Earnings Call: H1 2021

Aug 26, 2021

Hello, welcome to the Glenveagh 2021 interim results call. My name is Molly, and I'll be your coordinator for today's event. Please note that this call 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. This can be done by pressing star one on your telephone keypad to register your question at any time. If you require assistance at any point, please press star zero and you will be connected to an operator. I would now like to hand the call over to your host, Stephen Garvey, to begin today's conference. Thank you. Thank you, Molly, and welcome everyone to Glenveagh's interim results call. Joining me here in Maynooth is my colleague, Michael Rice, our CFO. We are pleased to report on the continued progress made by Glenveagh's team to create Ireland's leading volume home builder with a focus on starter homes, affordable rental product, and partnerships. To begin, please turn to page 4, where we set out our operational highlights, which demonstrate Glenveagh's strong progress in the period. During the first half of 2021, the group completed the sale of 322 units, which represents a 162% increase from last year. Our attractive customer offering is further evidenced from a 58% year-on-year increase in the average weekly private reservation rate that has resulted in 1,000 units being closed or signed, which translates into 87% of our 2021 target. From an institutional and state partnerships perspective, the group has also made important progress and further strengthened its position as the preferred partner of choice. Having completed a forward fund transaction for the Premier Inn hotel, we have now progressed negotiations to forward fund a 320 unit development and agreed heads of terms with an institutional counterparty, with completion expected within six months. Alongside the sale of the Premier Inn element of the Docklands sites, Glenveagh has made significant progress in monetizing this key urban development during the financial period, which reduces the group's risk in the Docklands while allowing the business to redeploy the proceeds elsewhere in the business to maximize return on capital. The group has exchanged contracts on the sale of the residential and second hotel sites at Castle Forbes in Dublin Docklands for a cash consideration of EUR 78.5 million. In the meantime, our overall construction progress has been substantial. Our 1,150 unit guidance has been maintained despite COVID lockdowns. In addition to the 15 existing sites delivering units in 2021, the group has recently opened 5 new suburban sites, as well as construction on the commercial elements of Castle Forbes, all of which will deliver units from early 2022. To enhance our construction capabilities, we are investing further in our supply chain, starting with EUR 60 million investment in an additional timber frame and soil recovery facility. Lastly, the group continues to take disciplined approach to capital management. Over the past 2 years, we have received over EUR 90 million from non-core disposals. By year-end, we anticipate that our land value will be below EUR 600 million. Our share buyback program that was initiated has over 25 million shares repurchased to date. This operational progress gives the team confidence that the business is well-positioned to continue to meet our output targets beyond 2021. Turning to page 5, we highlight the financials for the period, which Michael Rice will cover in more detail later. Our revenue of EUR 127 million is related to the sale of 322 units and the forward fund land sale of the Premier Inn site at Castle Forbes. The disposal of the residential component of Castle Forbes will be reflected in our full year results. Underlying gross margin of 23% compares favorably to the 13.8% achieved in H1 2020, and is expected to moderate to approximately 19.5% by year end. Reflecting the maturity of our operational profile of the business, we are now profitable at half year on a net basis for the first time since IPO. Land and work in progress on our balance sheet has increased in the first half of the year as a result of site acquisitions and further investment, principally suburban WIP, and with continued growth in mind. Reflecting the greater weighting for H2 from a completion perspective and the disposal of Castle Forbes, both land and construction WIP will reduce materially by year end, leaving the balance sheet exceptionally well funded. Now let's turn to the market overview section on page 7, where we would like to outline what we've seen in our operational environment more broadly. As you can see from the chart on the left, Ireland has now emerged from one of the strictest and long-lasting periods of lockdown across major global economies. As a result, construction sites were disrupted for the first 13 weeks of the year due to government-imposed lockdowns. Looking at the right-hand chart, you can see that the economy started to reopen as Ireland made significant progress on the vaccine rollout, which will also hopefully minimize the possibility of future lockdowns. Let's look at page 8. You can see that the successful vaccine rollout with easing of restrictions has led the OECD to forecast Ireland's 2022 domestic demand growth rate to be one of the highest across the globe. Ireland's global outperformance in the 1st quarter of 2021 and the rapid sentiment rebound in the construction industry gives no reason to believe that this won't be achieved. Turning to page 9, we would like to discuss the recent trends in the levels of savings and deposits by Irish households. A pandemic-driven reduction in consumer spending combined with earnings growth has led to a strong household savings rate, which has continued into 2021. Irish household saving levels continue to surpass household borrowings and are now among the highest in the EU. Looking next at page 10, the general consensus affirms that Ireland needs over 35,000 homes a year, or more than 400,000 in the next decade. As you can see on the left-hand chart, housing availability continues to decline, with the number of properties available for sale on one of Ireland's most popular property search websites currently at all-time lows. Nevertheless, demand from customers is increasing, as evidenced by strong mortgage data approval on the right-hand chart, which is further supported by high levels of Irish household savings discussed in the previous slide. In conclusion to the market overview section, let's look at page 11, where we outline recent policy developments from the Irish government that are aimed at supporting much needed housing supply. Some of these measures have been announced in detail and are moving into implementation stage, while others have been reported in the media in the context of the government's Housing for All strategy, due to be published in September. Broadly speaking, we believe that many of these policies announced by government will be helpful in terms of delivering additional supply into the market within a shorter timeframe. Of note is the expansion of Help to Buy to €30,000, which removes the requirement of a deposit at the group's average suburban ASP of approximately €300,000. The expansion of Cost Rental and the introduction of shared equity scheme, where the state will come on board and take a stake of an average of 20% in any new build home subject to regional price caps. This scheme is capable of being used in conjunction with the existing Help to Buy scheme. The remainder of the initiatives are generally positive overall from a supply perspective. However, we await the publication of the Housing for All strategy in September, and we'll work through the detail when it's available. The main question we will be asking is whether the policies will help more supply into the market, as opposed to simply reallocating existing viable units across the electorate. Lastly, it is important to understand that housing delivery has a long lead in, and it will take time for these measures to make a substantial impact on housing delivery. The new housing strategy should set a long-term strategy ambition for this government, and make sure that the policy environment moving forward is stable and aligned. This will ensure that we can plan for the future with confidence. Let's now turn to page 13, where I would like to reiterate our strategic focus, which has not changed despite COVID. Firstly, we continue to make disciplined investments across the 3 targeted segments of suburban, urban, and partnerships. Secondly, we continue to deliver for our customers in places they want to live and at prices that they can afford, as evidenced by our strong reservation rates. Thirdly, we continue to scale and standardize our operations and construction capabilities, which we'll discuss in detail later. Fourthly, we continue to optimize our capital employed in land and work in progress. All the while, we are pursuing our environmental and social agenda and focusing on scaling the business to deliver strong returns for our shareholders. Looking at page 14, we would like to highlight the attractions of our complementary business units. Our suburban segment, which delivers suburban housing, is highly attractive as it targets the part of the market with the deepest demand. As we continue to successfully execute on our strategy of delivering affordable, high quality homes in locations of choice, the group is well positioned to maximize sales in this segment. Moreover, the nature of the product allows for easier optimization of construction process, which allows Glenveagh to benefit from economies of scale as we continue to ramp up our deliveries. Our urban segment, which delivers urban apartments for institutional investors in the private rental sector, represents a substantial opportunity for the group. As Ireland has the lowest proportion of apartments in the EU, the structural occupied shift to rental and the increasing urbanization rates have led to the substantial mismatch between supply and demand of urban accommodation. This environment has attracted a considerable number of institutional investors that are committed to forward commit the vast majority of our PRS units. Our partnership segment is another highly attractive segment whereby the group enters into an agreement with a government agency or local authority to build on state land at a reduced upfront outlay. Over time, this will de-risk Glenveagh's market exposure and provide access to both land and deliveries for suburban and urban segments, facilitating a strong return on capital profile and increased business resilience with reduced risk. With considerable undersupply of social affordable and Cost Rental housing in Ireland, we believe the opportunity for partnerships is significant. Overall, we believe that targeting these three business segments represents the best use of capital and operational resources going forward, and we are confident that the business is well positioned to capitalize on these opportunities. Turning to page 15, we outline our key priorities for this year, which are aimed at enhancing our strategy to continue to align the business and the land portfolio with support of government policy. This means we are focusing on land acquisitions of affordable suburban sites with planning permission. We're aiming to create a more active land portfolio and improve capital efficiency. To achieve this, we are acquiring sites with planning permission whilst maximizing planning, as well as delivering services and utility to our existing land portfolio. We are focusing on improving and increasing Glenveagh's manufacturing capabilities. This will be achieved through a combination of maximizing benefits and efficiencies from our existing facilities, as well as acquiring further manufacturing facilities to support growth. Again, I would like to discuss this in more detail later. Our fourth priority is to further enhance our construction capabilities and reputation. This means maximizing delivery capabilities on existing sites while increasing construction team and opening new sites. Our fifth priority is to further cement our status as delivery partner of choice. To achieve this, we are aiming to build on our relationships with approved housing bodies, make demonstrable progress on our forward funds of our core urban developments. Our final priority is related to advancing our partnership segment. To date, we have made significant progress on each priority, which I would like to discuss in the two following sections. Let's now turn to page 17, where I would like to provide an update on our land portfolio and discuss several features of its strategic appeal. Over the course of the past four years, we've assembled an excellent land portfolio, which falls within the three core segments. Our portfolio is Dublin-centric, with approximately 77% located in the Greater Dublin Area, combined with a particular focus on the deeper segment of the residential market, being homes under EUR 350,000. We have a true starter home-focused suburban land bank with no site concentration risk. In addition to affordability, we have placed an emphasis upon transport links, particularly train lines and local employment. Attraction of our assets is further highlighted to the multiple exit options, with 40% of our portfolio having an institutional or state-supported exit option. Turning to page 18, we discuss the government's recent Shared Equity Scheme initiative in light of our current portfolio. Under Shared Equity Scheme, the state takes up to 20% in the homes of first-time buyers who will take out a mortgage with a bank for the remainder of the cost. The scheme is capable of being used in conjunction with the existing Help to Buy scheme. The scheme has been introduced with several region price caps for suburban housing, ranging from EUR 450,000 to EUR 225,000, depending on location. As you can see from the chart below, Glenveagh has established a suburban land portfolio aimed at the most affordable end of the market, with 77% of the units in regions 1 to 3 falling within these shared equity price caps. As a result, 73% of our overall portfolio qualifies for shared equity scheme. Turning to page 19, we outline another substantial government initiative aligned with Glenveagh's land bank. Cost Rental schemes are a proven model across Europe, whereby approved housing bodies purchase Cost Rental units from the private market to be rented out at 25% below market rent rates. To date, Glenveagh has already delivered 2 of the state's first ever Cost Rental transactions in Taylor Hill and Barnhall Meadows. The group intends to continue to provide units to the Cost Rental scheme, and a decent amount of our land bank can be dedicated to social, affordable, or Cost Rental housing. Concluding the review of our land portfolio, let's now turn to page 20, where we would like to highlight the deliverability from a planning and infrastructure perspective. Guided by our experienced in-house planning team, we have made significant planning progress during the period, with over 2,000 units granted permission across 10 sites. Combining this with sites acquired with planning permission in the period, the group now has over 6,700 available planned units, which translates to approximately 40% of our overall land bank. As a result, we do not have any planning concerns for delivery of our target of 1,400 homes in 2022. On the other hand, our dedicated services department has continued delivering utility connections earlier to the business. As you can see on the chart on the right-hand side, the number of sites with utility connections secured in advance of construction has increased from 3% in 2018 to over 85% in 2021. Reducing connection delays has significantly improved delivery timelines and facilitated a leaner construction. Moving to slide 22, which is the opening slide of the operational review section, which I would like to provide an update on our operational and sales activity, as well as some recent initiatives within the business. To date, the group has seen significant 1-off cost increases in the period in a variety of commodity and trades, the most significant of which were timber and resin-based products. To partially mitigate these price increases, the business was able to leverage its purchasing power and scale. More importantly, the supply chain initiatives that the business invested in over the last number of years have paid dividends. Our timber frame factory facility, set up in 2020, and our soil recovery facility opened early in 2021, allowed the business to shield itself from the full impact of the increases that the wider market experienced, generating significant competitive advantage. As a result of the initial reaction to the reopening of residential construction and the global commodity price increases, the business saw cross-price inflation of approximately 5% on tenders in the period, which will largely impact deliveries for 2022. Looking to future periods, the group's continued investment in its supply chain will be the main driver in managing CPI. Turning to page 23, we would like to provide a further update on our manufacturing strategy. Given the evident benefits of the existing supply chain integration, we have initiated further expansion opportunities, resulting in a EUR 16 million investment in an additional timber frame and soil recovery facility. The timber frame facility is strategically located within our suburban south region to better service our expanding network of construction sites throughout the country. The purchase of the vacant facility will complete in the coming weeks and will be operational from 2023, following the delivery of new manufacturing lines. When combined with our existing Dundalk facilities, the group now intends to manufacture approximately 2,000 timber frame per annum by 2024. Our soil recovery capabilities have been augmented with the addition of our new facility in suburban south region, which will complement our existing facility at Bay Lane in our suburban north region. These investments will allow the sustainable growth of the business to 3,000 units per year and beyond, while also controlling the cost in a manner that improves the return on capital in the medium term. Turning to page 24, we summarize our construction progress to date. Having opened five construction sites in the period, the group are currently constructing on 20 sites, with additional site openings planned for the second half of the year. Our experienced onsite construction teams are assisted by recognized construction support teams, which allowed us to maintain our 1,150 units guidance for 2021. As a result of the progress made today, we have assembled a high caliber team capable of ramping up to volumes of 3,000 units. Turning to page 25, I would like to provide a further overview of transactions that strengthen Glenveagh's status as a partner of choice for institutional investors. Having completed the sale of 134 units in Marina Village to Realis, we have also delivered another 132 units to an institutional investor across two other developments. As mentioned in one of the previous slides, we have successfully delivered units under the Cost Rental scheme to an approved housing body, Clúid Housing, who also purchased a further 81 units from two of our other sites. We have also made a significant progress on our Docklands portfolio, which we would like to cover on the next slide. During 2017 and 2018, the group made two attractive acquisitions at a strategic but one-off Dublin Docklands location. Significant value has been added in the interim via a series of successful planning applications and the forward fund of the Premier Inn Hotel. Having received an unsolicited off-market approach and an attractive valuation, the company has decided to sell the remaining site at Castle Forbes. This brings forward profits from the development and frees up capital and resources to invest in our core urban or suburban business. The group plans to forward fund the 554 units East Road development. From a business perspective, this transaction delivers a strong financial outcome, accelerates return on capital, and reduces the risk while increasing our ability to capitalize on our urban deliveries. Let's now turn to page 27, where I would like to discuss our first landmark deal in our partnership segment. During the period, we were selected by Fingal County Council as its partner for the proposed development of 1,200 new homes at Ballymastone, Donabate in North County Dublin. This is a significant win for the business. The project will deliver much needed housing units in the area across a mix of private, social, affordable, and Cost Rental homes. We will now move forward with a formal planning application and would hope to begin development in 2022. We continue to be very supportive of the partnerships delivery model and are actively engaged in two separate schemes, which, if awarded, could deliver additional 1,400 units. Given the group's construction capabilities, private market experience, and reputation and strong balance sheet, Glenveagh remains strongly placed to be the supplier of choice for much needed housing across a range of tenures. In conclusion to our operational review section, let's turn to page 28, where we will discuss the attractiveness of our well-established network of suburban sites. The benefits of Glenveagh's suburban land assembly strategy, which has been exclusively starter home focus, continue to produce positive results from a sales perspective, with 1,000 units for 2021 now sold or with a binding contract in place, underpinning our target of 1,150 units for 2021. Currently, there are 15 active selling sites in 2021, three of which are new sites opened this year. Lastly, I would like to note that of our 1,400 units target for 2022, we've come from our currently active construction sites with six new sales outputs to deliver units for 2022. Let's turn to page 30, where I would like to give you a quick recap on our sustainability strategy. Determined to play a role in creating a sustainable future, we've assessed a wide range of issues across our value chain to identify those that present the most significant risks and opportunities. As a result, we have set out clear targets against them, which can be found in our 2020 sustainability report. These material issues are grouped in our six sustainability pillars, and they address the most relevant issues to our stakeholders while supporting our strategic priorities. We considered how important each issue is to our key stakeholders, including investors, customers, employees, and communities, as well as government, and to the extent which each issue could have a negative or positive impact on people, society, or the environment. We look forward to reporting on the progress against these targets as part of our 2021 full year results announcement. We would like to share some of our preliminary progress to date on the next page. The group continues to make incremental and meaningful progress on the material areas of focus identified in our 2020 sustainability report. During the first half, Glenveagh achieved two certifications from the National Standards Authority of Ireland, ISO 14001 Environmental Management and ISO 45001 Occupational Health and Safety. The ISO 14001 certification will help ensure our business is focused on reducing our environmental impact, supported by effective management process. ISO 45001 demonstrates that we are committed to improving employee safety, reducing workplace risks, and creating a better safe and working conditions. We have also built on our disclosures in the period, measuring scope three emissions for the first time and reporting these via Carbon Disclosure Project CDP 2021, as part of demonstrating our wider approach to managing climate and environmental issues. Recognizing the importance of the group's sixth sustainability pillar to our strategy, the board has established an Environmental and Social Responsibility Committee to lead our ambitious plans in this area, ensuring we deliver homes for our people alongside the highest standards of environmental stewardship and responsible business. A further detailed progress report on our sustainability agenda progress in each material area of focus will be provided at the time of full year results. Now I'd like to pass you over to Michael, who will discuss the financials for the period. Thanks, Stephen, and good morning, everyone. As Stephen mentioned, the first 6 months have been a very positive period for Glenveagh, and this is reflected in the financial performance of the business. These results are the strongest H1 results that we've had to date, and we're profitable in H1 for the first time, demonstrating the maturing nature of the business. We hope that we have now seen the worst of the pandemic, and we have certainly made good progress across the various areas of the business in the 6-month period, and I'll touch on many of these as I walk you through the financial results. Starting on slide 33, our income statement for the 6-month period to 30 June. Total revenue for the period was EUR 127.5 million, a significant increase from the EUR 37 million generated in H1 2020. There are 3 main components to revenue in the period. EUR 59 million from the 197 core suburban units, EUR 53 million from the 125 non-core units in Marina Village, Greystones, and EUR 16 million from the Premier Inn hotel site sale, which is the first part of the wider EUR 70 million forward fund transaction with Union Investment. As anticipated, the weighting towards closings in H1 has improved, with nearly 30% of our full year unit target closing in H1. This compares very favorably to the 18% and 19% in 2020 and 2019, respectively. Looking out to the full year revenue forecast, we have announced the signing of the residential and second hotel site sales in Castle Forbes for EUR 78.5 million this morning. We expect this transaction to close before year-end. As you may remember from this time last year, we took the decision to accelerate the sale of our non-core units to maximize cash generation. Due to this decision, an asset impairment of EUR 20.3 million was required. Fast-forward 12 months, the sales in Marina Village have progressed very well with the business having generated close to EUR 90 million of revenue to date. We're also in a position to reverse EUR 4.2 million of the impairment due to stronger than expected selling prices. This partial reversal feeds into the overall gross profit for the business of EUR 21.4 million versus a gross loss of EUR 15.2 million in the prior period. This provides the business with an overall gross margin of 16.8%. There are a number of components within margin due to the non-core disposals. Excluding the non-core sales in Marina Village, the overall core gross margin for the business is 23%. This is obviously a very strong number for the period, but this will get diluted over the rest of the year as the remaining suburban units complete. On that basis, we expect the full year overall core gross margin to be in excess of 19.5%, including the residential and second hotel sites in Castle Forbes. The core suburban housing gross margin for the full year is expected to be approximately 17.5%. Our central costs, including depreciation, are 14.8% for the first six months of the year, but includes a one-off cost of EUR 1.6 million relating to the disposal of our previous head office in Merrion Square in Dublin. Post-pandemic, this office is surplus to requirements, and we made the call to sell the building and bring the cash back into the business to reinvest elsewhere. Overall, the income statement shows a healthy position for the group, with EUR 4.3 million of profit before tax versus a loss of EUR 27.2 million for the same period last year. Slide 34 shows our balance sheet at 30 June. I won't go through the full slide, but as usual, there are a couple of areas that I want to draw your attention to. The property plant and equipment has decreased due to disposal of our office in Merrion Square, as I mentioned. The additions of the new timber frame and soil recovery facilities that Stephen mentioned earlier will only hit the balance sheet in the second half of the year. As in previous years, our inventory number of EUR 881 million is the most significant line item to discuss. The overall number is split between land of EUR 642 million and work in progress of EUR 239 million. The increase in land predominantly relates to our investment in 9 new suburban sites for a total of EUR 52 million, the majority of which are planning with construction starting this year. Getting on site early post-acquisition has been a key part of the business's drive to improve capital efficiency over the last number of years. With this capital efficiency in mind, the current trajectory is to reduce our land value below EUR 600 million by year-end, while at the same time continuing to invest in new suburban sites to grow the business to 3,000 units per year and beyond. We have continued to invest in work in progress in line with the growth strategy for the business, with a balance of EUR 239 million, an increase of EUR 37 million from the year-end position. Having a higher WIP balance at half year is the current norm for the business, and we expect the WIP position per site to unwind by year-end as we close the remaining units from our 1,150 target. Moving over to slide 35, our cash flow statement, which mirrors a lot of the movements we've just seen in the balance sheet. Our continued investment in inventory is coming through with the EUR 54.8 million cash outflow in the period. The cash inflows and outflows from our new EUR 250 million committed debt facility agreed in the period can be seen in the financing activity section. We made total repayments of EUR 102.5 million in the period, including EUR 100 million from our existing RCF ending and replacing it with the EUR 100 million term element of the new facility. The EUR 150 RCF component of the new facility was not utilized at 30 June. In the financing activity section, you will see the cash outflows from our EUR 75 million share buyback program, which we announced at our AGM in late May. We purchased 20.5 million shares in the period at a cost of EUR 19.8 million, with EUR 4.1 million sitting in payables on 30 June, giving you the EUR 15.7 million that you see in the cash flow. Currently, we have purchased 26 million shares. We're making decent progress on the buyback. To give you a better sense for the level and scale of cash flowing through the business, slide 36 shows the cash movements in the 12-month period from 30 June 2020 to 30 June 2021. Even though they're not the largest numbers on the slide, I want to highlight the cash flows from the non-core units in Marina Village and also the forward fund in Castle Forbes. The total cash inflows from these are EUR 93 million, and from what could be regarded as non-traditional or non-core activities. These funds have allowed us to invest in land of EUR 67 million and initiate the share buyback of EUR 16 million and allow the funds from the core business to fund our working capital requirements. We finished the period with a net debt position of EUR 33.5 million, which is a strong position given the level of growth we are currently delivering. We've included the next slide 37, to summarize and conclude on what has been a very busy and productive period for the business from a financial perspective. For a couple of years, we've talked about reducing our net investment in land. Even though our land investment has increased at 30 June, we now have good visibility on reducing our land investment below EUR 600 million by year-end, with a big driver of that being the site sale in Castle Forbes. Our gross margin has progressed well in the period, and we now have greater clarity post-COVID. As mentioned, we are guiding to a full year core gross margin in excess of 19.5%, when the expectation, certainly at the start of the year, was a few hundred basis points below that. This time last year, we made a commitment to accelerate the disposal of our non-core units and generate EUR 100 million for the business in a 12-month period. To date, we have over EUR 90 million back into the business, which, as I showed you on the previous slide, has allowed us to invest in land and initiate our share buyback program. We continue to invest in our work in progress, and that mainly came in the form of opening new sites in the period. The investment in these new sites is consistent with our infrastructure-led approach, and they will deliver sales in 2022. As we talked about before, we agreed our new EUR 250 million committed debt facility in the period, which will give us the necessary financial resources to grow the business to 3,000 units per year and beyond. It was also the final cog in the wheel to allow us to come out with a number of new policies and targets. With our new 5-year debt facility in place, we set out our capital allocation and leverage policies at our AGM in late May to give clarity on the level of debt and the level of net debt that we'll maintain as a business, and also what our capital allocation priorities are. Very simply, we'll prioritize growth through investment in work in progress, followed by our investment in our supply chain, which you've seen this morning from our investment in 2 additional facilities, with the final element being our investment in land. With balance sheet efficiency in mind and to give clear direction to external stakeholders, we set out a return on equity target of 15% by 2024. We believe that this is a challenging but achievable target and requires us to continue to optimize our investment in land and work in progress while managing our cash and debt levels appropriately. Finally, as part of the capital allocation policy, we said that if we had excess cash in the business, we'd return it to shareholders. This was simply honoring a commitment we made at the Capital Markets Day in January 2020. To be honest, we didn't think it would take us nearly 16 months to deliver, but obviously, we didn't expect COVID. We needed to sensibly manage our way through the pandemic, but we were delighted to initiate the EUR 75 million share buyback program in May. Overall, I hope you'll agree that financially, we've had a successful year to date, and that the business is maturing nicely as we grow to 3,000 units and beyond. Thanks, everyone, for joining this morning, and I look forward to speaking to most of you over the coming weeks. I'll pass you back to Stephen for his concluding remarks. Thank you, Michael. In conclusion, let's turn to page 39, where I would like to summarize Glenveagh's progress against their strategic priorities. Firstly, we have strategically assembled an affordable land portfolio that is aligned with supportive government policy, which further de-risks our yearly target deliveries going forward. Secondly, announcement of our ambition to go past 3,000 units per year is in line with our priority of creating a more active land portfolio. In line with our strategic priority to scale and standardize our construction capabilities, we're expanding our manufacturing operations with a EUR 16 million investment in two additional facilities. Furthermore, our construction capabilities and reputation have been reinforced as we maintain our 1,150 unit guidance for 2021, despite a 13-week lockdown. Our first forward fund agreement to deliver the Premier Inn hotel in Castle Forbes is complete, and we are now currently working on other projects in line with our strategy to forward fund urban projects. Alongside this, we have also made significant progress within our partnership segment, having been selected by Fingal County Council as partners to deliver 1,200 homes, much needed housing in the area. Lastly, we've commenced a EUR 75 million share buyback program using excess capital, which is in line with our objective of enhancing shareholder value. In conclusion, I would like to know that we have every confidence in our continuation of our successful ramp-up, given the expertise, work ethic, and experience of all the members of the growing Glenveagh team that have delivered for the company and their customers, and will continue to do so as we move to 2021 and beyond. With that, I am happy to turn over the call to any questions. Thank you. Thank you. As a reminder, if you would like to ask a question, please press star 1 on your telephone keypad. Please ensure that your line is unmuted locally. You'll then be advised when to go ahead with your question. The first question today comes from the line of Colin Sheridan. Colin from Davy, please go ahead. Hey, good morning, guys, and congratulations on the results. Hi, Colin. Hi, Colin. Just a few from me, if possible. First, just on inflation. I suppose you pointed to 5% house price inflation in suburban and 5% build cost inflation. Just trying to get a feel more recently about where you feel the risk to those numbers is directionally as we go through the rest of the year. Obviously, you've spoken to shared equity and obviously that could play a part in it. There's clearly a lot of concerns on things like the materials front as well, what way you think that could progress, as I said, into the end of the year. The second one, Ben, just on your investments from a supply chain perspective this morning, the additional amounts going into timber frame and soil recovery. Maybe you explain your thinking, what way we should think about the future economic impacts on the business from those facilities. I think we all understand the supply chain benefit that you get from the surety of supply, particularly on the timber frame side. Are there benefits that we should be thinking about in terms of enhancing, say, margin from the timber frame business or a benefit from a construction cost inflation perspective over a number of years? Just which way do you think about that? Which way do you think we should think about those investments? Finally, I guess on Castle Forbes, it's a very impressive amount of value being nailed down today by the transaction on the land in Castle Forbes. How do you think about the trade-off between realizing all of that value in 2021 versus the margin that could have been made in the future by, say, pre-funding that site, particularly with respect to any alternative investments that you can go after now that the Castle Forbes pre-fund on that first site, I guess, won't go ahead. Just to give us a flavor of what your thinking was from a value standpoint on site. Thank you. Sure. Thanks, Colin. I suppose I'll deal with house price inflation first, then pass over to Michael to cover anything. House price inflation, we've called it out that we've seen about 5%, probably seen greater than 5% in certain markets. It is very robust out there, the demand. We all know the supply issues in the sense of the low amount of stock that's available for sale. Also, I suppose COVID, the delays in opening up new schemes obviously is forcing that as well. I suppose in our interim results of last year, we kind of called out that you could see the trend of household deposit saving and things like that was increasing dramatically. You've obviously had the Help to Buy expansion of €20,000 to €30,000. Sorry, from 20 to 30. All of that's feeding in. We kind of said over the next two years from that point, we probably thought that there was potentially up to 10% house price inflation coming down the track. Obviously, shared equity hasn't impacted at all on the market yet. That hasn't been rolled out. That is expected to start, commence hopefully when the Housing for All strategy is published. It is hoped to be enacted. We expect further expansion on that, not just from this year, but next year, as it seems to be a key policy driver for government to help people bridge the gap between the macroprudential rules. We're quite comfortable where what we're seeing, I suppose what we've always indicated is we want to ramp up volumes. We want delivery. We've seen really strong progress in, I suppose, the early part of the end of the summer, early autumn in our progress. We've already seen 300 units there progressing well, the guys are achieving good sales prices on those. It's quite robust and there's good momentum out there. We're very happy where things are going. It's probably hard to gauge where it could end up. Calling it 5% today, we're seeing that and it's pretty robust. On the CPI front, absolutely at the start of reopening, we've seen obviously the commodity issue. You've seen lumber prices in the U.S. going from all the way to from 280 up to 1,700 and coming all the way back down to about 460, 470. We do think the lumber issue has probably resolved at this stage and prices have calmed down. Now, that hasn't fed into the system yet. It does take a number of weeks or months to probably come true. You've seen resin-based issues as well. There were supply chain issues there with factories in the U.S. that went down. Unfortunately, that felt true to a lot of PVC products, plastics, piping, et cetera. That is kind of settling down. There isn't an abundance of labor out there at this moment in time. We would kind of hope what we're seeing is we're seeing a lot of commercial developments on the go that are trying to finish up. I suppose we're really wondering what happens after those commercial developments finish up. What will be the next phase of that? I suppose the office space will free up a lot of trades as well. I suppose feeding into that, what we've tried to do is look forward. We've seen the benefits of the timber frame factory in Dundalk. We've seen the benefits of our soil recovery facility in Bay Lane. I suppose to enhance on those, we've added 2 further facilities. The ways I would look upon that is you can see our product as we bring through standardization, and standardization is something that we've been talking about for probably the best part of 3 years at this stage. It's now just coming into the system. The product that Glenveagh has designed is now starting to feed in. That is bringing more efficiencies in the house size, the ways we deliver it, and I suppose the innovation we're trying to put in that. For me, I suppose the innovation that we can bring to the factory and how we can produce the product, we want to move more and more of our production off-site because we see this as the best way to ramp up. Particularly as we standardize the product that we're delivering. Just to give an example, since the business has started, we've had to implement here, I think it's 439 different house type designs. If you bring that down to 20 house type designs, it makes the business a lot more streamlined and makes it more efficient, and that's the benefit to feeding into manufacturing. On the cost, I suppose what we would see is that the facilities that we have this year and how they really help the business was when we were able to reopen, because we control the production facility ourselves, we were able to ramp up volumes quite quickly, whereas using a third party, that would be a lot more difficult. We have seen the benefits of cost savings where the market was really, to a degree, prices were being pushed on to the outside market, but our timber frame prices we were far better to control. I suppose what we'd like to do is make sure we get the benefit that it can feed through to the site and progress the gross margins on site. That's the way we're probably looking. I don't know, Michael, if you are viewing that? No, I think you're spot on, Stephen. It's partly due to margin and obviously return on capital and getting our initial investment back, but having that comfort that we control our own supply chain when we're trying to get to 3,000 units and being able to control that and not rely on third parties is as much of a benefit as the cost saving we'll see over the next 2 years. I suppose just on the last point, the Castle Forbes, Colin, we've obviously made substantial progress on that development. It's a substantial development for us. We've over 1,250 odd units through the planning system. We have 2 hotel sites we got through the planning system, and obviously the office space as well. Obviously, the forward fund with Union earlier in the year and getting that in was a great success on a forward fund. Obviously doing this deal and announcing this today just enhances that return on capital to the business. What I would say is we have a lot of substantial assets that are through the planning system. This gives us greater flexibility to reallocate those resources and capital to enhance further returns to the business. We've been quite successful. If you look, we've obviously East Road through the planning system. We have Castleknock through the planning system, Citywest through the planning system, the Docklands and Cork. We've almost another 3,000 urban units. I suppose what we have now today is the ability to enhance those and deliver them as quickly as possible. Very clear. Thanks, guys. The next question comes from the line of Emily Beddalls calling from Credit Suisse. Please go ahead. Morning, guys. Thanks for taking my questions. I hope you're all well. I've got 3, please. The first one is just on your underlying suburban margin. I think Michael said in his presentation for this year, you're expecting it to be about 17.5% now. I think versus what you were saying at the start of the year, it's sort of 100 or 150 basis points better than where you were sort of commenting then. What are the moving parts in there? Is this just about sort of COVID disruption not being quite as bad as you'd expected? Are there other sort of, are you getting any sort of positive price cost through this year already? Sort of what else should we be thinking about? Secondly, sort of tied into that, obviously you're sort of talking and you commented before about house price inflation currently being about 5% and seeing scope to push that on in the second half. Is there also scope for price for you guys to be sort of incrementally a bit better just because of the number of new sites that you have launching in the second half? Presumably that gives you a chance to sort of both benefit from pent-up demand in an area and sort of basically go out without a like for like compound price, so therefore you sort of have chance to step up. As we think about sort of price cost as those things feed into next year, is it possible that sort of meaningfully sort of positive in the margin bridge for 2022? Thirdly, just on the timber frame factory, the logic of that new factory, is that just about where it's located or are there any sort of other things that we should bear in mind there? Are there capacity constraints to come on the existing factory or sort of what's the logic for the incremental one? Thanks again. Hi, Emily, and thanks. Michael, do you want to take the first and I take the second? Yeah. You're right, Emily. I mentioned the 17.5% as being the expected underlying suburban housing margin for the full year. A couple of things feeding into it. I suppose during COVID, we were a little bit uncertain as to the eventual cost of dealing with COVID and I suppose what the world and what our sites look like post-COVID. We were probably a little bit cautious to kind of push margin guidance on too much until we'd get greater clarity. I use that phrase, greater clarity, in my narrative. There is an element of that, of just being, well, touch wood, being post-COVID now and kind of releasing that little bit of contingency that we had in our guidance. The other element, and you touched on it as well, is we have seen that little bit of HPI movement in the first half of the year. That'll feed into the full year. Again, as we mentioned in the statement, I think the real benefit or the real kind of HPI that we've seen in the last 6 months, and probably in the last 3 months, will only really hit into our 2022 deliveries, given we had such a strong reservation number earlier in the year. Just, I suppose, moving on to your second point. I think that kind of HPI number of 5% kind of encapsulates everything. I think what we kind of say in opening our new developments, and I get your point and I appreciate your point on you don't have a direct comparable from the previous phase, so the prices aren't directly side by side. I think when we look at our product type, and it comes back to Stephen's point on standardization. When we look at our product type in two similar developments. We'd be looking to kind of push the house pricing on that 5%, when you compare a current house type in site A with what we're going to launch at in site B. I think that 5% is a comfortable number, even taking in those new sites, the six new sites that we'll open in the second half of the year into account. I think if we stick to that 5% as an overarching number, we're in a good place. Just on the timber frame, Emily, I would say everything is strategic. I suppose, for us, the benefits, we've really seen the benefits from Dundalk. It's a great facility. We only got it operational really in 2021 in a pandemic. We obviously, in factories, practicing social distancing was difficult. We've ramped up volumes there quickly, like that facility will deliver somewhere between 650 and 700 timber frame units this year. It's a great result there. I suppose the second asset that we've bought and where we're locating that, we've thought about this in the sense of to disperse our sites as we spread. This facility is located, which, as I said, covers suburban south. That's strategically well-placed for those reasons. It also, I suppose, gives us flexibility, not over-reliant on one factory either, because it's not that we're coming up with constraints, but just if issues come out, God forbid, there was a breakout of COVID or anything like that, having two operations, being too reliant on one would be a risk for the business. Strategically, that's why we've done this. Great. Thanks, guys. The next question comes from the line of Dudley Shanley, calling from Goodbody. Please go ahead. Good morning, gentlemen. Thanks for taking the questions. Just have two, please. First of all, in the context of 20 active sites and further site openings in H2, how should we think about the evolution of WIP over the next, I guess, 12 to 24 months? The second question is, obviously, you've spent EUR 52 million on land in the first half. What are you seeing in the land market at present? Thanks. You deal with the WIP, and I'll deal with the land. The evolution of WIP, I suppose, again, and I referenced it in the narrative, half year is always kind of peak WIP for us. We talk about kind of WIP unwinding on a per site basis over the rest of the years as we close units. The other factor that's still in there is there's a little bit of completers stock from our non-core units. We called it out more specifically in previous periods because it was larger numbers back then, but there still is some bit of non-core in there that, again, will unwind by year-end. I suppose the rule that we would always have is it's probably per suburban site is probably a WIP of around EUR 8 million-EUR 10 million per site. If you extrapolate that over the 20 sites, that gives you a good indication of where our core suburban WIP is at the moment. I suppose the evolution of the forward funds and being able to announce the hotel and the heads of terms for a second forward fund is certainly a move in the right direction, and that'll manage our WIP even tighter. You might get a position where we're on 23, 24, 25 sites, but actually 2 or 3 of them are forward funded, so you only need to worry on the WIP of the 22. I think on the core suburban units, which let's be honest, is going to be the vast majority of our deliveries, that EUR 8 to EUR 10 million per active site is always a good gauge, and that's where we've been kind of pointing people towards for the last probably 18, 20 months, and it still kind of holds true. Dudley, on the land, I suppose we have been quite active. We probably said from around August last year, we've seen good opportunities in the land market. We've seen the market obviously turning. As we've covered today, we purchased 9 in the first half. We've added further acquisitions, which we announced post period. Quite active. We're seeing really good opportunities out there. As we've kind of always talked about the capital management, spending less on site acquisitions. We're buying some sites subject to planning. I suppose we're the buyer of choice now to a certain degree with landowners or institutions or whoever it may be. They see what we're trying to do. They understand our discipline. I suppose they've also seen the success of being able to deliver on acquisitions. We've probably been one of the most active buyer in the market. When we do terms with people, we usually always follow through if nothing breaks the deal. Yeah, competition-wise, smaller guys are active in the market. It's predominantly people with equity. Alternative finance has got a little trickier in the market. Unless the site has planning permission, it is quite difficult to finance that. That is opportunities for us. Also the resources of getting planning are obviously quite substantial now. I suppose having the internal team has really helped us to get deals done as well, because we can do the due diligence quicker, but we can also probably deliver on the other side. Landowners are quite comfortable doing business with us. Overall, quite subdued. We've added well. I suppose we've extended the portfolio, but actually reduced the amount of capital we're investing in the portfolio. Great. Thanks. The final question today comes from the line of John Cahill, calling from Numis. Please go ahead. Thanks very much. Morning, Stephen and Michael. A few questions from me, please. Firstly, on overheads. Keen to hear what your expectations now are for the shape of overheads over the next few years as you scale to 3,000 units. Do you expect to need to directly employ a lot more labor over the period? Clearly, the labor market's become a bit tighter over the past few months. What are you seeing there? Also, keen to hear what your expectations are for the impact of the new manufacturing facilities on overheads. The second question would be, if I can refer back to slide 20, where you show the improvement of working with utility providers to streamline deliveries. What are your expectations here for the impact that has on WIP investment as you open new sites going forward? Do you expect that you're getting a bit better in terms of the phasing of WIP investment as you improve this process of the enabling works on new sites? The third question would just be on partnerships. Keen to hear, on this scheme, what the phasing of capital you expect will be, and in terms of what the payments will necessarily be on the land component. Also, if you've got an overage agreement there and kind of what your exposure is to any further HPI on these sites. Thanks very much. Sure, Johnny. Good morning. I'll deal with the partnerships first, then the site openings. Michael, you deal with that. On the partnerships deal, yeah, we're delighted obviously to win the Ballymastone development. It's a significant development of over 1,200 units. It's a mixed tenure development of private, social, affordable, and Cost Rental. The prices for the social and affordable are the only units that are locked in, and obviously, we can set the pricing for the private market. As we've always said with partnerships, the benefit is it's a very low land outlay up front, which is, and I think it's out there in the market that we've approximately EUR 12 million in land payments to make here, which will be phased over a number of phases. This development will probably go on for something like 6-7 years. As you hit each phase, an element or proportion of that will be paid back to the local authority. Quite a low amount of capital up front for the land element, and obviously gives us access to, sorry, for construction, and gives us access to delivery units as we progress. Obviously, an element of the de-risk from the minute you commence, 40% of the scheme is already, to a degree, is going to be taken out by the local authority. We see this obviously quite accretive to return on capital employed, and we see it as a real positive segment of the business going forward. I suppose you've also seen the government talk about they understand to deliver housing, they need to free up as much state land as quickly as possible. The formation of the Land Development Agency will be key to that going forward. The other question was on how we're opening sites and our philosophy, and I suppose as I'd always say, never waste a good crisis. I suppose COVID, to a certain degree, not for that reason, but in the sense of it gave us a little bit of breathing space, and I suppose we stepped back and said, "Right, how are we doing things? We need to ramp up here." I suppose the opportunity was to implement more infrastructure up front. All our sites, and you'll see some of our sites that are on the go today, there's a dedicated construction team that only go in and deliver the roads, the services, and the base of the units. They deliver that over a six to nine-month period, and then they move off-site. I suppose the benefits we've really seen in that is when the real construction or the superstructure team move on to site, what you really see is that they can erect the house in 16 weeks, and they can turn the keys. There's real benefits to that, and I suppose what we're trying to do there is, yes, we have to invest the element of infrastructure up front, but the real benefit that is when we're actually building the units, we're turning our WIP much quicker, and that's the real pros to that analogy. Sorry, that's not. I suppose what we've really done as well is, as you see the weighting of deliveries this year, 322 units for the first half of the year is a phenomenal achievement in the restrictions that were out there. It shows how the business and the profile of the business is maturing, where more and more units are going to come into the system in the first half of the year. It's just making progress on all those fronts, which are huge benefits for the business. Just on the overhead point, John Cahill. I suppose we don't see a significant increase in overheads over the next kind of 3 to 4 years. It's certainly not going to track the revenue growth. Most of the new employees, new infrastructure, costs in relation to timber frame, that'll all be baked into our gross margin because effectively they're direct to site costs. Over the last number of years, we've talked about building a team early, so for the last couple of years, we've had a team looking at manufacturing design, and obviously their kind of work is coming to fruition now. We have a target of around 4% of revenue by 2024. I think we're certainly well on track to deliver that. It's not going to increase significantly based on the new manufacturing capabilities. Great. That's very helpful. Thanks very much. No problem. We have no further questions coming through on the phone lines, so I'd like to hand the call back over to your hosts. Thank you. Thank you, Molly, and thank you everyone for joining the call today, and we look forward to catching up with you over the next number of days.