Scaling regional powerhouse

Mercia Asset Management 8 July 2019 Update
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Mercia Asset Management

Scaling regional powerhouse

FY19 results

Investment companies

8 July 2019

Price

31.8p

Market cap

£96m

Net cash (£m) at 31 March 2019

29.8

Shares in issue

303.3m

Free float

47.3%

Code

MERC

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

1.6

(5.6)

(4.5)

Rel (local)

(3.3)

(7.9)

(4.0)

52-week high/low

38.7p

27.5p

Business description

Mercia Asset Management is a regionally focused specialist asset manager. Its stated intent is to become the leading regional provider of supportive balance sheet, venture, private equity and debt capital in transaction sizes typically below £10m.

Next event

AGM

September 2019

Half year results

December 2019

Analysts

Richard Williamson

+44 (0)20 3077 5700

Victoria Pease

+44 (0)20 3077 5700

Mercia Asset Management is a research client of Edison Investment Research Limited

Mercia’s FY19 results reflect continued progress across the portfolio, with the company in good shape for further growth. Net assets rose 2% to £126.1m, but FUM fell 5% to £381m due to the winding up of the successful RisingStars Growth Fund (15% IRR, TVPI of 528%). The direct investment portfolio increased to £87.7m, with £19.4m of cash invested in 17 companies, as well as £3.9m of fair value uplift. Mercia remains well positioned for further progress in FY20 with key portfolio companies strategically well placed, together with firepower from the group’s £168m of free cash and £30m of unrestricted balance sheet cash. The shares continue to trade at a significant discount to NAV (0.77x), even before considering the embedded value of Mercia Fund Managers (10p+).

Period end

Net cash* (£m)

Direct
investments (£m)

FUM
(£m)

NAV
(£m)

NAV per share (p)

P/NAV
(x)

03/16

30.9

38.1

220.0

80.0

26.4

1.20

03/17

59.6

52.0

336.5

121.4

40.0

0.79

03/18

49.4

66.1

400.0

123.5

40.7

0.78

H119

38.3

77.8

394.9

125.2

41.3

0.77

03/19

29.8

87.7

381.0

126.1

41.6

0.77

Note: *Includes liquid securities but not funds held on behalf of EIS investors.

32.7% growth in direct investment portfolio

Mercia reported FY19 net assets of £126.1m (FY18: £123.5m). The direct investment portfolio grew by 32.7% to £87.7m. In Mercia Fund Managers, FUM fell 5% to £381m with the winding up of the successful RisingStars Growth Fund (15% IRR, TVPI of 528%). Net expenses rose to £1.4m (FY18: £0.4m), largely due to a one-off performance-related fee received in FY18, and staff and administrative expenses rose 13.9% as headcount was expanded to manage mandates won in FY18. Management reiterated its intention to achieve a sustainable position in the medium term, where revenue covers expenses before realised gains and fair value movements.

Brand repositioning: Mercia Asset Management

Mercia has changed its name to Mercia Asset Management to better reflect the balance of the business. Its stated intent remains to become the leading regional provider of supportive balance sheet, venture, private equity and debt capital in transaction sizes typically below £10m. Historically, Mercia has been closely associated with IP commercialisation. However, this categorisation no longer reflects the growth of the business, the diversity of its deal sourcing or the breadth of its investment portfolio, both debt and equity. IP commercialisation remains an important element of Mercia’s investment proposition, but today represents one of five principal sources of deal flow.

Valuation: 0.77x NAV, does not include MFM

Mercia’s shares continue to trade at a discount to NAV (0.77x), even before considering the embedded value of Mercia Fund Managers, which we believe should add 10p+ to NAV. Catalysts for a re-rating include meaningful commercialisation of the direct investment portfolio and/or further successful exits.

FY19 results review

Small rise in net assets

Mercia reported a net asset value of £126.1m at end FY19 (vs £123.5m at end FY18) or 41.6p per share (FY18: 40.7p), representing a small rise of 2% over the year. Direct investment of £19.4m was made into 17 portfolio companies (FY18: £21.1m, 17 companies) during the year, including two new direct investments, W2 Global Data Solutions and Locate Bio. Largely as a result of the £19.4m of direct investment, unrestricted cash and short-term liquidity investments fell from £49.4m at end FY18 to £29.8m at end FY19, in line with management guidance.

Funds under management (FUM) fell by 4.8% to £381.3m, from £400m at FY18. This fall in FUM was largely attributable to the winding up of the successful RisingStars Growth Fund, an early-stage fund that generated an investor IRR of 15% over its lifetime, total value to paid-in capital (TVPI) of 528% and distributions as a proportion of paid in capital (DPI) of 468%. The demonstrable success of this fund and the returns delivered to investors positions the group well to raise further funds in the future.

Group revenues increased by 4.7% to £10.7m (FY18: £10.2m), largely due to the full year contribution from fund management contracts won during FY18, split £7.3m from fund management fees, £1.1m from initial management fees and £2.1m from portfolio director fees. The prior year comparison was also flattered by a one-off £1.2m performance-related fund management fee.

Net expenses rose to £1.4m (FY18: £0.4m) due to the one-off performance-related fee, and staff and admin expenses of 13.9% to £12.1m (FY18: £10.6m), reflecting an increase in headcount (from 65 to 85 over the course of the year) required to manage the FY18 fund mandate wins. Management expects net expenses to level off for FY20. Management also reiterated its intention to achieve a sustainable zero net expenses position in the medium term, where revenues cover expenses before realised gains and fair value movements, to minimise NAV erosion.

Portfolio review: Direct investment up 32.7% vs prior year

Mercia’s direct investment portfolio grew from £66.1m in FY18 to £87.7m in FY19, with net portfolio investment of £17.7m (£19.4m less a £1.7m loan repayment), together with a fair value increase of £3.9m (FY18: £2.8m). Like previous reporting periods, Mercia’s top 20 direct investments represented 98.4% of total portfolio value.

Notable fair value uplifts included: nDreams (£1.1m); Intelligent Positioning (£1.3m); Faradion (£1.6m); Oxford Genetics (£0.6m); Medherant (£1.2m); The Native Antigen Company (£0.9m); and Voxpopme (£0.5m). On the downside, as well as the fair value write-off of Smart Antenna Technologies, Mercia also reflected a negative fair value movement of £0.5m on Concepta, recognising market movements on the AIM listed investment. A previous fair value provision for Soccer Manager was released as the company’s prospects were deemed to have materially improved with an acceleration in revenues, following Mercia’s proactive intervention.

Post year-end developments are as follows:

Further funding rounds for Voxpopme (£1.3m), Medherant (£1.5m) and Locate Bio (£1.8m).

£0.8m investment into MyLotus developer, Concepta, as part of a £2.3m placing in April 2019.

£0.5m invested into a new direct investment, Clear Review, a fast-growing SaaS business providing HR management tools.

nDreams announced a partnership with global technology company Oculus (Facebook), developing its first title – Phantom: Covert Ops. This received significant industry recognition including the Game Critics Award for the best VR/AR game at the E3 Expo in June 2019.

Exhibit 1: nDreams – Oculus partnership for Phantom: Covert Ops

Source: nDreams, YouTube

Exhibit 2: Direct investment portfolio

£000s

Sector

Net value 1/4/18

Net value 30/9/18

Net cash invested FY19

Fair value change FY19

Net value 31/3/19

% held at 31/3/19

nDreams

Digital/digital entertainment

12,979

12,979

1,029

1,112

15,120

45.5

Oxford Genetics

Life sciences/biosciences

9,090

9,090

433

638

10,161

33.3

Warwick Acoustics

EMME

6,152

7,152

1,500

252

7,904

62.5

Intechnica

Software and the internet

4,021

4,677

2,000

656

6,677

32.0

Ton UK t/a Intelligent Positioning

Software and the internet

4,216

4,216

-

1,257

5,473

28.8

Impression Technologies

EMME

3,107

4,607

2,268

6

5,381

31.4

Medherant

Life sciences/biosciences

3,453

3,453

524

1,228

5,205

31.9

VirtTrade t/a Avid Games

Digital/digital entertainment

2,538

3,088

1,400

-

3,938

28.4

Faradion

EMME

1,299

3,524

601

1,625

3,525

18.1

Voxpopme

Software and the internet

1,000

3,026

1,500

526

3,026

21.8

The Native Antigen Company

Life sciences/biosciences

1,942

2,324

-

921

2,863

32.7

PsiOxus Therapeutics

Life Sciences/biosciences

2,377

2,377

-

-

2,377

1.5

Edge Case Games

Digital/digital entertainment

2,000

3,150

300

-

2,300

21.2

Soccer Manager

Digital/digital entertainment

1,199

1,499

500

400

2,099

31.6

W2 Global Data Solutions

Software and the internet

-

-

2,000

-

2,000

17.4

LM Technologies

EMME

1,913

1,913

-

-

1,913

41.4

sureCore

EMME

1,500

1,834

334

-

1,834

24.4

Aston EyeTech t/a Eyoto

Life sciences/biosciences

1,750

1,750

4

1

1,755

18.7

Crowd Reactive

Software and the internet

1,650

1,637

(61)

-

1,589

26.2

Concepta

Life sciences/biosciences

1,306

1,203

365

(538)

1,133

18.2

Locate Bio

Life sciences/biosciences

-

-

500

-

500

6.0

Smart Antenna Technologies

EMME

2,148

3,348

1,900

(4,048)

-

32.2

Other direct investments

430

980

576

(120)

886

n/a

Total

 

66,070

77,827

17,673

3,916

87,659

n/a

Source: Mercia. Note: EMME is Electronics, Materials, Manufacturing and Engineering. Excludes post year-end investments.

Valuation: Mercia looks undervalued at 0.77x NAV

In line with Mercia’s intent to become the leading regional provider of supportive balance sheet, venture, private equity and debt capital in transaction sizes typically below £10m, we have broadened Mercia’s valuation peer group to include a broader range of direct private equity and venture capital investors, as well as IP commercialisation companies.

Mercia trades at a 23% discount to FY19 NAV, below the mean and median of the peer group and, in our view, unwarranted given the strength of the business and its underlying operating model.

Exhibit 3: Peer group comparison

Price

Currency

Market cap (m)

NAV (m) (last reported)

Cash/(debt) (m)

NAV multiple
(x)

NAV per share (p)

Allied Minds

72.7

GBP

175.0

218

40

0.80

91

Arix Bioscience

136

GBP

184.4

270

91

0.68

200

IP Group

75.1

GBP

795.4

1218

219

0.65

115

Malin Corporation

3.80

173.6

392

(12)

0.44

8.57

HgCapital

221.5

GBP

891.8

802

102

1.11

215

Oakley Capital

235.0

GBP

481.3

575

212

0.84

281

Draper Esprit

550.0

GBP

648.6

619

100

1.05

524

Augmentum FinTech

112.0

GBP

105.3

98

44

1.08

104

Mean

0.83

Median

0.82

Mercia

31.7

GBP

96.1

126

30

0.76

41.6

Adjustment for embedded funds business

32

10.6

Mercia + Adjustment

31.7

GBP

96.1

158

30

0.61

52.1

Source: Refinitiv data, Edison Investment Research. Note: Priced as at 5 July 2019.

NAV excludes the embedded funds business

Mercia’s strategic goals remain to grow the value of the direct investment portfolio, while also seeking to expand FUM to allow the group to reach a sustainable position over the medium term, where revenue covers expenses before realised gains and fair value movements.

These goals underline that the NAV-based valuation does not properly reflect the embedded value of Mercia Fund Managers, whose fees already cover a significant proportion of the group’s net expenses. Placing these fees on a relatively conservative 3x EV/Sales multiple implies a value of £32m or 10.6p per share for Mercia Fund Managers (from 9p based on EV/Sales and P/E previously). Adjusting the NAV calculation for this embedded value (see Exhibit 3), suggests that Mercia is trading at closer to 0.61x the group’s adjusted value.

In our view, this level of discount does not reflect either the strategic positioning of the portfolio or the strength of Mercia’s underlying operating model.

Group overview

Mercia Asset Management

Despite the name change last week, Mercia’s business model remains the same. Its stated intent is to become the leading regional provider of supportive balance sheet, venture, private equity and debt capital in transaction sizes typically below £10m.

Historically, Mercia has been closely associated with IP commercialisation. However, this categorisation no longer reflects the growth of the business, the diversity of its deal sourcing or the breadth of its investment portfolio, both debt and equity. Through its 19 university partnerships, IP commercialisation will remain an important element of Mercia’s overall investment proposition, but today represents one of five principal sources of deal flow (the others being direct sourcing from Mercia’s own network, client referrals, advisor referrals and cross-referrals).

Exhibit 4: Mark Payton, CEO on Mercia’s FY19 results

Source: Mercia Asset Management, Edison Investment Research

Funds overview

Mercia invests in both growing its pipeline and its existing portfolio companies through four pools of capital under management: balance sheet (£87.7m portfolio fair value, £30m unrestricted cash), venture (FUM £224.1m), private equity (£61.2m) and debt (£96.0m). In aggregate, the company manages assets under management (AUM) of c £500m, of which FUM accruing management fees represent £381m.

We include below introductory snapshots from the Fund Principals for each of for each of Mercia’s three main business lines. Venture, including EIS and IP commercialisation, represents the majority (FY19: 59%) of the group’s funds under management, but private equity (16%) and debt (25%) together represent a substantial proportion of overall funds.

Exhibit 5: Split of funds under management (FUM)

Source: Mercia Asset Management, Edison Investment Research

Fund performance and returns

To date, Mercia’s closed and legacy funds have returned c £177m, with vintages varying from 10 to 16 years and with typical IRRs of 15–17%.

Venture – FUM £224.1m

Venture capital remains an important source of funding for entrepreneurial start-ups and young, growing companies. Mercia is one of the leading providers of venture capital and equity funding to small businesses in the UK regions, providing funding in the range of £0.05–2m across all sectors of the UK economy.

Exhibit 6: Will Clark, Fund Principal – Venture

Source: Mercia Asset Management, Edison Investment Research

Private equity – FUM £61.2m

Through its EV Growth Funds, Mercia is one of the most active investors backing management teams looking to scale. It offers equity investment of up to £5m for purposes including expansion finance, to support management buyouts and buy-ins, acquisition finance, cash-out transactions and preparing for succession planning.

Mercia structures packages of debt and equity that deliver returns through a combination of yield, performance-related dividends and capital gain on exit, typically over a period of three to five years.

Exhibit 7: Wayne Thomas, Fund Principal – Private Equity

Source: Mercia Asset Management, Edison Investment Research

Debt – FUM £96.0m

Mercia provides debt funding ranging from £0.1m to £1m to both start-up and established businesses, across all sectors to businesses based anywhere in the UK.

Debt is available for a wide range of purposes: additional working capital to fund expansion plans, cover the cost of fulfilling a new contract or buying stock. Alternatively, businesses may need to borrow money to acquire a new property, improve existing premises or invest in plant machinery, new IT systems or other one-off business expenses. Mercia can often help in situations where banks and other lenders are unable to provide the full requirement.

Packages are tailored to individual business requirements with competitive rates and terms. Funding is typically for a period of up to five years, with rates fixed for the duration.

Exhibit 8: Paul Taberner, Fund Principal – Debt

Source: Mercia Asset Management, Edison Investment Research

Exhibit 9: Financial summary

£'000

2015

2016

2017

2018

2019

31-March

IFRS

IFRS

IFRS

IFRS

IFRS

INCOME STATEMENT

Revenue

 

 

508

1,755

6,660

10,197

10,675

Cost of Sales

(10)

(79)

(92)

0

0

Gross Profit

498

1,676

6,568

10,197

10,675

Operating costs

(1,495)

(4,011)

(9,051)

(10,633)

(12,115)

Fair value changes

3,934

896

4,268

2,823

3,916

Realised gains

0

0

839

871

0

Normalised operating profit

 

 

2,937

(1,439)

2,624

3,258

2,476

Amortisation of acquired intangibles

0

(17)

(301)

(301)

(301)

Exceptionals

(1,018)

(372)

(1,125)

(1,125)

0

Share-based payments

(44)

(230)

(395)

(497)

(171)

Reported operating profit

1,875

(2,058)

803

1,335

2,004

Net Interest

93

361

186

274

562

Joint ventures & associates (post tax)

0

0

0

0

0

Profit Before Tax (norm)

 

 

3,030

(1,078)

2,810

3,532

3,038

Profit Before Tax (reported)

 

 

1,968

(1,697)

989

1,609

2,566

Reported tax

0

0

54

54

54

Profit After Tax (norm)

3,030

(1,078)

2,810

3,532

3,038

Profit After Tax (reported)

1,968

(1,697)

1,043

1,663

2,620

Minority interests

0

0

0

0

0

Discontinued operations

0

0

0

0

0

Net income (normalised)

3,030

(1,078)

2,810

3,532

3,038

Net income (reported)

1,968

(1,697)

1,043

1,663

2,620

Basic average number of shares outstanding (m)

212

212

224

302

303

EPS - basic normalised (p)

 

 

1.43

(0.51)

1.26

1.17

1.00

EPS - diluted normalised (p)

 

 

1.43

(0.51)

1.21

1.13

0.96

EPS - basic reported (p)

 

 

0.93

(0.80)

0.47

0.55

0.86

Dividend (p)

0.00

0.00

0.00

0.00

0.00

Revenue growth (%)

(-29.7)

245.5

279.5

53.1

4.7

Gross Margin (%)

98.0

95.5

98.6

100.0

100.0

Normalised Operating Margin

578.1

-82.0

39.4

32.0

23.2

BALANCE SHEET

Fixed Assets

 

 

27,121

50,103

63,693

77,428

98,724

Intangible Assets

2,455

11,815

11,514

11,213

10,912

Tangible Assets

49

145

151

145

153

Investments & other

24,617

38,143

52,028

66,070

87,659

Current Assets

 

 

54,349

31,730

64,576

53,965

31,180

Stocks

0

0

0

0

0

Debtors

716

798

747

1,057

782

Cash & cash equivalents

23,633

20,932

28,829

42,908

25,210

Short term liquidity investments

30,000

10,000

35,000

10,000

5,188

Current Liabilities

 

 

(631)

(1,521)

(6,698)

(7,760)

(3,730)

Creditors

(631)

(1,521)

(6,698)

(7,760)

(3,730)

Tax and social security

0

0

0

0

0

Short term borrowings

0

0

0

0

0

Other

0

0

0

0

0

Long Term Liabilities

 

 

0

(271)

(217)

(163)

(109)

Long term borrowings

0

0

0

0

0

Other long-term liabilities

0

(271)

(217)

(163)

(109)

Net Assets

 

 

80,839

80,041

121,354

123,470

126,065

Minority interests

0

0

0

0

0

Shareholders' equity

 

 

80,839

80,041

121,354

123,470

126,065

CASH FLOW

Op Cash Flow before WC and tax

2,943

(1,406)

2,700

3,339

2,560

Working capital

(20)

650

5,250

(87)

(3,724)

Exceptional & other

(4,952)

(1,268)

(5,107)

(3,694)

(3,916)

Tax

0

0

0

0

0

Net operating cash flow

 

 

(2,029)

(2,024)

2,843

(442)

(5,080)

Capex

(27)

(113)

(82)

(75)

(92)

Acquisitions/disposals

(11,563)

(20,939)

(8,779)

(10,664)

(17,673)

Net interest

22

397

165

260

531

Equity financing

67,230

(22)

38,750

0

(196)

Dividends

0

0

0

0

0

Other

(30,000)

20,000

(25,000)

25,000

4,812

Net Cash Flow

23,633

(2,701)

7,897

14,079

(17,698)

Opening net debt/(cash)

 

 

(39)

(23,633)

(20,932)

(28,829)

(42,908)

FX

0

0

0

0

0

Other non-cash movements

(39)

0

0

0

0

Closing net debt/(cash)

 

 

(23,633)

(20,932)

(28,829)

(42,908)

(25,210)

Closing net debt/ (cash) inc short-term liquidity investments (not EIS)

(53,633)

(30,932)

(59,601)

(49,435)

(29,798)

Source: Mercia Asset Management, Edison Investment Research

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

United Kingdom

Neither this document and associated email (together, the "Communication") constitutes or form part of any offer for sale or subscription of, or solicitation of any offer to buy or subscribe for, any securities, nor shall it or any part of it form the basis of, or be relied on in connection with, any contract or commitment whatsoever. Any decision to purchase shares in the Company in the proposed placing should be made solely on the basis of the information to be contained in the admission document to be published in connection therewith.

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 (nor will such persons be able to purchase shares in the placing).

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

The Investment Research is a publication distributed in the United States by Edison Investment Research, Inc. Edison Investment Research, Inc. is registered as an investment adviser with the Securities and Exchange Commission. 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 Mercia Asset Management and prepared and issued by Edison, in consideration of a fee payable by Mercia Asset Management. 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.

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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 2019 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2019. “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.

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

Neither this document and associated email (together, the "Communication") constitutes or form part of any offer for sale or subscription of, or solicitation of any offer to buy or subscribe for, any securities, nor shall it or any part of it form the basis of, or be relied on in connection with, any contract or commitment whatsoever. Any decision to purchase shares in the Company in the proposed placing should be made solely on the basis of the information to be contained in the admission document to be published in connection therewith.

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 (nor will such persons be able to purchase shares in the placing).

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

The Investment Research is a publication distributed in the United States by Edison Investment Research, Inc. Edison Investment Research, Inc. is registered as an investment adviser with the Securities and Exchange Commission. 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

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