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Rachael Cairns of Goodbody commented -- "First Derivatives released
its FY13 results this morning with revenue +22.5% yoy to £56.5m
(-3% versus our forecast of £58.1m primarily due to the delay in revenue
the ASIC deal). Adj. EBITDA (Goodbody definition) of £11.0m was 5% ahead of our
forecast which was due to a slightly higher gross margin, higher other income
In Consulting, the group delivered strong yoy growth of 27% to £41.5m versus
of £42.5m driven by growth in existing and new clients (15 new customers added
consulting during the year). In Software, the group reported revenue growth of
11% for the
year to £15m versus our forecast of £15.6m. This implies H2 growth of c.16%
versus H1 of
7.2%. Recurring revenue was +36.2% within Software and the statement notes that
trend has continued into FY14. This increase offset a decrease in legacy income
Cognotec acquisition of -62% yoy.
In terms of current trading, the group notes that in addition to its
traditional pipeline it has a
strong pipeline of larger prospects arising from the group’s push into Big Data.
the group highlights that it is well positioned for the exchanges/ regulators’
expects that it will make a number of announcements in this area in the coming
On the balance sheet, the group reported net debt of £22.2m, up from £20.9m. In
the group has disposed of seven properties in the year giving a profit of £0.7m.
has announced a final dividend of 8.4p per share leaving the full year dividend
Overall, FY13 represents another year of double-digit revenue growth and
growth. In terms of FY14, we will bring back our forecasts by 7% to £12.8m given
the longer expected sales times associated with exchanges/regulators. However,
we remain positive on the story given the still strong rates of growth that the
company is able to deliver in both divisions, the positive outlook for new
and the apparent progress the company has made in terms of its software offering
through the increase in recurring revenue which gives better revenue visibility.
"In very subdued markets overnight we had a
mixed bag of positive and negative equity performances with U.S. markets
posting small gains and most Asian markets closing in the red;
FX markets are equally as dull with most
currency pairs stuck in very tight ranges ahead of the all important FOMC
announcement on Wednesday evening;
Mr. Bernanke can only be upbeat in relation
to the housing market with yesterdays NAHB homebuilder sentiment index (52
versus 44 previous and 45 consensus) printed at its highest level since the
onset of the US housing crisis in March of 2006;
The German ZEW sentiment index is the key EZ
economic release later this morning and we can expect some rolling rhetoric
as the NI G-8 summit winds down later today."
Conall Mac Coille, chief economist at
Davy, comments - - "Stock indices rose on Monday,
driven by positive US data on the housing market and industrial production. The
Euro Stoxx gained 1.3% and the S&P500 rose 0.8%. US Treasury yields increased by
5 basis points to a peak close to 2.18%. The US national homebuilder confidence
survey rose to its highest level since early 2006, indicating that the housing
market recovery is well underway. US CPI inflation is today’s key release and is
expected to rise to 1.4% in May, ahead of tomorrow’s Federal Reserve policy
US housing market recovery gathers pace
Stock indices rose on Monday: the Euro Stoxx 50 gained 1.3% and the S&P500 0.8%.
Positive data on the US economy helped sentiment ahead of this week’s Fed policy
meeting. US ten-year bond yields increased almost 5 basis points through the day
to peaks close to 2.18%. The US Empire Manufacturing survey rose sharply in
June, back into positive territory – relieving worries on recent poor industrial
production data and the fall in the ISM manufacturing survey below the 50 no
Furthermore, the US national homebuilders confidence survey posted a massive
gain to 52 in June from 44 in May. This is the highest survey reading since
early 2006 – indicating that the US housing market recovery is well underway and
reinforcing expectations that today’s housing starts release will show a rebound
in June to 950,000 from 853,000 in May. Although housing starts fell back
sharply in May from levels exceeding 1m, building permits continued to rise. So
the fall back in US housing starts in May is likely to be temporary.
With the pace of the Fed’s quantitative easing programme a key focus, investors
will closely watch today’s US CPI inflation releases. A rise in the headline
rate from 1.1% to 1.4% in May is expected. But the core rate excluding food and
energy is expected to be flat at 1.7%. In a similar vein, UK CPI inflation is
expected to rise from 2.4% to 2.6% in May as price declines in 2012 fall out of
the annual comparison. Again, surprises in the UK inflation rate could change
expectations for further monetary stimulus from the Bank of England."
Economic View: Ireland passes 10th review; Dermot O'Leary, chief
economist at Goodbody comments - - "Following the completion of the tenth review
of Ireland’s programme, the IMF once again gave the go-ahead for the
disbursement of a further €0.95bn in funding yesterday. In its statement, the
IMF gave now familiar compliments about the “steadfast policy implementation” of
the Irish authorities to date. It also states that fiscal targets for 2013
remain on track and welcomes the commitment to savings in the public sector pay
and pensions bill. In relation to the savings resulting from the promissory note
transaction, the IMF is quite cautious, saying that the savings “provide an
opportunity to help build buffers against shocks”. In other words, the IMF is
saying that the savings should not be used to slow down fiscal consolidation.
In terms of risks, the IMF says that the economic recovery is “not well
established and risks to debt sustainability remain”. Dealing with mortgage
arrears and troubled SME loans is mentioned as key priorities in the banking
sector, while the strengthening of employment services will be necessary to
tackle the issue of structural unemployment. These are all familiar risks, but
the leaked European Commission report on the 10th review is significantly more
pointed in its concerns to the Irish programme. Media reports highlight European
Commission warnings on competitiveness issues in some sheltered sectors,
long-term unemployment problems and SME debt.
A difference in opinions between the three Troika partners has been in place
since the beginning of the programme, with the IMF continuously pushing for more
efforts in relation the banking union in particular from European leaders. There
is surprisingly little mention, as far as we can see, of the potential need for
a precautionary programme, but we would expect to hear a lot more talk about
this issue in the coming months as the end of the programme nears."
Banks 1: Spain to proceed with stress tests this year; Eamonn Hughes and
Colm Foley of Goodbody comment -- "The Bank of Spain is planning to conduct
stress tests on Spanish banks this year according to reports in Spanish
newspaper Expansion’s Tuesday Internet edition. The plan is to conduct the tests
at the beginning of autumn, ahead of the stress tests planned by the European
Central Bank and the European Banking Authority at the end of 2013 and early
Notwithstanding the likely Troika exit at the end of 2013, a decision was made
last week to align the Irish bank tests with the EBA/ECB ones next year
(previously it was pencilled in for the autumn). This has removed some timeline
headaches for the banks and gives BOI more time to deal with the step up in its
preference shares slated for next March (step up at AIB is in May 2014).
Our base case is that BOI raises €1-1.15bn of capital to pay off the €1.8bn of
preference shares, but pension savings, disposals and RWA mitigation may go some
way in delivering this target. We have a Buy on the equity and are positive on
the BKIR co-cos."
Banks 2: Possible EU proposals to issue loss absorbing securities; Hughes
and Foley add - -"Bloomberg ran a story in which a proposal from the UK,
Netherlands and Finland could see minimum targets for issuing debt and other
liabilities written down by regulators in a crisis. The targets would be set
centrally for banks that are systemically important but rules for smaller banks
would be set by national regulators. The proposal is that systemically important
banks should be forced to issue loss absorbing securities, whose value is
equivalent to 15% of risk weighted assets or 10% of total capital & liabilities.
In the case of AIB, these targets on the end 2012 balance sheet would range from
€11-12bn, with a range of €8.5-13bn at BOI, though there are no time-lines set
as yet for the proposal. Looking at loss absorbing capital, our starting point
is probably to look at the transition rules Basel III estimated capital ratio at
end 2013. However, from this we would probably take off the deferred tax asset
and pension deficit, but add back the contingent convertible (the main tier 2
capital in the banks). This measure implies an estimated €6.0-6.5bn base at AIB,
implying a c.€5bn requirement on this measure. We note the bank had €6bn of
senior debt in issuance last December. In the case of BOI, the equivalent figure
is €5.5-6.0bn, but just €3bn+ below the minimum hurdle, with unsecured funding
of €8bn last December.
Should this proposal come to pass and obviously timelines are uncertain, it
would appear that AIB may have to consider relatively more issuance at a future
date. This would obviously come at a greater cost to the P&L account."
Banks 3: Fitch shows Irish RMBS arrears still rising in quarter to April;
They further comment - - "Fitch published its latest evaluation of the
residential mortgage backed securities market to April with 90 day delinquency
trends rising from 17.3% to 18.1%. The 360-day arrears figure, which is often
seen as a proxy for defaults, rose from 8.5% to 9.4%.
Irish RMBS accounts for an estimated 40% of the total market. Q1 mortgage
arrears data for the market are due on Friday from the Central Bank, the most
complete dataset available, but it is clear arrears are still rising.
Our base case is that arrears should start to
plateau in the owner occupier market over the summer, with buy-to-let
stabilising later in the year or early 2014."
In New York Monday, the Dow rose 110 points or
0.73% to 15,180.
The S&P 500 added 0.76% and the Nasdaq advanced
The MSCI Asia Pacific Index
slipped 0.20% Tuesday.
The Japanese Nikkei 225
0.20%; China's Shanghai
Composite dropped 0.41%;
Korea's Kospi index rose 0.93%;
Australia's S&P/ASX 200 declined 0.24%;
in Mumbai, the Bombay Stock Exchange the S&P BSE India Sensex Index dropped 0.53%.
the Dow Jones Stoxx Europe 600 is up 0.15%
in mid-morning trading Tuesday.
for the first year since the futures were created, Brent crude is poised to
overtake West Texas Intermediate (WTI) oil as the world’s most-traded commodity.
in Brent jumped 14% to average 567,000 contracts in the year to November 20
compared with all of 2011, while WTI fell 17% to 575,000, according to data from
the ICE Futures Europe exchange in London and New York Mercantile Exchange
compiled by Bloomberg. The number of Brent futures changing hands has exceeded
those for WTI every month from April through October,the
longest streak since at least 1995.
Brent, produced in the North
Sea, is gaining favour among traders because of its role as the benchmark for
energy prices from Saudi Arabia to Russia. Prices have climbed 34% in the past
two years, reflecting everything from war in Libya to the embargo on Iran. WTI,
the main grade in the US, has risen 9% as the nation, which prohibits crude
exports, has struggled to clear a glut at Cushing, Oklahoma, the delivery point
for Nymex futures.