Record — Showing good growth and on track strategically

Record (LSE: REC)

Currency in GBP

Last close As at 03/02/2023

GBP0.96

−0.10 (−0.10%)

Market capitalisation

GBP191m

Research: Financials

Record — Showing good growth and on track strategically

Record is continuing to make good progress with its strategy of developing new capabilities and products to augment its core currency management services. This holds out the prospect of significantly higher and more diversified revenue and profit by FY25. In the meantime, existing currency strategies have performed well against a more volatile market background, which also creates a favourable background for conversations with potential clients for well-established hedging services.

Andrew Mitchell

Written by

Andrew Mitchell

Director, Financials

Financials

Record

Showing good growth and on track strategically

H123 results

Financial services

12 December 2022

Price

87p

Market cap

£173m

Net cash and money market instruments (£m) at end-September 2022

17.7

Shares in issue

199.1m

Free float

56%

Code

REC

Primary exchange

LSE

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

16.0

26.1

8.8

Rel (local)

13.4

24.7

10.9

52-week high/low

92p

61p

Business description

Record is a specialist independent asset, currency and derivatives manager. It provides a number of products and services for institutional clients, including passive and dynamic hedging and a range of currency for return strategies, including funds and customised segregated accounts.

Next events

Q323 trading update

26 January 2023

Capital markets afternoon

9 February 2023

Analysts

Andrew Mitchell

+44 (0)20 3681 2500

Martyn King

+44 (0)20 3077 5745

Record is a research client of Edison Investment Research Limited

Record is continuing to make good progress with its strategy of developing new capabilities and products to augment its core currency management services. This holds out the prospect of significantly higher and more diversified revenue and profit by FY25. In the meantime, existing currency strategies have performed well against a more volatile market background, which also creates a favourable background for conversations with potential clients for well-established hedging services.

Year end

Revenue (£m)

PBT*
(£m)

EPS*
(p)

DPS**
(p)

P/E
(x)

Yield
(%)

03/21

25.4

6.2

2.73

2.30

31.9

2.6

03/22

35.2

10.9

4.37

3.60

19.9

4.1

03/23e

42.0

13.2

5.45

4.10

16.0

4.7

03/24e

43.5

13.7

5.22

4.20

16.7

4.8

Note: *EPS is diluted. **DPS excludes special dividends.

A strong first half result

Record reported a strong H123 result with revenues up 35% compared with H122. This included an 18% increase in management fees, reflecting c 10% higher average sterling assets under management equivalent (AUME) and a richer fee-rate product mix. In addition, there were performance fees of £2.8m (nil H122, £0.5m H222) as increased market interest rate differentials provided opportunities to earn performance fees on enhanced hedging mandates. Pre-tax profit increased to £7.5m (+46%), basic EPS to 3.27p (+57%) and the interim dividend to 2.05p (+14%).

Looking towards diversifying growth

The group continues to make progress on its diversification plans and notes that current market volatility underlines the relevance of its currency management products for potential clients. The performance of several existing currency products gives encouragement, work on enhancing the group’s IT platform continues on time and to budget and the pipeline of further partnering/new product initiatives (including a measured entry into the area of digital assets) provides a range of potential avenues for diversifying growth. Against this background and despite the difficult macroeconomic climate, the group reiterates its aspiration to achieve revenue of over £60m by FY25 (FY22: £35m).

Valuation

There are limited changes in our estimates with a small increase in earnings for FY23 and a small decrease for FY24 reflecting updated exchange rate, fund flow and fee margin assumptions. Record shares have substantially outperformed UK asset managers year-to-date and trade on above their peer-average P/E and EV/EBITDA multiples, although within the range for these companies. The group has reaffirmed its FY25 targets, which would imply a sharply reduced P/E multiple and a correspondingly increased dividend yield as the benefits of new product initiatives are realised.

Record in numbers

We have updated our compilation of information provided by Record on AUME, fee income, clients and asset class exposure (Exhibit 1). This includes our calculations of estimated average fee rates by strategy and hedging fee exposure by underlying asset class.

We highlight several points:

Hedging services in total account for 89% of AUME and 64% of management fees, reflecting the lower fee rates that apply to passive hedging. The growth in dynamic hedging and currency for return since FY19 has reduced the proportion of management fees accounted for by passive hedging from 52% to 33% in H123.

Since 2018 AUME has increased from $62.2bn to $80.8bn in H123 (compound annual growth of 6%). The average fee rate rose slightly over the period, from 5.1bps to 5.8bps.

Within the client base, 75% of AUME is accounted for by corporate and public pension funds. Measured by AUME, 51% have been in place for over six years. However, with the renewed focus on growth over the past two years there is a healthy inflow of new clients, which often start with a relatively low AUME level; by number, 46% of clients have joined Record within three years.

Geographically, Switzerland accounts for 37% of revenue followed by the United States (32%).

We estimate 54% of hedging mandate fees relate to underlying equity assets, 15% to fixed income and 31% to other assets.

Exhibit 1: Record profile in numbers (H123 except where indicated)

Analysis by strategy

AUME (%)

Management fees (%)* FY19

H123

Est. average fee rate (bps)**

Dynamic hedging

12.4

20.6

30.5

13.5

Passive hedging

77.0

52.0

33.4

2.6

Currency for return

5.3

8.0

18.7

18.8

Multi-product

5.2

19.4

17.4

18.4

Cash

0.1

N/A

N/A

0

Total

100.0

100.0

100.0

5.8

Value

$80.8bn

£22.3m

£19.0m

Client analysis

Concentration (FY22)

% AUME

Type

% AUME

Longevity (years)

% Clients

% AUME

Top 10

52

Corporate pension funds

41

0-1

16

13

Next 10

35

Public pension funds

34

1–3

30

21

Balance

12

Foundations & trusts

8

3–6

29

15

Other

17

6–10

12

29

>10

13

22

100

100

100

100

Geographical analysis and AUME progression

By client location

% revenue

By invoice currency (FY22)

% revenue

AUME progression

($bn)

Switzerland

37

US dollar

50

2018

62.2

US

32

Swiss franc

28

2019

57.3

Europe (rest)

22

Euro

10

2020

58.6

UK

6

Sterling

7

2021

80.1

Other

4

Other

4

2022

83.1

100

100

H123

80.8

Underlying asset class exposure of dynamic and passive hedging AUME (%)

Dynamic

Passive

Estimated % of hedging fees

Equity

90

21

54

Fixed income

0

29

15

Other

10

50

31

100

100

100

Source: Record, Edison Investment Research. Notes: *Management fee excluding performance fees. **Fee rate is our own calculation and within each strategy there will be a range of mandate types and fee structures/levels. Rounding may mean some columns do not sum.

H123 results analysis

As announced in the October Q223 trading update, total AUME stood at $80.8bn at end-September. This was 2.8% below the end-March level and 3.9% below the end-H122 figure (see Exhibit 2). Net AUME inflows of $8.6bn in H123 (the fourth consecutive half-year period of inflows) included $5.6bn from new client mandates. These inflows were more than offset by market, foreign exchange and other moves totalling $10.9bn in a period of elevated volatility.

Weakness in the pound mean that in sterling terms AUME increased by 14.6% in H123 to £72.3bn. We calculate that average AUME in sterling terms for H123 was 10% above the prior year period and nearly 5% above H222.

Exhibit 2: AUME progression

End period AUME ($bn)

AUME movements ($bn)

$bn

H122

H222

H123

H122

H222

H123

Net flows

Dynamic hedging

10.3

10.6

10.0

0.6

0.8

1.7

Passive hedging

63.0

62.8

62.2

0.3

0.8

7.2

Currency for return

5.4

5.0

4.3

1.0

(0.6)

(0.3)

Multi-product

5.2

4.5

4.2

0.0

(0.5)

0.0

Cash and futures

0.2

0.2

0.1

0.0

0.0

0.0

Total

84.1

83.1

80.8

1.9

0.5

8.6

Other movements

Markets

1.8

(1.5)

(4.8)

FX and scaling for mandate volatility targeting

0.3

0.0

(6.1)

Total change

4.0

(1.0)

(2.3)

Source: Record, Edison Investment Research

Key points from the income statement

The profit and loss (P&L) account for H123 is set out in Exhibit 3. We comment on key areas below, with comparisons versus H122 unless stated.

Management fees increased by 18% reflecting a 10% increase in average AUME (in sterling terms), and changes in the fee-rate mix. The largest increase was in currency for return fees, which benefited from the launch of the Record Emerging Market Sustainable Finance Fund (EMSF), which we estimate has a fee rate similar to comparable actively managed fixed income funds at 50–60bps. As a result, the average fee rate within currency for return increased from 12.5bps to 18.8bps, while the overall average fee rate increased by 7% (from 5.4bps to 5.8bps).

Total revenue rose 35% with a £2.8m performance fee earned (nil) as increased interest rate differentials in the market created better opportunities for enhanced passive hedging mandates to add value.

Administrative expenses increased by 36%, within which personnel costs before the group bonus scheme increased by 26% versus H122 and 9% from H222. Broadly in line with pre-bonus operating profit, bonus payments increased from £2.8m to £3.8m. As a percentage of pre-bonus operating profit (33%), the payment was still towards the top of the group’s 25–35% target range but below the H122 level of 35%. Attracting and retaining staff remains a priority and the significant year-on-year rise in personnel costs reflects promotions, pay increases and recruitment as part of the succession planning element of the group’s strategy. Since the period end a £3,000 flat payment has been made to staff who are not directors as a one-off recognition of inflationary pressures, particularly for those on lower salaries. Non-personnel costs rose 55% compared with H122 and 5% versus H222 to £4.5m. This included costs related to the modernisation of IT systems and the employment of contractors as part of these projects. Data costs and the cost of office space in London are other contributors. The London office is proving valuable in staff recruitment and retention. Ongoing costs related to new systems and continuing investment to support client service and product innovation are expected to remain a feature of the group P&L, but, as seen in the H123 to H222 comparisons, the rate of cost increase is likely to be much lower.

Pre-tax profit increased by 46% and, with the effective tax rate of 18% versus 22%, the increase in diluted EPS was 58%.

The interim dividend is increased from 1.80p to 2.05p (+14%). The dividend policy is unchanged with a target ordinary dividend payout range of 70–90% of annual earnings set at a level allowing sustainable growth. The board still intends to pay out earnings in excess of ordinary dividends, taking into account capital requirements (including regulatory requirements and a buffer for operating expenses, working capital and investment expectations). Such payments would usually be in the form of a special dividend.

Exhibit 3: Profit and loss analysis

£000s

H122

H222

H123

Change versus H122

Change versus H222

Dynamic hedging

4,783

5,237

5,780

20.8%

10.4%

Passive hedging

5,802

5,966

6,328

9.1%

6.1%

Currency for return

2,077

3,436

3,544

70.6%

3.1%

Multi-product

3,446

3,336

3,308

-4.0%

-0.8%

Management fees

16,108

17,975

18,960

17.7%

5.5%

Performance fees

0

499

2,833

N/A

467.7%

Other investment services income

225

345

266

18.2%

-22.9%

Total revenue

16,333

18,819

22,059

35.1%

17.2%

Cost of sales

(206)

(13)

(3)

-98.5%

-76.9%

Gross profit

16,127

18,806

22,056

36.8%

17.3%

Administrative expenses

(10,713)

(13,013)

(14,561)

35.9%

11.9%

Other income/expense

(264)

(108)

21

N/A

N/A

Operating profit

5,150

5,685

7,516

45.9%

32.2%

Net finance income

4

17

28

600.0%

64.7%

Profit before tax

5,154

5,702

7,544

46.4%

32.3%

Taxation

(1,156)

(1,069)

(1,334)

15.4%

24.8%

Profit after tax

3,998

4,633

6,210

55.3%

34.0%

Diluted EPS (p)

2.01

2.33

3.16

57.6%

35.6%

DPS (p)

1.80

2.72

2.05

13.9%

Source: Record, Edison Investment Research

Turning to product investment performance, Record reports that increased market volatility has provided the backdrop for strong performances by a number of its products. In passive hedging the enhanced passive hedging product added value; during H123 a representative account recorded a positive return of 11bps relative to a fixed-tenor benchmark and since inception there was a positive return of 10bps per year. For comparison, the average fee rate in passive hedging is under 3bps.

Strength in the US dollar created the conditions for dynamic hedging to add substantial value for US investors. For a representative account the value added in H123 was 648bps and the since-inception return was +95bps per year.

Within currency for return products, the EMSF fund (US dollar share class) has seen negative returns reflecting the difficult background for emerging markets during a period of dollar strength. However, it has significantly outperformed relevant indices such as the JP Morgan GBI-EM Global Diversified Index with a return since inception of -3.61% compared with -23.46% for the index. Based on this outperformance, Record sees scope to market this strategy more broadly to attract reallocation within the sector. There is also the potential for increased allocations to the fund itself in due course from within Record’s strategic partner, UBS Wealth Management.

Strategy on track

Record reports that it is progressing well in implementing its strategy to accelerate growth in a sustainable way. As a reminder this has three strands: diversification, modernisation and succession.

Diversification is well underway with the EMSF fund and the Municipal Bond fund both launched (though the latter is having limited traction to date because of changes in the market background). There are a range of other initiatives in progress with further details to be given in the group’s capital markets afternoon in February 2023. These include products involving supply chain finance, Sharia finance, infrastructure and digital assets. All reflect expressed client interest and are being developed with partners that have expertise in each area. Record can bring the ability to provide a fund structure, administration and client access (it has a Luxembourg fund platform and has received a BaFin licence in Germany). Management stresses that currency management remains core for the group and that no individual new product will be allowed to become too dominant. This was underlined in relation to digital assets (including a potential crypto fund). Group investment here is to be capped at £2m and care has been taken to select partners (both funds and direct investments) whose track record and governance are seen as appropriate.

As noted earlier, costs have risen in part because of the investment in IT modernisation to increase efficiency in the business, facilitate new products and increase scalability. IT projects are running on time and to budget.

Confidence in succession planning has built following two years of change involving new senior appointments (chief executive, chief investment officer and chief technology officer) and other promotions through the organisation to unlock talent and position the group for longer-term progress. Chief Executive Leslie Hill indicates that she would wish to stay in position to ‘a little beyond’ the end of the group’s three-year plan to FY25. This points to continuity of management over an important phase of the group’s development.

The group reiterates the financial targets previously given for the three-year plan: revenue of over £60m for FY25 based on detailed assessment of the product pipeline and an operating margin of c 40%, subject to inflation levels.

Outlook, estimate changes and financial position

As outlined above Record is making good progress in developing its platform and new product initiatives. Meanwhile performance of existing products has been more positive and currency volatility provides a positive environment for conversations with potential clients. At this point the timing and scale of new product launches is uncertain so they are not factored into our forecasts for FY23–24. The capital markets afternoon in February 2023 may provide a framework to make estimates of the impact of the diversification programme. In the meantime, the group’s target revenue for FY25 gives an indication of its aspirations for the impact of growth in new and existing products.

Exhibit 4 sets out headline changes in our estimates. These reflect the strong performance in H123, currency movements, updated fee rates and more conservative estimates for near-term additions to the ESMF fund. We no longer assume inflows to the municipal bond fund although the revenue effect of this is small given the expected fee rate of c 13bp. In a departure from previous practice, we now include assumed performance fees (H223 £1m and FY24 £2.5m) reflecting the more favourable environment for the enhanced passive hedging service. This increases the risk to estimates but it seems reasonable to reflect some of the potential from this episodic source of revenue.

Exhibit 4: Estimate changes

 

Revenue (£m)

PBT (£m)

EPS (p)

DPS (p)*

 

Old

New

Change (%)

Old

New

Change (%)

Old

New

Change (%)

Old

New

Change (%)

03/23e

41.3

42.0

2%

13.1

13.2

1%

5.30

5.45

3%

4.40

4.10

-7%

03/24e

45.1

43.5

-4%

14.4

13.7

-5%

5.39

5.22

-3%

4.55

4.20

-8%

Source: Edison Investment Research. Notes: *Dividend excludes any special payment.

The dividend estimates shown exclude special dividends. Based on our FY23 and FY24 basic earnings estimates and assuming a near 100% payout, we pencil in special payments of 1.55p and 1.20p, respectively, giving total dividends of 5.65p and 5.40p. The reduction in FY24 reflects a lower performance fee assumption following the relatively high level of performance fees crystallised in H123.

The group figure for net cash and equivalents at end September was £17.7m compared with cash and money market instruments of £17.3m at the year end. The group capital position remains strong. At the end of FY22 Record had regulatory capital resources of £25.3m compared with a regulatory capital requirement of £5.4m. The introduction of new products may increase the capital requirement, but the capital position is seen as well able to support the growth envisaged in the three-year plan.

As in our last note in July, it is interesting to consider a scenario that could generate over £60m in revenue and a 40% operating margin in line with the group’s targets for FY25. Starting with AUME, we envisage most of the growth required falling within the multi-product category but also allow for additional inflows in currency for return and dynamic hedging. Our scenario assumes average AUME of just over $91bn compared with existing estimates of $81.2bn and $84.9bn for FY23 and FY24, respectively. We allow for a marked increase in multi-product fee rate at 30bp (compared with 18.4bp currently assumed for FY24, for example) and a smaller increase for currency for return both reflecting the effects of new higher-margin products, with fee rates potentially ranging between 20bp and 50bp. The overall group average fee rate is assumed to rise to 7.8bp (compared with 5.6bp and 5.8bp respectively in our FY23 and FY24 estimates). Adding performance fees of £2m gives revenue just above £60m. On costs we allow for a 21% increase in total operating expenses compared with our FY24 estimate, reflecting mainly an increase in group profit share but still generating considerable operating leverage and matching the target 40% operating margin. This would give pre-tax profit of c £24.5m and diluted EPS of over 9p.

Valuation comparison

Exhibit 5 shows an updated version of our comparative valuation table, with a selection of quoted UK fund managers. Year-to-date, the comparator asset managers share prices are down 33% on average, while Record shares are 6% higher, a reflection of its lower sensitivity to equity market volatility and the growth it is demonstrating. It trades at a premium to the average calendarised P/E and EV/EBITDA multiples for the comparators, although within the range of multiples. Delivery of growth in line with the group’s three-year plan would bring the final year multiple below 10x. On our estimates, Record’s prospective yield (including special dividend) would be over 6% for FY23 and FY24 and, on our FY25 scenario, c 11%.

Exhibit 5: Comparing valuation with UK fund managers

Price
(p)

Market cap

(£m)

P/E

2022e (x)

EV/EBITDA 2022e (x)

Dividend yield (%)

Ashmore

218

1,551

13.4

5.0

7.7

City of London Investment Group

424

214

11.1

N/A

7.8

Impax Asset Management

756

1,000

20.1

13.8

3.7

Jupiter

129

703

13.2

4.1

13.3

Liontrust

1,016

658

9.6

5.7

7.1

Man Group

204

3,190

5.5

4.2

5.8

Polar Capital

477

479

11.2

5.5

9.6

Schroders

448

7,204

12.9

10.4

4.6

Average

12.1

7.0

7.5

Record

87.00

173

16.8

11.2

4.1

Source: Refinitiv, Edison Investment Research. Note: P/E and EV/EBITDA on a calendar-year basis. Record’s (FY22) dividend yield excludes the special dividend. Priced at 9 December 2022.


Exhibit 6: Financial summary

Year end 31 March

£'000s 

 

2019

2020

2021

2022

2023e

2024e

PROFIT & LOSS

 

 

 

 

 

 

 

 

Revenue

 

 

24,973

25,563

25,412

35,152

41,975

43,512

Operating expenses

 

 

(17,089)

(17,996)

(19,333)

(23,945)

(28,840)

(30,133)

Other income/(expense)

 

 

(8)

82

41

(372)

(40)

(40)

Operating profit (before amort. and except.)

 

 

7,876

7,649

6,120

10,835

13,095

13,339

Finance income

 

 

113

88

33

21

124

330

Profit before tax

 

 

7,989

7,737

6,153

10,856

13,219

13,669

Taxation

(1,559)

(1,365)

(802)

(2,225)

(2,512)

(3,417)

Minority interests

 

 

0

48

0

0

0

0

Attributable profit

 

 

6,430

6,420

5,351

8,631

10,707

10,252

 

 

 

 

 

 

 

 

 

Revenue/AuME (excl. perf fees) bps

 

 

4.9

4.9

4.8

5.6

5.6

5.8

Operating margin (%)

 

 

31.5

29.9

24.1

30.8

31.2

30.7

 

 

 

 

 

 

 

 

 

Average number of shares outstanding (m)

 

 

198.1

197.1

196.2

197.3

196.4

196.4

Basic EPS (p)

 

 

3.27

3.26

2.75

4.52

5.64

5.40

EPS - diluted (p)

 

 

3.25

3.26

2.73

4.37

5.45

5.22

Dividend per share (p)

 

 

2.30

2.30

2.30

3.60

4.10

4.20

Special dividend per share (p)

 

 

0.69

0.41

0.45

0.92

1.55

1.20

Total dividend (p)

 

 

2.99

2.71

2.75

4.52

5.65

5.40

 

 

 

 

 

 

 

 

 

BALANCE SHEET

 

 

 

 

 

 

 

 

Non-current assets

 

 

2,161

4,868

5,153

6,084

6,318

6,028

Intangible assets

 

 

288

470

420

562

1,211

1,561

Tangible assets

 

 

761

751

683

401

345

165

Investments

 

 

1,112

2,472

3,046

3,447

3,606

3,606

Other

 

 

0

1,175

1,004

1,674

1,156

696

Current assets

 

 

31,427

31,149

28,045

27,141

29,423

28,298

Debtors

 

 

7,562

8,704

8,006

9,883

11,021

12,436

Cash

 

 

12,966

14,294

6,847

3,345

18,391

15,851

Money market instruments

 

 

10,735

7,958

12,932

13,913

0

0

Other

 

 

164

193

260

0

11

11

Current liabilities

 

 

(6,158)

(6,955)

(5,992)

(6,210)

(6,658)

(6,837)

Creditors

 

 

(2,736)

(3,009)

(3,426)

(4,721)

(4,976)

(5,615)

Financial liabilities

 

 

(2,621)

(2,191)

(1,696)

0

0

0

Other

 

 

(801)

(1,755)

(870)

(1,489)

(1,682)

(1,222)

Non-current liabilities

 

 

(29)

(901)

(407)

(1,085)

(960)

(960)

 

 

 

 

 

 

 

 

 

Net assets

 

 

27,401

28,161

26,799

25,930

28,123

26,529

Minority interests

 

 

60

132

0

0

0

0

Net assets attributable to ordinary shareholders

 

 

27,341

28,029

26,799

25,930

28,123

26,529

 

 

 

 

 

 

 

 

 

No of shares at year end (m)

 

 

199.1

199.1

199.1

199.1

199.1

199.1

NAV per share p

 

 

13.7

14.1

13.5

13.0

14.1

13.3

 

 

 

 

 

 

 

 

 

CASH FLOW

 

 

 

 

 

 

 

 

Operating cash flow

 

 

7,026

6,543

6,798

11,355

11,359

10,106

Capital expenditure

 

 

(72)

(243)

(230)

(75)

(300)

(170)

Cash flow from other investing activities

 

 

(561)

1,513

(6,210)

(3,392)

13,735

(170)

Dividends

 

 

(5,517)

(5,888)

(5,290)

(6,512)

(9,250)

(11,346)

Other financing activities

 

 

(613)

(943)

(2,368)

(5,019)

(688)

(960)

Other

 

 

205

346

(147)

141

190

0

Net cash flow

 

 

468

1,328

(7,447)

(3,502)

15,046

(2,540)

Opening cash/(net debt)

 

 

12,498

12,966

14,294

6,847

3,345

18,391

Closing net (debt)/cash

 

 

12,966

14,294

6,847

3,345

18,391

15,851

Closing net (debt)/cash inc money market instruments

 

23,701

22,252

19,779

17,258

18,391

15,851

 

 

 

 

 

 

 

 

 

AUME ($bn)

 

 

 

 

 

 

 

 

Opening

 

 

62.2

57.3

58.6

80.1

83.1

83.8

Net new money flows

 

 

(4.5)

4.6

9.7

2.4

11.2

1.4

Market/other

 

 

(0.4)

(3.3)

11.8

0.6

(10.5)

0.9

Closing

 

 

57.3

58.6

80.1

83.1

83.8

86.1

Source: Record accounts, Edison Investment Research


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Frankfurt +49 (0)69 78 8076 960

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60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

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

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No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2022 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

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Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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