Morning Wrap

Today ’s Newsflow Equity Research 04 Mar 2016 Upcoming Events Select headline to navigate to article

Economic View The uncertainty of Brexit Company Events 04-Mar Independent News & Media; Q4 2015 Results Norwegian Air Shuttle; February 2016 Traffic Stats easyJet Much left to do after load factor falls behind in 07-Mar ICG; FY16 Results February 08-Mar Air France-KLM; February 2016 Traffic Stats ; FY15 Results Paddy Power Betfair; Final Year Results 09-Mar Breedon Aggregates; FY15 Results Independent News & Media Solid FY15 performance DS Smith; Q3 2016 Results driven by Digital Glanbia; Q4 2015 Results Lufthansa; February 2016 Traffic Stats SIG; 2015 Full year Results 10-Mar C & C Group; Q4 2016 Results Hibernia REIT Acquisition of Marine House for €26.5m, Origin Enterprises; Q2 2016 Results 11-Mar J D Wetherspoon; H116 Interim Results reversion story, with development angle

Commercial Property KWE and IRES make it into EPRA Index Economic Events Ireland 07-Mar CPI YoY Cairn Homes Announces an extended banking facility, up to €200m. United Kingdom

United States 04-Mar Unemployment Rate UDG Healthcare Positive disposal update Change in Nonfarm Payrolls

Europe

Wireless Group CEO announces his retirement

Goodbody Capital Markets Equity Research +353 1 6419221 Equity Sales +353 1 6670222 Bloomberg GDSE

Goodbody Stockbrokers (trading as Goodbody) is regulated by the Central Bank of Ireland. For the attention of US clients of Goodbody Securities Inc, this third-party research report has been produced by our affiliate Goodbody Stockbrokers. Please see the end of this report for analyst certifications and other important disclosures. Goodbody Morning Wrap

Economic View The uncertainty of Brexit

Our base case is that the UK will vote to remain in the EU on June 23rd. However, with the Juliet Tennent +353-1-641 9469 polls too close to call, uncertainty surrounding the vote poses a serious event risk for the UK [email protected] and will be one of the key market concerns over the coming months. We lay out our own take on the issue and its possible impact on the UK and Irish economy in a note published this morning.

In the run up to the vote we are likely to see investment decisions delayed, FDI flows slow and may see consumers defer making large purchases. In financial markets, the most significant short term effect is persistent sterling weakness. A vote to stay should see sterling and investment rebound. A vote to exit would set in train a two-year negotiation period (ambitious given its complexity) for the UK to redefine its relationship with the EU and other existing trading partners. Although the impact of Brexit is highly uncertain, a 14% hit to GDP per has been estimated in a worse-case scenario.

Ireland exports €34bn of goods/services to the UK and it is the country’s 2nd largest export market. The ESRI estimates exports to the UK could fall by up to 20% in the event of Brexit, with the Agri-food sector the most exposed. The tourism sector would also be adversely affected by lower sterling and possibly tighter security. Thus, employment-intensive indigenous industries would suffer the most. This sector is dominated by the private and co- op sector, with the publically-quoted food companies having a diversified geographic reach.

The uncertainty in the run up to the vote and the consequences of an exit will weigh on UK GDP growth and impact companies with large UK exposures. However, there are also potential opportunities from the re-introduction of duty free and increased FDI. One thing that is certain is that Brexit is set to remain centre stage at least until the end of June.

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easyJet Much left to do after load factor falls behind in February easyJet reports passenger growth of 9.8% for February, in line with our forecast of +10%. Recommendation: Hold However, the mix was slightly different to our expectation, as seat growth was ahead, but Closing Price: £14.85 load factor was behind at -0.4pts, against our +0.5pt expectation.

Mark Simpson The company has guided for 8% seat capacity growth for the H1 period to March ’16, and as +353-1-641 0478 a result, seat growth in March will need to moderate to +9% to reach this H1 target. In order [email protected] to hit our H1 passenger estimate, and based on the company seat guidance, we will need to see a pickup in load factor performance to +1.4pts to achieve 10.7% passenger growth in March and our 8.6% H1 pax estimate. The difficult prior year comp means that easyJet will need to hit 94% load factor in March, a level which it has only previously achieved in peak summer months.

This set of traffic figures is slightly disappointing relative to the performance seen at Ryanair and IAG with both reported rising load factors, despite inflated capacity in February driven by the Leap Year.

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Independent News & Media Solid FY15 performance driven by Digital

Independent News and Media released FY15 results this morning. Group revenue came in at Recommendation: Hold €321.2m (+1% yoy) and operating profit was €37.4m (+10% yoy). Print advertising Closing Price: €0.17 revenue was -1% yoy to €70.4m while Digital advertising revenue was +42% yoy to Gavin Kelleher €12.5m. The statement notes that the independent.ie unique monthly visitors grew 10% to +353-1-641 0423 8.9m and the number of monthly actives on the independent.ie app grew by 29.1% from [email protected] January to December. Although Circulation revenue fell -4% yoy to €101m, management believes this is a strong outperformance of the market. Print and Distribution revenue was

+4% yoy to €135.4m. The group ended the year with €60m net cash (2014: €89m net debt) and no dividend has been proposed for 2015. The net pension obligation at the end of the year was €86m (2014: €106m). In terms of outlook, management expects a 2016 performance in line with expectations.

Overall a very solid performance from INM in 2015 as it managed to offset the decline in its traditional print businesses through growing its digital revenue. The group now has a strong balance sheet and while there is no sign of stabilisation in print media, the outlook for the group has improved substantially. The valuation appears undemanding for a business that has stabilised revenue. The strong balance sheet leaves plenty of scope for acquisitions and/or the resumption of dividend payments. On that note, we await an update from the conference call.

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Hibernia REIT Acquisition of Marine House for €26.5m, reversion story, with development angle

Hibernia REIT announced this morning the acquisition of Marine House, in Dublin 2, for Recommendation: Buy €26.5m. Marine House is a 1970’s office building totalling 41,000 sq ft over 6 floors with a Closing Price: €1.26 double basement and 81 underground car parking spaces. The building is currently Colm Foley generating €1.2m (€23 per sq ft) of income, an implied net initial yield of 4.3%. However, +353-1-641 6042 the weighted average period to break and rent review is 3 and 3.5 years respectively and [email protected] c.20% of the current rent roll is subject to review or expiry in the next 18 months.

Commenting on the deal, management has indicated it is likely to be a longer term development asset, with the possibility to redevelop it alone or as part of the wider re- generation of Clanwilliam Court area, of which it is part (comprises seven separate blocks, six office, one residential).

This is the second deal in quick succession from Hibernia, following the recent acquisition of Central Quay in Dublin for €51.3m and leaves Hibernia with c. €280m spending capacity (post near term capex). Marine House is well located near the Grand Canal Basin (and Grand Canal Dart station) and it is worth noting that agents are currently quoting €60 per sq ft for the brand new 51,000 sq ft building, Valesco building (cost of construction believed to be €35m and acquisition cost of €10m), adjoining Marine House. Valesco will be ready for delivery in Q316. The acquisition follows the Hibernia strategy of posing some upwards rental reversion opportunities in the short to medium term, with a significant redevelopment angle in the medium to long term.

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Commercial Property KWE and IRES make it into EPRA Index

EPRA realised a statement yesterday evening indicating that KWE and IRES have both been Colm Foley +353-1-641 6042 included into the EPRA indices. Addition day is March 18th. IRES is expected to make up [email protected] about 0.2% of the EPRA Developed Europe Index, with KWE a larger 0.8% of the index. Eamonn Hughes +353-1-641 9442 Based on our analysis of funds following EPRA, we estimate that c.18.4m shares of [email protected] IRES need to be bought by EPRA funds with 7.6m shares of KWE. This is likely to Sarah Dunne provide some support to both stocks in the short term. +353-1-641 0482 [email protected]

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Cairn Homes Announces an extended banking facility, up to €200m.

Cairn Homes has announced that it has increased its senior debt facility to €200m (from Recommendation: Buy €150m), following the admission of Ulster Bank to its banking group. The amended facility, Closing Price: €1.17 which has a four year term, is on the same terms as the facility announced in December Colm Foley 2015. AIB is the lead financer in the facility. Ulster is providing €68m to the facility. +353-1-641 6042

[email protected] In its investor presentation earlier this week, Cairn had flagged it was in the process of negotiating a new debt facility, which would provide it with c.€125m of residual investment capacity. However, some anticipated non-core disposals from its Project Clear portfolio acquisition could drive this figure higher.

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UDG Healthcare Positive disposal update

This morning UDG Healthcare has confirmed that it has received clearance from the Recommendation: Buy European Commission (EC) on the sale of the Supply Chain business (being sold to Mc Closing Price: £5.37 Kesson for €407.5m) based in the Republic of Ireland which represents the majority of the David O'Brien overall business unit. While the UK part of the business is being referred to the UK +353-1-641 9230 competition and markets authority, the company noted that clearance from EC allows the david.a.o'[email protected] transaction to complete in full on April 1st. This was originally scheduled to complete by the end of June.

The earlier than expected completion of the Supply Chain business disposal is positive news given the capital that the deal will unlock. We estimate that UDG Healthcare will have net cash of €175m on the balance sheet by year end (Sept- 16), which will fund expansion in the higher growth/returns parts of the business, driving shareholder value.

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Wireless Group CEO announces his retirement

Recommendation: Buy The Wireless Group (formerly UTV) has this morning announced that CEO John McCann will Closing Price: £1.80 retire from the group at its AGM in June. Following the sale of its TV assets, and with consideration for the continuing group the Board has asked current non Executive chairman Gavin Kelleher Richard Huntingford to become executive chairman. +353-1-641 0423 [email protected] During John McCann’s time as CEO, UTV has been transformed into one of the UK and Ireland’s largest media groups, with leading assets across TV, radio and new media. With the group’s focus on its radio business going forward, Richard Huntingford as executive chairman brings significant radio market experience having worked at Chrysalis and Virgin Radio.

The Wireless Group owns some of the most attractive radio assets in Ireland and the UK. The group is in the process of returning £55m cash to shareholders over the coming months. Following this the group will only have a small net debt position. The group remains highly cash generative and it can remain an attractive income growth story. We re-initiate coverage with a BUY recommendation.

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Market Data Top 10 Covered Companies

Company Price Mkt Cap Absolute Relative to European Sector P/E (LC) (LCM) 1 Day 1 Week 1 Mth Ytd 1 Day 1 Week 1 Mth Ytd 2016f 2017f CRH 24.96 20,358 3.7 10.1 8.2 -6.5 4.2 5.9 5.0 0.8 15.7 12.4 Ryanair 13.86 18,967 -2.6 -1.0 -1.5 -7.7 -2.2 -4.8 -4.4 -0.5 15.0 11.5 AIB Group 6.51 17,787 -6.8 -12.3 32.9 -2.2 -6.4 -15.7 29.0 5.4 12.6 19.6 IAG 5.33 10,835 -2.3 -4.6 1.8 -12.7 -1.8 -8.2 -1.2 -5.9 6.1 5.0 Kerry Group 79.00 13,888 -0.9 3.0 4.6 3.5 -0.5 -0.9 1.5 11.6 23.9 21.1 HeidelbergCement 69.85 13,859 1.3 6.2 7.4 -7.6 1.8 2.1 4.2 -0.4 12.7 12.1 Wolseley 38.20 9,934 2.2 5.3 16.4 3.5 2.3 3.7 10.8 6.5 15.6 13.9 Paddy Power Betfair 98.80 8,258 -4.5 -7.2 -4.6 8.8 -4.4 -8.6 -9.2 11.9 32.2 26.0 Bank of Ireland 0.28 9,035 2.2 11.6 0.4 -17.5 2.7 7.4 -2.6 -11.0 11.2 10.4 Mondi 13.06 6,341 -0.5 1.3 15.8 -2.1 -0.0 -2.5 12.4 5.5 11.0 10.8

Indices ISEQ performance

% Price 1 Day 1 Week 1 Mth Ytd 7,000

ISEQ 6,341.02 -0.59 3.14 1.80 -6.64 6,800 FTSE 100 6,130.46 -0.27 1.96 5.03 -1.79 6,600 DAX 30 9,751.92 -0.25 4.51 3.36 -9.23 6,400 CAC 40 4,416.08 -0.20 3.95 4.47 -4.77 6,200 FTSE Eurofirst 300 1,335.58 -0.47 3.97 3.08 -7.09 6,000 Nasdaq 4,707.42 0.09 2.73 4.51 -5.99 S&P 500 1,993.40 0.35 2.14 4.23 -2.47 5,800 Dow Jones 16,943.90 0.26 1.48 3.72 -2.76 5,600 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Nikkei 225 16,960.16 1.28 5.08 -1.34 -10.89

Exchange Rates

Current Px 1 day Px 1 Week Px Dec15 Avg Ytd

Stg/€ 0.772 0.770 0.791 0.737 0.765 STOXX 600 performance US$/€ 1.093 1.083 1.103 1.086 1.096 CHF/€ 1.085 1.083 1.091 1.087 1.096 420

JPY/€ 124.171 123.358 124.325 130.676 127.475 400

Bonds 380

Yield 1 Day Yld 1 Wk Yld 1 Mth Yld 3 Mth 360

US 2 Yr 0.85 -0.01 0.85 0.12 -0.10 340 US 10 Yr 1.83 -0.00 0.11 -0.05 -0.48 320

UK 2 Yr 0.38 -0.00 0.08 0.00 -0.29 300 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 UK 10 Yr 1.43 -0.03 0.06 -0.11 -0.46

BD 2 Yr -0.57 -0.04 -0.04 -0.57 -0.27

BD 10 Yr 0.17 -0.04 0.03 0.17 -0.50

Irish 10 Yr 0.89 -0.03 -0.01 -0.05 -0.29

Commodities FTSE 250 performance

% Current 1 day 5 day 1 Mth 1 Yr Brent (ICE $/bbl) 37.07 0.38 5.61 5.79 -39.25 18,000 Gasoline (NYM $/Gal) 1.30 -0.91 27.76 28.12 -33.39 17,500 Heat Oil (NYM $/Gal) 1.12 1.24 5.01 3.86 -42.24 17,000 Nat.Gas 1.64 -2.32 -8.49 -19.58 -39.56 Gold $/oz 1,250.25 0.89 1.94 10.45 3.09 16,500 Silver $/ozt 14.97 1.01 -1.32 3.89 -8.83 16,000

Copper U$/MT 4,830.00 1.05 3.18 5.49 -17.51 15,500

Wheat $/BU 4.60 2.11 1.66 -4.22 -9.14 15,000 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16

Source : FactSet

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Issuer & Analyst Disclosures

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