Carr’s Group — FY21 results ahead of improved expectations

Carr’s Group (LSE: CARR)

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Research: Industrials

Carr’s Group — FY21 results ahead of improved expectations

Carr’s Group’s FY21 results were ahead of management’s improved expectations, with increased profits across both the Speciality Agriculture and Agricultural Supplies divisions offsetting weaker performance from the Engineering division caused by low oil prices during Q121. Noting continued strength in livestock prices in the United States and the UK, stable farmgate milk prices in the UK and a strong Engineering order book, we raise our FY22 and FY23 PBT estimates by 4.7% and 2.2% respectively.

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Industrials

Carr’s Group

FY21 results ahead of improved expectations

FY21 results

General industrials

7 December 2021

Price

145.9p

Market cap

£137m

Net debt (£m) at end August 2021 (excluding finance leases)

10.0

Shares in issue

93.7m

Free float

59.6%

Code

CARR

Primary exchange

LSE

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

3.2

(9.9)

16.8

Rel (local)

4.6

(9.3)

5.0

52-week high/low

167.5p

121.0p

Business description

Carr’s Group’s Speciality Agriculture and Agricultural Supplies divisions serve farmers in the North of England, South Wales, the Welsh Borders and Scotland, the United States, Germany, Canada and New Zealand. The Engineering division offers remote handling equipment and fabrications to the global nuclear and oil and gas industries.

Next event

AGM

January 2021

Analyst

Anne Margaret Crow

+44 (0)20 3077 5700

Carr’s Group is a research client of Edison Investment Research Limited

Carr’s Group’s FY21 results were ahead of management’s improved expectations, with increased profits across both the Speciality Agriculture and Agricultural Supplies divisions offsetting weaker performance from the Engineering division caused by low oil prices during Q121. Noting continued strength in livestock prices in the United States and the UK, stable farmgate milk prices in the UK and a strong Engineering order book, we raise our FY22 and FY23 PBT estimates by 4.7% and 2.2% respectively.

Year end

Revenue (£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

08/20**

395.6

15.0

12.0

4.75

12.2

3.3

08/21

417.3

16.6

13.2

5.00

11.1

3.4

08/22e

422.5

17.3

13.7

5.20

10.7

3.6

09/23e

434.0

17.9

14.0

5.40

10.4

3.7

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

Outperformance in agricultural divisions in FY21

Group FY21 revenues increased by 5.5% year-on-year to £417.3m reflecting higher volumes of feed blocks and feed combined with commodity price inflation, which offset underperformance in those engineering activities exposed to the oil and gas market. Adjusted operating profit grew by 7.9% to £17.6m, as improved performances from both the agriculture related divisions were partly offset by the underperformance in the Engineering division and a sharp increase in central costs, which returned to normal levels. Stronger than expected US feed block sales over the summer led to a performance ahead of management ’s expectations, which had been raised in July. The results were also slightly ahead of our estimates.

Order book underpins FY22 Engineering recovery

Livestock prices in the UK and the United States continue to be strong and milk prices in the UK are stable. This is encouraging farmers in both regions to invest in feed blocks and supplements to enhance farm outputs, which is beneficial for the Speciality Agriculture division. The situation is also supportive for the Agricultural Supplies division, which only operates in the UK. The Engineering division’s order book was 15.9% higher year-on-year at end FY21, reflecting a big jump in orders for fabrication work and good order intake at the precision engineering business during H221 as oil and gas companies resumed investment in exploration activity. This improved order book backs our assumption of divisional recovery during FY22.

Valuation: Indicative valuation of 170p/share

Our DCF analysis gives an indicative value of 170p/share (previously 165p/share), with the small increase resulting from our profits upgrade. We believe that the valuation gap with respect to our indicative valuation and peer share price multiple averages should start to close as the strong Engineering order book converts to an improved divisional performance.

Divisional performance

Speciality Agriculture

Divisional revenues grew by 10.6% year-on-year during FY21 to £68.5m and adjusted operating profit by 25.0% to £9.5m. The division remained fully operational during the coronavirus-related lockdowns. Cattle prices in the United States were depressed in FY20 because of a delayed start to winter feeding but have remained robust since the recovery noted towards the end of FY20 because the easing of COVID-19 restrictions increased demand for beef, offsetting the impact of drought on farm incomes. Feed block volumes in the region rose by 13.4% during FY21. During FY20 demand for both feed blocks and Animax supplements in the UK was depressed because of the unfavourable combination of unseasonably mild weather and lower cattle and lamb prices, which disincentivised farmers from pushing to maximise outputs. In contrast, weather patterns were more normal during FY21 and livestock prices were higher, resulting in a 10.8% increase in feed block volumes. Overall, the volume of feed blocks sold, which includes sales in mainland Europe and New Zealand, increased by 12.3% year-on-year.

Livestock prices in the UK and the United States continue to be strong and milk prices in the UK are stable, encouraging farmers to invest in feed blocks and supplements to enhance farm outputs. In addition, the project to automate production at Animax, which will provide additional capacity and more consistent product quality, is close to completion. This will be timely as, following successful business development initiatives, demand currently exceeds supply. Management expects that the new production line at Animax, which cost c £1m, will be fully operational during FY22. Our estimates model zero growth in divisional profits during FY22 on the basis that the drought in the United States will have an adverse impact on sales of feed blocks in the region, but not as large a drop as previously (see Changes to estimates section.) We model a small year-on-year drop in contribution from joint ventures (JVs) and associate for the same reason. We then model a modest improvement in profits from both the Speciality Agriculture division and the contribution from JVs and associate during FY23 to reflect the positive impact of strengthening the group’s sales presence in the United States, particularly Texas, and in Canada and Germany.

Agricultural Supplies

Divisional revenues grew by 6.0% year-on-year to £297.5m and adjusted operating profit increased by 15.7% to £6.7m. This division also remained operational during the coronavirus-related lockdowns, though the retail outlets shifted to a collection model during the most severe phases of lockdown. The recovery in UK livestock prices during FY21 noted above together with improved farmgate milk prices supported a 2.6% increase in total feed volumes and the recovery of higher raw material costs. UK farmer confidence generally improved as the prospect of a no-deal Brexit, which would have been ruinous for sheep farmers, disappeared, contributing to a 6.3% increase in like-for-like retail sales (1.6% overall) and an 8.3% rise in machinery revenues. However, fuel volumes reduced by 5.6% year-on-year because customers had stocked up on fuel while it was relatively inexpensive over the summer of calendar 2020.

The outlook for this division is favourable as well, for the reasons discussed above. Management is focusing on investing in IT and processes to enhance margins by standardising product ranges and prices, improving supply chain arrangements and strengthening raw material procurement. To this end it spent £1.9m in FY21 (which was expensed) towards a new ERP system, which went live in September 2021. Our estimates model modest divisional growth in profits during both FY22 and FY23. This is based on management’s comments that it has created a new central buying team, recruited new sales managers and introduced a programme to ensure that the management teams spend more of their time with customers.

Engineering

Divisional revenues reduced by 3.2% year-on-year to £51.3m, though adjusted operating profit rose by 3.0% to £3.9m. This division also remained fully operational through the lockdowns. The remote handling and robotics business performed well (£16.3m revenues in FY21 vs £14.8m in FY20) despite coronavirus-related restrictions preventing access to customer sites. Revenues attributable to the engineering solutions segment declined from £20.5m to £19.2m as several mechanical stress improvement process (MSIP) projects completed during the year. Revenues from the UK fabrication and precision engineering segment fell from £17.7m to £15.8m. While low oil prices depressed investment from the oil and gas industry in exploration during H121, adversely affecting order intake in the precision engineering business, this was partly offset by a higher level of fabrication activity for the nuclear industry throughout the year.

The divisional order book totalled £38.8m the end of FY21, which was 15.9% higher than a year previously. It then rose further, reaching £44.6m at the end of October. The improvement reflects a big jump in orders for fabrication work and good order take at the precision engineering business during H221, partly offset by a small reduction in the robotics order book. During FY21 the UK engineering solutions business won several major contracts, including a £4.5m defence contract to upgrade testing facilities that runs into FY22 and FY23, and the US engineering solutions business won a $4m MISP project in Slovenia for delivery in late calendar 2022. The strengthening order book, especially for the precision engineering business, puts the division in a good position for growth in FY22 and supports our assumption of a substantial improvement in divisional profitability during FY22 followed by more modest improvement in FY23.

Group performance

P&L: FY21 trading ahead of management expectations

Group FY21 revenues increased by 5.5% year-on-year to £417.3m, reflecting higher volumes of feed blocks and feed combined with commodity price inflation, which offset underperformance in those engineering activities exposed to the oil and gas market. Adjusted operating profit grew by 7.9% to £17.6m. Improved performances from both the agriculture related divisions were partly offset by the Engineering division’s underperformance and a sharp increase in central costs attributable to a changes in provision for a non-recoverable debt, higher performance related remuneration and CEO handover costs. The results were ahead of the board’s expectations, which were raised in July, because of stronger than expected US feed block sales over the summer. They were also slightly ahead of our estimates. For example, actual adjusted PBT was £0.5m or 3.2% better than our estimate, which had been raised by 4.5% in July. Non-recurring items affecting profit before tax totalling £4.6m included a £1.0m credit related to a net decrease in fair value of deferred consideration payable for the US and UK engineering solutions businesses, £1.9m expenditure on the ERP system and a £2.1m impairment on the value of the Afgritech joint venture in the United States, which manufactures bypass-proteins and has been affected by a shortage of canola. The full year dividend was raised from 4.75p/share to 5.00p/share, ahead of our 4.9p/share estimate.

Strong cash generation

Net debt (excluding £15.4m finance leases) reduced by £8.9m during FY21 to £10.0m at the year-end. Strong cash generation from operating activities benefited from a £3.2m decrease in working capital requirements. The retirement benefit surplus increased by £1.3m to £9.4m at end FY21. The group no longer makes deficit reduction contributions because the pension scheme was fully funded at the last full actuarial valuation.

Changes to estimates

We make the following changes to our estimates:

We reduce our FY22 and FY23 Agricultural Supplies revenues to reflect growth from a slightly lower base.

We raise our FY22 and FY23 Speciality Agriculture EBITA estimates to reflect a continuation of strong feed block sales in the United States, which do not seem to be as much affected by the drought there as management had initially anticipated because of the strong livestock prices. This means that the year-on-year decline in FY22 is much less pronounced than previously. We reduce our FY22 and FY23 Specialist Agriculture revenues to keep EBITA margin constant.

We raise our FY22 and FY23 dividend estimates to reflect the higher-than-expected dividend payment in FY21.

Our estimates assume that the high level of creditor days at the end of FY21 is not sustained.

Exhibit 1: Estimate revisions

£m

2021

2022e

2023e

Old

Actual

Change

Old

New

Change

Old

New

Change

Speciality Agriculture revenues

66.8

68.5

2.4%

72.2

67.0

-7.2%

76.5

68.5

-10.5%

Agricultural Supplies revenues

320.0

297.5

-7.0%

319.8

300.5

-6.0%

322.5

303.5

-5.9%

Total Agriculture revenues

386.8

366.0

-5.4%

392.0

367.5

-6.3%

399.0

372.0

-6.8%

Engineering revenues

53.2

51.3

-3.6%

55.0

55.0

0.0%

62.0

62.0

0.0%

Group revenues (£m)

440.0

417.3

-5.2%

447.0

422.5

-5.5%

461.0

434.0

-5.9%

Speciality Agriculture EBITA excluding JVs

7.4

8.5

15.2%

7.4

8.3

12.2%

7.9

8.5

7.6%

Agricultural Supplies EBITA excluding JVs

4.8

4.7

-1.1%

4.9

4.9

0.0%

5.0

5.0

0.0%

Agriculture JVs EBITA

2.8

2.9

5.2%

2.8

2.8

0.0%

2.9

2.9

0.0%

Total Agriculture EBITA including JVs

15.8

16.2

2.6%

15.1

16.0

6.0%

15.8

16.4

3.8%

Engineering EBITA

4.7

3.9

-16.5%

4.9

4.9

0.0%

5.3

5.3

0.0%

Central costs (£m)

(3.5)

(2.6)

94.5%

(2.5)

(2.6)

-13.2%

(2.5)

(2.7)

-21.1%

Group EBITA after deducting share-based payments (£m)

17.0

17.6

3.4%

17.5

18.3

4.4%

18.6

18.9

2.1%

Normalised PBT after deducting share-based payments (£m)

16.1

16.6

3.2%

16.5

17.3

4.7%

17.6

17.9

2.2%

Normalised undiluted EPS after deducting share-based payments (p)

11.6

13.2

14.2%

13.0

13.7

5.0%

13.7

14.0

2.3%

Dividend per share (p)

4.9

5.0

2.0%

5.1

5.2

2.0%

5.3

5.4

2.9%

Net debt/(cash) (£m)

29.0

25.4

-12.4%

26.7

23.6

-11.3%

21.1

17.3

-18.2%

Source: Carr’s Group data, Edison Investment Research

Management changes

In line with the succession plan announced in August 2020, Hugh Pelham was appointed as CEO in September 2020 and took up his role when the previous CEO, Tim Davies, stood down at the group's AGM in January 2021. Hugh left the group in October 2021. Chairman Peter Page has moved from a non-executive to an executive role while a new CEO is found. The board expects to complete this process during the current financial year.

Valuation

DCF methodology

Our valuation methodology is based on a discounted cash flow (DCF) analysis, supplemented with a comparison of peer group multiples. We continue to use a conservative 10.0% WACC and a 1.0% terminal growth rate for our DCF calculation. This gives a fair value of 170p/share (previously 165p/share), with the small increase resulting from our profits upgrade. We prefer a DCF analysis to a peer-based multiples approach because it looks beyond any short-term issues of unseasonal weather, which the group, like other companies engaged in agricultural supply, is exposed to. We believe that the valuation gap should begin to close as the strong order book in Engineering starts to convert to an improved divisional performance.

Exhibit 2: DCF valuation (p/share) – sensitivities to WACC and terminal growth assumptions

WACC

9.0%

9.5%

10.0%

10.5%

11.0%

Terminal growth

0.0%

176

166

157

149

141

1.0%

194

181

170

160

151

1.5%

204

190

178

167

158

2.0%

216

200

187

175

164

3.0%

245

225

208

193

180

Source: Edison Investment Research

Peer-based multiples

In Exhibit 3 we compare Carr’s prospective EV/EBITDA and P/E multiples with those for its listed peers in the agricultural sector. At the current share price (145.9p), Carr’s is trading below the mean for its peers (excluding Anpario) on all metrics. In our opinion, this discount is not justified because Carr’s feed block activity in North America, mainland Europe and New Zealand reduces the exposure of its agricultural businesses to challenges caused by the UK climate and government policy. This sets Carr’s apart from both NWF and Wynnstay, whose agricultural activities are confined to the UK. In addition, since a substantial proportion of operating profit (47% FY21) is derived from sales of feed blocks and supplements, Carr’s Group merits multiples that are closer to the higher values achieved by natural feed additives provider Anpario than pure-play agricultural supply companies like ForFarmers or Origin Enterprises.

Exhibit 3: Peer based multiples

Name

Market cap (£m) 

EV/EBITDA 1FY (x)

EV/EBITDA 2FY (x)

P/E 1FY
(x)

P/E 2FY
(x)

Anpario

151.7

20.1

19.4

29.8

29.0

ForFarmers

311.6

5.4

4.9

11.1

10.1

NWF Group

105.6

6.3

6.2

12.1

12.1

Origin Enterprises

365.8

5.8

5.5

8.4

8.0

Ridley Corporation

231.5

6.9

6.4

13.6

11.9

Wynnstay Group

112.2

8.3

8.1

14.5

14.0

Mean excluding Anpario

6.5

6.2

12.0

11.2

Mean including Anpario

8.8

8.4

14.9

14.2

Carr's Group @ 145.9p/share

136.7

5.9

5.8

10.7

10.4

Carr's Group at 170p/share

159.4

6.8

6.7

12.4

12.1

Source: Refinitiv, Edison Investment Research. Note: Prices as at 2 December 2021.

At the indicative value of 170p/share derived from our DCF calculation, Carr’s would be trading at a small premium to the average for its peers, excluding Anpario, but at a discount when Anpario is included in the mean calculation.


Exhibit 4: Financial summary

£m

2020

2021

2022e

2023e

Year end 31 August

IFRS

IFRS

IFRS

IFRS

INCOME STATEMENT

restated

Revenue

 

 

395.6

417.3

422.5

434.0

Share of post-tax profit from JVs and associate

2.6

2.9

2.8

2.9

EBITDA

 

 

23.4

23.9

24.8

25.4

Operating Profit (before amor. and except.)

 

16.3

17.6

18.3

18.9

Amortisation of acquired intangibles

(1.4)

(1.2)

(1.2)

(1.2)

Exceptionals

(2.6)

(3.4)

0.0

0.0

Reported operating profit

12.3

13.0

17.1

17.8

Net Interest

(1.3)

(1.0)

(1.0)

(1.0)

Profit Before Tax (norm)

 

 

15.0

16.6

17.3

17.9

Profit Before Tax (reported)

 

 

10.9

12.1

16.1

16.8

Reported tax

(1.3)

(2.4)

(2.9)

(3.2)

Profit After Tax (norm)

12.7

14.7

14.4

14.7

Profit After Tax (reported)

9.6

9.7

13.2

13.5

Minority interests

(1.2)

(1.9)

(1.6)

(1.6)

Net income (normalised)

11.1

12.3

12.8

13.1

Net income (reported)

8.4

7.7

11.6

11.9

Average number of shares outstanding (m)

92.3

93.1

93.7

93.7

EPS - normalised (p)

 

 

12.0

13.2

13.7

14.0

EPS - normalised fully diluted (p)

 

 

11.8

13.0

13.4

13.8

EPS - basic reported (p)

 

 

9.1

8.3

12.4

12.7

Dividend (p)

4.75

5.00

5.20

5.40

EBITDA Margin (%)

5.9

5.7

5.9

5.9

Normalised Operating Margin

4.1

4.2

4.3

4.4

BALANCE SHEET

Fixed Assets

 

 

124.4

123.4

120.3

117.2

Intangible Assets

38.4

36.7

35.5

34.3

Tangible Assets

53.1

53.0

51.1

49.3

Investments & other

32.9

33.7

33.7

33.7

Current Assets

 

 

120.4

139.1

136.9

143.2

Stocks

41.0

43.2

44.0

45.2

Debtors

59.8

68.9

67.1

69.0

Cash & cash equivalents

17.6

24.3

23.1

26.4

Other

2.1

2.7

2.7

2.7

Current Liabilities

 

 

(70.8)

(86.1)

(75.9)

(73.5)

Creditors

(56.6)

(72.0)

(64.8)

(65.4)

Tax and social security

(0.0)

(0.0)

(0.0)

(0.0)

Short term borrowings including finance leases

(14.2)

(14.1)

(11.1)

(8.1)

Other

0.0

0.0

0.0

0.0

Long Term Liabilities

 

 

(42.4)

(41.2)

(41.2)

(41.2)

Long term borrowings including finance leases

(36.2)

(35.6)

(35.6)

(35.6)

Other long term liabilities

(6.2)

(5.6)

(5.6)

(5.6)

Net Assets

 

 

131.6

135.2

140.0

145.8

Minority interests

(16.8)

(17.2)

(18.7)

(20.3)

Shareholders' equity

 

 

114.8

118.1

121.3

125.5

CASH FLOW

Op Cash Flow before WC and tax

23.4

23.9

24.8

25.4

Working capital

5.2

3.2

(6.1)

(2.4)

Exceptional & other

(7.4)

(4.9)

(2.8)

(2.9)

Tax

(3.1)

(2.1)

(2.9)

(3.2)

Operating cash flow

 

 

18.2

20.0

13.0

16.8

Investment activities

(6.2)

(3.6)

(4.6)

(4.6)

Acquisitions/disposals

(2.7)

(1.1)

(0.9)

0.0

Net interest

(1.5)

(1.1)

(1.0)

(1.0)

Equity financing

0.0

0.9

0.0

0.0

Dividends

(3.3)

(5.5)

(4.7)

(4.9)

Other

0.8

0.3

0.0

0.0

Net Cash Flow

5.2

9.9

1.8

6.4

Opening net debt/(cash) including finance leases

 

23.8

32.8

25.4

23.6

FX

0.0

0.0

0.0

0.0

Other non-cash movements

(14.3)

(2.5)

0.0

0.0

Closing net debt/(cash) including finance leases

 

32.8

25.4

23.6

17.3

Finance leases

13.9

15.4

15.4

15.4

Closing net debt/(cash) excluding finance leases

18.9

10.0

8.2

1.8

Source: company data, Edison Investment Research


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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

1185 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

1185 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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This report has been commissioned by Carr’s Group and prepared and issued by Edison, in consideration of a fee payable by Carr’s Group. Edison Investment Research standard fees are £60,000 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.

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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 2021 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

1185 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

1185 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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