Rank Group — Update 23 August 2016

Rank Group (LSE: RNK)

Last close As at 02/03/2024

73.00

0.80 (1.11%)

Market capitalisation

GBP342m

More on this equity

Research: Consumer

Rank Group — Update 23 August 2016

Rank Group

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Consumer

Rank Group

Building blocks in place

Final results

Travel & leisure

23 August 2016

Price

221.5p

Market cap

£865m

€1.15/$1.31/£

Net debt at 30 June 2016 (£m)

41.2

Shares in issue

390.7m

Free float

29%

Code

RNK

Primary exchange

LSE

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(6.6)

(10.5)

(15.4)

Rel (local)

(8.6)

(18.6)

(22.7)

52-week high/low

295.50p

199.70p

Business description

Rank is the UK’s largest multi-channel casino operator with Grosvenor Casinos and the second largest multi-channel bingo operator with Mecca. It is also the fourth largest bingo operator in Spain and has two casinos in Belgium. About 95% of Rank’s revenues arise in the UK.

Next events

AGM/ Q1 IMS

October 2016

Interim results

January 2017

Analysts

Jane Anscombe

+44 (0)20 3077 5740

Katherine Thompson

+44 (0)20 3077 5730

Rank Group is a research client of Edison Investment Research.

A weak Q416 left final results a tad below our forecasts despite good results in Mecca venues and Grosvenor digital. However, cash generation was strong and the dividend was lifted by 16%. The organic growth strategy (focusing on multi-channel development) remains intact and while the failure to progress what would have been a transformational acquisition of William Hill (with 888) was a disappointment, it demonstrates the scale of management’s ambitions. We suspect that future accretive opportunities will arise within the consolidating online gambling space.

Year end

Revenue* (£m)

EBITDA**
(£m)

PBT**
(£m)

EPS**
(p)

DPS
(p)

P/E
(x)

Yield
(%)

06/15

738.3

126.3

74.1

14.6

5.6

15.4

2.5

06/16

753.0

128.2

77.4

15.4

6.5

14.6

2.9

06/17e

782.7

133.0

81.5

16.2

7.4

13.7

3.3

06/18e

809.4

141.5

90.0

17.9

8.8

12.4

3.9

Note: *Revenue is before customer incentives. **Normalised, excluding amortisation of acquired intangibles, one-off and exceptional items.

Swings and roundabouts, strong cash flows

FY16 normalised EPS increased 5% to 15.4p (Edison estimate 15.7p) with a 2% decline in operating profit offset by lower net interest. Divisional progress was mixed, with Mecca retail performing very well but Grosvenor casinos affected by an industry-wide weak Q4 (trends are reported to have normalised so far in Q117). Digital was the other way round with Grosvenor digital gathering momentum, with sports and poker soft-launched in the period and operating profit up 71%, while Mecca’s platform migration caused some disruption in Q416 as had already been flagged. Improved cross-selling remains a key opportunity for Rank, which only generates 13% of its revenue from digital versus almost 40% for the UK market. We have trimmed our FY17 forecasts to reflect the lower base and now forecast EPS of 16.2p (previously 16.7p). Net debt fell by 22% in FY16, to £41.2m.

Proposed offer for William Hill withdrawn

The proposed offer, made in conjunction with 888, would have created the UK’s largest multi-channel gaming operator with proforma revenues of £2.66bn and EBITDA of over £520m, before at least £100m of cost synergies and material potential revenue synergies. However, with William Hill management refusing to engage, we believe it was better for Rank and 888 to walk away than to overpay.

Valuation: 2016e EV/EBITDA only 6.9x

Rank’s shares have fallen from a 2016 peak of 295.5p (on 8 January) weighed by concerns over UK consumer spending, disappointment over Mecca’s digital migration issues and uncertainty around the William Hill situation. However, the rating now looks too low, with annualised 2016e EV/EBITDA only 6.9x versus 11.9x for the peer group, suggesting good upside potential. We are hopeful of a positive Q117 IMS in mid October, which would be a positive catalyst

FY16 results and revised estimates

Headline numbers showed revenue up 2% to £753m, normalised operating profit down 2% to £82.4m and normalised PBT up 4% to £77.4m. We had forecast operating profit of £85.0m; the difference was due to a shortfall in Grosvenor, partly offset by a better than expected result at Mecca. Interest is falling slightly faster than we had allowed for, helped by the refinancing of bank facilities in September 2015. Normalised FY16 PBT of £77.4m was only 2% below our target and our revised FY17 PBT is £81.5m, which implies 5.3% growth.

Exhibit 1: Half-yearly results

Year to June £m

H115

H215

FY15

H116

H216

FY16

FY16old

FY17e

FY17old

FY18e

Grosvenor venues

195.7

205.4

401.1

205.1

203.0

408.1

414.0

418.3

423.0

426.4

Grosvenor digital

9.9

12.4

22.3

13.9

16.6

30.5

30.5

41.2

43.0

52.5

Grosvenor revenue

205.6

217.8

423.4

219.0

219.6

438.6

444.5

459.5

466.0

478.9

Mecca venues

111.8

112.6

224.4

109.8

111.7

221.5

221.0

219.0

219.0

217.0

Mecca digital

31.5

33.7

65.2

33.2

33.0

66.2

65.5

73.8

73.0

81.9

Mecca revenue

143.3

146.3

289.6

143.0

144.7

287.7

286.5

292.8

292.0

298.9

Enracha revenue

12.8

12.5

25.3

12.2

14.5

26.7

25.0

30.5

27.0

31.6

Group revenue*

361.7

376.6

738.3

374.2

378.8

753.0

756.0

782.7

785.0

809.4

EBITDA

62.1

64.2

126.3

62.7

65.5

128.2

130.0

133.0

136.0

141.5

EBITDA margin %

17.2%

17.0%

17.1%

16.8%

17.3%

17.0%

17.2%

17.0%

17.3%

17.5%

Depreciation/amortisation

(21.3)

(21.0)

(42.3)

(22.3)

(23.5)

(45.8)

(45.0)

(47.0)

(46.5)

(47.5)

Grosvenor venues op. profit

29.1

34.3

63.4

30.9

30.0

60.9

67.8

66.5

71.0

69.0

Grosvenor digital op. profit

1.9

1.2

3.1

2.4

2.9

5.3

4.7

7.5

7.0

10.5

Grosvenor operating profit

31.0

35.5

66.5

33.3

32.9

66.2

72.5

74.0

78.0

79.5

Mecca venues op. profit

14.5

14.4

28.9

14.3

18.6

32.9

29.0

30.0

27.5

31.0

Mecca digital op. profit

8.4

5.7

14.1

5.6

3.0

8.6

10.5

10.0

12.0

12.0

Mecca operating profit

22.9

20.1

43.0

19.9

21.6

41.5

39.5

40.0

39.5

43.0

Enracha operating profit

0.9

1.7

2.6

1.4

2.2

3.6

2.8

4.0

2.9

4.5

Central costs

(14.0)

(14.1)

(28.1)

(14.2)

(14.7)

(28.9)

(29.8)

(32.0)

(30.9)

(33.0)

Group operating profit (norm)

40.8

43.2

84.0

40.4

42.0

82.4

85.0

86.0

89.5

94.0

Net finance costs (norm)

(5.0)

(4.9)

(9.9)

(3.0)

(2.0)

(5.0)

(6.0)

(4.5)

(5.5)

(4.0)

PBT (norm)

35.8

38.3

74.1

37.4

40.0

77.4

79.0

81.5

84.0

90.0

Source: Rank Group, Edison Investment Research. Note: *Revenue is before customer incentives.

Grosvenor casinos (60% of FY16 operating profit)

FY16 revenue increased by 4% and operating profit was almost flat at £66.2m, within which digital increased by £2.2m to £5.3m (despite an extra £1.5m full year effect of RGD gaming duty) but venues fell by a similar amount to £60.9m. Grosvenor digital’s migration to the new Bede gaming platform (end February) went well. The new sportsbook (powered by Kambi) and digital poker (Microgaming) were successfully soft-launched in June and should increasingly contribute in the current year. Venues’ revenue increased by 2% but Q416 win margins and visits were disappointing both in London and the provinces, in line with the industry (we believe that visits may have been impacted by uncertainty ahead of the June 23 Brexit vote). This left venues’ H216 operating profit at £30.0m, £4.3m below the prior period despite an uplift in trading in the Luton casino, where a £4.3m expansion and refurbishment was completed in September 2015.

For FY17 we expect a good recovery in Grosvenor venues’ operating profit, with trading reported to have normalised so far in Q117, a full-year benefit of a £10m investment in new slot machines and electronic roulette tables and the benefit of refurbishments in Leeds and Nottingham. We also expect further strong growth in Grosvenor digital, with better products and marketing and rising margins as it scales up. The cross-selling opportunity is a key plank of Rank management’s organic growth strategy: less than 3% of its venues’ customers play at grosvenorcasinos.com, yet at least a quarter of them are estimated to play online. Its UK online casino market share is less than 2% and management’s medium-term goal is to attain nearer 10% (which would imply revenues of over £100m, double what we are currently forecasting for FY18).

Mecca bingo (37% of FY16 operating profit)

Mecca’s FY16 revenue increased by 2% l-f-l but reported was 1% lower at £287.7m, with three clubs closed during the year. Operating profit declined by £1.5m to £41.5m, better than we had expected due to a strong second half in the bingo clubs. Mecca has worked very hard on its multichannel product offering and in widening its demographic appeal, which has paid off in the form of increased customer numbers. For example, younger players’ visit frequency might be less but they are more likely to play on Mecca Max tablets (5,600 added at the beginning of FY16 and 2,500 incremental units to be rolled-out in FY17). A Max customer’s spend is typically four times higher than that of a paper player. Overall, Mecca venue’s operating profit increased by 14% to £32.9m. With the industry in structural decline, and some cost pressures (increased marketing and a full year of the Living Wage in FY17) we expect venues’ operating profit to settle back to around £30.0m in FY17, still ahead of our previous £27.5m forecast.

Mecca digital’s platform migration disruption was flagged in the May IMS (Edison update note of 12 May) and the final results showed the impact on operating profit, down £5.5m to £8.6m (with £3.3m of the reduction due to the full year effect of RGD and some impact too from increased self-exclusions). We believe that Mecca digital is probably six months behind target in terms of functionality, but the platform is now performing much more robustly and new games will soon be added from leading providers such as Net Entertainment and NXY. Management intends to focus on customer retention and on widening the VIP customer base during FY17. Mecca has a 9-10% share of the growing but competitive UK online bingo market and we expect stronger revenue growth and higher EBITDA margins in FY17 as the business scales up.

During FY17 we expect Rank to introduce its new cross-channel (digital and retail) bingo brand. Part of the quid pro quo for the 2014 bingo duty cut was a commitment to opening three new bingo clubs, which are intended to offer a different proposition to traditional retail bingo and appeal to a different demographic. Rank is awaiting planning permission on a number of venues. For Mecca digital, the new brand will enable it to cross-sell, retaining players who may have been on a losing streak and attracting players who are looking for something different.

Enracha (3% of FY16 operating profit)

Rank’s Spanish bingo business had a very good year with revenue up 6% (7% in euros) and operating profit up 38%, reflecting the improving economic backdrop and the benefit of product improvements. The number of customers increased by 2% and the number of visits by 10%, although the spend per visit fell 4%. Our forecasts assume steady growth in euro terms, with a translation boost assuming sterling stays at €1.15-1.2.

Strong cash flows and balance sheet

Rank’s FY16 EBITDA of £128.2m converted into £110.2m of cash generated from operations (Exhibit 3), an 86% conversion rate, despite a working capital outflow. Capex was £52.7m, up from £31.9m in FY15 and included £24.8m in Grosvenor venues (including the Luton extension and The Park Tower refurbishment), £9.1m in Mecca venues and £7.5m in the new gaming platform and data analytics. Other material cash flow items included a £21.5m payment of disputed tax (as expected, relating to a tax avoidance case). Overall Rank’s net debt fell from £52.9m to £41.2m in FY16. Net debt/EBITDA was only 0.3 times and gearing was only 11.7%; net assets at 30 June 2016 were £352.6m, up from £294.4m a year earlier.

Management now plans capex of £60-70m in FY17, well above our previous forecast of £45m. Additional areas include new gaming machines in Grosvenor Casinos after the positive pay-backs in FY16, as well as the Leeds and Nottingham casino refurbishments. As a result, we now expect June 2017 net debt of £34.0m (previous estimate £9.0m) but we still expect the group to have eliminated net debt completely by end FY18 in the absence of any major acquisitions.

Proposed consortium offer for William Hill

On 25 July Rank and 888 Holdings (888) confirmed they were considering a possible consortium offer for William Hill and on 10 August they submitted a non-binding proposal worth 364p per William Hill share (versus a share price of 313.6p on Friday 22 July). On 15 August this was increased to a proposal worth 394p per share (before expected cost and revenue synergies and a potential re-rating). Following completion William Hill, Rank and 888 shareholders would have owned 48.8%, 23.8% and 27.4% of the enlarged group respectively.

The proposed merger would have created the UK’s largest multi-channel operator (ahead of Ladbrokes Coral) with proforma revenues of £2.66bn, EBITDA of £522m and a land-based/digital split of about 60/401. Proforma net debt would have been £2.2bn or 4.3x proforma EBITDA and cash restructuring costs were forecast at c £69m, but as synergies flowed through the net debt leverage ratio was expected to fall rapidly to 2.5-3.0x in 2018. Combined marketing spend of over £300m and strong brands across the full suite of sports, casino, poker and bingo were expected to produce material revenue synergies (eg cross-selling 888 and William Hill’s content to Rank’s c  three million customers) while the auditors signed off on net cost-savings of at least £100m even without input from William Hill management.

Edison estimates based on Rank and WMH 12-months to June 2016 and 888 2015 reported results.

Rank’s CEO Henry Birch would have been CEO of the enlarged group and we believe the management and operational structure would have been more straightforward than perhaps perceived with, broadly, 888 in charge of digital, William Hill running the betting retail estate and Rank the bingo/casino venues and corporate functions. The proposal was supported by Rank and 888’s major shareholders but was rejected by the William Hill management on the grounds of price and complexity. Having failed to persuade them to engage, Rank and 888 decided not to further improve the proposal and withdrew on 18 August (before the Takeover Panel deadline to submit a firm bid on 21 August). William Hill’s management now needs to show that it can justify turning down a proposal that was already at a sizeable premium (it has just upped its 2016 profit guidance), while Rank and 888’s management have demonstrated an enthusiasm to participate in sector consolidation, but not at any price.

Valuation

Exhibit 2 updates our peer group comparison; we show the average both with and without Paddy Power Betfair, which trades on a noticeably above average rating. As a generalisation, land-based operations are more mature and capital-intensive and trade at lower EV/EBITDA multiples than pure online. Applying a sum-of-the parts approach our valuation would be 277-309p, which would still only imply a calendarised 2016e EV/EBITDA of 8.6-9.5x.

Exhibit 2: Peer group comparison

Company

Price

Mkt Cap

EBITDA (x)

P/E (x)

 

(p)

(£m)

2015

2016e

2017e

2015

2016e

2017e

Rank Group (RNK)*

222

865

7.2

6.9

6.5

14.6

14.0

13.0

888 Holdings (888)

217

778

11.3

11.1

9.9

17.7

17.6

15.9

GVC Holdings (GVC)

704

2,056

6.4

13.1

9.9

13.1

32.4

15.4

Ladbrokes (LADB)

158

1,609

11.6

10.2

8.6

17.4

24.7

19.3

Paddy Power Betfair (PPB)

9830

8,238

27.8

22.5

18.6

40.7

32.5

22.1

Playtech (PTEC)

892

2,878

12.1

9.8

8.4

16.2

15.1

12.8

William Hill (WMH)

325

2,825

8.9

9.5

9.2

13.2

14.4

13.2

Average

12.2

11.9

10.2

19.0

21.5

15.9

Average ex PPB

9.6

10.1

8.7

15.4

19.7

14.9

Source: Bloomberg, Edison Investment Research. Note: *Annualised. Prices at 22 August 2016.

Exhibit 3: Financial summary

£'m

2014

2015

2016

2017e

2018e

June

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

707.7

738.3

753.0

782.7

809.4

Cost of Sales

(409.2)

(414.2)

(427.1)

(447.4)

(463.8)

Gross Profit

298.5

324.1

325.9

335.3

345.6

EBITDA

 

 

116.0

126.3

128.2

133.0

141.5

Operating Profit (before amort. and except.)

72.4

84.0

82.4

86.0

94.0

Intangible Amortisation

0.0

0.0

0.0

0.0

0.0

Exceptionals

(46.5)

2.1

9.3

0.0

0.0

Operating Profit

25.9

86.1

91.7

86.0

94.0

Net Interest

(9.9)

(9.9)

(5.0)

(4.5)

(4.0)

Other finance adjustments*

(1.6)

(1.7)

(1.1)

0.0

0.0

Profit Before Tax (norm)

 

 

62.5

74.1

77.4

81.5

90.0

Profit Before Tax (FRS 3)

 

 

14.4

74.5

85.6

81.5

90.0

Tax on norm PBT

(13.9)

(17.0)

(17.4)

(18.3)

(20.3)

Profit After Tax (norm)

48.6

57.1

60.0

63.2

69.8

Profit After Tax (FRS 3)

0.5

57.5

68.2

63.2

69.8

Average Number of Shares Outstanding (m)

390.7

390.7

390.7

390.7

390.7

EPS - normalised (p)

 

 

12.4

14.6

15.4

16.2

17.9

EPS - (IFRS) (p)

 

 

5.2

19.1

18.2

16.2

17.9

Dividend per share (p)

4.50

5.60

6.50

7.40

8.80

Gross Margin (%)

42.2

43.9

43.3

42.8

42.7

EBITDA Margin (%)

16.4

17.1

17.0

17.0

17.5

Operating Margin (before GW and except.) (%)

10.2

11.4

10.9

11.0

11.6

BALANCE SHEET

Fixed Assets

 

 

613.3

607.2

614.1

638.0

643.0

Intangible Assets

390.2

395.7

404.3

410.0

415.0

Tangible Assets

217.5

204.0

202.0

220.0

220.0

Deferred tax/other

5.6

7.5

7.8

8.0

8.0

Current Assets

 

 

87.9

123.4

100.5

83.5

102.0

Stocks

3.1

2.8

2.9

3.5

4.0

Debtors

37.7

31.0

36.6

40.0

44.0

Cash

47.1

89.6

61.0

40.0

54.0

Other

0.0

0.0

0.0

0.0

0.0

Current Liabilities

 

 

(168.4)

(309.4)

(173.9)

(187.5)

(190.0)

Creditors (incl provisions)

(164.0)

(184.5)

(159.5)

(167.5)

(170.0)

Short term borrowings

(4.4)

(124.9)

(14.4)

(20.0)

(20.0)

Long Term Liabilities

 

 

(290.5)

(126.8)

(188.1)

(139.0)

(94.0)

Long term borrowings

(179.7)

(17.6)

(87.8)

(54.0)

(32.0)

Other long term liabilities

(110.8)

(109.2)

(100.3)

(85.0)

(62.0)

Net Assets

 

 

242.3

294.4

352.6

395.0

461.0

CASH FLOW

Operating Cash Flow

 

 

55.0

146.6

110.2

124.2

138.5

Net Interest

(8.1)

(7.5)

(5.0)

(4.5)

(4.0)

Tax

(19.1)

(2.2)

(31.1)

(16.3)

(18.0)

Capex

(44.3)

(31.9)

(52.7)

(65.0)

(47.0)

Acquisitions/disposals

0.3

(1.0)

16.2

0.0

0.0

Financing

0.0

0.0

0.0

0.0

0.0

Dividends

(16.4)

(18.6)

(22.7)

(26.6)

(30.9)

Net Cash Flow

(32.6)

85.4

14.9

11.8

38.6

Opening net debt/(cash)

 

 

104.1

137.0

52.9

41.2

34.0

HP finance leases initiated

(2.3)

(3.1)

(2.8)

(3.0)

(3.0)

Other

2.0

1.8

(0.4)

(1.7)

0.4

Closing net debt/(cash)

 

 

137.0

52.9

41.2

34.0

(2.0)

Source: Rank Group, Edison Investment Research. Note: *unwinding of discount in disposal provisions, other financial gains and losses.

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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 2016. “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

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

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

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

Edison, the investment intelligence firm, is the future of investor interaction with corporates. Our team of over 100 analysts and investment professionals work with leading companies, fund managers and investment banks worldwide to support their capital markets activity. We provide services to more than 400 retained corporate and investor clients from our offices in London, New York, Frankfurt, Sydney and Wellington. 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 and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2016 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Rank Group 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 Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. 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 2016. “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

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

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

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

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