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Today ’s Newsflow Equity Research 18 May 2020 08:42 GMT Upcoming Events Select headline to navigate to article

Ryanair Good guidance in difficult times Company Events 18-May ; FY20 Results UK Economic View Early signs of pent-up demand by 19-May DCC; FY20 Results home-movers First Derivatives; FY20 Results UDG Healthcare; Q220 Results Irish Banks Suggestions of possible portfolio cap on loan 20-May Britvic; Q220 Results guarantee scheme Great Portland Estates; FY2020 21-May Hilton Food Group; Q120 Trading Update UK Real Estate Intu seeks standstills from creditors Wizz Air; FY20 Results 22-May Cranswick; FY results Greencore; H1 results

Economic Events Ireland 22-May PPI Apr20 Wholesale Price Index Apr20

United Kingdom 19-May ILO Unemployment Rate Mar20 20-May CPI Apr20 PPI Apr20 Retail Price Index Apr20 21-May Retail Sales Apr20 CBI Industrials Trends Orders May20

United States

Europe

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Ryanair Good guidance in difficult times

The airline release FY20 numbers, with clean PAT of €1,002m before a €353m net charge on Recommendation: Buy ineffective hedges for a reported PAT of €648.7m. However, the focus is on commentary into Closing Price: €8.45 the summer and early indication of what management are thinking in terms of a return to operations. Mark Simpson +353-1-641 0478

[email protected] In this regard we think there were some positives in the release given a) Ryanair could carry over 20m passenger in Q2 to September, with the comment being that it ‘expects to carry no

more than 50% of its original Q2 traffic target of 44.6m’ b) that passenger numbers for the year will be ‘less than 80m’ but this suggests over 50m passengers in H221 and c) that its current cash balance stands at €4.1bn having recently raised £600m under the UK’s CCFF, with this giving it further resources to see it through the current crisis.

With that said, Ryanair continues to face the challenges of these unprecedented times, with its cash burn at over €60m all-in a week in May (although this number includes its commitment to fuel hedges), while it continues to look to right size the business through base closures, pay cuts of up to 20%, unpaid leave and up to 3,000 job cuts.

Given this outlook, Ryanair cannot provide FY21 PAT guidance although it has updated its Q2 comment to say that it expects to record a loss of over €200m in Q1 but that it would then expect a smaller loss expected in Q2 given peak summer operations. We think that these numbers look pretty good given the scale of the challenges faced by the airline.

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UK Economic View Early signs of pent-up demand by home-movers

As the housing market reopens in England, there is early evidence of pent-up home-mover Alexander Wilson demand, according to the latest Rightmove House Price Index for May. On Wednesday 13th +353-1-641 9225 [email protected] May, home-mover visits to Rightmove were up 4% yoy, pushing levels back to those seen before the lockdown. Meanwhile, sales demand (unique enquiries) doubled from Tuesday to Wednesday last week and were down only 10% yoy. On supply, there was an 111% week- on-week increase in new sales listings on day the market reopened, a trend we would expect over the coming weeks. Rightmove noted that there is not enough data to include house price analysis.

This document is intended for the sole use of Goodbody Stockbrokers and its affiliates The Rightmove release provides some early evidence that there is a strong desire for home-mover purchases, but we view this data with cautious optimism given that the market has only been open for less than a week. It will also be important to monitor the impact of increased health and safety measures, as agents continue to encourage video viewings of properties in the early days of the process.

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Irish Banks Suggestions of possible portfolio cap on loan guarantee scheme

The headlines over the weekend were dominated by comments from the former Department Eamonn Hughes of Finance Secretary General during the Troika bailout years to the Sunday Independent that +353-1-641 9442 “if we don’t rescue businesses and stabilise employment, we will end up bailing out the [email protected] banks”. John Moran is quoted as suggesting that unless businesses are given additional Barry Egan funding of at least €10bn on top of the €6.5bn already committed, the State is facing +353-1-641 6059 another banking crisis. The article also quotes a government report that Ireland’s extended [email protected] lockdown and “unclear” reopening plan risks leaving many businesses permanently closed. The reports come as Ireland embarks today on the first phase of re-openings, which will see

the likes of hardware stores, garden centres, garages, construction sites and IT stores

reopen.

In addition, the Sunday Times reports that only €33m has been drawn down from the €200m SME loan scheme from the SBCI for businesses impacted by Covid-19 which is being criticised for being too complex. This fund formed a key part of the initial c.€1bn government response to the crisis for SMEs and the report notes that just 189 firms have drawn down loans, whilst c.2,000 have expressed interest, However, the existing scheme, repurposed from an old Brexit scheme, requires companies to use the funds for research and innovation and the CEO of SBCI noted that SMEs need more and better forms of finance to overcome the immense challenges posed by Covid-19. As it was clear that the crisis for SMEs was escalating, the State recently announced an upsized €6.5bn financing plan for businesses (a €2bn stabilisation fund, a €2bn loan guarantee fund with 80% guarantees, €2bn of tax warehousing, €0.25bn of commercial rates write-offs and a €0.25bn restart fund for micro & small business). Whilst the various schemes are being worked upon, the Sunday Times reports over the weekend that a portfolio cap on the proposed loan guarantee scheme might see the State only cover 40% of a bank’s aggregate exposure through the scheme.

The former senior civil servant’s comments that if the State doesn’t provide support to businesses, it will stress the banking system is kind of obvious and presumably his views on the likely scale of financing required is not shared by government. On the government’s specific plans, any proposals to the 80% loan guarantee level through a lower portfolio cap of say 40% as per the Sunday Times article suggestion is not helpful. Indeed, we had noted that the 80% guarantee level itself was at the lower end of the comparable range in other countries, where higher figures have generally worked better in supporting businesses. The Central

Bank recently estimated companies had liquidity requirements for a 3-month This document is intended for the sole use of Goodbody Stockbrokers and its affiliates lockdown of €2.4-5.7bn, with the BPFI estimating a €6-8bn figure. But with lockdowns to be phased out over a slightly longer period (3-5 months depending on the industry, and obviously risks of longer, and some businesses will continue to struggle thereafter as well), the demands are likely to be higher, in our view. The debate on whether the government support needs to be upscaled is likely to continue to linger and speed of implementation will also be key bearing in mind that legislation is needed for the €2bn guarantee scheme and the tax liabilities freeze.

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UK Real Estate Intu seeks standstills from creditors

Intu (INTU:LN) confirmed in an announcement this morning that it is seeking standstill Colm Lauder arrangements from its creditors for a period until December end 2021 in an attempt to +353-1-641 6042 prevent the company running into further difficulty at covenant tests which Intu believes it is [email protected] likely to breach. At present, Intu has secured waivers on its covenant tests in respect of its Cian O’Sullivan revolving credit facility until 26th June. +353-1-641 9281 [email protected] The standstills sought would provide relief from financial covenant testing, debt amortisation and facility maturity payments with interest being “pay if you can”. This would likely provide Eamonn Hughes +353-1-641 9442 an opportunity for refinancing debt arrangements to hold off on bankruptcy. [email protected]

According to the latest MSCI UK Monthly Index data for April, shopping centre values declined by 4.7% month on month, having now fallen by 12.1% over the last three months.

Given the investment market is effectively closed for asset disposals, Intu believe standstills will be the best course of action, allowing asset valuations and portfolio performance to stabilise so that risk can be appropriately priced. There is currently too much uncertainty to assess where the value of these assets lies, and given the asset management intensity of shopping centres, especially at this time, it is likely that Intu are better placed than most creditors to continue operating its centres for the time being at least until the dust settles on COVID-19.

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