Morning Wrap
Today ’s Newsflow Equity Research 27 Feb 2020 08:51 GMT Upcoming Events Select headline to navigate to article
Grafton Group A strong FY19 and year of “progress” in Company Events FY20 27-Feb Bakkavor Group; FY19 results Flutter Entertainment; FY19 Results Flutter Entertainment Good start to FY20 but regulatory Howden Joinery; FY19 Results & RG impacts likely to see 4-5% d/grades to consensus LafargeHolcim; FY19 Results Mondi; FY19 Results standalone EBITDA Persimmon; FY19 Results Playtech; FY19 Results Playtech - FY19 in line; COVID-19 impacting FY20 Provident Financial; FY19 Results performance in two of its main markets Standard Chartered; FY19 Results Vistry Group ; FY19 Results FBD Holdings FY19 results show 72% COR, ROE c.30% 28-Feb CRH; FY19 Results and €1 dividend Glenveagh Properties; FY19 Results IAG; FY19 Results Bakkavor Group Solid FY19 performance, China to impact 03-Mar Cairn Homes; FY19 Results FY20 Travis Perkins; fy19 05-Mar GVC Holdings; FY19 Results Howden Joinery A solid update with further cash returns Origin Enterprises; H1 results Origin Enterprises; H1 results Persimmon Solid update from Persimmon, CEO set to step down Economic Events Ireland Mondi FY19 – Pricing guidance will be key 28-Feb Retail Sales Jan20 03-Mar ILO Unemployment Rate Feb20 Provident Financial FY19 results analysis 05-Mar Industrial Production Jan20 Live Register Feb20 Amigo Holdings 3Q19 results in line ex-complaints; complaints provision surges United Kingdom 02-Mar BoE Mortgage Approvals Jan20 The Stars Group Strength in UK and Australia offsets M4 Money Supply Jan20 continued International weakness CIPS Manufacturing PMI Feb20 03-Mar CIPS Construction PMI Feb20 Building Materials LafargeHolcim reports Q419 in line 04-Mar CIPS Services PMI Feb20 with expectations United States Irish Banks NTMA chief calls for sell-down plan for bank shares Europe
This document is intended for the sole use of Goodbody Stockbrokers and its affiliates Irish Insurance RSA Ireland FY19 results similar trends to FBD (but not as good COR)
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Grafton Group A strong FY19 and year of “progress” in FY20
Grafton Group has reported FY19 operating profit of £204.8m representing yoy growth of 4% Recommendation: Buy and a 1% beat versus our forecasts (note: January trading update already gave detailed Closing Price: £8.97 sales figures). The key variance versus our forecasts was a better performance in the Netherlands and lower central costs, partially offset by lower than expected profits in Irish Robert Eason +353-1-641 9271 Merchanting. On 2020, management notes the expectations for “continuing but moderating [email protected] growth in Ireland and the Netherlands” and the potential for “some uplift in the UK RMI market” which will help underpin “another year of progress for Grafton”. Sales trends have
improved into the start of the ytd with group lfl sales of -0.4% compared to -1.8% in Q419. On first glance, we envisage no material changes to operating profit forecasts.
The key takeaways for us are: (i) Strong performances in Leyland, TG Lynes, MacBlair and in the Civils and Lintels business offset lower volumes in the larger UK businesses, especially Buildbase; (ii) In Retail, operating margins increased by 120bps for the year driven by a material uplift in operating leverage during the second half; (iii) The Netherlands came in ahead of our forecasts highlighting the benefits of integration from recent deals offsetting a more challenging top-line backdrop; (iv) Following another period of strong cash generation the Group has moved into a net cash position for the first time in decades; and (v) In terms of lfl tends in the ytd, UK merchanting -1.5% ytd vs -4% in Q4, Irish merchanting +2% ytd vs 2.7% in Q4, Retail -0.3% ytd vs +5.6% in Q4, and the Netherlands +1.3% ytd vs -1.4% in Q4.
Management will host a presentation at 8.30am which can be accessed via: https://www.graftonplc.com/investors/grafton-group-final-results-2019/
Overall this is a solid statement from Grafton and on first glance, we envisage no material changes to operating profit forecasts.
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Flutter Entertainment Good start to FY20 but regulatory & RG impacts likely to see 4-5% d/grades to consensus standalone EBITDA
Revenue and EBITDA broadly in line with consensus expectations Recommendation: Buy Group revenue came in at £2,140m (GBY: £2,138m), with underlying EBITDA (pre IFRS and Closing Price: £88.26 US investment) of £426m (Consensus: £423m & GBY: £433m). US losses were £40m, at the lower end of the guidance range of £40-45m. On outlook, the statement notes that 2020 has Gavin Kelleher +353-1-641 0423 begun strongly with good customer and revenue momentum across all divisions. It does [email protected] however note that the UK credit card deposits ban is an annualised revenue impact of £20- 25m, while its decision to switch off certain B2B Exchange partners is a <£20m revenue
impact.
Overall there are both positives and negatives in today’s update. The Australian and US businesses both appear to be in great shape, while retail is seeing its performance improve since the £2 stake introduction. However, the performance of the European Online division is again mixed. While the changes being made to this business make sense in the long term (i.e. greater sustainability and the group gives multiple examples of RG improvements), it looks like FY20 will be another year of no real profit growth for this division. However, we continue to highlight that the TSG deal is a much more significant part of the investment case at present, and it can help improve the European Online business significantly. In terms of forecasts; the two issues called out in the outlook statement above (credit cards & exchange B2B partners) have the potential to see consensus EBITDA expectations (pre IFRS 16 and US) reduced by c.£20m for FY20 (consensus currently £441m and Goodbody £473m, albeit our number was cut in August 2019). This represents a c.4-5% reduction to standalone Flutter consensus EBITDA but is <2% of the combined FLTR/TSG EBITDA.
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Playtech - FY19 in line; COVID-19 impacting FY20 performance in two of its main markets
Group revenue came in at €1,508m and adjusted EBITDA was €383m (Goodbody: €381m). Recommendation: Buy The main positives include an impressive performance from Snaitech, and a strong Closing Price: £3.07 performance from B2B regulated gambling helped by hardware sales. The main negative is the, already well flagged, weakness in its Asian business and Tradetech. On outlook, in the Gavin Kelleher +353-1-641 0423 first 55 days of 2020 it is noted that: (i) Core B2B Gambling revenue is +5% (ex-Hardware [email protected] sales and ex-acquisitions); (ii) Snaitech saw a strong start to 2020, but has seen a recent impact from COVID-19; (iii) Asia February revenue is expected to be €7m due to the
negative impact from COVID-19; and (iv) TradeTech has seen a good start to 2019. The group is launching a €40m share buyback, alongside its dividend.
Overall, there are positives and negatives in today’s release. The positives include the robust B2B Core Gambling business, and the strong underlying performance at Snaitech. The negatives, which are externally driven and mainly outside the group’s control; are the impact of COVID-19 in two of its main markets. At first glance we are likely to reduce our FY20 adj. EBITDA forecasts (pre-share based payments) by c.13% from €390m currently. While this level of downgrade is disappointing, we would highlight the impact is mainly down to the recent unforeseen COVID-19 outbreak. It also must be viewed in the context of a stock trading on a very low valuation already.
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FBD Holdings FY19 results show 72% COR, ROE c.30% and €1 dividend
FBD pre-announced recently that FY19 Pretax Profit would be greater than €100m. We Recommendation: Buy moved estimates to €101.6m but FBD’s reported €112.5m this morning was still stronger Closing Price: €8.96 than we anticipated (ROE 30%). Net earned premiums were in line, but claims costs was the big beat, with higher prior year reserve releases – combined ratio of 72.3% vs 76.7% Eamonn Hughes +353-1-641 9442 expected. NAV per share of 1068c is c.3% ahead of our forecast, whilst the solvency capital [email protected] ratio of 192% was also stronger than anticipated (182%). The €1 dividend per share is in line with our forecasts.
In terms of details, Gross Written Premiums of €370.1m were marginally down -0.4% yoy (FBD notes strong competition and rate decreases of 2.2%). Net earned premiums were flat €337.6m, close to our €336.4m forecast. Claims costs were a much better than anticipated €156.6m, down 17.7% y/y (8% better vs our forecast of €171m), with FBD indicating a net €40.1m benefit from prior year releases (namechecks the 2016 year). The claims ratio was 46.3%, down 10ppts yoy. Expenses of €87.3m were slightly higher by c.3.8% y/y, but in line with our forecast of €87.1m. Overall, the combined ratio was 72.3% vs our 76.7% estimate though a quick “back-of-the-envelope” estimate excluding the prior year release would pitch the combined ratio closer to the 83-85% level, which with the benign weather probably saw the underlying current year combined ratio closer to c.90%. In addition to underwriting, the net investment return was also strong at €17.9m in the P&L but FBD also generated €10.9m of gains through reserves (total investment return a strong 2.7%). Elsewhere, income from financial services of €3.5m was 40% better y/y.
The positives are the 3% NAV beat and particularly the higher than anticipated solvency capital ratio (prospects for future strong income potential), though we note FBD’s comments on competition being “fiercely competitive” (2.2% average decline in rates in FY19). In terms of outlook, FBD is guiding a COR “in the low-90s absent exceptional weather”. Our forecast is c.91-92%, so forecasts are unlikely to materially change.
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Bakkavor Group Solid FY19 performance, China to impact FY20
Bakkavor has reported its FY19 results this morning in which adj. EBITDA came in at Recommendation: Hold £153.5m, marginally ahead of our forecast for £152.7m. As previously indicated in its pre- Closing Price: £1.25 close trading statement in mid-January, Group LFL sales increased by 1.7% in the period (H119 2.0%, H219 1.4%) with the UK broadly flat and International growing 12.8%. Jason Molins +353-1-641 9141
[email protected] The UK division (c.90% of Group sales) achieved LFL revenue growth of 0.2% with the benefit of business wins coming through in H219 and a good finish to the year. We note that
despite the challenging market backdrop, the Group was able to make market share gains in 3 of its 4 categories. From a profitability perspective, adj. EBITDA of £147.1m which was broadly flat year and c.1% better than forecast. Margins held flat yoy at 8.9% (GBY 8.8%) reflecting strong internal cost efficiencies. Bakkavor’s International division (c.10% of Group sales) delivered a strong top line performance in FY19, while adj. EBITDA grew 10% to €6.4m. Growth was driven by both its Chinese and US markets with volume increasing across all key customers. While the longer-term opportunity around the Group’s Chinese operation remains intact, we note the Coronavirus will likely have a significant negative impact on performance in FY20.
In terms of outlook, management notes that UK volumes should grow in H1 driven by new business gains and should more than offset labour inflation. Consequently, the UK should see some progress in adj. EBITDA for FY20. For the International business, the company notes that the Coronavirus outbreak is having a significant effect on the business in China, with volumes down significantly in February and no line of sight on when normal trading conditions will resume. As a result, and while it remains difficult to accurately assess the financial impact, EBITDA in the division is expected to £6-10m lower than FY19. Taking the mid-point of this range, we are likely to lower our EBITDA forecasts by c.6% largely reflecting the impact of the Coronavirus in China.
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Howden Joinery A solid update with further cash returns
Howden Joinery has reported underlying PBT of £261m, which compares to our forecast of Recommendation: Hold £257m and consensus of £255m. The key variances were a slightly lower than expected top- Closing Price: £6.78 line which was offset by operating costs that were a touch below our forecasts. On the outlook, management notes that UK sales have increased by 3.5% (1.6% on a same depot Robert Eason +353-1-641 9271 basis) in the first two periods (8 weeks) of the year, which highlights continued momentum [email protected] from the second half of the year albeit at a lower pace of growth. Cash flow generation has been stronger than expected leaving net cash balances at £267m versus forecast of £207m.
As a result management has announced a further buyback programme of £85m over the next two years.
The key points that we would highlight include: (i) UK sales grew by 4.9% in the FY (5.1% forecast), which compares to 5.5% in H1 (periods 1-6) and 4.9% for periods 7-11. On a same depot basis this was equivalent to 2.5% (2.7% forecast) versus 3.4% H1 and 2.0% periods 7-11; (ii) Gross margins for the FY came in at 62.3%, representing an increase of c.60bps, implying +55bps in H2 versus +70bps H1; (iii) Operating costs increased by 5.5% to £726m (£731m forecast), which was split 5.6% in H2 versus 5.5% in H1 (7% in FY18, split 8% H1 / 6% H2); and (iv) cashflow was stronger than expected leading to an announcement of a further buy back (£85m).
Management will host a results presentation at 10.00am which can be accessed via: https://webcasting.brrmedia.co.uk/broadcast/5e1db9d6fb21a407ce74ca66
This is a solid update and again highlights the strong cashflow characteristics of the business. Overall, we see no major changes to forecasts.
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Persimmon Solid update from Persimmon, CEO set to step down
Persimmon FY results are broadly in line with expectations with most of the detail already Recommendation: Buy released in a trading update in January. We believe the key incremental points from today’s Closing Price: £30.78 are release are as follows: (i) Dividend Policy - Management has announced that the 2020 dividend payout will remain unchanged (235p per share) whilst it has increased the 2021 David O'Brien +353-1-641 9230 payout to 235p per share (from 110p). This represents a yield of c.7.5%; (ii) CEO set to step david.a.o'[email protected] down – CEO, David Jenkinson, has signalled his intention to step down as group CEO. He will remain in the position until an adequate successor is found; (iii) Independent review –
Management has stated that the independent review has been “embraced” and is implementing the recommendations. The tangible evidence of Persimmon putting more focus on customer service can be seen through the HBF survey in which it is “is trending strongly ahead of the Four star threshold”; (iv) Outlook – Management is guiding for “sales this year to follow a similar pattern to last year” (H1 weaker than H2) and anticipates completions in 2020 being flat yoy.
From a current trading perspective, management has stated “customer activity through the initial weeks of 2020 is encouraging”. Moreover management states that sales rates thus far in 2020 are “tracking ahead of the prior year”. The group’s forward order book has ticked up slightly on prior periods, down -2% yoy in value terms. This should be viewed in the context of the order book being consistently down between 3-4% over the last 5 periods (see graph on following page) as the group slows forward sales to place more of an emphasis on customer service.
Persimmon management will host a conference call this morning at 10:00am for which the dial in details are as follows: Dial in - +44 (0) 203 0095709; Access Pin – 2429008
On first glance, we do not envisage making any material changes to numbers. Indeed this is a solid set of numbers from Persimmon and underpins our bullish stance on the name given the group’s strong balance sheet, well covered yield and robust fundamentals per affordable housing. Maintain BUY.
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Mondi FY19 – Pricing guidance will be key
Mondi has reported Q419 EBITDA of €381m representing a yoy decline of 15% or 12% ex Recommendation: Buy forestry valuation and maintenance impacts. This compares to -14% in Q319. On the outlook Closing Price: £16.20 management notes that although heightened macro risks are likely to persist short term, there are some signs of stability in pricing in certain segments which along with input cost David O'Brien +353-1-641 9230 relief and profit improvement programmes will help support performance. david.a.o'[email protected]
The key takeaways for us are: (i) Kraft paper prices weakened in H219 and management
notes this continued into FY20. There has been no guidance in how this translated into the outlook for bag prices for 2020; (ii) The group is still in discussion with customers on a containerboard price increase but gives no indication of chances of success. The increase was based on a deceleration of destocking trends and better orderbooks; (iii) Capex has been guided to €700-800m in FY20 falling to €450-550m in FY21. We had forecast c.€550m in both years; (iv) Trading remains challenging in UFP with both prices and volumes under pressure as highlighted by the 34% decline in EBITDA in H219 (albeit impacted by forestry gains).
Colour on pricing dynamics into FY20 will be key on the conference call. On first glance, we will be trimming forecasts towards €1.5bn for FY20.
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Provident Financial FY19 results analysis
Provident Financial Group (PFG) has reported FY19 results this morning with an underlying Recommendation: Buy PBT of £162.6m for FY19, which compares favourably to our own forecast for £162.4m. Closing Price: £4.51 However, PFG made an accounting policy change in FY19 with respect to deferred acquisition costs in Vanquis Bank, which it now capitalises (including for prior years). This benefited FY19 John Cronin +353-1-641 9187 PBT by £10.5m. Amortisation on incremental receivables (owing to the capitalisation decision) [email protected] will drive a c.£6m hit to FY20 revenues (with a declining impact thereafter) relative to what they would have been. Essentially, the impact of the accounting policy change is that it drives
an improved capital position – with that uplift set to be amortised through the P&L over time.
Looking at each of the divisions, Vanquis Bank reported underlying PBT of £173.5m, marginally above our £172.8m forecast – however, when we reverse out the restatement adjustment, this shows underlying PBT of £163.0m relative to our forecast for £172.8m, which appears to be predominantly due to softer revenue yields. Vanquis net receivables shrunk by 2.2% y/y in FY19 to £1.46bn, broadly in line with our forecasts due to tighter affordability criteria, strong repayment levels in 4Q19, and Persistent Debt measures. Moneybarn reported underlying PBT of £30.9m, pretty much in line with our £31.0m forecast – with strong growth in net receivables of +20.6% y/y reported for FY19 as demand for used cars remains strong. It is disappointing to note that Shamus Hodgson, Moneybarn MD, is leaving. CCD reported an underlying loss before tax of £20.8m, which was marginally better than our forecast for a loss of £21.2m – with management reiterating its expectation for CCD to return to profitability in 2H20. The £21.0m loss before tax reported in the Central division was slightly worse than our £20.2m forecast loss. Importantly, management reiterates its target for a RoE of 20-25% in FY21.
PFG reiterates that it sees opportunities for funding efficiencies ahead – and this follows the successful completion of a bilateral securitisation facility to fund Moneybarn in January 2020. The CET1 capital ratio at end-FY19 was a strong 30.7%, implying headroom of c.£117m over the minimum total capital requirement of 25.5% - with the ICAAP review expected to start in March, and a result expected in 2Q20. This should put paid to any residual capital concerns. The final DPS of 16p means a FY19 DPS of 25p, comparing favourably to our 24.5p forecast.
All-in-all, good fundamental value but may see some selling pressure today. We see many catalysts to support stock price growth (i.e., capital relief, further cost extraction, return of CCD to profitability, line of sight on funding efficiencies, rising dividend, strategic optionality) but the market is unlikely to welcome the softer-
than-expected revenue yields in Vanquis Bank this morning. This document is intended for the sole use of Goodbody Stockbrokers and its affiliates
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Amigo Holdings 3Q19 results in line ex-complaints; complaints provision surges
Amigo Holdings reported 3Q19 numbers (ex-complaints) for 3Q19 (i.e., the three months to Recommendation: Buy 31st December) that are broadly in line with our forecasts. AMGO printed 3Q19 revenues of Closing Price: £0.55 £72.6m, marginally below our forecasts for £73.1m – due to slightly lower average net receivables though we note that revenue yield was marginally ahead of our forecasts. John Cronin +353-1-641 9187 Operating costs were £14.9m in 3Q versus our forecast for £15.8m while the interest expense [email protected] was £8.5m, which was bang in line with our forecast. Impairment charges were broadly in line with our forecasts - £23.5m versus our forecast for £23.1m. Underlying PAT was £8.9m versus
our forecast for £16.9m – the miss was due predominantly to higher complaints provisions in the quarter (£16.2m versus our forecast for just £5m).
We have previously warned that complaints is the NUMBER 1 risk to our price recommendation. we lifted our provisioning assumptions by £20m (for next year) in our recent forecasts refresh (which brought our incremental provisioning assumptions to £30m over our forecast period, which is still above the existing stock of complaints provisions - but timing assumptions differ). We have spoken to management at length on this point this morning and our strong sense is that AMGO is seeking to take a conservative approach to provisioning but, alas, does not break out the provision between existing and future expected complaints. We will absolutely be ratcheting up our complaints provisions in response, but this doesn’t mean we don’t still see material upside given what the current share price is already factoring in.
Finally, on outlook, AMGO is cautioning in terms of net receivables evolution as it is now trialling an even more prudent approach to repeat lending among a few other changes. This leads AMGO to warn that the changes “could result in materially lower future lending volumes”. We do harbour concerns about repeat lending (as we highlighted in our initiation of coverage research report in November 2018, though, admittedly, we never said we expected AMGO to choke it off in its entirety) and we now suspect that the company is under regulatory pressure in the background in this context. AMGO is also withdrawing its current full year financial guidance as it is “no longer valid” – going on to note that the lower risk appetite on new lending could materially reduce net receivables in FY19 as well as noting that “a number of variables could impact the final outcome”, which we would interpret as caution around future provisioning too.
Overall, we see aggressive selling pressure this morning with material earnings downgrades in train. However, the current share price already captures a huge
amount of downside. We will reflect on our forecasts and valuation and will revert in This document is intended for the sole use of Goodbody Stockbrokers and its affiliates due course.
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The Stars Group Strength in UK and Australia offsets continued International weakness
TSG has this morning released its Q4 and FY19 results. Group revenue came in at $2,528m Recommendation: Hold (GBY:$2,549m) while group EBITDA was $921m, broadly flat yoy (Guidance: $905m-$930m, Closing Price: $24.16 Consensus: $911m). The group finished the period with net debt of $4.6bn and enter 2020 with the full $100m run-rate of expected synergies from the SkyBet transaction. The group is David Brohan +353-1-641 9450 not providing any FY20 guidance due to the impending transaction with Flutter. [email protected]
The performance of the UK business was strong, especially when taking into account the
weak net win margin in Q1. In addition, early signs in the US appear to be encouraging with good growth in both FTP and real money customers. In International, the impact of disrupted markets continues to weigh on performance and we are likely to downgrade our Poker expectations on the back of today’s release. We expect the quantum of the downgrade will be low single digit to FY20 EBITDA standalone numbers. However it is worth noting that focus will now turn to completion of its merger with Flutter which is expected to complete in late Q2/early Q3.
International revenue declined by -9% (-4%cc) as it continued to be adversely impacted by disrupted markets and FX. Within International, Betting came in -8%, Casino was flat and Poker was -12%. “Disrupted markets” (14% of International revenues) declined by 29% in the Q4, while the Rest of World declined by 1% due to adverse impact of FX. Adjusted EBITDA came in at $605m, -14% yoy. In the US, FoxBet losses were broadly in line with the previously guided $40m. Encouragingly the FTP app has been downloaded over 1.3m times.
In the UK, revenue increased by 13% and Adjusted EBITDA came in 44% higher. Betting revenue was 10% higher yoy with stakes +11.4% and net win margin -10bps. This is an extremely impressive FY outcome for SkyBet given revenue declined -38% in Q119. Gaming increased by 16%, Poker -10% and Other +25%.
Australia revenue increased by 32% with a strong net win margin of 9% (+120bps) along with 13% growth in stakes. Adjusted EBITDA came in at A$64m, (+80% yoy), with Adjusted EBITDA margin of 16.2%.
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Building Materials LafargeHolcim reports Q419 in line with expectations
LafargeHolcim has reported Q419 Group EBITDA of CHF1,610m which represented a broadly David O’Brien flat outturn for the period and comes in c.1-2% ahead of consensus. The main variance with +353-1-641 9230 forecasts appears to be a better performance in Latin America albeit lfl EBITDA declines david.a.o’[email protected] persist. Net debt of CHF10.1bn has come in better than consensus expectations for Robert Eason CHF10.5bn. Management is guiding for FY20 lfl revenue growth of 3-5% with EBIT growth of +353-1-641 9271 at least 7% (a new reporting metric) which it notes is equivalent to at least 5% lfl EBITDA [email protected] growth. Sean Blaney +353-1-6419222 Key takeaways: (i) Price cost spread momentum eases in Q419 – During Q419 price cost [email protected] spread contributed CHF20m to performance which compares to CHF63m in Q319, CHF216m
in Q219 and CHF100m in Q119. HeidelbergCement reported similar trends at a group level; Shane Carberry (ii) The outlook remains solid for developed markets (continued market growth in North +353-1-6419118 America and continued demand across most countries in Europe) but more mixed for [email protected] developing markets. Improved conditions are expected in Latina America. However, management flags that a more challenging environment is expected in China without taking account of the coronavirus impacts; (iii) In North America during Q419 all business segments reported strong volume growth with lfl EBITDA growth of 4.3% for the period (6.9% in Q3, 0% in Q2). Management notes that the backdrop is favourable in the US and Eastern Canada underpinned by strong order backlogs; and (iv) In Europe lfl EBITDA increased by 4.3% (c.7% in Q2/Q3) with Eastern Europe remaining particularly robust. Encouragingly price increases were implemented across all key markets.
Overall, this is a decent set of results from LafaregeHolcim with developed markets solid whilst China appears more challenging.
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Irish Banks NTMA chief calls for sell-down plan for bank shares
The head of the NTMA, Conor O’Kelly, has earned a reputation over the years for being very Eamonn Hughes astute and a straight-talker. As such we note his comments at an ISIF market engagement +353-1-641 9442 event yesterday that the State should clearly outline its plan to sell down its remaining [email protected] stakes in the Irish banking system. Barry Egan
+353-1-641 6059 Mr Kelly noted that “the idea that we should wait until the bank shares get back to where we [email protected] once sold them, or until we get all our money back – as if the market owes us something – is to introduce what’s known in behavioural economics and science, as optimism bias and
ownership bias”. He added that “the introduction of those biases leads to very poor decision-
making”. In relation to the AIB share price, he urged that a plan be outlined for further share sales, even at relatively lower prices, adding that the State needed to use the proceeds to pay down the “debt mountain” and get Ireland back “closer to base camp”.
Mr Kelly may be using the opportunity of his comments for the various political parties as they negotiate with each other on the possible formation of a new government. Any joint work programme between the parties in whatever government is formed may include plans in relation to the banks (as a prior confidence and supply arrangement between FF & FG did). Whether his advice is taken on board by the politicians is a moot point, but as usual he talks a lot of sense.
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Irish Insurance RSA Ireland FY19 results similar trends to FBD (but not as good COR)
RSA has published FY19 results this morning. RSA in Ireland reported a 5% rise in net Eamonn Hughes written premiums to £327m, with the underwriting result improving from £30m to £42m as +353-1-641 9442 the combined operating ratio improved from 90.2% to 87.1%. The improvement was within [email protected] the claims line, down from 64.1% to 60.2%, with a small uptick in the expense ratio by 1ppt Barry Egan to 15.3%. RSA notes the benign weather outturn, lower large claims and positive prior year +353-1-641 6059 development in the Irish business. [email protected]
Readthrough for FBD will be minimal since FBD reports its own FY19 this morning, This document is intended for the sole use of Goodbody Stockbrokers and its affiliates
but it’s no harm in looking at the competition. Some of the favourable underwriting
trends seen at FBD, including positive prior year development, were also seen at RSA, though at a more positive level in FBD (reported COR was 72.3% vs 87.1% at RSA).
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Issuer & Analyst Disclosures
Analyst Certification The named Research Analyst certifies that: (1) All of the views expressed in this research report accurately reflect my personal views about any and all of the subject securities and issuers. (2) No part of my remuneration was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed by me in this report.
Regulatory Information 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 the Irish Stock Exchange and the London Stock Exchange. Goodbody is a member of the FEXCO group of companies. This publication has been approved by Goodbody. The information has been taken from sources we believe to be reliable, we do not guarantee their accuracy or completeness and any such information may be incomplete or condensed. All opinions and estimates constitute best judgement at the time of publication and are subject to change without notice. The information, tools and material presented in this document are provided to you for information purposes only and are not to be used or considered as an offer or the solicitation of an offer to sell or to buy or subscribe for securities.
Conflicts of Interest Goodbody has procedures and policies in place to identify and manage any potential conflicts of interest that arise in connection with its research business. Goodbody analysts and other staff who are involved in the preparation and dissemination of research operate and have a management reporting line that is independent to its business. Information barriers are in place between the Corporate Finance arm and the Research arm to ensure that any confidential and or price sensitive information is handled in an appropriate manner.
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Goodbody has provided investment banking services to AIB Group, Applegreen, ARYZTA, Cairn Homes, Datalex, Draper Esprit, FBD Holdings, First Derivatives, Flutter Entertainment, Grafton Group, Greencore, Hibernia REIT, ICG, IFG Group, Kingspan, Origin Enterprises, Playtech, Rank Group, Total Produce, UDG Healthcare, and Yew Grove REIT in the past 12 months.
Goodbody Stockbrokers acts as corporate broker to AIB Group, Applegreen, ARYZTA, Cairn Homes, Datalex, Draper Esprit, FBD Holdings, First Derivatives, Flutter Entertainment, Grafton Group, Greencore, Hibernia REIT, ICG, IPL Plastics, Kingspan, Origin Enterprises, Playtech, Rank Group, and Yew Grove REIT The list of companies for which Goodbody acts as market maker and on which it provides research, is available at Regulatory Disclosures
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Page 15 27 Feb. 20 Goodbody Morning Wrap
Other disclosures
We would like to inform you that Eamonn Hughes holds shares in AIB Group We would like to inform you that Robert Eason holds shares in Kingspan We would like to inform you that Robert Eason holds shares in SIG
A description of this company is available at Company Descriptions
All prices used in this report are as at close of business of the previous working day unless otherwise indicated.
A summary of our standard valuation methods are available at Valuation Methodologies
A summary of share price recommendations and whether material investment banking services have been provided to these companies is available at Regulatory Disclosures
Other important disclosures are available at Regulatory Disclosures
Goodbody updates its recommendations on a regular basis. A breakdown of all recommendations provided by Goodbody is available at Regulatory Disclosures Where Goodbody has provided investment banking services to an issuer, details of the proportion of buys, holds and sells attributed to that issuer will also be included. This is updated on a quarterly basis.
The date on which stock recommendations were first released for all stocks mentioned in this report are available at https://www.goodbody.ie/assets/Reg_Disclosures.pdf. If a different recommendation has been made in the previous twelve months, this will also be disclosed here.
Recommendation Definitions Goodbody uses the terms “Buy”, “Sell” and “Hold. The term “Buy” means that the analyst expects the security to appreciate in excess of 10% over a twelve month period. The term “Sell” means that the security is expected to decline in excess of 10% over the next twelve months. The term “Hold” means that the analyst expects the security to neither appreciate more than 10%, or depreciate more than 10% over the next twelve months.
On 26th November, 2012, the terms “Add” and “Reduce” were removed from the Recommendation Definitions and both were replaced with the “Hold” recommendation. Any Previous Recommendation that refers to either an “Add” means that the analyst expected the security to appreciate by up to 15% over a twelve month period. Any Previous Recommendation to “Reduce” means that the analyst expected the security to decline by up to 15% over the next twelve months.
In the event that a stock is delisted the firm will automatically cease coverage. If however the firm ceases to cover a stock for any other reason the firm will disclose this fact.
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This information was current as of the last business day of the month preceding the date of the report. An affiliate of GSI may have acted, in the past 12 months, as lead manager/co-lead manager of a publicly disclosed offer of the securities in this company. Investors should be aware that an affiliate of GSI may have provided investment banking or non-investment-banking services to, and received compensation from this company in the past 12 months or may provide such services in the next three months. The term investment banking services includes acting as broker as well as the provision of corporate finance services, such as underwriting and managing or advising on a public offer. All transactions by US persons involving securities of companies discussed in this report are to be
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