Tuning up

Focusrite 13 September 2017 Update
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Focusrite

Tuning up

Full-year pre-close statement

Consumer electronics

13 September 2017

Price

307.50p

Market cap

£179m

Net cash (£m) at 31 August 2017

14.2

Shares in issue

58.1m

Free float

42%

Code

TUNE

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

6.0

6.0

89.2

Rel (local)

4.9

7.3

70.9

52-week high/low

336.5p

157.5p

Business description

Focusrite is a global music and audio products group supplying hardware and software products used by professional and amateur musicians, which enables the high-quality production of music.

Next events

Final results

November 2017

Analysts

Paul Hickman

+44 (0)20 3681 2501

Richard Lewis Jones

+44 (0)20 3077 5700

Focusrite is a research client of Edison Investment Research Limited

Following a strong first half driven in part by known product launches, this equally strong second half appears to show a more fundamental improvement resulting from sustained sales growth and improving mix together with margin and cash management in Focusrite’s international markets. These factors underpin our conviction that the company has sustainable independent strength.

Year end

Revenue (£m)

PBT*

(£m)

EPS*

(p)

DPS

(p)

P/E

(x)

EV:EBITDA

(x)

Yield

(%)

8/16

54.3

7.7

11.8

2.0

26.1

16.9

0.6

8/17e

66.0

9.2

13.9

2.3

22.1

13.3

0.7

8/18e

71.8

9.7

14.6

2.4

21.0

12.2

0.8

8/19e

77.5

10.3

15.0

2.6

20.5

11.1

0.8

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

Revenue and profit over-performance: FY17e upgrade

Focusrite has had an excellent second half. Revenue was up c 22% for the year, implying c 20% revenue growth in the second half. The fact that both revenue and profit are now guided ahead of the first half raises our expected pre-tax profit for the full year by £0.7m, or 8.8% to £9.2m.

Combination of positive sales and margin factors

Reasons for the strong H2 include improved product sales, which moreover were weighted towards higher-margin product areas, foreign exchange benefits against the € (though fx is never a major factor for Focusrite given its natural dollar hedge); and active gross margin management. As a result of these factors, our expected FY17 gross margin rises one whole percentage point from 38.0% to 39.0%.

Margin gains should be sustainable into FY18

With a continuing focus on margin management, we believe a 39.2% gross margin should be achievable in FY18, driving a 5.7% PBT and EPS upgrade.

Major improvement in cash performance

Net cash of £14.2m is up from £5.6m at August 2016 and £9.4m at February 2017. Net cash inflow of £8.6m is a much stronger cash performance than our forecast £5.2m. This is largely the result of better working capital management, particularly inventory. We raise our FY18 net cash forecast by £3m to £18.1m.

Valuation: Margin upgrade drives higher valuation

EBITDA margin, at 18.7%, is expected to beat our previous FY17 forecast by 80bp, giving us increased confidence to assume terminal EBITDA margin of 20.0% (previously 19.5%). This helps to drive a DCF valuation of 344p/share, up from 243p. Our peer-based comparison implies a similar valuation of 345p.

Full year pre-close: Material profit upgrade

Revenue and profit outperformance

Focusrite has had an excellent second half. Revenue was up c 21.6% for the year, or 13% on a constant currency basis to approximately £66m, implying c 16% revenue growth in the second half. However, the fact that both revenue and profit are now guided ahead of the first half means that second-half pre-tax profit of £4.6m is considerably ahead of our forecast, raising our expected pre-tax profit for the full year by £0.7m, or 8.8%, to £9.2m.

Exhibit 1: Summary of forecast beat

£'000

H116

H216

FY16

H117

H217

FY17e

Revenue - forecast

25.9

28.4

54.3

32.0

32.8

64.9

Revenue - pre-close

34.0

66.0

Adjusted EBITDA - forecast

4.8

5.4

10.2

6.1

5.5

11.6

Adjusted EBITDA -pre-close

6.2

12.4

Pre-tax profit - forecast

3.0

4.7

7.7

4.6

3.9

8.5

Pre-tax profit - pre-close

4.6

9.2

Source: Focusrite, Edison Investment Research

Our forecast was understandably set at lower levels than the first half because, although Focusrite is not a markedly seasonal business, the first half had benefited significantly from the launch of the second-generation Scarlett range in June 2016. There was also demand strength for the Novation division’s core Launchpad product, and we questioned whether this would continue as strongly in the second half.

The reasons for the strong H2 result relate both to revenue and margin:

Improved sales of product: although second half revenue is only slightly higher than we expected, we understand that the improvement reflects a weighting of sales growth towards higher-margin product areas, such as Focusrite’s professional ranges and Novation products, while discounts have been actively managed.

Foreign exchange benefits: over 50% of Focusrite sales and close to all its cost of sales are denominated in US dollars (or related currencies), which gives the company an effective natural hedge against the currency. However, as around 25% of its revenue is in €, of which 75% is hedged, there is a small positive exposure to the €. This means that the strength of the € against sterling in the second half, compared to our cautious forecast, has driven some margin benefit.

Gross margin management: as well as the margin benefits of sales mix mentioned above, management continues to manage margin actively. This includes a tough attitude to discounts allowed to resellers and continuous review of pricing.

As a result of these factors working in combination, the over-performance is reflected in a net improvement in gross margin of one whole percentage point from the 38.0% we had forecast to the 39.0% we now forecast for FY17.

The company has not commented on operating costs, interest or tax and we leave these items materially unchanged in our upgraded FY17 forecast.

Exhibit 2: Revised FY17 forecast

£'000

H116

H216

FY16

H117

H217e

FY17e

H1 y-o-y

H2 y-o-y

FY y-o-y

Total revenue

25,880

28,421

54,301

32,020

34,003

66,023

23.7%

19.6%

21.6%

Gross profit

10,305

10,557

20,862

12,855

12,894

25,749

24.7%

22.1%

23.4%

Gross margin (%)

39.8%

37.1%

38.4%

40.1%

37.9%

39.0%

0.3%

0.8%

0.6%

Adjusted EBITDA

4,821

5,428

10,249

6,131

6,242

12,373

27.2%

15.0%

20.7%

Adjusted EBITDA margin (%)

18.6%

19.1%

18.9%

19.1%

18.4%

18.7%

0.5%

-0.7%

-0.1%

Operating profit

3,692

3,985

7,677

4,571

4,613

9,184

23.8%

15.8%

19.6%

Pre-tax profit

2,969

4,694

7,663

4,599

4,623

9,222

54.9%

-1.5%

20.3%

EPS (p)

4.6

6.9

11.4

7.0

6.9

13.9

52.2%

0.6%

21.6%

Net cash

3,952

5,606

5,606

9,391

14,204

14,204

137.6%

153.4%

153.4%

Source: Focusrite, Edison Investment Research

Cash over-performance

Focusrite has ended its financial year with net cash of £14.2m, up from £5.6m at August 2016 and £9.4m at February 2017.

Representing net cash inflow of £8.6m compared with an outflow of £0.6m in FY16, this is a much stronger cash performance than the £5.2m we had forecast. In fact, it is 6% higher than net profit after tax for the year. This is largely the result of better working capital management, and specifically, we understand, inventory management.

Strong trading performance also naturally feeds into the cash flow, but the effect of strong demand on working capital is to run down inventory on hand to lower than planned levels. It would not be surprising to see a slight unwinding of this position in FY18.

Margin gains should be sustainable into FY18

Given the existing sales mix, Focusrite’s culture of margin management, and in the absence of an extreme sterling recovery against the €, we assume FY17 gross margin of 39.0% can be improved in FY18e to 39.2%, resulting in a 5.7% upgrade to our PBT and EPS forecast. We assume a £3m improvement to our net cash forecast, reflecting the profit over-performance for both years, but allowing for some necessary restocking.

Exhibit 3: Changes to forecasts

Year end August

FY17e

FY18e

(£m)

Old

New

% change

Old

New

% change

Revenues

64.9

66.0

1.8%

70.5

71.8

1.8%

Gross profit

24.7

25.7

4.4%

27.0

28.1

4.2%

Gross margin (%)

38.0%

39.0%

1.0%

38.3%

39.2%

0.9%

Adjusted EBITDA

11.6

12.4

6.4%

12.6

13.2

4.4%

Adjusted EBITDA margin (%)

17.9%

18.7%

0.8%

17.9%

18.4%

0.5%

Normalised operating profit

8.4

9.2

8.8%

9.1

9.7

5.8%

Normalised PBT

8.5

9.2

8.8%

9.2

9.7

5.7%

Normalised EPS (c)

12.8

13.9

8.8%

13.9

14.6

5.7%

Net cash

10.8

14.2

31.1%

15.2

18.1

19.0%

Source: Edison Investment Research

Valuation

Although Focusrite’s market remains technical and competitive, the company continues to show independent growth characteristics and has strengthened its leadership credentials. We value the shares using a DCF projection to place a value on the longer-term income stream available to investors. Although there are few close peers, we also consider valuation relative to a group of relevant smaller companies on near-term earnings expectations.

DCF valuation of 344p

We value Focusrite using a DCF projection which extends our published forecast using similar revenue growth and margin assumptions for a further two years, and then out to 10 years on consistent growth assumptions, fading in the last three years to a terminal rate of 2%. EBITDA margin, at 18.7%, is expected to beat our previous FY17 forecast by 80bp, giving us increased confidence to assume terminal EBITDA margin of 20.0% (previously 19.5%). In addition, our valuation has been moved up by the higher cash base now established for FY17 and the fact that our DCF therefore now includes a further trading year. We assume an equity-only cost of capital remaining at 8.4% (risk-free rate 2%, risk premium 7%, beta 0.9), resulting in a valuation of 344p/share, of which 193p is in the terminal value (previous valuation: 243p). This would put the shares on a FY18e P/E of 23.5x and EV/EBITDA of 13.8x. Varying the cost of capital and the terminal growth assumption would give the following ranges:

Exhibit 4: DCF assumption scenario analysis (p)

------------------------------------------------------Terminal growth rate---------------------------------------------------

Cost of capital

0.0%

1.0%

2.0%

3.0%

4.0%

10.0%

240

253

270

292

321

9.0%

270

289

312

343

387

8.0%

308

334

368

416

487

7.0%

358

395

447

525

655

Source: Edison Investment Research

Varying our assumed sales growth and margin assumptions affects the valuation as follows:

Exhibit 5: Growth and margin assumption scenario analysis

---------------------------------------------Sales growth 2019-2020e---------------------------------------------------

6%

7%

8%

9%

10%

Margin change pa 2021-24e

0.5pp

321

344

369

396

424

0.4pp

310

332

356

382

409

0.3pp

298

320

344

368

395

0.2pp

287

308

331

354

380

0.1pp

276

296

318

341

365

Source: Edison Investment Research

Peer group valuation of 345p

As there is no close small-cap peer, we define the relevant group as UK smaller cap tech, electronics and consumer companies in relevant subsectors, as well as relevant companies in US and European markets.

Exhibit 6: Peer valuation

All calendarised to August

Country

Mid price

(ccy)

Mkt cap

(ccy) m

Mkt cap

£m

P/E

2017e

P/E

2018e

EV/EBITDA

2017e

EV/EBITDA

2018e

Universal Electronics

US

57.0

821

621

18.2

14.4

9.8

8.7

Tivo

US

18.1

2,207

1670

10.8

8.1

9.2

7.4

Morgan Adv. Materials

UK

298.0

850

850

13.9

12.4

7.2

6.9

Photo-Me International

UK

166.5

627

627

18.1

17.2

8.8

8.1

Oxford Instruments

UK

1121.0

643

643

23.2

20.9

13.9

14.1

Bang & Olufsen

DK

131.5

5,680

693

N/A

94.9

17.6

12.0

XP Power

UK

2620.0

504

504

19.6

18.8

12.8

12.3

Avid Technology

US

4.3

175

133

12.5

17.8

7.0

6.9

Gooch & Housego

UK

1336.0

327

327

28.4

24.6

15.9

13.8

Tt Electronics

UK

237.5

386

386

21.0

19.5

9.4

10.4

Dialight

UK

719.0

234

234

20.4

14.5

9.2

6.9

Quixant

UK

427.5

282

282

27.8

24.2

20.8

18.1

Judges Scientific

UK

1907.5

117

117

17.7

15.9

12.1

11.1

B&C Speakers

IT

11.8

130

118

19.0

N/A

N/A

N/A

Trakm8 Holdings

UK

92.5

33

33

33.0

12.8

15.1

7.8

Gear 4 Music (Hldgs)

UK

805.0

168

168

87.5

78.2

52.2

41.1

Average

24.8

26.3

14.7

12.4

Focusrite

UK

314.0

182

182

22.2

21.4

13.6

12.5

Premium/(discount)

-10.4%

-18.4%

-7.7%

0.6%

Source: Bloomberg. LSE subsectors: Electrical Components & Equipment, Computer Hardware, Recreational Products; Retail: relevant audio/video companies from US and European markets. Market cap £25m-2bn. Note: Outliers excluded from table. Prices as at 11 September 2017. N/A: data not available.

For the year to August 2017, Focusrite trades at an average 10.4% P/E and a 7.7% EV/EBITDA discount to the group. For FY18e it trades at an 18.4% discount and a 0.6% premium respectively. Adjusting to average peer multiples values Focusrite shares at 369p on a P/E basis and 320p on an EV/EBITDA basis, a blend of 345p, which is close to our DCF valuation.

Exhibit 7: Financial summary

£'k

2015

2016

2017e

2018e

2019e

31-August

IFRS

IFRS

IFRS

IFRS

IFRS

INCOME STATEMENT

Revenue

 

 

48,029

54,301

66,023

71,798

77,541

Cost of Sales

(29,381)

(33,439)

(40,274)

(43,653)

(47,145)

Gross Profit

18,648

20,862

25,749

28,145

30,396

EBITDA

 

 

9,302

10,249

12,373

13,188

14,213

Normalised operating profit

 

 

7,024

7,677

9,184

9,675

10,228

Amortisation of acquired intangibles

0

0

0

0

0

Exceptionals

(704)

(537)

0

0

0

Share-based payments

0

0

0

0

0

Reported operating profit

6,320

7,140

9,184

9,675

10,228

Net Interest

164

(14)

38

40

45

Joint ventures & associates (post tax)

0

0

0

0

0

Exceptionals

0

0

0

0

0

Profit Before Tax (norm)

 

 

7,188

7,663

9,222

9,715

10,273

Profit Before Tax (reported)

 

 

6,484

7,126

9,222

9,715

10,273

Reported tax

(1,022)

(870)

(1,107)

(1,166)

(1,534)

Profit After Tax (norm)

6,166

6,793

8,116

8,549

8,738

Profit After Tax (reported)

5,462

6,256

8,116

8,549

8,738

Minority interests

0

0

0

0

0

Discontinued operations

0

0

0

0

0

Net income (normalised)

6,166

6,900

8,116

8,549

8,738

Net income (reported)

5,462

6,256

8,116

8,549

8,738

Basic average number of shares outstanding (m)

52.4

53.2

54.1

55.1

55.1

EPS - basic normalised (p)

 

 

11.8

13.0

15.0

15.5

15.9

EPS - diluted, normalised (p)

 

 

10.5

11.8

13.9

14.6

15.0

EPS - basic reported (p)

 

 

10.4

11.8

15.0

15.5

15.9

Dividend (p)

1.80

1.95

2.25

2.40

2.55

Revenue growth (%)

17.2

13.1

21.6

8.7

0.0

Gross Margin (%)

38.8

38.4

39.0

39.2

39.2

EBITDA Margin (%)

19.4

18.9

18.7

18.4

18.3

Normalised Operating Margin

14.6

14.1

13.9

13.5

13.2

BALANCE SHEET

Fixed Assets

 

 

5,264

6,367

7,482

8,760

9,949

Intangible Assets

3,941

4,792

5,570

6,669

7,739

Tangible Assets

1,323

1,575

1,912

2,092

2,210

Investments & other

0

0

0

0

0

Current Assets

 

 

22,766

28,191

34,072

40,294

47,254

Stocks

8,633

11,361

9,000

10,166

12,916

Debtors

7,737

11,224

10,869

12,016

12,978

Cash & cash equivalents

6,173

5,606

14,204

18,112

21,360

Other

223

0

0

0

0

Current Liabilities

 

 

(8,809)

(9,256)

(8,040)

(8,541)

(9,376)

Creditors

(8,406)

(8,612)

(7,396)

(7,897)

(8,529)

Tax and social security

(403)

(644)

(644)

(644)

(847)

Short term borrowings

0

0

0

0

0

Other

0

0

0

0

0

Long Term Liabilities

 

 

(743)

(282)

(332)

(403)

(472)

Long term borrowings

0

0

0

0

0

Other long term liabilities

(743)

(282)

(332)

(403)

(472)

Net Assets

 

 

18,478

25,020

33,182

40,111

47,355

Minority interests

0

0

0

0

0

Shareholders' equity

 

 

18,478

25,020

33,182

40,111

47,355

CASH FLOW

Op Cash Flow before WC and tax

9,302

10,249

12,373

13,188

14,213

Working capital

(1,689)

(6,009)

2,000

(2,312)

(3,080)

Exceptional & other

(591)

(417)

600

(0)

(0)

Tax

(838)

(165)

(1,107)

(1,166)

(1,534)

Net operating cash flow

 

 

6,184

3,658

13,867

9,710

9,599

Capex

(3,559)

(3,675)

(4,090)

(4,519)

(4,966)

Acquisitions/disposals

0

0

0

0

0

Net interest

6

(111)

38

40

45

Equity financing

0

172

0

0

0

Dividends

(314)

(976)

(1,217)

(1,322)

(1,430)

Other

53

365

0

0

0

Net Cash Flow

2,370

(567)

8,598

3,909

3,248

Opening net debt/(cash)

 

 

(3,803)

(6,173)

(5,606)

(14,204)

(18,112)

FX

0

0

0

0

0

Other non-cash movements

0

0

0

0

0

Closing net debt/(cash)

 

 

(6,173)

(5,606)

(14,204)

(18,112)

(21,360)

Source: Focusrite, Edison Investment Research

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Copyright 2017 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Focusrite 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 2017. “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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, 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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. 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 2017 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Focusrite 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 2017. “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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, 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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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