Sefalana Holding Company Limited HY 2014 financial results by Stockbrokers Botswana


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Sefalana Holding Company Limited HY 2014 financial results by Stockbrokers Botswana

  1. 1. Stockbrokers Botswana Research Sefalana Holding Company Limited Interim Results BUY P7.70 USD 0.88 May 28, 2014 Trading & Liquidity Mkt cap (Pm) 1,441 Mkt cap (US$m) 166 DCI Mkt weight 3.3% Shares in issue (m) 185.7 Free float 100.0% Annual Liquidity 2.3% 12 month high 777 12 month low 443 Codes BSE SEFALANA Reuters SEFA.BT Bloomberg SFLN.BG ISIN No BW 0157 Results Date of last report 14-Sep-12 Last results Interims- Oct 2013 Expected results Finals - April 2014 Analysts Tshepo Setlhare Sales +267 3957 900 Kennedy Kgomanyane Mooketsi Poane Xxxx P2.95 USD 0.37 March 2, 2009 Trading & Liquidity Mkt cap (Pm) 489 Mkt cap (US$m) 61 DCI Mkt weight 1.9% Shares in issue (m) 165.6 Free float 100.0% Annual Liquidity 8.9% 12 month high 480 12 month low 295 Ground Floor, Letshego Place, Private Bag 00113, Gaborone Tel: +267 3957 900 Fax: +267 3957 901 Sefalana enjoys upsurge in profits, costs kept low Once again, Sefalana Group posted impressive interim results for the 6 months ended 31 st October 2013. The conglomerate saw revenues up 2.2% to BWP1.18 billion (H1:2012 BWP1.15 billion) having increased in most segments with the exception of Trading (others) segment. Cost of sales were subdued, increasing by a mere 0.2% to BWP1 billion (H1:2012 BWP1 billion), translating to a 25% increase in gross profit. The group’s subsidiaries have been pulling their weight, with the front runner being Sefalana Cash and Carry (Sefcash). Sefcash continues to be the main revenue driver for the Group, with management reporting improved performance of the retail stores, which have contributed significantly to growth in turnover and profit before tax. Foods Botswana has also proven itself essential to the profitability of the group. Focusing on completing the two Government contracts for the supply of Tsabana and Malutu, the company also posted impressive results for the 6 months. Shareholders of the group definitely have something to smile about, as Sefalana shares have soared over the past 12 months, boasting a gain of more than 70%, from 440 thebe per share as at 1 st May 2013, to 776 thebe per share as at 1 st May 2014. Further price gains can be expected should the retail chain achieve its goal of opening 3-5 stores ever year. Key Financials Six months ended October (BWP) 2013 2012 Revenue (‘000) 1,176,856 1,151,173 Revenue growth 2.2% 19.9% Earnings per share(t) 26.6 17.2 P/E Ratio (x) 10.9 11.0 Dividend per share(t) 10.0 8.0 Net Asset Value (t) 345 295 P/B Ratio 2.25 2.6 Debt-Equity 1.5% 2.0% Inventory Turnover 4.9 5.4 0 100 200 300 400 500 600 700 800 900 10-May-13 10-Jun-13 10-Jul-13 10-Aug-13 10-Sep-13 10-Oct-13 10-Nov-13 10-Dec-13 10-Jan-14 10-Feb-14 10-Mar-14 10-Apr-14 Price(t) Sefalanavs DCI over 12 months DCI rebased Sefalana
  2. 2. - 2 - Sefalana Holding Company Ltdl Interim Results 28 May 2014 Sefcash Sefalana Cash and Carry continues to be the main revenue driver for Sefalana Group. Operating in the Fast Moving Consumer Goods (FMCG) sector, the company consists of 3 Hyper Stores, 25 Cash and Carry stores and 18 Supermarkets (Shoppers) which have significantly contributed to the growth and profitability of the group. During the period, the arm contributed 87% to Group revenue and 56% to Group profit before tax. The company seems vibrant, as revenues increased 3% to BWP1 billion (H1:2012 BWP990 million) and profit before tax up 18.8% to BWP35 million (H1:2012 BWP30 million). Gross profit margins were up from 5.0% to 6.0%. The improved performance of retail stores as management reports, was achieved through better product offering and enhancing the shopping experience for the customers. This increase can also be attributed to the company’s increased market presence after the company opened additional Shoppers supermarkets in Tonota and Gaborone West. With an estimated 7% of the local market share, the supermarket operates in 20,000 square metres of retail space, generating revenues of around BWP24,000 per square metre. The supermarket has a target of 40 stores, with plans to open 3 to 5 stores per year until they reach their target. Sefcash’s outlook is positive as the company embarks on a retail expansion into Namibia, having already acquired one store, with plans to open 12 more stores. In terms of the local environment, the market has been moving away from wholesale and more towards retail. Their expansion into Namibia should not be hindered by these developments as most of the stores in Namibia operate as hybrid stores. Management reports that of the 12 stores that are being acquired, 4 operate as hybrid stores, providing opportunity to convert some of the others into hybrid once the acquisition is complete. Sefcash in the driver’s seat Enhanced shopping experience increases revenues Sefcash takes on Namibia
  3. 3. - 3 - Sefalana Holding Company Ltdl Interim Results 28 May 2014 Foods Botswana once again posts impressive results Foods Botswana is a wholly owned subsidiary of Sefalana Holding Company Limited, which mills and produces sorghum, soya and maize- based food products from a mill it operates in Serowe. Once again, the subsidiary has proven itself essential to the profitability of the group; contributing 8% to group revenues and just over 29% of group profit before tax, a 6% improvement in terms of revenue and 10% improvement in profit before tax, year-on-year. Foods Botswana’s market includes the provision of enriched meals for the Government feeding schemes and a variety of its own branded products. The significant improvement in performance is due to its contracts (and timing) with Government for the supply of Tsabana and Malutu, which in turn Government issues to local clinics and health facilities across the country. Shortages during the period have required Government to order additional volumes of the nutritional products, which is a contributing factor to the improved performance. Over-reliance on government tenders by Foods Botswana remains a key concern. The most recent contract was awarded in March 2014 after a lapse of 4 months, and this contract is scheduled to run for 12 months. As a result, we estimate that Foods Botswana is looking at lost revenues of about BWP18 million per month; however, to reduce reliance on Government tenders, management reports that they are expanding third party production and trying to grow the non-government sector. The Group’s focus therefore, has been on developing and selling products to individuals and other non-Government agencies. Having already secured the Government tender, and taking into consideration the increasing demand of grain in the country, we expect yet another profitable year from Foods Botswana. The group is also on track to set up a maize plant in Serowe towards the end of 2014, which is expected to increase profitability through efficiencies in the supply chain of maize based products sold by Sefcash in its Retail and Wholesale outlets. Source – own estimates Source – own estimates Source – Company Reports Foods Botswana dishes up strong revenues Tsabana and Malutu push volumes Reliance on Government remains a concern; focus is on sales of branded products 87% 5% 7% 1% 2013- Revenue split Trading Consumer Goods Trading- Others Manufacturing Property 85% 8% 6% 1% 2012- Revenue split Trading Consumer Goods Trading- Others Manufacturing Property Foods Botswana secures Government tender
  4. 4. - 4 - Sefalana Holding Company Ltdl Interim Results 28 May 2014 Properties Management reports that the Group’s property portfolio, a majority of which is held by the wholly owned subsidiary of Sefalana, Meybeernick Investments, continues to perform well. The Group’s property portfolio, valued at over BWP300 million, consists of a variation of investments in Botswana and neighbouring country Zambia. Consisting of office blocks, workshops, factories, and warehouses, Botswana properties are well spread throughout the country, while in Zambia, Sefalana prides itself in having a first class, well positioned property, which is rented out to third parties. The fully let Zambian property continues to generate a substantial income stream and has shown significant increases in market value over the years. For the period under review, the Zambian property contributed 24% to the Group’s revenue generated by the property division, an improvement from the 20% for the same period the previous year, while contributing 22% to profit before tax from 28% the previous year on a comparable basis. The Zambian property has seen significant growth in revenues and profit before tax, posting an increase of 41% and 27%, respectively, after allowing for foreign exchange movements. Sefalana holds over 525 000 square metres of land, majority of which is undeveloped property, providing potential for future investment and capital appreciation. The Group already has plans for the development of a number of existing properties over the next 36 months, and a specific debt facility has been secured in respect of these developments. Current developments for the Broadhurst wholesale and the new Head Office are underway with completion expected in late 2014. Trading (others) declines- too much reliance of Government? On other trading segments of the group, the interims show significant declines in revenues and profits. The trading (others) segment, comprised of subsidiaries Commercial Motors (CML), Merchanised Farming (MFL) and Bargen (Vintage Travels), reports a 35% decline in revenues, from BWP93 million (H1:2012) to BWP60 million (H1:2013), and a 20% decline in gross profits, from BWP15.6 million (H1:2012) to BWP12.5 m (H1:2013), which has translated into a chilling 47% decline in profit before tax. Profit before tax was down from BWP6 million (H1:2012) to BWP3 million (H1:2013). On a positive note, margins were considerably higher as gross profit margin increased by 24%, which shows improved efficiency and profitability from the Group. The major players in the segment, Commercial Motors and Merchanised Farming, receive a significant amount of business from Government. Management reports that results for MFL were flat for the period, and the Group is looking to improve the results of this business in the second half of the year. As for CML, the subsidiary reports that the previous period results included the delivery of a number of units on a specific Government order at that time. Once the transaction is consummated, the total fleet of MAN trucks in circulation will exceed 700 trucks. This growing fleet of trucks should continue to propel the growth of CML, as positive income streams are generated by service agreements in respect of vehicles sold. Sefalana looks to develop properties Sefalana properties valued at over BWP300 million Zambia properties continue to generate substantial income Service agreements expected to generate positive income streams Reliance on Government leads to negative growth in revenues
  5. 5. - 5 - Sefalana Holding Company Ltdl Interim Results 28 May 2014 The decrease in revenues and profits should not necessarily be considered grim, as some of the tenders span over more than one financial period and therefore will be reported in the second half of the year; however, the volatility in revenues hints at the need for diversification of revenue streams. Management is constantly looking for ways to diversify, by especially focusing on greater promotion of private sales. However, management reports that vehicles delivered have proven to be reliable and cost effective for Government requirements, hence the optimistic outlook on continued Government support. Furthermore, management reports the pursuit of a number of large ticket deals for the delivery of fleets of vehicles. The vehicles are expected to be delivered in the forthcoming financial year and should serve to bolster CML’s results in the second half of the year. Volatility in revenues hints at the need for diversification
  6. 6. - 6 - Sefalana Holding Company Ltdl Interim Results 28 May 2014 Results Analysis Once again, Sefalana Group posted impressive interim results for the 6 months ended 31 st October 2013. The conglomerate saw revenues up 2.2% to BWP1.18 billion (H1:2012 BWP1.15 billion) having increased in most segments with the exception of Trading (others) segment. Cost of sales were subdued, increasing by a mere 0.2% to BWP1 billion (H1:2012 BWP1 billion), translating to a 25% increase in gross profit. Margins for the group are quite encouraging as we have seen increased profitability during the period. Gross profit margins were 9.8% (H1:2012 8.0%), and net profit margins 4.3% (H1:2012 3.2%). Profit for the period was up 48% to BWP50 million (H1:2012 BWP34 million). Assets employed were 12% higher than the prior year comparatives at BWP1 billion (H1:2012 BWP979 million). Current assets were BWP589 million (H1:2012 BWP502 million), with Cash and Cash Equivalents at BWP185 million (H1:2012 BWP168 million). Cash generated was positive with net operational cash flow up 45% to BWP45 million (H1:2012 BWP31 million). Inventories were also higher at BWP240 million (H1:2012 BWP213 million). Inventory turnover was 4.9 times compared to the prior year at 5.4 times, signaling improved management of inventory levels. Long term borrowings were down slightly to BWP9.5 million from BWP11 million. However, with plans for future development of several of their properties, the Group has entered into a BWP100 million debt facility over 15 years with one of the local financial institutions. This funding will be used to fund capital projects. Shareholder equity was up 17.6% and the company increased its retained earnings to BWP363 million (H1:2012 BWP286 million). The counter trades at a NAV of 345 thebe per share, which infers a price- book multiple of 2.25 times. Sefalana currently trades at a price to earnings multiple of 10.9 times. Management declared a higher interim dividend of 10 thebe compared to last year’s 8 thebe, taking the payout over the past 12 months to 36.62 thebe (H1:2012 25.15 thebe). 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 2013 2012 2011 2010 2009 ROE and ROA ROE ROA Source – Company Reports Profits for the period up 48% Long term debt expected to increase Sefalana enjoys upsurge in profits; Cost kept low Higher dividends make shareholders happy The group reports positive net operational cash flows Shareholder equity was up as the company increased its retained earnings
  7. 7. - 7 - Sefalana Holding Company Ltdl Interim Results 28 May 2014 Sefalana Outperforms DCI Shareholders of the group definitely have something to smile about, as Sefalana shares have soared over the past 12 months. Boasting a gain of more than 70%, from 440 thebe per share as at 1 st May 2013, to 776 thebe per share as at 1 st May 2014, the counter has notably outperformed the DCI. Shareholders enjoy capital gains
  8. 8. - 8 - Sefalana Holding Company Ltdl Interim Results 28 May 2014 Risks  Reliance on Government tenders - Over-reliance on Government tenders posts a significant risk to business, as has been reflected in the results posted by the trading segment. However, the biggest arm of the group, Sefcash, is safeguarded from this risk as the business model does not rely on Government tenders.  Aggressive pricing from competitors - With stiffer competition in the market, Sefalana faces risks of squeezed margins as they try to compete with the aggressive pricing shown by competitors.  Election year in Botswana and Namibia - Markets tend to be less predictable during election years as there tends to be uncertainty associated with the outcome of the elections as well as developments leading to the general elections.  Reduced government spending - The recent increase in civil servant salaries could see government spending less.  Drought and Water Shortages - The current drought situation and water shortage in the country posts a significant risk to the manufacturing sector. With parts of their production localized, there remains the risk of reduced production from Foods Botswana. However, Management reports that Foods Botswana procures as much grain locally as possible, but in any one year the local supply is not sufficient for the Group’s requirements. The Group therefore imports a large quantity each year therefore the effects of the drought situation are limited to grain produced locally. Opportunities  Economic and trading conditions - During the year 2013, the Central Bank reduced the bank rate by a cumulative 2%. The reduction in interest rates should serve to underscore increased demand and consumption, which has been subdued.  Success in securing government tenders - The Group has enjoyed success in securing government tenders and is confident with continued support from government due to the scope of their operations and proven track record.  Diversification - The acquisitions in Namibia will further help the company diversify its exposure in the competitive retail market.  Growth prospects - Tapping into new markets is a fast way of accelerating profitable growth.
  9. 9. - 9 - Sefalana Holding Company Ltdl Interim Results 28 May 2014 Competitor Analysis A bulk of Sefalana’s business is generated by the consumer goods arm, Sefalana Cash and Carry. Given its sheer size and contribution to the group, it is worth noting Sefcash’s competitors, which in this case include the local retailer Choppies and its South African counterparts Shoprite, Pick n Pay, and Spar. On the retail side, Choppies controls the lions share of the market with 40% market share. Spar, Pick and Pay, and Shoprite control an estimated 21%, 14%, and 10% respectively making Sefcash somewhat of an underdog within the group, with potential to grow their market share. A close analysis of Choppies and Sefcash’s operations highlight how Sefcash has been able to leverage its underdog status to give Choppies a run for their money. Market Segmentation: Both Choppies and Sefcash target customers on the lower end of Living Standard Measure segments. They target areas where the penetration is less than the average with the smaller stores attracting footfall of around 10,000 people per month. On the other hand, Spar and Pick and Pay target customers in the middle to upper Living Standard Measure segments and their stores tend to be over 3,000 square meters in size. Botswana, Namibia, and Zimbabwe consist of many small settlements giving both Choppies and Sefcash massive scope for growth in those countries. Supplier Relationships: The Choppies group, due to its larger size, is able to leverage its buying power to negotiate healthier deals with suppliers. The company has the ability to ensure optimal trade terms with suppliers such that their growth is subsidized by their suppliers. Sefcash with its relatively larger inclination towards the warehousing sector tends to have more working capital tied up in inventory, which may hamper growth if growth in retail sales abates. On the other hand, if retail sales are buoyant, their retail stores will be more adequately stocked than their competitors. Low Costs: Choppies arguably has the ability to keep costs lower than their competitors. Outside of Cost of goods sold, a retailer’s next largest overhead would be labor costs. Choppies stores operate with one store manager per store. In Botswana, store managers are predominantly of Indian descent, which tends to be less costly than sourcing managers locally or regionally. Sefcash does not enjoy access to the same pool of low cost labour to the extent that Choppies does and therefore has to carry out its cost-cutting elsewhere. Coincidently Choppies top management is remunerated more handsomely than Sefcash’s, so cost savings at the top management level might not find their way to the bottom line. Supply chain: Choppies has good control over their supply chain, with all its warehousing and logistics done in-house. Operating two distribution centers, one located in Gaborone, Botswana, and another in Rustenburg, South Africa, the company manages the flow of products from the distribution centers, down to all of their retail shops. This further reduces the company’s operational costs. Sefcash will be opening a distribution center in Francistown, which will give them a competitive advantage in the more populous northern region of Botswana. Both Choppies and Sefalana target areas where penetration is less than the average Choppies has the ability to ensure optimal trade terms with suppliers Choppies arguably has the ability to keep costs lower than their competitors Both Sefalana and Choppies look to cut operational costs through improved supply chain management
  10. 10. - 10 - Sefalana Holding Company Ltdl Interim Results 28 May 2014 Limited growth locally: Choppies’ expansion has been aggressive over the years. The company has more floor space and coverage as compared to competitors, but limited growth locally. Limited growth in Botswana, as well as opportunities presented by tapping into other markets have led the company to expand regionally. The expansion into South Africa has not been well received, as the company continues to face challenges in that country. Sefalana has been more conservative with regards to its new store openings and will most likely not experience similar woes, as they expand into Namibia. Established wholesaler: Sefalana, having been in the wholesale business for years, is more established on the wholesale side and has a fine understanding of where the market is coming from and where it is going. However, given that the market seems to be moving away from wholesale and towards retail, it is expected that the wholesale business in Sefalana will continue to lose market share to retail Shoppers, Choppies, and other retail competitors in the country. Product Mix: A large proportion of business generated by Sefalana is through the distribution of liquor, a market within which it is well positioned. Income generated by the sale of liquor should increase going forward, as Namibia Cash and Carry stores are well equipped with a distribution of alcohol license. Similarly, on the wholesale side, Sefalana enjoys over 60% market share in sugar and mealie meal, which tend to draw customers to their cash and carry stores. Choppies group has increased its offering of private label brands and pharmacies. In-house brands have increased the group’s brand awareness and contribute to improving the group’s margins. Management structure. The management structure by Sefalana group is quite robust. The group has a more diversified management structure, whereby strategy and execution is not vested in a key man, as is the case with Choppies. A more top heavy structure, will ensure that there is a succession plan in place. Both management teams are well resourced, however, Choppies executive management tends to be paid exceedingly higher salaries relative to their Sefcash counterparts, an aspect which might be a cause for concern if their growth trajectory declines. Diversification. Being a conglomerate, Sefalana has its toes dipped in various business sectors in the market. This diversification reduces the group’s exposure to any single sector, thereby reducing the risks associated with those sectors. Diversification also allows for income generation from the different sectors in the group, which is essential in times of cyclical downturns although historically all the groups segments have been known to exhibit some cyclicality. Choppies’ operations are focused entirely on the FMCG sector, which enables investors to evaluate their performance more seamlessly hence it trades at a higher price-to-earnings ratio than Sefalana. Rental. Sefalana group owns a larger portion of the properties that they operate out of. This strategy significantly reduces the group’s operating expenses, while providing for capital gains at times when the properties are revalued upwards. Furthermore, the group generates a substantial income stream from the properties that it leases. Going forward, their properities could serve to unlock latent value should they decide to spin- off their non-core assets. Choppies leases most of their properties. Going Sefalana has a more robust management structure Sefalana owns a larger portion of the properties that it operates out of whereas Choppies leases most of their properties Sefalana’s diversification gives them some cushion against cyclical dips Both Sefalana and Choppies generate a large portion of business from their differing product mix The market seems to be moving away from wholesale and towards retail which should see Sefalana lose market share Choppies expansion has been aggressive over the years while Sefalana has been more conservative
  11. 11. - 11 - Sefalana Holding Company Ltdl Interim Results 28 May 2014 forward escalating rentals may come back to haunt them, as they deal with several landlords, which could stifle growth if rental negotiations are not in their favor.
  12. 12. - 12 - Sefalana Holding Company Ltdl Interim Results 28 May 2014 Outlook Sefalana expands into Namibia Going forward we expect explosive growth from major business segments. The Namibian acquisition is expected to be accretive to earnings and should boost the top line to the tune of BWP800 million. The Group got the ball rolling in January 2014 by opening its first store outside Botswana in Katima Mulilo, Namibia. Twelve more stores will come on-line after the consummation of the acquisition in July 2014. The retail giant has a war chest of cash to go to battle with having sourced a BWP100 million debt facility for the development of property while being on the cusp of a rights issue, which aims to raise BWP255 million. A robust balance sheet should serve the retail giant well as they pursue their regional expansion. As they approach their goal of 40 retail stores in Botswana, Namibia should provide better prospects in the FMCG sector. In the trading segment, Management will be looking to realize value from CML and MF, as they continue to focus their resources on the FMCG sector. In the event that CML and MF are spun-off from Sefalana, we would expect to see a rerating in the stock price. Valuation We used the sum-of-the-parts valuation to derive a valuation of 775 for Sefalana. Our sum-of-the-parts value at 775 thebe per share indicates that the stock is fairly priced. However, we recommend the stock as a BUY for the rock-solid value, and for the significant upside potential going forward. There is lots of room for upside potential Exciting times lie ahead as Sefalana focuses on FMCG sector with their expansion into Namibia
  13. 13. - 13 - Sefalana Holding Company Ltdl Interim Results 28 May 2014 Year ended April (P'000) Income Statement 2012 2013 2014 F 2015 F Revenue 2,103,634 2,350,399.0 2,632,446.9 3,685,425.6 Cost of sales (1,920,760) (2,121,964.0) (2,334,160.4) (3,251,485.4) Gross Profit 182,874.0 228,435.0 298,286.5 433,940.2 Investment Income 4,172 4,299.0 - - Other income and gains 20,771 22,005.0 23,692.0 33,168.8 Administrative expenses (91,737) (102,548.0) (105,297.9) (147,417.0) Finance costs (7,516) (5,187.0) - - Profit before share of results of associate 108,564.0 147,004.0 216,680.6 319,692.0 Share of results of associate 181 - - - Profit before taxation 108,745.0 147,004.0 216,680.6 319,692.0 Income tax expense (21,888.0) (26,787.0) (47,669.7) (70,332.2) Profit for the period 86,857.0 120,217.0 169,010.9 249,359.8 Other comprehensive income Currency translation differences 1,142 2,799.0 - - Other income and gains 1,637 - - - Net gain on revaluation of land and buildings 47,186 13,725.0 - - Total comprehensive income for the period 136,822.0 136,741.0 169,010.9 249,359.8 Balance sheet 2012 2013 2014 F 2015 F Total current liabilities 397,509 333,375 348,710 364,751 Total non-current liabilities 80,957 82,133 193,632 206,740 Shareholders’ Equity 553,128 629,798 661,840 818,379 Total Funds Employed 1,031,594 1,045,306 1,204,182 1,389,870 Fixed assets 487,152 517,371 622,397 748,744 Curent Assets 544,442 527,935 581,784 641,126 Total Assets Employed 1,031,594 1,045,306 1,204,182 1,389,870 This research report is not an offer to sell or the solicitation of an offer to buy or subscribe for any securities. The securities referred to in this report may not be eligible for sale in some jurisdictions. The information contained in this report has been compiled by Stockbrokers Botswana Limited (“SBB”) from sources it believes to be reliable, but no representation or warranty is made or guarantee given by SBB or any other person as to its accuracy or completeness. All opinions and estimates expressed in this report are (unless otherwise indicated) entirely those of SBB as of the date of this report only and are subject to change without notice. Neither SBB, nor any other person, accepts any liability whatsoever for any loss howsoever arising from any use of this report or its contents or otherwise arising in connection therewith. Each recipient of this report shall be solely responsible for making its own independent investigation of the business, financial condition and prospects of companies referred to in this report. SBB and its respective affiliates, officers, directors, and employees, including persons involved in the preparation or issuance of this report may, from time to time, (1) have positions in, and buy or sell, the securities of companies referred to in this report (or in related investments); (2) have a consulting, investment banking or broking relationship with a company referred to in this report; and (3) to the extent permitted under applicable law, have acted upon or used information contained or referred to in this report including effecting transactions for their own account in an investment (or related investment) in respect of any company referred to in this report, prior to or immediately following its publication. This report may not have been distributed to all recipients at the same time.