JDC Group — Strong results in a difficult market

JDC Group (SCALE: JDC)

Last close As at 18/06/2024

EUR21.20

0.10 (0.47%)

Market capitalisation

EUR290m

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Research: Financials

JDC Group — Strong results in a difficult market

JDC Group (JDC) reported FY22 results that were in line with the preliminary results published on 9 March. After slower than expected growth in H222, JDC expects 2023 revenue growth to accelerate again to 17% at the midpoint of guidance and the EBITDA margin to improve. Nevertheless, we have lowered our 2023 and 2024 revenue estimates by 5% and 6% and our EBITDA estimates by 7% and 12%, respectively, due to a lower FY22 base. JDC trades at an FY24e EV/EBITDA multiple of 12.0x on consensus estimates, which we believe is very undemanding for what is essentially a fast-scaling platform business. Our DCF calculation provides a valuation of €32.51/share (versus €36.40/share previously).

Edwin de Jong

Written by

Edwin De Jong

Analyst

Financials

JDC Group

Strong results in a difficult market

FY22 results update

Diversified financials

17 April 2023

Price

€18.4

Market cap

€252m

Net debt (€m) at end FY22

3.0

Shares in issue

13.7m

Free float

51%

Code

JDC

Primary exchange

Deutsche Börse Scale

Share price performance

%

1m

3m

12m

Abs

9.4

5.8

(19.9)

Rel (local)

4.0

1.5

(28.3)

52-week high/low

€23.3

€14.6

Business description

JDC Group is a leading German insurance platform, providing advice and financial services for professional intermediaries and banks but also directly for end-customers. JDC’s digital platform, for end-clients and for the administration and processing of insurance products, is also provided as a white-label product.

Next events

Q1 results

11 May 2023

AGM

20 July 2023

Analyst

Edwin De Jong

+44 (0)20 3077 5700

JDC Group is a research client of Edison Investment Research Limited

JDC Group (JDC) reported FY22 results that were in line with the preliminary results published on 9 March. After slower than expected growth in H222, JDC expects 2023 revenue growth to accelerate again to 17% at the midpoint of guidance and the EBITDA margin to improve. Nevertheless, we have lowered our 2023 and 2024 revenue estimates by 5% and 6% and our EBITDA estimates by 7% and 12%, respectively, due to a lower FY22 base. JDC trades at an FY24e EV/EBITDA multiple of 12.0x on consensus estimates, which we believe is very undemanding for what is essentially a fast-scaling platform business. Our DCF calculation provides a valuation of €32.51/share (versus €36.40/share previously).

Year end

Revenue
(€m)

EBITDA
(€m)

EPS
(€)

DPS
(€)

EV/EBITDA
(x)

P/E
(x)

12/21

146.8

8.3

0.07

0.0

40.8

262.9

12/22

156.1

9.0

0.07

0.0

28.4

267.8

12/23e

182.7

12.3

0.23

0.0

20.2

81.1

12/24e

212.2

17.4

0.50

0.0

13.8

36.5

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

FY22 results in line with preliminary numbers

JDC reported FY22 results in line with its preliminary results. Revenue came in at €156.1m (+6.3% y-o-y), at the lower end of previous guidance and slightly below consensus (€161m). Decreasing consumer confidence in Germany towards the end of the year led to a weak Q4. In particular, the life insurance, investment products and construction/real estate financing businesses suffered. Nevertheless, reported EBITDA came in at €9.0m, at the higher end of guidance (€7.5–9.5m, consensus €8.8m) due to good cost control. Net profit rose by 6.7% to €1.0m.

Key clients should see >20% growth this year

In recent years, JDC has won several large contracts with German financial institutions. In FY22, these key clients generated nearly 20% of JDC’s total turnover and this percentage is expected to grow in the coming years. The onboarding of savings bank-related insurer Provinzial is gaining traction, especially at the large Cologne branch. JDC believes this should result in growth of more than 20% in FY23 for key clients (FY22: 27.6%). Over the longer term, by 2025, JDC expects revenues to double to €246m and a multifold increase in EBITDA compared to FY20, especially driven by these large contracts. We believe this target is realistic given the growth prospects and the company’s FY23 guidance.

Valuation: FY24e EV/EBITDA of 12.0x

JDC trades at an FY24e P/E of 33.5x and EV/EBITDA of 12.0x on consensus estimates. Our EPS estimates are slightly lower compared to consensus and we arrive at an FY24e P/E of 36.5x. Compared to the average of platform peers like Hypoport and Goosehead, JDC’s EV/EBITDA discount is relatively stable, while its premium compared to financial brokers like Netfonds and Aon varies. A DCF analysis based on our updated estimates gives a valuation of €32.51/share.

Strong results in a challenging FY22

JDC reported FY22 results that were generally in line with its preliminary results on 9 March. Revenue came in at €156.1m (+6.3% y-o-y), at the lower end of the guided range of €155–165m and lower than consensus estimates (€161m). EBITDA amounted to €9.0m, compared with guidance of €7.5–9.5m (consensus €8.8m) and €8.9m in the preliminary results.

In Q422, revenue declined by 7.7% to €40.4m, mainly due to lower life insurance, investment products and construction/real estate financing, driven by decreasing consumer confidence in Germany towards the end of the year. This is a trend that started in Q3 and led to a downward revision of guidance in November.

Exhibit 1: FY22 results highlights

€m

FY19

FY20

FY21

FY22

FY22 y-o-y change

Total revenue

111.5

122.8

146.8

156.1

6.3%

– Advisortech

92.3

102.6

121.0

132.9

9.8%

– Advisory

29.9

30.9

35.7

34.7

-2.7%

-Holding

(10.7)

(10.6)

(9.9)

(11.5)

16.0%

Initial commission

75.1

85.5

100.2

102.2

2.0%

Insurance products

56.9

64.1

77.3

83.5

8.0%

Investment funds

13.6

16.0

15.9

12.7

-20.6%

Shares/Closed-end funds

4.7

5.4

7.0

6.1

-12.9%

Follow-up commission

20.2

21.2

26.0

29.4

13.3%

Overrides

6.6

6.5

6.8

6.9

0.6%

Services

3.4

3.5

4.4

3.5

-20.5%

Fee-based advisory

3.1

2.8

3.1

3.4

7.9%

Other income

3.0

3.4

6.3

10.7

69.7%

Capitalised services

1.0

1.1

1.2

1.4

20.4%

Other operating income

0.6

0.3

0.7

1.6

133.3%

Commission expenses

(81.4)

(90.5)

(107.0)

(111.3)

4.0%

Commission expense as % of revenues

73.0%

73.7%

72.9%

71.3%

 

Personnel expenses

(17.4)

(18.7)

(22.3)

(27.2)

22.2%

Other operating expenses

(10.1)

(9.9)

(11.1)

(11.6)

4.5%

EBITDA

4.2

5.1

8.3

9.0

7.9%

D&A

(4.3)

(4.6)

(5.4)

(6.1)

12.1%

EBIT

(0.1)

0.5

2.9

2.9

0.1%

Associates

0.0

0.0

0.1

(0.3)

-481.7%

Pre-tax profit

(1.8)

(1.0)

1.4

1.1

-21.6%

Net income

(1.8)

(1.2)

0.9

0.9

3.9%

EPS (€)

(0.14)

(0.09)

0.07

0.07

0.0%

Source: JDC Group financial accounts

Advisortech revenue increased by 9.8% in FY22 (but fell by 4.6% in Q4), while Advisory revenue was 2.7% lower (13.3% lower in Q4). In particular, life insurance activities suffered in Q422, especially compared to the strong Q421. This affected revenues from the independent financial advisor (IFA) part of the business (6.2% growth in FY22). The largest key clients (27.6% growth in FY22) grew in Q4 and this is where JDC’s growth should come from in the next few years. Key client revenues now amount to €29.1m, or 19% of total revenues.

FY23 started well for JDC (January was still weak, but February and March were strong) and the company now expects turnover of €175–190m and EBITDA of €11.5–13.0m. At the midpoint, this equates to revenue of €182.5m and EBITDA of €12.3m, or 16.9% revenue growth and 36% EBITDA growth. On average, 17% top-line growth per year will be needed to meet the 2025 target of €246m in revenue.

JDC’s net debt at end FY22 amounts to €3.0m. Interest-bearing liabilities of €19.7m (largely from a bond) are partly offset by a cash position of €16.7m. JDC also has 687k (H1: 546k) shares due to buyback programmes, which provides a solid financial position.

Execution at banking clients at an early stage

JDC’s insurance platform can be sold either as a white-label product with the client’s look and feel or as a separate service, for example www.allesmeins.de and direct customer platform www.geld.de. Through the platform, private individuals/intermediaries can select, add and service insurance policies from almost all insurers active in the German market, in a simple app that also provides a comprehensive overview of an individual’s insurance portfolio.

Larger German financial institutions, ranging from savings bank-related insurers like Provinzial and Versicherungskammer Bayern (VKB) to company in-house insurance brokers (eg Lufthansa/BMW/Volkswagen) are starting to adopt JDC’s platform or have already done so in the last few years. These clients are JDC’s major or key customers. In FY22, they generated nearly 20% of the company’s total turnover and this percentage is expected to grow rapidly, as adoption progresses and more insurance contracts are transferred to JDC’s platform.

The savings bank and cooperative bank-related insurers in particular provide a large opportunity for JDC. The company expects these client groups to generate more than €300m in annual revenue once fully onboarded and as such these groups are vital if JDC is to reach or exceed its longer-term guidance.

The onboarding of Provinzial, the first large savings bank-related insurer contract, is on track, with more than 50 banks onboarded (with around 30 more to go). However, contract transfers to JDC’s platform (which generate turnover for JDC) are much faster at some branches than others. For example, Cologne (one million customers, balance sheet total €30bn) is the branch with the best adoption of JDC’s platform. This branch will roll out JDC’s S-Versicherungsmanager to all savings bank branches as the sole insurance platform for all retail activities. Provinzial’s clients will contribute €3–5m in revenue this year alone, according to JDC management.

Onboarding has not yet started at VKB and should start this year at cooperative bank insurer R+V Versicherung. All in all, savings and cooperative bank-related insurers should contribute c €10m in revenue this year compared to €5m in the last year.

Adding other client groups

JDC Group is constantly looking to add more client groups to its platform, as adding volume brings strong operational leverage. After winning in-house brokers from Lufthansa (Albatros) and BMW, JDC Group added insurance companies from large savings banks and cooperative banks, as well as, for example, internet platform Finanzguru and agency networks of insurers like Gothaer.

The joint venture with Bain and 27% shareholder GWL, initiated last year, is another opportunity for platform growth. In this deal, JDC can co-invest (we estimate c 10% of the equity) with Bain/GWL to acquire larger insurance brokers in Germany and Austria (we estimate €1m+ in revenue). The acquired brokers will consequently be plugged into JDC’s platform through service agreements. JDC expects to close three to five deals with the Bain/GWL joint venture this year. The first could be announced as soon as the end of April.

In late 2022, JDC Group’s unit Jung, DMS & Cie signed a purchase agreement to acquire Top Ten Financial Network Gruppe, adding another product and client group to its platform. Top Ten administers more than €2bn in investment portfolios for around 1,000 intermediaries in its network using its own software solutions, generating largely recurring revenues of around €20m.

The acquisition price was not disclosed. The transaction is expected to close in mid-2023. With this acquisition, JDC is expanding its position in investment management (it already has portfolio management activities in its Advisortech division), while gaining control over the technical platform required for this. Top Ten’s software solutions can be integrated with JDC’s Insurtech systems. This brings significant cross-selling synergies, as JDC can offer existing customers further digital services in the asset management, liability umbrella solutions and label funds sectors and service Top Ten’s c 1,000 intermediaries with its Insurtech platform and vice versa. Top 10 is likely to start contributing to revenues from Q3/Q423.

Lower estimates

Building a revenue model around a platform business is always subject to a high degree of uncertainty, as adoption is generally unpredictable, while JDC’s revenue model is also changing quickly. In the next few years, we expect an acceleration in growth for Advisortech activities, not only driven by key clients, but also by increased growth in the IFA business. This is a result of the joint venture with Bain/GWL gaining momentum, as well as the partnership with Gothaer. As a consequence, we believe that the FY25 target of €246m revenues is realistic without further acquisitions. We have introduced FY25 estimates in this note (see Exhibit 4).

In FY23, we estimate that Advisortech revenues will increase by 16.1% to €154.3m, fuelled by 25% growth at key clients and 14% in the IFA business. In Advisory, we expect revenues to increase by 15% to €39.9m, as this division recovers from a weak 2022. After 2023, we expect revenue growth in Advisory to return to a more normalised level of 5%.

Compared to our previous estimates, our revenue forecasts are 5–6% lower and our EBITDA forecasts 7–12% lower in FY23 and FY24. This is due to the lower comparison base in 2022 as a result of a more difficult market environment and slower roll-out, especially at VKB and Provinzial.

JDC’s cost base is relatively stable and we have pencilled in 15% higher staffing costs, driven by higher pay rates and an increase in personnel to assist the growth in transfers of insurance contracts to JDC’s platform. We expect other operating expenses to grow by 3–4% in the next few years. As a result of fast-growing revenues, compared to a slower increasing cost base, we estimate that EBITDA will almost double over the next two years to €17.4m. We see D&A increasing by 5–10% in the next few years. JDC’s corporate tax rate will be 15–20% (we have assumed 20%), as it has deferred tax assets of €2.5m. As a result, we expect net profit will increase to €6.9m by 2024 from €0.9m in 2022.

Exhibit 2: Estimate changes

€m

FY22

FY23 old

FY23e new

Change

FY24 old

FY24e new

Change

FY25e

Total revenue

156.1

192.9

182.7

-5.3%

225.5

212.2

-5.9%

249.9

EBITDA

9.0

13.3

12.3

-7.3%

19.8

17.4

-12.0%

26.2

EBIT

2.9

6.8

5.7

-16.6%

11.2

10.4

-7.1%

18.9

Pre-tax profit

1.1

5.3

3.9

-26.9%

9.7

8.6

-11.3%

17.1

Net income

0.9

4.2

3.1

-26.2%

7.7

6.9

-10.6%

13.7

EPS (€)

0.07

0.31

0.23

-26.9%

0.57

0.50

-11.7%

1.00

Source: JDC Group financial accounts, Edison Investment Research

Valuation still undemanding

DCF

Our DCF analysis results in a value of €32.51 per share, down from €36.40 in our last report published on 21 November 2022. This decrease is the result of our lower estimates. The most important assumptions in our DCF model are:

We only consider organic revenue growth, although we expect JDC to remain active in M&A. We expect organic revenue growth to increase in the next few years to 25%, as adoption of the platform by retail clients grows, before levelling off to a terminal growth rate of 2.5%.

We expect the EBITA margin to increase to 7.6% in 2025 from 1.9% in 2022, as JDC benefits from platform effects and operational leverage. After 2025, the EBITA margin should increase to 10%, driven by operational leverage.

An effective tax rate of 32%, based on the corporate tax rate in Germany, starting at a lower level as a result of JDC’s tax shield.

We use a beta of 1.5 to reflect the relatively low-risk IFA/advisory business, offset by a more uncertain key client development.

We set a risk-free rate and market equity risk premium of 3.0% and 5.0%, delivering a WACC of 9%.

We have excluded treasury shares from our calculations.

Peer valuation

We see financial broker Aon and aggregators in the UK such as Moneysupermarket.com as relevant comparators for the advisory part of JDC’s business. Compared to these companies, JDC trades at a premium on EV/EBITDA but at a steep discount on EV/sales for the next two years due to its higher profitability. Compared to our report introducing forecasts published on 14 July 2022, the premium on EV/EBITDA has decreased, while the discount on EV/Sales has increased.

JDC’s much bigger Advisortech activities are essentially a platform business. This part of the business is most comparable to German mortgage specialist Hypoport, which also offers an insurance platform, and US-based Goosehead, which offers an independent advisory platform service. We have not included US-based Lemonade in our peer comparison as it is not yet EBITDA positive. Compared to the average multiples of Goosehead and Hypoport, JDC’s discount on FY23 EV/EBITDA now is 20.4% compared to 9.3% in July 2022.

Although we realise that a peer comparison is not easy given JDC’s diversified profile, we note that JDC trades at a 67% discount on FY24e consensus EV/sales compared to platform peers and 68% compared to financial brokers.

Exhibit 3: Peer valuation

Market cap (local currency, m)

FY23e EV/sales

FY24e EV/sales

FY23e EV/EBITDA

FY24e EV/EBITDA

Aon

$66,000

5.8

5.5

17.7

16.5

Moneysupermarket.com

£1,320

3.3

2.9

10.7

9.5

Netfonds

€87

0.4

0.4

9.0

6.9

Average financial brokers

 

3.1

2.9

12.5

11.0

Goosehead

$1,221

4.8

3.7

25.7

17.9

Hypoport

€898

2.4

2.2

19.3

14.7

Average platforms

 

3.6

2.9

22.5

16.3

JDC Group

€234

1.2

1.0

17.9

12.0

Premium/(discount) financial brokers

 

-61.2%

-67.5%

43.5%

9.4%

Premium/(discount) to platform

 

-66.1%

-67.3%

-20.4%

-26.4%

Source: Refinitiv. Note: Priced at 14 April 2023.

Exhibit 4: Financial summary

€m

2021

2022

2023e

2024e

2025e

Year end 31 December

IFRS

IFRS

IFRS

IFRS

IFRS

INCOME STATEMENT

Revenue

 

 

146.8

156.1

182.7

212.2

249.9

Cost of Sales

-105.1

-108.3

-127.0

-148.0

-174.7

Gross Profit

41.7

47.8

55.7

64.3

75.2

EBITDA

 

 

8.3

9.0

12.3

17.4

26.2

Operating profit (before amort. and excepts.)

 

2.9

2.9

2.9

5.7

10.4

Amortisation of acquired intangibles

0

0

0

0

0

Exceptionals

0

0

0

0

0

Share-based payments

0

0

0

0

0

Reported operating profit

 

 

2.9

2.9

5.7

10.4

18.9

Net Interest

 

 

-1.6

-1.5

-1.8

-1.8

-1.8

Joint ventures & associates (post tax)

0.1

(0.3)

0.0

0.0

0.0

Profit Before Tax (norm)

1.4

1.1

3.9

8.6

17.1

Profit Before Tax (reported)

1.4

1.1

3.9

8.6

17.1

Reported tax

-0.5

-0.2

-0.8

-1.7

-3.4

Profit After Tax (norm)

0.9

0.9

3.1

6.9

13.7

Profit After Tax (reported)

0.9

0.9

3.1

6.9

13.7

Basic average number of shares outstanding (m)

13.7

13.7

13.7

13.7

13.7

Average Number of Shares Outstanding (m)

 

 

13.7

13.7

13.7

13.7

13.7

EPS (€)

 

 

0.07

0.07

0.23

0.50

1.00

EPS - normalised (c)

0.07

0.07

0.23

0.50

1.00

DPS (€)

0.00

0.00

0.00

0.00

0.00

Gross Margin (%)

28.4

30.6

30.5

30.3

30.1

EBITDA Margin (%)

5.7

5.7

6.7

8.2

10.5

Normalised Operating Margin (%)

2.0

1.9

3.1

4.9

7.6

BALANCE SHEET

Fixed Assets

 

 

 

78.0

74.5

71.6

69.0

66.9

Intangible Assets

66.4

64.1

61.9

60.0

58.3

Tangible Assets

5.6

4.9

4.2

3.5

3.0

Investments & other

6.0

5.6

5.6

5.6

5.6

Current Assets

 

 

 

43.7

38.5

47.6

60.5

80.7

Stocks

0.0

0.0

0.0

0.0

0.0

Debtors

19.2

17.6

20.6

23.9

28.2

Cash & cash equivalents

21.9

16.7

22.0

30.8

45.7

Other

2.6

4.2

4.9

5.7

6.8

Current Liabilities

 

 

 

36.9

32.7

35.8

39.3

43.6

Creditors

23.8

18.1

21.2

24.7

29.0

Tax and social security

0.0

0.0

0.0

0.0

0.0

Short term borrowings

1.0

0.0

0.0

0.0

0.0

Other

12.1

14.6

14.6

14.6

14.6

Long Term Liabilities

 

 

 

46.0

43.3

43.3

43.3

43.3

Long term borrowings

19.5

19.7

19.7

19.7

19.7

Other long term liabilities

26.5

23.6

23.6

23.6

23.6

Net Assets

 

 

 

38.8

37.0

40.1

47.0

60.6

Minority interests

0.0

0.0

0.0

0.0

0.0

Shareholders' equity

 

 

 

38.8

37.0

40.1

47.0

60.6

CASH FLOW

Operating Cash Flow

5.6

7.2

11.6

15.7

22.8

Working capital

9.3

0.4

(0.6)

(0.7)

(0.9)

Net operating cash flow

 

 

 

14.9

7.6

10.9

15.0

21.9

Capex

(2.1)

(3.2)

(3.8)

(4.4)

(5.2)

Acquisitions/disposals

(11.0)

0.0

0.0

0.0

0.0

Net interest

0.0

(6.4)

(1.8)

(1.8)

(1.8)

Equity financing

10.6

(3.2)

0.0

0.0

0.0

Dividends

0.0

0.0

0.0

0.0

0.0

Other

(2.2)

0.0

0.0

0.0

0.0

Net Cash Flow

10.2

(5.2)

5.3

8.8

14.9

Opening net debt/(cash)

 

 

 

(11.6)

(1.4)

3.0

(2.3)

(11.1)

FX

0.0

0.0

0.0

0.0

0.0

Closing net debt/(cash)

 

 

 

(1.4)

3.0

(2.3)

(11.1)

(26.0)

Source: JDC Group, Edison Investment Research

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

Copyright: Copyright 2023 Edison Investment Research Limited (Edison).

Australia

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

New Zealand

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

United Kingdom

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

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

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

United States

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

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

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This report has been commissioned by JDC Group and prepared and issued by Edison, in consideration of a fee payable by JDC Group. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

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

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

Copyright: Copyright 2023 Edison Investment Research Limited (Edison).

Australia

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

New Zealand

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

United Kingdom

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

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

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

United States

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

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

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Nicox — Chinese partner Ocumension files Zerviate NDA

Nicox has announced that its Chinese partner, Ocumension Therapeutics, has submitted a New Drug Application (NDA) to commercialise Zerviate (cetirizine ophthalmic solution, 0.24%) in China, for ocular itching associated with allergic conjunctivitis. Ocumension expects the review process to take around 12 months, leading to a potential launch in China in 2024. Ocumension estimates that Zerviate could potentially deliver $100m in annual sales in China within seven years. Nicox itself would be entitled to royalties between 5% and 9% of net Zerviate sales by Ocumension, as well as sales milestones up to $17.2m. We see the advancement of the Zerviate NDA as a positive development, as it should translate into an additional royalty stream for Nicox provided the Chinese NDA is approved. We believe the drug has a high likelihood of approval given that it is also approved in the US (and commercialised by Nicox’s US partner, Santen), and are also encouraged by Ocumension’s commitment to commercialising the product, as evidenced by it funding and completing its own Phase III studies in China on Zerviate.

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