Ergomed — Healthy fundamentals for 2022

Ergomed (AIM: ERGO)

Currency in GBP

Last close As at 02/02/2023

GBP12.08

8.00 (0.67%)

Market capitalisation

GBP604m

Research: Healthcare

Ergomed — Healthy fundamentals for 2022

Ergomed’s FY21 results showed that adjusted EBITDA of £25.4m was ahead of our estimate of £24.0m and consensus of £23.4m. A strong order book (£239.7m, up 24.2% y-o-y), continued overall business growth and a rapidly improving balance sheet position Ergomed for another solid year of growth. Ergomed recently acquired ADAMAS Consulting Group, which we have now incorporated in our model. A UK-based quality assurance services provider, ADAMAS will diversify revenue sources (its offerings do not overlap with Ergomed’s). According to management, the acquisition should be immediately accretive to earnings. We have raised our valuation to £777m or 1,577p/share (versus 1,536p/share previously).

Analyst avatar placeholder

Written by

Jonas Peciulis

Healthcare

Ergomed

Healthy fundamentals for 2022

FY21 results

Healthcare services

27 April 2022

Price

1,228p

Market cap

£608m

Net cash (£m) at end-FY21

31.2

Shares in issue

49.3m

Free float

81%

Code

ERGO

Primary exchange

AIM

Secondary exchange

Frankfurt Xetra

Share price performance

%

1m

3m

12m

Abs

1.1

8.7

6.8

Rel (local)

2.5

11.0

3.6

52-week high/low

1,540p

1,060p

Business description

Ergomed is a global full-service contract research outsourcing (CRO) business with a core focus on the US and EU. It provides Phase I–III clinical services in addition to post-marketing pharmacovigilance services through its PrimeVigilance (PV) division. Ergomed is predominantly focused on oncology, orphan drugs, rare diseases and pharmacovigilance.

Next events

AGM statement

June 2022

H122 trading update

July 2022

H122 result

September 2022

Analyst

Dr Jonas Peciulis

+44 (0)20 3077 5728

Ergomed is a research client of Edison Investment Research Limited

Ergomed’s FY21 results showed that adjusted EBITDA of £25.4m was ahead of our estimate of £24.0m and consensus of £23.4m. A strong order book (£239.7m, up 24.2% y-o-y), continued overall business growth and a rapidly improving balance sheet position Ergomed for another solid year of growth. Ergomed recently acquired ADAMAS Consulting Group, which we have now incorporated in our model. A UK-based quality assurance services provider, ADAMAS will diversify revenue sources (its offerings do not overlap with Ergomed’s). According to management, the acquisition should be immediately accretive to earnings. We have raised our valuation to £777m or 1,577p/share (versus 1,536p/share previously).

Year end

Revenue (£m)

Adjusted EBITDA* (£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

12/20

86.4

19.4

23.8

0.0

N/M

N/A

12/21

118.6

25.4

41.3

0.0

N/M

N/A

12/22e

140.3

28.1

43.9

0.0

28.0

N/A

12/23e

156.3

31.6

49.5

0.0

24.8

N/A

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

Product mix shifting to US, but gross margins stable

Top-line numbers, including business segment revenues, were released with the trading update in January 2022, which we addressed in our last report. FY21 total gross margin was 40.8% versus 4  5.9% last year, which is explained by increased pass-through revenues in the CRO segment in 2021 due to the rapid growth of the US business (63% of total revenue in 2021). The FY21 gross margin of 43.3% on underlying CRO business service fees stayed at similar level to the prior year (FY20: 46.3%) despite FX headwinds. In the PV segment, the gross margin on service fees also stayed at a similar level (FY21: 51.3% vs FY20: 52.4%).

Adjusted EBITDA better than expected

FY21 adjusted EBITDA increased to £25.4m from £19.4m in FY20 and was somewhat better than our estimate of £24.0m and consensus of £23.4m. As well as updating our model for Ergomed’s FY21 results, we have made some changes to our estimates. We also included the ADAMAS business based on the high-level information about its performance released so far. Our updated total revenue estimates are £140.3m (PV: £73.8m, CRO: £66.5m) in 2022 and £156.3m (PV: £83.4m, CRO: £72.9m) in 2023. Our adjusted EBITDA estimates now stand at £28.1m (from £27.9m) in 2022 and £31.6m (from £34.9m) in 2023.

Valuation: £777m or 1,577p/share

We have increased our DCF-based valuation to £777m or 1,577p/share compared to £751m or 1,536p/share previously due to rolling the model forward, updating our estimates and including the acquisition of ADAMAS. Our valuation implies an EV/EBITDA multiple of 26.5x (FY22e). Ergomed trades at a premium on FY22e EV/EBITDA (consensus) of 20.4x vs the peer average of 13.9x. Our bull case scenario valuation stands at 2,011p/share and our bear case at 1,227p/share, both based on our different sets of DCF assumptions (long-term sales growth and profit margins; for details, see our Outlook report).

FY22 update: Solid year despite the pandemic

Solid top-line numbers have already been reported

As a reminder, total 2021 revenues were £118.6m, up 37.3% y-o-y (our estimate and consensus were both £119.6m), despite continuing FX headwinds (at constant exchange rates, CER, growth was 44.3%, see Exhibit 1A).

Revenues in the CRO segment increased to £58.1m, up 85.5% (97.3% CER; our estimate was £56.0m). This includes MedSource, acquired in December 2020. Excluding MedSource, CRO revenues increased by 26.2% (33.2% CER), indicating a strong rebound after the CRO industry was affected by the pandemic.

Revenues in the PV segment increased to £60.5m, up 9.9% (14.2% CER; our estimate was £63.6m).

Stable underlying gross margins

FY21 total gross margin was 40.8% versus 45.9% last year, which is explained by increased pass-through revenues in the CRO segment in 2021 due to the rapid growth of the US business. Some of the costs in each business segment are passed through to customers but booked as Ergomed’s revenues (at no profit; profitable revenues are service fees which Ergomed collects from customers). While pass-through revenues are minimal in the PV segment, their mix in the CRO segment is much higher, which affects reported and underlying gross margins (Exhibit 1B).

The FY21 gross margin of 43.3% on underlying CRO business service fees stayed at a similar level to the prior year (FY21: 46.3%) despite FX headwinds. In the PV segment, the FY21 gross margin on service fees was also at a similar level (FY21: 51.3% versus FY20: 52.4%) (Exhibit 1C). Underlying gross profit increased by a healthy 21.9% to £48.4m.

Exhibit 1: Ergomed’s revenue mix and gross margin developments

Source: Ergomed

Adjusted EBITDA better than expected

FY21 adjusted EBITDA increased to £25.4m from £19.4m in FY20 and was somewhat better than our estimate of £24.0m and consensus of £23.4m. Total FY21 operating expenses were £33.7m versus our expected £35.3m. Adjusted FY21 EPS came in at 41.3p versus our estimate of 34.1p.

Cash and cash equivalents increased by £12.2m to £31.2m and the company was debt free at the year end. The order book was strengthened by organic growth, finishing at £239.7m (up 24.2% year-on-year) providing good visibility into 2022.

ADAMAS diversifies Ergomed offering and revenue sources

In February 2022, Ergomed announced that it had agreed to acquire UK-based ADAMAS Consulting Group. ADAMAS offers a full range of quality assurance services and specialises in auditing pharmaceutical manufacturing processes, clinical trials and pharmacovigilance systems. There is little overlap in the offerings of the two companies, so with this acquisition Ergomed expanded its expertise.

ADAMAS booked £8.5m in revenue, up 31% y-o-y, and £1.8m in adjusted EBITDA in 2021. Gross margin on fee income is around 50%, so somewhat better than Ergomed’s total gross margin in 2021. ADAMAS expects its revenues to grow by more than 20% per year in 2022–23, with the EBITDA margin reaching more than 20% (Ergomed’s adjusted EBITDA margin was 21.4% in 2021).

Ergomed paid £25.6m (all cash), giving ADAMAS an EV of £24.2m (£1.4m in cash on the balance sheet). This EV implies c 12.0x guided adjusted EBITDA in 2022. Ergomed’s EV/adjusted EBIDTA multiples pre-acquisition were 21.8x (2021) and 18.8x (2022). It indicated that the transaction will be immediately accretive to earnings.

Revenues generated by ADAMAS will be allocated to Ergomed’s CRO and PV segments. Although there is no overlap with Ergomed’s existing business, the characteristics of ADAMAS’s services are sufficiently similar and there is no need for the creation of a separate business segment. ADAMAS will continue to operate as an independent consulting business and its existing senior executive team will continue in their current positions in the business. We believe this demonstrates Ergomed’s trust in the management team and processes at ADAMAS, and provides confidence that the integration will be smooth.

According to management, the M&A strategy remains intact post the acquisition of ADAMAS. Ergomed will consider the right businesses at the right price and still has access to an unused credit facility of £30m.

Estimate revisions

As well as updating our model for Ergomed’s FY21 results, we have made some changes to our estimates. 2021 PV sales came in at £60.5m versus our expected £63.5m and we have therefore lowered our near-term forecasts. However, after adding the ADAMAS business, our FY22 estimate is relatively unchanged, at £73.8m (Exhibit 2). As the CRO segment performed slightly better than expected, we have therefore increased our FY22 estimate slightly. Our updated total revenue estimates are £140.3m (PV: £73.8m, CRO: £66.5m) in 2022 and £156.3m (PV: £83.4m, CRO: £72.9m) in 2023.

We also revised our expected gross margins in 2022 and 2023, as discussed above. This was offset by the revision of SG&A costs, which were lower than we had expected. As a result, our adjusted EBITDA estimate is little changed for FY22 but somewhat lower in FY23. Our adjusted EBITDA estimates now stand at £28.1m in 2022 and £31.6m in 2023.

With regards to ADAMAS, Ergomed will consolidate the new business in its next report (for H122, due in July 2022). Ahead of that, we have made preliminary changes to our model to reflect the acquisition based on the details and high-level information about ADAMAS’s performance released so far (described above).

We forecast that the end-2022 cash position will be lower at £26.8m (versus £31.2m in 2021) due to the all-cash ADAMAS acquisition, but expect it to increase to £48.8m in 2023, reflecting strong cash generation.

Exhibit 2: Key changes to forecasts

£m

FY21

FY22e

FY23e

Est

Act

Change (%)

Old

New

Change (%)

Old

New

Change (%)

Total revenues

119.6

118.6

-0.9%

136.8

140.3

2.6%

161.3

156.3

-3.1%

– PrimeVigilance

63.6

60.5

-4.9%

73.6

73.8

0.2%

88.2

83.4

-5.4%

– CRO

56.0

58.1

3.7%

63.3

66.5

5.2%

73.1

72.9

-0.3%

O/W pass-through

13.6

17.6

29.9%

15.3

20.6

34.1%

17.7

22.2

25.4%

Gross profit

54.1

48.4

-10.6%

61.4

57.0

-7.2%

72.7

64.1

-11.7%

Gross margin

45.3%

40.8%

-4.5pp

44.8%

40.6%

-4.2pp

45.0%

41.0%

-4.0pp

Adjusted EBITDA

24.0

25.4

6.0%

27.9

28.1

0.9%

34.9

31.6

-9.5%

Adj. EBITDA margin

20.0%

21.4%

1.4pp

20.4%

20.1%

-0.3pp

21.6%

20.2%

-1.4pp

Adjusted EBIT

19.8

20.4

2.8%

23.7

26.0

9.5%

30.7

29.4

-4.3%

Adj. EBIT margin

16.6%

17.2%

0.6pp

17.4%

18.5%

1.2pp

19.0%

18.8%

-0.2pp

Adjusted EPS (p)

34.1

41.1

20.8%

40.5

43.9

8.3%

52.1

49.5

-4.9%

Source: Ergomed FY21 results, Edison Investment Research

Valuation

Our valuation of Ergomed is higher at £777m or 1,577p/share versus our last published £751m or 1,536p/share valuation in the post-trading update in January 2022. This is derived from our DCF model using a 10% discount and 2% terminal growth rates. Our valuation implies an EV/EBITDA multiple of 26.5x based on our FY22 forecasts. We note that Ergomed trades at a premium EV/EBITDA (FY22e) of 20.4x compared to the peer average of 13.9x.

Exhibit 3: Ergomed base case DCF model

£'000s

2022e

2023e

2024e

2025e

2026e

2027e

2028e

2029e

2030e

Revenue

140,296

156,273

179,714

206,371

236,639

270,952

309,788

353,675

403,190

Growth (%)

18.3%

11.4%

15.0%

14.8%

14.7%

14.5%

14.3%

14.2%

14.0%

Adj. EBIT

25,986

29,402

35,943

43,682

52,849

63,674

76,414

91,366

108,861

Margin (%)

18.5%

18.8%

20.0%

21.2%

22.3%

23.5%

24.7%

25.8%

27.0%

Tax

(4,705)

(5,354)

(6,658)

(8,104)

(9,817)

(11,841)

(14,224)

(17,024)

(20,301)

Rate (%)

-19%

-19%

-19%

-19%

-19%

-19%

-19%

-19%

-19%

D&A

2,150

2,150

2,150

2,150

2,150

2,150

2,150

2,150

2,150

Working capital

286

(909)

(1,419)

(1,794)

(239)

(2,103)

987

2,214

3,188

Capex*

(25,770)

(1,550)

(1,473)

(1,550)

(864)

(1,207)

(1,036)

(1,121)

(1,078)

Operating free cash flow

(2,053)

23,739

28,542

34,385

44,080

50,673

64,291

77,586

92,820

Value

Value/share

DCF for forecast period (2022 to 2023)

18.2

36.9

DCF for transition period (2023 to 2030)

214.3

434.9

Terminal value

513.6

1,042.0

Enterprise value

746.1

1,513.7

Net cash, end FY21

31.2

63.4

Equity value

777.3

1,577.1

Source: Edison Investment Research. Note: 10% WACC. Note: *Acquisition of ADAMAS in February 2022.

Exhibit 4: Ergomed comparable companies

Company

Price

Market cap

EV/EBITDA (x)

EV/sales (x)

P/E (x)

2022e

2023e

2024e

2022e

2023e

2024e

2022e

2023e

2024e

Ergomed*

1,406p

£605m

20.4x

18.2x

11.4x

4.1x

3.7x

3.0x

28.8x

25.5x

20.1x

Syneos

$66.0

$6,905m

11.3x

10.1x

9.2x

1.7x

1.6x

1.5x

13.3x

11.7x

10.2x

ICON

$210.7

$17,181m

15.5x

13.8x

12.6x

2.8x

2.6x

2.4x

18.0x

15.4x

13.3x

Medpace

$132.6

$4,461m

14.9x

13.2x

10.9x

2.8x

2.5x

2.1x

22.9x

20.9x

17.4x

Average

13.9x

12.4x

10.9x

2.4x

2.2x

2.0x

18.0x

16.0x

13.6x

Source: Edison Investment Research, Refinitiv. *Edison estimates. Priced at 27 April 2022.

Exhibit 5: Financial summary

Accounts: IFRS, year-end 31 December (£000s)

2019

2020

2021

2022e

2023e

INCOME STATEMENT

 

 

 

 

Total revenues

68,255

86,391

118,581

140,296

156,273

Cost of sales

(29,790)

(38,686)

(52,191)

(61,730)

(68,760)

Reimbursable expenses

(8,940)

(8,055)

(18,028)

(21,609)

(23,388)

Gross profit

29,525

39,650

48,362

56,957

64,125

Gross margin %

43%

46%

41%

41%

41%

SG&A (expenses)

(23,513)

(27,803)

(34,877)

(31,740)

(35,487)

R&D costs

(545)

(152)

(130)

(207)

(211)

Other income/(expense)

51

1,839

1,269

0

0

Exceptionals and adjustments

3,265

993

5,753

976

976

Reported EBITDA

9,230

18,378

19,670

27,160

30,576

Depreciation and amortisation

3,712

4,844

5,046

2,150

2,150

Reported EBIT

5,518

13,534

14,624

25,010

28,426

Finance income/(expense)

(245)

(395)

(360)

(245)

(245)

Other income/(expense)

(286)

(511)

0

0

0

Reported PBT

4,987

12,628

14,264

24,765

28,181

Income tax expense (includes exceptionals)

583

(2,946)

(1,590)

(4,705)

(5,354)

Reported net income

5,570

9,682

12,674

20,060

22,827

Basic average number of shares, m

46.6

48.3

48.5

49.3

49.3

Basic EPS (p)

12.0

20.0

26.2

40.7

46.3

Adjusted EBITDA

12,495

19,371

25,423

28,136

31,552

Adjusted EBIT

8,783

14,527

20,377

25,986

29,402

Adjusted PBT

8,637

14,442

21,616

26,341

29,757

Adjusted EPS (p)

19.8

23.8

41.3

43.9

49.5

Adjusted diluted EPS (p)

19.8

22.8

39.6

42.6

48.1

Order book

124,100

193,000

239,700

254,919

312,036

BALANCE SHEET

 

 

Property, plant and equipment

1,110

1,742

1,966

1,986

1,986

Right-of-use assets

5,171

4,715

2,691

2,691

2,691

Goodwill

13,380

24,605

23,903

23,903

23,903

Intangible assets

2,755

9,618

7,653

31,253

30,653

Other non-current assets

2,616

4,898

9,433

9,433

9,433

Total non-current assets

25,032

45,578

45,646

69,266

68,666

Cash and equivalents

14,259

18,994

31,243

26,774

48,781

Trade and other receivables

14,359

22,224

25,143

33,160

37,500

Other current assets

3,382

5,553

3,958

3,958

3,958

Total current assets

32,000

46,771

60,344

63,892

90,239

Lease liabilities

3,716

3,128

1,432

1,432

1,432

Long term debt

0

0

0

0

0

Other non-current liabilities

635

2,743

1,939

1,939

1,939

Total non-current liabilities

4,351

5,871

3,371

3,371

3,371

Trade and other payables

10,373

15,702

15,207

22,315

25,235

Lease liabilities

1,718

1,978

1,249

1,249

1,249

Other current liabilities

3,770

15,932

18,924

18,924

18,924

Total current liabilities

15,861

33,612

35,380

42,488

45,408

Equity attributable to company

36,820

52,866

67,239

87,299

110,126

CASH FLOW STATEMENT

 

 

Profit before tax

4,987

12,628

14,264

24,765

28,181

Cash from operations (CFO)

11,788

18,048

18,683

21,300

23,557

Capex

(996)

(974)

(983)

(1,570)

(1,550)

Acquisitions & disposals net

(107)

(11,985)

103

(24,200)

0

Other investing activities

(1,728)

0

(3,267)

0

0

Cash used in investing activities (CFIA)

(2,831)

(12,776)

(4,146)

(25,770)

(1,550)

Net proceeds from issue of shares

1,427

0

0

0

0

Movements in debt

(1,677)

(2,189)

(2,490)

0

0

Other financing activities

0

(157)

(169)

0

0

Cash from financing activities (CFF)

(250)

(477)

(2,113)

0

0

Increase/(decrease) in cash and equivalents

8,707

4,795

12,424

(4,470)

22,007

Currency translation differences and other

363

(60)

(175)

0

0

Cash and equivalents at start of period

5,189

14,259

18,994

31,243

26,774

Cash and equivalents at end of period

14,259

18,994

31,243

26,774

48,781

Net (debt)/cash

14,259

18,993

31,243

26,774

48,781

Source: Ergomed accounts, 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

General disclaimer and copyright

This report has been commissioned by Ergomed and prepared and issued by Edison, in consideration of a fee payable by Ergomed. 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.

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 2022 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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