Davy Morning Equity Briefing

Sep 18, 2019

Market Comment

Bounce back in SME lending in Q2 2019 a temporary Brexit reprieve

On September 17th, new Irish SME lending figures were better than expected, bouncing back after poor figures in Q1, no doubt hurt by Brexit uncertainty. However, this may only be a temporary reprieve after the original March 29th deadline, with uncertainty set to hit loan demand again in H2 2019. Total corporate lending grew by 4.8% to €42.5bn, evidence that Ireland’s strong economic performance is creating loan demand from larger companies.


Results highlight extent of the challenges ahead for incoming CEO

Kingfisher’s interim results highlight, not that this is in any way needed, the challenges facing incoming CEO Thierry Garnier (H1 underlying pre-tax profits down 6% year-on-year (yoy)). He will inherit a business that is attempting a complex transformation at a time when the DIY industry is grappling with massive structural upheaval. It is clear that the job to reboot Kingfisher remains a huge task. While first-half profits were better than forecast, our initial reaction is that we are likely to trim our underlying full year pre-tax profit forecast by 2-3%. We believe the uncertain outlook for the group will continue to weigh on a share price that has been anchored around the 200p level.