Tempering near-term outlook

IFG Group 8 September 2016 Update

IFG Group

Tempering near-term outlook

H116 result

Financial services

8 September 2016

Price

162p/€1.97

Market cap

£171m

Net cash (£m) at 30 June 2016

23.5

Shares in issue

105.4m

Free float

94%

Code

IFP

Primary exchange

ISEQ

Secondary exchange

LSE

Share price performance

%

1m

3m

12m

Abs

(13.4)

(12.7)

15.1

Rel (local)

(14.3)

(19.2)

(3.0)

52-week high/low

186.4p

141.0p

Business description

IFG provides financial services, comprising a platform for retirement wealth planning and personal advisory business primarily operating in the UK. Through the James Hay Partnership it is one of the largest UK platform providers.

Next events

Q3 trading update

17 November 2016

Analysts

Andrew Mitchell

+44 (0)20 3681 2500

Martyn King

+44 (0)20 3077 5745

IFG Group is a research client of Edison Investment Research Limited

Uncertainty surrounding the EU referendum and the accompanying reduction in base rate has resulted in lower earnings estimates for IFG, although the longer-term outlook for its two businesses remains promising. Both the retirement wealth platform and financial adviser stand to benefit from an ageing population and pension freedoms. Meanwhile, IFG continues to invest to address these opportunities and has sufficient capital and net cash to support growth while maintaining a progressive dividend policy.

Year end

Revenue (£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

12/15

71.3

11.5

8.3

4.4

19.6

2.7

12/16e

77.3

9.2

7.2

4.9

22.6

3.0

12/17e

81.3

12.0

9.0

5.4

17.9

3.3

12/18e

89.7

15.9

12.4

5.9

13.0

3.7

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

First half results

IFG’s first half saw strong revenue and adjusted operating profit growth of 16% and 31% respectively compared with H115. Adjusted EPS were 41% ahead and the dividend was increased by 11%. At James Hay Partnership (JHP), EU referendum uncertainty and a focus on larger advisers left the number of SIPP accounts flat compared with the year end. New client growth slowed at Saunderson House (SH) as demand for financial advice surged around the time of the referendum which, combined with a fee increase, contributed to strong revenue growth.

Outlook

For JHP two headwinds present a near-term revenue challenge. The company estimates that the recent 25bp reduction in base rate will reduce revenues by £1.2m in the second half and more in 2017. Secondly, the lower than expected rate of SIPP account growth flows through into near-term revenue expectations. Positively, however, JHP is considering price changes to offset reduced interest income, while a relatively calm equity market background may help rekindle account growth. Acquisition opportunities may increase as additional capital requirements are implemented, potentially putting further pressure on smaller players. As demand for advice from existing clients normalises, SH will be able to devote more time to client acquisition, a task that should be eased by continued solid investment performance (see page 4).

Valuation: Reduced expectations already discounted

We have updated our DCF valuation, which now points to a central value of around 180p (formally 181p versus 186p previously). The limited reduction, despite lower near-term estimates, reflects an assumed resumption of SIPP account growth feeding through to revenues in 2017/18 and a neutralisation of the interest income drag through pricing/rate increase. Following post-results weakness, on our estimates, the share price discounts subdued intermediate and long-term growth, suggesting significant upside in due course.

Company description

IFG’s activities as a financial services group began in 1989 and it listed on the Irish Stock Exchange in 1996 and on the London Stock Exchange in 2000. The group expanded organically and through acquisitions, with key purchases including IPS Pensions in 2002 (a provider of self-invested personal pensions or SIPPs), James Hay Holdings (SIPP provider, 2010) and financial adviser, Saunderson House in 2001. In more recent years the group has focused on its two main, UK-based, businesses James Hay and Saunderson House, with disposals freeing cash to pay down debt and invest in further growth.

James Hay Partnership (JHP) is a leading provider of SIPPs and has broadened its capabilities and invested in IT so that it can describe itself as the sixth largest platform in the UK specialising in retirement wealth planning and with assets under administration of over £20bn. It has secured partnership agreements with companies such as Capita and Towry (2014 and 2015 respectively) and is in the process of focusing its efforts on the higher end of the adviser market to achieve more profitable growth. Key indicators for JHP include the number of clients, client usage of different services and, to a limited but growing extent, the level of trading.

Saunderson House (SH) is a financial advisor based in the City of London that provides financial and investment planning, charging fees on an hourly rate. The SH staff includes 52 chartered financial planners and five chartered financial analysts. Its clients are typically drawn from the professions including partners in legal and accounting firms. This is reflected in average assets under advice (AUA) per client of over £2m. At the end of June AUA stood at £4.1bn. SH’s key indicators comprise chargeable time, capacity utilisation, number of clients, investment performance, staff retention and assets under advice.

Interim results

In the first half of 2016 IFG’s assets under advice and administration increased by 14% from H115, primarily reflecting an increase in the number of clients for both JHP (SIPPs +14%) and SH (+8%). This and increased demand for advice from SH clients around the time of the EU referendum contributed to an overall increase in revenues of 16%. With underlying costs up 13%, helped modestly by a lower FSCS levy, adjusted operating income increased 31%, which translated into a substantial rise in adjusted EPS (+41%). The interim dividend has been increased by 11%.

Exhibit 1: Interim results – group summary

£000 except where shown

H115

H116

% change

Assets under administration and advice (£bn)

21.4

24.4

+14

Revenue

34,513

39,901

+16

Adjusted operating profit:

James Hay Partnership

3,826

4,242

+11

Saunderson House

2,733

3,632

+33

Group/other

(2,124)

(2,054)

-3

Total adjusted operating profit

4,435

5,820

+31

Amortisation of acquired intangibles

(868)

(989)

+14

Exceptional items

(1350)

(799)

-41

Operating income

2,217

4,032

+82

Net finance income

48

4

-92

Pre-tax profit

2,265

4,036

+78

Net profit

1,423

2,767

+94

Basic EPS (p)

1.26

2.63

+109

Adjusted EPS (p)

2.87

4.05

+41

Dividend per share (p)

1.44

1.60

+11

Source: IFG Group

Reported operating income of £4.4m versus £2.2m benefited from lower net exceptional costs. In the first half of last year there were nearly £1.4m of exceptional costs, mainly arising from disposals made in 2014, whereas for H116 there was a net charge of £0.8m. This included a provision of £1.3m for costs relating to IFG’s decision to move its remaining group functions from Dublin to London, offset in part by a £0.5m gain following agreement of the final amount to be received on the 2014 sale of the IFG UK Financial Services business.

James Hay Partnership

First half revenues were more than 15% above the same period last year, but the group notes that this was a challenging period for the industry and for JHP. The number of SIPPs at the end of June was up nearly 14% compared with the same point last year, but was marginally lower than the year-end figure, reflecting in part the impact on client/adviser activity of market volatility in the run up to and following the EU referendum (Exhibit 2). At the same time JHP has been focusing its marketing efforts on a smaller number of higher-value/volume adviser partners. This has also been reflected in pricing changes that took effect in the second half of last year designed to provide a better match with costs. Taken together, this has prompted a faster than expected drop-off within the ‘tail’ of smaller accounts; reflecting this, the level of business outside the top 200 advisers fell by 75% in the first half. Further, where appropriate, JHP has encouraged a merging of clients’ protected benefit and other accounts (over 900 in the first half). The company intends to continue to migrate legacy products to the Modular iPlan product (MiPlan) where this is in the interest of clients.

These changes mesh well with IFG’s ongoing investment in IT and a move towards functional specialisation of operational staff to ease training and increase the efficiency of service delivery. The company is in the process moving towards a digital platform that will improve client service, enhance scaleability and facilitate new service developments. In developing this platform IFG highlights the advantages of control and flexibility conferred by its proprietary in house technology.

Exhibit 2: Divisional summary - James Hay Partnership

£000 except where shown

H115

H215

H116

% change y-o-y

Revenue

20,860

22,957

24,032

+15.2

Adjusted operating profit

3,826

6,020

4,242

+10.9

Adjusted operating margin %

18.3

26.2

17.7

Total SIPPs end period

45,613

52,101

51,875

+13.7

Additions % of opening

17.4

36.4

7.9

Attrition as % of average acc.

(6.8)

(7.4)

(8.8)

Average revenue per account (£)

938

940

925

-1.4

AUA per account

384

374

391

2.0

Source: IFG Group, Edison Investment Research. Note: Attrition calculated on a simple average of opening and closing SIPP numbers, while IFG reports an annualised H1 figure of 6.8% versus 6.4%.

Saunderson House

SH’s first half performance was also affected by the EU referendum with a marked increase in client demand for advice contributing to the 16% increase in revenue, but also prompting a slowdown in the rate of new client wins (126 versus 166 in H115), with decisions hiring a financial adviser being deferred. A 6% increase in the fee rate at the beginning of the year, the first for some years, was a positive factor for revenues. Client attrition appears to have jumped (40 versus 20), but this included only 12 clients who moved to alternative providers, with death or other reasons accounting for the balance. As a proportion of the average number of clients during the period the annual rate of attrition (for all reasons) remains low at c 4%, albeit an area to which management pays close attention.

Exhibit 3: Divisional summary – Saunderson House

£000 except where shown

H115

H215

H116

% change y-o-y

Revenue

13,653

13,846

15,869

16.2

Adjusted operating profit

2,733

3,196

3,632

32.9

Adjusted operating margin (%)

20.0

23.1

22.9

New client wins

166

77

126

-24.1

Attrition

(20)

(22)

(40)

100.0

Clients end period

1,754

1,809

1,895

8.0

Average revenue per client

16,244

15,544

17,137

5.5

Revenue/average AUA (bp)

71.9

70.1

78.4

AUA per client (£m)

2.22

2.21

2.16

-2.7

Source: IFG Group, Edison Investment Research

Important in retaining and building the client base is the fact that SH advice, as captured by its balanced model portfolio, has delivered performance ahead of its private client benchmark, the FTSE All-Share index and inflation over most periods, as illustrated in Exhibit 4. Over the periods shown, the SH portfolio was ahead of its comparator benchmark with volatility that was somewhat higher. It also outperformed the FTSE All-Share index for one, three and 10 years with significantly lower volatility.

Exhibit 4: Saunderson House balanced model performance to 31 July 2016 (%)

1 year

3 years

5 years

10 years

Return

Return pa

Volatility

Return pa

Volatility

Return pa

Volatility

SH balanced model portfolio

5.0

6.1

5.6

6.8

6.4

5.8

7.6

ARC index

4.3

4.4

5.0

5.0

5.6

4.4

6.3

FTSE All-Share index

3.8

4.9

9.6

7.6

11.3

5.7

14.1

Inflation (CPI)

0.6

0.8

1.1

1.5

1.2

2.3

1.3

Source: IFG Group. Note: The ARC index is the Asset Risk Consultants balanced portfolio private client index.

Outlook

The market and economic background on a medium-term view retains the overlay of uncertainty associated with Brexit negotiations. However, the near-term reaction has been more resilient than some expectations and if this is maintained then the reduction in economic growth estimates that has followed the referendum may prove conservative and investor confidence could be sustained. The equity market has fared well since the referendum and year to date the FTSE All-Share index is up by more than 7% (as at 31 August).

While renewed periods of market volatility seem quite likely these should pass and for both JHP and SH the longer-term background of an ageing population and increase in pension flexibility seems likely to support demand for their investment platform and advice services.

For JHP there is one important near-term brake on performance in the shape of the 25bp reduction in the Bank of England’s base rate that followed the EU referendum. IFG has indicated a potential cost of £1.2m in the second half of 2016 with a larger impact in 2017: we assume around twice the impact on unchanged assumptions. We estimate about £1bn or nearly 5% of AUA is held on deposit on behalf of clients. Prospectively, JHP is considering adjustments to its fees to counter this impact and this may moderate the impact during 2017 and beyond (we assume the adverse interest income effect is largely neutralised by 2018 either through prices and/or a change in rates).

JHP has also noted that continued investment in the business will be required, and in the near term a reduction in revenue growth expectations, reflecting the slowdown in SIPP account growth already seen in the first half, creates what IFG acknowledges is a “revenue challenge”.

Strategically, JHP will continue to monitor developments in its industry where, in common with other participants, it expects to see further consolidation, particularly as higher capital requirements pressure smaller players. Otherwise, the company will continue to focus on the higher end of the adviser market as a source of business. Partnerships such as those with Towry and Capita are attractive as they provide a good flow of new accounts and impose a lower proportionate administrative burden than would be the case for smaller, less active advisers.

At SH the surge in demand for client advice around the time of the referendum is likely to subside to some extent, but this will allow greater focus on winning new clients and if markets remain relatively calm then the environment for this should be more favourable. We therefore look for a reacceleration of the growth in clients for 2017 and 2018, while allowing for some reduction in the average revenue per client to allow for growth in the number of younger clients with smaller portfolios and less complex requirements for advice.

Financials

Reflecting the Brexit-related reduction in interest income and the slower rate of SIPP account growth highlighted above, we have trimmed our estimates for both this year and next, as shown in Exhibit 5. We have also introduced an estimate for 2018 that assumes the resumption of more rapid growth in accounts and clients flowing through to revenues, together with the neutralisation of the negative interest income effect through pricing or rate changes. Operational gearing is expected to generate a marked strengthening in margin over the forecast period (pre-exceptional operating margin is estimated to increase from 10.7% to 16.5%).

Exhibit 5: Estimate revisions

Revenue (£m)

EBITDA* (£m)

PBT** (£m)

EPS** (p)

DPS (p)

New

Old

% chg.

New

Old

% chg.

New

Old

% chg.

New

Old

% chg.

New

Old

% chg.

2016e

77.3

79.5

-2.7%

13.3

16.8

-20.7%

9.2

13.3

-31.2%

7.16

9.77

-26.7%

4.90

4.89

0.2%

2017e

81.3

85.2

-4.6%

16.0

18.8

-15.0%

12.0

14.8

-18.9%

9.03

11.11

-18.7%

5.39

5.38

N/A

2018e

89.7

N/A

N/A

20.0

N/A

N/A

15.9

N/A

N/A

12.42

N/A

N/A

5.93

N/A

N/A

Source: Company data, Edison Investment Research. Note: *Excludes exceptional items, share-based payments and discontinued businesses. **Additionally excludes amortisation of acquired intangibles, unwind of contingent consideration.

Compared with H115 the group’s net cash balance increased by 23% to £23.5m, a reduction of £3.8m compared with the year end after dividend payments of £3m and capital spending of £2m.

The capital position of the group remains strong. The Pillar 3 disclosure for end 2015 showed capital resources of £40.5m compared with a requirement of £5.7m (coverage over 7x). New capital requirements for SIPP operators come into force this month (September) enhancing the capital requirements in respect of non-standard investments held in SIPPs. IFG has indicated that it will continue to have sufficient resources to meet these requirements and, subject to further information on the size of the additional requirement, would appear to have significant capital headroom to support prospective growth.

Valuation

Following the adjustments to our estimates detailed above, we have refreshed our DCF valuation with the main assumptions including a 10% discount rate, 10x terminal multiple and a 4% longer-term growth rate beyond 2020. We have allowed for two years of 10% growth in 2019-20. This results in a central value, as shown in Exhibit 6, of 181p compared with 186p previously. The relatively small reduction in indicated value reflects the near-term estimate downgrade and our assumption of more rapid growth resuming in 2017 and 2018, together with the retention of a reasonably robust growth rate for the intermediate period. Changes to these assumptions would have a significant impact on the outcome in addition to the sensitivities shown in the table below. Flexing the growth rate to match the current share price would require both a long and intermediate growth rate of c 2%, suggesting the market is currently inclined to take a relatively risk-averse approach when assessing the valuation.

Exhibit 6: Discounted cash flow valuation sensitivity

Discount rate (right)
and long-term growth

8%

9%

10%

11%

12%

2%

192

181

170

161

152

3%

199

187

176

166

157

4%

206

193

181

171

161

5%

213

200

188

177

166

Source: Edison Investment Research

We have also updated our sum-of-the-parts valuation, this time setting it so that it matches the output of our DCF valuation to provide a sense check. This has required the assumption of a higher multiple for JHP than we have used previously (23.5x versus 18.0x), reflecting lowered earnings estimates and the expectation of a resumption in growth (Exhibit 7).

Exhibit 7: Sum-of-the-parts valuation

 

2016 post-tax

Multiple

Value

James Hay Partnership

5.7

23.5

135.1

Saunderson House

5.3

17.0

89.3

Operating units

11.0

20.4

224.4

Central cost

(3.4)

10.0

(34.1)

Total

7.6

25.1

190.2

IFG group value per share (p)

181

IFG group value per share (€)

2.11

Source: Edison Investment Research

Finally, we set out a platform comparison including Curtis Banks, Hargreaves Lansdown, Alliance Trust Savings and Share plc. Differences in scale, particularly for Hargreaves Lansdown, and business mix means this should be treated with some caution. The comparison shows the respective revenues and AUA, together with corresponding multiples and, where available, consensus P/E ratios. For JHP we have taken the valuation assumed in our sum-of-the-parts, allowing a crude sense check of the higher multiple we have applied to the business. In terms of value to revenue and to AUA and on P/Es, JHP ranks closer to the bottom of the range, arguably suggesting support for a valuation at around this level.

Exhibit 8: Platform comparison

£m unless stated

James Hay

Curtis Banks

Hargreaves Lansdown

Alliance Trust Savings

Share

Market capital

135.1*

144.2

6,397.6

41.4

Surplus capital ( cover 2x reg. requirement)

0.0

0.0

135.6

6.6

Adjusted value

135.1*

144.2

6,262.0

54.0**

34.8

Revenue

47.0

36.0

326.5

13.7

14.4

Assets under administration (AUA)

20,300

18,000

61,700

11,500

3,400

Adjusted value/revenue (x)

2.9

4.0

19.2

3.9

2.4

Adjusted value/AUA (%)

0.7

0.8

10.1

0.5

1.0

2016e P/E (x)

23.5

18.0

34.9

N/A

60.4

Source: Edison Investment Research, Bloomberg, company disclosures. Note: *James Hay valuation is from our sum-of-the parts table valuation. **Alliance Trust Savings valuation is from H116 results.

Exhibit 9: Financial summary

Year end 31 December

£'000s

2014

2015

2016e

2017e

2018e

PROFIT & LOSS

 

 

 

Revenue

 

 

65,096

71,316

77,325

81,312

89,724

Cost of sales

(54,459)

(55,864)

(60,224)

(62,611)

(69,087)

Gross profit

10,637

15,452

17,102

18,702

20,637

Gross margin %

16.3%

21.7%

22.1%

23.0%

23.0%

Other underlying expenses

(328)

(1,414)

(3,772)

(2,714)

(656)

EBITDA

 

 

10,309

14,038

13,329

15,988

19,981

Depreciation

(1,190)

(1,091)

(1,108)

(1,235)

(1,221)

Amortisation (exc acquired intangibles)

(950)

(1,094)

(1,941)

(2,134)

(2,350)

Share based payment charges

(287)

(204)

(197)

(230)

(230)

Total underlying operating expenses as reported by divisions

(2,755)

(3,803)

(7,018)

(6,313)

(4,457)

Underlying operating profit as reported by divisions

 

7,882

11,649

10,083

12,389

16,179

Amortisation of acquired intangibles

(1,701)

(1,809)

(1,781)

(1,576)

(1,395)

Operating profit before exceptional items

 

 

6,181

9,840

8,302

10,813

14,785

Exceptional items

(1,353)

(1,350)

(799)

0

0

Operating profit

 

 

4,828

8,490

7,503

10,813

14,785

Finance Income

284

569

396

92

104

Finance expense

(504)

(482)

(492)

(483)

(483)

Profit Before Tax (FRS 3)

 

 

4,608

8,577

7,407

10,422

14,405

Profit Before Tax (norm)

 

 

7,825

11,539

9,152

11,998

15,891

Tax

(3,310)

(1,900)

(2,011)

(2,293)

(2,684)

Discontinued businesses

(497)

246

0

0

0

Non-controlling interests

(134)

(598)

0

0

0

Profit After Tax (FRS 3)

 

 

667

6,325

5,396

8,129

11,722

Profit After Tax (co norm)

 

 

5,652

8,568

7,430

9,386

12,906

Profit After Tax (Edison norm)

 

 

5,889

8,731

7,587

9,569

13,090

Average number of shares outstanding (m)

104.6

105.2

105.4

105.4

105.4

EPS - Company adjusted (p)

 

 

5.40

8.14

7.05

8.91

12.25

EPS - normalised (p)

5.61

8.26

7.16

9.03

12.42

EPS - FRS3 (p)

0.64

6.01

5.12

7.71

11.12

Dividend per share (p)

4.04

4.44

4.90

5.39

5.93

Underlying EBITDA margin (%)

15.8%

19.7%

17.2%

19.7%

22.3%

Reported operating margin (%)

12.1%

16.3%

13.0%

15.2%

18.0%

BALANCE SHEET

Non-current assets

 

 

59,972

57,946

57,066

56,321

55,580

Property plant and equipment

2,491

2,597

2,754

2,719

2,723

Intangible assets

54,398

55,314

54,303

53,593

52,848

Other non-current assets

3,083

35

9

9

9

Current assets

 

 

48,405

56,359

55,541

60,953

69,456

Trade receivables

19,079

22,255

20,245

22,124

24,599

Cash & equivalents

29,326

34,089

35,295

38,829

44,857

Other current assets

0

15

0

0

0

Held for sale assets

 

 

3,544

0

0

0

0

Total Assets

 

 

111,921

114,305

112,607

117,274

125,036

Current liabilities

 

 

21,909

30,347

27,458

29,104

31,266

Borrowings

2

6,831

6,831

6,831

6,831

Trade payables

20,741

22,813

17,688

19,330

21,492

Provisions

1,015

703

1,796

1,798

1,798

Other current liabilities

151

0

1,143

1,145

1,145

Non-current liabilities

 

 

11,390

4,760

4,823

4,823

4,823

Borrowings

6,639

0

0

0

0

Provisions

1,726

1,857

2,038

2,038

2,038

Deferred tax

3,025

2,903

2,785

2,785

2,785

Held for sale liabilities

1,908

0

0

0

0

Total liabilities

 

 

35,207

35,107

32,281

33,927

36,089

Minority interests

(4)

0

0

0

0

Shareholders' equity

 

 

76,718

79,198

80,325

83,347

88,947

CASH FLOW

Operating Cash Flow

 

 

8,091

13,803

7,820

15,751

19,668

Net Interest

(188)

(162)

(216)

(391)

(379)

Tax

(2,331)

(2,226)

(936)

(2,293)

(3,169)

Capex

(5,087)

(5,221)

(3,965)

(4,200)

(4,225)

Acquisitions/disposals

8,602

1,800

2,934

0

0

Issue of equity

529

403

162

0

0

Dividends

(4,068)

(4,188)

(4,711)

(5,333)

(5,866)

Other

378

529

(4)

0

0

Change in net cash

5,926

4,738

1,083

3,534

6,028

FX changes

(222)

(167)

123

0

0

Opening net (debt)/cash

16,983

22,687

27,258

28,464

31,998

Closing net (debt)/cash

22,687

27,258

28,464

31,998

38,026

Source: Company data, Edison Investment Research

Edison, the investment intelligence firm, is the future of investor interaction with corporates. Our team of over 100 analysts and investment professionals work with leading companies, fund managers and investment banks worldwide to support their capital markets activity. We provide services to more than 400 retained corporate and investor clients from our offices in London, New York, Frankfurt, Sydney and Wellington. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2016 Edison Investment Research Limited. All rights reserved. This report has been commissioned by IFG Group and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.
Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2016. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

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

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

Edison, the investment intelligence firm, is the future of investor interaction with corporates. Our team of over 100 analysts and investment professionals work with leading companies, fund managers and investment banks worldwide to support their capital markets activity. We provide services to more than 400 retained corporate and investor clients from our offices in London, New York, Frankfurt, Sydney and Wellington. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2016 Edison Investment Research Limited. All rights reserved. This report has been commissioned by IFG Group and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.
Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2016. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

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

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

Share this with friends and colleagues