Morning Wrap

Today ’s Newsflow Equity Research 26 Apr 2021 08:25 BST Upcoming Events Select headline to navigate to article

Draper Esprit ‘Fair value’ portfolio increase of c.47% Company Events 26-Apr Draper Esprit; Q421 Trading Update C & C Group Introduction of minimum unit pricing in 27-Apr HSBC; Q121 Results Ireland would be a positive Whitbread; FY21 Results 28-Apr Kindred Group; Q121 Results Irish Economic View “Outdoor” summer roadmap in Lloyds Banking Group; Q121 IMS which caution remains the theme Persimmon; Q121 Trading Update Sainsburys; FY21 Results Irish Some players looking to fill void from exits 29-Apr Howden Joinery; Q121 Trading Update Lufthansa; Q121 Results FBD Holdings Moving slowly towards the quantum hearing NatWest Group; Q121 Results on BI case 30-Apr Barclays; Q121 Results Derwent ; Ex Final Div Kingspan; Q121 Trading Update Smurfit Kappa; Q121 Trading Update

Economic Events Ireland 28-Apr Retail Sales Mar21

United Kingdom 30-Apr Nationwide House Price Apr21

United States

Europe

This document is intended for the sole use of Goodbody Investment Banking and its affiliates

Goodbody Capital Markets Equity Research +353 1 6419221 Equity Sales +353 1 6670222 Bloomberg GDSE

Goodbody Stockbrokers UC, trading as “Goodbody”, is regulated by the Central of Ireland. In the UK, Goodbody is authorised and subject to limited regulation by the Financial Conduct Authority. Goodbody is a member of and the London Stock Exchange. Goodbody is a member of the FEXCO group of companies. For the attention of US clients of Goodbody Securities Inc, this third-party research report has been produced by our affiliate, Goodbody Stockbrokers Goodbody Morning Wrap

Draper Esprit ‘Fair value’ portfolio increase of c.47%

Headline detail in the scheduled Trading Update from Draper Esprit this morning highlights a Recommendation: Buy gross portfolio value as of March of not less than £955m, up from £703m at the start of the Closing Price: £8.34 year, and a NAV per share of not less than 728p, up from 555p at the end of March 2020. While the NAV per share is broadly in line with our 730p adjusted estimate as outlined in Gerry Hennigan +353-1-641 9274 commentary on April 8th, that understates the progress made in FY21, which delivered an [email protected] uplift in ‘fair value’ of c.47%, despite currency headwinds of over £50m, driven in part by the listing of Trustpilot in London (a core asset since Draper’s IPO) and UiPath last week in NY.

Portfolio asset listings aside, follow-on rounds in Graphcore, Endomag, M-Files and Freetrade to name a few also contributed to the uplift in ‘fair value’ as adoption of technology accelerated during the pandemic. The scale, maturity and opportunity set currently available to Draper is reflected in the fact that investment for the current year has been guided up from £120m to £150m, relative to the £128m outlaid by the PLC in FY21. With available cash of £161m, relative to £50m of approved investment, and visibility on a further £75m of qualified dealflow, funding at management’s disposal would appear to be adequate, particularly given the option to realise value in the aforementioned portfolio listings as lock- outs expire.

Having listed in 2016 with a stated aim to achieve a self-funded model from a baseline valuation of c.£1bn, Draper Esprit effectively reached that objective in March with a portfolio of assets straddling seed-investments to recent asset listings (Trustpilot, UiPath), with potentially more asset IPOs to follow (Cazoo).

Home…

C & C Group Introduction of minimum unit pricing in Ireland would be a positive

In recent years there has been an expectation that Ireland would introduce minimum unit Recommendation: Buy pricing (MUP) for alcohol products, however, it has been delayed for a number of reasons Closing Price: £2.77 including the pandemic. We note media speculation over the weekend that Ireland is to introduce the new pricing regime in the coming weeks. It is expected that the minimum price Patrick Higgins +353-1-641 0403 will be set at 10 cent per gram of alcohol which implies a standard 440ml can of lager would [email protected] be €1.32. The aim is to reduce the health impact from alcohol through preventing the sale of strong alcoholic products at very low prices.

We would consider this to be a positive development for C&C. When MUP was introduced in This document is intended for the sole use of Goodbody Investment Banking and its affiliates Scotland in May-18, C&C’s core Scottish brand, Tennents, took volume and value share in the off-trade channel as its closest peers could no longer heavily discount to drive volume. Mix also improved as the larger and cheaper pack sizes (e.g. 24 packs etc) were no longer viable.

We expect C&C's core Irish brand Bulmers, would experience a similar benefit. The brand will not be directly affected by MUP given its relatively higher price point. However, as it is typically priced against standard lager given its size, any MUP related price increase will provide the Group the opportunity to either push through a price increase or reduce the premium and drive share.

Home…

Page 2 26 Apr. 21 Goodbody Morning Wrap

Irish Economic View “Outdoor” summer roadmap in which caution remains the theme

The Irish Times this morning report that there will be a “clear indication” of what the next Shaun McDonnell phases of the reopening in Ireland will look like for the months of May, June, and July +353-1-641 9127 [email protected] following a Cabinet meeting this Thursday.

Ahead of the meeting, some leaks have been reported of the plans for particular sectors of the Irish economy. The findings are as follows:

• May’s reopening looks as though it will not be stretched beyond the initial plan of the full resumption of construction, the reopening of hairdressers and personal services, the phased return of retail (click-and-collect first, followed by non-essential retail) and the allowance of in-person religious services.

• The theme for the summer will be one that is enjoyed outdoors with hotels and guesthouses set to reopen in June, while travelling outside county borders is also set to be permitted.

• Indoor hospitality will not resume fully until sometime in July while a review of the ban on international travel is also set to take place during the same period.

Finally, the theme of quotes from Government Ministers is that the experience of the Christmas reopening combined with international experiences with new variants such as that in India are leading them to lie on the side of caution.

While caution remains the theme of reopening, Ireland looks set to have a concrete roadmap for a summer reopening following the meeting of Cabinet this Thursday. The focus needs to take a swift turn toward supporting the hospitality, tourism, and travel sectors for when their eventual returns do manifest. With the number of first dose vaccinations reaching 1 million over the weekend, and the concurrent decline in hospitalisations and ICU admissions, Ireland finally looks to be on the home straight. Hang in there!

Home…

This document is intended for the sole use of Goodbody Investment Banking and its affiliates

Page 3 26 Apr. 21 Goodbody Morning Wrap

Irish Banks Some players looking to fill void from exits

With the exit of Ulster Bank and KBC, other organisations have started to appear on the Eamonn Hughes horizon considering plans for expansion in Ireland and hoping to fill some of the gap created +353-1-641 9442 by the exits. The Irish Independent reports that N26 is planning to introduce new loan and [email protected] overdraft products to capitalise on the exit of Ulster Bank and KBC. It is also mulling over Barry Egan whether at some stage in the future it may also offer mortgages, according to its chief +353-1-641 6059 operating officer. The fintech has almost hit the 200k user mark in Ireland. Elsewhere, An [email protected] Post (the post office network) is revamping its current account offering with a number of new features. In addition, the Department of Enterprise, responsible for the Covid-19 Credit

Guarantee Scheme, is considering proposals to loosen criteria for loans given the

disappointing take-up in the scheme to date. Just 13% of the €2bn available under the 80% guarantee scheme has been taken up, with the junior minister noting “it’s clear the scheme is not working as we originally envisaged”, according to the Irish Independent. The same newspaper also carries an article today that a range of alternative finance providers will also help to unlock credit as the economy reopens with alternative finance options.

Elsewhere, proposals are set to be brought to cabinet this week for a summary rescue process for SMEs to be introduced before the summer recess. It would introduce a fast-track administrative process without the expense of going to court (which is often too costly for SMEs), with the process being called an “examinership-lite” proposal, with the voluntary examinership hammered out in the office of an insolvency professional rather than the courtroom. ISME (the small business lobby group) has been involved in the company law review group that drafted the proposals for a summary rescue package. Elsewhere, the Irish Independent notes that the Central Bank official responsible for regulating the credit unions has criticised persistent governance and risk management weaknesses amongst credit unions and accused the sector of a lack of maturity for failing to address its problems. Whilst there is progress at some credit unions, the overall picture is not so positive, noted the official.

There are plusses and minuses with the new entrants for the large incumbents. As we noted in our commentary on the sector last week, new entrants were likely to appear on the horizon given the KBC and UB exits which combined accounted for about one quarter of the mortgage market and one-sixth of the SME market. The negative is that the large incumbents will not have a free run at the market post the KBC and UB exits – but we never expected they would – though the positive is that as new entrants are entering, it potentially eases concentration concerns with

some deals still pending that need to be approved by competition authorities. The This document is intended for the sole use of Goodbody Investment Banking and its affiliates summary examinership process looks like an interesting development. Obviously with such extensive government supports in place, the real stresses on SMEs will more likely appear as the recovery kicks in and supports are tapered. Our base case is that Stage 3 SME loans rise to about 13.5% in time, very similar to the Central Bank estimate of Finance Distress amongst SMEs of c.14%. Meanwhile, it’s onto Q1 IMSs later this week with BOI slated to lead the way on Friday, with PTSB and AIB the following week.

Home…

Page 4 26 Apr. 21 Goodbody Morning Wrap

FBD Holdings Moving slowly towards the quantum hearing on BI case

There was a further step forward in FBD’s business interruption court case on Friday with an Recommendation: Buy update on a number points relating to costs and other issues. The judge has ruled that Closing Price: €7.84 policies taken out by the four publicans in the case cover losses resulting from partial closure as well as full closure. The pubs were also entitled to their legal costs though not on the Eamonn Hughes +353-1-641 9442 highest available scale. However, with main quantum hearing still has to be decided at a [email protected] later date, so the process continues to drift onwards.

The main quantum hearing looks to be next month and is probably the most important next step in FBD’s BI test case. Whilst the BI court case final settlement is ongoing, so some risks still remain on FBD’s BI provision, similarly, underlying trading ytd remains favourable.

Home…

This document is intended for the sole use of Goodbody Investment Banking and its affiliates

Page 5 26 Apr. 21 Goodbody Morning Wrap

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 . In the UK, is also subject to regulation by the Financial Conduct Authority. Goodbody is a member of 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.

Our Investment Research Conflicts of Interest Policy is available at Conflicts of Interest

Investors should be aware, that, where appropriate, research may be disclosed to the issuer(s) in advance of publication, in order to correct factual inaccuracies only and not to materially amend the research in any way. Goodbody is satisfied that it has operational procedures in place, which ensure that such disclosures will not compromise the report’s objectivity.

Goodbody has provided investment banking services to AIB Group, Applegreen, ARYZTA, Bank of Ireland, Cairn Homes, Collagen Solutions, Datalex, Draper Esprit, FBD Holdings, First Derivatives, Grafton Group, Greencore, Hammerson, Harworth, Hibernia REIT, ICG, Kingspan, Origin Enterprises, Playtech, Rank Group, Supermarket Income REIT, Total Produce and Yew Grove REIT in the past 12 months.

Goodbody Stockbrokers acts as corporate broker to AIB Group, ARYZTA, Cairn Homes, Datalex, Draper Esprit, FBD Holdings, First Derivatives, Grafton Group, Greencore, Hibernia REIT, ICG, 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

This document is intended for the sole use of Goodbody Investment Banking and its affiliates

Page 6 26 Apr. 21 Goodbody Morning Wrap

Other disclosures

We would like to inform you that Eamonn Hughes holds shares in AIB Group

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.

Distribution of research to clients of Goodbody Securities Inc (GSI) in the US

GSI distributes third-party research produced by its affiliate, Goodbody GSI is a member of FINRA and SIPC GSI does not act as a market-maker. Goodbody Stockbrokers or GSI holds a proprietary position and/or controls, on a discretionary basis, more than 0.5% of the total issued share capital of FBD Holdings

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 effected through GSI.

Disclaimer While all reasonable care has been taken in the production and dissemination of this report it is not to be relied upon in substitution for the exercise of independent judgement. Nothing in this report constitutes investment, legal, accounting or tax advice, or a representation that any investment or strategy is suitable or appropriate to your individual circumstances, or otherwise constitutes a personal recommendation to This document is intended for the sole use of Goodbody Investment Banking and its affiliates you.

Private customers having access, should not act upon it in anyway but should consult with their independent professional advisors. The price, value and income of certain investments may rise or may be subject to sudden and large falls in value. You may not recover the total amount originally invested. Past performance should not be taken as an indication or guarantee of future performance; neither should simulated performance. The value of securities may be subject to exchange rate fluctuation that may have a positive or adverse effect on the price or income of such securities.

All material presented in this report, unless specifically indicated otherwise is copyright to Goodbody. None of the material, nor its content, nor any copy of it, may be altered in any way, transmitted to, copied or distributed to any other party, without the prior express written permission of Goodbody.

Goodbody, Ballsbridge Park, Ballsbridge, Dublin 4, Ireland T (+353 1) 6670400 W www.goodbody.ie E [email protected] Page 7 26 Apr. 21