Consort Medical — Update 15 August 2016

Consort Medical — Update 15 August 2016

Consort Medical

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Consort Medical

Delivering on commitments

Preliminary results

Healthcare equipment & services

15 August 2016

Price

1,035.00p

Market cap

£508m

Net debt (£m) at end-April 2016

97.0

Shares in issue

49.1m

Free float

99%

Code

CSRT

Primary exchange

LSE

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(4.3)

7.9

10.9

Rel (local)

(8.1)

(3.8)

5.8

52-week high/low

1,155.00p

909.50p

Business description

Consort Medical is an international medical devices business with more than 2,000 staff. It consists of Bespak (inhalation, injection and other drug delivery technologies) and Aesica (contract development and manufacturing, CDMO).

Next events

AGM

September 2016

Interim H117 results

December 2016

DEV610: GDUFA date

28 March 2017

Analysts

Lala Gregorek

+44 (0)20 3681 2527

Daniel Wilkinson

+44 (0)20 3077 5734

Consort Medical is a research client of Edison Investment Research Limited

Consort Medical’s FY16 results reflected the first full year of consolidation of Aesica. Revenues of £277m evidenced the scalability of its full-service contract development and manufacturing operations, as well as the impact of ongoing operational efficiencies, with improved operating margins at both Bespak (+170bp) and Aesica (+210bp). Consort is making good progress with building scale and is well placed to capitalise on the strong growth in outsourcing development and manufacturing in the sector.

Year
end

Revenue (£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

04/15

184.8

22.7

47.8

18.1

21.7

1.7

04/16

276.9

32.3

57.6

19.3

18.0

1.9

04/17e

281.5

33.5

55.8

19.3

18.5

1.9

04/18e

298.7

36.3

60.5

19.3

17.1

1.9

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

Aesica integration on track

Consort has delivered on its key strategic goals following the Aesica acquisition, including securing a first drug/device development and manufacturing collaboration with Precision Ocular. Aesica restructuring is largely complete and EBIT margin improved to 7.4% in 2016 (targeting low double digits in the next one to two years), reflecting active cost management and the curtailment of negative/low-margin work. Consort’s positioning as a single-source supplier for medical device contract development and manufacturing is a key differentiating factor for customer engagement.

Growing pipeline and customer diversification

The disclosed pipeline has expanded with the addition of the Aeropharm VAL050 MDI contract and Precision Ocular’s joint Aesica/Bespak project (with a £3.3m equity investment). Uncertainty remains over the launch of the Voke nicotine inhaler (DEV200), potentially in the next year, although the revelation that DEV610 is Mylan’s Advair generic with a GDUFA date of 28 March 2017 brings clarity to its launch timeline and sales potential.

Financials: Better margins and scope for investment

49.8% higher FY16 revenues (before special items) reflected growth in all Bespak segments and Aesica. Operating profit (before special items) grew to £37m (FY15: £25.1m) with margin broadly maintained (13.4%). Strong operating cash flows are expected, although investment in growth opportunities means capex will remain high (£25m FY17-18).

Valuation: Range of 1,350-1,403p per share

Our updated valuation range (previously 1,292-1,399p) reflects updated peer group multiples and a revision of our assumptions for DEV200 and DEV610 following recent disclosures. We value Consort using a combination of peer comparables and a risk-adjusted NPV for the pipeline. On a calendarised 11.5x FY17e EV/EBITDA, our equity valuation is 1,130p/share. Adding 220-273p for the product pipeline results in a group valuation of 1,350-1,403p/share. On DCF, we value Consort at 1,248p/share.

Update: Executing on strategy

Consort Medical’s key objectives for FY16 (to end-April 2016) were achieved with a strong operational performance in both the Bespak and Aesica divisions. In line with strategic objectives, Consort delivered organic growth and new development contracts, completed the post-acquisition restructuring and integration of Aesica and secured its first combined drug/device development and manufacturing contract with Precision Ocular. Following the year-end, in July, it was announced that Precision Ocular completed its £15.5m Series A fund-raising from a syndicate that included Consort. Planned use of funds includes development of next-generation ocular drug delivery systems for the administration of cell and gene therapies to the back of the eye.

These steps provide further evidence of Consort’s ongoing business diversification, both horizontally to harness more of the value chain with pharma customers and vertically into other new administration forms beyond its traditional strength in inhalers. Consort’s disclosed pipeline now has 14 respiratory, nasal, ocular and autoinjector programmes in late-stage development or under regulatory review, each of which represents a minimum £3m peak revenue potential, but some up to £25m, based on the company’s assessment. Exhibit 1 provides an overview of the major development programmes. The most recent additions to this pipeline are the Aeropharm (Sandoz) VAL050 pMDI valve and actuator contract and Precision Ocular’s joint Aesica/Bespak project. At its prelims, Consort also provided a status update on two of its key late-stage inhalation programmes: DEV200 and DEV610. Uncertainty remains over the launch of the Voke nicotine inhaler, potentially in the next year, although the revelation that DEV610 is Mylan’s Advair generic with a GDUFA date of 28 March 2017 brings clarity to its launch timeline and sales potential.

Exhibit 1: Consort’s major product development programmes

Project

Description

Customer

Status

VAL310

EasiFill primeless valve

US pharma company

Awaiting regulatory approval

INJ570

Autoinjector

Global pharma company

Awaiting regulatory approval

VAL020

MDI valve

Global pharma company

Stability trials complete; customer progressing towards approval and launch

DEV200 (Voke)

Nicotine delivery

Nicovations

Awaiting launch. Joint statement with British American Tobacco: “we remain committed to the delivery of the product for successful launch, which we are hopeful of in the next 12 months”.

POC010

POC test cartridge

Atlas Genetics

CE mark granted for chlamydia; combined chlamydia/gonorrhoea test cartridge development progressing

NAS020

Nasal device

Global generic company

Formulation change; brief under review

DEV610

Dry powder inhaler

Mylan

Potential GDUFA date 28 March 2017

NAS030

Nasal device

Pharma company

Early-stage programme

INJ600

PatchPump infusion system for Treprostinel

SteadyMed Therapeutics

NDA submission planned Q416

INJ650

ASI autoinjector

Global generic company

Continuing progress; early stage

INJ700

Lila Mix injector

Pharma company

Development progress on track

IDC300

Oral IDC

Pharma company

Good progress; launch expected H117

VAL050

pMDI valve and actuator

Aeropharm

Awarded November 2015

OCU050

Ophthalmic drug delivery

Precision Ocular

Awarded February 2016; first combined Bespak/Aesica programme

Source: Consort Medical

Sensitivities

Consort Medical’s investment in innovation and the resulting product launches are the key determinants for its organic growth, in our view. As an acquisitive company, Consort is additionally exposed to risks pertaining to integration of acquisitions in a timely and cost-effective way and the execution of its growth strategies.

The company is also subject to various other sensitivities common to drug and device CDMOs, on both the up and down side. In particular these include reliance on large contracts and key customers, product development and regulatory risks, and technology and commercial risks. We provide more detail on these sensitivities in our Outlook report Improved prospects for margin expansion, published in March 2016.

We also note that Consort is sensitive to FX movements, in particular the €/£ rate. Management has indicated that each 1c movement in the FX rate has a £0.6m impact on full year revenue and a £0.1m impact on EBIT. This translational exposure is predominantly related to Aesica’s European business, while Bespak has low exposure to FX movements (€ or US$).

Valuation

Our valuation of Consort Medical takes into account both the underlying business and the business pipeline, which we evaluate on a risk-adjusted NPV basis. As a sense check, we also evaluate Consort’s earnings multiples against a broad peer group of UK and international peers. Consort’s business model is unique in the context of the healthcare sector. Consequently, its peers include UK healthcare investments, subsidiaries/divisions of wider groups involved in specialist contract development and manufacture for the pharmaceutical industry (eg Catalent), as well as companies involved in medical packaging solutions and drug delivery.

Exhibit 2: Peer group multiples

Company

Market cap ($bn)

2015 P/E
(x)

2016 P/E
(x)

2017 P/E
(x)

2015-17e
EPS CAGR

2015 PEG

2016 EV/
EBITDA (x)

2017 EV/
EBITDA (x)

Advanced Medical Solutions

0.58

29.1

27.2

25.6

6.5%

4.45

17.9

16.8

Clinigen Group

0.95

18.8

15.5

13.5

17.9%

1.05

12.2

10.7

Smith & Nephew

14.87

19.8

17.8

16.1

10.9%

1.82

8.8

8.1

UDG Healthcare

1.96

24.9

22.0

20.1

11.2%

2.22

12.6

11.6

Average UK peers

4.59

23.14

20.63

18.84

11.6%

2.38

12.86

11.77

AptarGroup

5.31

23.7

21.6

19.6

10.1%

2.34

9.9

9.3

Gerresheimer

2.68

18.6

17.3

16.0

7.6%

2.44

9.7

9.2

West Pharmaceutical Services

6.09

36.3

30.6

26.2

17.8%

2.04

15.7

14.0

Ypsomed

2.55

48.6

41.7

30.3

26.7%

1.82

22.9

17.7

Average international peers

0.46

31.80

27.80

23.01

15.6%

2.16

14.53

12.56

Consort Medical

0.39

21.7

18.0

18.5

8.1%

2.67

12.8

12.1

Consort Medical (calendarised)

19.1

18.3

17.6

4.2%

4.56

12.3

11.5

Source: Bloomberg consensus except Consort Medical based on Edison Investment Research. Note: Consort Medical multiples reflect the April year end and refer to FY15, FY16 and FY17, respectively. Prices as at 15 August 2016.

Given the differences in capital structures between the constituents of our comparator group, we believe EV/EBITDA is the most appropriate parameter. With the international and UK peer groups trading at 12.6x and 11.8x 2017e EV/EBITDA, respectively, we note that calendarised Consort Medical trades at a 8.4% and 2.3% discount, respectively. With 2015-17e EPS CAGR below the average of both the UK and international peer groups, we consider calendarised 11.5x FY17e EV/EBITDA to be justified. That derives an implied average valuation for the current Consort Medical operations of 1,130p per share.

For our DCF valuation, we consider the risk profiles of Aesica and Bespak’s underlying businesses to be similar and employ a WACC of 10% of the underlying business. For the business pipeline, we forecast known projects based on the company’s guidance that each of these will have peak revenue potential of at least £3m pa. We forecast an operating margin of only 15% (below Bespak’s 20%), success probabilities of 60-80% and a WACC of 12.5%. For both of these, we have rolled forward our valuation model to FY17.

We believe the development pipeline should meaningfully boost revenues from end CY16 onwards. In view of the undisclosed identity of many of these projects, our valuation may not adequately capture expected revenue growth (particularly if any of these programmes have significant potential, or material new contracts are secured). We have updated our assumptions following latest disclosures related to potential launch timelines of DEV200 (Voke nicotine inhaler) and DEV610 (Mylan’s generic salmeterol/fluticasone DPI). Consequently, we now expect first material commercial revenues in FY18 from both programmes and for the latter (DEV610), we also upgrade our revenue expectations and probability of success to 90% given that the product/partner is now disclosed and it has been filed with the FDA. Incorporating these changes, we value the Bespak project pipeline at 220p/share (down from 240p/share at a 60% probability of success for non-DEV610 programmes) to 273p/share (down from 319p/share at 80% probability). Adding this to our peer group valuation of 1,130p/share gives a valuation range of 1,350p to 1,403p per share.

We have also performed a DCF-based valuation, including the financial impact of the product pipeline, as a reality check. We have employed a three-phase DCF, using our forecasts for free cash flows from our model from FY17 to FY21 to derive the first part of our NPV. The second phase sees the expected growth rates tapering from a high of 10% in 2021 to 3% in 2031, with a terminal value applied after that (using a 2% growth rate). We have used a 10% discount rate and assumed a tax rate of 18%. This approach suggests Consort Medical is worth 1,248p per share (previously 1,289p).

Exhibit 3: Assumptions for base case DCF valuation

Key assumptions

NPV (£m)

Free cash flow model FY17-21e

137.3

Tapering growth-free cash flows FY21-31e

265.7

Terminal value (2% growth rate assumed)

329.6

Total NPV

710.24

Cash/(debt) (FY16)

(96.95)

Valuation (£m)

613.3

Valuation/share (p)

1,248.3

Discount rate (%)

10%

Tax rate (%)

18%

Key assumptions

Free cash flow model FY17-21e

Tapering growth-free cash flows FY21-31e

Terminal value (2% growth rate assumed)

Total NPV

Cash/(debt) (FY16)

Valuation (£m)

Valuation/share (p)

Discount rate (%)

Tax rate (%)

NPV (£m)

137.3

265.7

329.6

710.24

(96.95)

613.3

1,248.3

10%

18%

Source: Edison Investment Research

Financials

Consort Medical’s FY16 results highlight continuing delivery on its growth strategy, with significant progress being made with margin expansion at both Bespak and Aesica, and a growing diversification of the business and customer base. Full year revenues for FY16, the first year in which Aesica operations were fully consolidated (FY15 included six months of operations), were a record £277m – up 49.8% on FY15. This reflects growth in all Bespak segments (MDI, DPI and other/injectables) to £117.2m (FY15: £105.8m) and a £159.7m Aesica contribution.

Importantly, FY16 operating profit (before special items related to restructuring and acquisitions) grew to £37m (FY15: £25.1m) with margin broadly maintained (13.4% vs 13.6% in FY15), albeit masking +170bp margin improvement at Bespak (to 21.5%) and 210bp at Aesica (to 7.4%). This reflects continuing operating leverage, active cost management and the curtailment of negative/low-margin work at Aesica. EBITDA (also before special items) grew by 45.5% from £33.2m to £48.3m, with margin falling slightly from 18.0% to 17.4%.

Following the Aesica acquisition in November 2014, FY16 represented a full year of utilisation of borrowing facilities, hence net financial costs were higher at £3.3m vs £2.1m. Pre-tax profit (before special items) increased to £32.3m vs £22.7m (up 42.3%). On account of the strong performance, the final dividend was raised 7.5% to 12.56p, above the 5% increase in the interim dividend. Cash generated from operations was £54.1m; with capex of £21.1m (reflecting the final phase of significant investment in capacity expansion for DEV200 and DEV610) and interest and tax of £9.3m, net debt fell slightly from £99.2m at FY15 to £97m at end-FY16.

We broadly maintain our forecasts as outlined in our March 2016 Outlook report. For FY17 and FY18 we forecast group revenues to increase by 1.6% to £281.5m and 6.1% to £298.7m, comprised of Bespak revenues of £118.1m and £127.2m, and £163.4m and £171.6m from Aesica. At the group level, we expect operating profit (before special items) to increase to £37.3m and £40.0m, with Bespak and Aesica operating profit (again before special items) of £24.2m and £25.4m and £13.1m and £14.6m, respectively. We forecast respective normalised pre-tax profit and fully diluted EPS at £33.5m and 55.8p for FY17e and £36.3m and 60.5p for FY18e. Consort does not have an explicit dividend policy, but adapts the dividend payout in relation to its operating cash flow and investment requirements. We forecast DPS to be maintained at 19.3p.

Operating cash flows are expected to remain strong, but continue to highlight that Consort has identified growth opportunities in both divisions, which should sustain capex at a high level of £25m in FY17-18. Thereafter, we expect capex to drop back to £17-18m. On this basis, net debt is forecast to fall to £93m in FY17 and £88m in FY18.

Consort benefits from a £160m long-term credit facility with rates ranging from Libor plus 165-190bp. The key covenants are that interest cover (EBITDA/net finance charge) must exceed 3.0x and leverage (debt/EBITDA) must be less than 3.25x until 30 April 2016 and less than 3.0x thereafter. Net debt/EBITDA as reported at end-April 2016 stood at 1.92x. The headroom in this revolving credit facility (£46.7m is undrawn), coupled with the £65m accordion facility, means there is ample capacity to make suitable bolt-on acquisitions or opportunistic product and/or technology acquisitions as appropriate.

Exhibit 4: Financial summary

£000s

2014

2015

2016

2017e

2018e

Year ending 30 April

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

100,010

184,825

276,910

281,467

298,729

EBITDA

 

24,434

33,188

47,614

50,077

54,317

Operating profit (before special items)

 

18,793

25,055

36,975

37,277

40,017

Intangible amortisation

(983)

(778)

(333)

(800)

(800)

Exceptionals/Special Items

(1,387)

(17,179)

(21,018)

(13,400)

(13,400)

Share-based payment

(1,821)

(1,557)

(1,792)

(1,828)

(1,864)

Operating profit

17,406

7,876

15,957

23,877

26,617

Net interest

(1,266)

(2,364)

(4,716)

(3,750)

(3,700)

Profit before tax (norm)

 

17,527

22,691

32,259

33,527

36,317

Profit before tax (as reported)

 

16,544

21,913

31,926

32,727

35,517

Tax

(3,611)

(3,269)

(4,181)

(6,035)

(6,537)

Profit after tax (norm)

13,916

19,422

28,078

27,492

29,780

Profit after tax (as reported)

12,968

4,948

15,968

13,495

15,784

Average number of shares outstanding (m)

32.9

40.7

48.8

49.2

49.2

EPS - normalised (p)

 

42.3

47.8

57.6

55.8

60.5

EPS - FRS 3 (p)

 

39.4

12.2

32.7

27.4

32.1

Dividend per share (p)

18.1

18.1

19.3

19.3

19.3

EBITDA margin (%)

24.4%

18.0%

17.2%

17.8%

18.2%

Operating margin (before GW and except) (%)

18.8%

13.6%

13.4%

13.2%

13.4%

BALANCE SHEET

Fixed assets

 

79,699

329,687

334,861

347,061

357,761

Intangible assets

20,835

194,350

189,938

189,138

188,338

Tangible assets

49,955

128,012

136,673

149,673

161,173

Investment in associates

4,068

6,266

8,250

8,250

8,250

Trade investment & others

4,841

1,059

0

0

0

Associated with assets held for sale

0

0

0

0

0

Current assets

 

64,028

139,075

110,899

116,819

121,267

Stocks

10,203

31,344

30,725

35,183

37,341

Debtors

27,975

60,133

54,632

64,737

68,708

Cash

25,843

45,201

16,258

16,898

15,218

Other

7

2,397

9,284

0

0

Current liabilities

 

(17,868)

(222,953)

(178,780)

(189,068)

(186,300)

Creditors

(15,479)

(74,285)

(61,705)

(75,202)

(79,434)

Other creditors

(1,842)

0

0

0

0

Short-term borrowings

0

(144,414)

(113,209)

(110,000)

(103,000)

Provisions and other current liabilities

(547)

(4,254)

(3,866)

(3,866)

(3,866)

Associated with assets held for sale

0

0

0

0

0

Long-term liabilities

 

(7,335)

(45,316)

(57,829)

(43,522)

(43,415)

Long-term borrowings

0

0

0

0

0

Deferred taxation

(3,429)

(22,401)

(18,571)

(4,497)

(4,496)

Other long-term liabilities

(3,906)

(22,915)

(39,258)

(39,025)

(38,919)

Net assets

 

118,524

200,493

209,151

231,291

249,313

CASH FLOW

Operating cash flow

 

17,978

22,040

46,752

48,210

51,621

Net interest

(416)

(1,304)

(2,802)

(3,800)

(3,700)

Tax

(3,564)

(4,503)

(6,548)

(6,035)

(6,537)

Capex

(16,134)

(20,500)

(21,126)

(25,000)

(25,000)

Purchase of intangibles

(158)

(178)

(357)

0

0

Acquisitions/disposals

(387)

(202,812)

1,543

0

(1,500)

Financing

(2,598)

91,918

(1,868)

0

0

Dividends

(5,780)

(7,011)

(8,999)

(9,526)

(9,564)

Other

(64)

(2,909)

(1,265)

0

0

Net cash flow

(11,123)

(125,259)

5,330

3,849

5,320

Opening net debt/(cash)

 

(36,966)

(25,843)

99,213

96,951

93,102

HP finance leases initiated

0

0

0

0

0

Other

0

203

(3,068)

0

(0)

Closing net debt/(cash)

 

(25,843)

99,213

96,951

93,102

87,782

Source: Edison Investment Research, Consort Medical accounts

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Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2016. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

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DISCLAIMER
Copyright 2016 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Consort Medical and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.
Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2016. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

Share — Update 15 August 2016

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