Glenveagh Properties PLC

Hello and welcome to the Glenvar Properties PLC 2024 Full Year Results Call. Please note this conference is being recorded and for the duration of the call, your lines will be on listen only. However, you will have the opportunity to ask questions at the end of the call. This can be done by pressing star 1 on the telephone keypad to register your question. If you require assistance at any point, please press star 0 and you will be connected to an operator. I will now hand you over to your host, Stephen Garvey, CEO, to begin today's conference. Thank you.

Thank you, and good morning to everyone on the call. My name is Stephen Garvey, and I'm CEO of Glenveig, and I'm joined today by my colleague and Glenveig CFO, Conor Murtaugh. I'd like to thank you all for taking the time to join our conference call, which relates to our full year 2020 results statement released today. This morning, I'm going to focus on the front end of the deck up to slide 16, and Conor will talk to the financials. We want to give you a clear picture of the most important moving parts in the business and how delivering against our building better strategy has resulted in strong performance. We will also provide context on the environment that we operate in, and of course, allow plenty of time to answer any questions you may have at the end. I would like to draw your attention to the forward-looking statements included at the end of today's presentation. Let's begin on slide four, highlighting the strong performance in 2024 which delivered record financial operational milestones for the company. We're extremely pleased to have delivered 2,450 new homes last year, a record revenue of 869 million and an improved gross margin of 21.2%. Our market enjoys excellent fundamentals, but our achievements are a result of our agility, our continued operational excellence and our successful execution of our building better strategy launched in 2023. The gains and efficiencies we see today, our opportunistic approach to our land bank and our scale partnership segments are core aspects of this strategy. We are pleased to secure such strong results in such a short timeframe. As you recall in September, we said we anticipated strong increases in several areas and delivered a record upturn in both revenue and home completions. We also achieved a strong EPS for our shareholders, an increase of 112% in addition to the commencement of a 65 million euro share buyback program. Importantly, our 2024 performance also sets us up well to operate at scale in 2025 and beyond. This was a significant year for our partnership business, now operating at scale and making a material contribution to the group's revenue of 120 million euros. At the same time, our commitment to innovation is driving tangible efficiencies across the business, evident in our increased delivery of units and our improved gross margin profile. As a scale business, we continue to move proactively and with agility to emerging opportunities. The strategic expansion of our land bank this year supports our long-term ambitions. We will discuss these elements in greater detail as we progress this morning. For now, I want to emphasize that we hold an increasingly strong market position and have every confidence in our ability to sustain the... Hello, how are you doing? Sorry about that. We had a technical problem here. So I'm going to go back to slide five and continue from there if possible. So as we drive forward with the momentum, we move to slide five. It's useful to provide an overview of some of the key elements of our differential investment case. The need for housing in Ireland is acute, and government policy is particularly focused on increasing supply. This is against the backdrop of continued economic strength. Therefore, the market opportunity is apparent. From our perspective at Glenveig, there are a number of key elements that we've embedded in our business to capitalise on that opportunity. We are confident in our sector-leading platform, building high-quality homes at scale in the right location through our uniquely integrated operating platform. Coupled with that, our focused approach to profitable growth, balanced sheet strength, and capital investment are enabling us to create long-term value in our business, thereby driving shareholder return. Providing some more context to the economic environment, slide six emphasizes the long-term demand outlook is very positive. With a resilient domestic economy, high employment levels, a growing population, and healthy public finances, that can provide some protection from external shocks if needed. There are still some challenges, of course, but with our enhanced land bank and full planning commission secured for this year ahead, we are confident in our ability to sustain the excellent momentum that we have built and get more homes on the ground. Turning to slide seven, we illustrate in more detail how the programme for government and the substantial market initiatives are creating a supportive environment for the housing market. The programme for government aims to build 300,000 new homes by the end of 2030, a significant acceleration compared to our recent years. In addition to How to Buy and the First Home Scheme, which underpin the affordability for homebuyers, the Taoiseach Micheál Markner stressed his intention to bring private sector capital and investment into the housing market to ramp up completions. Such moves are welcome as, in our view, a minimum of up to €20 billion a year will be required in all forms of private sector investments and capital to achieve the government's housing target and meet future housing needs. As I said in January, there remains a serious challenge to housing delivery without substantial additional capital, adequately zoned land, public sector resources and critical infrastructure to support new homes. The success of our partnerships platform, which we will go into further detail a little later, demonstrates how public and private resources can be pooled effectively to deliver this much needed housing. Moreover, we believe that we are excellently positioned to make strong contribution in addressing Ireland's housing needs. Now let's take a deeper look at our business segment starting with suburban on slide eight. We completed 1,650 homes, which was a 24% increase on 2023. generating record revenue of 631 million our gross margin expanded by over 200 bits to 22.2 percent reflecting the benefits of our strategic and sustained focus on innovation standardization and on our large scale sites looking towards 2025 we anticipate completing at least 1500 homes which are already under construction and at an average selling price of approximately 345 000. Our forward order book is now 59% complete and provides a strong foundation for future growth. All of this is underpinned by sustainable operational excellence, increasing innovation and standardization of our product, and capitalizing on modern methods of construction, which we'll touch on again shortly. Looking now at our partnership segment on slide nine, as mentioned earlier, 2024 was a breakout year for partnerships. We actively collaborated with multiple state agencies to stimulate and accelerate housing supply and earning a partner of choice status. In 2024, we demonstrated the strong sustainable potential of this segment as the portfolio expanded on four partnership agreements. The new Moortown and new road sites joined Ballymastone and Oskatrain Road developments. Overall, we achieved $120 million in revenue in this business segment, up from $17 million in 2023, with a gross margin of 16.9%. As evidenced by our strength of our suburban results, the group's strategic investment in innovation, standardization, and supply chain integration also provides a strong competitive advantage for partnerships, enhancing our capabilities in planning, design, manufacturing, quality, and speed. We are well positioned for future collaboration with public sector bodies, having forged strong relationships with multiple state agencies, approved housing bodies, and local authorities. The partnership segment has the potential to deliver a sustained role and will account for a significantly higher proportion of revenues from 2025 onwards, with an anticipated reoccurring annual revenue of over €400 million. Turning to slide 10, the urban segment made good progress in 2024, completing 655 units and generating €118 million in revenue by closing key projects, including our Clean Water Development, City West and Castlenock. In Q4, the segment also completed a forward fund transaction of 52 million for 139 units at our Browns Barn site with an approved housing body and a forward fund transaction of 337 units at our Cork Docklands site with the Land Development Agency. These partnerships further cement our position as a partner of choice in public-private collaboration and our ability to execute large-scale projects efficiently. Finally, as announced in January, the group intends to simplify its segment reporting under house building and partnerships. You will see our urban segment consolidated under partnerships from H1 2025, reflecting our strategic focus on large-scale mixed-tenure developments. With slide 11, let's take a step back for a moment. When we launched our building value strategy in 2023, we highlighted our proactive land investment strategy, which could be the cornerstone for our growth. This approach was driven by market context for structural undersupply, particularly in core locations, and the time lag in delivering units on newly zoned land. Our strategy has been to acquire land both opportunistically and proactively to facilitate the delivery of on-door housing in the right locations. In 2024, we identified the opportunity and acted decisively to secure attractive assets across 14 well-located sites. aligned with future planning, the National Planning Framework Policy. As you can see on the right here, our controlled landmine now approaches 20,000 units. Moving on to slide 12, as you can see in more detail on the profile and qualities of those acquisitions, the size, the location, the profile of the site align with our strategy of the type of high-quality units we can deliver efficiently, with strong focus on own-door homes. The sites were purchased at an attractive cost of 31,000 per unit, with site costs as a percentage of net development value of less than 10%, and strong embedded spot margins of approximately 21%, offering an attractive return on capital employed profile. Our controlled land bank of up to 20,000 units will support the delivery of over 2,600 equivalent units across our business segments through to 2029. Moving to slide 13, innovation, standardization, and manufacturing are an integration and inheritance to the process that we will continue to future-proof the business with. With our off-site manufacturing unit now operating at scale, the benefits of the investment in these processes are evident across our operation and financial performance. A key focus of building better strategy has been to transform our manufacturing business. NUA, our innovation and manufacturing arm, reflects our success in doing that, having operated high volume and manufactured over 2000 units in 2024. Innovation in offsite manufacturing enables us to plan, design and build homes and houses effectively and with greater efficiency, speed and cost control over our supply chain. The benefits are already evident in our margin expansion and will yield great results in coming years. Slide 14 illustrates how we are evolving construction methods to future-proof our business. Our innovation agenda is supporting the transition from heavy traditional materials to innovative lightweight alternatives that enhance the efficiency and the delivery of high-quality units. As outlined on this slide, these innovative wall, roof, and floor solutions will be rolled out on a phase basis right through to 2030. A notable achievement last year was the signing of an exclusive perpetuity license to extend the capabilities of our manufacturing business and increase the pre-manufactured value in future periods. Our innovation agenda has positioned Glenveig as a leader in modern methods of construction and timber frame construction, with the government targeting 25% of modern methods of construction in state-backed housing and promoting timber frame in new housing. we are well positioned for future delivery. As you can see on slide 15, we have scaled our delivery while delivering the high quality standards and excellent finish that customers trust, which underpins our reputation. Our customer satisfaction rating increased to a high of 94.3% in 2024. We continue to adapt to meet customer needs, exemplified by our digitalized customer service platform, which enhances support and overall experiences for our homeowners. At the same time, our industry-leading certified manufacturing capabilities ensure that all developments meet the highest quality standards. Turning to slide 16, sustainability has always been a key driver integrated in our Better Building Strategy. For us, sustainability is about identifying opportunities, managing risks, and ensuring the long-term resilience. Cost and carbon are inherently linked in home building, and by reducing emissions, Not only do you protect the environment, but you also drive operational efficiency and safeguard the future for the business. Furthermore, in a sector where the workforce participation rate is declining, we must remain an employer of choice, both for our direct employees and those working across our sites with our subcontractors. In 2024, we made significant progress in our emissions reduction, biodiversity and inclusion. We achieved a reduction in absolute scope one and scope two emissions and conducted our first double materiality assessment. This year, we became the first Irish home builder to report against CSRD, enhancing the rigor and the accountability of our business activities and further strengthening our position as a market leader. We are also proud to share our experience with the initiatives that have helped the business to improve the sustainability performance. We also earned a gold accreditation from the Irish Centre of Diversity, making Glenveig the first construction company to do so. And finally, with the positive news that we have been recognised as one of Ireland's best workplaces for now half a decade. With that, I'll pass you over to Conor for the reviews of financials. Thank you.

Thanks Stephen and good morning everyone. I'll start with the income statement for 2024 on slide 18. As Stephen has said, 2024 was a landmark year for Glenveig, characterised by robust revenue growth, improved margins and significant increases in both operation profit and EPS. Total group revenue reached £869 million, an increase of 43% from 2023. This revenue growth was as a result of strong delivery on site, particularly in the suburban segment, which recorded revenues of $631 million, up 34%. Our partnership segment is also now generating material revenues, and we anticipate further sustained growth in this segment in 2025 and beyond. Prior period investment in innovation, standardization, and size of scale were clearly evident in the group's gross profit and margin performance in 2024. Gross profit of 184 million grew by 63% and resulted in a corresponding group gross margin of 21.2%, 270 basis points higher, with the suburban segment expanding gross by 200 basis points to 22.2%. Urban and partnership segments delivered margins of 19.7 and 16.9% respectively, with both benefiting from strong mix effects in addition to a 2 million net impairment reversal in urban. The enlarged partnership segment is expected to deliver a gross margin of approximately 15% in future periods. People, innovation, and systems are all critical to the continued success and growth of the business, and the increase in operating expenses reflects a continued investment in those areas, inclusive of an increase in the share-based payment expense. This is partly as a result of a significant increase in the share price during the period. Overall, the group delivered an improved EPS of 17 cents in line with guidance, and a return on equity of 14.2% was achieved. Moving to slide 19, we take a closer look at the balance sheet, which reflects a robust financial position. While our capital allocation priorities remain unchanged, market dynamics and the opportunity to secure a long-term outlook necessitated a rebalancing towards land investment in 2024, with a closing land balance of $556 million excluding development rights. Moving to other working capital, December 24 bulk sale transactions resulted in an artificially high debtor balance, with one-off proceeds from the Foxwood Barn Forward Fund development received following year-end. Meanwhile, underlying trade and other receivables increased due to a rise in contract assets from our partnerships business. Given the stage of construction on existing partnership sites and the profile of new partnership wins, significant growth in segment revenues is achievable without a material further investment in this contract asked. Moving to slide 20, reflective of our deliberate decision to add to the group sector leading owned or focused land portfolio, operating cash outflow for the year was 93.4 million compared to an inflow of 15.9 million in 2023. Notwithstanding this, we delivered a strong underlying cash performance in H2 of approximately 100 million. Our net debt position increased to $179 million, or 15% of gross assets, comfortably within our guided range of 15% to 25%. Finally, the expansion of net debt in H-125 is expected to be significantly less pronounced than in H-124, given the improved revenue and cash profile in H-125, with more home building unit completions anticipated and a more favourable cash flow profile and partnership. Moving to slide 21, the year-end land balance was $556 million, up from $403 million in 2023, excluding development rights. This represents a peak year-end investment level, and we anticipate reducing our land bank investment through unit delivery, complemented by non-core site sales, exceeding $100 million over 2025 and 2026. Confidence in delivering this outcome has increased since the trading statement in January. On slide 22, our capital allocation priorities are unchanged, with a focus on value creation and shareholder returns through disciplined and balanced capital allocation across four areas, land investment, work in progress, supply chain, and returning excess cash to shareholders. As I've outlined, our land investment represents a peak year-end level for us and will reduce in future periods. Partially offsetting this, investment is required in work in progress to support home building unit growth from 2025 to 2027. Creek Cunnahan schemes in particular will require near-term WIP investment as we prove out this new market segment. Meanwhile, divesting the freight building will allow us to reallocate resources effectively in due course. In supply chain, our investment in off-site premises is largely complete. We have capacity in place to produce 2,500 timber frames and light gauge steel units per annum and plan to invest approximately 25 million in aggregate across the next three years, primarily to operationalize production of an external wall system, thereby improving supply chain efficiency, meeting growing demand, and supporting margin expansion. finally with regards to the return of excess cash on completion of the current buyback program we will have returned over 380 million shareholders since 2021 reducing the share count by approximately 37 as part of our ongoing 65 million share buyback program we have deployed 46 million today with the remainder of the program expected to complete around the date of the group's agm in may So bringing that all together on slide 23, the long-term demand outlook is very positive by underlying housing need as a result of population growth, resilient demand, clear policy visibility over the next five years, and our ability to deliver high-quality, own-door housing in the best locations. We expect to exceed 1,500 home building unit deliveries in 2025, with 1,900 anticipated in 2027. As a partner of choice for the public sector, we also anticipate further projects and growth in our partnership segments and are targeting run rate revenues of approximately 400 million from this segment from 2025. Meanwhile, we will reduce capital in land with side sales exceeding 100 million over 2025 and 2026 with a weighting towards 2025. As a result, we are confident in our ability to sustain the excellent momentum we have built and deliver EPS of approximately 19.5 cents for 2025, well underpinned by our strong forward order book. Finally, we will maintain a disciplined and balanced approach to capital allocation, prioritizing long-term value creation and shareholder returns. Our return on equity target remains at 15%, following the activation of newly acquired land assets in future periods. Thanks again for joining this morning, and I'll now pass you back to Stephen for his concluding remarks. Thank you, Conor.