Epwin Group — Business resilience and appropriate actions

Epwin Group (AIM: EPWN)

Last close As at 02/03/2024

GBP0.77

1.40 (1.84%)

Market capitalisation

GBP110m

More on this equity

Research: Industrials

Epwin Group — Business resilience and appropriate actions

Epwin Group’s FY19 results matched latest guidance and showed business resilience against weaker trading conditions towards the period end. The temporary operational shutdown in place since the end of March is ongoing and cash management continues to be a top priority pending an easing of UK government guidelines and business restarting. Our estimates have been withdrawn as has all management forward guidance.

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Written by

Industrials

Epwin Group

Business resilience and appropriate actions

FY19 results and

latest COVID-19 update

Construction & materials

1 May 2020

Price

82.1p

Market cap

£117m

Core net debt (£m) at end December 2019

16.4

Shares in issue

142.9m

Free float

67%

Code

EPWN

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

39.2

(24.7)

0.1

Rel (local)

32.5

(6.3)

24.8

52-week high/low

113.5p

58.4p

Business description

Epwin Group supplies functional low-maintenance exterior building products (including windows, doors, roofline and rainwater goods) into a number of UK market segments and is a modest exporter. It has a vertically integrated model in windows and doors and a leading market position in roofline products.

Next events

AGM

16 June 2020

Analyst

Toby Thorrington

+44 (0)20 3077 5721

Epwin Group is a research client of Edison Investment Research Limited

Epwin Group’s FY19 results matched latest guidance and showed business resilience against weaker trading conditions towards the period end. The temporary operational shutdown in place since the end of March is ongoing and cash management continues to be a top priority pending an easing of UK government guidelines and business restarting. Our estimates have been withdrawn as has all management forward guidance.

Year end

Revenue (£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

12/18

281.1

16.5

9.8

4.9

8.3

6.0

12/19

282.1

15.0

8.5

1.8

9.7

2.1

Note: *PBT and EPS (fully diluted) are normalised, excluding intangible amortisation and exceptionals, with estimates on an IFRS 16 basis. FY19 dividend represents the H1 payment only; no final dividend is expected.

In line FY19 results

FY19 results were well trailed in a previous trading update (on 25 March) and reported figures were in line with this. In underlying pre IFRS 16 terms, group revenue was flat year-on-year with EBIT showing a 2.1% increase while PBT rose by almost 60% (including property profit, or broadly flat otherwise). Progress with site consolidation and investment – specifically the new Telford facility, which was the subject of a sale and leaseback transaction – released cash and contributed to a c £8m reduction in net debt to £16.4m at the year end.

Guidance and estimates withdrawn

The previous update also commented on a temporary shutdown period across Epwin’s manufacturing, fabrication and distribution facilities as well as steps being taken to manage costs and cash, as widely seen elsewhere also. Although group trading was slightly ahead of management expectations for the first two months of the new financial year, current circumstances will have a more pronounced negative effect on trading that is difficult to quantify. Management is no longer providing forward guidance and our estimates are now withdrawn pending greater clarity on the timing and rate of return to more normal trading conditions.

Managing cash during the temporary shutdown

Core net bank debt approached c £30m at the end of March (inferred from reference to ‘over £45m of headroom’). The increase since the year end is likely to reflect some further capital spending at Telford and a degree of usual early year working capital investment, and is before any receipt of government staff support monies, which are anticipated to be in the order of £3.3m per month. Under an outlined worst-case scenario (ie loss of six full months of revenue, with a phased return of revenue across the remainder of 2020), management notes that lenders have indicated that they would remain supportive in this situation. As Epwin was a strategically improved business as FY20 began, prompt actions together with existing borrowing facilities suggest that Epwin is as well placed as it can be to weather extreme trading disruption. A full six months without trading revenues seems to us unlikely and, with financial headroom, the company should be in a position to formally restart operations when appropriate.

FY19 results overview

Epwin reported headline FY19 financial metrics of revenue, EBIT and net debt in line with its 25 March update. On flat revenues, pre-IFRS 16 operating profit saw a small improvement. PBT benefited from a £10m sale and leaseback property profit but excluding this was effectively flat year-on-year on a like-for-like basis. (At group level, the adoption of IFRS 16 benefited EBIT by £2.1m with a £0.6m adverse impact on PBT.) At the year end, core bank net debt (excluding IFRS 16 lease liabilities) had reduced to £16.4m, or 0.6x pre-IFRS 16 EBITDA.

Exhibit 1: Epwin Group divisional and interim splits

Year end 31 December, £m

H118R

H218

FY18

H119

H219

FY19

Group revenue

140.5

138.7

281.1

140.0

142.1

282.1

Extrusion & Moulding

88.5

88.9

177.4

87.8

89.8

177.6

Fabrication & Distribution

52.0

49.8

103.7

52.2

52.3

104.5

Group EBIT pre IFRS 16

7.5

11.6

18.7

8.3

10.8

19.1

Extrusion & Moulding

7.7

9.8

17.5

8.1

9.4

17.5

Fabrication & Distribution

0.7

2.6

2.9

1.2

2.5

3.7

Group costs

(0.9)

(0.8)

(1.7)

(1.0)

(1.1)

(2.1)

Group EBIT profit post IFRS 16

9.4

11.8

21.2

Extrusion & Moulding

8.6

10.1

18.7

Fabrication & Distribution

1.8

2.8

4.6

Group costs

(1.0)

(1.1)

(2.1)

Group EBIT margins – pre IFRS 16

5.3%

8.4%

6.7%

5.9%

7.6%

6.8%

Extrusion & Moulding

8.7%

11.0%

9.9%

9.2%

10.5%

9.9%

Fabrication & Distribution

1.3%

5.2%

2.8%

2.3%

4.8%

3.5%

Source: Epwin Group. Note: H118R = restated for the exit from a loss-making Cardiff window fabrication operation.

IFRS 16 Leases1: The adoption of this accounting standard from 1 January 2019 had the effect of boosting FY EBIT by £2.1m (£1.1m at the interim stage) and reduced FY PBT by £0.6m (£0.2m in H1). At the end of FY19, Epwin had £71m lease liabilities recorded on the balance sheet, split £9m short term and £62m long term. Just over three-quarters of the corresponding £51.4m right of use assets related to leasehold land and buildings, the remainder to plant, equipment and motor vehicles. During the course of the year, Epwin acquired a second Telford site and, after converting and developing it, undertook a sale and leaseback transaction, which is included in these year-end figures.

  Prior to IFRS 16 all leased asset costs were included in the EBIT calculation; under IFRS 16 only the leased asset’s depreciation charge is factored in at this level with interest cost recorded as a finance charge further down the P&L.

Extrusion & Moulding (E&M): Primarily PVC-based window profile systems, roofline and rainwater goods extrusion activities with wood composite decking products and glass reinforced plastic building products also in the portfolio. Aluminium lines (Stellar, window systems and Adeck, decking) have been developed internally and launched in the last 12 months.

Overall, this division was flat on the prior year in both revenue and EBIT terms (pre IFRS 16). H1 trading conditions were relatively benign (though there was a relatively minor year-on-year revenue headwind in H1 arising from the acquisition of Amicus2 in March 2018) with firmer selling prices aiding input cost recovery and profitability. The trading environment deteriorated in H2 amid UK Brexit and general election uncertainties and although higher revenues were generated year-on-year, markets were competitive and some margin tightening was apparent. Site inefficiencies relating to relocating certain lines may also have contributed to margin leakage.

  Amicus Building Products, a distributor of plastic and low maintenance building products, was previously an E&M external customer. Following the company’s acquisition by Epwin in March 2018, external Amicus sales are reported under F&D. (The value of products supplied by E&M to the company is now netted out on consolidation.) Around £1.5m of pre-acquisition sales were made by E&M to Amicus in 2018.

During the year, PVCu window systems extrusion operations became fully consolidated into the existing Telford facilities. Profile foiling (relocated, capacity and capabilities expanded) and aluminium window profile production (new) were established in an existing building on the new Telford site. On full completion – now expected in H220 – the newbuild warehouse at this site will be the main distribution centre for window systems and related hardware. While like-for-like facility costs may not be too dissimilar to previous arrangements, this model should improve service efficiency and be able to accommodate higher sales volumes.

Epwin has traditionally been the leading supplier of cellular roofline products though sales in this sub-segment have been buffeted by the sale of an important customer to a competing supplier (ie SIG’s disposal of its Building Plastics and Windows businesses to privately owned GAP Plastics in August 2017). The indications are that the associated impact had effectively washed through in 2019 and sales volumes stabilised in generally competitive markets, gaining market share.

For certain other business lines, issues following the 2017 Grenfell Tower fire continued to impinge on trading in two ways, directly through updated fire testing requirements disrupting door demand and sales but also indirectly via a re-channelling of funds by the social housing sector into related priority areas requiring remedial action. To some extent, decking is thought to be affected by this at the margin (ie where used as balcony products in taller multi-occupancy buildings); core Ecodek3 volumes were lower year-on-year and more so in H2 we believe as general market conditions weakened. This effect was partly offset by the introduction of the complementary Dekboard range during 2019, which supplied an increasing proportion of internally produced lines to sister company PVS (acquired February 2019, external revenues reported in the Fabrication & Distribution division). A further range extension product, Adek, has since been launched in 2020, partly to address taller multi-occupancy residential and commercial buildings.

  These decking and ancillary products (such as steps, handrails, balustrading) are made from a variety of different materials, as follows: Ecodek = wood plastic composite (WPC); Dekboard = poly vinyl chloride (PVC); and Adek = aluminium.

No comment was made on other product lines within the portfolio (eg drainage, Stormking entrance canopies) so we assume that their year-on-year impact on revenues and profitability was not material.

Fabrication & Distribution (F&D): Downstream manufacture of finished windows and doors (using profiles from E&M) and multi-channel (including own branches) B2B distribution of these and other group finished products. Supply and installation of low maintenance decking and ancillary products.

Indications are that actions taken in recent years to improve performance are starting to deliver a sustained improvement in divisional profitability. There was a marked step up in EBIT year-on-year in H1, while profit in the seasonally stronger H2 trading period sustained the improved level seen in H218 (on unchanged and higher sales, respectively). Overall, the divisional EBIT margin for the year rose by 70bp to 3.5%.

Having sold the non-core glass sealed unit manufacturing operations at the beginning of 2019, this division now comprises three fabrication facilities,4 c 86 owned specialist plastic building products distribution branches (and a backbone of various warehousing sites to service this network and other independent distributors) and a decking/ancillary product installation business.

  Window fabrication – Telford and Paignton; door fabrication – Upton-on Severn; Decking installation – Great Yarmouth.

Distribution operations are typically groups of regional, locally branded outlets, which together in a broad sense provide national coverage overall. Stock ranges include finished products from the company’s E&M division as well as complementary third-party lines. Where opportunities exist, this division seeks to build out the network with infill acquisitions where they are not in conflict with existing or third-party customer branches. Amicus (acquired in March 2018, 15 branches) provided some annualised benefit in H119. In underlying terms, our E&M observations regarding cellular roofline also feed in here; Epwin appears to be regaining share here in the specified new housebuilding segment serviced directly through its own branch network.

Epwin entered the decking installation subsector through the acquisition of PVS (February 2019), providing a further outlet and a degree of vertical integration with E&M’s decking products. We estimate that this business directly added c £3m external revenue and c £0.3m EBIT during the c 10 months of ownership by Epwin, weighted towards H1. The 2019 results statement made no explicit references to the F&D’s window fabrication operating performance. Given that F&D revenue was flat year-on-year and EBIT improved on a comparable basis together with the above commentary on other elements of the division, we infer that window fabrication revenues were flat to slightly down, while profitability was probably similar or better in FY19 compared to FY18.

Telford development provides FY19 cash flow boost

Epwin ended FY19 with core bank net debt of £16.4m, a reduction of £8.4m y-o-y. This outturn was significantly influenced by net flows relating to the new Telford E&M facility. Excluding this, underlying cash flow was broadly neutral overall and similar to the prior year. For the purposes of comparability in the following analysis we split out cash flows relating to IFRS 16 leases and comment separately, though the overall group net cash flow movement is not affected by this.

Pre-IFRS 16 EBITDA in FY19 was comparable to the prior year at c £27m. Net working capital excluding provisions saw an outflow of £2.4m versus an inflow (of £5.1m) in 2018; around one-third of this year-on-year difference was due to a swing to a small incremental inventory investment position but the larger component was a c £5m absorption into receivables. A large proportion of the latter movement was seen in H1 but a smaller additional outflow in H2 – as opposed to an inflow in prior years – suggests that the trade debtor position was unlikely to have been squeezed at year-end. There were non-underlying cash outflows in both FY19 and FY18 concerning site moves/related staff changes (and also discontinued operations and reorganisation costs in FY18); we believe that some of these were netted off as part of the Telford development (see below) in FY19. Taken altogether, pre-IFRS 16 operating cash flow was c £23m, c £3m lower than in FY18.

Cash flows associated with the site acquisition, development and then sale and leaseback of the new Telford facility brought a net £10.1m inflow into the group for the year.5 (NB remaining fit-out and access work is expected to complete during H220; a further receipt from the new owner will cover the c £5m cost to complete leaving c £2m tax payable as the net cash outflow in FY20.) Other group capex spend approached £9m in the year and included some new equipment for the new Telford site and investment in foiling line items.

  Gross proceeds were £22.8m, 20-year lease. Epwin secured the 20 acre site and a functional building for a good initial price and moved to convert the building for E&M use (housing window systems finishing operations for PVC profile foiling and aluminium window profiles), add a substantial new warehouse building as well as new service access for inbound and outbound materials and products.

Cash outflows relating to bank interest and taxation were in the same ballpark as their P&L equivalents and totalled £4.2m. Excluding the Telford net sale and leaseback proceeds but including all of the above other items, underlying, pre IFRS 16 free cash flow was c £10m in FY19, marginally ahead of the prior year. Discretionary M&A spend and dividend payments were just over £2m (largely for PVS) and c £7m respectively. A small increase in loans explained the residual difference between the net cash and net debt movements.

IFRS 16 effects: the cash flow statement presentation relating to leased assets is changed by the adoption of IFRS 16, but overall cash movement is not affected. (For example, EBIT increased by £2.1m, as seen in Exhibit 1 and a £9.4m depreciation charge attributable to leased assets is now visible.) For the record, cash payments regarding lease liabilities were £12.3m in FY18.

Banking facilities: Epwin has in place a £65m RCF (initially to June 2022, with two annual options, each to extend for a further year) and a £10m overdraft facility (subject to annual renewal). At the year-end therefore, the implied headroom under existing facilities was c £58m.

COVID-19 update, estimates withdrawn

Epwin had previously notified the market (on 25 March) that cost reduction and cash preservation measures are being undertaken including a temporary shutdown of operations and an intention not to declare an FY19 final dividend. These points – together with the withdrawal of forward financial guidance – were all reiterated in the 2019 results release. This statement also provided an update on the group financing position as at the end of March; at this point group headroom under existing banking facilities was said to be over £45m headroom, £10m+ below the FY19 year-end level.

As seen elsewhere, as part of the going concern and audit sign off process for the FY19 financial statements and annual report. Epwin was required to provide additional cash flow modelling under a number of scenarios. Two of these along with high-level banking implications were included within the results announcement, as follows:

Optimistic – loss of all of April revenue, 50% of revenue for May and 25% of revenue for June. Management commented that ‘Under this scenario the Group would remain within both its facility headroom and within its banking covenants.’

Worst caseloss of six full months of revenue as operations remain closed, with a phased return of revenue across the remaining months of 2020. Management commented: ‘The Group still remains within its facility headroom, assuming cost saving measures are successfully implemented and CJRS grants are utilised. At this extreme, leverage and interest cover covenants would be breached, however, the group’s bankers have indicated that they remain committed to supporting the group through this situation and would at this time be minded to waive such breaches.’

While the UK’s government’s full lockdown apart from essential services is still in place until the next scheduled review date of 7 May, the business community is already openly airing plans to restart operations. Commercial pressures will build and where government guidelines can be adhered to, a gradual and selective resumption of operations is currently the most likely scenario in our view. In this light, Epwin’s worst case scenario would not be realised, meaning that existing bank facility headroom would be sufficient. That said, having initially left our estimates beyond FY19 in place – heavily caveated that they were likely to be reduced – in the absence of greater business environment clarity we are now formally withdrawing forecasts.

Business model considerations: Epwin’s FY19 reported gross margin was 31.5%. Within cost of goods sold, between 85% and 90% is accounted for by substantially variable costs including materials/consumables, production staff and energy. With a significant proportion of staff (both direct and indirect) currently under furlough arrangements, Epwin anticipates a payroll cost support cash run rate of c £3.3m per month. (As a benchmark aggregate group payroll costs in FY18 were £69.6m.) While more discretionary items such as sales and marketing spend and timing of new product launch costs could be stepped down for a period, other items (eg property-related, insurances) are more fixed in nature.

Following a re-shaping of Epwin’s business portfolio in recent years – including acquisitions, disposals and site consolidation activity – the company is better positioned to withstand the current period of uncertainty. Medium- and longer-term business drivers of UK residential repair, maintain and improvement (RMI) spending (including ageing housing stock, housing transactions and population growth) are intact as is the demand for faster rates of new house building and management remains positive on the business outlook in this context.

Exhibit 2: Financial summary

£m

2013

2014

2015

2016

2017

2017

2018

2019

Year end 31 December

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

 

 

 

 

 

 

 

Restated

 

 

Revenue

 

 

255.3

259.5

256.0

293.2

298.3

292.8

281.1

282.1

Cost of Sales

 

 

(185.8)

(186.7)

(178.6)

(200.6)

(207.5)

(201.5)

(196.4)

(193.3)

Gross Profit

 

 

69.5

72.8

77.4

92.6

90.8

91.3

84.8

88.8

EBITDA (pre IFRS 16)

 

 

21.4

24.5

25.6

33.3

30.3

32.1

26.7

26.4

Operating Profit (pre IFRS 16 norm)

 

15.6

19.5

20.1

25.6

22.3

24.2

18.7

19.1

Operating Profit (IFRS 16 norm)

 

 

 

 

 

 

 

 

 

21.2

Intangible Amortisation

 

 

(1.7)

(1.7)

(0.0)

(1.1)

(1.1)

(1.1)

(1.2)

(0.3)

Exceptionals

 

 

(5.1)

2.3

(0.6)

(0.2)

(7.4)

(7.4)

(2.0)

(2.3)

Other

 

 

0.0

(0.8)

(0.4)

(0.3)

(0.6)

(0.6)

(0.7)

(1.4)

Operating Profit

 

 

8.8

19.3

19.1

24.0

13.2

15.1

14.8

17.2

Net Interest

 

 

(1.0)

(0.7)

(0.5)

(1.0)

(1.2)

(1.2)

(1.5)

(4.8)

Profit Before Tax (IFRS 16 norm)

 

14.6

18.0

19.2

24.3

20.5

22.4

16.5

15.0

Profit Before Tax (statutory)

 

 

7.9

18.6

18.6

23.0

12.0

13.9

13.3

12.4

Tax

 

 

(1.3)

(3.5)

(3.3)

(3.4)

(1.9)

(2.3)

(2.5)

(2.9)

Profit After Tax (norm)

 

 

12.4

14.4

15.9

20.9

17.6

19.1

14.0

12.2

Profit After Tax (statutory)

 

 

5.1

15.1

15.3

19.6

10.1

11.6

10.8

9.6

 

 

 

 

 

 

 

 

 

 

 

Average Number of Shares Outstanding (m)

 

122.3

128.0

135.2

141.5

142.6

142.6

142.9

142.9

EPS - normalised (p) – IFRS 16 from 2019 

10.1

11.2

11.8

14.8

12.4

13.4

9.8

8.5

EPS - normalised (p) FD – IFRS 16 from 2019

 

 

11.2

11.7

14.7

12.4

13.4

9.8

8.5

EPS - statutory (p)

 

 

4.2

11.8

11.3

13.8

7.1

7.1

4.1

6.7

Dividend per share (p)

 

 

0.0

4.2

6.4

6.6

6.7

6.7

4.9

1.8

 

 

 

 

 

 

 

 

 

 

 

Gross Margin (%)

 

 

27.2

28.1

30.2

31.6

30.4

31.2

30.2

31.5

EBITDA pre IFRS 16 Margin (%)

 

 

8.4

9.4

10.0

11.3

10.2

11.0

9.5

9.4

Operating Margin pre IFRS 16 norm (%)

 

6.1

7.5

7.9

8.7

7.5

8.3

6.7

6.8

 

 

 

 

 

 

 

 

 

 

 

BALANCE SHEET

 

 

 

 

 

 

 

 

 

 

Fixed Assets

 

 

54.7

53.8

93.5

108.5

106.2

 

111.7

125.6

Intangible Assets

 

 

26.4

24.7

59.7

70.2

69.6

 

73.7

75.7

Tangible Assets

 

 

25.1

26.2

33.1

37.9

36.0

 

37.3

46.1

Other

 

 

3.2

2.9

0.7

0.4

0.6

 

0.7

3.8

Current Assets

 

 

62.1

62.3

87.2

82.6

82.2

 

75.7

91.5

Stocks

 

 

21.7

22.4

23.6

28.2

29.6

 

29.2

30.3

Debtors

 

 

40.1

37.6

41.5

41.4

45.3

 

40.4

44.0

Cash

 

 

0.3

2.3

22.1

13.0

7.3

 

6.1

17.2

Current Liabilities

 

 

(54.5)

(49.0)

(68.8)

(79.2)

(79.2)

 

(69.3)

(77.3)

Creditors

 

 

(51.5)

(48.6)

(53.2)

(62.9)

(58.2)

 

(63.7)

(76.0)

Short term borrowings

 

 

(3.0)

(0.4)

(15.6)

(16.3)

(21.0)

 

(5.6)

(1.3)

Long Term Liabilities

 

 

(25.7)

(4.3)

(31.8)

(21.0)

(15.5)

 

(28.1)

(36.7)

Long term borrowings

 

 

(16.0)

(0.8)

(20.9)

(17.3)

(11.4)

 

(25.3)

(32.3)

Other long term liabilities

 

 

(9.7)

(3.5)

(10.9)

(3.7)

(4.1)

 

(2.8)

(4.4)

Net Assets

 

 

36.6

62.8

80.1

90.9

93.7

 

90.0

103.1

 

 

 

 

 

 

 

 

 

 

 

CASH FLOW

 

 

 

 

 

 

 

 

 

 

Operating Cash Flow

 

 

12.1

19.8

23.8

30.8

19.9

18.1

25.8

34.1

Net Interest

 

 

(0.9)

(0.7)

(0.5)

(1.0)

(1.0)

(1.0)

(1.3)

(1.6)

Tax

 

 

(0.9)

(1.7)

(2.3)

(3.8)

(2.7)

(2.7)

(2.6)

(2.6)

Capex

 

 

(4.9)

(5.6)

(9.0)

(12.7)

(7.1)

(5.3)

(12.5)

1.5

Acquisitions/disposals

 

 

(0.2)

0.0

(20.9)

(10.2)

(3.9)

(3.9)

0.0

(2.2)

Financing

 

 

0.0

10.0

0.0

0.0

0.0

0.0

(0.0)

(12.3)

Dividends

 

 

0.0

(1.9)

(6.7)

(9.1)

(9.5)

(9.5)

(8.8)

(7.1)

Net Cash Flow

 

 

5.2

19.9

(15.6)

(6.1)

(4.3)

(4.3)

0.6

9.8

Opening net debt/(cash)

 

 

23.2

18.7

(1.1)

14.4

20.6

20.6

25.1

24.8

Finance leases initiated

 

 

(0.5)

(0.3)

0.4

1.9

(1.4)

(1.4)

(1.1)

0.0

Other

 

 

(0.1)

0.2

(0.3)

(2.1)

1.2

1.2

0.8

(1.5)

Closing net debt/(cash)

 

 

18.6

(1.1)

14.4

20.6

25.1

25.1

24.8

16.4

IFRS 16 Leases

 

 

 

 

 

 

 

 

 

71.0

Source: Company accounts, Edison Investment Research


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This report has been commissioned by Epwin Group and prepared and issued by Edison, in consideration of a fee payable by Epwin Group. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: 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 and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. 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.

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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 2020 Edison Investment Research Limited (Edison).

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

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3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

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NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by Epwin Group and prepared and issued by Edison, in consideration of a fee payable by Epwin Group. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: 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 and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. 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.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

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 2020 Edison Investment Research Limited (Edison).

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

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