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Domino’s Pizza Group - Disappointing Q1 update leads to Company Events further downgrades 07-May Domino's Pizza Group; Q119 Results 08-May ; Trading update Irish Banks The Correctiv papers and alleged carbon J D Wetherspoon; Q319 Trading Update emissions fraud across Europe SIG; AGM ; Trading update 09-May Barratt Developments; Q3 trading update HeidelbergCement; Q119 Results IFG Group; Q119 Results IPL Plastics; Q119 Results Mondi; Q119 Trading Update ; AGM trading update 10-May IAG; April 2019 Traffic Stats IAG; Q119 Results IPL Plastics; Q1 results 13-May DCC; FY19 Results Lufthansa; April 2019 Traffic Stats 14-May Allianz; FY19 Results Charter Court Financial Services; Q119 Trading Update ; FY19 Results

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Domino’s Pizza Group - Disappointing Q1 update leads to further downgrades

Domino’s this morning reported a Q1 trading update. Group system sales were £324.4m, Recommendation: Hold +4.3% year on year with UK & ROI system sales +4.8% to £299.3m. The key UK division Closing Price: £2.61 reported LFL sales growth of +3.1% YoY, broadly in line with our expectation for H119. Like for Like order volumes were -2.7% with items per order +0.7% and price +5.1%. Online Rachel Fox +353-1-641 0442 sales growth remained strong in the UK +8.5% YoY. The Republic of Ireland had LFL sales [email protected] growth of +6.8%. International system sales were disappointing, -2.0% on a reported basis to £25.1m (+1.1% CC LFL). As a result it is again tightening its capital deployment to these

markets. The poor performance in International was wide spread with Switzerland LFL’s - 8.4%, Iceland LFL’s -4.6%, and Norway system sales -1.0%. The German performance is noted as being solid. The group has opened 4 stores in the UK in Q1 and closed one and has opened 3 stores since the end of the period. The group notes that store openings continue to be impacted by ongoing franchisee discussions but note there is a healthy pipeline of new stores.

Overall, this is a disappointing Q1 statement. While at a headline level the LFL of +3.1% looks in line with expectations we think the mix is concerning, driven by price +5.1%, with order volumes declining 2.7% and item per order just +0.7%. Additionally, the weaker than expected International performance is concerning given guidance to break-even this year. We currently forecast a loss of -£1.1m in this year. We will likely downgrade our FY expectations on the back of this update as we believe International losses could be similar to last year (c.£4m). This would drive a downgrade to our FY19 PBT of c.3% to £94m. Trading on >13x EV/EBITDA with limited earnings growth and another downgrade, we see little scope for a re- rating of the shares and retain our HOLD recommendation (245p PT).

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Irish Banks The Correctiv papers and alleged carbon emissions fraud across Europe

The Irish Times has a full one-page article on The Correctiv Files on alleged carbon emissions Eamonn Hughes VAT fraud across Europe. The files, obtained by German non-profit newsroom, Correctiv and +353-1-641 9442 released to media organisations across the continent, relate to police and tax authority [email protected] investigations in Denmark, Germany and Italy. However, it appears that clients of Bank of Colin Jackson Ireland and Ulster Bank were linked to some fraudulent transactions. The involvement of the +353-1-641 6050 Irish banks in transactions relates to 2009 and 2010. [email protected]

The files show that clients of BOI and Ulster Bank were unwittingly involved in trades with Barry Egan +353-1-641 9492 individuals or companies suspected of being part of the alleged VAT fraud. While the [email protected] Correctiv Files allege large-scale fraud relating to carbon credits, there is little evidence that

Irish companies were directly involved in organising the cases discussed according to the John Cronin Irish Times, or that the Irish exchequer lost out as a result of these cases. According to the +353-1-641 9187 Irish Times, this may be because Ireland was among the first EU countries to introduce a [email protected] reverse-charge mechanism on carbon credits, shifting the onus to pay VAT to the person receiving the supply. Links to the articles in the Irish Times below https://www.irishtimes.com/news/ireland/irish-news/boi-and-ulster-bank-used-in-tax-fraud- carbon-credits-trading-1.3882777 https://www.irishtimes.com/news/ireland/irish-news/complex-alleged-frauds-estimated-to- cost-eu-taxpayers-billions-of-euro-a-year-1.3882548 https://www.irishtimes.com/news/ireland/irish-news/carbon-credit-fraud-in-the-eu-how- does-it-work-1.3882656

The Correctiv papers strike us as vaguely reminiscent of the Panama Papers released a number of years ago which showed that multiple banks in multiple jurisdictions fell foul of inappropriate off-shore transactions. In the case of the Correctiv papers on alleged carbon emissions VAT fraud, we would note again the multi-jurisdictional nature of the problem, involving banks in a number of countries. In addition, the involvement of the Irish banks appears to solely date to 2009 and 2010, subsequent to which extensive AML developments have occurred, including the transposing of the fourth anti-money laundering directive into Irish law in 2016/17 and the alignment of European AML laws with recommendations from the Financial Action Task Force and other proposed changes commonly referred to as the Fifth EU AML Directive. Whilst clearly AML is topical in the sector after recent misadventures at Scandinavian banks, but our first take on this is that investors will be relatively relaxed about it in the context of the Irish banks.

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