Glenveagh Properties PLC

Transcription by CastingWords I will now hand you over to your host, Jack Gorman, head of IR, to begin today's conference. Please go ahead, Sam.

Thank you, Adib, and good morning to everyone on the call. My name is Jack Gorman. I'm head of IR and corporate affairs here at Glenveig. I'd like to thank you all for taking the time to join us for our conference call and webcast, which relates to our interim 2024 results statements that we released earlier this morning. I'm joined on the call today by our CEO, Stephen Garvey, and our CFO, Michael Rice. In a moment, I'll hand you over to Stephen to begin the presentation, and following that, we'll open up the call to Q&A. I'd also like to draw your attention to the forward-looking statements included at the end of today's presentation. Thank you. And with that, I'll pass it over to Stephen.

Thank you, Jack, and welcome everyone to Glenveig's H1 2024 results call. We will proceed like previous presentations by focusing on the summary slides that are at the front of the deck up to slide 10, allowing plenty of time for us to discuss them and then take any topics that you might have during the Q&A afterwards. Starting with slide four, let's reflect on the progress that we've made so far this year that I believe sets us up for strong delivery in full year 2024 and beyond. From an operational financial perspective, we've completed over 800 units in H1, approaching a third of our full year target of 2,700 units. We've benefited from an increased scale and greater integration of standardisation and off-site manufacturing to drive 190 bps of improvement in overall gross margin, largely driven from our suburban portfolio. And we've successfully signed a third partnership agreement on our site adjacent to Balmaston, as well as advancing several other transactions for a fourth partnerships agreement, forward transactions on two urban assets, and we are in final negotiations with the Land Development Agency on our Cork Dockland site. In addition, we noted in July that we have a unique opportunity to significantly expand our land bank. If completed, these deals will provide over 6,000 units in strategic locations, complementary to our existing land bank, some of which we can deliver from next year. Importantly, these also provide us with scope to secure partnerships on adjacent sites for a further 2,000 units that will further enhance the growth and returns profile of the partnership segment of the overall group. The strong operational financial position of the business also allows us to consider capital returns, and we have today announced our intention to commence a €50 million buyback programme from tomorrow, having already returned over €300 million of capital to shareholders since 2021. Finally, we are on track to deliver full year 2024. Our confidence in this is driven by our closed and forward order book that now is over €1.4 billion across the three segments. Operationally, we currently are active on 21 sites and have been focusing on larger sites with the capability and capacity to deliver units at scale over multiple years across various tenures. Increased standardisation of our product and process, as well as the positive impact for our manufacturing business, is supporting a more scalable, repeatable and faster delivery across the business. And on this basis, our guidance of EPS of 17 cents is reiterated alongside the return on equity target of approximately 15% by the end of the year. On slide 5, let's review the performance across the three business segments. Starting with Suburban, our largest business segment with £102 million of revenue in H1. It will come as no surprise that the market demand backdrop remains extremely positive with strong private demand and supportive government initiatives that I will discuss in more detail later on. Reflecting on the timing of site commencements, our H1 completions of just under 300 units have accelerated strongly into the third quarter. We've increased our margin by 100 BIPs to 19.7%, bringing the expansion over two years to 240 BIPs, which reflects the benefits of standardisation manufacturing and integration at scale. Sustainable operational excellence underpins our whole network of 21 active sites, generating efficiencies embedded in sustainability and how we run our business day to day, underpinned by our net zero biodiversity and circular economy strategies. 70% of our suburban product is priced below 400,000 and almost 80% of it works within the first home scheme caps, ensuring that not only our homes are environmentally sustainable, but also affordable to home purchasers. Moving into partnerships, we are very pleased with how this segment is progressing as the year has evolved. We broke ground on two of the largest partnership sites in the country last year at Belmoston and Oscar Traynor Road, and these projects generated £32 million of revenue and a 15% gross margin in the first half of the year. We are now on track to commence construction on the 1,300 homes this year on these two sites, and in total will deliver over 2,000 A-rated high-quality homes over the lifetimes of schemes. And in doing so, we are proving that public and private partnership entities can work successfully together to deliver sustainable mixed-tenure developments. We have now signed and commenced a third partnership agreement for a site adjacent to Belmaston, which alongside a fourth agreement that is also advancing, has the potential to add 1,000 units of pipeline this year. The experience from a partnership segment is a very useless template for future growth. We have identified a strong pipeline of medium to long-term opportunities for the business segment, which we can deliver with both local authorities and the land development agency. We believe that similar partnership models could be the ideal mechanism through which the state can activate its own land bank that is the largest in the country. Finally, on this slide, if I move on to urban, the business generated about 18 million euros of revenue in the period. Revenue comprised of the completion of the two forward fund projects at City West and Castlenock. These projects delivered over 500 units in the period. Our forward sale project at Climweir and Blackrock is on track to complete in H2 and all revenue and profits will be recognised in completion. In addition, several other urban assets have commenced development or are in the final stages of negotiations. Our development under the Cree-Cona scheme recently launched by the government in Eden and Blackrock and Cork is underway and first revenue and profits are expected in 2026. Forward transactions are being advanced in Brownsburn and Turlestown, totalling 260 units. As I said earlier, we're in the final legal negotiations with the Land Development Agency to commence activation on our site in the Cork Docklands via a forward fund transaction. Let's now turn to slide six. Stepping back for a moment, we continue to be highly focused on increasing the free cash generation capacity and we allocate capital in a disciplined, consistent and efficient manner to optimise shareholder value. Our capital allocation framework has worked very well, buying land efficiently while at the same time investing in our manufacturing capability and returning over 300 million of shareholder value through buybacks. Our scale and the anticipated cash flow catalyst in the coming quarters enables the business to continue to maintain an efficient balance sheet alongside delivering our growth agenda on land, We continue to be strategic, disciplined and innovative in our approach to ensuring that the business has the land capable of supporting our future growth while maintaining both the capital requirement and underlying land costs. Over the last 12 months, we have entered into five off-market subjective planning permission transactions, which will provide access to over 1,500 plots in a capital efficient, low-cost manner. Furthermore, we have noted on slide four, we see the potential to accelerate our future land investment plans and significantly invest our land bank in the near future, some of which could be delivered in 2025. These investments, should they all materialise, will provide more than 6,000 units across multiple tenures. This is a rare opportunity to secure unique assets that are well located, aligned with future national planning framework policy and with the scope for us to secure an additional 2,000 units for our partnership business on adjacent sites. In addition, securing forward funding for the partnership on urban sites presents significant potential working capital benefits, along with the opportunities to create synergies by sharing operational functions and services across adjacent sites. The returns profile is also very favorable, and we expect pricing per unit to be very attractive at approximately 10% or lower than NDV pricing, and lower still when you combine this with the adjacent partnership sites. Assuming we can transact on all the potential activity, we expect that our land bank value will be a little over 500 million at the end of the year, but over the median term, we'll return back to 400 million. And over time, this land bank will comprise of a balance of own land, structured deals and partnership assets. Secondly, on capital returns, we remain committed to returning excess cash identified to shareholders in accordance with our capital allocation framework. Given our confidence in the future cash generation and the balance sheet strength of the business, we are pleased today to announce the intention to commence on the 6th of September a €50 million share buyback programme Again, reflecting our focus on enhancing the ROE and optimising shareholder returns. Turning to slide seven, where I would like to provide some more context on the planning and policy we've seen recently. Strong planning momentum has continued for the business and we have been granted permissions for approximately 1,500 units so far this year. This gives us a clear line of sight for the near-term deliveries and over 95% of our units are already through the system for 2025. We are also on track to lodge applications for a further 2,000 units this year, further underpinning delivery for next year and beyond. We are also playing our part in partnering with various state agencies and authorities to accelerate housing supply across tenures, including with the local authorities and also in schemes such as Creecona and with the LDA as it accelerates its activity to deliver on state lands. In its own right, the scale and commitment of the government's support to the housing market is substantial. Some of the key initiatives that have been included to underpin affordability for homebuyers, such as the have-to-buy in the first home scheme. Under 50,000 applications have been approved for have-to-buy since its initiation, and well over 10,000 potential homebuyers have registered for their interest in the first home portal over the last two years. From a supply perspective, I would highlight the waiver on development contributions that was initiated and put in place in April 2023. This has helped the industry to mitigate ongoing inflation environment and has also helped accelerate commencement levels over the course of the last two years. Maintaining this momentum requires comprehensive resourcing of all aspects of the design, planning and development lifecycle and streamline design standards across the national level. This, alongside effective partnering with local authorities and the land development agency, will enable the industry and the private sector capital to work together with state agencies to accelerate supply in a sustainable manner. Moving on to slide eight. Excuse me. Slide eight outlines the key elements are now put in place to enable the next phase of output growth. Firstly, when we look at the housing market itself, 2024 is looking like a much more active year. Commencements on a rolling 12-month basis are running at 80% ahead of year-over-year or 80% up, which is a strong indicator of future output growth. Completions, which will always lag, again are rolling on a 12-month basis, 3% ahead of the previous year. Based on this data, it looks very much like completions are likely to surpass 2023's delivery, of over 33,000 units. And in addition to the government's commitment to invest in demand and supply side schemes that have already outlined, more officials have been appointed to the National Planning Authority and it is expected to extra funding to be allocated to various infrastructure projects in the upcoming budget next month. Other clear indicators of this increased commitment in recent months include the state becoming increasingly active in the land market via the local authorities or the land development agencies. There is also a move to make Creecona more accessible and viable by extending the scheme to the metropolitan areas as well as the cities. And, of course, the national planning framework is being revised and consultation is currently underway. We expect this to provide a housing target that accurately reflects the current and future population requirements. and it is designed for viable and desirable homes in locations where there is demand. And that next phase of output growth will help address the last decade of structural undersupply that we have experienced in Ireland, as well as catering to the ongoing demand growth from the strong economy and a rapidly growing population. Multiple independent estimates, including the Housing Commission and the ESRI, have pointed to a significant increase in required annual supply, well above the current levels. most of which are at least in line with the commitment by the Taoiseach for over 250,000 units to be supplied over the next five years if that government is re-elected to power, equivalent to 50,000 units per annum. With that, I'll pass it over to Michael to cover all the financial review.