7digital Group — H2 step increase in revenues underpinned

7digital Group — H2 step increase in revenues underpinned

H1 results reflect the progress 7digital Group has made over the last year and the initial impact of the transformative 24-7 acquisition, with exit monthly recurring revenues (MRR) up 113%. The step change in revenues forecast in H2 looks underpinned and the integration of 24-7 has started, key to moving to positive cash flow in H218 – a target reiterated by management. We expect this to trigger a re-rating of the shares, which trade on 4.1x FY18e EBITDA, a fraction of its B2B video streaming peers.

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Written by

7digital Group

H2 step increase in revenues underpinned

Interim update

Media

29 September 2017

Price

6.38p

Market cap

£12m

Net debt (£m) as at June 2017

0.5

Shares in issue

184.3m

Free float

84%

Code

7DIG

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

0.0

(7.3)

(4.7)

Rel (local)

0.4

(6.9)

(11.5)

52-week high/low

9.16p

5.32p

Business description

7digital Group provides an end-to-end, white-label digital music platform and access to global music rights that enable its clients, which include businesses in the radio, electronics, social media and telecoms industries around the world, to offer music streaming and download services to their own customers. Its global customer base includes musical.ly, Onkyo, Panasonic, MediaMarktSaturn, Cdiscount, Electric Jukebox, eMusic and i.am +.

Next events

FY17 results

March 2018

Analysts

Bridie Barrett

+44 (0)20 3077 5700

Fiona Orford-Williams

+44 (0)20 3077 5739

7digital Group is a research client of Edison Investment Research Limited

H1 results reflect the progress 7digital Group has made over the last year and the initial impact of the transformative 24-7 acquisition, with exit monthly recurring revenues (MRR) up 113%. The step change in revenues forecast in H2 looks underpinned and the integration of 24-7 has started, key to moving to positive cash flow in H218 – a target reiterated by management. We expect this to trigger a re-rating of the shares, which trade on 4.1x FY18e EBITDA, a fraction of its B2B video streaming peers.

Year end

Revenue (£m)

EBITDA
(£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

EV/EBITDA
(x)

P/E
(x)

12/15

10.4

(2.1)

(7.6)

(7.1)

0.0

N/A

N/A

12/16

11.9

(3.5)

(4.7)

(4.1)

0.0

N/A

N/A

12/17e

19.1

(1.7)

(2.9)

(1.8)

0.0

N/A

N/A

12/18e

24.9

3.0

2.1

1.2

0.0

4.1

5.3

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

Strong client momentum and 24-7 deal

Revenues increased 9%, or 17% before foreign currency translation effects. Despite the consolidation of one month of 24-7, the cost base decreased 4% enabling a 36% reduction in EBITDA losses to £1.7m. While this acquisition was the main contributor to the 113% increase in the annualised exit MRR to £11.5m, the group has also made solid organic progress. £4m of new business was won in H1 from strategically significant customers across a range of sectors. Furthermore, the high-quality MQA audio format supported by 7digital, the only B2B service to do so, is gaining momentum. It is now supported by over 80% of global music labels, spurring interest across the sector for HD audio streaming services.

Good visibility in revenues

Management targets EBITDA profitability in 2018. This is predicated on more than doubling revenues in the second half of this year and full integration of 24-7 (by H218). With 65% of revenue forecasts already contracted, and most of our forecast for licensing revenues considered highly secure, it appears on track. There is still much work to be done to deliver the cost synergies associated with 24-7; here, management can draw on its experience following the acquisition of Snowite last year. Cash reserves at the end of June were £0.9m. Together with an additional £4.9m of guaranteed pre-payments in H2, this should bring the group to, or close to, the point at which it becomes cash flow positive, which we forecast in H218.

Valuation: Progress warrants re-rating

7digital is well positioned to benefit from the strong growth in the market for streamed music (H117 streaming revenues +180%). The 4.1x FY18e EV/EBITDA multiple, which is low for an operationally geared growth company’s first year of profitability, is a fraction of the average 14.4x rating of its (more mature) peer set of video streaming companies. As the group moves towards targeted EBITDA profitability in FY18, which is contingent on the successful integration of 24-7, we expect to see a significant re-rating.

H1 results highlights

Total revenues increased by 9% to £5.9m and 17% before foreign currency translational effects. 24-7, acquired in June, contributed £530k to revenues, which implies solid organic constant currency revenue growth of approximately 7%. With the bulk of revenue growth from higher-margin licensing and creative revenues, gross margins expanded to 71% (H116: 61%) and gross profit increased by 27% to £4.2m. Despite the consolidation of one month of 24-7’s cost base, operating expenses decreased by 4%, as the group continues to see the benefit of the efficiency programme initiated last year and cost synergies following last year’s acquisition of Snowite. Consequently, the H117 EBITDA loss was reduced to £1.7m (H116: £2.6m).

Exhibit 1: Summary H117 results and forecasts, £000s

Revenues

H116

H117

Change

H217e

FY17e

FY18e

FY19e

Licence sales

3,043

4,036

33%

10,685

14,721

20,557

23,191

Content

1,367

1,117

-18%

728

1,845

1,660

1,494

Creative

837

982

17%

1,312

2,294

2,639

2,902

Other

196

(198)

-201%

448

250

0

0

Total revenues

5,443

5,937

9%

13,173

19,110

24,856

27,587

Revenue growth

60.6%

30.1%

11.0%

Gross profit:

Licensing

2,771

3,526

27%

9,723

13,249

18,501

20,872

Content

127

31

-76%

172

203

183

164

Creative

423

546

29%

601

1,147

1,319

1,451

FX

3

132

118

250

0

0

Total gross profit

3,324

4,235

27%

10,614

14,849

20,003

22,487

Gross margin

61.1%

71.3%

80.6%

77.7%

80.5%

81.5%

Operating expenses

(5,952)

(5,921)

-1%

(10,675)

(16,596)

(17,038)

(17,842)

EBITDA

(2,628)

(1,686)

-36%

(61)

(1,747)

2,965

4,646

EBITDA margin

-48.3%

-28.4%

-0.5%

-9.1%

11.9%

16.8%

Normalised EBITA

(3,079)

(2,333)

-24%

(542)

(2,875)

2,145

3,762

Normalised PBT

(3,074)

(2,333)

-24%

(542)

(2,875)

2,130

3,762

Reported PBT

(3,174)

(2,975)

-6%

(1,292)

(4,267)

478

3,762

Source: Historics - 7digital, forecasts - Edison Investment Research

Review by division

Licensing revenues increased by 33% to £4.0m, and MRR (monthly recurring revenues, which excludes one-off revenues, ORR) increased 38% to £3.2m. The annualised exit MRR, which is more relevant for gauging the group’s outlook, increased by 113% to £11.5m, of which streaming MRR increased by 180%. Much of this increase is due to the acquisition of 24-7, which is expected to contribute £5m to revenues this year (mainly in H217) and £8m next year. However, there was also solid organic growth momentum across a number of verticals:

Hardware: A three- year deal with Ubithings to power Prizm, its subscription streaming service on its smart audio player, initially in France with other territories to follow. Prizm devices come with unlimited music access for a year before reverting to an annual subscription of €40. Two other hardware deals signed in the period include Onkyo, to redesign its digital music stores, and DTS, related to the development of a high-resolution audio solution prototype for the automotive market.

Direct to consumer services: The relaunch of TriPlay’s eMusic service in the US and the HDtracks music service, which post launch in H2 will use the MQA standard supported by 7digital (the only B2B provider to currently do so). It also extended its agreement with hugely popular social media music service musical.ly, doubling the number of territories covered to 60.

Music labels: 7digital is the only B2B platform that supports the high-resolution master quality authenticated (MQA) file format, which has received support from all the main record labels and is now gaining momentum. Its expertise in this area has also resulted in additional work for the major record labels and their artists in the period.

During the period, the group also acquired Flow Radio’s technology platform and certain customers from Imagination Technologies. Flow Radio is an internet radio aggregation service that provides consumer access to over 25k radio stations worldwide.

Creative revenues increased 17% to £1.0m driven by renewals of long-terms clients (BBC Radio 2’s Pick of the Pops, The Folk Show, The Golden Hour) as well as new clients and services; for example, it is starting to see some synergies between divisions with the use of its curation skills for the creation of playlists for its streaming customers (Electric Jukebox).

Content revenues decreased by 18% to £1.1m and continue to provide a headwind to total top line growth. The prior year comparison includes project based revenues from a major label to use 7digital's platform for the sale of music downloads direct from an artist's own website. Excluding these revenues (which are now classified as B2B revenues within licensing), content revenues decreased by a more moderate 3%. These are very low-margin revenues and have little impact at the group’s gross profit level. The H117 gross margin was 3.2%, lower than the 5-10% typical margin due to the catch up of expensing credit card charges.

Outlook: Full 24-7 impact in H2 and client momentum moving into H217

Excluding MMS, contracts with a lifetime value of c £4m were signed in H1 (some of which are renewals), which will contribute to revenues from H2. Furthermore, since the period end, 7digital has announced several client wins: Global Eagle Entertainment (Nasdaq-listed inflight entertainment content to the airline industry), Deedo SAS (for a new music streaming service across 27 markets in Africa and Asia) and US group Fan Label. In parallel with its results announcement, 7digital also disclosed a new contract with Fender (a leading musical instruments company).

The second half of the year will also see the full benefit from the acquisition of 24-7. As well as the ongoing business acquired (three-year contract to run the Juke! music services and other third-party business for £6m pa), MediaMarktSaturn (MMS) has widened its relationship with 7digital, committing to a new contract worth £6m to develop new digital music services. Management has reiterated its expectation that the 24-7 acquisition will add £5m of revenues, mostly in the second half of this year and more than £8m in 2018. In total, 24-7 brings approximately £18m of contracted revenues over the coming three years. This estimate excludes the potential to develop the acquired business, an area where the group is feeling increasingly confident it can drive concrete revenue synergies; for example, additional work is currently under discussion with MMS.

Good revenue visibility: A significant share of licensing contracted

Overall, the solid H1 performance, a developed pipeline and the full impact of the 24-7 deal should result in a step change in revenues in the second half, in line with our forecasts. While the cost base will also rise as 24-7 is integrated for the entire period (we factor in an 80% increase in the cost base in H217 from H1), the synergy opportunities are considerable; work is underway to consolidate the technology platforms and a full review of all of 7digital’s European offices should lead to additional savings next year. Consequently, from the second half of 2018, we expect the majority of new revenues to convert to EBITDA, underpinning our forecast for EBITDA profitability and positive operating cash flow next year.

Revenue visibility is good. Approximately 65% (£7m) of our H2 revenue forecast is contracted and all of our £11m H2 forecast licensing revenues are considered “highly secure” (Exhibit 3). Growth in creative revenues is tracking ahead of our full year forecasts and the reduction in content revenues is as expected. We make no change to our estimates.

Exhibit 2: Annualised exit MRR (£000s)

Exhibit 3: Licensing revenues outlook – highly secure and contracted (£000s)

Source: 7digital interim 2017 presentation

Source: 7digital interim 2017 presentation

Exhibit 2: Annualised exit MRR (£000s)

Source: 7digital interim 2017 presentation

Exhibit 3: Licensing revenues outlook – highly secure and contracted (£000s)

Source: 7digital interim 2017 presentation

Cash flow and balance sheet

Net debt at June was £0.5m, including cash reserves of £0.9m (FY16: net debt £0.7m, cash £0.8m). This includes only £0.8m of the £5.7m pre-payment for existing services and setup fees agreed as part of the MMS contract. A further £2.2m was received in July, £1.4m in August and £1.3m is expected in October. This also explains the £3m increase in trade debtors and corresponding increase in accruals and deferred income.

While the cost base is forecast to increase significantly in H217, this should be covered by the incremental revenues and we expect operating cash outflow to decrease. On this basis, the extra working capital from MMS should, if carefully managed, be sufficient to see it through to Q118 or Q218. That said, it is dependent upon astute working capital management and the integration process proceeding to plan. Given the already long payables cycle, additional short-term facilities may be advisable to provide some flexibility until the anticipated cost savings (as a result of the integration of 24-7) are fully realised, which we expect to bring the group to positive cash flow in H218, in line with management’s target. We have assumed an additional £2.0m short-term financing is drawn in our FY18 estimates (we had previously assumed £0.5m).

Valuation

7digital offers unique exposure to the rapidly growing music streaming segment in Europe (H117 streaming MRR +180%), which will be increasingly in focus following Spotify’s mooted IPO later this year.

The group has made considerable strategic and operational progress over the past year. The transition to a licensing business is complete, a number of strategically significant customer wins have been announced and the acquisition of 24-7 consolidates the group’s leading position and should enhance profitability. Via this acquisition and a focus on higher tier customers, the quality of 7digital’s revenue base has improved considerably, which should also help mitigate past issues relating to customer loss through bankruptcy.

There is still work to be done to deliver to forecasts; however, revenue visibility is strong and provided management’s EBITDA targets can be met in FY18, the shares look very attractive.

Based on our forecasts, 7digital trades on an FY18e EV/sales multiple of 0.5x, an EV/EBITDA of 4.1x and a P/E of 5.3x. On a standalone basis, we believe these multiples are very attractive for an operationally geared company, with a strong market position in its first year of profitability. The valuation looks similarly attractive in the context of its peer set, which trades on an average FY18 EV/sales multiple of 1.7x and an EV/EBITDA multiple of 14.4x. If 7digital were to trade towards the lower end of its peer set on 8x FY18 forecast EBITDA, this would offer upside towards 14p/share. An average EBITDA multiple would imply a value per share of approximately 23p.

We are forecasting an EBITDA margin of 12% in FY18 and 17% in FY19 and consider a peak EBITDA margin of 20% to be achievable by FY20. If we assume moderate revenue growth of 5% pa for the seven years to FY26, our DCF returns a value of 13.7p. A slightly more aggressive growth rate over this period of 10% returns a value of 17.9p.

Please refer to our initiation report Stand and deliver for more information on 7digital.

Exhibit 4: Financial summary

£'000s

2014

2015

2016

2017e

2018e

2019e

31-December

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

INCOME STATEMENT

Revenue

 

 

10,212

10,392

11,899

19,110

24,856

27,587

Cost of Sales

(4,882)

(3,308)

(3,451)

(4,261)

(4,853)

(5,100)

Gross Profit

5,330

7,084

8,448

14,849

20,003

22,487

EBITDA

 

 

(3,108)

(2,102)

(3,528)

(1,747)

2,965

4,646

Normalised operating profit

 

 

(3,775)

(2,862)

(4,684)

(2,875)

2,145

3,762

Amortisation of acquired intangibles

0

0

(321)

(552)

(552)

0

Exceptionals

(388)

(128)

(464)

(840)

(1,100)

0

Share-based payments

(340)

(137)

4

0

0

0

Reported operating profit

(4,503)

(3,127)

(5,465)

(4,267)

493

3,762

Net Interest

3

11

(13)

0

(15)

0

Joint ventures & associates (post tax)

0

0

0

0

0

0

Exceptionals

1,888

(4,767)

0

0

0

0

Profit Before Tax (norm)

 

 

(1,884)

(7,618)

(4,697)

(2,875)

2,130

3,762

Profit Before Tax (reported)

 

 

(2,612)

(7,883)

(5,478)

(4,267)

478

3,762

Reported tax

(17)

(3)

(12)

0

0

(376)

Profit After Tax (norm)

(1,901)

(7,621)

(4,709)

(2,875)

2,130

3,386

Profit After Tax (reported)

(2,629)

(7,886)

(5,490)

(4,267)

478

3,386

Minority interests

0

0

0

0

0

0

Discontinued operations

3,004

0

0

0

0

0

Net income (normalised)

(1,901)

(7,621)

(4,709)

(2,875)

2,130

3,386

Net income (reported)

375

(7,886)

(5,490)

(4,267)

478

3,386

Basic average number of shares outstanding (m)

87

108

114

160

183

183

EPS - basic normalised (p)

 

 

(2.2)

(7.1)

(4.1)

(1.8)

1.2

1.9

EPS - diluted normalised (p)

 

 

(2.2)

(7.1)

(4.1)

(1.8)

1.2

1.9

EPS - basic reported (p)

 

 

0.4

(7.3)

(4.8)

(2.7)

0.3

1.9

Dividend (p)

0.00

0.00

0.00

0.00

0.00

0.00

Revenue growth (%)

N/A

1.8

14.5

60.6

30.1

11.0

Gross Margin (%)

52.2

68.2

71.0

77.7

80.5

81.5

EBITDA Margin (%)

N/A

N/A

N/A

N/A

11.9

16.8

Normalised Operating Margin

N/A

N/A

N/A

N/A

8.6

13.6

BALANCE SHEET

Fixed Assets

 

 

7,661

1,121

2,778

3,508

2,836

2,673

Intangible Assets

345

417

2,303

3,013

2,541

2,548

Tangible Assets

691

704

475

495

295

125

Investments & other

6,625

0

0

0

0

0

Current Assets

 

 

8,451

6,220

4,590

5,327

7,838

8,358

Stocks

44

62

177

177

177

177

Debtors

3,095

4,502

3,575

4,712

6,129

6,802

Cash & cash equivalents

5,312

1,656

838

438

1,532

1,378

Other

0

0

0

0

0

0

Current Liabilities

 

 

(4,984)

(3,975)

(7,193)

(8,652)

(8,198)

(7,354)

Creditors

(4,796)

(3,804)

(6,731)

(8,190)

(7,736)

(6,892)

Tax and social security

0

0

0

0

0

0

Short term borrowings

0

0

0

0

0

0

Other

(188)

(171)

(462)

(462)

(462)

(462)

Long Term Liabilities

 

 

0

0

(1,746)

(1,561)

(3,376)

(1,191)

Long term borrowings

0

0

(1,519)

(1,334)

(3,149)

(964)

Other long term liabilities

0

0

(227)

(227)

(227)

(227)

Net Assets

 

 

11,128

3,366

(1,571)

(1,378)

(900)

2,486

Minority interests

0

0

0

0

0

0

Shareholders' equity

 

 

11,128

3,366

(1,571)

(1,378)

(900)

2,486

CASH FLOW

Op Cash Flow before WC and tax

(3,108)

(2,102)

(3,528)

(1,747)

2,965

4,646

Working capital

(2,788)

(2,439)

4,098

322

(1,871)

(1,518)

Exceptional & other

(391)

(150)

(1,024)

(840)

(1,100)

0

Tax

(17)

(3)

(12)

0

0

(376)

Net operating cash flow

 

 

(6,304)

(4,694)

(466)

(2,265)

(6)

2,751

Capex

(345)

(848)

(447)

(800)

(700)

(720)

Acquisitions/disposals

3,718

1,828

108

0

0

0

Net interest

2

11

(13)

0

(15)

0

Equity financing

6,952

0

0

2,850

0

0

Dividends

0

0

0

0

0

0

Other

(1)

0

0

0

0

0

Net Cash Flow

4,022

(3,703)

(818)

(215)

(721)

2,031

Opening net debt/(cash)

 

 

(1,290)

(5,312)

(1,656)

681

896

1,617

FX

0

48

0

0

0

0

Other non-cash movements

0

0

(1,519)

0

0

0

Closing net debt/(cash)

 

 

(5,312)

(1,656)

681

896

1,617

(414)

Source: 7digital (historics), Edison Investment Research (forecasts)

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Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2017. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, 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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2017 Edison Investment Research Limited. All rights reserved. This report has been commissioned by 7digital Group and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.
Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2017. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, 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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Air Partner — Better to travel

Air Partner (AIR) is on a journey of transformation, with a clear, long-term strategy to become a world-class global aviation services group. While AIR’s market includes some inherent volatility, the group is international, broadly based and diversified – increasingly so as the younger Consulting & Training business scales up. Cash-rich, it is well-placed both to add and grow complementary businesses.

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