Smiths News — Refinancing releases dividend shackles

Smiths News (LSE: SNWS)

Last close As at 18/06/2024

GBP0.57

−0.40 (−0.70%)

Market capitalisation

GBP141m

More on this equity

Research: Industrials

Smiths News — Refinancing releases dividend shackles

Smith News’ H124 results highlighted the robustness of the underlying business, but also revealed the success that management is achieving in creating long-term shareholder value. For example, 74% of revenue is now contracted until 2029, the recent refinancing saves costs and removes the dividend restriction, and the organic growth initiatives are gaining significant momentum. Furthermore, the revised capital allocation policy raises the possibility that modest, self-funded M&A could add further scope to the growth initiatives. Our revenue and profit forecasts are broadly unchanged, but dividends are materially raised. Our valuation is edged up to 90p.

Andy Murphy

Written by

Andy Murphy

Director, Financials & Industrials

Industrials

Smiths News

Refinancing releases dividend shackles

Interim results

Industrial support services

20 May 2024

Price

65p

Market cap

£162m

Net debt (£m) at 29 February 2024

10.0

Shares in issue

247.7m

Free float

88.5%

Code

SNWS

Primary exchange

LSE

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

31.7

38.7

27.1

Rel (local)

22.8

27.2

16.8

52-week high/low

65.6p

40.7p

Business description

Smiths News is the UK’s largest newspaper and magazine distributor with a c 55% market share covering 24,000 retailers in England and Wales. It has a range of long-term exclusive distribution contracts with major publishers, supplying a mix of supermarkets and independent retailers.

Next events

Year-end trading update

August

Preliminary results

November

Analyst

Andy Murphy

+44 (0)20 3077 5700

Smiths News is a research client of Edison Investment Research Limited

Smith News’ H124 results highlighted the robustness of the underlying business, but also revealed the success that management is achieving in creating long-term shareholder value. For example, 74% of revenue is now contracted until 2029, the recent refinancing saves costs and removes the dividend restriction, and the organic growth initiatives are gaining significant momentum. Furthermore, the revised capital allocation policy raises the possibility that modest, self-funded M&A could add further scope to the growth initiatives. Our revenue and profit forecasts are broadly unchanged, but dividends are materially raised. Our valuation is edged up to 90p.

Year

end

Revenue (£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

08/22

1,089.3

32.3

11.7

4.2

5.6

6.4

08/23

1,091.9

33.4

11.3

4.2

5.8

6.4

08/24e

1,070.1

33.4

10.5

5.0

6.2

7.7

08/25e

1,038.0

35.0

11.1

5.3

5.8

8.2

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

Core business outperformed historical trends

H124 revenue slipped c 2% to £539.8m but Smiths’ core news and magazine revenue outperformed the structural decline as Smiths won new contracts and there were a number of cover price rises in the period. Operating profit reduced 7.8% to £18.8m, reflecting lower one-shot revenue and pricing pressure in magazine waste volumes. As ever, these pressures were offset by the well-rehearsed annual efficiency savings. Adjusted EPS declined 12.5% to 4.9p, but the company increased the interim dividend by 25% to 1.75p following the removal of restrictions relating to the previous banking arrangements. Average bank net debt at the half year fell 52.5% to £12.5m.

Multiple positives should excite investors

Operationally, Smiths News’ core business is performing robustly. Elsewhere there is also positive news. Firstly, the organic growth opportunities are gaining significant momentum and could account for c 5% of group profit in the current year, and more in future periods. Secondly, the refinancing has lifted the restriction on dividends and offered us the opportunity to raise our full year dividend estimates materially. And thirdly, the revised capital allocation policy offers scope for growth via conservative M&A while offering shareholders additional potential returns.

Valuation: Nudged up to 90p/share

Our underlying profit estimates are largely unchanged but we have lifted our dividend expectations now that the distribution cap has been removed. Our DCF valuation of Smiths News is nudged up from 89p/share, to 90p representing c 40% upside. The company trades on a P/E multiple of 6.2x in FY24e, which we believe is attractive for a company with such cash-generative characteristics. It also yields 7.7% from its raised and twice covered dividend.

Solid core operation, organic growth expansion

Smiths News traded well in H124, outperforming the underlying revenue trends, with the year-on-year decline in revenue and profit largely attributed to the exclusion of one-offs in the latest period. However, there are two items of real news. Firstly, the company has refinanced its debt facilities, which not only produces interest cost savings, but also removes the cap on dividend payments. Secondly, the organic business is expanding rapidly and is expected to generate a profit contribution of c £2m in the current year, with management expecting that further growth is likely. Furthermore, there has been a tweak to the capital allocation policy, which should foster growth and maintain balance sheet discipline. Our full year forecasts are largely unchanged but we have materially lifted our dividend forecast. Our valuation is nudged up from 89p to 90p.

Robust H124 trading performance implies solid FY24

H124 revenue slipped c 2% to £539.8m, which was primarily accounted for by the inclusion of revenue generated from the men’s football World Cup and the Royal Succession in the comparable period. Smiths’ core news and magazine revenue also outperformed the structural decline, which is typically c 3–5% pa, as there were a number of cover price rises in the period. Operating profit reduced 7.8% or £1.8m to £18.8m, reflecting the one-shot revenue mentioned above, and also pricing pressure in magazine waste volumes. As ever, these pressures were offset by the well-rehearsed annual efficiency savings that target c £4–5m pa.

Adjusted EPS declined 12.5% to 4.9p, but the company increased the interim dividend by 25% to 1.75p following the removal of restrictions relating to the previous banking arrangements. Smiths News intends to have a twice covered dividend paid out one-third/two-thirds in H1 and H2. Net debt at the half year fell 56% to £10m, while average net debt fell 52.5% to £12.5m.

Exhibit 1: H1 summary results (£m)

Year end 31 August

FY21

H1

H2

FY22

H1

H2

FY23

H124

Total revenue

1,109.6

544.8

544.5

1,089.3

550.1

541.8

1,091.9

539.8

% change

-4.7%

-1.2%

-2.4%

-1.8%

1.0%

-0.5%

0.2%

-1.9%

Cost of goods sold

(1,036.2)

(508.0)

(508.6)

(1,016.6)

(512.4)

(507.0)

(1,019.4)

(504.9)

% change

-5.1%

-1.5%

-2.2%

-1.9%

0.9%

-0.3%

0.3%

-1.5%

Gross profit

73.4

36.8

35.9

72.7

37.7

34.8

72.5

34.9

Gross margin

6.6%

6.8%

6.6%

6.7%

6.9%

6.4%

6.6%

6.5%

Total admin expenses

(33.9)

(17.9)

(17.1)

(35.0(

(17.4)

(16.4)

(33.8)

(16.2)

% change

-11.0%

5.9%

0.6%

3.2%

-2.8%

-4.1%

-3.4%

-6.9%

Income from JV

0.1

0.2

0.1

0.3

0.1

0.0

0.1

0.1

Total adjusted operating profit

39.6

19.1

19.0

38.1

20.4

18.4

38.8

18.8

% change

12.8%

1.1%

-8.2%

-3.8%

6.8%

-3.2%

1.8%

-7.8%

Total adjusted operating profit margin

3.6%

3.5%

3.5%

3.5%

3.7%

3.4%

3.6%

3.5%

Source: Smith News, Edison Investment Research

In the period, newspaper revenues increased 0.1% despite the ongoing volume decline due to the inclusion of new contracts with News UK and the Midlands News Association won in October 2023, and from some cover price increases. Magazine revenue was down 5%, in line with historical trends, and again, cover price increases partly offset volume declines. Revenue from collectables, excluding the World Cup and the Royal Succession mentioned above, were up by c 5% reflecting a better performance from the Premier League football collections and a first sticker collection from the Women’s Super League.

The two new long-term contract wins with News UK and the Midlands News Association imply that c 74% of revenue is now contracted to 2029. Other contracts are due to expire in the foreseeable future and, if renewed, which is the likely outcome, the percentage of revenue contracted to 2029 and beyond is likely to increase, further improving the visibility of revenue.

Exhibit 2: Contracted sales revenues

Source: Smiths News

Material dividend increase post refinancing

Smiths News’ previous banking arrangements reflected the elevated net debt levels from M&A, which saw its net bank debt to EBITDA ratio stand at c 3x in 2020. These arrangements were due to mature in August 2025 and importantly contained a dividend distribution limit of £10m pa. Since 2020, cash generated in the business and disposals have seen the net debt level fall to below £10m, and we expect net debt to continue this trend in FY25 and beyond.

Alongside the interim results, Smiths News announced that it has renegotiated its financing in a favourable way to both the company and shareholders. This includes a modest increase in total potential facilities, from £46.5m to £50m, a three-year term with two one-year extension options and a reduction in the margin from 4.0% to 2.45%, implying a material cost saving.

Furthermore, the £10m dividend distribution limit has been removed, which has allowed the company to increase its interim dividend by 25% to 1.75p, and allowed us the freedom to increase our full year dividend expectation from 4.2p to 4.9p. This implies a very attractive dividend yield of 8.6%.

Exhibit 3: Net bank debt reduction and debt ratio

Source: Smith News, Edison Investment Research

Revised capital allocation policy

Now the refinancing is complete and the dividend restrictions have been removed, Smiths News has revised its capital allocation policy, which is designed to promote investment in the business, provide scope for potential bolt-on acquisitions and reward shareholders.

In summary, the revised plan is as follows:

Maintain a strong balance sheet, with a net bank debt to adjusted EBITDA ratio of less than 1.0x.

Continued investment in both the core operations and the organic growth opportunities.

Payment of a sustainable ordinary dividend, maintaining 2x dividend cover.

A disciplined approach to inorganic growth, focused on bolt-on acquisitions with clear accretive returns to enhance shareholder value.

Further returns to shareholders when appropriate.

The maintenance of a strong balance sheet is likely to limit the scale of any bolt-on acquisitions. The demonstration of clear value accretion in any future deal will be a key focus for shareholders.

Organic new business streams add useful profit

In November 2022, Smiths News outlined its ambition to better utilise its distribution network to generate new profit streams to offset the anticipated annual decline in newspaper and magazine distribution volumes. We believe this makes practical and commercial sense considering that its 36 depots in the UK are idle for long periods each day, and that its vans are visiting each of the company’s 19,000 customers every day.

Exhibit 4: Smiths News’ distribution network

Exhibit 5: Potential new profit streams

Source: Smiths News

Source: Smiths News

Exhibit 4: Smiths News’ distribution network

Source: Smiths News

Exhibit 5: Potential new profit streams

Source: Smiths News

In 2023, Smiths News successfully trialled a cardboard and plastic recycling collection service in Birmingham. The service included the collection of unwanted cardboard and plastics at the same time as dropping off the day’s newspaper and magazine delivery. Smiths News now has c 5,000 subscribers, a number that has more than doubled in the last 12 months. We anticipate that the service might be suitable for c 30% of its addressable customer base, and could also be attractive to other adjacent businesses such as betting shops.

Smiths has trialled other categories including the distribution of greetings cards in point-of-sale stands, DVDs and books to major retailers and some supermarkets. The product is delivered to Smiths in bulk where it breaks the supply down, picks, packs and handles returns, playing to the company’s core strengths. There are potentially other products and/or customers where this kind of service may offer value to clients, and income and a profit contribution to Smiths News, which could offset the expected decline in the core business. These are being actively explored.

The new business streams are potentially significant. Last year, these initiatives generated £0.7m of operating profit. In FY24, the company is anticipating that it will generate a profit contribution of c £2.0m. Ultimately, these new income streams are likely to grow further. It remains to be seen if they can be scaled sufficiently to completely offset the decline of the core business, but so far there is optimism.


Revised forecasts reflect investment and dividends

Following the interims and the company’s in line outlook statement, we see no reason at this stage to revise our profit estimates. However, the new refinancing arrangements, which do not contain any restrictions on dividend payments, give rise to higher shareholder payments, hence the material increase in the DPS payments in the table below. The company is also budgeting for increased capex spending, which collectively account for the change in net debt.

Exhibit 6: Forecast revisions

£m

2023

FY24e

FY25e

Old

New

% chg

Old

New

% chg

Revenue

1,091.9

1,026.4

1,070.1

4.3%

995.6

1,038.0

4.3%

Y-o-y % change

-3.0%

-3.0%

-6.0%

-

-3.0%

-3.0%

-

EBITDA - Edison basis

42.7

42.1

42.1

-0.1%

41.8

41.8

-0.1%

Y-o-y % change

70.0%

-70.0%

-1.5%

-

-0.7%

-0.7%

-

EBITDA - reported pre IFRS 16

40.1

39.5

39.5

-0.1%

39.2

39.2

-0.1%

Y-o-y % change

-50.0%

-70.0%

-1.6%

-

-0.8%

-0.8%

-

Total adjusted operating profit

38.8

37.8

37.8

-0.1%

37.5

37.5

-0.1%

Y-o-y % change

0.0%

-80.0%

-2.7%

-

-0.8%

-0.8%

-

PBT (reported, post-exceptionals)

31.8

31.3

31.3

-0.1%

31.2

32.9

5.5%

Y-o-y % change

10.8%

1.3%

-1.6%

-

-0.3%

5.2%

-

EPS - diluted, normalised (p)

10.7

10.3

10.0

-2.8%

10.2

10.6

4.1%

Y-o-y % change

-4.5%

-1.9%

-6.3%

-

-1.0%

6.1%

-

DPS (p)

4.2

4.2

5.0

19.3%

4.2

5.3%

26.9%

Y-o-y % change

0.0%

0.0%

20.8%

-

0.0%

6.4%

-

Net (debt)/cash (pre IFRS 16)

(4.2)

(8.1)

(12.1)

48.9%

5.9

(5.3)

N/A

Y-o-y % change

-81.6%

211.5%

N/A

-

-172.8%

(56.3%)

-

Source: Smiths News data, Edison Investment Research

Valuation of 90p with upside potential from non-core

Our discounted cash flow (DCF) valuation remains broadly unchanged at 90p/share (from 89p), representing c 40% upside to the current share price. Smiths News trades on a P/E of 6.2x in FY24e, with a yield of 7.7% and the prospect of special dividends to bolster the yield as debt falls. In our experience, when ‘safe’ dividend yields exceed P/E ratios in absolute terms, it indicates a value opportunity.

Although we currently forecast a consistent revenue decline, the early signs of success with the new business initiatives suggest that the associated profit decline may be less than we currently forecast, implying that profit and valuation risks could ultimately be to the upside. The success or otherwise of these new business streams is likely to become clearer in the next two to three years.

The low P/E rating might be explained by market expectations of continued revenue declines. Our DCF valuation assumes a 5% pa revenue reduction. A full explanation of our assumptions can be found in our November 2022 update note.


Exhibit 7: Financial summary

£'m

2019

2020

2021

2022

2023

2024e

2025e

2026e

31-August

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

INCOME STATEMENT

Revenue

 

 

1,303.5

1,164.5

1,109.6

1,089.3

1,091.9

1,070.1

1,038.0

1,006.8

Cost of Sales

(1,217.5)

(1,091.4)

(1,036.2)

(1,016.6)

(1,019.4)

(1,000.7)

(969.7)

(939.8)

Gross Profit

86.0

73.1

73.4

72.7

72.5

69.4

68.2

67.0

EBITDA

 

 

60.1

40.4

44.9

42.9

42.7

42.1

41.8

41.5

Normalised operating profit

 

 

44.0

35.4

40.6

39.3

39.9

38.9

38.6

38.3

Share-based payments

(0.4)

(0.3)

(1.0)

(1.2)

(1.1)

(1.1)

(1.1)

(1.1)

Total adjusted operating profit

43.6

35.1

39.6

38.1

38.8

37.8

37.5

37.2

Amortisation of acquired intangibles

(0.1)

(0.2)

0.0

(4.4)

0.0

0.0

0.0

0.0

Exceptionals

(7.2)

(7.8)

(1.9)

(2.5)

0.1

(1.0)

(1.0)

(1.0)

Impairment

0.0

(6.0)

(1.6)

1.2

0.0

0.0

0.0

0.0

Other financial costs

0.0

0.9

3.5

2.5

0.0

0.0

0.0

0.0

Other

0.0

0.0

(0.3)

0.0

(0.6)

0.0

0.0

0.0

Reported operating profit

36.3

22.0

39.3

34.9

38.3

36.8

36.5

36.2

Net Interest

(6.0)

(7.2)

(8.7)

(7.0)

(6.5)

(5.5)

(3.6)

(3.3)

Profit Before Tax (norm)

 

 

38.0

28.2

31.9

32.3

33.4

33.4

35.0

35.0

Profit Before Tax (reported)

 

 

30.3

14.8

30.6

27.9

31.8

31.3

32.9

32.9

Reported tax

(8.4)

(2.8)

(4.3)

(4.5)

(6.7)

(8.1)

(8.2)

(8.2)

Profit After Tax (norm)

29.6

25.4

27.6

27.8

26.7

25.2

26.8

26.8

Profit After Tax (reported)

21.9

12.0

26.3

23.4

25.1

23.1

24.7

24.7

Discontinued operations

(53.4)

(18.7)

(0.1)

0.0

0.0

0.0

0.0

0.0

Net income (normalised)

29.6

25.4

27.6

27.8

26.7

25.2

26.8

26.8

Net income (reported)

(31.5)

(6.7)

26.2

23.4

25.1

23.1

24.7

24.7

Basic average number of shares outstanding (m)

246

245

244

239

237

241

241

241

EPS - basic normalised (p)

 

 

12.01

10.39

11.33

11.66

11.25

10.48

11.12

11.11

EPS - diluted normalised (p)

 

 

11.98

10.28

10.83

11.03

10.68

10.01

10.62

10.61

EPS - basic reported (p)

 

 

(12.78)

(2.74)

10.76

9.81

10.58

9.61

10.25

10.24

Dividend (p)

1.00

0.00

1.50

4.15

4.15

5.01

5.33

5.30

Revenue growth (%)

N/A

(-10.7)

(-4.7)

(-1.8)

0.2

(-2.0)

(3.0)

(3.0)

Gross Margin (%)

6.6

6.3

6.6

6.7

6.6

6.5

6.6

6.7

EBITDA Margin (%)

4.6

3.5

4.0

3.9

3.9

3.9

4.0

4.1

Normalised Operating Margin

3.4

3.0

3.7

3.6

3.7

3.6

3.7

3.8

BALANCE SHEET

Fixed Assets

 

 

31.5

66.5

47.1

41.9

38.6

30.7

26.3

21.9

Intangible Assets

10.1

4.0

2.3

1.7

1.9

1.7

1.5

1.3

Tangible Assets

10.9

9.4

9.4

8.6

8.8

7.5

9.7

11.9

Investments & other

10.5

53.1

35.4

31.6

27.9

21.5

15.1

8.7

Current Assets

 

 

181.2

165.9

139.1

147.5

156.7

148.7

145.3

142.6

Stocks

16.2

14.1

13.2

15.6

17.7

14.4

14.0

14.1

Debtors

124.2

101.2

106.6

95.7

101.1

96.3

93.4

90.6

Cash & cash equivalents

24.0

50.6

19.3

35.3

37.3

37.3

37.3

37.3

Other

16.8

0.0

0.0

0.9

0.6

0.6

0.6

0.6

Current Liabilities

 

 

(229.7)

(283.9)

(167.5)

(157.2)

(158.9)

(131.9)

(125.3)

(122.1)

Creditors

(173.7)

(139.5)

(136.5)

(140.3)

(141.5)

(114.5)

(107.9)

(104.7)

Tax and social security

0.0

(1.7)

(0.3)

0.0

0.0

0.0

0.0

0.0

Short term borrowings

(46.1)

(130.1)

(21.2)

(8.0)

(10.0)

(10.0)

(10.0)

(10.0)

Other

(9.9)

(12.6)

(9.5)

(8.9)

(7.4)

(7.4)

(7.4)

(7.4)

Long Term Liabilities

 

 

(57.3)

(30.1)

(76.4)

(64.2)

(52.7)

(54.6)

(41.8)

(27.1)

Long term borrowings

(49.3)

0.0

(50.1)

(39.1)

(30.2)

(38.1)

(31.3)

(22.6)

Other long term liabilities

(8.0)

(30.1)

(26.3)

(25.1)

(22.5)

(16.5)

(10.5)

(4.5)

Shareholders' equity

 

 

(74.3)

(81.6)

(57.7)

(32.0)

(16.3)

(7.1)

4.5

15.3

CASH FLOW

Op Cash Flow before WC and tax

60.1

40.4

44.9

42.9

42.7

42.1

41.8

41.5

Working capital

(3.9)

(5.3)

(1.8)

2.8

(5.5)

(19.0)

(3.2)

(0.5)

Exceptional & other

(7.7)

(13.4)

(1.3)

(4.4)

(1.6)

(2.1)

(2.1)

(2.1)

Tax

(2.6)

0.0

(6.3)

(5.3)

(6.6)

(8.1)

(8.2)

(8.2)

Other

(22.9)

1.7

5.9

13.8

7.4

7.1

7.4

7.4

Net operating cash flow

 

 

23.0

23.4

41.4

49.8

36.4

20.0

35.7

38.0

Capex

(8.1)

5.3

(2.4)

(1.9)

(3.4)

(4.2)

(6.2)

(6.2)

Acquisitions/disposals

0.0

(10.2)

6.5

14.0

(0.3)

0.0

0.0

0.0

Net interest

(5.1)

(8.0)

(9.4)

(8.0)

(5.3)

(4.6)

(3.6)

(3.3)

Equity financing

0.0

(0.7)

(2.6)

(2.6)

(1.7)

(3.3)

(1.1)

(1.1)

Dividends

0.1

(2.2)

(1.0)

(5.9)

(9.6)

(9.7)

(12.0)

(12.7)

Other

(2.8)

(15.6)

(5.9)

(6.4)

(6.1)

(6.0)

(6.0)

(6.0)

Net Cash Flow

7.1

(8.0)

26.6

39.0

10.0

(7.9)

6.8

8.7

Opening net debt/(cash)

 

 

79.3

72.1

79.7

53.2

14.2

4.2

12.1

5.3

FX

0.1

(0.1)

(0.2)

0.0

0.0

0.0

0.0

0.0

Other non-cash movements

0.0

0.5

0.1

0.0

0.0

0.0

0.0

0.0

Closing net debt/(cash)

 

 

72.1

79.7

53.2

14.2

4.2

12.1

5.3

(3.4)

Source: Smiths News accounts, Edison Investment Research

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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

General disclaimer and copyright

This report has been commissioned by Smiths News and prepared and issued by Edison, in consideration of a fee payable by Smiths News. 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 2024 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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