S&U — Advantage growth resumes

S&U (LSE: SUS)

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Research: Financials

S&U — Advantage growth resumes

The H120 results confirmed encouraging trends at Advantage motor finance with a resumption of growth in new transactions and an increase in receivables following a contraction in H219. Early indicators continue to show that the tightening of credit criteria is beginning to take effect with the potential for further benefits in future periods. While muted liquidity in the property market is affecting the small Aspen property bridging business there is still a good opportunity for it to make a useful contribution to growth on a medium-term view.

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Financials

S&U

Advantage growth resumes

H120 results

Financial services

30 September 2019

Price

2,120.00p

Market cap

£256m

Group debt end-July 2019 (£m)

125

Shares in issue

12.1m

Free float

26%

Code

SUS

Primary exchange

LSE

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

2.4

(11.3)

(18.2)

Rel (local)

(1.9)

(12.0)

(16.7)

52-week high/low

2,605.00p

1,767.50p

Business description

S&U’s Advantage motor finance business lends on a simple hire-purchase basis to lower and middle income groups that may have impaired credit records that restrict their access to mainstream products. It has over 62,000 customers. The Aspen property bridging business has moved beyond the pilot stage and is expanding its loan book (over £24m at end July).

Next events

Q320 trading update

10 December 2019

Q420 trading update

11 February 2020

Analysts

Andrew Mitchell

+44 (0)20 3681 2500

Martyn King

+44 (0)20 3077 5745

S&U is a research client of Edison Investment Research Limited

The H120 results confirmed encouraging trends at Advantage motor finance with a resumption of growth in new transactions and an increase in receivables following a contraction in H219. Early indicators continue to show that the tightening of credit criteria is beginning to take effect with the potential for further benefits in future periods. While muted liquidity in the property market is affecting the small Aspen property bridging business there is still a good opportunity for it to make a useful contribution to growth on a medium-term view.

Year end

Revenue (£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

01/18

79.8

30.2

202.4

105.0

10.5

5.0

01/19

89.2

34.6

232.0

118.0

9.1

5.6

01/20e

98.0

36.9

248.7

124.0

8.5

5.8

01/21e

108.2

40.5

271.7

128.0

7.8

6.0

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

H120 results

S&U’s H120 results showed revenues 7% ahead to £47.7m with pre-tax profit and fully diluted EPS up 3% and 4%, respectively. The dividend was increased by 6% to 34p. At Advantage receivables growth resumed (+5.8% compared with year end) and the risk adjusted yield was slightly up at 24.9% versus 24.6% following earlier tightening of credit criteria. Increased costs tempered profit growth, including higher commission payments to improve transaction volume/quality. Aspen property bridging continued to make progress with the loan book standing at £24.7m at end July versus £18m at the beginning of the year and its pre-tax profit increased from £0.3m to £0.5m. The weak market has also affected borrower exits and resulted in one crystallised loss (default interest only) and late repayments on nine loans.

Background and outlook

While car transaction volumes in the UK market have shown some weakness year to date, the used car segment was down less than 2% in the first half and car finance through dealerships for used cars has continued to grow, albeit more slowly than previously (see page 5). At Advantage the recent resumption of growth in transactions is encouraging for the near-term outlook, while the company’s track record through a number of cycles and potential to grow market share from a small base is positive on a longer view. For Aspen there is also good scope to grow from a small base and management’s conservative approach to the business should limit risks.

Valuation

Our estimates are little changed following the first half results (EPS marginally higher: see page 5) and we still look for the company to generate returns on equity of over 17% this year and next. An ROE/COE calculation suggests the current market price is factoring in a return of just over 13%, which appears cautious. Also worth noting is the dividend yield of 5.6% (peer average 3.7%).

H120 results

A summary of figures from the H120 results is shown in Exhibit 1 and key points from the results are noted below with percentage changes versus H119 unless stated.

Motor finance receivables increased by nearly 6% compared with end FY19 following a contraction in H219 when the number of new loans was restricted by a tighter credit policy and competitive behaviour. The average level of receivables increased 3% against H119.

Advantage revenues increased by 5% while pre-tax profit was £16.6m (vs £16.3m).

The property bridging loan book increased by 51% and revenue by 74% as the business begins to build scale following its pilot phase. Aspen pre-tax profit was £0.5m compared with £0.3m.

The total profit and loss impairment charge was slightly lower, with Advantage lower (equivalent to 8.3% versus 8.8% of average receivables) while the figure for Aspen increased from a low base reflecting increased scale and a difficult market that has affected borrower exits and resulted in one crystallised loss (default interest only) and late repayments on nine loans.

Not shown below but the ratio of transactions to applications at Advantage fell from 2.3% to 1.8%, evidencing the tighter credit standards that are being applied.

The 19% increase in cost of sales can be attributed to a small increase in the number of new loans, an increase in commissions paid by Advantage in order to encourage a higher volume and a better mix of deals from internet brokers (see Exhibit 3). Administrative expenses increased by 17% as investment was made in collection capability at Advantage.

Pre-tax profit increased by 3% and fully diluted earnings per share by 4%.

The interim dividend is increased by 6% to 34p. Board policy with regard to dividends is to take into account a conservative treasury policy and to aim for cover of two times on a longer-term view.

Exhibit 1: Summary of H120 figures

£000 unless stated

H119

H219

H120

H120 vs H119 %

Sequential change %

Motor finance receivables at period end

263,455

258,810

273,771

3.9

5.8

Number of new motor loans

11,822

9,231

12,065

2.1

30.7

Bridging loans at period end

16,327

18,253

24,690

51.2

35.3

Revenue

Motor finance

43,270

43,102

45,586

5.4

5.8

Property bridging

1,190

1,653

2,073

74.2

25.4

Total

44,460

44,755

47,659

7.2

6.5

Impairments

Motor finance

(11,320)

(11,660)

(11,075)

-2.2

-5.0

Property bridging

(98)

(108)

(318)

224.5

194.4

Total

(11,418)

(11,768)

(11,393)

-0.2

-3.2

Other cost of sales

(8,587)

(7,164)

(10,249)

19.4

43.1

Administration expenses

(5,468)

(5,295)

(6,381)

16.7

20.5

EBITDA

18,987

20,528

19,636

3.4

-4.3

Depreciation

(174)

(240)

(226)

29.9

-5.8

Operating profit / loss

18,813

20,288

19,410

3.2

-4.3

Finance expense

(2,139)

(2,402)

(2,272)

6.2

-5.4

Pre-tax profit

16,674

17,886

17,138

2.8

-4.2

Tax

(3,167)

(3,404)

(3,121)

-1.5

-8.3

Net profit

13,507

14,482

14,017

3.8

-3.2

EPS fully diluted (p)

111.8

120.2

116.1

3.8

-3.4

Dividend per share (p)

32.0

86.0

34.0

6.3

Source: S&U, Edison Investment Research

The following exhibits show a number of measures for the motor finance business starting with the trends in Advantage’s customer credit score and flat interest rates. Historically, the credit score was at a high level following the financial crisis as mainstream lenders drew back from the market driving borrowers with higher credit ratings to alternative providers such as Advantage. More recently the score has run at a lower level as these borrowers settled and an experimental move towards higher risk categories pulled the average down. Credit criteria have been tightened and on various measures (including first payment performance) this is starting to gain traction. H120 saw a small increase in the average score while the flat interest rate was only down slightly on FY19. Turning to Exhibit 3, the cost of sales per loan has shown a consistent rise in recent periods reflecting the growing role of internet brokers in the market and competitive pressures. The latest increase, to £823 per loan, reflects a deliberate decision to increase commissions paid in order to improve the flow and mix of deals from brokers. As shown, the level of transactions in the first half (annualised in the chart) saw a marked recovery and ran at a similar level to FY18.

Exhibit 2: Customer credit score and flat interest rates

Exhibit 3: Cost of sales and transactions

Source: S&U. Note: Internal credit quality score and flat interest rate by year of origination. FY19 and 1H20 scores adjusted for negative impact of use of new HCSTC products.

Source: S&U. Note: Cost of sales represents acquisition costs mainly arising from commission paid to brokers. H120 annualised.

Exhibit 2: Customer credit score and flat interest rates

Source: S&U. Note: Internal credit quality score and flat interest rate by year of origination. FY19 and 1H20 scores adjusted for negative impact of use of new HCSTC products.

Exhibit 3: Cost of sales and transactions

Source: S&U. Note: Cost of sales represents acquisition costs mainly arising from commission paid to brokers. H120 annualised.

Next we look at revenue and impairment as a percentage of average receivables (Exhibit 4). The revenue yield rose in the post-crisis period and has then subsided with changes in risk exposure playing a role as well as the market environment. As noted earlier, impairments as a percentage of receivables were slightly lower year-on-year in H120. Combining the revenue yield and rate of impairment, the risk-adjusted yield (Exhibit 5) increased slightly in the first half (S&U reports a risk adjusted yield of 24.9% at end July compared with 24.6% based on average monthly receivables). The cost of sales increase shown in Exhibit 3 and investment in collection were drivers of a lower pre-tax profit margin at Advantage, also shown below. Despite this Advantage continued to record a return on capital employed of over 15% (as it has in each year from FY12).

Exhibit 4: Revenue and impairment, % of receivables

Exhibit 5: Risk-adjusted yield and profit margin

Source: S&U, Edison Investment Research

Source: S&U, Edison Investment Research

Exhibit 4: Revenue and impairment, % of receivables

Source: S&U, Edison Investment Research

Exhibit 5: Risk-adjusted yield and profit margin

Source: S&U, Edison Investment Research

Other indicators reported for Advantage showed limited change with the original term of loans standing at 51 months compared with 50 for FY19 and the average advance up 3.5% at £6,353.

Advantage reached its 20th anniversary in the period and it was announced with the results that Guy Thompson, current chief executive and managing director at its inception, is to retire in 2020 having overseen a period in which the company achieved profit growth in every year. His successor will be Graham Wheeler, who joins in October and brings with him extensive experience in motor finance in the UK including senior roles at VW Financial Services and Jaguar Land Rover Financial Services. His remit is to develop the business further, retaining the culture and conservative approach that characterise the business.

Turning to Aspen Bridging, the business remains at an early stage but increased its net receivables to £24.7m by end July and having made 137 loans in the 30 months since inception. Of these loans 73 have been repaid. The average loan size has increased to c £0.400m (from £0.375m). Maximum loan to value is 71%, the average interest rate just over 1% per month and the original term between six and 14 months. As noted above, reduced liquidity in the UK property market (for example, residential property transactions in the period were down nearly 5% y-o-y) has affected the ability of some borrowers to meet their target exit dates and this has contributed to one crystallised loss and late repayments on nine loans. Higher interest rates may be applied where repayments are delayed so, providing an exit is simply delayed and repayment is made in full, this can enhance the returns earned.

Background and outlook

As highlighted in previous notes, S&U sees the main potential sensitivity for its Advantage business as being the financial well-being of its borrowers rather than used car prices, given the relatively low value of vehicles being financed and their typical use for transport to work. Consumer confidence is running at a lower level than pre-referendum levels but could be seen as resilient so far given the uncertain background. Similarly unemployment remains low and redundancies have been muted, although these indicators will tend to lag any significant economic downturn were this to occur.

Exhibit 6: GFK UK consumer confidence indicator

Exhibit 7: UK redundancies and unemployment

Source: Bloomberg (last value August 2019)

Source: Bloomberg (last value July 2019)

Exhibit 6: GFK UK consumer confidence indicator

Source: Bloomberg (last value August 2019)

Exhibit 7: UK redundancies and unemployment

Source: Bloomberg (last value July 2019)

Exhibits 8 and 9 show trends in the UK new and used car markets. Used car market transaction volumes have been less volatile and recent quarters have seen smaller reductions in used car activity. The value of car finance through dealerships shows a similar relationship and used car financing has continued to see growth in value over the period shown (to Q219). The latest monthly reading for the value of used car financing (in July) showed a YoY increase of 8%.

Exhibit 8: UK car market trends (volume)

Exhibit 9: Car finance through dealerships (value)

Source: SMMT

Source: Finance and Leasing Association

Exhibit 8: UK car market trends (volume)

Source: SMMT

Exhibit 9: Car finance through dealerships (value)

Source: Finance and Leasing Association

Prospectively the prevailing macro uncertainties seem likely to persist, but for Advantage the positive trend in transaction numbers and indications that the tightened credit criteria are taking effect are encouraging.

At Aspen the incidence of slower repayments and a lower than expected pace of new loans in the first half may mean it is prudent to assume that the near-term pace of expansion is below previous estimates, but the market opportunity is still seen as attractive with enquiries and deal pipeline running well ahead of the prior year. Product adaption, experience in the market and further establishment of the network of introducer relationships should all be helpful in moving the business to a scale where it would be seen as more material as a diversifying profit and growth contributor (potentially with a loan book of £60–70m and profit of c £5m).

Financials

Our profit and earnings estimates only change marginally, as shown below, with higher estimated revenues for Advantage offset by higher assumed cost of sales, mirroring the changes seen in the first half figures.

Exhibit 10: Changes to estimates

Year-end
January

Revenue (£m)

PBT (£m)

EPS (p)

DPS (p)

Old

New

Change (%)

Old

New

Change (%)

Old

New

Change (%)

Old

New

Change (%)

FY20e

94.7

98.0

3.5%

36.9

36.9

0.1%

247.8

248.7

0.4%

122.5

124.0

1.2%

FY21e

103.8

108.2

4.3%

40.3

40.5

0.5%

270.8

271.7

0.4%

124.6

128.0

2.7%

Source: Edison Investment Research

Our assumptions for Advantage include motor finance receivables growth of 11% and 8% for FY20 and FY21, respectively, and a reduced percentage level of impairments at c 8.5% of receivables. At Aspen bridging receivables are assumed to reach £30m in the current year followed by £40m (£45m previously). Further details from our estimates are shown in the financial summary (Exhibit 14).

S&U’s half-yearly cash flow analysis is shown in Exhibit 11. The main features to highlight here are the swing from a net inflow to a net outflow at Advantage between the H219 and H120 as new transactions increased, while at Aspen the outflow increased with higher advances and lower collections sequentially. Net debt at end H120 stood at £125.2m (excluding lease liabilities) and committed funding facilities remain at £160m, providing headroom for growth. On our estimates, net debt could rise to c £148m by end FY21 with net debt/equity at 75%.

Exhibit 11: Cash flow analysis

£m

H119

H219

H120

Motor finance

Advances

(72.8)

(56.4)

(76.6)

Monthly collections

67.7

70.4

72.1

Settlements/reloans

14.4

13.5

15.6

Debt recovery

7.3

8.2

8.6

Overheads/interest

(15.8)

(14.6)

(17.2)

Corporation tax

(2.8)

(2.7)

(3.1)

Dividend

(7.5)

(3.0)

(9.0)

Motor finance inflow/(outflow)

(9.5)

15.4

(9.6)

Property bridging

Gross advances

(10.1)

(13.0)

(16.6)

Retention collections

1.1

1.4

1.8

Collections

4.5

9.5

5.7

Debt recovery

0.1

1.7

4.4

Overheads/interest

(0.5)

(1.2)

(1.3)

Property bridging inflow/(outflow)

(4.9)

(1.6)

(6.0)

Other inflow/(outflow)

(2.0)

(0.4)

(1.6)

Group inflow/(outflow)

(16.4)

13.4

(17.2)

Opening net debt

105.0

121.4

108.0

Closing net debt

121.4

108.0

125.2

Source: S&U. Note: Net debt excludes lease liabilities.

Valuation

We have updated our peer comparison table including companies with exposure to motor finance and non-standard lending. This shows S&U trading on similar earnings multiples to the average and on an above average yield. The price to book multiple is above the average, but the return on equity is also higher than average.

Exhibit 12: Peer comparison

Price
(p)

Market cap
(£m)

P/E 2019
(x)

P/E 2020
(x)

Yield
(%)

ROE
(%)

P/BV
(x)

S&U

2,120

259

8.6

7.9

5.6

17.6

1.5

Close Brothers

1,354

2,073

10.1

9.9

4.9

14.9

1.5

PCF Group

27

68

8.9

7.0

1.1

10.8

1.3

Provident Financial

402

1,030

8.5

7.1

2.5

16.1

1.5

Secure Trust Bank

1,300

243

7.4

6.2

6.4

12.7

1.0

Peer average

8.7

7.5

3.7

13.6

1.3

Source: Refinitiv, Edison Investment Research. Note: P/Es adjusted to calendar years. Priced 26 September 2019.

Using an ROE/COE model (with cost of equity assumed at 10% and growth of 4%) the current share price implies a market assumption of a return on equity of just above 13%, which appears cautious when compared with our expectation of over 17% for this year and next and 17.6% recorded in FY19.

Exhibit 13 shows the recent share price performance of the same companies. The weakness of the whole group on a one-year view and from 12-month highs can be attributed to concerns over possible risks in the economic background for domestic lenders in the UK. Directionally, S&U has mirrored its peers though the year-to-date and from its 12-month high it has outperformed, which can be justified by the resilience demonstrated by the main Advantage business through previous cycles.

Exhibit 13: Share price performance comparison

% change

1 month

3 months

1 year

YTD

From 12m high

S&U

3.4

-10.9

-18.3

-0.5

-20.3

Close Brothers

5.4

-4.4

-15.4

-6.0

-17.3

PCF Group

8.0

-11.5

-32.3

-25.2

-33.7

Provident Financial

5.5

-1.0

-35.9

-30.1

-39.6

Secure Trust Bank

-2.3

-10.3

-24.7

9.2

-26.1

Average

4.1

-6.8

-27.1

-13.0

-29.2

Source: Refinitiv. Note: Priced 26 September 2019.

Exhibit 14: Financial summary

£000s

2016

2017

2018

2019

2020e

2021e

Year end 31 January

PROFIT & LOSS

Revenue

 

 

45,182

60,521

79,781

89,215

98,002

108,240

Impairments

(7,611)

(12,194)

(19,596)

(23,186)

(23,530)

(25,880)

Other cost of sales

(8,980)

(12,871)

(17,284)

(15,751)

(19,814)

(21,648)

Administration expenses

(7,131)

(8,332)

(9,629)

(10,763)

(12,322)

(13,746)

EBITDA

 

 

21,460

27,124

33,272

39,515

42,336

46,965

Depreciation

 

 

(209)

(253)

(294)

(414)

(475)

(555)

Op. profit (incl. share-based payouts pre-except.)

 

 

21,251

26,871

32,978

39,101

41,862

46,410

Exceptionals

0

0

0

0

0

0

Non recurring items

0

0

0

0

0

0

Investment revenues / finance expense

(1,782)

(1,668)

(2,818)

(4,541)

(4,962)

(5,911)

Profit before tax (FRS 3)

 

 

19,469

25,203

30,160

34,560

36,900

40,499

Profit before tax (norm)

 

 

19,469

25,203

30,160

34,560

36,900

40,499

Tax

(3,583)

(4,861)

(5,746)

(6,571)

(6,876)

(7,695)

Discontinued business after tax

53,299

Profit after tax (FRS 3)

 

 

69,185

20,342

24,414

27,989

30,024

32,804

Profit after tax (norm)

 

 

15,886

20,342

24,414

27,989

30,024

32,804

Average Number of Shares Outstanding (m)

12.0

12.0

12.1

12.1

12.1

12.1

Diluted EPS (p)

 

 

576.5

169.1

202.4

232.0

248.7

271.7

EPS - normalised (p)

 

 

132.4

169.1

202.4

232.0

248.7

271.7

Dividend per share (p)

201.0

91.0

105.0

118.0

124.0

128.0

EBITDA margin (%)

47.5%

44.8%

41.7%

44.3%

43.2%

43.4%

Operating margin (before GW and except.) (%)

47.0%

44.4%

41.3%

43.8%

42.7%

42.9%

Return on equity

15.2%

15.2%

16.7%

17.6%

17.4%

17.3%

BALANCE SHEET

Non-current assets

 

 

103,653

138,004

181,015

185,383

215,413

238,124

Current assets

 

 

61,903

57,763

84,178

95,430

106,188

117,552

Total assets

 

 

165,556

195,767

265,193

280,813

321,600

355,675

Current liabilities

 

 

(6,850)

(17,850)

(7,927)

(6,722)

(7,815)

(8,144)

Non current liabilities inc pref

(30,450)

(38,450)

(104,450)

(108,724)

(132,801)

(148,701)

Net assets

 

 

128,256

139,467

152,816

165,367

180,984

198,830

NAV per share (p)

1,084

1,177

1,276

1,375

1,505

1,654

CASH FLOW

Operating cash flow

 

 

(16,017)

(27,431)

(43,418)

10,530

(9,113)

230

Net cash from investing activities

80,716

(308)

(1,040)

(785)

(625)

(860)

Dividends paid

(23,090)

(9,548)

(11,377)

(13,080)

(14,453)

(15,088)

Other financing (excluding change in borrowing)

55

21

12

14

(16)

0

Net cash flow

 

 

41,664

(37,266)

(55,823)

(3,321)

(24,206)

(15,718)

Opening net (debt)/cash

 

 

(53,565)

(11,901)

(49,167)

(104,990)

(108,311)

(132,494)

Closing net (debt)/cash

 

 

(11,901)

(49,167)

(104,990)

(108,311)

(132,494)

(148,213)

Source: S&U, Edison Investment Research. Note: FY16 dividend per share includes exceptional payment of 125p.


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Copyright: Copyright 2019 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2019. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

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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

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

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2019 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2019. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Australia

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

New Zealand

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

United Kingdom

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

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

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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