Mark Carney

23 Aug 2019

Irish builders: Glenveagh Properties - H119 in line, CEO departs

GLV H119 results this morning. 

Numbers below look solid and in line with management and consensus expectations, but CEO Justin Bickle has also announced he is stepping down immediately to return to live in the UK. He will be replaced by COO and co-founder Stephen Garvey which should allow for a smooth (if surprising) transition. The board has also been buttressed by two additions (Pat McCann the CEO of Dalata Hotel Group and Cara Ryan). 

The H1 results show revenue of €45.5m (H118 €1.3m), driven by 158 unit sales (H118 6 units), generating a gross profit of €7.5m (H118 €0.3m), EBITDA loss €2.2m (H118 loss €7.7m) and pro-forma/underlying gross margin of 17.6% (H118 16.7%). Net loss after tax of €3.5m (H118 net loss €7.2m). Net debt of €42.1m, with €193m investment in work-in-progress out of total inventory of €903m (capable of delivering c.13,350 units). The Group expects delivery of 725 units in 2019 with 455 now through practical completion. Construction cost inflation remains in line with expectations at less than 3%. 

Management intend to provide an updated business plan in Q120 (alongside a CMD) now that the initial IPO-business strategy is fully up and running, noting that this should therefore be able to take into account any impact from Brexit and the Irish government's review of the HTB scheme. 

Irish builders: SCSI/CBI residential property survey sees price expectations fall 

A survey produced by the Society of Chartered Surveyors in Ireland and the Central Bank of Ireland has found that professionals working in the industry (surveyors, estate agents, auctioneers) have become notably more pessimistic on their expectations for house price development in Ireland over the next twelve months. 

The Q219 survey results indicate that 46% of respondents believe that Irish residential property prices will rise over the next year, down from 78% in Q218 and 63% in Q119, with 26% expecting house prices to fall over this period. However, 55% of participants expect house prices to grow over a 3-year period, down from 82% in Q218. Regionally, one third of respondents believe Dublin house prices will be higher in 12 months’ time, with 38% expecting lower prices.

The survey results are indicative of the decline in sentiment for residential property prices across the sector in H119 and are consistent with the slowdown in property price growth and the sluggishness seen in both new mortgage lending and new home construction this year. While the outlook remains supported by the continued demand-supply imbalance, which leads the path of least resistance for both rents and capital values higher, the outlook is certainly more balanced than it would have been at the start of the year.


Donegal Investment Group: Smyth disposal completed

Donegal this morning announced the completion of the sale of its animal feeds business, Robert Smyth & Sons Ltd and it subsidiary companies, including Burke Shipping Services Ltd, to Fane Valley Co-Operative Society, approval having been granted by the Competition and Consumer Protection Commission. The terms of the deal remain unchanged from those originally announced on the 3rd of July. Fane is acquiring Smyth for a €17.25m cash consideration. 

At the time of the original announcement, management noted that the proceeds from the transaction will be used by Donegal for general corporate purposes. This disposal follows a number of similar transactions over the past three years as the company continues its stated objective of concentrating on its core businesses, which continue to be its seed potato enterprise and specialty dairy business Nomadic. 

Jackson Hole

Today marks the first full day of the Kansas City Fed’s annual Symposium, held in Jackson Hole, Wyoming. Historically, this has been used to signal shifts in the Fed’s thinking. As such, markets will be paying particularly close attention to Fed Chair Jerome Powell’s speech on the “Challenges for Monetary Policy” at 3:00pm Irish time which will mark his first public comments since the latest round of tariffs were announced. 

We got some rather hawkish/neutral Fedspeak from a selection of the regional US presidents. Philly president, Patrick Harker, commented that he feels “we should stay here for a while and see how things play out” while Dallas president, Robert Kaplan, hawked it up more saying “I’d like to avoid having to take further action.” 

Note that Bank of England Governor Mark Carney is set to give the luncheon address at 8:00pm Irish time this evening which may provide a steer on the path for UK monetary policy. 

EZ PMI’s surprise on the upside

The ‘flash’ Eurozone composite PMI, released yesterday morning, rose to 51.8 in August from July’s three-month low of 51.5. Both consensus and Investec Economics expectations had been for a fall to 51.2. Underpinning the improvement was a half point rise in the manufacturing PMI to 47.0, while further support came from the services PMI edging up to 53.4 from 53.2. Note, however, that firms were the least optimistic in their year-ahead outlook since May 2013. 
Survey compilers IHS Markit, reported that sentiment had softened throughout the Eurozone, but most acutely in Germany where firms were downbeat about their prospects for the first time in almost five years. 

The benchmark EUR/USD rate briefly broke up through $1.1100 the news but the spike was short lived, it opens this morning in/around $1.1070.

ECB account 

The account to the July ECB Governing Council (GC) meeting failed to deliver any real headline grabbing surprises, however a read through the details provides a moderately clear hint that the ECB is preparing to ease policy. 

There are a few key points to note. Firstly, the ECB acknowledges that whilst information received since the June GC had generally been soft; it had been more or less in line with the June projections. Secondly, a view was expressed that whilst the slowdown in manufacturing had been offset by robust growth in the service sector, the divergent performance could not last forever and that manufacturing was typically a leading indicator for services. Thirdly, there were more worries about inflation expectations. 

In recent press conferences, President Draghi had pushed back against the decline in market-based inflation expectations, however the account notes that a fall in survey-based forecasts, combined with the decline in market measures represented a ‘matter of concern’. Our central view is that the ECB will now cut the deposit rate 10bps to -0.50% and restart QE at a month pace of €60bn at its September meeting.

Economic Releases

15.00  US   Powell speaks in Jackson Hole

20.00  UK   Carney speaks in Jackson Hole