OPAP — Well capitalised to weather COVID-19

OPAP (ASE: OPAP)

Last close As at 24/04/2024

EUR16.65

0.01 (0.06%)

Market capitalisation

EUR6,162m

More on this equity

Research: Consumer

OPAP — Well capitalised to weather COVID-19

FY19 results were in line demonstrating a strong underlying business, but these have been overshadowed by the impact of COVID-19 on FY20. Management estimates that the disruption (shop closures) will have an impact on monthly gross gaming revenues (GGR) of €130–140m and EBITDA of €50–53m. Our new forecasts assume a €400m revenue loss equivalent to three months of full disruption during FY20 and we also have reduced FY21 GGR forecasts by 9% to reflect the potential impact on consumer confidence. Nonetheless, the balance sheet remains robust and we forecast a final dividend for FY20 (payable in FY21). The shares trade at 6.8x EV/EBITDA and 12.7x P/E for FY21 with an 11.8% yield.

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Consumer

OPAP

Well capitalised to weather COVID-19

FY19 results

Travel & leisure

6 April 2020

Price

€6.5

Market cap

€2,176m

Net debt (€m) at April 2020, post IFRS 16, excluding investments

609

Shares in issue

334.7m

Free float

60%

Code

OPAP

Primary exchange

ASE

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(35.5)

(44.1)

(29.4)

Rel (local)

(8.5)

(4.9)

(2.1)

52-week high/low

€12.3

€5.9

Business description

OPAP was founded in 1958 as the Greek national lottery and it is the exclusive licensed operator of all numerical lotteries (seven games), sports betting (four games) and horse racing. OPAP listed in 2001 and was fully privatised in 2013. Sazka Group has significant board representation and a 40% holding.

Next events

Q120 results

10 June 2020

Analysts

Victoria Pease

+44 (0)20 3077 5740

Russell Pointon

+44 (0)20 3077 5700

OPAP is a research client of Edison Investment Research Limited

FY19 results were in line demonstrating a strong underlying business, but these have been overshadowed by the impact of COVID-19 on FY20. Management estimates that the disruption (shop closures) will have an impact on monthly gross gaming revenues (GGR) of €130–140m and EBITDA of €50–53m. Our new forecasts assume a €400m revenue loss equivalent to three months of full disruption during FY20 and we also have reduced FY21 GGR forecasts by 9% to reflect the potential impact on consumer confidence. Nonetheless, the balance sheet remains robust and we forecast a final dividend for FY20 (payable in FY21). The shares trade at 6.8x EV/EBITDA and 12.7x P/E for FY21 with an 11.8% yield.

Year end

GGR
(€m)

EBITDA
(€m)

EPS*
(€)

DPS
(€)

P/E
(x)

Yield
(%)

12/18

1,547.0

353.6

0.52

0.70

12.5

10.8

12/19

1,619.9

411.2

0.62

1.00

10.4

15.4

12/20e

1,385.1

302.2

0.29

0.50

22.3

7.8

12/21e

1,709.7

420.7

0.51

0.77

12.7

11.8

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

COVID-19 dramatically affects operations

OPAP’s stores and gaming halls across Greece have been closed since 14 March and will not reopen until at least 11 April 2020, and the nationwide lockdown has restricted street vendors for the distribution of Scratch & Passive lotteries. The online lottery business has seen an increase in activity and, although this remains only a small portion of the total, OPAP has stated that it is focusing on expanding its online games portfolio. In terms of online sports, this has been significantly affected by the lack of sporting fixtures. OPAP also announced that CEO Damian Cope will stand down in May 2020, with a replacement yet to be announced.

Our forecasts assume equivalent of 3 months’ impact

It is difficult to forecast the duration of the COVID-19 outbreak, or the subsequent economic impact of restrictions. The direct impact is a 99% reduction of gaming revenues during the disrupted period and management stated that the monthly financial impact from COVID-19 related restrictions will be c €130–140m on GGR and c €50–53m on EBITDA, before cost mitigations (c €4–6m). We note that OPAP has a relatively low fixed cost base, given its commission structure for agents, and 35% gaming tax based on revenues. Our forecasts assume the equivalent of three months of full disruption and we have lowered our underlying (excluding Stoiximan) FY20 GGR forecasts by €400m and EBITDA by €145m.

Valuation: 11.8% dividend yield for FY21e

OPAP reported FY19 net debt of €483m (€419m pre IFRS 16, excluding €10m of investments) and the net debt/LTM EBITDA was 1.0x. At April 2020, post IFRS net debt was €609m, due to the payment of the extraordinary dividend in Q120. We assume no further dividend for FY19 but forecast a final dividend for FY20 (payable in FY21) and a normal policy thereafter. The shares trade at 6.8x EV/EBITDA and 12.7x P/E for FY21 with an 11.8% dividend yield.

FY19 results in line but FY20 hit hard by COVID-19

Impact of COVID-19: Retail closed until at least mid-April

OPAP’s stores and gaming halls across Greece have been closed since 14 March and will not reopen until at least 11 April 2020. Similar measures have affected the Cypriot business (c 5% of total revenues) and the nationwide lockdown has restricted street vendors for the distribution of Scratch & Passive lotteries.

The online lottery business has seen an increase in activity and, although this remains only a small portion of the total, OPAP has stated that it is focusing on expanding its online games portfolio. In terms of online sports, this has also been significantly affected by the lack of sporting fixtures.

Financial impact per month: €130–140m on GGR and €50–53m on EBITDA

It is currently very difficult to forecast the duration of the COVID-19 outbreak, and the subsequent economic impact of the restrictions. Current restrictions are leading to a 99% reduction in gaming revenues. However, about 60% of GGR are linked to revenue-based payments and therefore OPAP has a relatively low fixed cost base – eg the commission structure for agents, and 35% gaming tax based on revenues and revenue sharing agreements with multiple vendors. The company has specifically not reduced headcount or salaries at present.

Management has stated that the monthly financial impact from COVID-19 related restrictions will be c €130–140m on GGR and c €50–53m on EBITDA, before cost mitigations of c €4–6m. The expected cash burn per month is c €20m, due to fixed costs. We assume a total disruption duration equivalent to three months (which allows for a slow return to normality), and we have lowered our underlying (excluding Stoiximan) FY20 GGR forecasts by €400m and EBITDA by €145m.

Balance sheet remains robust

In addition to proactively managing capex by freezing uncommitted spend, OPAP has recently secured additional funding of €325m (including overdrafts). At 1 April 2020, the company’s cash balance was €623m, with total net debt of €609m (post IFRS, and excluding €10m of investments). This includes the €1.00/share extraordinary dividend (€172m cash component) from Q120 and compares to net debt of €483.3m at FY19.

Our forecasts assume a total of three months’ equivalent of negligible monthly revenues and, on this basis, we believe that OPAP continues to have a sufficient cash position and sufficient liquidity to meet future payment obligations.

Extraordinary dividend paid in Q120, with final dividend under discussion

OPAP paid a €1.00 extraordinary dividend in Q120, which was distributed as €172m cash with 48.2% of shareholders electing for a scrip dividend. Given the current uncertainty surrounding coronavirus, management will delay its recommendation concerning a final dividend for FY19. We have assumed no further dividend to be paid corresponding to FY19, but we assume the company will return to its normal dividend policy from FY20 onwards, which is to pay out the bulk of free cash flow. Our forecasts assume a final FY20 dividend to be paid in FY21.

FY19 results summary

FY19 GGR increased by 4.7%, driven by full roll out of VLTs

FY19 GGR increased 4.7% to €1,619.9m and Q419 GGR increased by 1.4% to €446.7m, with better sports betting in the last quarter (up 5.7% to €112.4m), as well as continued momentum in video lottery terminals (VLTs) (up 24.2% to €85.0m). In terms of VLTs, management has achieved its main target of installing 25,000 VLT machines by year end, in 428 gaming halls and 2,161 OPAP stores.

Lottery was down 7.8% to €201.8m during Q419 vs the previous year, leading to a flat performance for FY19. The weaker quarter was due to KINO side bets’ natural attrition and less favourable Joker jackpot roll-overs. Encouragingly, Instant and Passives increased by 0.8% in Q419 to €47.4m, although this was still a 3.1% decline for the year as a whole.

Adjusted EBITDA margin of 25.4%

FY19 adjusted EBITDA of €411.2m was in line with our estimates with a stronger margin helped by continued cost containment measures. Note that our adjusted EBITDA excludes the contribution from Stoiximan, which is now fully consolidated in our forecasts from H220 onwards (previously from January 2020, but the deal is yet to conclude). We also exclude the €7.1m impairment of financial assets.

Forecasts: FY20 dramatically affected by COVID-19

Due to COVID-19 related shop closures, we have lowered our underlying FY20 GGR forecasts (excluding Stoiximan) by €400m and our EBITDA forecasts by €145m. This is the approximate equivalent to three months of full business interruption due to COVID-19 related disruption. Although it is clearly difficult to forecast the duration of shop closures, we assume that in addition to one month of closure (until mid-April) there is likely to be a prolonged residual impact once stores reopen, as many customers may be unwilling to enter shops for several months. To reiterate, we forecast the net GGR revenue impact from the closures and residual slowdowns upon reopening to be c €400m. We will amend our forecasts as the situation becomes clearer.

Since it is highly likely that consumer confidence will be dented as a result of the current disruptions, we have lowered our FY21 GGR forecasts by 9.3%. Our FY21 EBITDA estimate decreases by 12.5%.

We now also assume that the Stoiximan acquisition will not complete until H220 and our forecasts reflect full consolidation from H220 onwards, rather than from January 2020.

As noted above, we assume that no further payment will be made this year for the FY19 dividend. Going forward, we assume that OPAP continues its dividend policy of paying out the bulk of free cash flow. Even with the three-month closure in our estimates, we believe OPAP has a sufficiently strong capital structure to support the continuation of its dividend policy and depending on the duration of the shop closures, it might even choose to pay a final dividend for FY19 also. An announcement on the FY19 dividend is expected by June 2020.

We summarise our estimate changes in the table below.

Exhibit 1: Estimate changes

GGR (€m)

EBITDA (€m)

Normalised EPS (€)

Old

New

% chg.

Old

New

%chg.

Old

New

%chg.

2019

1,635.0

1,619.9

(0.9)

408.9

411.2

0.6

0.62

0.62

0.0

2020e

1,833.0

1,385.1

(24.4)

456.7

302.2

(33.8)

0.69

0.29

(57.9)

2021e

1,884.6

1,709.7

(9.3)

480.6

420.7

(12.5)

0.72

0.51

(29.2)

Source: Edison Investment Research estimates, OPAP accounts


Exhibit 2: Financial summary

€'m

2014

2015

2016

2017

2018

2019

2020e

2021e

2022e

Year end 31 December

ISA

ISA

ISA

ISA

ISA

ISA

ISA

ISA

ISA

INCOME STATEMENT

GGR

 

 

1,377.7

1,399.7

1,397.6

1,455.5

1,547.0

1,619.9

1,385.1

1,709.7

1,761.3

NGR

 

 

973.1

987.7

930.8

972.9

1,039.9

1,086.2

934.7

1,152.7

1,187.3

Cost of Sales

(764.2)

(774.3)

(827.5)

(862.9)

(904.3)

(946.9)

(795.9)

(962.0)

(988.3)

Gross Profit

613.5

625.3

570.1

592.6

642.7

673.0

589.2

747.8

773.1

EBITDA

 

 

346.5

377.1

307.5

306.5

353.6

411.2

302.2

420.7

441.4

Normalised operating profit

 

 

289.6

318.1

252.4

218.8

258.4

296.6

170.7

287.4

306.2

Impairments

7.5

(14.1)

0.0

(2.7)

(17.5)

0.0

0.0

0.0

0.0

Exceptionals

0.0

0.0

0.0

0.0

0.0

(7.1)

0.0

0.0

0.0

Share-based payments

(0.9)

(1.2)

(3.1)

(1.5)

(1.6)

(1.6)

(1.6)

(1.6)

(1.6)

Reported operating profit

296.2

302.8

249.3

214.6

239.3

287.8

169.1

285.8

304.5

Net Interest

1.6

(4.7)

(13.3)

(21.1)

(23.5)

(27.1)

(38.7)

(38.4)

(33.6)

Joint ventures & associates (post tax)

0.0

0.0

0.0

0.0

0.0

8.5

4.0

0.0

0.0

Other

7.8

1.5

1.0

(0.3)

0.0

0.0

0.0

0.0

1.0

Profit Before Tax (norm)

 

 

299.0

314.9

240.0

197.5

234.9

278.0

136.1

249.0

273.6

Profit Before Tax (reported)

 

 

305.6

299.6

236.9

193.2

215.9

269.2

134.4

247.3

271.9

Reported tax

(106.4)

(89.7)

(64.1)

(61.6)

(70.6)

(67.1)

(36.7)

(64.7)

(68.4)

Profit After Tax (norm)

212.3

223.6

170.4

140.2

166.8

200.1

99.3

184.3

205.2

Profit After Tax (reported)

199.2

209.9

172.9

131.6

145.3

202.1

97.7

182.6

203.5

Minority interests

(4.2)

0.8

(2.6)

(5.4)

(2.0)

0.3

(2.3)

(8.8)

(10.2)

Discontinued operations

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Net income (normalised)

208.1

224.4

167.8

134.8

164.8

200.4

97.0

175.5

195.0

Net income (reported)

195.0

210.7

170.2

126.2

143.3

202.4

95.3

173.9

193.3

Basic average number of shares outstanding (m)

319

319

319

318

318

322

332

342

352

EPS - basic normalised (€)

 

 

0.65

0.70

0.53

0.42

0.52

0.62

0.29

0.51

0.55

EPS - diluted normalised (€)

 

 

0.65

0.70

0.53

0.42

0.52

0.62

0.29

0.51

0.55

EPS - basic reported (€)

 

 

0.61

0.66

0.53

0.40

0.45

0.63

0.29

0.51

0.55

Dividend (€)

0.70

0.40

1.29

1.10

0.70

1.00

0.50

0.77

0.80

Revenue growth (%)

1.6

(-0.2)

4.1

6.3

4.7

(-14.5)

23.4

3.0

Gross Margin (%)

44.5

44.7

40.8

40.7

41.5

41.5

42.5

43.7

43.9

EBITDA Margin (%)

25.2

26.9

22.0

21.1

22.9

25.4

21.8

24.6

25.1

Normalised Operating Margin

21.0

22.7

18.1

15.0

16.7

18.3

12.3

16.8

17.4

BALANCE SHEET

Fixed Assets

 

 

1,343.4

1,318.9

1,330.3

1,356.5

1,384.2

1,370.1

1,346.8

1,231.8

1,115.0

Intangible Assets

1,284.2

1,237.2

1,231.0

1,218.5

1,157.2

1,096.0

1,060.0

977.1

892.5

Tangible Assets

44.2

56.2

67.6

109.3

111.5

162.3

175.1

143.0

110.9

Investments & other

15.0

25.5

31.7

28.7

115.5

111.7

111.7

111.7

111.7

Current Assets

 

 

409.4

389.9

437.4

440.4

385.5

869.6

928.8

998.8

1,052.8

Stocks

3.0

4.2

12.5

7.9

10.7

6.7

11.7

16.7

21.7

Debtors

92.3

55.2

80.6

127.8

138.3

161.2

171.2

166.2

161.2

Cash & cash equivalents

297.4

301.7

273.5

246.1

182.6

633.8

678.0

748.0

802.0

Other

16.7

28.8

70.8

58.5

54.0

67.9

67.9

67.9

67.9

Current Liabilities

 

 

(457.9)

(325.0)

(390.2)

(482.0)

(299.3)

(326.4)

(311.4)

(296.4)

(281.4)

Creditors

(170.4)

(127.1)

(149.3)

(173.9)

(176.7)

(184.1)

(169.1)

(154.1)

(139.1)

Tax and social security

(178.2)

(129.9)

(55.5)

(89.8)

(8.6)

(5.3)

(5.3)

(5.3)

(5.3)

Short term borrowings

(0.0)

(32.1)

(118.7)

(169.2)

(0.2)

(13.9)

(13.9)

(13.9)

(13.9)

Other

(109.3)

(35.9)

(66.7)

(49.2)

(113.8)

(123.1)

(123.1)

(123.1)

(123.1)

Long Term Liabilities

 

 

(59.8)

(181.0)

(305.3)

(556.7)

(710.8)

(1,141.5)

(1,266.5)

(1,166.5)

(1,066.5)

Long term borrowings

0.0

(115.0)

(263.0)

(513.1)

(650.3)

(1,103.2)

(1,228.2)

(1,128.2)

(1,028.2)

Other long term liabilities

(59.8)

(66.0)

(42.3)

(43.6)

(60.6)

(38.3)

(38.3)

(38.3)

(38.3)

Net Assets

 

 

1,235.1

1,202.8

1,072.2

758.2

759.5

771.7

697.7

767.7

819.9

Minority interests

(67.4)

(41.0)

(37.0)

(43.4)

(36.8)

(18.1)

(20.0)

(20.0)

(20.0)

Shareholders' equity

 

 

1,167.7

1,161.8

1,035.3

714.8

722.8

753.6

677.7

747.7

799.9

CASH FLOW

Op Cash Flow before WC and tax

347.4

378.3

310.7

308.0

355.2

412.9

303.9

422.4

443.0

Working capital

7.0

(41.0)

(71.9)

(9.2)

(25.0)

(16.5)

(25.0)

(10.0)

(10.0)

Exceptional & other

1.0

9.1

(12.4)

(0.4)

1.1

(13.9)

0.0

0.0

0.0

Tax

(68.8)

(142.5)

(116.9)

(31.4)

(51.7)

(78.9)

(36.7)

(54.7)

(58.4)

Net operating cash flow

 

 

286.6

203.9

109.4

266.9

279.6

303.6

242.1

357.6

374.6

Capex

(18.6)

(39.6)

(42.9)

(96.3)

(51.9)

(34.8)

(15.0)

(20.0)

(20.0)

Acquisitions/disposals

(18.6)

(0.8)

(0.0)

(31.5)

(47.9)

(21.9)

(94.9)

0.0

0.0

Net interest

1.6

(4.2)

(11.9)

(19.6)

(24.6)

(22.3)

(38.7)

(38.4)

(33.6)

Equity financing

(8.3)

(24.2)

(11.9)

(1.8)

(5.5)

(0.1)

0.0

0.0

0.0

Dividends

(79.8)

(277.3)

(292.8)

(446.1)

(154.0)

(164.0)

(172.0)

(120.4)

(156.9)

Other

48.1

(0.7)

(12.7)

0.3

(18.6)

(11.1)

(2.3)

(8.8)

(10.2)

Net Cash Flow

211.0

(142.9)

(262.8)

(328.0)

(22.8)

49.3

(80.8)

170.0

154.0

Opening net debt/(cash)

 

 

(86.4)

(297.4)

(154.5)

108.3

436.2

467.9

483.3

564.1

394.0

FX

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Other non-cash movements

0.0

0.0

0.0

0.0

(8.9)

(64.8)

0.0

0.0

0.0

Closing net debt/(cash)

 

 

(297.4)

(154.5)

108.3

436.2

467.9

483.3

564.1

394.0

240.1

Source: OPAP accounts, Edison Investment Research

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

United Kingdom

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.

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United States

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

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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Australia

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

New Zealand

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

United Kingdom

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

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

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

United States

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

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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Coro Energy — Cost reductions result in board restructuring

Coro Energy has announced that in light of the unprecedented market changes, its board has initiated a material cost-reduction programme. As a result, James Menzies, the company’s CEO, saw his employment terminated with immediate effect. The board also mutually agreed with Nick Cooper that he will leave the company with immediate effect. Following these changes, the board will consist of James Parsons as nonexecutive chairman and Andrew Dennan, Marco Fumagalli and Fiona MacAulay as non-executive directors. As result of recent developments and Coro’s current situation, we are suspending our valuation.

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