Morning Wrap
Today ’s Newsflow Equity Research 04 Jun 2021 08:40 BST Upcoming Events Select headline to navigate to article
European Airlines Anger, frustration and a delayed Company Events recovery 04-Jun Derwent London; Interim Ex Div 08-Jun Paragon Banking Group; Q221 Results Smurfit Kappa Entering the Peruvian corrugated market 09-Jun SSP Group; Q221 Results
Datalex Intention to raise €25m Irish Banks An Post mortgage timeline might be mid-2022 Irish Banks BOE governor on climate change at Green Swan conference
Economic Events Ireland 04-Jun GDP Q1 08-Jun Industrial Production Apr21 10-Jun CPU May21
United Kingdom 04-Jun CIPS Construction PMI May21 11-Jun Construction Output Apr21 GDP Apr21 Trade Balance Apr21 Industrial Production Apr21 Manufacturing Production Apr21
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European Airlines Anger, frustration and a delayed recovery
The UK Government’s decision to shorten rather than lengthen its travel destination green Mark Simpson list saw a sharp decline in share prices as the market will need to adjust down forecasts for +353-1-641 0478 this year and raise cash needs for the industry. Commentary in response to this news was [email protected] pretty universally negative, not surprisingly given the downgrading of Portugal from green to Nuala McMahon amber after only three weeks, with the country the only real summer holiday destination +353-1-641 0498 previously on the green list. [email protected]
Johan Lundgren, easyJet’s CEO, comments summed up the frustration felt by airlines,
especially with what is seen as illogical decisions based on infection levels. "With Portuguese
rates similar to those in the UK, it simply isn’t justified by the science. And to add no more
countries to the green list when most of Europe’s infection rates are on a downward trend and many places are with low infection rates below that of the UK, such as the Balearics with 33 in 100,000 and Malta with just 12 in 100,000, makes no sense. Yet the [UK] Government has torn up its own rule book and ignored the science, throwing peoples’ plans into chaos, with virtually no notice or alternative options for travel from the UK.”
This ‘stop, go, stop’ decision making by the UK Government makes scheduling future capacity almost impossible for airlines, with all the cost implications this have in terms of readying aircraft and staff for deployment and then having to stand them down again. Further, it will undermine customers’ confidence in making bookings given the uncertainty that the status of any destination could change when they are abroad. As a result, we would expect the booking window to tighten again as a result of the decision made to change Portugal’s status to amber.
This retrograde step also raises the issue of the travel industries finances as earnings prospects over the summer get cut. Mark Tanzer, CEO of the travel agents' association Abta, stated that the UK Government was ‘'continuing to prevent any meaningful resumption of international travel’’ and that ‘'The Government now needs to come forward with tailored financial support for the sector.’’ Potentially we might see a further round of funding made available, such as the CCFF scheme accessed last year, although the industry would prefer the loosening of travel restrictions as the answer to this concern.
With the above said, we repeat the last paragraph of yesterday’s bites, which read as follows: ‘In summary, progress to recovery was never going to be a straight line, with the
Delta variant proving to be a concern that is currently looking to be delaying a wider This document is intended for the sole use of Goodbody Stockbrokers and its affiliates lowering of barriers by some three to four weeks. This is why a number of airlines were cautioning the market that losses this year may be bigger than consensus indicated (RYA, WIZZ) at the time of their recent results. With that said, this doesn’t impact the reason to be buying the sector/LCCs on the dips for the leverage to recovery seen in calendar 2022.’
As for shorter-term milestones we suggest these are: 1) 14th June – UK Government to give guidance on whether lifting of all restrictions in the UK occurs on 21st. 2) Post 14th June - EU response to this in terms of adding the UK to its ‘white list’ of restriction free travel if 21st June date is approved. 3) 24th June – UK Government should update on any ‘green list’ adjustments to be made on 28th June.
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Smurfit Kappa Entering the Peruvian corrugated market
Smurfit Kappa has announced the acquisition of Cartones del Pacifico in Peru. The deal sees Recommendation: Buy Smurfit Kappa enter the Peruvian corrugated market and brings the countries operated in Closing Price: €43.80 from 12 to 13 in the Americas. This cements its leadership position as the largest pan regional supplier in Latin America. As part of the deal Smurfit Kappa will dispose of its David O'Brien +353-1-641 9230 flexibles business in El Salvador to Grupo Quimpac. david.a.o'[email protected]
While the deal is reasonably small in the overall scheme of the Smurfit Kappa
group it is encouraging to see a new region added. This further strengthens the groups position and pan regional offering to multi national customers. We believe the deal is likely to act as a beachhead for further deals and highlights another avenue for Smurfit Kappa to deploy its considerable firepower alongside the attractive capex plans already underway.
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Datalex Intention to raise €25m
The company has announced its intention to raise €25m in gross proceeds by way of a Recommendation: Restricted Cornerstone Placing (€14.7m), Firm Placing (€4.2m) and Placing and Open Offer (€6.1m) of Closing Price: €0.50 newly issued ordinary shares at a price of €0.50 each. Given stated Cornerstone commitments, €16.8m of the capital raise is already conditionally committed. The funds will Nuala McMahon +353-1-641 0498 be used to strengthen the Group's balance sheet and enable a deleveraging of Datalex's [email protected] capital structure by way of the repayment of the outstanding Tireragh loan. Datalex has also proposed its intention to transfer to the Euronext Growth market from the regulated market
of Euronext Dublin to benefit from lower transaction costs, reduced ongoing costs and
simpler administrative and regulatory requirements. The capital raise is conditional on the This document is intended for the sole use of Goodbody Stockbrokers and its affiliates approval from shareholders at an EGM to be held on July 1st.
Disclaimer. Goodbody has been engaged by Datalex PLC (the “Company”) as Financial Adviser, Bookrunner and Sponsor in connection with the Company’s proposed equity fundraising (the “Transaction”). Goodbody is acting exclusively for the Company and no one else in connection with the Transaction. Goodbody will be providing factual commentary only in relation to the Transaction until the conclusion of the shareholder vote.
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Irish Banks An Post mortgage timeline might be mid-2022
The Irish independent reports that An Post (the Irish Post Office) is hoping to launch a Eamonn Hughes mortgage offering by the middle of next year. It reports that the group’s head of Retail +353-1-641 9442 suggests that the company is in advanced stages with another partner, but a lot of issues [email protected] remain to be ironed out and the company also has “big ambitions” to get into SME lending. Barry Egan
+353-1-641 6059 An Post was first linked to an entry into the mortgage market back in 2018, which [email protected] at that time caused negative significant share price reaction for the Irish banks. At one stage, it was linked to Avant, which has since gone its own way, launching in
the market last September. We’ll keep an eye on An Post in the meantime, but
investors are likely to be more sanguine this time given the timeline but also the
recent market exits of KBC and Ulster Bank – which accounted for c.25% of the market in aggregate – and the view that such a structural change was always going to attract new competition as “new” challengers filled some of the gap created by the departure of the “legacy” challengers. In the meantime, with a number of the main banks in the process of working through deals on the KBC and Ulster Bank loan books, it wouldn’t surprise us to see them mention the possible entry of An Post into both the mortgage and SME markets in any competition commission submissions they are making.
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Irish Banks BOE governor on climate change at Green Swan conference
Andrew Bailey, the Bank of England Governor, spoke on climate change at the Green Swan Eamonn Hughes conference yesterday evening on improving the understanding of climate-related financial +353-1-641 9442 risks, embedding climate risk management across financial firms and achieving best practice [email protected] through its operations as a central bank. Barry Egan
+353-1-641 6059 On understanding climate-related financial risks, the governor noted that the Network for [email protected] Greening the Financial System (NGFS) has continued its pioneering work through the publication of climate scenarios that provide a common starting point for analysing risks to
the system, with the latest version due to be published soon. He repeated his comments
from earlier in the week that the UK will be launching its Climate Biennial Exploratory
Scenario exercise (CBES) on June 8th. The CBES will involve the UK’s largest banks and insurers and explore three different climate scenarios, testing different combinations of physical and transition risks over a 30-year period. The intention is that the test acts as a catalyst to drive increasing knowledge of the risks faced and incentivising firms to take steps to address the risks. He noted that the Monetary Policy Committee (MPC) recently had its first informal discussion on the macroeconomics of climate change and climate is an increasingly important part of G7 discussions between central banks and finance ministries. The Bank needs to further integrate climate modelling, understand transmission channels, assess sectoral implications and assess how it might impact demand and supply.
On embedding climate risk management across the financial system, the governor noted the likes of the PRA have already outlined its supervisory expectations for banks and insurers. He highlighted the importance of climate disclosures, not only for transparency and for risk management purposes, but to facilitate the flow of capital towards investments that are consistent with an orderly economy-wide transition to net-zero. It supports TCFD and has worked with the UK to implement mandatory disclosure requirements across the UK economy by 2025. But information needs to be consistent, internationally.
In relation to the Bank’s own operations, he indicated they need to lead by example and ensure their own operations are climate fit for purpose, such as financial portfolios held and emissions from its operations. The Bank will be moving to green its Corporate Bond Purchase Scheme from Q4 this year.
The governor noted significant progress being made by the G7, G20, central banks
and the preparation heading into COP26 in Glasgow later this year. But the coming This document is intended for the sole use of Goodbody Stockbrokers and its affiliates year must be an opportunity to better convert climate change risks into something that we can all tackle for real. The developments at the Bank of England mirror moves by the ECB and EBA for the eurozone, with the publication last winter of supervisory expectations for financials firms on climate (and ESG) matters. In addition, the EU recently introduced the Corporate Sustainability Reporting Directive that will drive mandatory sustainability reporting for all listed firms and all corporates >250 employees. Whilst there was little new in the governor’s speech, per se, it is clear that climate change is moving front and centre across the whole financial system.
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Goodbody has been engaged by Datalex PLC (the “Company”) as Financial Adviser, Bookrunner and Sponsor in connection with the Company’s proposed equity fundraising (the “Transaction”). Goodbody is acting exclusively for the Company and no one else in connection with the Transaction. Goodbody will be providing factual commentary only in relation to the Transaction until the conclusion of the shareholder vote.
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