Morning Wrap
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Morning Wrap Today ’s Newsflow Equity Research 21 Jul 2021 08:33 BST Upcoming Events Select headline to navigate to article Wickes Group H1 PBT in line with expectations; no Company Events changes to FY forecasts 21-Jul Close Brothers Group; Q421 Trading Update 22-Jul Amigo Holdings; Q421 Results Building Materials ABI points to sharp upturn in US non- Breedon Group; Q221 Results Britvic; Q321 Trading Statement res activity set for H2 Howden Joinery; Q221 Results Paper and Packaging Stora Enso reports significantly 23-Jul Land Securities Group; FY Dividend Payment Date 26-Jul Cranswick; Q1 trading update higher corrugated prices Packaging Corp. of America; Q221 Results Bakkavor Group Encouraging build back with Group Ryanair; Q122 Results 27-Jul Greencore; Q321 Trading Update revenues now ahead of 2019 Hibernia REIT; AGM Virgin Money UK; Q321 Trading Update Economic View Vaccinations versus the variants – where 28-Jul Barclays; Q221 Results is Ireland at? Smurfit Kappa; Q221 Results Wizz Air; Q122 Results Economic Events Ireland 22-Jul PPI Jun21 Wholesale Price Index Jun21 28-Jul Retail Sales Jun21 United Kingdom 23-Jul Retail Sales Jun21 United States Europe This document is intended for the sole use of Goodbody Investment Banking and its affiliates Goodbody Capital Markets Equity Research +353 1 6419221 Equity Sales +353 1 6670222 Bloomberg GDSE<GO> Goodbody Stockbrokers UC, trading as “Goodbody”, is regulated by the Central Bank of Ireland. In the UK, Goodbody is authorised and subject to limited regulation by the Financial Conduct Authority. Goodbody is a member of Euronext Dublin and the London Stock Exchange. Goodbody is a member of the FEXCO group of companies. For the attention of US clients of Goodbody Securities Inc, this third-party research report has been produced by our affiliate, Goodbody Stockbrokers Goodbody Morning Wrap Wickes Group H1 PBT in line with expectations; no changes to FY forecasts Wickes released a trading statement this morning for the first six months of 2021. Sales Recommendation: Buy growth for the half year on a two-year basis came in at +22.4% which is broadly in line with Closing Price: £2.47 the growth the group already reported for the first 21 weeks to May 22nd of +23%. David O'Brien +353-1-641 9230 From a divisional perspective Core (Trade + DIY) lfl sales on a two-year basis came in at david.a.o'[email protected] +44%, broadly in line with +46% reported for the first 21 weeks of the year. Looking at the other 1/3 of the business, DIFM, reported 2 year lfl sales of -27.9% reflecting a first half which was impacted by enforced closures but it is comforting to see the group re-iterate its message for positive sales growth expected to be delivered in H2. Moreover the group note that ordered sales has grown over 30% on a 2 year basis, further underpinning commentary for growth in H2 within the DIFM business. The group has continued to re-iterate its guidance for H1 PBT of £45m. FY guidance remains “in line” with management expectations (previous guidance for FY21 PBT of £65-74m) and thus we do not expect to move forecasts materially. Home… Building Materials ABI points to sharp upturn in US non-res activity set for H2 The latest Architectural Billing Index (6-12 month leading indicator for the non-residential David O’Brien sector) from the American Institute of Architects was released this morning. Overall, the +353-1-641 9230 score for June remains buoyant at 57.1 (May: 58.5, April: 57.9). The level of inquiries david.a.o’[email protected] continues to touch higher, up from 69.2 in May to 71.8 in June (April: 70.8). Finally, the Robert Eason level of design contracts remained at an elevated level for the month at 58.9 (May: 63.2, +353-1-641 9271 April: 61.7). In the commentary attached to the release, it is noted that “with the current [email protected] pace of billings growth near the highest levels ever seen in the history of the index, we’re expecting a sharp upturn in non-residential building activity later this year and into 2022”, Shane Carberry +353-1-6419118 however it did note growing concerns around labour shortages with “nearly six in 10 firms [email protected] reporting that they are having problems filling open architectural staff positions”. This document is intended for the sole use of Goodbody Investment Banking and its affiliates Dudley Shanley This morning’s release further points to strong levels of activity in the pipeline +353-1-641 9174 within the US non-residential sector. While there is still caution on rising input [email protected] costs within the sector and as highlighted in the release a shortage of labour, Kate McCarthy overall there is a positive read across for our coverage which includes CRH, +353-1-641 9005 HeidelbergCement, Kingspan, Tyman and Ferguson. [email protected] Home… Page 2 21 Jul. 21 Goodbody Morning Wrap Paper and Packaging Stora Enso reports significantly higher corrugated prices Stora Enso has reported Q221 EBITDA growth of c.58% from Q220 (Q121: 46%), c.7% David O’Brien ahead of consensus. The key point for us in relation to our coverage is that corrugated box +353-1-641 9230 prices are described as significantly higher yoy and compared to Q121. This is a marked step david.a.o’[email protected] up from the "slightly higher" in Q121 relative to Q420. Sales growth for the corrugated Robert Eason division came in at c.21% with volumes +15% pointing to encouraging price increases +353-1-641 9271 during the period. While we would have expected prices to increase it is nonetheless [email protected] encouraging to see Stora Enso confirm strong box price increases. In the commentary management noted that Packaging Materials benefit from a “solid orderbook” with more than Shane Carberry +353-1-6419118 20% growth while “significant sales growth” was achieved in corrugated, albeit raw high raw [email protected] material costs remain a challenge for profits. Dudley Shanley Overall this is an encouraging update in regard to both demand and box price +353-1-641 9174 increases for the European paper & packaging players. We continue to favour [email protected] Smurfit Kappa which we believe warrants a re-rating based on the structural improvement in margins and returns. Home… This document is intended for the sole use of Goodbody Investment Banking and its affiliates Page 3 21 Jul. 21 Goodbody Morning Wrap Bakkavor Group Encouraging build back with Group revenues now ahead of 2019 Bakkavor released a Q2 trading update this morning which noted that Group sales have Recommendation: Buy continued to recover with Q2 returning to revenue growth. Whilst benefiting from easier Closing Price: £1.32 comps, it is encouraging that Group sales in Q2 were ahead of 2019 levels. During Q2, Group revenues increased by 16.1% on a LFL basis, and are now 1.8% ahead of 2019. Jason Molins +353-1-641 9141 [email protected] Within the UK, sales continued to recover as lockdown restrictions were eased during the period. Increased mobility has resulted in shopping habits returning to more normalised levels. Overall, UK LFL sales during Q2 increased by 12% (Q2’20 -12.3%) and ahead of the 6.4% decline seen during Q1. Growth was seen across all its key categories, with sales back to pre-pandemic levels, apart from its salads business. Compared to 2019, sales in the quarter were only down 1.4%. Across its International operations, the US continues to perform well with Q2 LFL sales growth of 48.7% (Q1 17.9%) as the demand for fresh prepared meal solutions remained robust. Against easy prior year comps, China saw significant Q2 LFL revenue growth of 40.8% (Q1 56.2%), with sales down 5.5% compared to 2019 levels. Bakkavor also note that the labour market is increasingly challenging due to continued shortages, particularly in the US and UK. That said, it remains focused on labour retention, recruitment and planning and working closely with customers to mitigate the respective challenges. Overall, we remain encouraged by the continued recovery in sales seen by Bakkavor during the period. Cost pressures on raw materials (largely recovered with customers) and labour (mitigating actions underway) remain an industry wide challenge and we will keep a close watch on how these develop in the coming months. Bakkavor will release its H1’21 results on September 8th and at this juncture we are unlikely our profit forecasts. Home… This document is intended for the sole use of Goodbody Investment Banking and its affiliates Page 4 21 Jul. 21 Goodbody Morning Wrap Economic View Vaccinations versus the variants – where is Ireland at? The latest phase of the pandemic is clearly marked by increased concern globally about the Dermot O’Leary rapidly rising prevalence of the delta variant. Ireland is no different in that regard, seeing a +353-1-641 9167 [email protected] rapid increase in case numbers over recent weeks. That’s the bad news, but the good news is that vaccination rates have also improved, with Ireland now rolling out vaccines at one of the fastest paces in the world. The latest data shows that 46% of the total population and 62% of the adult population in Ireland has been fully vaccinated against the virus. This is not the best in the EU but is certainly among the best. For reference, 53% of the UK population and 48% of the US population is currently fully vaccinated.