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UK Housebuilders Rightmove data points to slowing HPI Company Events trend 21-Jan Entain; Q420 Trading Update Ibstock; Q420 Trading Update J D Wetherspoon; Q221 Trading Update Irish Housebuilders Survey points to 3% HPI in in 2021 Keywords Studios – Sonia Lashand appointed as Chief Operating Officer Irish Banks BOI to close NI branches/AIB loan sales/House prices set to rise 2021? FBD Holdings UK supreme court ruling finds against insurance industry on BI test case

Economic Events Ireland 22-Jan PPI Dec20 Wholesale Price Index Dec20

United Kingdom 20-Jan CPI Dec20 PPI Dec20 Retail Price Index Dec20 22-Jan Retail Sales Dec20

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UK Housebuilders Rightmove data points to slowing HPI trend

Rightmove data is out this morning, we dont get full colour until later on today but from Shane Carberry what we can see in news articles there are two key points: i) UK HPI is down -0.9% mom for +353-1-6419118 the period from Dec 6th to Jan 9th, reflecting "the expiry of a tax cut for buyers". This leaves [email protected] the annual pace of growth at 3.3% (6.6% last month). ii) Demand remains robust with Dudley Shanley buyers contacting agents +12% yoy and sales agreed +9% yoy. This is against a tough +353-1-641 9174 comparison as we had the so called “Boris bounce” this time last year (having been elected [email protected] in December). David O’Brien +353-1-641 9230 One of the reasons we have for expecting house price declines, is the view that some portion david.a.o’[email protected] of the significant inflation we saw last year is directly linked to the stamp duty cut and

therefore will have to unwind. This looks like it is starting to be borne out, however whether Robert Eason it will lead to deflation or just a more muted inflationary backdrop remains to be seen. It is +353-1-641 9271 noteworthy that some of the weekend papers suggested that some form of extension to the [email protected] stamp duty holiday (set to end on March 31ST) is being considered as part of the March budget albeit that could be at the expense of a new property tax. We believe this decision is likely be based on how the market evolves over the coming months but for now, at least, whilst the “boom” in prices may be starting to fade, demand is still at elevated levels.

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Irish Housebuilders Survey points to 3% HPI in Dublin in 2021

According the Irish Times, The Society of Chartered Surveyors Ireland (SCSI) surveyed 250 Robert Eason chartered surveyors in December. Two thirds of those surveyed expect ongoing supply +353-1-641 9271 shortages to result in property price increases in 2021. Prices are expected to increase by an [email protected] average of 4%, ranging from 3% in Dublin to 6% in Connacht and Ulster. TJ Cronin, vice- David O’Brien president of the SCSI said that “while COVID-19 has badly affected certain sectors, it has +353-1-641 9230 enabled prospective buyers who work in areas which haven’t been hugely impacted, such as david.a.o’[email protected] pharma, tech, financial and the public sector to increase their savings”. Dudley Shanley +353-1-641 9174

We are forecasting flat underlying prices in 2021 followed by +3% in 2022 and 2023 for both This document is intended for the sole use of Goodbody Stockbrokers and its affiliates [email protected] Cairn and Glenveagh. Based on the recent trading updates from both companies we know

they are already more than 50% forward sold for 2021 so the impact of any price inflation in Shane Carberry 2021 will be somewhat muted. It will feed into 2022 where we already assume underlying +353-1-6419118 inflation of 3%. Assuming no change to land or build costs and considering the forward sales [email protected] position, a 3% increase in prices in 2021 could result in a mid to high single digit upgrade for Cairn and a low to mid-teens upgrade for Gleaveagh (the upgrade is bigger due to the lower profit forecast).

Overall, it is positive to see that chartered surveyors are expecting prices to increases and it highlights that our current forecast for Cairn and Glenveagh are based on conservative assumptions.

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Keywords Studios – Sonia Lashand appointed as Chief Operating Officer

Keywords Studios has appointed Sonia Lashand as Chief Operating Officer with effect from Recommendation: Hold today and joins the Board. Sonia will report directly into Andrew Day. She has over 20 years’ Closing Price: £25.94 experience in scaling up businesses internationally including global head of managed services at Diebold Nixford, a global retail banking and technology services business and Sutherland Patrick O'Donnell +353-1-641 6013 Global Services, a digital transformation company, where she worked as MD of EMEA. [email protected]

This looks like a sensible appointment for Keywords Studios (“KWS”) as it scales up

the business through continued M&A on top of a strong backdrop for outsourcing demand. In terms of M&A, we have seen momentum uptick strongly in late 2020 with a number of material deals and in excess of £90m in all in expenditure announced. The appointment of Sonia follows significant investment in the organisational structure in 2019 and 2020 and ensures the right structures are in place for KWS to sustain this growth as it seeks to become the global go-to partner for video games outsourcing.

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Irish Banks BOI to close NI branches/AIB loan sales/House prices set to rise 2021?

The Irish Times reports this morning that Bank of Ireland is planning to scale back its Eamonn Hughes operations in Northern Ireland. Whilst all options are being considered in its strategic review, +353-1-641 9442 flagged at the H1s last year, the business is set to escape being fully closed according to the [email protected] article. It suggests sources said the bank is planning to close a number of its 28 branches in Barry Egan the subscale business though “a final decision has not yet been made and may drift past the +353-1-641 6059 results date”. The NI bank has €2.8bn of loans and €5.6bn of deposits, with 600 staff. [email protected]

It is clear that costs are coming out of the NI operation. Whilst a final decision may

or not be made by the time of the FY20 results, based on prior analysis, we

anticipate BOI will revise its current FY21 <€1.65bn cost target at the FY20 results stage to a possible c.€1.5bn target by FY23 (is our best guess). This will bring the cumulative journey from FY17’s c.€1.9bn cost base to c.€400m of net savings.

The Irish Times reports that AIB is set to sell a portfolio of non-performing owner-occupier mortgages with an original portfolio value of €150m to an “ethical” finance house or debt- charity. There are reported to be two bidders for Project Iris, with both bidders having access to the State’s mortgage-to-rent scheme. The preferred bidder is expected to be announced before the end of January. The report notes that the Project Iris sale is expected to close before a larger portfolio, Project Oak, with an original book value of €1.3bn. Project Oak was originally launched in Q1 last year, then pulled due to the pandemic, and resurrected again in Q4 last year.

There has been a number of articles around these potential portfolio sales in recent weeks, so the commentary this morning looks broadly as anticipated.

Finally, in Ireland, a survey by the Society of Chartered Surveyors Ireland (SCSI) expects house prices to rise by 4% in 2021 as supply shortages continue to support valuations. The pandemic is impacting the level of supply, again in the current lockdown, which the SCSI believes will support property prices again in the current year. Whilst property prices are holding up, a survey from credit risk analyst CRIFVision-net in the Irish Independent notes that new company registrations fell by just 4% last year against the backdrop of the pandemic. Insolvencies were down 11% in 2020 which the agency attributes to the prolonged closure of the courts.

That data on insolvencies and registrations mirrors a detailed research paper into This document is intended for the sole use of Goodbody Stockbrokers and its affiliates the same issue from the Central Bank in Q420, which highlighted similar trends.

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FBD Holdings UK supreme court ruling finds against insurance industry on BI test case

On Friday, the Supreme Court in England made its decision on the appeal of the original High Recommendation: Buy Court ruling for the business interruption test case taken by the FCA against a number of Closing Price: €7.38 insurers last summer. The Supreme Court noted that it largely dismissed the insurer’s Eamonn Hughes appeals, effectively upholding the original rulings which largely found in favour of the FCA in +353-1-641 9442 its role as representing customers of the insurers. The decision against the insurers will [email protected] clearly have ramifications for the cost of the industry and Hiscox on Friday added $48m to its business interruption cost for 2020 after the verdict.

However, the devil is in the detail of the ruling and whilst the Supreme Court largely upheld the original High Court ruling, we note that it reversed a decision on pre-trigger losses. The Supreme Court noted that the High Court, subject to qualifications, permitted adjustments to be made under the trends clauses to reflect a measurable downturn in the turnover of a business due to COVID-19 before the insured peril was triggered. The Supreme Court rejected this approach in its ruling on Friday. It went on to say that in accordance with its interpretation of the trends clauses, adjustments should only be made to reflect circumstances affecting the business which are unconnected with COVID-19.

FBD was defendant in a Commercial Court business interruption test case back in October with four plaintiff pub groups, with the judgment due on February 5th. The Irish judge is already on the record as saying that he had not fundamentally relied upon the English court’s (original) findings and, in general terms, the English courts found against the insurance sector. In addition, we believe the change in the pre-trigger clause in Friday’s judgment is also negative for the insurance sector (and possibly why Hiscox raised its provision, though we note that Hiscox was actually up on Friday 3%, having originally started lower).

FBD has already taken a €30m provision to provide for its anticipated costs from the outcome of the case. In October, we suggested that the initial English ruling had the potential to plausibly increase the cost for FBD to 1.5-2x the current provision on a gross basis, but importantly any adverse court judgement would obviously strengthen its case with its reinsurers. A key question now is also around the change in the English court treatment on pre-trigger losses and if that potentially raises the cost if also adopted in Ireland as well. For the record, every additional €10m would impact FBD’s solvency capital by c.4ppts, manageable in the context of the 186% SCR at the end of June (which also includes its prior accrued

th

€1 dividend per share). We’ll have to wait until February 5 to find out. This document is intended for the sole use of Goodbody Stockbrokers and its affiliates

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We would like to inform you that Eamonn Hughes holds shares in AIB Group We would like to inform you that Dudley Shanley holds shares in Cairn Homes We would like to inform you that Dudley Shanley holds shares in Glenveagh Properties

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