Augean — Update 8 August 2016

Augean (LN: AUG)

Last close As at 12/06/2024

248.50

0.00 (0.00%)

Market capitalisation

261m

More on this equity

Research: Industrials

Augean — Update 8 August 2016

Augean

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Written by

Industrials

Augean

Management ensures capital not wasted

Acquisition and IMS update

Industrial support services

8 August 2016

Price

45.75p

Market cap

£47m

Net debt (£m) at 31 December 2015

4.27

Shares in issue

102.2m

Free float

78.11%

Code

AUG

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(3.2)

(3.2)

(20.4)

Rel (local)

(7.8)

(11.8)

(20.6)

52-week high/low

61.50p

40.00p

Business description

Augean manages hazardous waste through a divisional structure of five businesses: Radioactive Waste Services (3% of group revenues), Energy & Construction (37%), Industry & Infrastructure (21%), Augean Integrated Services – AIS (11%) and Augean North Sea Services – ANSS (27%).

Next event

Interim results

20 September 2016

Analysts

Jamie Aitkenhead

+44 (0)20 3077 5700

Roger Johnston

+44 (0)20 3077 5722

Augean is a research client of Edison Investment Research Limited

Augean’s high margins and earnings growth offer attractive returns for equity holders in an uncertain macroeconomic environment. Bolstered by the accretive Colt acquisition and benefiting from new contract wins, we increase our FY17 group EBITDA forecast for Augean by 16%. Given its specialist service offering, Augean is highly profitable and typically carries a low level of debt, so continually has to weigh capital allocation versus shareholder returns. We were therefore pleased that management paid a very sensible EV/EBITDA multiple of 6.6x for Colt, a Hull-based specialist waste services provider.

Year
end

Revenue (£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

12/14

55.2

5.4

4.13

0.50

11.1

1.1

12/15

61.0

6.0

4.65

0.65

9.8

1.4

12/16e

61.7

6.8

5.27

0.80

8.7

1.7

12/17e

67.8

8.8

6.76

1.00

6.8

2.1

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

Insulation from macroeconomic headwinds

Since we last published on Augean in April, economic uncertainty in the UK has risen with the Brexit vote while difficult conditions in the oil and gas industry have continued. We therefore revisited our Augean investment case and updated our forecasts for the Colt acquisition, the IMS on 21 July and new contract wins. We found that due to its resilient margins underpinned by high regulatory barriers to entry, its strong management team and recent earnings accretion from acquisitions, Augean offers a compelling and resilient returns profile for investors.

Increased earnings forecasts

We have updated our forecasts to reflect the Colt acquisition plus the addition of new contracts in the Energy and Construction business. We have also taken into account other smaller items, such as updates from the recent IMS, which do not move our forecasts significantly. The net effect of all of our changes is increased EBITDA and EPS across our earnings horizon. Our FY17 EBITDA forecast has moved from £14.2m to £16.5m. Meanwhile, positive underlying cash flow underpins a sound balance sheet.

Valuation: Nudged up for acquisition

We have increased our fair value range from 49-77p to 60-90p. We use a mixture of DCF, ROCE over WACC and a peer-based comparison to arrive at our fair value range. Trading on respective FY17e EV/EBITDA and P/E multiples of 3.4x and 6.8x, we believe Augean is materially undervalued based on its high degree of profitability and sector-beating returns profile.

2016: Solid growth in uncertain end-markets

Augean’s 21 July trading update stated the business was trading ‘in line’ with expectations. On 19 May Augean announced it had acquired Colt Holdings, a Hull-based specialist industrial cleaning provider. We look briefly at each of Augean’s five operating segments in this section, with a particular focus on the I&I unit, which will integrate Colt. We have updated our forecasts where necessary. Outside the updates made for the acquisition, the contract win and the legal settlement, we have made minimal changes to our assumptions for the underlying business as we do not believe Augean is significantly exposed to macroeconomic factors.

Energy and Construction (E&C)

Augean sounded positive on this unit, citing growth “across a broad range of waste streams” and highlighted in particular a meaningful increase in air pollution control residues (APCR). We have significantly increased our APCR revenue forecast (FY16e +27% and FY17e +24%) to reflect the new contract wins announced on 20 April, in addition to the high level of underlying gate fee growth in that business. While we still forecast a 1.8% year-on-year revenue decline in FY16 due to declines in hazardous landfill, our new FY17 divisional EBITDA forecast is 8.6% above our previous estimate.

Radioactive Waste Services

In the trading update, management guided to a continuation in the “sharp reduction in volumes from UK nuclear decommissioning”. We maintain our forecast of a 10% decline in revenues within Radioactive Waste Services to £1.7m.

Industry & Infrastructure (I&I), including Colt acquisition impact

According to the trading statement, I&I traded “ahead of management expectations” during the first six months of the year. The announcement mentioned enhanced profitability at its Avonmouth site and stated that the integration of the Colt acquisition is underway. As outlined above, we have worked cash flow from Colt through the I&I unit in our updated forecasts. In FY17e – the first full-year contribution from Colt – our segmental EBITDA forecast for the I&I business is materially increased from £1.18m to £2.62m post-acquisition. On a group basis, this converts to a 10% increase in FY17e EBITDA, previously £14.21m. Our updated I&I FY16 and FY17 EBITDA forecasts of £1.31m and £2.62m represent respective increases of 83% and 123%.

Exhibit 1: Industry & Infrastructure divisional forecast changes (£000s)

Net revenues

EBITDA

EBIT

Old

New

Old

New

Old

New

FY15

11,728

11,728

396

396

(695)

(695)

FY16e

11,728

14,660

717

1,314

(410)

(13)

FY17e

11,728

17,738

1,175

2,622

0

1,035

Source: Edison Investment Research, Augean accounts

We do not include further cash flows from Colt meeting its sales targets (see page 5 for more discussion), nor do we include the cash outflow of £4.75m as these events are not strictly organic in nature. However, to give an idea of the potential impact of the triggering of the earn-out, Exhibit 2 shows the potential impact on Augean’s group EBITDA in a range of scenarios depending on the implied ‘EBITDA multiple’ of the earn-out payment. There are two parts to the earn-out, and both have different expiry dates. For ease however, we assume a full year EBITDA contribution for the full £4.75m and its impact on our FY17e and FY18e base EBITDA assumptions. For example, for FY18e the earn-out could add between 4.8% (at 6.0x EBITDA) and 14.4% (at 2.0x EBITDA) to our base case EBITDA forecasts.

Exhibit 2: Earn-out sensitivity table

EBITDA multiple assumed

2.0x

3.0x

4.0x

5.0x

6.0x

Additional EBITDA

FY17e

2.375

1.583

1.188

0.950

0.792

% incremental EBITDA

FY17e

14.4%

9.6%

7.2%

5.7%

4.8%

Additional EBITDA

FY18e

2.375

1.583

1.188

0.950

0.792

% incremental EBITDA

FY18e

13.6%

9.1%

6.8%

5.4%

4.5%

Source: Edison Investment Research, Augean

Augean Integrated Services

At the trading update, Augean management blamed H116 weakness on “Below-plan availability at East Kent,” although it remains confident that an operational improvement plan, together with new contract wins, will contribute to a recovery in the second half. We do not make any changes in this division to our previous estimates.

Augean North Sea Services (ANSS)

The decline in the oil price has clearly been a major driver behind the weaker half-on-half performance in Augean North Sea Services (ANSS). We maintain our 19% year-on-year revenue decline in our FY16 forecast, but note that management has made excellent headway in offsetting the impact of declining oil and gas spend. In the trading update, Augean highlighted “A number of significant contract wins in the first half”, which it argued was “In line with the ANSS strategy of reducing its dependency on exploration drilling.”

Colt: Accretive acquisition, but much more besides

On 19 May Augean announced it had acquired Colt Holdings, a Hull-based specialist industrial cleaning provider. The £9.2m paid by Augean for Colt implied a trailing (FY15) EV/EBITDA multiple of 6.6x. We believe Colt offers significant optionality via two means: the earn-out offered to management; and the potential for revenue synergies from Colt’s existing customer base.

Colt’s management is heavily incentivised to hit targets for securing new contracts over the coming years. If met, these targets would trigger a further total payment from Augean of £4.75m. It is our belief that these payments would imply a lower EV/EBITDA than Augean paid for Colt in the first place. In other words, if the earn-out targets are met, Augean will unlock even more shareholder value than in the first stage of the transaction; it will receive more EBITDA in return for each pound of initial outlay.

Of potentially more value to Augean shareholders, especially in the long term, is the number and quality of client relationships Colt brings to Augean. There is very little overlap between Augean’s and Colt’s existing customer base and each of the companies has a different geographical focus. The potential to cross-sell Augean’s existing client offering to Colt’s customers is a significant opportunity for management to drive enhanced shareholder returns. We do not include any upside to account for this for now as it is very difficult to quantify. However, we would expect management to begin to offer some insight into this potential at the interim results on 20 September.

Colt is a particularly attractive addition to Augean’s business portfolio as it not only brings a complementary skill set – namely specialist on-site cleaning services – but it also has a quality client franchise with little overlap with Augean’s existing customer base. As we explain below, while the Colt acquisition immediately enhances our earnings projections and fair value, the real benefit is the future revenue synergies for Augean from Colt’s complementary customer relationships.

Financials and earnings update

The £1.45m additional FY17e EBITDA provided by Colt, together with the incremental £0.89m FY17e EBITDA from new contract wins in E&C and the other net changes, translate into a 16% increase in our FY17 EBITDA forecast to £16.5m, still well below Bloomberg consensus. The £9.2m cost for the Colt acquisition translates into a higher FY17e net debt figure. That said, our net interest charge estimates for FY16 and FY17 increase by 55% and 87%, respectively, as a function of the increased debt burden. We should stress, however, that Augean remains very conservatively geared and that given the enhanced cash flow from Colt and new contract wins, we forecast net debt/EBITDA to drop from 0.94x in FY16e to 0.25x in FY18e.

The forecast changes include:

A fully consolidated contribution from Colt, starting halfway through FY16 and contributing fully in FY17, plus the associated increase in net debt. Our new EBIT forecast for FY17 includes a £1.04m contribution from the Colt acquisition and £8.6m of debt associated with the transaction.

A revenue increase of £1.1m in FY16e and £2.4m in FY17e to represent the expected contribution from the new air pollution control residues (APCR) contracts signed in the E&C business. These equate to 13,000 incremental tonnes in FY16e and 12,000 incremental tonnes in FY17e (FY15 totalled 75,000 tonnes treated). We also increase the operating margin to reflect the higher margins available in APCR contracts.

The £1.1m legal settlement announced by the company on 13 July.

Other smaller changes and minor post-trading update changes.

Our forecast changes do not include the following in relation to the Colt acquisition:

The ‘earn-out’ agreed between Augean and Colt management for Augean to pay a further £4.75m based on Colt achieving new contract wins.

Cost and revenue synergies from the acquisition. Colt has an attractive customer-base, which could deliver significant new contracts for Augean’s existing business units.

Even with some headwinds on the operational side – for instance in ANSS – Augean has remained highly profitable in comparison to international peers as a function of its specialist waste management capabilities. Its high level of cash flow generation means it will continue to have the ‘high quality problem’ of a surplus of capital and will have to decide whether to deploy capital either in enhanced shareholder returns, such as increased dividends or a buy-back, or look for other bolt-on acquisitions. We remain confident in Augean’s capital discipline and ability to make the right decision for long-term shareholder value.

Exhibit 3: Forecast changes

EPS (p)

PBT (£m)

EBITDA (£m)

Old

New

% chg.

Old

New

% chg.

Old

New

% chg.

2015

4.65

4.65

0.0

6.03

6.03

0.0

12.06

12.06

0.0

2016e

5.08

5.27

0.9

6.58

6.83

0.9

12.89

13.71

4.6

2017e

5.73

6.76

6.6

7.41

8.75

6.7

14.21

16.54

10.2

Source: Edison Investment Research, Augean accounts

Valuation

We have increased our fair value (FV) range for Augean from 49-77p to 60-90p to reflect the improved earnings profile. As well as updating our earnings forecasts, we have lowered the terminal growth rate to 1% from 2%. Our DCF-based fair value of 88p/share is derived using a post-tax WACC of 8.5% (2% risk-free rate, 0.8x beta, 5.5% debt risk premium, 8.5% equity risk premium, 10% debt weighting) and forms the basis of one part of our valuation methodology.

Exhibit 4: Augean DCF

2013

2014

2015

2016e

2017e

2018e

Terminal value

EBIT

6,235

6,146

6,820

7,807

9,955

10,398

Less cash taxes

-1,309

-1,291

-1,432

-1,639

-2,091

-2,184

Tax rate (%)

21.0

21.0

21.0

21.0

21.0

21.0

NOPLAT

4,926

4,855

5,388

6,168

7,865

8,215

Add back depreciation

2,671

3,887

5,236

5,898

6,589

7,086

Less capex

-6,286

-5,240

-7,571

-7,654

-8,250

-8,376

Free cash flow

1,311

3,502

3,053

4,411

6,203

6,925

8,284

FCF growth (%)

167.2

-12.8

44.5

40.6

11.6

1.0

WACC (%)

8.5

8.5

8.5

8.5

Year

1

2

3

Discount factor (x)

1.00

0.85

0.78

0.78

Discount cash flow

4,411

5,270

5,422

86,511

NPV

101,614

97,203

91,933

86,511

EV/EBITDA (x)

7.4

5.9

5.3

Source: Edison Investment Research, Augean

We explicitly model cash flow for three years and then take a terminal value. Below we also include our conversion of group NPV to equity value per share.

Exhibit 5: Augean DCF

DCF valuation

£m

p/share

Comments

EV

101,614

99

NPV of FCF cash flow to 2018, with TV growth of 1%

Net debt

-4,265

-4

Estimated as at December 2015

Environmental provisions

-6,899

-7

As at December 2015

Equity value

90,450

88

Number of shares ('000)

102,249

Equity value (p/share)

88

Current share price

47

Upside/(downside) (%)

87

Source: Edison Investment Research, Augean

We also use an Economic Value Added (EVA) model as part of our valuation methodology. Our FY16e EVA implied FV is 60p/share. This is based on an FY16e ROCE of 9.3% and a WACC over the same period of 8.9% (the EVA WACC is different from our DCF WACC as it calculates the cost of debt directly from the income statement, so is slightly higher). We note that, even when taking into account the increased capital employed during the Colt acquisition, our FV for Augean continues to rise in the coming years, based on our profit assumptions. The fact that the ROCE/WACC multiple continues to rise in FY17e and FY18e, with the addition of Colt, confirms our views on management’s capital discipline and this is before revenue and cost synergies. Finally, we note that our EVA analysis does not produce such a high FV as our DCF. This shows the usefulness of the EVA analysis, as it takes forward-looking capital employed into account explicitly. It is our EVA analysis that provides the lower end of our valuation range. However, even the lower end of our valuation range still offers 33% upside.

Exhibit 6: Peer comparison

 

Country

Currency

Price

P/E (x)

EV/EBITDA (x)

Dividend yield (%)

FY1

FY2

FY1

FY2

FY1

FY2

Shanks

UK

p

107.3

21.0

17.9

9.1

8.6

3.2

3.2

Veolia Environnement

France

19.8

18.9

15.7

7.5

7.1

4.1

4.4

Suez Environnement

France

14.1

17.9

15.3

7.2

6.9

3.5

3.6

Clean Harbors

US

$

48.6

70.7

34.4

9.1

8.0

N/A

N/A

Toxfree

Australia

A$

2.6

14.3

12.6

6.0

5.3

3.5

4.0

Average

28.6

19.2

7.8

7.2

3.6

3.8

Augean

UK

p

45.0

8.8

7.4

4.4

3.6

1.8

2.2

Source: Edison Investment Research, Bloomberg. Note: Prices as at 3 August 2016. Augean forward multiples are based on Edison forecasts.

In comparison to its listed peers, Augean trades at 47% and 69% discounts to one-year forward EV/EBITDA and P/E multiples, respectively due to the following factors:

Low market capitalisation: Augean’s market cap of £45m means that very few funds can invest in the stock. Furthermore, Augean has a concentrated ownership structure: the top five owners together hold 65.7% of the outstanding equity. These factors combined mean Augean struggles for liquidity. In 2016, the average daily traded volume of shares has been 148,000, or around £70,000 in value.

Exposure to oil and gas industry: Operationally, the group has suffered by having exposure to the oil and gas industry. ANSS accounted for 19.6% of group operating profit in FY15. This is also likely to be a factor in Augean’s depressed valuation.

While we acknowledge that there are very real limitations on the stock, both technical (eg the low free float), and fundamental, we believe that if management can continue delivering and exceeding market expectations, Augean’s profits should drive a substantially higher equity value.

Even before management delivers on its integration plan for Colt, we see significant upside on a P/E basis – the third component of our valuation range. If we exclude Clean Harbors from Augean’s peer comparison table (as an outlier), we see a global +2y P/E of 15x. If we placed Augean on 15x its FY16/17e average earnings, we would reach an FV of 90p/share. This, therefore, constitutes the high end of our FV range of 60p-90p.

Exhibit 7: Financial summary

£000s

2013

2014

2015

2016e

2017e

2018e

Year end 31 December

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

47,123

55,204

61,005

61,652

67,801

70,638

Cost of Sales

(31,368)

(38,852)

(42,592)

(42,226)

(45,536)

(47,432)

Gross Profit

15,755

16,352

18,413

19,426

22,265

23,206

EBITDA

 

 

8,906

10,033

12,056

13,705

16,544

17,485

Operating Profit (before amort. and except.)

6,235

6,146

6,820

7,807

9,955

10,398

Intangible Amortisation

0

0

0

0

0

0

Exceptionals

(6,250)

823

(3,508)

(1,000)

(100)

0

Operating Profit

(15)

6,969

3,312

6,807

9,855

10,398

Associated company

(13)

(5)

0

0

0

0

Exceptionals

0

0

0

0

0

0

Net Interest

(674)

(759)

(788)

(982)

(1,204)

(906)

Profit Before Tax (norm)

 

 

5,548

5,382

6,032

6,825

8,752

9,493

Profit Before Tax (IFRS)

 

 

(702)

6,205

2,524

5,825

8,652

9,493

Tax

(977)

(1,125)

(837)

(1,433)

(1,838)

(1,994)

Profit After Tax (norm)

4,571

4,257

5,195

5,392

6,914

7,499

Profit After Tax (IFRS)

(1,679)

5,080

1,687

4,392

6,814

7,499

Average Number of Shares Outstanding (m)

99.7

100.1

102.1

102.2

102.2

102.2

EPS - normalised (p)

 

 

4.48

4.13

4.65

5.27

6.76

7.33

EPS - normalised and fully diluted (p)

 

4.48

4.01

4.53

5.27

6.76

7.33

EPS - (IFRS) (p)

 

 

(1.79)

4.92

1.60

4.30

6.66

7.33

Dividend per share (p)

0.35

0.50

0.65

0.80

1.00

1.20

Gross Margin (%)

33.4

29.6

30.2

31.5

32.8

32.9

EBITDA Margin (%)

18.9

18.2

19.8

22.2

24.4

24.8

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

13.2

11.1

11.2

12.7

14.7

14.7

BALANCE SHEET

Fixed Assets

 

 

59,997

63,215

62,889

73,845

75,507

76,797

Intangible Assets

19,800

19,898

19,971

19,971

19,971

19,971

Tangible Assets

40,192

43,317

42,918

53,874

55,536

56,826

Investments

5

0

0

0

0

0

Current Assets

 

 

12,863

16,295

18,004

24,283

25,945

26,887

Stocks

296

410

306

309

340

354

Debtors

9,806

12,785

11,829

13,355

14,986

15,914

Cash

418

1,412

3,553

8,303

8,303

8,303

Other

2,343

1,688

2,316

2,316

2,316

2,316

Current Liabilities

 

 

(9,030)

(11,213)

(10,838)

(24,346)

(21,674)

(17,428)

Creditors

(9,030)

(11,213)

(10,838)

(10,953)

(12,045)

(12,549)

Short term borrowings

0

0

0

(13,393)

(9,629)

(4,879)

Long Term Liabilities

 

 

(15,876)

(14,542)

(15,657)

(15,810)

(16,015)

(16,219)

Long term borrowings

(8,909)

(7,124)

(7,818)

(7,818)

(7,818)

(7,818)

Other long term liabilities

(6,967)

(7,418)

(7,839)

(7,992)

(8,197)

(8,401)

Net Assets

 

 

47,954

53,755

54,398

57,972

63,763

70,036

CASH FLOW

Operating Cash Flow

 

 

5,862

9,416

12,348

11,291

15,874

17,048

Net Interest

(629)

(516)

(715)

(982)

(1,204)

(906)

Tax

(316)

(801)

(1,105)

(1,433)

(1,838)

(1,994)

Capex

(6,286)

(5,240)

(7,616)

(7,654)

(8,250)

(8,376)

Acquisitions/disposals

0

(300)

(1,050)

(9,200)

0

0

Financing

(757)

569

96

0

0

0

Dividends

(249)

(349)

(511)

(665)

(818)

(1,022)

Net Cash Flow

(2,375)

2,779

1,447

(8,643)

3,764

4,750

Opening net debt/(cash)

 

 

6,116

8,491

5,712

4,265

12,908

9,144

HP finance leases initiated

0

0

0

0

0

0

Other

0

0

0

0

0

0

Closing net debt/(cash)

 

 

8,491

5,712

4,265

12,908

9,144

4,394

Source: Edison Investment Research, Augean accounts

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

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

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

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

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

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