Morning Wrap

Today ’s Newsflow Equity Research 27 Aug 2015 Upcoming Events Select headline to navigate to article

CRH Encouraging progress in H115 Company Events 27-Aug Cairn Homes; H115 results CRH; Interim Results Grafton Group On track to meet medium term targets Donegal Investment Group; Q2 2015 Results Grafton Group; H1'15 results ICG; Q2 2015 Results Playtech; Q2 2015 Results ICG Strong EBITDA growth in H1; rising dividend payment 28-Aug Bwin.Party; Q2 2015 Results Independent News & Media; Q2 2015 Results ; H1 2015 Results UTV Media; Q2 2015 Results Playtech Good H1 numbers & separate positive Plus500 outlook further supports investment case

Cairn Homes H115 results, acquisition of Stillorgan site and outlook remains positive on further deals

Economic Events IFG Group H115 results show continued strong momentum Ireland 28-Aug Retail Sales Volume MoM 01-Sep Unemployment Rate Aug 12% growth in H1, with strong momentum into H2 United Kingdom 28-Aug GDP YoY 01-Sep Mortgage Approvals Economic View Positive trends continue in the Irish labour market United States 27-Aug GDP Annualized QoQ 28-Aug U. of Michigan Sentiment 01-Sep ISM Manufacturing Greene King CFO Davis spends £33k on shares

Europe 28-Aug Consumer Confidence 31-Aug CPI Estimate YoY

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CRH Encouraging progress in H115

CRH has reported Group adjusted EBITDA of €587m (+16% yoy on a reported basis) which Recommendation: Buy compares to our forecasts of €552m. This translates into 14% yoy underlying growth (ex- Closing Price: €24.60 currency) which is ahead of company guidance for “around 10%” growth given in the May IMS. Robert Eason +353-1-641 9271

[email protected] US lfl sales increased 6% yoy for H1, compared to our forecast of 4-5% and +8% in Jan-Apr. Management notes that pricing has been robust in aggregates (+4%), which is reflected in the margin performance of the heavyside division (EBITDA margins +139bps yoy, +60bps H114/-50bps H214). European lfl sales declined by 1-2% yoy for H115 implying stability compared to the performance in Jan-Apr (-2%). EBITDA performance was better than expected in the heavyside operations relative to our expectations.

Having just completed the Holcim-Lafarge asset acquisitions management has again utilised its balance sheet strength to acquire CR Laurence, a glass business, for $1.3bn implying a multiple of c.11x lowering to 8x post synergies. We are encouraged by such capital allocation given management’s focus on driving returns.

Management has guided for “good progress” in H215 EBITDA yoy compared to guidance in May for it to be “ahead” on an underlying basis (Goodbody forecasting 5% growth). Overall, we believe this is a solid set of results with CRH being one of the few building materials companies in Europe or the US to deliver results ahead of market expectations. With good momentum in US pricing and tangible signs of stabilisation/recovery in Europe we believe forecasts are well underpinned. In addition, the integration and, in our view, upside to synergy targets underpins a positive news flow cycle over the coming 12-24 months for CRH. With upside bias to our FY15 underlying EBITDA forecasts, we reiterate our BUY recommendation.

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Page 2 27 Aug. 15 Goodbody Morning Wrap

Grafton Group On track to meet medium term targets

Grafton has reported a first half operating profit of £61m, up 21% yoy and 2% ahead of our Recommendation: Buy forecasts. Excluding already guided property profits of £6m, operating profits were up 12% Closing Price: £6.77 which reflected a 30bps increase in the margin to 5.1% which is in line with management’s guidance given in June for margins to be “modestly ahead”. The variance with forecasts Robert Eason +353-1-641 9271 increases to 7% at an eps level due to lower than expected financial / tax charges. [email protected]

Period end net debt of £51m was significantly ahead of our expectations of £105m, this reflected: (i) A working capital inflow of £2m versus our more typical seasonal outflow estimate of £30m; (ii) Lower than expected capex of £19m (forecast £32m), which is likely due to phasing; and (iii) a favourable currency movement of £15-16m. This now leaves annualised net debt to EBITDA at just 0.3x (circa 2x lease adjusted EBITDAR).

Management continues to be positive on the UK market backdrop and the merchanting business is expected to see lfl growth in competitive markets. This will be supplemented with organic development initiatives and acquisitions which will enable further progress in H2. Indeed, lfl sales growth in Jul / Aug was 3.7%. A key change in the outlook for us is the more positive rhetoric around the Irish consumer which is reflected in lfl sales up 5.7% in Retail in July / Aug (2% H1). Underlying growth also remains robust in Irish Merchanting at 6.7% in July / Aug.

Overall, the outlook for the remainder of the year is broadly in line with our forecasts (implies 15% growth in H2, ex-property, versus 12% H1). There might be a slight up-lift to FY15 eps, as we factor in lower financial / tax charges. However, this is unlikely to translate into FY16/FY17 estimates as we factor in more competitive markets. We still see Grafton getting to its medium-term targets of 7% margins and 15% ROCE in FY17/18.

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Page 3 27 Aug. 15 Goodbody Morning Wrap

ICG Strong EBITDA growth in H1; rising dividend payment

ICG has this morning reported very strong trading in H115, with EBITDA up 82% yoy, to Recommendation: Buy €25.5m. This was driven by a robust performance in its high margin Ferries business in Closing Price: €4.41 particular, while its cost base benefitted from low fuel. Its net debt fell significantly, to €34m, from €61m at year end 2014. The company also declared a €3.638c dividend, a 5% ncrease Jack Diskin +353-1-641 9193 yoy, in line with our forecast. [email protected]

Total revenues were 10% higher yoy, led by a 12% increase in Ferries revenue. The RoRo business saw an 11.5% increase in volumes while both car and pax segments benefitted from the impact of a stronger Sterling on tourism volumes into Ireland and on translated revenues. The Container business reported 7% revenue growth, with the Lifts segment benefitting from the opening of the new terminal in Belfast. Of the €11.5m increase in EBITDA, 85% of this came from Ferries, with EBITDA for the Ferries business almost doubling yoy.

Total costs were 1% higher yoy despite the significant increase in activity in the period. Employee costs rose 8%, with Sterling inflating THE payroll for certain staff segments. Offsetting this was the significant fall in its fuel bill, by 21% yoy, with the positive impact of falling spot prices more than compensating for the negative impact of SECA.

Robust growth seen in the RoRo and car passenger segments has carried through the peak summer trading period (July 1st – August 22nd), with 8% and 4% volumes reported. However, this pace of growth is a moderation from H1 levels, given the more established patterns of the Epsilon in the second half of 2014. For the container/lift segments, these figures were +1% and +20% respectively, with the introduction of the new terminal operation in Belfast particularly benefitting the Lifts business.

Given the seasonality of the business, with 60-70% of full year RoRo and car volumes typically carried through the first 8 months of the year, the volume update provides strong visibility on the 2015 outrun. We expect to increase our RoRo and Lifts assumptions in light of ytd trading; though conscious of the slight slowdown in growth of RoRo/car volumes from summer/H1 levels. These volume adjustments, particularly on RoRo, combined with rolling in the impact of lower H1 fuel and recent spot moves will see us increase our FY15 EBITDA assumption. We expect to increase this figure by c.7/8% to reflect the exposure ICG has to the significant economic expansion taking place in Ireland and the UK and to falling fuel.

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Page 4 27 Aug. 15 Goodbody Morning Wrap

Playtech Good H1 numbers & separate positive Plus500 outlook further supports investment case

Playtech released its H115 results this morning with group revenue +33% yoy to €286m, 2% Recommendation: Buy ahead of our forecast. Adjusted EBITDA was +16% yoy to €112.9m which is in line. EBITDA Closing Price: £8.91 margins decreased as expected to 39.5% (45.5% in H114), due to lower margins from Gavin Kelleher acquisitions and white label revenues, together with the impact of UK POCT. Revenues from +353-1-641 0423 regulated markets in Gaming was 40% in H1 (H114 35%, H214 38%), with total regulated [email protected] revenues increasing to 42% (includes financials division).

Casino continues to be the main revenue growth driver, +28% yoy to €148.8m (Goodbody €146m). Services revenue increased by 21% yoy to €73.9m (Goodbody €77m) as the new white label contracts launched in Q414 had a significant revenue contribution. In Sports, revenue +30% despite a tough World Cup comp. Land-based revenues increased by 160% yoy, aided by acquisitions completed in Q314 and IGS set up costs. Poker remains weak – 19% yoy although Bingo revenues increased by 21% yoy. Trade FX contributed €10.6m of revenues in H1, however May/June revenues down 5% yoy due to very low market volatility.

On current trading, average daily revenues for the first 55 days of H2 are +15% yoy in Gaming. In Trade FX, Q3 to date CFD customers +19% yoy with FTDs +12% yoy. Management is confident in continued strong growth for the remainder of 2015 and beyond. Separately, Plus500 (Playtech expected to acquire in September) has released its H1 numbers this morning. In its outlook, it noted that Q3 had started strongly and it expects 2015 revenue to be ahead of 2014 and market expectations (previous guidance was flat revenues yoy which we have used in our numbers).

Overall, a solid set of H1 numbers from Playtech this morning. The current trading for the core gambling business is strong and in line with our expectations of 16% (+15% in Q3 to date is impacted by World Cup comp in July). While the new financials business saw revenues down 5% in May/June, this was put down to lower market volatility, and in Q3 performance is noted as strong. We do not expect to make any changes to our FY15 EBITDA numbers at this stage (€271m which we updated to earlier this week). We note the Plus500 outlook released this morning gives some encouragement and any continuation could drive upside to FY16. There is a lot of moving parts in the Playtech story at present, and the move into financial trading is not without its risks. However, the group is making progress increasing its regulated revenues and bias to numbers remains to the upside. We updated our valuation early this week (PT 1050p) and re-iterated our BUY recommendation.

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Page 5 27 Aug. 15 Goodbody Morning Wrap

Cairn Homes H115 results, acquisition of Stillorgan site and outlook remains positive on further deals

Cairn Homes released its interim results for FY15 this morning, covering the period from Recommendation: Buy incorporation in November 2014 to 30 June 2015. The reported numbers offer little insight Closing Price: €1.09 on progress to date, however, there is some useful colour on acquisitions and progress on existing sites. Cairn announced it has acquired an additional site at Ard Na Glaise, Stillorgan, Colm Foley +353-1-641 6042 for €5.45m, its ninth acquisition since IPO (total acquisitions of c. €130m). It also flagged a [email protected] strong pipeline of targets. At its existing sites, there will be a formal launch at Parkside in September 2015 and in Q1 2016 at Killiney. Cairn Homes indicates it has progressed on the planning and development at its sites in Dublin, Galway and Meath and that recruitment of personnel remains a key priority.

The release indicates that due diligence is under way on 11 sites, with a total projected cost of €120m and total potential units of 1,600. Cairn Homes flags that land sale activity is expected pick-up in Q3/Q4 15, as NAMA and Ulster Bank release a number of sites to the market. Cairn Homes’ pipeline has a Dublin bias.

In our recently published note “Natural Born Builders” we highlighted the structural undersupply in the Irish housing market where supply of c.13,000 units (2015f) compares to annual demand of c.31,000 units. We believe a well- capitalised homebuilder (investment capacity of c. €400m assuming c. 20% leverage) such as Cairn Homes has a strong competitive advantage against a decimated industry. We reiterate our Buy call.

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IFG Group H115 results show continued strong momentum

IFG reported H115 revenue of £34.5m, +10% yoy on continuing operations and €1m behind Recommendation: Buy our forecasts. Adjusted operating profit of £4.4m was in line with estimates. Reported Closing Price: €1.99 Operating profit at £2.2m compares to our estimate of £3.6m although there was an exceptional charge of £1.35m which relates to ongoing costs for businesses sold in 2014. Colm Foley +353-1-641 6042 PAT for the year came in at £1.5m, +30% yoy, and compared to our £2.6m forecast. Net [email protected] cash was up 63% yoy at the H115 stage at £17m. The interim DPS was increased by 10%, in line with our FY15 estimates.

This is a solid set of numbers from IFG. Management state there is positive momentum in the business and that recent investment and strategic alliances will support further growth in revenues, assets, clients and profitability into H2 and 2016.

James Hay is reaping the benefits of prior year investment as both the top line and bottom line are now showing good growth. The operational leverage is beginning to show and we expect further margin expansion in H2 as the final tranche of Towry and Capita plans are transferred across to IFG. The increased FSCS Levy at Saunderson House has impacted margins and was a disappointment, although it is a H1 impact only. We are likely to make adjustments to the mix of our forecasts (higher JH lower SH), although we expect our group earnings forecasts to remain unchanged. We reiterate our Buy call and €2.25 price target.

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Page 6 27 Aug. 15 Goodbody Morning Wrap

Fyffes 12% growth in H1, with strong momentum into H2

Fyffes saw adjusted EPS growth of 12% in H1 (vs. 20% forecast) driven by good profit Recommendation: Buy growth in both pineapples and bananas. The necessary price increases to offset the FX Closing Price: €1.40 headwind were achieved in Q2 and their full impact will be seen in H2 (we assumed more of Patrick Higgins this would be seen in H1). As a result, the Group has maintained its full year guidance for +353-1-641 0403 adjusted EPS growth of 9% - 24%. [email protected]

Banana profits grew €2m in the period (estimated +10% yoy) despite the significant currency headwinds (EURUSD +18%, GBPUSD +9%). Margins improved thanks to lower fuel (-40% yoy) and import costs as well as operational efficiencies in its UK distribution centres. In addition, after a slow start to the year the Group successfully passed on the price increases (mid-single digit) necessary to offset the FX impact. This will have a full impact in H2 (vs. just Q2 in H1).

The pineapples category continues to exhibit profitability growth as yields and on-farm efficiencies continue to improve. In addition, the category, like bananas, saw strong pricing growth thanks to supply constraints arising from difficult weather conditions in key growing areas. Lower fuel costs was also at play here. The melons business delivered a performance in-line with a strong H114 as lower volumes due to poor weather conditions was offset by a modest increase in pricing. Given the division is also purely focused in the US, there is also a positive dollar translation impact.

The strong profit performance in H1 coincided with a net reduction in working capital of €3.7m (vs. €5m outflow last year), coupled with a low capex spend of just €4.9m, saw the company move from a net debt position of €11.7m at year end to net cash of €18.6m (vs. forecast of €1.4m net cash).

We currently forecast FY15 adjusted EPS growth of 19.5% to 13.3c, which is in the upper end of the Group’s current guidance range. We are unlikely to change our forecasts at this stage, with a strong performance expected in H2 as the Group benefits from the full contribution of higher banana and pineapple prices. Home…

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Economic View Positive trends continue in the Irish labour market

While statistical noise can often cloud the message coming from data such as GDP in Ireland, Dermot O’Leary +353-1-641 9167 labour market data do not have the same problems. As such, yesterday’s employment data [email protected] for Q2 is confirmation that domestic economic momentum strengthened in Ireland over recent months. In turn, this is leading to some important changes in population flows that will be a driver of growth over the medium-term.

To recap on the labour market trends. Employment grew by 1% quarter on quarter in Q2, with the annual rate of growth strengthening to 3% (2.2% yoy in Q1). The underlying details are even more positive. Firstly, full-time employment grew by 3.9% yoy, with part-time employment effectively flat. Secondly, the growth is broad-based, with eleven of the fourteen sectors seeing annual employment gains (construction leading the way). Thirdly, unemployment is falling quite rapidly and the unemployment rate fell to 9.5%, putting it at its lowest level since 2008.

There is still a long way to go to return the unemployment rate to “normal” levels, but there are already signs in the latest population statistics, also published yesterday, that the labour market recovery is acting as a magnet for economic migrants to Ireland. While outward migration remained relatively constant at 81K, inward migration rose from 60K to 69K in the twelve months to April 2015 (with the big increase coming from RoW). This meant, along with the ongoing natural increase in the population, that the overall population increased by 26K (0.6%).

Given our expectations for ongoing economic growth, we would anticipate that the next wave of inward migration will be from the return of Irish migrants. This will provide an important source of growth in the population over the coming years.

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Page 8 27 Aug. 15 Goodbody Morning Wrap

Greene King CFO Davis spends £33k on shares

Greene King’s CFO Kirk Davis spent £33k buying 4,000 shares yesterday, his first purchase Recommendation: Buy since joining the company in November 2014. Davis was previously CFO of sector peer J D Closing Price: £8.09 Wetherspoon. Simon Matthews

+353-1-641 9187 Greene King shares have traded down 7% in the last fortnight. Macro issues, as [email protected] well as poor summer weather, high competitive intensity and concerns over the New Living Wage, are weighing on sentiment in the sector. With the integration of

Spirit underway, Davis’s purchase thus represents a timely confidence boost for Greene King shareholders.

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Page 9 27 Aug. 15 Goodbody Morning Wrap

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 2015f 2016f AIB Group 0.08 41,880 - -7.0 -7.0 1.3 1.8 1.3 4.8 -0.9 26.0 29.2 CRH 24.60 20,065 -0.7 -9.4 -7.9 23.6 1.1 -1.4 3.8 20.9 23.9 15.6 11.93 16,516 -0.4 -6.5 -3.2 21.7 1.4 1.9 9.1 19.0 13.1 14.9 IAG 5.32 10,804 2.6 -1.4 -5.5 9.3 4.4 7.4 6.5 7.0 10.2 7.2 Wolseley 40.45 10,519 -1.0 -5.7 -3.8 9.7 0.8 2.7 8.5 7.4 16.8 15.4 64.35 11,313 -0.0 -6.3 -6.2 12.8 1.7 2.0 5.7 10.3 21.5 19.6 Bank of Ireland 0.34 11,140 0.6 -3.4 -10.4 9.9 2.4 5.2 1.0 7.5 10.8 11.2 Mondi 14.05 6,822 -1.2 -8.4 -5.9 33.8 0.6 -0.3 6.1 30.9 14.6 13.9 easyJet 16.77 6,607 0.1 -1.2 -2.8 0.4 1.9 7.6 9.6 -1.8 12.7 12.2 Travis Perkins 19.73 4,873 -2.1 -4.2 -11.1 6.2 -0.4 4.4 0.2 3.9 15.7 13.3

Indices ISEQ performance

% Price 1 Day 1 Week 1 Mth Ytd 7,000 ISEQ 6,115.53 0.34 -6.09 -5.66 17.05 6,500 FTSE 100 5,979.20 -1.68 -6.63 -9.13 -8.94 6,000 DAX 30 9,997.43 -1.29 -6.41 -11.90 1.96 CAC 40 4,501.05 -1.40 -7.84 -11.00 5.34 5,500

FTSE Eurofirst 300 1,380.88 -1.86 -8.35 -11.71 0.90 5,000 Nasdaq 4,697.54 4.24 -6.41 -7.69 -0.81 4,500 S&P 500 1,940.51 3.90 -6.69 -6.69 -5.75 Dow Jones 16,285.51 3.95 -6.13 -7.30 -8.63 4,000 Aug-14 Nov-14 Feb-15 May-15 Aug-15 Nikkei 225 18,376.83 3.20 -9.13 -10.55 5.31

Exchange Rates

Current Px 1 day Px 1 Week Px Dec14 Avg Ytd

Stg/€ 0.734 0.727 0.707 0.776 0.727 STOXX 600 performance US$/€ 1.140 1.141 1.106 1.210 1.114 CHF/€ 1.079 1.082 1.074 1.202 1.059 420

JPY/€ 135.913 136.824 137.387 145.079 134.787 400

Bonds 380

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

US 2 Yr 0.67 0.07 0.67 -0.01 0.07 340 US 10 Yr 2.18 0.10 0.05 -0.09 0.04 320

UK 2 Yr 0.68 -0.01 -0.01 -0.11 0.01 300 Aug-14 Nov-14 Feb-15 May-15 Aug-15 UK 10 Yr 1.85 0.05 -0.01 -0.11 -0.04

BD 2 Yr -0.24 0.01 0.03 -0.24 -0.01

BD 10 Yr 0.70 -0.02 0.09 0.70 0.15

Irish 10 Yr 1.37 -0.04 0.09 0.11 0.13

Commodities FTSE 250 performance

% Current 1 day 5 day 1 Mth 1 Yr 18,500

Brent (ICE $/bbl) 43.14 -0.16 -5.10 -21.02 -57.91 18,000

Gasoline (NYM $/Gal) 1.35 -5.82 -12.30 -25.89 -50.96 17,500 Heat Oil (NYM $/Gal) 1.40 -0.88 -5.14 -14.62 -50.92 17,000 Nat.Gas 2.69 0.30 0.64 -2.99 -31.14 16,500 16,000 Gold $/oz 1,120.75 -1.47 -3.09 3.70 -12.85 15,500 Silver $/ozt 14.41 -3.09 -6.79 -0.55 -26.06 15,000

Copper U$/MT 4,959.00 -1.45 -1.72 -5.08 -30.12 14,500

Wheat $/BU 4.94 -1.05 -1.93 -3.42 -11.19 14,000 Aug-14 Nov-14 Feb-15 May-15 Aug-15

Source : FactSet

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