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Expert System — Making good progress towards growth targets

Expert.ai (MI: EXAI)

Last close As at 05/08/2026

—

— 0.00 (0.00%)

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More on this equity

Research: TMT

Expert System — Making good progress towards growth targets

Expert System’s H118 results confirmed year-on-year sales growth of 52% and positive EBITDA. Over the last year, the business has seen strong demand for subscription licensing, resulting in recurring revenue increasing to 50% from 38% in H117. Management remains confident of meeting its FY18 guidance and we make minimal changes to our forecasts. Continued progress towards growth and profitability targets should support share price upside.

Written by

Katherine Thompson

Director

TMT

Expert System

Making good progress towards growth targets

H118 results

Software & comp services

8 October 2018

Price

€1.36

Market cap

€49m

Net debt (€m) at end H118

10.0

Shares in issue

35.6m

Free float

73.1%

Code

EXSY

Primary exchange

AIM Italia

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

14.3

7.5

1.1

Rel (local)

16.1

15.4

12.2

52-week high/low

€1.5

€1.1

Business description

Expert System has developed and patented technology that extracts useful information from unstructured text using semantic-based techniques. It applies this technology to a number of verticals including enterprise search, customer experience management and big data analytics.

Next events

FY18 results

March 2019

Analysts

Katherine Thompson

+44 (0)20 3077 5730

Dan Ridsdale

+44 (0)20 3077 5729

Expert System is a research client of Edison Investment Research Limited

Expert System’s H118 results confirmed year-on-year sales growth of 52% and positive EBITDA. Over the last year, the business has seen strong demand for subscription licensing, resulting in recurring revenue increasing to 50% from 38% in H117. Management remains confident of meeting its FY18 guidance and we make minimal changes to our forecasts. Continued progress towards growth and profitability targets should support share price upside.

Year end

Revenue (€m)

EBITDA*
(€m)

EPS*
(€)

DPS
(€)

P/E
(x)

EV/EBITDA
(x)

12/16

25.1

(2.2)

(0.22)

0.0

N/A

N/A

12/17

27.8

1.7

(0.18)

0.0

N/A

33.6

12/18e

30.5

4.6

(0.04)

0.0

N/A

12.5

12/19e

34.8

7.0

0.02

0.0

78.6

8.2

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

Solid H118 sales growth drives positive EBITDA

Expert reported sales growth of 52% y-o-y to €12.9m and an adjusted EBITDA of €0.6m. After one-off costs of €0.5m, it reported EBITDA of €0.1m, compared to a reported EBITDA loss of €4.0m in H117. Higher revenues combined with good cost control resulted in a normalised operating loss of €2.0m, significantly below the H117 operating loss of €5.6m. Licence revenues made up 41% of total revenues compared to 33% in H117, and within this, subscription licences made up 79% of licence revenues versus 33% a year ago.

Order momentum supports FY18 guidance

The company has seen sustained interest in its software since H217, helped by growing recognition of its technology by market analysts such as Forrester and Gartner. As a result of the success it has had in signing up customers in the insurance industry, it has introduced insurance-specific solutions. It is also promoting the use of its software for process automation, as the ability of its software to make sense of unstructured data makes it ideal for integration with digital workers. While revenues were down sequentially in H118, we note that Expert typically sees strong demand in Q4. Management is confident of achieving its guidance for FY18 and we have made minimal changes to our forecasts.

Valuation: Hitting growth targets key to upside

Expert System trades on an EV/EBITDA of 12.5x FY18e. This is at a premium to its Italian software and services peers and at a discount to enterprise search and information management companies, and high-growth big data analytics software companies. Our DCF valuation of Expert System suggests a value of €1.91/share (unchanged). Expert’s ability to convert customer interest in the fast-growing data mining and analytics market into commercial contracts, combined with achieving the targeted profitability, will be drivers of share price upside from this point.

Review of H118 results

Exhibit 1: Half-yearly results

€m

H117

H217

H118

y-o-y

Sales

8.44

17.69

12.86

52.4%

Grants and other income

0.73

0.92

0.69

-4.7%

Total revenue

9.17

18.61

13.56

47.8%

Capitalised development costs

2.52

3.03

2.34

-7.3%

Changes in WIP

0.05

(0.58)

0.00

-91.7%

Total production value

11.75

21.06

15.90

35.4%

Staff costs

9.40

9.21

9.13

-2.9%

Other costs

5.98

6.48

6.20

3.8%

Adjusted EBITDA

(3.63)

5.38

0.57

N/A

Adjusted EBITDA margin

-39.6%

28.9%

4.2%

43.8%

Depreciation & amortisation

2.01

2.89

2.54

26.4%

Normalised EBIT

(5.64)

2.49

(1.97)

-65.1%

Normalised EBIT margin

-61.5%

13.4%

-14.5%

47.0%

Amortisation of acquired intangibles

1.30

1.30

1.10

-15.6%

Exceptional costs

0.35

0.35

0.50

42.9%

EBIT

(7.30)

0.84

(3.57)

-51.1%

Net income

(7.63)

(0.70)

(3.75)

-50.9%

Net debt

15.12

8.82

10.00

-33.9%

Source: Expert System

Exhibit 2: Revenues by type

€m

H117

H217

H118

Revenue breakdown

Subscription licences

0.9

4.0

4.2

One-off licences

1.9

5.1

1.1

Maintenance

2.4

2.3

2.2

Services

3.3

5.6

5.1

Other

0.0

0.2

0.2

Total*

8.5

17.1

12.9

Revenue split

Subscription licences

10.6%

23.4%

32.6%

One-off licences

22.0%

29.7%

8.7%

Maintenance

27.7%

13.4%

17.3%

Services

39.2%

32.6%

40.0%

Other

0.5%

0.9%

1.5%

100.0%

100.0%

100.0%

Revenue growth y-o-y

Subscription licences

365.9%

One-off licences

-40.2%

Maintenance

-5.6%

Services

54.6%

Other

387.5%

Total

51.6%

Source: Expert System *Net of changes in WIP

As confirmed in the recent trading update, Expert generated sales growth of 52% in H118 and generated positive EBITDA. Grants and other income were slightly lower than a year ago, resulting in revenue growth of 48% y-o-y. The company controlled costs well during the period, reducing staff costs by 3% y-o-y and increasing other costs by 4% y-o-y. This resulted in positive adjusted EBITDA of €0.6m for the period. The company incurred exceptional costs of €0.5m for restructuring in H118 resulting in reported EBITDA of €0.1m. After depreciation and amortisation, the company reported a normalised operating loss of €2.0m, significantly better than the €5.6m loss a year ago. Net debt at the end of H118 stood at €10.0m, €1.2m higher than at the end of FY17. The increase is made up of the combination of EBITDA of €0.1m, capitalised development costs of €2.4m, a working capital inflow of €1.2m and a net outflow of €0.1m for tax, interest and FX.

The company is seeing an increasing number of licences signed on a subscription basis rather than as a perpetual licence. Exhibit 2 shows the revenue split on a half-yearly basis. Subscription licences increased 366% y-o-y and 5% h-o-h, with a corresponding decline in perpetual licences. This drives higher recurring revenues (assuming customers renew their licences) and should improve revenue visibility for the company. Revenues from services increased 55% y-o-y, reflecting the higher level of new business compared to a year ago.

Business update

Specialist insurance solutions launched

In H118, Expert launched Cogito for Claims and Cogito for Underwriting. Over the last year or so, Expert has signed up several insurance customers (Lloyds of London, Generali Group and Zurich Insurance Group) and these solutions reflect Expert’s expertise in this market.

Crédit Agricole contract demonstrates banking relevance

Crédit Agricole’s Corporate and Investment Bank is using Cogito in its PanOptes project to analyse large quantities of newsflow and other public information to provide quick and easy access to relevant information on clients and the sectors in which they operate.

Blue Prism partnership extended

In September, the company announced it had extended its partnership with Blue Prism. Blue Prism provides robotic process automation software, and Expert has been working with Blue Prism on the best way to provide customers with access to the combination of both companies’ technology. The idea is for Cogito software to analyse unstructured data in order to provide structured data as an input for Blue Prism’s software. The two companies are now working together with shared customers.

Market researchers recognising Expert’s technology

Expert has seen inclusion in various market research studies since the beginning of this year.

■

Forrester: one of eight vendors selected for the Forrester Wave: AI-based text analytics platforms, Q218 report; categorised as a strong performer.

■

Gartner: included in the Gartner Magic Quadrant for Insight Engines for the second year running; one of 13 vendors.

■

KMWorld: selected as one of 100 companies that matter in Knowledge Management 2018. The Cogito Discover platform was selected as a trend-setting product for 2018.

The Forrester Wave report analysed the text analytics offerings of eight software vendors: Expert System, Attivio, Clarabridge, EPAM Systems, IBM, Micro Focus, Open Text and SAS. Expert scored top marks for the depth of functionality of its software, the mix of rules and machine learning, RPA functionality, vertical specialisations and its professional services capability. It received lower scores in several categories that reflect the size of Expert compared to larger competitors such as IBM and SAS, including having fewer data sources, less analytics capability and a limited number of partners. Expert's view is that it is not cost effective to build a comprehensive list of data connectors; instead it focuses on those most commonly requested by customers and will add new integrations if there is sufficient demand. It is developing some new analytics tools, again led by customer demand. Expert is building out its partner network to widen access to the market and provide additional implementation capacity.

Outlook and changes to forecasts

Management remains confident that it can achieve FY18 results within its previous guidance range (sales €28.5-30.0m, EBITDA €4.0-5.0m). We note that Expert typically sees strong seasonality, with a large proportion of licences signed in Q4. We leave our forecasts substantially unchanged. We have increased our forecast for adjusted EBITDA in FY18, assuming this is before exceptional charges of €0.6m. We have altered the mix of amortisation between capitalised development costs and acquired amortisation, which results in a reduction in normalised operating profit in FY19 but has limited impact on reported operating profit.

Exhibit 3: Changes to forecasts

€m

FY18e old

FY18e new

Change

y-o-y

FY19e old

FY19e new

Change

y-o-y

Sales

29.0

29.0

(0.1%)

11.0%

33.3

33.3

-0.1%

14.6%

Other income & grants

1.5

1.5

0.0%

(8.9%)

1.5

1.5

0.0%

0.0%

Total revenues

30.5

30.5

(0.0%)

9.8%

34.8

34.8

-0.1%

13.9%

Capitalised development costs & changes in WIP

5.5

5.5

0.0%

9.5%

5.5

5.5

0.0%

0.0%

Production value

36.0

36.0

(0.0%)

9.8%

40.3

40.3

-0.1%

11.8%

Adjusted EBITDA

4.0

4.6

13.7%

167.4%

7.0

7.0

-0.4%

52.7%

Adjusted EBITDA margin

13.2%

15.0%

1.8%

8.8%

20.2%

20.1%

-0.1%

5.1%

D&A

(5.2)

(5.4)

3.5%

(5.5)

(5.7)

3.9%

Normalised operating profit

(1.2)

(0.8)

(30.6%)

(73.9%)

1.6

1.3

-15.5%

N/A

Normalised operating margin

-3.9%

-2.7%

1.2%

8.8%

4.5%

3.8%

-0.7%

6.5%

Amortisation of acquired intangibles

(2.6)

(2.3)

(11.8%)

(2.6)

(2.3)

-11.8%

Exceptional items

Reported operating profit

(3.8)

(3.7)

1.9%

42.6%

(1.1)

(1.0)

-6.3%

73.5%

Normalised EPS (c)

(4.5)

(3.7)

19.1%

80.0%

2.4

1.7

-27.8%

N/A

Net debt

12.6

12.7

0.6%

44.1%

12.6

12.8

1.0%

0.4%

Source: Edison Investment Research

Valuation

The majority of Expert’s direct competitors are private companies or subsidiaries of large companies such as IBM or Micro Focus. We have compared Expert’s valuation and operating metrics to peers operating in the natural language processing, big data analytics, enterprise search and information management markets, as well as to Italian software and IT services peers.

Based on EV/sales, Expert is trading at a discount to all peer groups. This reflects the fact that the company is still in a growth phase and moving towards operating profitability. On an EV/EBITDA basis it is trading more in line with Italian software and IT services peers, and at a discount to all other groups. If the company can maintain the current sales momentum and meet the growth and profit targets it has set for FY18 and FY19, the valuation discount should start to close. Progress towards net cash generation will also help reduce the discount.

We note that Coveo, a privately owned intelligent search and predictive analytics company, recently attracted a $100m investment from Evergreen Coast Capital for a 27% stake in the company. This values the business at $370m. We understand from press articles that the company has an annualised revenue run rate of $50m, which values it on a price/sales multiple of 7.4x, more akin to high growth companies such as Splunk or Tableau.

Our 10-year DCF analysis values the company at €1.91/share, unchanged since our last report. We forecast a revenue CAGR of 9.0% from FY17 to FY27, with EBITDA margins rising to 28% by FY27. Assuming the company continues to capitalise development spend, we forecast capex/sales reducing to 9.5% by FY27. We use a WACC of 9% and long-term growth of 3%. A 1% increase in the WACC results in a valuation of €1.51/share, while a 1% decrease results in a valuation of €2.49.

Exhibit 4: Peer group operating and valuation metrics

Last year end

Market cap (€m)

CY EV/S

NY EV/S

CY EV/ EBITDA

NY EV/ EBITDA

CY P/E

NY P/E

CY sales (€m)

CY EBIT margin

CY EBITDA margin

Sales growth NY

EPS growth NY

Natural language understanding 

Expert System

12/2017

49

1.9x

1.7x

12.5x

8.2x

N/A

78.6x

30.5

-2.7%

15.0%

13.9%

N/A

Nuance Communications

09/2017

4,965

3.3x

3.2x

11.5x

11.0x

15.3x

14.1x

2,058

N/A

28.6%

3.3%

8.3%

Big data analytics

Splunk

01/2018

14,821

9.6x

7.8x

66.3x

46.7x

105.7x

75.3x

1,701

11.7%

14.5%

23.2%

40.4%

Tableau

12/2017

7,938

8.4x

7.3x

-1690.4x

202.9x

N/A

410.7x

991

N/A

N/A

15.2%

N/A

Teradata

12/2017

3,834

1.9x

1.9x

12.4x

10.6x

30.9x

23.7x

2,145

10.7%

15.3%

2.4%

30.2%

Average

6.6x

5.6x

N/A

86.7x

N/A

169.9x

5.9%

9.8%

13.6%

N/A

Enterprise search and information management

OpenText

06/2018

8,711

4.1x

4.0x

11.2x

10.5x

13.9x

12.8x

2,911

34.2%

35.6%

3.3%

8.9%

IHS Markit

11/2017

18,329

6.8x

6.0x

17.5x

15.3x

23.8x

20.8x

4,017

19.1%

21.7%

12.2%

14.2%

CommVault

03/2018

2,667

3.5x

3.3x

21.7x

17.0x

40.2x

33.8x

747

14.7%

18.3%

8.2%

18.7%

Average

4.8x

4.4x

16.8x

14.3x

26.0x

22.5x

22.7%

25.2%

7.9%

13.9%

Italian software & services

TXT e-solutions

12/2017

121

1.2x

1.0x

11.2x

8.0x

47.6x

36.4x

40

6.9%

8.7%

13.4%

30.8%

Exprivia

12/2017

62

0.5x

0.5x

7.1x

6.3x

30.1x

9.3x

610

3.5%

4.4%

2.3%

225.0%

Piteco

12/2017

83

4.4x

3.5x

11.0x

8.4x

17.7x

12.4x

21

31.0%

33.6%

24.6%

42.3%

Reply

12/2017

2,254

2.1x

1.9x

15.3x

13.5x

24.6x

21.6x

1,025

12.7%

13.0%

11.4%

14.1%

Average

2.1x

1.7x

11.2x

9.1x

30.0x

19.9x

13.5%

14.9%

12.9%

78.1%

Source: Edison Investment Research, Bloomberg. Note: Priced at 2 October.

Exhibit 5: Financial summary

€'000s

2012

2013

2014

2015

2016

2017

2018e

2019e

31-December

IT GAAP

IT GAAP

IT GAAP

IT GAAP

IT GAAP

IT GAAP

IT GAAP

IT GAAP

PROFIT & LOSS

Revenue

 

 

11,593

11,109

13,045

19,368

25,057

27,783

30,516

34,750

EBITDA

 

 

2,624

2,014

2,339

1,463

(2,245)

1,711

4,575

6,986

Operating Profit (before amort. and except.)

1,765

916

609

(1,226)

(5,941)

(3,189)

(832)

1,311

Intangible Amortisation

0

0

0

(2,549)

(2,608)

(2,608)

(2,300)

(2,300)

Exceptionals

(319)

45

59

0

0

(700)

(600)

0

Other

0

0

0

0

0

0

0

0

Operating Profit

1,446

961

669

(3,775)

(8,549)

(6,496)

(3,732)

(989)

Net Interest

(298)

(376)

29

213

(156)

(2,191)

(624)

(624)

Profit Before Tax (norm)

 

 

1,467

539

638

(1,013)

(6,097)

(5,380)

(1,456)

687

Profit Before Tax (reported)

 

 

1,148

584

697

(3,562)

(8,705)

(8,687)

(4,356)

(1,613)

Tax

(452)

(359)

(609)

277

579

348

436

161

Profit After Tax (norm)

1,015

180

29

(934)

(5,692)

(5,164)

(1,311)

618

Profit After Tax (reported)

697

225

89

(3,284)

(8,126)

(8,339)

(3,921)

(1,452)

Average Number of Shares Outstanding (m)

22.0

22.0

22.0

22.8

25.8

28.1

35.7

35.7

EPS - normalised (c)

 

 

4.6

0.8

0.1

(4.1)

(22.0)

(18.3)

(3.7)

1.7

EPS - normalised and fully diluted (c)

 

4.6

0.8

0.1

(4.1)

(22.0)

(18.3)

(3.7)

1.7

EPS - (IFRS) (c)

 

 

3.2

1.0

0.4

(14.4)

(31.5)

(29.6)

(11.0)

(4.1)

Dividend per share (p)

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

EBITDA Margin (%)

22.6

18.1

17.9

7.6

-9.0

6.2

15.0

20.1

Adj Operating Margin (%)

15.2

8.2

4.7

-6.3

-23.7

-11.5

-2.7

3.8

BALANCE SHEET

Fixed Assets

 

 

6,691

9,905

5,719

20,301

20,379

18,864

17,357

15,383

Intangible Assets

1,111

2,462

4,640

18,539

18,372

16,944

15,537

13,677

Tangible Assets

635

606

692

916

915

792

692

577

Investments

4,945

6,836

387

846

1,092

1,128

1,128

1,128

Current Assets

 

 

12,767

15,491

32,681

42,588

37,012

37,634

35,166

36,222

Stocks

722

476

1,563

1,797

627

99

99

99

Debtors

5,488

5,820

7,866

10,228

10,233

12,384

13,870

15,812

Cash

2,065

2,967

4,900

11,249

9,063

11,235

7,344

7,298

Other

4,492

6,228

18,352

19,314

17,088

13,916

13,852

13,013

Current Liabilities

 

 

(8,871)

(10,333)

(13,639)

(20,517)

(22,679)

(19,480)

(19,925)

(20,459)

Creditors

(6,538)

(7,350)

(10,698)

(15,082)

(16,459)

(14,104)

(14,549)

(15,083)

Short term borrowings

(2,332)

(2,984)

(2,940)

(5,435)

(6,219)

(5,376)

(5,376)

(5,376)

Long Term Liabilities

 

 

(4,642)

(5,172)

(7,803)

(22,227)

(18,275)

(17,742)

(17,242)

(17,242)

Long term borrowings

(4,642)

(5,172)

(4,799)

(18,240)

(15,252)

(14,683)

(14,683)

(14,683)

Other long term liabilities

0

0

(3,005)

(3,987)

(3,023)

(3,060)

(2,560)

(2,560)

Net Assets

 

 

5,945

9,890

16,958

20,145

16,437

19,276

15,355

13,903

CASH FLOW

Operating Cash Flow

 

 

8,077

2,891

737

2,738

2,088

(1,921)

2,922

6,570

Net Interest

(298)

(376)

29

(324)

(155)

(626)

(612)

(617)

Tax

(452)

(359)

(609)

(1,576)

0

0

0

0

Capex

(3,095)

(2,384)

(3,905)

(20,045)

(6,378)

(6,321)

(6,200)

(6,000)

Acquisitions/disposals

0

0

(6,436)

3,045

46

1,275

0

0

Financing

0

0

12,341

6,573

4,418

11,178

0

0

Dividends

0

(180)

0

0

0

0

0

0

Net Cash Flow

4,232

(408)

2,156

(9,588)

18

3,585

(3,890)

(47)

Opening net debt/(cash)

 

 

6,352

4,909

4,822*

2,839

12,426

12,408

8,824

12,714

HP finance leases initiated

0

0

0

0

0

0

0

0

Other

(2,788)

128

(173)

0

0

0

(0)

0

Closing net debt/(cash)

 

 

4,909

5,189*

2,839

12,426

12,408

8,824

12,714

12,761

Source: Expert System, Edison Investment Research **FY14 was first year of consolidation for some subsidiaries.

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2018 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Expert System and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Investment Research Pty Ltd (Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd (AFSL: 427484)) and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research. Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2018. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2018 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Expert System and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Investment Research Pty Ltd (Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd (AFSL: 427484)) and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research. Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2018. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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