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Glanbia FY19 results in line, though GPN challenges remain Company Events 26-Feb ; FY19 results Origin Enterprises Challenging UK weather backdrop to Metro Bank; FY19 Results weigh on FY20 profit Permanent TSB; FY19 Results Restaurant Group; FY19 Results William Hill FY19 broadly in line with expectations Taylor Wimpey; FY19 Results William Hill; FY19 Results Permanent TSB FY19 Results in line with expectations 27-Feb Bakkavor Group; FY19 results ; FY19 Results Metro Bank FY19 result; Fresh 2020 strategy update Howden Joinery; FY19 Results LafargeHolcim; FY19 Results Taylor Wimpey FY19 in line, pricing traction in FY20 ytd Mondi; FY19 Results Persimmon; FY19 Results Irish Economic View Wage growth highest in over a Playtech; FY19 Results decade Provident Financial; FY19 Results Standard Chartered; FY19 Results Vistry Group ; FY19 Results 28-Feb CRH; FY19 Results Glenveagh Properties; FY19 Results IAG; FY19 Results 03-Mar ; FY19 Results Travis Perkins; fy19

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United Kingdom 26-Feb BRC Shop Price Index Feb20 Nationwide House Price Feb20 02-Mar BoE Mortgage Approvals Jan20 M4 Money Supply Jan20 CIPS Manufacturing PMI Feb20 03-Mar CIPS Construction PMI Feb20 04-Mar CIPS Services PMI Feb20

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Glanbia FY19 results in line, though GPN challenges remain

Glanbia has reported FY19 results with EPS of 88.1c, down c.8% on constant currency basis. Recommendation: Hold This is broadly in with our forecast (and consensus) and at the bottom end of the guided Closing Price: €10.48 range (88c-92c). A stronger outturn from Glanbia Nutritionals (GN) and JV’s helped offset a weaker than expected result from Glanbia Performance Nutrition (GPN) where profit fell 15% Jason Molins +353-1-641 9141 to €146m (GBY €155m) and margins declined 410bps (guidance 300-350bps). Following a [email protected] strategic review of the business, Glanbia outlined several actions to simplify the GPN business and drive a turnaround in performance. In addition, it announced a 10% increase in

the 2019 dividend and proposed a share buyback programme, subject to shareholder approval.

The key takeaways include: (i) GPN branded organic revenue declined more than expected at -9.8% with vols -8.9% (GBY -8.2%) and price -0.9% (GBY 0%). This was driven by the known challenges in the International markets together with lower activity in the North America Club and Specialty channel. SlimFast performed well (very strong double-digit growth) and Optimum Nutrition saw mid-single digit growth in North America channels (ex. speciality). GPN margins declined 410bps to 10.7% (GBY 11.3%) which is lower than the 300-350bps guidance. (ii) GN performed strongly, with NS delivering organic revenue growth broadly in-line with forecast at +10.8% (vols 7%, price 3.8%) reflecting growth in Asia for pre-mix solutions and dairy snacking in the US. In US Cheese, volumes were +4.9% (GBY 5.8%), while pricing was stronger than forecast (+13.6% vs. +6% forecast) distorting the top-line performance (pass-through so no impact on profit). GN margins declined 40bps to 5.2% (GBY 5.6%) reflecting a 200bps decline in NS due to mix and input tariffs; (iii) Exceptional charges came in at €39m (GBY €15m), which included €12.7m of reorganisation and consultancy costs, and €17.3m of asset impairments (inventory write-downs and unsuccessful innovations SKUs).

Glanbia has announced several initiatives to help drive a turnaround of the GPN business and deliver a 200bp margin improvement by 2022. In terms of FY20 outlook, Glanbia are guiding to constant currency EPS to be broadly flat yoy, with an expected return to growth in GPN (H2 weighting) being offset by further margin headwinds in Nutritional Solutions (NS). We are unlikely to materially change our forecasts though note that challenges remain across a number of the international markets.

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Origin Enterprises Challenging UK weather backdrop to weigh on FY20 profit

Origin this morning provided an unscheduled trading update announcing that earnings for Recommendation: Buy FY20 will now be significantly below current market expectations. The weakness reflects the Closing Price: €3.22 impact of continued poor weather conditions in its core Ireland and UK market. With unprecedented levels of rainfall over the past six months, Origin estimates that winter Jason Molins +353-1-641 9141 plantings were down c.40% on last year. This compares to the expected decrease of c.25% [email protected] at the time of its Q1 update in November. In addition, the amount total planted area (Winter + Spring crops) is expected to fall by c.10% vs. -2% forecast previously, with the remainder

made up by Spring plantings which attracts a lower spend on crop inputs.

Outside of the UK, performance has been more solid with Continental Europe progressing well and yoy growth in profit expected. The Latam division continues to deliver volume growth despite lower market demand due to a delayed soybean planting season. The division is also expected to deliver yoy profit growth.

Origin will announce its interim results next week on March 5th, with further detail on trading conditions provided at that time though, as usual, no specific FY20 guidance will be provided until the Q3 update in June. Importantly, the Group does not expect any change to the Group’s long-term growth targets as guided in the 2019 CMD.

Given the level of rainfall since the company’s last update in November, today’s update is not entirely surprising. We are likely to reduce our FY20 Group EPS forecast to circa 39c (vs. 49.5c currently) to reflect the reduction in the higher yielding winter plantings and the significant increase in fallow land. While noting the longer-term growth opportunity for the Group and attractive valuation, we are cautious on Origin in the near term reflecting the lack of visibility for earnings due to the extremely challenging weather conditions currently being experienced.

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William Hill FY19 broadly in line with expectations

William Hill had pre released the majority of its headline numbers at its recent trading Recommendation: Buy update and as such there are no major surprises in today’s release. Group revenue came in Closing Price: £1.77 at £1582m (GBY:£1629m) and operating profit came in at £147m (GBY:£145m;), which was at the upper end of the previously guided range. On outlook, the statement notes that the Gavin Kelleher +353-1-641 0423 business is on track to perform in line with its expectations assuming normalised gross win [email protected] margins and a stable regulatory landscape.

Online reported net revenue of £738m (+16% reported, -3% pro forma, -1% adjusted for extra week) and operating profit of £119m (-9% yoy) versus our forecasts of £762m and £124m respectively. We would note that the comparative period for FY18 had an extra week in it so the underlying is not as weak as it seems . Sports proforma NGR was -6% driven by wagers -6% and a flat GWM yoy. In gaming, pro forma net revenue was -1%. Overall pro forma UK revenue declined by -3% the same decline as in International. On outlook, management expects to return the business to growth, with low single digit growth in the UK and high single digit growth internationally.

The US business delivered a strong FY19 outcome with revenue of £126m and operating profit of £1m. Within this the existing US business grew revenue by 7% to £78m and operating profit came in at £27m, -13% yoy. The expansionary business delivered revenue of £43m with an operating loss of -£26m. The US business now has market access in 24 states and the recently announced partnership with CBS should help to drive customer acquisition for its US Online business.

Overall there are no major surprises in this release. On the negative side, Online is still somewhat soft in terms of the top-line, but encouragingly management are confident of its returning to growth. On a positive note, the US is performing well and UK retail is doing well in the face of the £2 stake impact. In terms of our FY20 numbers, we are currently forecasting operating profit of £154m (consensus £161m). We do not expect to make any changes to our numbers, but expect consensus to drift down towards our expectation as more people include the impact of the credit card ban. Nothing to get overly excited about in general, but we would outline the attractive valuation given the strategic value in its US and UK online assets.

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Permanent TSB FY19 Results in line with expectations

PTSB’s FY19 results are essentially in line with expectations. NIM is effectively in line at Recommendation: Buy 1.80% (they are guiding lower NII in FY20 (forecasts are already -2% and NIM of 1.75%); Closing Price: €0.87 costs were in line, CET1 of 15.0% pro forma was bang in line, and NPEs of 6.4% were only c.€50m higher than hoped for at €1.0bn, so close. Mortgage market share in Q4 was flat on Eamonn Hughes +353-1-641 9442 the prior three quarters (though Q4 lower than Q3). Whilst better on impairments, PTSB had [email protected] slightly higher exceptionals.

NII in FY19 of €356m was exactly in line with our expectations. The NIM of 1.80% compared with our forecast of 1.81% and implies a Q4 exit NIM of c.1.74% (9M19 1.82%, we understand there was a one-off adjustment on the average mortgage life in Q4, so underlying Q4 NIM better). Average interest earning assets were €19.7bn (€19.7bn estimate). Non-interest income of €57m slightly below our €63m expectation. Operating costs of €329m, were -2% yoy, and in line with our €330m forecast. PTSB recorded a provision charge for the period of €10m, equating to c.6bps, so below our expected €19m charge. Elsewhere, PTSB incurred -€32m of expectational costs, slightly higher to the €24m charge in our estimates.

The pro forma fully loaded CET1 ratio was 15.0% (14.7% in Q3) and in line with our 15.0% year end forecast). PTSB reported 13% y/y growth in new Irish mortgage lending in FY19 ,implying a FY19 market share of 15.5%, flat on the 15.5% ytd by Q3 (in H119 was 14.7%), which probably means the Q3 figure (was in hi-16s) was a little lower in Q4. On funding, deposits of €17.2bn were in line with June levels (€17.1bn) and the net loan figure was €15.6bn (€15.6bn expected). NPEs of €1.05bn were down 4.5% on the €1.1bn figure at end Q3. We note the reference that “the company has 17% of the performing book paying interest only (majority BTL mortgages)”. The bank is engaging with customers in relation to assessing loan status (a regulatory requirement) and the programme is at an early stage of maturity with further detail to emerge in H1. This book already sits in Stage 2 with coverage, which PTSB believes is adequately provided, but investors likely to hone in on this today, though it is more than likely to be a loan book (with rent rolls) that may be more suited to a transaction outcome.

All-in-all, we await medium term targets but are unlikely to be making any material changes to estimates specifically on the back of the FY19s. We note the reference to the interest only (high LTV) BTL book which may receive attention today around

concerns for any incremental provisions, but we would note PTSB’s impairment This document is intended for the sole use of Goodbody Stockbrokers and its affiliates charge in FY19 was inside our estimate; this book is already in Stage 2 with provisions (and is performing) and may be more suited to a transaction outcome (with PTSB’s marks on three transactions to date proving adequate).

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Metro Bank FY19 result; Fresh 2020 strategy update

MTRO published its FY19 results and delivered 2020 guidance this morning, reporting revenues Recommendation: Sell of £80.2m in 4Q19, which was 21% behind our estimate (for £102.1m). This is a big miss and Closing Price: £1.92 is a function of: i) material NIM inflation in 4Q19 (1.30% versus our forecast for 1.35%), which appears predominantly due to elevated deposit costs (87bps in 4Q19, which is materially John Cronin +353-1-641 9187 higher than the guidance for “marginally above base rate” issued at the stage of the 3Q19 [email protected] results in October – and we did warn in our 31st October research report that there was downside to our NIM forecasts, which reflected this guidance); and ii) OOI came in at just

£14.9m (-35% q/q), which compares unfavourably to our forecast for £24.3m (with evolution now a major question mark). Operating costs were down marginally q/q (£97.9m in 4Q19 versus £99.7m for 3Q19), which is a beat relative to our estimates and shows that the cost rationalisation strategy put in place by the previous CEO et al. is working well. Impairments of £5.4m compared unfavourably to our forecast for £2.5m, though there was a single name commercial exposure underpinning this inflation – and FY19 CoR remained low at 8bps. All in all, MTRO printed an underlying loss after tax of £24.7m versus our forecast for a £3.5m loss. MTRO has also booked £154m of post-tax exceptional costs, including a writedown of intangibles of £68m (relating to discontinuation of certain WIP or older IT projects), additional transformation costs of £11m, and remediation costs of £27m in relation to the ongoing regulatory investigations and other matters, as well as DTAs derecognition (due to lack of profit visibility presumably) of £53m (there are a few other adjusting items if you’re looking to reconcile back to the £154m). In short, this led to a statutory loss of £179m, which is a lamentable performance.

RWA intensity was as expected but the statutory loss drove 60bps of CET1 capital ratio depletion in the quarter, which is not encouraging in the context of a strategy that may require capital support (we will refine our estimates and firm up on this view but it looks like we have to accelerate our expectations for a CET1 capital raise (we are currently forecasting a £200m further injection of CET1 capital in FY21F).

We see 10-15% downside to our FY20F revenues and we see a much greater FY19F loss than we had forecast (£18.9m is our current forecast). The refreshed strategy (contemplates tighter cost control (which MTRO had been pursuing anyway), widening the customer service proposition (we look forward to hearing the detail), more infrastructure investment (will require capital support), potential asset disposals, potential funding diversification, and potentially better-yielding assets. There is nothing concrete in any of this to support the revised

2024 targets. We are not saying that it is impossible to resuscitate MTRO but we reiterate our This document is intended for the sole use of Goodbody Stockbrokers and its affiliates view that radical action with the help of third party loan assets (or potentially a fast injection of much lower cost deposits, which feels unlikely) is needed. Perhaps this is what is what the Board wants too but it’s hard to start believing without seeing such action. Furthermore, MTRO has had to repay £50m of BCR funding, which is embarrassing for both parties.

All in all, while the share price has been weak coming into the update, we see further significant selling pressure in the wake of this update. Management has a tough job to do trying to convince investors that its strategy can work. Evidence will be in delivery. We remain open-minded but firmly reiterate our SELL view on MTRO.

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Taylor Wimpey FY19 in line, pricing traction in FY20 ytd

Taylor Wimpey FY19 results are in line with expectations with most detail already being pre- Recommendation: Buy announced. The key takeaways are around current trading; (i) The year has started well with Closing Price: £2.19 “a good level of customer demand”. This is evident in the ex bulk sales rate of 0.92 in FY20 to date versus 0.90 a year ago. The company is 49% forward sold for private reservations David O'Brien +353-1-641 9230 overall and 84% forward sold in London; (ii) A price increase of 1.5% has been achieved in david.a.o'[email protected] the ytd which will help offset the 3% build cost inflation (4.5% in FY19); (iii) The focus on value will see volumes “slightly lower” in FY20; (iv) FY20 operating margin is anticipated to

be in line with FY19 which is better than our expectations for a 40bps decline.

Taylor Wimpey’s forward order has once again grown by double-digits. In unit terms, the order was up +20% despite a tough yoy comparison (+11% last year) whilst in value terms the order book grew by 13%, again against a tough yoy comparison (+15% last year).

Management will host a conference call at 9am for which the dial-in details are as follows: Dial-in + +44 (0) 203 009 5710; Participant code: 5539368.

Overall this is a solid set of numbers and while we may nudge our forecasts slightly higher it looks like consensus will be reduce slightly on the lower volume commentary. We remain positive on the name with group’s robust balance sheet underpinning its sector leading dividend (c.8% yield). Maintain BUY.

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Irish Economic View Wage growth highest in over a decade

In a further sign of a healthy labour market in Ireland, wages grew at their fastest rate in Dermot O’Leary over a decade in Q4 2019, according to CSO data published yesterday. +353-1-641 9167 [email protected]

Average weekly earnings rose 3.5% yoy in Q4 2019, a similar rate to that seen since Q2 2018. This growth is all due to growth in average hourly earnings (+3.6% yoy), with average hours worked falling modestly over the past twelve months. By sector, the strongest growth in weekly earnings was in the accommodation and food sector (+8% yoy), followed by ICT (+6% yoy), due to a combination of higher hourly earnings and a longer working week. Looking at a core measure that excludes bonuses, hourly earnings growth was 3.7% yoy in Q4 2019. The fastest growth on this measure was Arts, entertainment and recreation (+5.9% yoy), followed by finance (+4.8% yoy) and professional and scientific (+4.5% yoy). All sectors, bar two, are experiencing earnings growth.

Following on from last week’s positive Irish employment release, the data shows similarly positive trends in earnings that will continue support growth in consumer spending, tax revenues and housing affordability.

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