Morning Wrap Today ’s Newsflow Equity Research 16 Jun 2020 09:00 BST Upcoming Events Select headline to navigate to article Team17 Group Strong Trading Update Company Events 17-Jun Berkeley Group; FY20 Results First Derivatives FDM AGM Update comforting for FD’s Domino's Pizza Group; Q120 Trading Update consulting business Kingfisher; FY20 Results Origin Enterprises; Q3 trading update Harworth Group Commercial plot sale at Logistics North 23-Jun Cranswick; FY results Irish Economic View Reigniting the economy an immediate focus for the new government Irish Banks Programme for Government – Impact on banking and insurance sectors Economic Events Ireland United Kingdom United States Europe This document is intended for the sole use of Goodbody Stockbrokers and its affiliates Goodbody Capital Markets Equity Research +353 1 6419221 Equity Sales +353 1 6670222 Bloomberg GDSE<GO> 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 Euronext Dublin 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 Team17 Group Strong Trading Update Team 17 released a trading update this morning ahead of interim results in September. The Recommendation: Buy company experienced strong sales during the period with the back-catalogue outperforming Closing Price: £5.16 expectations particularly during peak lockdown in April and May. Team 17 note strong traction for its multiplayer and co-op titles including Worms, Overcooked and The Escapists, Patrick O'Donnell +353-1-641 6013 Hell Let Loose and Golf with Your Friends. This commentary mirrors the strong performance [email protected] we have identified in the Goodbody Monthly Game Tracker. The business has transitioned smoothly to remote working, with three new games released successfully during the period. In terms of outlook whilst no guidance is provided in respect of FY20, the statement notes a strong launch profile in H2, with a mixture of owned and third-party IP. This morning’s statement is positive in respect of the continued delivery of Team17’s back catalogue and the heavily weighted H2 launch profile increases the prospect of further upgrades in 2020. We currently model organic revenue growth of c 20%, ahead of consensus *10%. We retain our BUY recommendation and PT of £6.50. Home… First Derivatives FDM AGM Update comforting for FD’s consulting business Last April FDM Group, which is an IT consultant serving clients across the globe, and thus a Recommendation: Buy proxy, in our view, for FDs consulting business, issued a Q1 and COVID-19 Update, which Closing Price: £23.30 highlighted that revenue for the quarter to March amounted to £71.0m up 6% YoY, despite the fact that the number of consultants placed with clients declined 3% YoY to 3,848. Gerry Hennigan +353-1-641 9274 [email protected] Commentary on performance at the time indicated that post-lockdown a number of consultants have had their placements terminated early by clients operating in sectors badly affected by COVID-19 and that the company has also been experiencing a reduction in the weekly number of new deals, with some clients needing additional time for the remote on- This document is intended for the sole use of Goodbody Stockbrokers and its affiliates boarding of consultants to new placements. In a statement this morning, ahead of its AGM the company indicates that "following the Group's First Quarter Trading and Covid-19 update given on 30 April 2020, the Group has traded comfortably in line with the Board's revised expectations.” As a marker of the relative resilience of First Derivatives consulting business, which grew by just 3.4% for the year to February, the statement from FDM provides a degree of comfort that any impact from the pandemic has on the face of eased, rather than deteriorated since March. Home… Page 2 16 Jun. 20 Goodbody Morning Wrap Harworth Group Commercial plot sale at Logistics North Harworth Group (HWG:LN) announced in a press release yesterday that it has sold a further Recommendation: Buy 2.2 acres of commercial development land at Logistics North, southwest of Bolton at a price Closing Price: £1.03 above book value. A&F forecourts purchased the site for an undisclosed sum, with construction due to get under way in September for a petrol filling station, forecourt shop, Colm Lauder +353-1-641 6042 car wash and electric vehicle charging points that all have planning permission. [email protected] This is A&F’s second acquisition at Logistics North following the purchase of a 0.7 acre plot last December. Logistics North is the largest live commercial development scheme in the North West of England and is now nearing completion with two plots left to be built out. Plot H, a 4.4 acre site has a reserved matters planning application submitted with the site capable of accommodating a 50,000 sq.ft unit. Multiply Logistics North, the Harworth and LPPI Real Estate c/o Knight Frank IM joint venture working at the scheme has reserved matters planning consent in place for a unit of up to 130,000 sq.ft at Unit F2/H. World leading tenants such as Amazon, Komatus, Costa, Aldi, Whistl, MBDA and Greene King have all located at the site since the development got underway following the receipt of outline planning consent at the end of 2013. It is again welcome to see Harworth make another land sale at a price above book value, with the success of Logistics North a prime example of the skills Harworth has for commercial developments, as the industrial/logistics market continues to be the best performing sector of UK property. Harworth has plenty more commercial development opportunities in the tank following the completion of Logistics North, with 9.1m sq.ft of commercial space consented at FY19. Home… This document is intended for the sole use of Goodbody Stockbrokers and its affiliates Page 3 16 Jun. 20 Goodbody Morning Wrap Irish Economic View Reigniting the economy an immediate focus for the new government With a focus on increased public spending on housing and healthcare, no mention of tax Dermot O’Leary cuts, and ambitious policies to reduce carbon emissions, the programme for government +353-1-641 9167 [email protected] finally agreed upon by the leaders of Fianna Fáil, Fine Gael and the Green Party represents a shift to the left in policy formulation in Ireland. This was inevitable and reflects the changed political arithmetic brought about by the 2020 General Election. It is not, however, a radical shift; the new government continues to support Ireland's long-held strategy of incentivising FDI through the 12.5% corporation tax rate and its position "at the heart" of the EU. While there are plenty of promises of reviews, taskforces and commissions, there are clear commitments in the document on the government’s plans to reignite the economy in the short-term. This will commence with a “July stimulus” that will include announcements on infrastructure, reskilling and retraining and measures to help companies access credit and capital. The final element here is crucial and may include further support for SMEs, an area where we have significant concerns. This will be followed by a national economic plan as part of October’s budget that will focus on education, investment, enterprise, finance regulation and costs. By that time, more information will be available about the damage that has been done to the economy and the public finances by the pandemic. With the parliamentary groupings of the three parties strongly endorsing the deal, it is likely that the deal will be backed by party members over the next two weeks, paving the way for the appointment of a Taoiseach and government before the end of the month. There are plenty of challenges ahead for the new government, but an end to political uncertainty about the formation of a government is welcomed. See our note last night for more details. Home… This document is intended for the sole use of Goodbody Stockbrokers and its affiliates Page 4 16 Jun. 20 Goodbody Morning Wrap Irish Banks Programme for Government – Impact on banking and insurance sectors The incoming government (subject to party votes) published its “Programme for Eamonn Hughes Government” (PFG) yesterday. You can read the separate detailed commentary from our +353-1-641 9442 economics team and clearly some of the macro developments/aspirations will be important [email protected] for the banks, like on housing in the form of a retained and expanded Help-to-Buy scheme, Barry Egan but we want to focus on the specific remarks on the banking and insurance sectors. +353-1-641 6059 [email protected] In relation to the Banking sector, the PFG specifically states that the parties “do not believe there is a long-term case for the State to remain as a shareholder in the Irish banking sector. However, we should not sell our current holdings until such a time as we are likely to recoup a significant portion, if not all, of the State’s investment”. In the July recovery plan, it will introduce measures to help Irish companies in accessing credit and capital and this may include the consideration of an enhanced credit guarantee scheme for which we have been advocating. There will be an SME Growth Taskforce to design a growth plan for the long-term strategic plan for the sector.