Morning Wrap Today ’s Newsflow Equity Research 26 Feb 2021 08:22 GMT Upcoming Events Select headline to navigate to article Glenveagh Properties Orderbook momentum continues Company Events despite the lockdown 26-Feb FBD Holdings; FY20 Results Glenveagh Properties; FY20 Results FBD Holdings FY20 Results better than expected, though LafargeHolcim; FY20 Results 02-Mar Dalata Hotel Group; FY Results prior year dividend accrual removed Flutter Entertainment; FY20 results Supermarket Income REIT; HY Results IAG In line loss of €6.9bn for 2020 Travis Perkins; FY20 results 04-Mar Entain; FY20 Results Building Materials Another strong close to the year with LafargeHolcim 7% ahead on Q4 Bunzl FY20 Preview – Timing a return to ‘normal’ Greencoat Renewables Further addition onshore Ireland Irish Banks Poor start to card spending data in January, trends better February UK Economic View Sunak to lay out a path to normality in Economic Events next week’s Budget Ireland 01-Mar Retail Sales Jan21 03-Mar ILO Unemployment Rate Feb21 05-Mar Foreign Direct Investment Q4 United Kingdom 26-Feb Nationwide House Prices Feb21 01-Mar BoE Mortgage Approvals Jan21 CIPS Manufacturing PMI Feb21 03-Mar CIPS Services PMI Feb21 04-Mar CIPS Constuction PMI Feb21 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 Glenveagh Properties Orderbook momentum continues despite the lockdown Glenveagh Properties released FY20 results this morning. Management highlights that Recommendation: Buy demand for housing “continues to be strong” and “market fundamentals are in the Group’s Closing Price: €0.82 favour”. The key takeaways for us are: i) Guidance maintained - Despite the ongoing level 5 lockdown in Ireland, Glenveagh is maintaining guidance for a total of 1,150 completions in Dudley Shanley +353-1-641 9174 2021 (1,000 core and 150 non-core), and; ii) The strength of the orderbook – The orderbook [email protected] now stands at 950 units sold, signed or reserved (including the majority of the remaining 150 noncore units), up strongly from the 687 units at the end of December. This includes 85 reservations for cost rental units from an AHB this year and strong uptake from private buyers. It leaves Glenveagh c.83% forward sold for FY21. Following the FY20 update in January there are no surprises in the numbers. Total units of 700 (655 core & 35 non-core) delivered revenue of €232m with core ASP of €311k and core revenue of €208.7m. Gross profit of €9.5m (4.1% gross margin) was after the non-core impairment of €20.3m. The underlying gross profit was €29.8m and the underlying gross margin was 14.1%. As expected, there was an operating loss of €13m in FY20. Net cash of €36m is as per the January update. In the statement management call out HPI in the starter homes segment increasing from marginally positive in H1 to +3% in H2. Given the length of the current orderbook, it will be 2022 before this impact is truly felt. It is positive to see HPI starting to come through although it is pretty much in line with our current forecast for underlying HPI of 0% in 2021 and 3% in 2022. Management also guides towards 3% CPI in 2021 which is also broadly in line with our forecast. On gross margin, Glenveagh expects it to be in excess of 16% in 2021 and continued progression in 2022 towards 17%. Again, this is broadly in line with our current forecasts therefore we expect no material changes to our forecasts. The refinancing has been completed with the signing of a new five-year €250m financing deal comprising of a €100m term component and a €150m committed RCF. €54m of non- core cash proceeds have been received to date with a further €42m contracted for 2021 and Glenveagh’s ambition remains to scale the business to 3,000 units by 2024. At the AGM on the 27th of May, management plan to give shareholders updated guidance on capital allocation, the leverage policy and medium-term ROE targets for the group. Overall, given the circumstances this is a very solid update from Glenveagh and we continue to believe the significant discount to NAV is unjustified. This document is intended for the sole use of Goodbody Stockbrokers and its affiliates Home… Page 2 26 Feb. 21 Goodbody Morning Wrap FBD Holdings FY20 Results better than expected, though prior year dividend accrual removed FBD reported a FY20 pretax profit of €4.8m, much better than our €14m loss expectation. Recommendation: Buy GWP of €358.2m was in line, however, claims of €231.1m were much lower than our €255m Closing Price: €7.36 estimate, partly due to a lower than expected BI provision and a prior year reserve release of €23m. FBD has made a provision of €65.3m relating to its BI court judgement (€70m Eamonn Hughes +353-1-641 9442 expected). Elsewhere, operating costs were in line, whilst investment income was better. As [email protected] a result, NAV per share of 1095c is c.8% higher than forecast. The SCR at 197% is much better than the 177% expected, partly from the better P&L, but mainly because the unpaid 2019 dividend is no longer accrued (adds c.14-15ppts) “given the continuing uncertainty prevailing”. In terms of outlook, FBD guides a current year COR of “approximately 90% absent exceptional weather”. Overall, the FY20 outcome is much better than anticipated down through the P&L, with lower claims costs than expected, only a small underwriting loss, better investment income and the higher SCR. Also, COR guidance for FY21 of c.90% vs our 92.4% estimate could add c.15% to our FY21 net profit. However, we think investors may be disappointed by the un-accrual of the FY19 dividend. Home… IAG In line loss of €6.9bn for 2020 FY20 results came in with an operating profit loss of €4,365m vs consensus of €4.45bn and Recommendation: Hold GBY €4.43bn, so a very small beat. With exceptional charges coming in at €3.06bn, the net Closing Price: £1.86 loss for the year was €6.92bn. Mark Simpson +353-1-641 0478 Net debt at the end of the year was €9.7bn, with liquidity of €8.1bn. This was a better [email protected] performance than we had forecast, helped in part by €600m higher ‘deferred revenue on ticket sales’ on the balance sheet than we expected at €5.13bn. The liquidity position has also been improved into this financial year with the UKEF loan of €2.2bn. This document is intended for the sole use of Goodbody Stockbrokers and its affiliates Cash burn estimates for Q121 are given as €185m a week, down from the €215m a week outrun for Q420, with the company making the statement that it 'has sufficient liquidity for the going concern assessment period to March 31, 2022'. This alleviates concerns over the shorter-term that investors will be tapped for a second time, although with further losses expected this year (GBY operating profit loss forecast of €744m), shareholders funds at end FY20 at only €1.3bn and cash flow positive not expected until 2022, another rights issue can't be ruled out in the medium term. Home… Page 3 26 Feb. 21 Goodbody Morning Wrap Building Materials Another strong close to the year with LafargeHolcim 7% ahead on Q4 LafargeHolcim released FY20 results this morning. Q420 sales of CHF 5,994m (2% ahead of David O’Brien consensus), reflected a return to growth with lfl of 1.5% yoy (Q320: -2.6% yoy, Q220: -17% +353-1-641 9230 yoy, Q120: -3.3%% yoy). This translated into an EBIT of CHF 1,037m, up 14.1% on a lfl david.a.o’[email protected] basis (compares to +10% yoy in Q320, -26% yoy in Q220, and -2.6% yoy in Q120) and is a Robert Eason c.7% beat on consensus, driven by all divisions. From a regional perspective, Latin America +353-1-641 9271 was the stand-out performer in Q4 with lfl sales up 20% yoy and an EBIT lfl increase of 42% [email protected] yoy. Indeed, the only region that didn't report strong double-digit profit growth in the fourth quarter was Asia Pacific. Net debt decreased by c.CHF 1.6bn leaving leverage at 1.4x, Shane Carberry +353-1-6419118 slightly ahead of the group’s target. [email protected] In the outlook, it is noted that in 2021 the group expects; 1). Recurring EBIT growth of at Dudley Shanley least 7% lfl in line with Strategy 2022; 2). Cash conversion of >40% & net debt leverage +353-1-641 9174 below 2x; and 3). Capex less than CHF 1.4bn. [email protected] Other takeaways from the release; (i) Softening of the tailwinds seen from price cost from €288m in Q220 and €267m in Q320 to €102m in Q4; and (ii) Growth in the European region in Q4 with Western Europe rebounding the strongest.