily based on the size of AUME so, like the asset managers, it is exposed to movements in underlying equity and fixed income markets and flows.

Exhibit 7: Comparing valuation with UK fund managers

Price

(p)

Market cap

(£m)

P/E 2020e

(x)

EV/EBITDA 2020e (x)

Dividend yield (%)

Ashmore

417

2,949

16.8

10.7

4.0

City of London Investment Group

383

101

10.5

N/A

7.0

Impax Asset Management

340

440

26.4

21.4

1.6

Jupiter

256

1,163

13.3

6.5

6.7

Liontrust

1,305

718

22.5

17.2

2.1

Man Group

131

2,376

12.6

9.0

6.5

Polar Capital

502

490

13.5

8.8

6.6

Schroders

2,949

7,770

18.0

12.3

3.9

Average

16.7

12.3

4.8

Record

39

78

15.1

9.0

5.9

Source: Refinitiv, Edison Investment Research. Note: P/Es and EV/EBITDA on a calendar year basis. Record’s dividend yield excludes the special dividend. Priced at 30 June 2020.

Record shares have outperformed the peers shown over three months (+48% versus 27% on average) but still trade on below the peer average calendar year 2020 P/E and EV/EBITDA ratios. The earnings for calendar year 2020 do benefit from a proportion of the £1.8m performance fee earned in FY20 and our FY21 and FY22 Record earnings estimates do not include any performance fees; we estimate that for calendar year 2021 Record is trading on a P/E of 16.8x, a moderate premium to the peer multiple of 14.9x for the same period. The dividend yield of 5.9% (excluding special dividend) is above the peer average and on a longer view there is the potential for the ordinary payment to be enhanced with a special dividend, particularly if performance fees are crystallised and growth accelerates.

Exhibit 8: Financial summary

Year end March (£'000s unless stated)

 

 

2018

2019

2020

2021e

2022e

 

 

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

 

 

 

 

 

 

 

Revenue

 

 

23,834

24,973

25,563

23,749

23,970

Operating expenses

 

 

(16,735)

(17,089)

(17,996)

(18,115)

(18,422)

Other income/(expense)

 

 

173

(8)

82

0

0

Operating Profit (before amort. and except.)

 

 

7,272

7,876

7,649

5,634

5,549

Finance income

 

 

56

113

88

86

86

Profit Before Tax

 

 

7,328

7,989

7,737

5,720

5,635

Taxation

(1,182)

(1,559)

(1,365)

(1,087)

(1,071)

Minority interests

 

 

0

0

48

40

30

Attributable profit

 

 

6,146

6,430

6,420

4,673

4,594

 

 

 

 

 

 

 

 

Revenue/AuME (excl. perf fees) bps

 

 

5.1

4.9

5.1

4.7

4.7

Operating margin (%)

 

 

30.5

31.5

29.9

23.7

23.1

 

 

 

 

 

 

 

 

Average Number of Shares Outstanding (m)

 

 

206.5

198.1

197.1

197.1

197.1

Basic EPS (p)

 

 

3.03

3.27

3.26

2.38

2.34

EPS - diluted (p)

 

 

2.98

3.25

3.26

2.37

2.33

Dividend per share (p)

 

 

2.30

2.30

2.30

2.30

2.30

Special dividend per share (p)

 

 

0.50

0.69

0.41

0.00

0.00

Total dividend (p)

 

 

2.80

2.99

2.71

2.30

2.30

 

 

 

 

 

 

 

 

BALANCE SHEET

 

 

 

 

 

 

 

Non-current assets

 

 

2,339

2,161

4,868

4,288

3,698

Intangible Assets

 

 

228

288

470

475

475

Tangible Assets

 

 

910

761

751

616

476

Investments

 

 

1,115

1,112

2,472

2,472

2,472

Other

 

 

86

0

1,175

725

275

Current Assets

 

 

29,737

31,427

31,149

30,067

30,206

Debtors

 

 

6,775

7,562

8,704

7,402

7,439

Cash

 

 

12,498

12,966

14,294

14,515

14,616

Money market instruments

 

 

10,198

10,735

7,958

7,958

7,958

Other

 

 

266

164

193

193

193

Current liabilities

 

 

(5,525)

(6,158)

(6,955)

(6,505)

(6,068)

Creditors

 

 

(2,630)

(2,736)

(3,009)

(2,559)

(2,572)

Financial liabilities

 

 

(2,467)

(2,621)

(2,191)

(2,191)

(2,191)

Other

 

 

(428)

(801)

(1,755)

(1,755)

(1,305)

Non-current liabilities

 

 

0

(29)

(901)

(451)

(451)

 

 

 

 

 

 

 

 

Net Assets

 

 

26,551

27,401

28,161

27,400

27,386

Minority interests

 

 

0

60

132

92

62

Net assets attributable to ordinary shareholders

 

26,551

27,341

28,029

27,308

27,324

 

 

 

 

 

 

 

 

No of shares at year end (m)

 

 

199.1

199.1

199.1

199.1

199.1

NAV per share (p)

 

 

13.3

13.7

14.1

13.7

13.7

 

 

 

 

 

 

 

 

CASH FLOW

 

 

 

 

 

 

 

Operating Cash Flow

 

 

2,746

7,026

6,543

6,269

5,334

Capex

 

 

(236)

(72)

(243)

(140)

(140)

Cash flow from other investing activities

 

 

7,899

(561)

1,513

(64)

(64)

Dividends

 

 

(6,810)

(5,517)

(5,888)

(5,394)

(4,578)

Other financing activities

 

 

(10,367)

(613)

(943)

(450)

(450)

Other

 

 

146

205

346

0

0

Net Cash Flow

 

 

(6,622)

468

1,328

221

102

Opening cash/(net debt)

 

 

19,120

12,498

12,966

14,294

14,515

Closing net (debt)/cash

 

 

12,498

12,966

14,294

14,515

14,616

Closing net debt/(cash) inc money market instruments

22,696

23,701

22,252

22,473

22,574

 

 

 

 

 

 

 

 

AUME

 

 

 

 

 

 

 

Opening ($bn)

 

 

58.2

62.2

57.3

58.6

61.9

Net new money flows

 

 

(1.2)

(4.5)

4.6

0.0

0.0

Market/other

 

 

5.2

(0.4)

(3.3)

3.3

0.3

Closing ($bn)

 

 

62.2

57.3

58.6

61.9

62.2

Source: Record accounts, Edison Investment Research


General disclaimer and copyright

This report has been commissioned by Record and prepared and issued by Edison, in consideration of a fee payable by Record. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

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

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by Record and prepared and issued by Edison, in consideration of a fee payable by Record. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

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

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Share this with friends and colleagues