discoverIE Group — Raising the bar

discoverIE Group (LSE: DSCV)

Last close As at 21/02/2024

GBP6.96

−12.00 (−1.69%)

Market capitalisation

GBP671m

More on this equity

Research: TMT

discoverIE Group — Raising the bar

For FY23, discoverIE reported double-digit organic revenue growth, operating margin expansion to 11.5% and strong free cash generation. On track to meet its FY25 operating margin target of 13.5%, the company has set a more testing target of 15% by FY28. We have upgraded our forecasts, which reflect more modest revenue growth than in FY23 as the order book normalises and continued operating margin expansion, and we expect further M&A activity to boost growth and profitability.

Katherine Thompson

Written by

Katherine Thompson

Director

TMT

discoverIE Group

Raising the bar

FY23 results

Electrical components

9 June 2023

Price

915p

Market cap

£882m

€1.16:$1.24:£1

Net debt (£m) at end FY23

42.7

Shares in issue

96.4m

Free float

96%

Code

DSCV

Primary exchange

LSE

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

13.5

15.0

28.3

Rel (local)

16.0

19.8

29.6

52-week high/low

915p

597p

Business description

discoverIE is a leading international designer and manufacturer of customised electronics to industry, supplying customer-specific electronic products and solutions to original equipment manufacturers.

Next events

AGM

24 July 2023

Analyst

Katherine Thompson

+44 (0)20 3077 5700

discoverIE Group is a research client of Edison Investment Research Limited

For FY23, discoverIE reported double-digit organic revenue growth, operating margin expansion to 11.5% and strong free cash generation. On track to meet its FY25 operating margin target of 13.5%, the company has set a more testing target of 15% by FY28. We have upgraded our forecasts, which reflect more modest revenue growth than in FY23 as the order book normalises and continued operating margin expansion, and we expect further M&A activity to boost growth and profitability.

Year
end

Revenue
(£m)

PBT*
(£m)

Diluted EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

03/22

379.2

37.6

29.4

10.80

31.1

1.2

03/23

448.9

46.3

35.2

11.45

26.0

1.3

03/24e

457.3

46.9

35.3

12.00

25.9

1.3

03/25e

472.1

48.9

36.4

12.50

25.1

1.4

Note: *PBT and EPS as per discoverIE’s underlying metric, excluding amortisation of acquired intangibles and exceptional items.

FY23: Organic revenue +10%, underlying EPS +20%

FY23 revenue came in slightly ahead of the April trading update expectations, with reported revenue growth of 18% (10% organic, 5% from acquisitions, 3% FX) and underlying operating profit growth of 25%. Underlying EPS came in 5.6% ahead of our forecast and grew 20% y-o-y. Net debt was significantly lower than we expected, resulting in year-end gearing (net debt/EBITDA) of 0.7x.

Outlook: Raising operating margin target to 15%

As previously flagged by management, the order book has started to normalise as supply chain disruption has eased, although in terms of revenue visibility it is still higher than before COVID-19. Based on FY23 performance, we have revised up our forecasts for FY24 (underlying EPS upgrade of 3.5%) and introduce forecasts for FY25. As a progression from the 13.5% underlying operating margin target for FY25, the company has introduced a new target of 15% to be achieved by FY28. We expect these targets to be reached through a combination of organic growth and the acquisition of higher-margin businesses.

Valuation: Reflects growth potential

The stock is trading at a small premium to its broader UK industrial technology peer group on a P/E basis for FY24, but at a discount compared to peers with a similar decentralised operating model (such as Halma and Spirax). The focus on strategic growth markets supports sustained organic revenue growth and we see potential for upside to earnings through operating margin expansion and accretive acquisitions. We note that over the last year, we upgraded our forecasts four times on better trading and twice to reflect accretive acquisitions. The company has ample headroom for further acquisitions and a strong pipeline of opportunities, which could well be boosted by the current uncertain macroeconomic environment.

Review of FY23 results

Exhibit 1: FY23 results highlights

£m

FY22a

FY23e

FY23a

Diff

y-o-y

Revenues

379.2

439.8

448.9

2.1%

18.4%

EBITDA

56.1

64.8

65.4

1.0%

16.6%

EBITDA margin

14.8%

14.7%

14.6%

(0.2%)

(0.2%)

Underlying operating profit

41.4

49.8

51.8

4.1%

25.1%

Underlying operating margin

10.9%

11.3%

11.5%

0.2%

0.6%

Normalised operating profit

44.8

52.2

54.3

4.1%

21.2%

Normalised operating margin

11.8%

11.9%

12.1%

0.2%

0.3%

Underlying PBT

37.6

44.4

46.3

4.3%

23.1%

Normalised PBT

41.0

46.8

48.8

4.3%

19.0%

Normalised net income

30.8

34.6

36.1

4.3%

17.4%

Normalised diluted EPS (p)

32.1

35.1

36.7

4.5%

14.4%

Underlying diluted EPS (p)

29.4

33.3

35.2

5.6%

19.5%

Reported basic EPS (p)

27.1

19.2

22.3

16.1%

(17.6%)

Dividend per share (p)

10.8

11.5

11.5

0.0%

6.0%

Net (debt)/cash

(30.2)

(54.6)

(42.7)

(21.8%)

41.4%

Net debt/EBITDA (x)

0.6

0.9

0.7

Source: discoverIE, Edison Investment Research

discoverIE’s 19 April trading update expected reported revenue growth of 16% and organic revenue growth of 8% for FY23. The final reported revenue for FY23 came in ahead of this, partly due to a revenue contribution of £5m for a one-off pass-through of elevated semiconductor costs. At constant exchange rates (CER), the group generated revenue growth of 15% and organic revenue growth of 10% (which includes the semiconductor cost pass-through). The company noted that of the 10% growth, c 5% was from volume, 4% from pricing and 1% from the semiconductor cost pass-through.

While the margin is not disclosed, the company noted that organic gross margin improved by 1pp at the group level. Underlying operating profit grew 25% y-o-y and was 4% higher than we forecast, resulting in the underlying operating margin increasing 0.6pp to 11.5% (versus our 11.3%). The company estimates that the drop-through from organic revenue growth (excluding the semiconductor cost pass-through) to underlying operating profit was 19%, mainly due to scale and internal efficiencies. Acquisitions made over the last two years contributed revenue of £14.9m and underlying operating profit of £2.2m.

Reported operating profit included £15.8m amortisation of acquired intangibles and exceptional charges totalling £1.4m (£1.8m acquisition costs and £1.5m contingent consideration accrual offset by a £1.5m insurance receipt and a £0.4m credit relating to last year’s disposal of Acal BFi). The tax rate on reported PBT was 26.8%; on an underlying basis the rate was 25.3%. Overall, this resulted in underlying diluted EPS of 35.2p (+20% y-o-y), 5.6% ahead of our forecast and 4.5% ahead of consensus.

The final dividend of 7.9p was in line with our forecast, resulting in a full year dividend of 11.45p (+6% y-o-y, 3.1x cover).

Net debt came in significantly lower than forecast at £42.7m. The company converted 94% of underlying operating profit to operating cash flow (EBITDA less working capital and capex) and generated free cash flow of £33m in the year. The company had estimated a year-end net debt/EBITDA of 0.9x in its April trading update, but the lower net debt position brought this down to 0.7x.

Exhibit 2: Divisional performance

£m

FY23

FY22

Reported y-o-y

CER y-o-y

Organic CER y-o-y

Revenues

Magnetics & Controls

280.8

234.7

20%

16%

11%

Sensing & Connectivity

168.1

144.5

16%

14%

8%

Total revenues

448.9

379.2

18%

15%

10%

Underlying operating profit

Magnetics & Controls

38.4

29.8

29%

Sensing & Connectivity

25.6

23.3

10%

Unallocated

(12.2)

(11.7)

4%

Total operating profit

51.8

41.4

25%

Underlying operating margin

pp change

Magnetics & Controls

13.7%

12.7%

1.0%

Sensing & Connectivity

15.2%

16.1%

(0.9%)

Total operating margin

11.5%

10.9%

0.6%

Source: discoverIE

Magnetics and Controls: revenue growth was 20% or 11% on an organic CER basis. The £5m semiconductor cost pass-through was reported in this division and, stripping it out, organic growth was 9%. Orders remained at a high level (£263.9m), although were down 9% on a CER basis resulting in a book-to-bill of 0.96:1. On a regional basis, organic growth was 22% in the UK, 19% in Europe and 21% in North America, whereas growth declined by 12% in Asia. China saw a 25% decline in organic revenue due to lower demand for wind energy-related products, as well as some customers opting to have their products manufactured nearer to their end-customers. Growth in India was 2% – stronger growth in H1 was tempered by inventory correction by one large customer in H2. Underlying operating profit grew 29% y-o-y and the margin increased by 1pp to 13.7%, helped by revenue growth and operating efficiencies.

Sensing and Connectivity: revenue growth was 16% or 8% on an organic CER basis. On a geographic basis, organic CER revenue growth was 6% in the UK, 5% in Europe, 13% in North America and 15% in Asia and rest of the world (China saw strong demand for solar-related products). The division received orders worth £173.7m, essentially flat y-o-y, resulting in a book-to-bill of 1.03:1. Underlying operating profit was up 10% y-o-y, resulting in a 0.9pp operating margin decline to 15.2%. This was due to increased investment, particularly for recent acquisitions, in sales resource and back office support.

Update on KSIs and KPIs

discoverIE sets and tracks key strategic indicators (KSIs) and key performance indicators (KPIs). Exhibit 3 summarises the company’s performance since FY14.

The current underlying operating margin target of 13.5% is for FY25. The company has introduced a new target of 15% over the next five years. In both cases, it expects to achieve these margins through a combination of organic and acquisitive growth.

The company targets four key markets: Industrial & Connectivity, Medical, Renewables and Transport. Revenue from these markets made up 77% of group revenue, up 1pp from FY22 and equivalent to 12% organic growth in FY23. This compares to organic growth of only 3% from other markets. Within the target markets, Renewables saw a 6% decline, mainly due to lower demand for wind power-related products, but the three other markets more than compensated for this with 15% growth. The focus on four markets helps diversify the risk from any one market.

Until last year, the company had a target to reduce scope one and two carbon emissions intensity (tCO2e/£m revenue) by 50% from CY19 to CY25. In November 2022, it changed the target to reduce carbon emissions on an absolute basis (including acquisitions) by 65% from CY21 to CY25. By the end of FY23, it had already achieved a 35% reduction, mainly from installing renewable energy at manufacturing sites (eg solar panels in Sri Lanka and Thailand). It expects to achieve the remaining reduction through a combination of manufacturing site renewable energy generation, switching energy providers to renewable sources, shifting from gas heating to electric options and, where this is not possible, buying renewable energy certificates. To support this process, M&A due diligence specifically includes ESG considerations to enable the company to quickly reduce the target company’s carbon footprint once acquired.

Exhibit 3: KSI and KPI track record and targets

Source: discoverIE

M&A still a key part of the strategy

The company was slightly less active in terms of completed acquisitions during FY23, mainly due to the elevated price expectations of vendors. According to management, expectations came down earlier this year but have started creeping up again more recently. However, pricing is now within the company’s target range. At the same time, it has a very active pipeline of potential deals and with gearing of 0.7x, plenty of headroom to fund these deals (its target gearing range is 1.5–2.0x).

The company has a £240m syndicated bank facility and in May, it extended the remaining term by one year to June 2027. It also has an £80m accordion facility which it can use to extend the facility to £320m. At the end of FY23, it had drawn down £88m of the facility. We estimate that it has headroom of £70–100m at its target gearing range.

Outlook and changes to forecasts

The group received orders totalling £437.5m in the year (£236.9m in H123, £200.6m in H223), resulting in a book-to-bill of 0.97x (H1: 1.08x, H2: 0.88x). This resulted in an order book of £223m at the end of FY23, essentially flat y-o-y. At the end of FY22, management noted that the order book revenue visibility was c 6.5 months, compared to 4.0–4.5 months pre-COVID. As expected and flagged by management, this has reduced over the course of the year to stand at roughly 5.5 months now. As supply chain issues have eased, customers have not felt the need to place orders as far in advance. Management believes that the order book may not revert to pre-COVID levels but could sit at more like five months’ visibility, as the recent memory of supply chain disruption may make customers more cautious in their ordering behaviour. For the same reason, the company is likely to carry a slightly higher level of inventory than pre-COVID.

In FY23, the company won new project designs with a lifetime value of £273m, up 11% y-o-y – this is a key driver of organic growth.

So far this year, management commented that it had seen organic revenue growth in the mid-single digits. We have revised our forecasts to reflect FY23 results and introduce forecasts for FY25. We note that our FY24 revenue forecast equates to 1.9% growth over FY23. However, if the £5m one-off semiconductor cost pass-through is excluded from FY23 revenue, the growth is 3%. Overall, we upgrade our FY24 underlying EPS forecast by 3.5%. Based on lower net debt at the end of FY23, we reduce our end-FY24 net debt forecast by 17% and expect net debt/EBITDA to reduce to 0.5x from our previous 0.7x forecast.

Exhibit 4: Changes to forecasts

£m

FY24e old

FY24e new

Change

y-o-y

FY25e new

y-o-y

Revenues

453.4

457.3

0.9%

1.9%

472.1

3.2%

EBITDA

68.2

68.9

1.0%

5.3%

71.2

3.4%

EBITDA margin

15.0%

15.1%

0.0%

0.5%

15.1%

0.0%

Underlying operating profit

52.1

53.5

2.6%

3.2%

55.5

3.8%

Underlying operating margin

11.5%

11.7%

0.2%

0.2%

11.8%

0.1%

Normalised operating profit

54.5

55.9

2.5%

2.9%

57.9

3.6%

Normalised operating margin

12.0%

12.2%

0.2%

0.1%

12.3%

0.0%

Underlying PBT

45.3

46.9

3.5%

1.3%

48.9

4.3%

Normalised PBT

47.7

49.3

3.3%

1.1%

51.3

4.1%

Normalised net income

35.6

36.6

2.7%

1.3%

37.8

3.4%

Normalised diluted EPS (p)

35.9

37.1

3.3%

1.2%

38.2

2.9%

Underlying diluted EPS (p)

34.1

35.3

3.5%

0.4%

36.4

3.1%

Reported basic EPS (p)

20.7

23.1

12.0%

3.7%

24.4

5.5%

Dividend per share (p)

12.0

12.0

0.0%

4.8%

12.5

4.2%

Net (debt)/cash

(41.1)

(34.0)

(17.3%)

(20.4%)

(25.2)

(25.9%)

Net debt/EBITDA (x)

0.7

0.5

0.4

Source: Edison Investment Research

Valuation

Exhibit 5 shows financial metrics for discoverIE’s peer group and Exhibit 6 shows the valuation metrics. For the peer group, we use companies active in the electronics market and acquisitive industrial companies. The stock has gained 15% since results were announced, so despite an upgrade to our forecasts, the stock trades at a small premium to its broader UK industrial technology peer group on an FY24e P/E basis. However, it trades at a discount compared to peers with a similar decentralised operating model (such as Halma and Spirax). The focus on strategic growth markets supports sustained organic revenue growth (we note that for FY18–23, the five-year CAGR for organic revenue was 10%) and we see potential for upside to earnings through operating margin expansion and accretive acquisitions. The company has debt headroom for further acquisitions and a strong pipeline of opportunities.

Exhibit 5: Peer group financial metrics

Year end

Share price

Market cap

Rev growth (%)

EBITDA margin (%)

EBIT margin (%)

(p)

£m

CY

NY

CY

NY

CY

NY

discoverIE

31-Mar

915

882

1.9

3.2

15.1

15.1

11.7

11.8

Diploma

30-Sep

3056

4096

17.4

4.7

20.9

20.9

18.4

18.5

Gooch & Housego

30-Sep

563

141

10.7

5.0

13.8

15.1

7.4

8.9

TT electronics

31-Dec

163.4

289

2.0

0.6

10.7

11.6

8.0

8.7

XP Power

31-Dec

2205

435

4.9

2.9

21.2

22.6

15.3

16.4

Avon Protection

30-Sep

890

269

5.3

-6.1

10.8

16.3

4.7

10.2

Halma

31-Mar

2462

9347

7.2

5.7

24.3

24.5

21.1

21.4

Spectris

31-Dec

3695

3864

6.4

4.7

20.8

21.4

16.6

17.4

Spirax-Sarco Engineering

31-Dec

11180

8248

12.7

5.3

27.0

27.5

22.6

23.2

Average

8.3

2.8

18.7

20.0

14.3

15.6

Median

6.8

4.7

20.9

21.2

16.0

16.9

Premium/(discount) to average

(77.5)

13.7

(19.4)

(24.6)

(18.0)

(24.5)

Premium/(discount) to median

(72.5)

(31.8)

(27.8)

(28.7)

(26.7)

(30.4)

Source: Edison Investment Research, Refinitiv (as at 5 June)

Exhibit 6: Peer group valuation metrics

EV/sales (x)

EV/EBITDA (x)

EV/EBIT (x)

P/E (x)

Div yield (%)

CY

NY

CY

NY

CY

NY

CY

NY

CY

NY

discoverIE

1.8

1.8

12.1

11.7

15.0

14.4

25.9

25.1

1.3

1.4

Diploma

3.6

3.5

17.3

16.6

19.7

18.8

25.2

24.2

1.9

2.0

Gooch & Housego

1.2

1.1

8.4

7.3

15.8

12.4

20.2

15.8

2.3

2.4

TT electronics

0.7

0.7

6.4

5.8

8.5

7.8

8.8

7.8

4.1

4.5

XP Power

2.1

2.0

9.9

9.0

13.7

12.4

13.9

12.5

4.3

4.4

Avon Protection

1.5

1.6

13.9

9.8

32.1

15.7

48.5

19.7

4.2

3.8

Halma

5.1

4.8

21.0

19.8

24.3

22.7

30.5

28.7

0.9

1.0

Spectris

2.6

2.5

12.6

11.7

15.8

14.4

20.0

18.5

2.2

2.3

Spirax-Sarco Engineering

5.0

4.7

18.4

17.1

21.9

20.3

27.9

25.7

1.5

1.6

Average

2.7

2.6

13.5

12.1

19.0

15.6

24.4

19.1

2.7

2.7

Median

2.4

2.3

13.3

10.7

17.7

15.0

22.7

19.1

2.2

2.3

Premium/(discount) to average

(32.8)

(32.3)

(10.0)

(3.2)

(21.1)

(7.1)

6.2

31.4

(50.9)

(50.3)

Premium/(discount) to median

(22.5)

(22.0)

(8.5)

9.4

(15.7)

(4.0)

14.1

31.6

(41.6)

(41.8)

Source: Edison Investment Research, Refinitiv (as at 5 June)

Exhibit 7: Financial summary

£m

2020

2021

2022

2023

2024e

2025e

Year end 31 March

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

297.9

302.8

379.2

448.9

457.3

472.1

EBITDA

 

 

43.6

44.0

56.1

65.4

68.9

71.2

Normalised operating Profit (before am, SBP and except.)

31.6

31.9

44.8

54.3

55.9

57.9

Underlying operating Profit (before am. and except.)

29.8

30.8

41.4

51.8

53.5

55.5

Amortisation of acquired intangibles

(9.0)

(11.1)

(14.0)

(15.8)

(16.0)

(16.0)

Exceptionals

(4.3)

(2.6)

(6.5)

(1.4)

(1.0)

(1.0)

Share-based payments

(1.8)

(1.1)

(3.4)

(2.5)

(2.4)

(2.4)

Operating Profit

16.5

17.1

20.9

34.6

36.5

38.5

Net Interest

(4.3)

(3.6)

(3.8)

(5.5)

(6.6)

(6.6)

Profit Before Tax (norm)

 

 

27.3

28.3

41.0

48.8

49.3

51.3

Profit Before Tax (FRS 3)

 

 

12.2

13.5

17.1

29.1

29.9

31.9

Tax

(3.3)

(4.0)

(7.4)

(7.8)

(7.7)

(8.4)

Profit After Tax (norm)

21.8

21.6

30.8

36.1

36.6

37.8

Profit After Tax (FRS 3)

8.9

9.5

9.7

21.3

22.2

23.5

Discontinued operations

5.4

2.5

15.5

0.0

0.0

0.0

Net income (norm)

21.8

21.6

30.8

36.1

36.6

37.8

Net income (FRS 3)

14.3

12.0

25.2

21.3

22.2

23.5

Ave. Number of Shares Outstanding (m)

84.0

88.8

93.0

95.4

95.9

96.4

EPS - normalised & diluted (p)

 

 

25.1

23.4

32.1

36.7

37.1

38.2

EPS - underlying, diluted (p)

 

 

24.4

22.4

29.4

35.2

35.3

36.4

EPS - IFRS basic (p)

 

 

17.0

13.5

27.1

22.3

23.1

24.4

EPS - IFRS diluted (p)

 

 

16.5

13.0

26.3

21.7

22.5

23.8

Dividend per share (p)

2.97

10.15

10.80

11.45

12.00

12.50

EBITDA Margin (%)

14.6

14.5

14.8

14.6

15.1

15.1

Normalised operating margin (before am, SBP and except.) (%)

10.6

10.5

11.8

12.1

12.2

12.3

discoverIE underlying operating margin (%)

10.0

10.2

10.9

11.5

11.7

11.8

BALANCE SHEET

Fixed Assets

 

 

236.4

244.6

326.5

335.9

323.0

311.0

Intangible Assets

182.2

190.8

263.3

272.0

257.7

243.4

Tangible Assets

46.3

45.9

45.4

44.4

45.8

48.1

Deferred tax assets

7.9

7.9

17.8

19.5

19.5

19.5

Current Assets

 

 

197.4

183.6

266.2

249.8

265.6

279.0

Stocks

68.4

67.7

77.8

90.0

92.7

95.7

Debtors

90.1

84.9

78.0

74.6

83.9

90.5

Cash

36.8

29.2

108.8

83.9

87.6

91.4

Current Liabilities

 

 

(103.6)

(107.8)

(190.3)

(151.2)

(153.0)

(151.8)

Creditors

(94.0)

(102.2)

(114.2)

(107.3)

(109.1)

(107.9)

Lease liabilities

(5.3)

(4.8)

(4.7)

(4.0)

(4.0)

(4.0)

Short-term borrowings

(4.3)

(0.8)

(71.4)

(39.9)

(39.9)

(39.9)

Long-term liabilities

 

 

(129.7)

(112.0)

(112.0)

(130.9)

(120.9)

(110.8)

Long-term borrowings

(93.8)

(75.6)

(67.6)

(86.7)

(81.7)

(76.7)

Lease liabilities

(14.7)

(16.7)

(16.4)

(14.8)

(14.8)

(14.8)

Other long-term liabilities

(21.2)

(19.7)

(28.0)

(29.4)

(24.4)

(19.3)

Net Assets

 

 

200.5

208.4

290.4

303.6

314.7

327.4

CASH FLOW

Operating Cash Flow

 

 

48.0

56.8

42.5

52.1

55.7

57.5

Net Interest

(3.7)

(3.1)

(3.3)

(4.8)

(6.1)

(6.1)

Tax

(6.4)

(7.2)

(7.1)

(9.0)

(12.7)

(13.5)

Capex

(6.3)

(3.9)

(6.2)

(5.6)

(9.0)

(9.2)

Acquisitions/disposals

(73.6)

(20.5)

(46.8)

(25.1)

(2.0)

(2.0)

Financing

53.9

(6.6)

47.2

(7.5)

(6.0)

(6.1)

Dividends

(8.1)

(2.8)

(9.4)

(10.5)

(11.2)

(11.8)

Net Cash Flow

3.8

12.7

16.9

(10.4)

8.8

8.8

Opening net cash/(debt)

 

 

(63.3)

(61.3)

(47.2)

(30.2)

(42.7)

(34.0)

HP finance leases initiated

0.0

0.0

0.0

0.0

0.0

0.0

Other

(1.8)

1.4

0.1

(2.1)

(0.0)

(0.0)

Closing net cash/(debt)

 

 

(61.3)

(47.2)

(30.2)

(42.7)

(34.0)

(25.2)

Source: discoverIE, Edison Investment Research


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London │ New York │ Frankfurt

20 Red Lion Street

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London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

General disclaimer and copyright

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

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 2023 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.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

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