Morning Wrap

Today ’s Newsflow Equity Research 26 Apr 2016 Upcoming Events Select headline to navigate to article

Paper & Packaging Leipa capacity addition may be Company Events delayed further 27-Apr CRH; Q1 IMS ; Q1'16 resutls

Kerry Group; Q1'16 results Q1 updates from Bayer and Du Pont 28-Apr ; Q1'16 results Howden Joinery; Trading update

Applegreen Another independent operator gets funding to drive growth

Builders Merchants Growth slows for Carpetright but upgrade gross margin guidance

Breedon Aggregates Proposal put forward to the CMA to satisfy competition concerns Economic Events Ireland 28-Apr Retail Sales Mar'16 29-Apr Unemployment Rate Apr'16 UK Economic View Sterling benefits as “Remain” Residental Property Prices YoY Mar campaign gains momentum 26-Apr BBA Loans for House Pucrhase Mincon Group Sandvik report Q1 results; Mining continues 27-Apr GDP YoY to see challenges 28-Apr Nationwide House Price NSA YoY

United States 26-Apr US Services PMI CPL Resources Randstad Q1 in-line, though UK lags Durable Goods Orders 27-Apr Pending Home Sales MoM 28-Apr GDP Annualised QoQ Glanbia 8% organic growth at DSM’s human nutrition 29-Apr U. of Michigan Sentiment Chicago Purchasing Manager division Europe 29-Apr CPI Apr'16 Unemployment Rate GDP SA YoY

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Paper & Packaging Leipa capacity addition may be delayed further

This morning UPM has confirmed the sale of the Schwedt newsprint mill to Leipa for €70m. David O’Brien +353-1-641 9230 The mill will be converted to containerboard and is expected to have a total production david.a.o’[email protected] capacity of 450k tonnes. Robert Eason +353-1-641 9271 This deal was originally expected to close in Q116 so the project is already running behind. [email protected] In our capacity model we had assumed that over 200k tonnes of would be produced in 2017.

However, given the original delay and this morning’s announcement that UPM and Leipa have entered into a contract manufacturing agreement for newsprint for a transition period which could last until the end of 2017, we could have to delay this impact until 2018.

The Leipa delay and the delay in Pro-Gest’s Manitova mill means that capacity growth for 2017 in Europe will be running closer to 2.5% than the original >5% expectation. While recognising this is just a delay not a cancellation it is welcome news nonetheless. Indeed, there still remains question marks around the timing of other mills scheduled for 2018.

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Origin Enterprises Q1 updates from Bayer and Du Pont

Both Bayer and Du Pont pointed to a difficult market backdrop in the global crop protection Recommendation: Buy market globally in their Q1 updates today. Bayer saw an increase in its seed sales (+5.4%). Closing Price: €6.81 However, within Crop protection product while sales of fungicides increased (+2.9%), this Liam Igoe was offset by declines in Insecticides (-12.2%) and Herbicides (-3.8%). Overall sales of crop +353-1-641 9450 protection products, therefore, are likely to have been lower. Meanwhile, Du Pont simply [email protected] noted volume declines globally within crop protection products.

Origin will release its Q3 IMS on May 26th. We are anticipating weaker sales of agri- inputs across the board to reflect the impact in the UK of weaker farm incomes on purchases of fertilisers and crop protection products.

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Applegreen Another independent operator gets funding to drive growth

Another UK independent, MPK Garages, has secured capital to accelerate growth plans in the Recommendation: Buy region. The forecourt retailer has secured £14m from BGF and HSBC to acquire additional Closing Price: €4.65 forecourts and refresh parts of its existing estate, with a particularly focus on improving its Patrick Higgins in-store offer (convenience and food). The company, which ranks tenth in the ‘Top 50 +353-1-641 0403 Indies’, currently operates 25 sites across the UK and plans to add a further 20 sites over the [email protected] next two years.

This announcement follows private equity investment in three of the top five Independent forecourt retailers. The increased capital flows into this market illustrates the strong growth potential for specialist operators in the region as the two primary operators, Oil Majors and Supermarkets, retrench and refocus on their core businesses.

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Builders Merchants Growth slows for Carpetright but upgrade gross margin guidance

Carpetright has reported that UK lfl sales increased by 0.7% in the 12 weeks to April 23rd Robert Eason +353-1-641 9271 (Q4). This represents a slowdown from the 2.4% in the prior period (Q3) and 3.7% in H1. [email protected] However, there were difficult comparatives with UK lfls up over 10% in the same 12 week period last year. Growth has also slowed in its European operations (Ireland, and David O’Brien +353-1-641 9230 Netherlands) with lfl of 1.9% in Q4 versus 4.2% in Q3. Despite the slower top-line growth david.a.o’[email protected] management has revised its guidance for a decline in gross margins from 100-150bps to 80- Sarah Reilly 100bps. +353-1-641 6080 [email protected]

The Carpetright statement is somewhat in contrast to last week’s update from Jason Molins Travis Perkins which reported a pick-up in lfl trends in the first quarter of the +353-1-641 9141 [email protected] calendar year. However, it is of note given the uncertainty that surrounds Brexit and we will be watching the data points closely in the coming weeks.

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Breedon Aggregates Proposal put forward to the CMA to satisfy competition concerns

The Competition and Markets Authority (CMA) has announced that as part of the on-going Recommendation: Buy investigation of the Breedon Aggregates acquisition of Hope Construction Materials, Breedon Closing Price: £0.75 Aggregates has proposed selling 14 ready-mixed concrete sites to satisfy competition Jason Molins concerns. This follows the announcement earlier this month that the CMA had highlighted 27 +353-1-641 9141 ready-mixed concrete sites that were giving rise to competition concerns. The CMA has until [email protected] June 23rd to accept the undertaking, with the ability to extend to August 25th if it considers there are sufficient reasons for doing so.

This news is largely as expected and we note that the CMA has indicated that “there are reasonable grounds for believing that the undertakings offered by Breedon, or a modified version of them, might be accepted by the CMA”. Our expectations remains that the deal should be completed by July.

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UK Economic View Sterling benefits as “Remain” campaign gains momentum

Sterling has being staging somewhat of a resurgence over the past two weeks. On a trade Juliet Tennent +353-1-641 9469 weighted basis it has risen by 3% over that timeframe and is at its highest level in 6 weeks. [email protected] The change in sentiment is a response to the polls and betting odds indicating that there has been a swing in momentum towards the “Remain” camp in recent days. The most recent poll of polls (whatukthings.org) shows that support to remain in the EU has risen to 47% from 40% a week earlier. Meanwhile, the betting odds imply that the probability of a Brexit has reduced from c.33% to c.27% (betfair exchange). This change is likely to have been driven by a number of factors including; 1) The treasury quantifying the cost to each household of the cost of leaving the European Union, and 2) The intervention of US President Obama supporting the “Remain” campaign last week.

Despite attracting criticism for meddling in the domestic affairs of the UK, President Obama’s warning on trade appear to have had some impact and sterling has responded accordingly. However, with almost 2 months to the referendum there are likely to be further twists resulting in volatility for sterling.

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Mincon Group Sandvik report Q1 results; Mining continues to see challenges

Sandvik released its first quarter results midday yesterday, for the period to March, Recommendation: Hold recording an adjusted operating profit decline of 19% yoy. Of relevance to Mincon is the Closing Price: €0.76 commentary on the mining division, which saw organic order intake down 8% yoy with Nuala McMahon revenues “largely stable at -1%”. The group did note Europe and Australia “recorded a +353-1-641 0498 positive development in revenue”. [email protected]

On the conference call management noted the mining segment “continues to see challenges”, which shouldn’t come as a surprise.

Mincon has revenue exposure of c.21% to Australia and c.47% to Europe, the Middle East and Africa. While uncertainty remains in the group’s core market, Mincon’s smaller and niche offering has seen it outperform its peers.

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Page 5 26 Apr. 16 Goodbody Morning Wrap

CPL Resources Randstad Q1 in-line, though UK lags

Randstad, which is focussed largely on the European and North American recruitment Recommendation: Buy markets, issued Q1 results this morning that are in line with market revenue expectations. Closing Price: €5.85 Revenue for the three months to March amounted to €4.7bn, up 6% YoY and 5% on an Gerry Hennigan organic basis. Underlying EBITA of €169m improved 10% organically with EBITA margin of +353-1-641 9274 3.6% up 10 basis points. [email protected]

On a regional basis, the UK, which accounted for just 5% of the revenue base, was down 3%

YoY, with growth of just 1% on an organic basis. Aside from the Belgium / Luxembourg region, the UK was one of the few outliers in terms of growth with France (+9%), Iberia (+8%) and ‘Other European countries’ (+10%) all recording strong YoY organic revenue growth. Of relevance to CPL, Poland, which is included in the Other European category, recorded YoY growth of 11%.

Commentary on the outlook is limited to an expectation of a small positive working day impact on reported growth in Q2 due to the timing of Easter, and a moderate seasonal increase in underlying operating expenses sequentially. Regionally, conditions in Europe are described as improving, though with respect to the UK comments attributed to the CFO indicate that they “are not where we want to be”.

While the statement from Randstad this morning has limited relevance to CPL given the latter’s 74% NFI exposure to Ireland, the underlying Randstad performance in Poland is a marginal positive (CPL’s International business derives from Poland and , c.10% of NFI), while commentary on the UK largely mirrors that of UK peers.

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Glanbia 8% organic growth at DSM’s human nutrition division

DSM reported flat earnings yoy in its Q1 update this morning. Within its Animal Nutrition & Recommendation: Buy Health Division the company saw an 8% organic growth rate in human nutrition sales. DSM Closing Price: €17.17 are the global leader in this category, while Glanbia’s Customised Solutions business (part of Liam Igoe its Global Ingredients division) is the number 2. +353-1-641 9450

[email protected] The Q1 update from DSM sets a positive backdrop for Glanbia’s AGM statement / Q1 IMS tomorrow. We expect a solid performance from its Customised Solutions business this year, while our forecast underlying 10% EPS growth for FY16 for Glanbia is again being driven mainly by the Performance Nutrition Division.

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Page 7 26 Apr. 16 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 2016f 2017f AIB Group 8.30 22,667 -7.8 -6.7 -7.9 24.6 -7.3 -7.4 -11.0 31.5 16.0 23.3 CRH 25.52 20,811 0.9 -0.4 3.5 -4.4 1.4 -1.1 0.0 0.8 16.0 12.7 13.07 17,893 0.4 0.4 -5.1 -12.9 0.9 -0.3 -8.3 -8.1 14.2 10.8 HeidelbergCement 78.88 15,651 0.5 0.4 6.9 4.3 1.0 -0.3 3.3 10.1 14.4 13.7 81.15 14,266 - -1.2 -0.3 6.3 0.5 -1.9 -3.6 12.2 24.6 21.7 IAG 5.28 10,723 0.2 -1.5 -2.7 -13.6 0.7 -2.2 -5.9 -8.8 5.8 4.6 Wolseley 39.04 10,152 1.1 1.1 0.5 5.8 1.9 2.5 -1.3 5.8 15.7 13.1 Paddy Power Betfair 83.75 7,010 - -12.1 -9.9 -7.8 0.9 -10.9 -11.6 -7.7 27.1 22.5 Bank of Ireland 0.26 8,517 1.9 9.6 1.2 -22.2 2.5 8.8 -2.2 -17.9 10.6 9.8 Mondi 12.92 6,273 0.6 -3.7 -1.7 -3.1 1.1 -4.4 -5.0 2.2 11.9 11.3

Indices ISEQ performance

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

ISEQ 6,148.11 0.40 -0.95 -1.23 -9.48 6,800 FTSE 100 6,260.92 -0.78 -1.46 2.53 0.30 6,600 DAX 30 10,294.35 -0.76 1.72 4.50 -4.18 6,400 CAC 40 4,546.12 -0.52 0.87 5.00 -1.96 6,200 FTSE Eurofirst 300 1,364.13 -0.57 0.65 3.57 -5.11 6,000 Nasdaq 4,895.79 -0.21 -1.29 2.56 -2.23 S&P 500 2,087.79 -0.18 -0.31 2.55 2.15 5,800 Dow Jones 17,977.24 -0.15 -0.15 2.63 3.17 5,600 Apr-15 Jul-15 Oct-15 Jan-16 Nikkei 225 17,439.30 -0.76 7.15 2.57 -8.38

Exchange Rates

Current Px 1 day Px 1 Week Px Dec15 Avg Ytd

Stg/€ 0.777 0.780 0.794 0.737 0.776 STOXX 600 performance US$/€ 1.127 1.124 1.133 1.086 1.109 CHF/€ 1.098 1.098 1.091 1.087 1.095 420

JPY/€ 125.007 125.303 123.169 130.676 126.440 400

Bonds 380

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

US 2 Yr 0.83 0.02 0.83 -0.05 -0.02 340 US 10 Yr 1.92 0.03 0.14 0.02 -0.09 320

UK 2 Yr 0.52 0.02 0.06 0.05 0.11 300 Apr-15 Jul-15 Oct-15 Jan-16 UK 10 Yr 1.61 0.01 0.13 0.15 -0.08

BD 2 Yr -0.50 0.00 -0.00 -0.50 -0.04

BD 10 Yr 0.26 0.03 0.10 0.26 -0.13

Irish 10 Yr 0.93 0.02 0.07 0.12 0.01

Commodities FTSE 250 performance

% Current 1 day 5 day 1 Mth 1 Yr Brent (ICE $/bbl) 44.48 -1.40 -2.88 9.99 -31.86 18,000 Gasoline (NYM $/Gal) 1.53 - 1.60 4.43 -23.14 17,500 Heat Oil (NYM $/Gal) 1.32 - -1.56 8.88 -31.82 17,000 Nat.Gas 2.06 -3.60 -0.29 14.23 -18.49 Gold $/oz 1,238.90 -0.35 -1.05 1.47 4.73 16,500 Silver $/ozt 16.86 -1.92 -0.65 10.34 6.51 16,000

Copper U$/MT 5,000.50 -0.30 1.26 1.41 -17.01 15,500

Wheat $/BU 4.74 - -7.47 2.38 -2.97 15,000 Apr-15 Jul-15 Oct-15 Jan-16

Source : FactSet

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