Stack of newspapers

Strong results, debt falling rapidly

Smiths News 8 November 2021 Update
Download PDF

Smiths News

Strong results, debt falling rapidly

Preliminary results

Industrial support services

8 November 2021

Price

40p

Market cap

£99m

Net debt (£m) at 31 August 2021

53.2

Shares in issue

247.7m

Free float

100%

Code

SNWS

Primary exchange

LSE

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

6.3

(4.8)

57.4

Rel (local)

2.9

(6.8)

25.3

52-week high/low

45p

25p

Business description

Smiths News is the UK’s largest newspaper and magazine distributor with a c 55% market share covering 24,000 retailers in England and Wales. It has a range of long-term exclusive distribution contracts with major publishers, supplying a mix of supermarkets and independent retailers.

Next events

Q1 trading update

January 2022

Analyst

Andy Murphy

+44 (0)20 3077 5700

Smiths News is a research client of Edison Investment Research Limited

Management delivered on promises again as Smiths News produced a strong set of FY21 results. Operating profit increased nearly 13% and net debt fell to £53m (1.2x net debt:EBITDA versus c 2.0x in August 2020). Underlying market conditions are normalising and the company has adopted new sustainability targets, which is encouraging. We have raised our forecasts to reflect better-than-expected trading while acknowledging that inflationary pressures exist in the market. On the back of the upgrade, we have increased our valuation from 77.4p/share to 81.5p/share, twice the current share price.

Year end

Revenue (£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

08/20

1,164.5

28.2

10.4

0.0

3.8

0.0

08/21

1,109.6

35.4

12.8

1.5

3.1

3.8

08/22e

1,065.2

30.1

10.0

2.3

4.0

5.8

08/23e

1,022.6

32.3

10.3

2.3

3.9

5.8

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

Full-year operating profit up 13%, debt cut by a third

FY21 revenue came in at £1.1bn, down 4.7%, while adjusted EBITDA increased by 9% to £42.6m. Reported PBT grew 10.8% to £30.9m and reported EPS increased 11.3% to 10.8p/share, c 7% ahead of consensus. Free cash flow more than doubled to £24m and net debt fell from £79.7m to £53.2m, partially helped by timing effects. Smiths News declared a final dividend for the year of 1p/share making a total of 1.5p/share for the year, implying a dividend that was more than 7x covered by earnings.

H2 recovery and efficiencies drove profits

The 4.7% decline in FY revenue was in line with the historical trend of -3% to -5%, although H1 was down 11.5% and H2 was up 2.9% versus a COVID-19 affected period, the latter benefitting from one-off sales, notably of Euro 2020 stickers and Pokemon trading cards. Newspaper revenue declined 4.3% (H1 down 8.8%, H2 up 0.6%) but stabilised more quickly than magazines as buyers shifted to local stores. Magazine revenues dipped 4.2% (H1 down 14.9%, H2 up 9.4%). The principal driver of the profit improvement was the Smiths News network efficiency programme that generated savings of £5m versus a net margin reduction of £2.2m.  

Valuation: Raised from 77.4p to 81.5p

We have increased our valuation of Smiths News from 77.4p to 81.5p/share based on a discounted cash flow (DCF) model, as we have rolled over the year end and raised estimates. Given the predictable and consistent cash flow of the core business, we believe this is a reasonable methodology to adopt. It also reflects the current strategy, which is to generate cash, pay down debt and return surplus cash to shareholders via dividends and ‘special’ payments. In absolute terms, Smiths News trades on a P/E of 4.0x in FY22e, with a yield of 5.8% and the prospect of ‘special’ dividends to bolster the yield as debt falls. In our experience, when ‘safe’ dividend yields exceed P/Es in absolute terms, it highlights a value opportunity.

Summary of full year results and implications

Despite the ongoing COVID-19 related disruption and declining markets, Smiths News delivered a strong set of results with operating profit increasing by nearly 13%. Underlying market conditions are returning to normalised activity levels with some further recovery expected as the commuter and travel sectors fully reopen. In line with current trends Smiths News has adopted sustainability targets largely designed to reduce its carbon footprint, which is very positive. Finally, we have raised our forecasts to reflect better-than-expected trading while acknowledging that inflationary pressures exist in the market. On the back of the upgrade, we have increased our valuation from 77p to 81.5p/share.

Revenue decline in line, but operating profit up 12.8%

The year to end August was clearly hampered by COVID-19 restrictions and comparisons with 2020 half years are also quite ‘noisy’ as H120 was largely unaffected by the pandemic, but H2 was severely affected. Therefore, it is not particularly surprising that H1 revenue fell 11.5% to £551.6m, but that H2 grew 3.1% to £558m. The full year decline of 4.7% was within the average annual decline of 3–5%.

Despite the falling revenues year-on-year, strength can be noted in the reported gross and operating margins. The former rose 30bp y-o-y to 6.6% which is in line with both FY19 and H120, both pre COVID-19. In fact, the gross margin in H221 was higher still at 6.8%, due largely to the partworks contribution. This will drop away in the current year but is likely to contribute in FY23, which will include partworks revenue from both the football World Cup in Dubai and the UEFA Nations League finals the following summer.

Exhibit 1: Summary of reported full year results

(£m)

2019

H120

H220

2020

H121

H221

2021

Total revenue

1,303.5

623.1

541.4

1,164.5

551.6

558.0

1,109.6

% change

-

-

-

(10.7%)

(11.5%)

3.1%

(4.7%)

Cost of goods sold

(1,217.5)

(581.7)

(509.7)

(1,091.4)

(515.9)

(520.3)

(1,036.2)

% change

-

-

-

(10.4%)

(11.3%)

2.1%

(5.1%)

Gross profit

86.0

41.4

31.7

73.1

35.7

37.7

73.4

Gross margin

6.6%

6.6%

5.9%

6.3%

6.5%

6.8%

6.6%

Total admin expenses

(42.9)

(21.7)

(16.4)

(38.1)

(16.9)

(17.0)

(33.9)

% change

-

-

-

(11.2%)

(22.1%)

(3.7%)

(11.0%)

Income from JV

0.5

0.2

(0.1)

0.1

0.1

0.0

0.1

Total adjusted operating profit

43.6

19.9

15.2

35.1

18.9

20.7

39.6

% change

-

-

-

(19.5%)

(5.0%)

36.2%

12.8%

Total adjusted operating profit margin

3.3%

3.2%

2.8%

3.0%

3.4%

3.7%

3.6%

Source: Company data, Edison Investment Research

Administration costs were kept under control, assisted by the reduced headcount following the disposal of Tuffnells. This resulted in an adjusted operating margin that was up 60bp versus 2020 and 30bp versus 2019, to 3.6%. We estimate that the contribution to profits from partworks was c £1m for the full year, though most of this fell into H2.

Underlying markets bouncing back post COVID-19

As already mentioned, revenues fell by 4.7%, in line with trends. However, magazine sales in particular, which are a smaller part of the revenue base but a higher margin activity, bounced back strongly in H2 versus easier comparatives, boosted by sales of one-shot titles, including stickers and albums relating to the Euros and Pokemon.

Newspaper sales were also affected of course, but some of the demand shifted to local vendors which meant that distribution volumes needed to be redirected. There is some optimism that overall sales can rebound in the current year as travel and commuting normalise.

Exhibit 2: Sales performance of newspapers and magazines

Source: Smiths News

New ESG-based sustainability targets

Following a period of consultation, Smiths News has introduced a new ESG sustainability framework based on the principals of the UN Sustainable Development Goals and the introduction of structured disclosures-based reporting promoted by the Global Reporting Initiative. The outcome of the consultation is the introduction of five pillars of focus for activity which are: Governance, Environment, People, Community and Responsible Partnership.

In addition to the five areas of focus it has committed to the following ambitions:

The migration of its subcontracted delivery service partners to sustainably fuelled vehicles by 2035 through the installation of supporting infrastructure at its sites by 2030.

The migration of the company’s car fleet to sustainably fuelled/hybrid vehicles by 2025 and of its heavy goods vehicles to decarbonised technology by 2030.

All new warehouse locations to be net carbon neutral and current sites to be net carbon neutral by 2030.

All gas and electricity to be sourced from 100% green/renewable sources by 2024.

A colleague engagement score of 70% or greater each year and an improving trend of relevant ‘promoters’ within the underlying metrics.

A material improvement in the ethnic and gender diversity of the leadership population.

At least one board member from a minority group and at least two female members by 2026.

Revised forecasts: PBT raised 3% and 11% in FY22e and FY23e

Revenue for 2021 was c £15m ahead of our expectations thus increasing the base for future years and hence the modest increase in forecast revenue. In FY23e there is also an increased element of partworks as both the 2022 World Cup and the UEFA Nations League finals fall into the period. This feeds the 1.2% increase in EBITDA (reported, pre IFRS) in 2022e to £38.8m. In 2023e the larger increase reflects our previously over-conservative assumptions.

We had already factored the inflationary pressures into forecasts hence we upgrade numbers rather than downgrade. These pressures include driver shortages at specific locations, higher fuel costs, contractor pressures and wage inflation. Smiths News is of course no stranger to cutting costs which it will continue to pursue through routing efficiencies and other initiatives, but the company estimates that the costs could amount to c £2m at the EBITDA level.

Therefore, we have increased PBT (reported, pre-exceptional) by 3% and 11% respectively in FY22e and FY23e, though both figures are below the FY21 figure reported of £30.6m.

Exhibit 3: Forecast revisions

Year end August (£m)

2021

2022e

2023e

Old

New

% chg

Old

New

% chg

Revenue

1,109.6

1,050.8

1,065.2

1.4%

998.3

1,022.6

2.4%

YoY % change

-

(5.3%)

(4.0%)

-

(5.0%)

(4.0%)

-

EBITDA - Edison basis

48.4

39.2

41.1

4.7%

36.4

41.9

15.1%

y-o-y % change

-

(19.0%)

(15.2%)

-

(7.1%)

2.0%

-

EBITDA - Reported pre IFRS 16

 

42.6

38.3

38.8

1.2%

35.5

39.6

11.5%

y-o-y % change

 

-

(10.1%)

(9.0%)

-

(7.3%)

2.2%

-

Normalised operating profit

44.1

34.6

36.6

5.7%

33.8

37.3

10.4%

y-o-y % change

-

(21.5%)

(17.1%)

-

(2.3%)

2.0%

-

PBT (Reported, pre-exceptionals)

30.6

27.2

28.1

3.2%

27.3

30.3

11.0%

y-o-y % change

-

(11.1%)

(8.2%)

-

0.3%

7.9%

-

EPS - Diluted, normalised (p)

12.2

9.0

9.9

9.8%

8.6

10.2

19.0%

y-o-y % change

-

(26.3%)

(19.0%)

-

(4.4%)

3.6%

-

DPS (p)

1.5

2.3

2.3

0.0%

2.3

2.3

0.0%

y-o-y % change

-

53.3%

53.3%

-

0.0%

0.0%

-

Net debt (pre IFRS 16)

(53.2)

(40.6)

(27.9)

(31.2%)

(26.1)

(10.1)

(61.1%)

y-o-y % change

-

(23.7%)

(47.5%)

-

(35.8%)

(63.7%)

-

Source: Company data, Edison Investment Research

Net debt for FY21 came in c £7m better than we estimated at £53.2m and we have modelled in the receipt of £6.5m of deferred consideration now received from the disposal of Tuffnells, hence the c £13m improvement in FY net debt in 2022e. This implies that Smiths News’ net debt:EBITDA ratio is estimated to be 0.7x at the end FY22e, falling to 0.25x at the end of the following year.

There are some outstanding potential receipts including an £8m pension surplus, a further £4.25m of deferred consideration for Tuffnells that may be received in the current year and the final deferred consideration of £4.25m due in May 2023 that would reduce the net debt further on the assumption that these were all received as planned. We have not factored these receipts into forecasts. If received it would imply a net debt:EBITDA ratio of 0.3x at the end of the current year and a net cash position by the end of 2023 which could have implications for the current £6m pa dividend payment limits for the next two financial years.

Revised estimates implies increase in valuation to 81.5p/share

We have retained our chosen DCF method to value Smiths News. This is because the decline in revenue is relatively constant, the reduction in the cost base is also factored into management action and it has a track record of delivering. Therefore, we believe that the profits and cash flow of the company are likely to be relatively robust and to decline only slowly over an extended period of time.

Our key assumptions include:

revenue declines of c 5% pa, a combination of volume declines of 8–9% and annual price rises of c 3–4%;

constant operating margins of 3.3%, a reflection of cost base action;

a terminal growth rate of -5% pa; and

a WACC of 7.5%, reflecting the cost of equity of 7.5% as the company would be debt free quite early in the modelling period. WACC is increased from 6.5% to reflect the faster paydown of debt.

Plugging these assumptions into our DCF model gives a valuation of 81.5p, up from 77.4p principally as we have rolled over the year end and raised estimates as described earlier.

The sensitivity table below describes how the valuation fluctuates with differing terminal value (TV) growth rates and WACCs. The current share price of c 40p is discounting a TV decline of 10% and a WACC of 15%, both roughly double the rates assumed in our base case scenario.

Exhibit 16: Smiths News DCF value per share (p)

Terminal growth rate (%)

0.0%

-2.5%

-5.0%

-7.5%

-10.0%

WACC (%)

8.0%

97.8

85.3

77.5

72.3

68.4

7.5%

105.0

90.4

81.5

75.7

71.4

7.0%

113.2

96.0

85.9

79.3

74.6

6.5%

122.6

102.2

90.7

83.2

78.0

6.0%

133.6

109.2

95.8

87.4

81.6

Source: Edison Investment Research

Exhibit 4: Financial summary

£'m

2019

2020

2021e

2022e

2023e

2024e

31-August

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

INCOME STATEMENT

Revenue

 

 

1,303.5

1,164.5

1,109.6

1,065.2

1,022.6

981.7

Cost of Sales

(1,217.5)

(1,091.4)

(1,036.2)

(996.6)

(954.0)

(914.2)

Gross Profit

86.0

73.1

73.4

68.6

68.6

67.5

EBITDA

 

 

60.1

40.4

48.4

41.1

41.9

41.8

Normalised operating profit

 

 

44.0

35.4

44.1

36.6

37.3

37.2

Amortisation of acquired intangibles

(0.1)

(0.2)

0.0

0.0

0.0

0.0

Exceptionals

(7.2)

(7.8)

(1.9)

(1.0)

(1.0)

(1.0)

Share-based payments

(0.4)

(0.3)

(1.0)

(1.0)

(1.0)

(1.0)

Impairment

0.0

(6.0)

(1.6)

0.0

0.0

0.0

Other

0.0

0.9

(0.3)

0.0

0.0

0.0

Reported operating profit

36.3

22.0

39.3

34.6

35.3

35.2

Net Interest

(6.0)

(7.2)

(8.7)

(6.5)

(5.0)

(3.1)

Profit Before Tax (norm)

 

 

38.0

28.2

35.4

30.1

32.3

34.1

Profit Before Tax (reported)

 

 

30.3

14.8

30.6

28.1

30.3

32.1

Reported tax

(8.4)

(2.8)

(4.3)

(5.3)

(6.7)

(8.0)

Profit After Tax (norm)

29.6

25.4

31.1

24.7

25.6

26.1

Profit After Tax (reported)

21.9

12.0

26.3

22.7

23.6

24.1

Discontinued operations

(53.4)

(18.7)

(0.1)

0.0

0.0

0.0

Net income (normalised)

29.6

25.4

31.1

24.7

25.6

26.1

Net income (reported)

(31.5)

(6.7)

26.2

22.7

23.6

24.1

Basic average number of shares outstanding (m)

246

245

244

248

248

248

EPS - basic normalised (p)

 

 

12.01

10.39

12.77

9.99

10.35

10.52

EPS - diluted normalised (p)

 

 

11.98

10.28

12.21

9.88

10.24

10.41

EPS - basic reported (p)

 

 

(12.78)

(2.74)

10.76

9.18

9.54

9.71

Dividend (p)

1.00

0.00

1.50

2.30

2.30

3.00

Revenue growth (%)

#DIV/0!

(-10.7)

(-4.7)

(-4.0)

(-4.0)

(-4.0)

Gross Margin (%)

6.6

6.3

6.6

6.4

6.7

6.9

EBITDA Margin (%)

4.6

3.5

4.4

3.9

4.1

4.3

Normalised Operating Margin

3.4

3.0

4.0

3.4

3.6

3.8

BALANCE SHEET

Fixed Assets

 

 

31.5

66.5

47.1

31.6

22.4

1.7

Intangible Assets

10.1

4.0

2.3

(1.5)

(5.5)

(9.5)

Tangible Assets

10.9

9.4

9.4

4.1

5.3

6.5

Investments & other

10.5

53.1

35.4

29.0

22.6

4.7

Current Assets

 

 

181.2

165.9

139.1

134.3

129.7

125.3

Stocks

16.2

14.1

13.2

12.8

12.3

11.8

Debtors

124.2

101.2

106.6

102.3

98.2

94.2

Cash & cash equivalents

24.0

50.6

19.3

19.3

19.3

19.3

Other

16.8

0.0

0.0

0.0

0.0

0.0

Current Liabilities

 

 

(229.7)

(283.9)

(167.5)

(136.8)

(113.7)

(79.7)

Creditors

(173.7)

(139.5)

(136.5)

(131.0)

(125.8)

(120.7)

Tax and social security

0.0

(1.7)

(0.3)

(0.3)

(0.3)

(0.3)

Short term borrowings

(46.1)

(130.1)

(21.2)

4.1

21.9

40.4

Other

(9.9)

(12.6)

(9.5)

(9.5)

(9.5)

1.0

Long Term Liabilities

 

 

(57.3)

(30.1)

(76.4)

(70.4)

(64.4)

(55.4)

Long term borrowings

(49.3)

0.0

(50.1)

(50.1)

(50.1)

(50.1)

Other long term liabilities

(8.0)

(30.1)

(26.3)

(20.3)

(14.3)

(5.3)

Net Assets

 

 

(74.3)

(81.6)

(57.7)

(41.2)

(26.0)

(8.1)

Shareholders' equity

 

 

(74.3)

(81.6)

(57.7)

(41.2)

(26.0)

(8.1)

CASH FLOW

Op Cash Flow before WC and tax

60.1

40.4

48.4

41.1

41.9

41.8

Working capital

(3.9)

(5.3)

(1.8)

(0.7)

(0.6)

(0.6)

Exceptional & other

(7.7)

(13.4)

(4.8)

(2.0)

(2.0)

(2.0)

Tax

(2.6)

0.0

(6.3)

(5.3)

(6.7)

(8.0)

Other

(22.9)

1.7

5.9

6.8

6.8

7.0

Net operating cash flow

 

 

23.0

23.4

41.4

39.8

39.4

38.2

Capex

(8.1)

5.3

(2.4)

(4.2)

(4.2)

(4.2)

Acquisitions/disposals

0.0

(10.2)

6.5

6.5

0.0

0.0

Net interest

(5.1)

(8.0)

(9.4)

(6.5)

(5.0)

(3.1)

Equity financing

0.0

(0.7)

(2.6)

(0.8)

(0.8)

(0.8)

Dividends

0.1

(2.2)

(1.0)

(3.6)

(5.6)

(5.6)

Other

(2.8)

(15.6)

(5.9)

(6.0)

(6.0)

(6.0)

Net Cash Flow

7.1

(8.0)

26.6

25.3

17.8

18.5

Opening net debt/(cash)

 

 

79.3

72.1

79.7

53.2

27.9

10.1

FX

0.1

(0.1)

(0.2)

0.0

0.0

0.0

Other non-cash movements

0.0

0.5

0.1

0.0

0.0

0.0

Closing net debt/(cash)

 

 

72.1

79.7

53.2

27.9

10.1

(8.4)

Source: Company data and Edison Investment Research

General disclaimer and copyright

This report has been commissioned by Smiths News and prepared and issued by Edison, in consideration of a fee payable by Smiths News. Edison Investment Research standard fees are £60,000 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 2021 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

General disclaimer and copyright

This report has been commissioned by Smiths News and prepared and issued by Edison, in consideration of a fee payable by Smiths News. Edison Investment Research standard fees are £60,000 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 2021 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

Share this with friends and colleagues