Morning Wrap
Total Page：16
File Type：pdf, Size：1020Kb
Morning Wrap Today ’s Newsflow Equity Research 23 Jul 2015 Upcoming Events Select headline to navigate to article Howden Joinery Accelerating into H2 Company Events 23-Jul Breedon Aggregates; H1 results Howden Joinery; Interim Results Breedon Aggregates Beats forecasts, raises medium term 24-Jul Air France-KLM; Q2 2015 Results 27-Jul Ryanair; Q1 2016 Results targets, upgrades coming 28-Jul Greencore; IMS 29-Jul Permanent TSB; Q2 2015 Results Smurfit Kappa; Q215 Economic View Fiscal rules limiting Minister Noonan’s Wizz Air; Q1 IMS 30-Jul Lufthansa; Q2 2015 Results room for manoeuvre CRH HeidelbergCement reported to have won bidding process for LafargeHolcim’s Indian assets Greencore Premier Foods reports stable gross margins in Q1 Economic Events Ireland ARYZTA Acquisition of Irish premium food distributor United Kingdom 23-Jul Retail Sales Ex Auto Fuel MoM Origin Enterprises Syngenta delivers 3% growth in H1 United States despite challenging markets 24-Jul New Home Sales Europe 24-Jul Markit Eurozone Composite Kerry Group Unilever food division provides mixed read- through UK PubCos Fullers reports 5.7% LFL sales growth in Q1 Lufthansa Expecting Q2 EBIT growth; tougher trading into winter Dalata Hotel Group Project Trinity completes for €170m Goodbody Capital Markets Equity Research +353 1 6419221 Commercial Property Total return for office accelerates in Equity Sales +353 1 6670222 Q2 Bloomberg GDSE<GO> FBD Holdings Two insurers withdraw from older car market Dragon Oil Member of Dragon ‘Independent Committee’ joins ENOC Board Goodbody Stockbrokers (trading as Goodbody) is regulated by the Central Bank of Ireland. For the attention of US clients of Goodbody Securities Inc, this third-party research report has been produced by our affiliate Goodbody Stockbrokers. Please see the end of this report for analyst certifications and other important disclosures. Goodbody Morning Wrap Howden Joinery Accelerating into H2 Howden Joinery has reported H115 results (for the 24 weeks to June 13th) with underlying Recommendation: Buy PBT of £59.2m, up 4% yoy, broadly in line with our forecasts (£60m) and marginally behind Closing Price: £5.18 consensus (£61.5m). Sarah Reilly +353-1-641 6080 UK sales increased by 11.1% in the period, broadly in line with our forecasts for growth of [email protected] 10.7%, and represents an acceleration on the 9.4% seen in the first 16 weeks of the financial year. This implies of 12-13% growth was achieved in the last 8 weeks of H1. This translated into an increase of 8.6% on a same depot basis marginally ahead of forecasts of 7.7%. UK depot revenue increased by 13.1% in the first four week period of H2, representing a continuation of the double-digit growth seen in last 8 weeks of H1. Management remain confident in the growth prospects for the company and is well placed to achieve its expectations for the full year. 17 new depots were opened in the period, 14 in the UK and 3 in France. Plans for 30 new UK depots and 7 new French depots in FY15 are unchanged. Howden Joinery now has over 600 depots in the UK. Cash flow remained strong with net cash coming in ahead of our forecasts, reflecting a lower than expected spend to date on the share buyback programme as well as a lower capex. However, guidance for both capex and the buyback spend remain unchanged for the full year (c. £60m and c. £35m, respectively). Overall, the key takeaway for us is that the strong top-line progression into the latter part of H1 has continued into the first four weeks of H2. As we have c. 10% top-line growth in the UK for the remainder of the year we believe the bias to our forecasts remains on the upside into the second half of the year. However, management will continue to invest in the underlying depot network in anticipation of continued growth. While we note that FY profits are significantly biased to the second half of the year (c. 70%) and that the critical “period 11” selling season is yet to come, our valuation thesis remains intact and we reiterate our BUY recommendation. Home… Page 2 23 Jul. 15 Goodbody Morning Wrap Breedon Aggregates Beats forecasts, raises medium term targets, upgrades coming Breedon Aggregates has reported H115 results to the end of June 2015 with EBITDA of Recommendation: Buy £27.3m, up 54% yoy. This is 14% ahead of our forecast £23.9m. The key variance was Closing Price: £0.53 better margin performance, which was aided by low oil prices. EBITDA margins increased by Robert Eason 190bps to 17% compared to +170bps in FY14. Indeed, management has increased its +353-1-641 9271 medium term EBITDA margin target from 15% to 20% with these results. [email protected] Group revenue increased by 28% yoy on a reported basis (split 30% in Q1 and c.27% in Q2). This compared to our forecasts for 27% growth. On a regional basis, revenue in England increased by 30% yoy while Scottish revenue increased 26% On a volume basis, aggregates increased by 25%, asphalt by 29% and ready-mix concrete by 33%. Management notes that underlying trading conditions continue to look robust with macro indicators pointing to further growth in construction output for 2015. The outlook for England remains positive with a number of contracts targeted for the second half. Demand in Scotland is not as robust with no sign of increased maintenance spending by local government. However, several large contracts are about to start. Management will continue to pursue its acquisition strategy and has several acquisition opportunities under review. At first glance we see material upside to our FY15 forecasts and beyond given H115 performance and the increased margin target. Even assuming H115 represents 52% of FY15 profits (typically heavyside should be H215 biased) suggests over 20% upside to our PBT forecasts which are slightly above consensus. We remain positive on the Breedon Aggregate investment case as management continue to execute its acquisition strategy well and benefit from robust underlying market conditions in the UK. The stock offers compelling exposure to the recovery in the UK heavyside construction. Home… Page 3 23 Jul. 15 Goodbody Morning Wrap Economic View Fiscal rules limiting Minister Noonan’s room for manoeuvre With the announcement on the Irish fiscal measures for 2016 less than three months away, Dermot O’Leary +353-1-641 9167 Budget season is now in full swing. In fact, one could argue that it has been in train since the [email protected] publication of the Spring Statement at the end of April, with pledges on spending and taxes being made since then. Given the policy demands expressed by various stakeholders, there was always a risk that the government would take an overly expansionary fiscal position in Budget 2016. With this in mind, it is reassuring to hear that Finance Minister Michael Noonan yesterday stood firm in his view that there is just €1.2bn-€1.5bn of fiscal space available. This is despite a further outperformance in the public finances since the first announcement on this front in April. The key constraint here is the EU fiscal rules, which dictate the available room for manoeuvre for countries with debt levels in excess of the 60% debt/GDP ratio. With an election due within months of Budget 2016, there was always a risk that the government may try again to push the envelope with the European Commission on the application of the rules (it has already partly done this in the Stability Programme Update). This exact situation is where the value of the new fiscal rules comes in for Ireland. With tax receipts booming, the budget deficit falling quicker than expected and an election looming, irresponsible policies could have been the end result. In the new policy environment, Minister Noonan can push back on the host of demands for higher spending and lower taxes by stating that the new rules simply won’t permit it. Home… CRH HeidelbergCement reported to have won bidding process for LafargeHolcim’s Indian assets Press reports this morning indicate that the bidding process for LafargeHolcim’s Indian Recommendation: Buy cement assets, in which CRH is taking part, has been won by HeidelbergCement. The assets, Closing Price: €26.88 which included c.5m tonnes of cement in the Chhattisgarh and Jharkhand regions in India, Robert Eason have reportedly been valued at over $900m by HeidelbergCement. +353-1-641 9271 [email protected] While we would welcome acquisition expansion by CRH, we note that management has clearly stated that any acquisitions will have to make both strategic sense and be at an acceptable multiple. As such, we are encouraged by CRH’s financial discipline which underpins our view that the company can generate returns above the prior peak during the current cycle. BUY. Home… Page 4 23 Jul. 15 Goodbody Morning Wrap Greencore Premier Foods reports stable gross margins in Q1 Premier Foods, the UK based producer of branded cakes, cooking sauces and meals, reported Recommendation: Buy Q1 results this morning with revenues down 1.6%. Sales were impacted by the early Easter Closing Price: £3.19 this year; according to the company, sales would have otherwise been broadly flat, Simon Matthews consistent with its Q4 performance. Gross margins in the quarter were in line with the prior +353-1-641 9187 year. [email protected] Flat gross margins in the quarter indicate that there has been no change in Premier’s relationships with its customers, despite fears of suppliers coming under increasing pressure from UK retailers.