Morning Wrap Today ’s Newsflow Equity Research 20 May 2021 08:30 BST Upcoming Events Select headline to navigate to article easyJet Nothing really to report in the H121 release Company Events 20-May easyJet; Q221 Results Builders Merchants Kingfisher delivers blow out Q1 LFL’s 24-May Hilton Food Group; Q121 Trading Update and a strong start to Q2 25-May Greencore; Q221 Results Harworth Group; AGM Fever-Tree Drinks AGM statement indicates trading is in- 26-May British Land Company; FY21 Results Hibernia REIT; FY Results line with expectations Games Workshop Group FY21 Trading Update signals strength of online offering Irish Banks ECB stability review highlights risks still in system; Climate risk becoming more embedded Irish Banks PTSB drops a few clues on Ulster Bank process at its AGM Irish Economic View Ireland appears to be making other friends, trade data shows Economic Events Ireland 21-May PPI Apr21 Wholesale Price Index Apr21 United Kingdom 21-May Retail Sales 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<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 easyJet Nothing really to report in the H121 release th With the headline H121 numbers pre-released on April 14 and the return to the skies Recommendation: Buy stalled until the Q4/September quarter, there was little in this morning’s release for the Closing Price: £9.83 market to get its teeth into. Mark Simpson +353-1-641 0478 The headline pre-tax loss was £701m before an exceptional profit of £56m (mainly from [email protected] SLBs), versus the pre-gain guidance given on April 14th for a loss of between £690-730m; consensus stood at a loss of £706m. On a reported basis, the pre-tax loss came in at £646m vs last year’s loss of £353m (which included a £160m charge). Balance sheet liquidity stood at £2.9bn as guided, while net debt stood at £2bn vs £1.13bn at the end of September 2020. Q221 cash burn at £38m/week per week on average outperformed the guidance for £40m/week given at the Q1 trading update. Other balance sheet items of note saw unearned revenues and trade payables increase by £48m and decrease by £441m respectively over the last six months, while trade receivable decreased by £43m for a net change of £350m in cashflow from these item. Looking forward the company ‘Outlook’ statement says ‘Based on current travel restrictions in the markets in which we operate, easyJet expects to fly c.15% of 2019 capacity levels in Q3 with an expectation that capacity levels will start to increase from June onwards.’ Previously, the April trading update suggested it would fly up to 20% of Q319 capacity, demonstrating the restrictions that current governments’ travel policies are having on activity levels. The fairly neutral outlook presented by the company will change over the next few months, with much Q421 stronger pre-sales expected to be reported in the Q3 release, but in the short-term the market will see this release as ok but not a catalyst for performance. Home… This document is intended for the sole use of Goodbody Investment Banking and its affiliates Page 2 20 May. 21 Goodbody Morning Wrap Builders Merchants Kingfisher delivers blow out Q1 LFL’s and a strong start to Q2 Yet again the current strength of RMI is demonstrated by Kingfisher (KGF) who issued a very David O’Brien strong Q1 trading update this morning. KGF’s UK and Ireland LFL sales were up +65% yoy or +353-1-641 9230 38.6% versus 2019. As has been the case until now DIY is outperforming Trade with B&Q david.a.o’[email protected] delivering LFL's of +82% (+42% on a 2-year basis) and Screwfix delivering LFL's of 39% Robert Eason (32.5% on a 2-year basis). +353-1-641 9271 [email protected] Group Q2 LFL sales to the 15th of May are +8.2% yoy or +25% versus 2019 reflecting continued strength in the UK and France and the re-opening of stores in Poland. Q2 LFL’s in Shane Carberry +353-1-6419118 the UK are slightly lower than the Group lower at +6.8% or +24% on a 2-year basis. As a [email protected] result of the strength of Q1 and Q2 to date management are increasing the LFL sales outlook for H1 to mid to high teens from low double digits. KGF now expects H1 adjusted PBT to be Dudley Shanley ahead of previous expectations, in a range of £580m-£600m (Bloomberg consensus is +353-1-641 9174 £480m).Despite the strong start to the second quarter, H2 LFL sales guidance is unchanged [email protected] as KGF is planning for LFL scenarios of -15% to -5% (2-year LFLs of -1% to +11%), this Kate McCarthy looks very conservative given the current LFL sales run rate. +353-1-641 9005 [email protected] Specifically for Wickes, Kingfisher comments that B&Q’s new exclusive brand Kitchen range continues to perform well despite lockdown restrictions and it is encouraged by the uptake of the newly introduced installation services suggesting that Kingfisher is starting to gain some traction in kitchens. Home… This document is intended for the sole use of Goodbody Investment Banking and its affiliates Page 3 20 May. 21 Goodbody Morning Wrap Fever-Tree Drinks AGM statement indicates trading is in-line with expectations Fever-Tree provided a trading statement this morning ahead of its AGM later today. Overall, Recommendation: Sell despite the continued restrictions and increasing logistic cost pressures, sales performance Closing Price: £25.66 has been strong, and trading has been in-line with Group expectations. This reflects a strong off-trade performance, particularly in the US (+38% yoy), and the Group is focused on Patrick Higgins +353-1-641 0403 working with partners to drive the recovery in the on-trade as it reopens. [email protected] In the UK, the off-trade channel remained robust at +10% in the 13 weeks ending 18 April which was ahead of the wider mixer category. While no details have been provided on the performance in the important UK on-trade channel since its reopening and it is too early to predict the pace of the on-trade recovery, there is renewed optimism for H2 given its phased reopening. In the US, while the on-trade channel is gradually reopening on a state-by-state basis, sales in the off-trade remained robust (+38% in the 12 weeks up to 27 March), again ahead of the mixer category. In Europe the on-trade recovery has lagged the UK and US, though the Group has delivered continued progress in the off-trade. Finally, Fever-Tree has continued to grow strongly in RoW, albeit from a low base. Of interest, Australia, where the on-trade has been open for a few months, has seen a good recovery in suburban areas though city centre demand is taking longer to return. As a reminder, at the time of the FY20 results in March, the Group guided FY21 revenue growth of 12-16% with the UK at +6-9%, while margins were guided to be broadly flat yoy. The mid-point of the range implies EBITDA growth of c.14% which compares to our forecast for c.15% growth. Overall, we consider today’s update from Fever-Tree to be broadly in-line. Growth in the US and UK off-trade has been strong which is encouraging, however, we note it now begins to lap much tougher comps so the pace of the on-trade recovery will become key to delivering growth in H2. Furthermore, the increasing logistic cost pressures may weigh on margins. With the stock up c.20% since its FY20 results, Fever-Tree now trades on an FY22 PE of c.49x (42x historic average). As a result, we remain cautious as we consider this valuation to be stretched given the scope for disappointment over the medium term on US growth and margin progression. Home… This document is intended for the sole use of Goodbody Investment Banking and its affiliates Page 4 20 May. 21 Goodbody Morning Wrap Games Workshop Group FY21 Trading Update signals strength of online offering GAW released its trading update this morning in respect of FY21. Revenue is expected to be Recommendation: Buy not less than £350m, c.30% y.o.y growth in line with our forecasts whilst PBT of £150m Closing Price: £110.30 (42.8% margin), is 7% ahead of our expectations and 68.5% ahead y.o.y. That is likely down to a higher share of online sales (Goodbody: 22%). Licensing revenue is in line with Patrick O'Donnell +353-1-641 6013 our expectations at £15m. Total dividend per share is 235p up 62% y.o.y in line with group [email protected] policy of distributing excess cash. The group will report full year results on July 27th.