Hello everyone, and welcome to the Irish Residential Properties REIT 2023 preliminary result investor call, and thank you for standing by. My name is Daisy, and I'll be coordinating your call today. If you would like to register a question, please press star followed by 1 on your telephone keypad. And I would now like to hand over to your host, Luke Ferriter, Head of Investor Relations. To begin, so Luke, please go ahead.
Thank you, operator. Good morning, and thank you for joining the IRES 2023 preliminary results call. My name is Luke Ferriter, Head of Investor Relations, and I'm joined today by our CEO, Margaret Sweeney, and our CFO, Brian Fagan. The presentation we are about to make, along with today's results announcement, are available to download on the Investor Relations section of our website, iresreit.ie. Before we begin, I would like to remind everyone that certain statements we make today are or may be considered to be forward-looking, and therefore are inherently subject to those various risks and uncertainties that could cause actual results to differ materially from those expressed or implied by these forward-looking statements. I direct you to read in detail our preliminary results announcement issued today, which highlights these risks and uncertainties on page 25.
I remind you that there is no guarantee that the company will generate a particular rate of return at any particular time. I will now hand you over to Margaret, who will take you through our 2023 financial year overview.
Thank you, Luke. So turning to slide 5, we continue to deliver on our strategic objectives during 2023, and I'm pleased to report a strong and resilient performer. Well-invested, modern portfolio, and our sector-leading, technology-led operating platform, coupled with the underlying fundamentals of the Irish private residential market, continue to deliver market-leading occupancy rates and strong cash flows for the company. We continue to execute across all strategic pillars in 2023, and our focus on operational excellence, along with asset and capital management, delivered further growth as well as a stable and resilient operational and financial performance. This further demonstrates the strength of our business and the high quality of our assets. We are committed to safeguarding financial stability, optimizing operational efficiency, and delivering sustainable long-term value to our shareholders. Through focused execution of our strategy, we drove value across all our key strategic pillars in 2023.
On operational excellence, delivery was supported by our consistently high occupancy rate, which held firm at 99.4%, as well as maintaining a broadly stable NRI margin of 77.3% despite persistently high inflation. This was due to a clear focus right across the company on cost management, process efficiency, and seeking opportunities to generate ancillary revenue. This delivered revenue growth with a 3.5% increase reaching EUR 87.9 million for the year. This was due to the full-year impact of new assets and organic rental growth offset by disposals completed during the year. Our adjusted EBITDA grew by 3.3% to EUR 56 million, further reflecting successful cost management and with the EBITDA margin remaining broadly stable. Our asset management strategy reflected the increased risk environment during 2023, as well as our focus on maximization of shareholder value. The company delivered on a previously communicated asset disposal program during the year.
This included property sales as well as individual unit sales and sales of non-income-earning assets, and we were pleased to execute this program in a timely fashion in 2023, generating proceeds of EUR 96.5 million. These proceeds were deployed in line with our capital allocation policy, strengthening our financial position by retiring higher-cost debt under our revolving credit facility while broadly maintaining our earnings profile. This disciplined approach to asset recycling and capital allocation provides an important lever to protect long-term business value while navigating periods of increased risk and volatility. The acceleration in interest rates by 450 basis points from July 2022 and through September 2023, along with extremely low transaction activity in Ireland in the residential real estate market, resulted in market yield expansion of prime yields by approximately 75 basis points in 2023, as indicated by external valuer reports.
As a result, our EPRA net initial yield increased by 50 basis points from 4.4% to 4.9% at 31 December 2023, resulting in a non-cash revaluation IFRS adjustment of EUR 141.8 million for the full year 2023. Our high-quality modern assets continue to exhibit strong characteristics with fundamental performance and strong sustainability credentials, delivering increasing revenue and cash flow, consistent occupancy levels, and collection rates of over 99%, including low CapEx requirements. On capital management, our net LTV at 31 December 2023 was 44.3%, within our target range and reflecting the positive impact of the asset disposal program and offsetting the impact of the revaluation adjustments. At period end, approximately 83% of the group's drawn debt is fixed against interest rate volatility at a blended rate of 3.27% and with maturities from 2026 to 2032.
The completion of the asset disposal program has allowed us the flexibility to reduce our overall RCF facility size from EUR 600 million to EUR 500 million, providing savings on commitment fees payable going forward. As part of ongoing risk management and providing additional headroom, we also reduced our interest cover ratio covenant from 200% to 175%. As I mentioned, the company continues to deliver strong recurring income, revenue growth, and cash generation. All of this feeds through to our dividend, an important contributor to shareholder returns. A further dividend of 0.02 per share is declared for H2 2023, bringing the total dividend for the year to 0.45 per share, and this is in line with our policy of paying out 85% of profits as dividend annually. In determining the dividend level, maintaining a robust balance sheet and strong liquidity profile continues to be a strategic priority for the company.
Sustainability and ESG principles form a key part of our strategy and continue to be a key focus across our business. It's our objective to reduce our carbon emissions in line with the ambition and commitment of the Paris Climate Agreement, Ireland's Climate Action Plan, and the UN Sustainable Development Goals. We have been making good progress on reducing our carbon footprint through further reductions in Scope 1 and 2 emissions during 2023. We've also progressed on our Scope 3 energy data collection program, and this is underway in collaboration with our residents as well as our suppliers, with a particular focus on our supply chain. The sustainability credentials of our properties are high, with 90% of our assets holding Building Energy Rating certification of A, B, and C.
Our people are a key asset to the business, and we support them by creating a diverse and welcoming community that enables all our employees and residents to thrive. Our unique and diverse culture is evident in our employee survey results, with employee satisfaction scores continuously high at 90%. Through professional property management and responsive customer service, as well as a leading technology platform, we have solidified our position as a preferred residential landlord supporting continuing high occupancy. Turning to slide 6, during 2023, we launched our new vertically integrated digital platform, I-RES Living, as part of our wider operational and digital transformation strategy. The integration of our platform and the adoption of technology has allowed us to streamline our operations and improve multiple delivery KPIs across our business, including enhanced rent collection rates, more efficient resident service delivery and leasing operations, and improved resident engagement levels.
We are now able to automate many resident interactions, unlocking cost and process efficiencies and reducing our response times, resulting in more efficient resolutions for both the company and its residents. Our platform delivers asset-by-asset performance metrics, providing management with granular insights and driving informed decision-making and cost management, which is reflected in our strong operating performance and stable margins during 2023. Our technology platform is now capable of being white-labeled and redeployed for use by third parties and with relevant licensing and structures put in place in 2023, and is now positioned for additional capital-light revenue streams. Turning to slide 8, the IRES Board remains fully committed to unlocking and maximizing value for shareholders, and as previously announced on the 8th of January, the company commences a strategic review today. This review will explore and consider all strategic options available to maximize value for shareholders.
Strategic options to be assessed will include but not be limited to new strategic initiatives, consolidation, combinations, mergers, or other corporate action, a review of the company's status as a listed REIT, the sale of the entire issued share capital of the company, or selling the company's assets and returning value to shareholders. This strategic review will be comprehensive and led by a board committee of new Chair, Hugh Scott-Barrett, and non-executive directors, Denise Turner and Philip Burns. They will be supported by Savills, a leading real estate advisory firm with local and international knowledge, in conjunction with our existing international financial advisors and brokers. The company intends to keep the market updated with regular progress reports as the review advances, and an initial update will be provided ahead of the company's AGM in May of this year.
The board remains fully committed to unlocking and maximizing value for shareholders as part of this strategic review process. I will now hand you over to Brian Fagan, our CFO, who will bring you through our financial results.
Thanks, Margaret. Moving to slide 10, which provides a summary of our financial performance for the year. We are pleased to report an excellent operating performance for 2023, despite facing revenue increased year on year by 3.5% to EUR 87.9 million. Our net rental income grew by 3.3% to EUR 67.9 million. Occupancy in the portfolio remains strong at 99.4% at December 2023, similar to December 2022. Collections also remain strong at over 99%, reflecting our continued focus on this area. The strong occupancy and revenue performance further underlines the resilient characteristics of the business. Against the inflationary background that we have seen in 2022 and continuing into 2023, we have been working hard to maintain our NRI margins at the 77% level. This has included initiatives right across the company in terms of cost savings and revenue generation.
Adjusted EBITDA increased by 3.3% to EUR 56 million, with margins of 64% broadly in line with 2022, further illustrating our cost focus. As anticipated, financing costs increased over 2022, rising from EUR 16.8 million to EUR 26.7 million, reflecting the higher interest rate environment. As a result, EPRA earnings reduced from EUR 30.9 million to EUR 27.6 million in 2023. As at the end of 2023, 83% of the company's drawn debt is now fixed at an overall average rate of 3.27%, providing increased certainty on financing costs over the medium term. In accordance with international financial reporting standards, the company's profits are stated after taking account of movements in the valuation of investment properties. At 31 December 2023, our independently led valuation process resulted in a reduction of EUR 141.8 million in the value of our assets.
This non-cash revaluation adjustment reflects the expansion of yields across the Irish real estate market, as indicated by external valuer's reports, and this was offset by increased net rental income and strong operational performance. EPRA earnings per share amounted to EUR 0.05 compared to EUR 0.05 per share in 2022. The strong operating performance, together with the cash-generative capabilities of the business, enables us to continue our strong track record of delivering dividends to shareholders. Following today's results, the board is proposing, in line with our policy of 85% dividend payouts, that a final dividend per share of EUR 0.02 will be paid, bringing the total dividend to EUR 0.45 per share. Turning to slide 11, we continue to deliver on our strategy of asset recycling and balance sheet management, which generates value for the business and our shareholders.
Aligning with the challenging market environment during 2023 and our focus on maximizing shareholder value, the company set out in May 2023 an objective to dispose of EUR 100 million of assets to strengthen our financial position. We were pleased to deliver on this initiative in an efficient and timely manner, disposing of assets in line with relevant book values at December 2022 and 30 June 2023, and at an attractive return on the original acquisition cost. We executed sales of our two properties in Hansfield, along with individual sales of 11 units and also non-income earning assets. These disposals generated gross proceeds of EUR 96.5 million, inclusive of VAT. Proceeds were deployed in line with the group's disciplined capital allocation strategy, further strengthening our balance sheet by retiring higher-cost debt under the RCF, while broadly maintaining the company's earnings profile.
The disposal program forms part of our disciplined capital management strategy, and we will continue examining opportunities for asset recycling and capital management that we believe will deliver value for our shareholders, subject to the strategic review. Moving to slide 12. Financial position remains strong, with no debt maturities until 2026 and repayments laddered out to 2032. Net LTV at 31st of December 2023 is 44.3%, within our targeted range. It increased as a result of the IFRS revaluation adjustment recorded in the year, offset by the strategic asset disposal program completed. It remains well below the 50% maximum allowed by the Irish REIT regime and the group's debt covenants. Our debt facilities are made up of our RCF and EUR 200 million in private placement notes.
In January 2024, the company exercised its right to reduce the RCF facility size from EUR 600 million to EUR 500 million, an option available to the company given the successful completion of the circa EUR 100 million asset disposal program and saving on commitment fees going forward. Remaining undrawn committed facilities are EUR 127 million, providing the company with ample liquidity and optionality. The private placement notes are fully fixed at an overall weighted average fixed interest rate of 1.92%, inclusive of swap costs and excluding transaction costs. The maturity of the notes is laddered over six, nine, and 11-year maturities, with the first repayment due in March 2027. As part of our ongoing risk management, we have also engaged with the RCF syndicate banks and private placement noteholders to reduce our interest cover ratio covenant from 200% to 175%, providing us with additional headroom across our financial covenants.
The drawn debt facilities are predominantly fixed against interest rate volatility, with 83% of the drawn debt fully fixed. The group has a weighted average drawn debt maturity of 2.9 years and no debt maturities before April 2026. Our average cost of interest for 2023 was 3.85%. Turning to slide 13, reflecting prevailing macroeconomic conditions such as accelerated interest rate increases, institutional real estate transaction activity in Ireland was muted during 2023. Total transaction value for the year was approximately EUR 1.8 billion, down 70% compared to 2022 and down 60% compared to the 10-year average. PRS investment activity was less than EUR 250 million in 2023, with total transaction volumes well below recent historical averages. These factors have resulted in market yield expansion, with prime yields on residential assets expanding by 75 basis points in Ireland in 2023, as reported by external valuers.
This shift in yields has resulted in our EPRA Net Initial Yield increasing by circa 50 basis points to 4.9% and an IFRS revaluation adjustment of EUR 141.8 million for the year ended December 2023. Reflecting these movements, our EPRA NTA per share decreased to EUR 1.317 as of December 2023. Inherent in our portfolio is significant and increasing reversionary potential, with current rents approximately 16% below market according to our independent valuers. The number of our assets are in excess of 25% below market level. This supports rent increases going forward and future value. The underlying performance of our assets remains strong, as reflected in our strong operational performance during 2023, underpinned by growth in revenue and cash flow. High-quality assets with strong sustainability credentials. As of December, the asset portfolio comprised 3,734 apartments and houses, predominantly in Dublin and well-diversified across locations that continue to experience significant demand.
Our buildings are modern, with an average age of 14.9 years, meaning they require low capital expenditures and are of a high sustainability standard. 90% of our portfolio comprises A, B, or C Building Energy Ratings. We offer attractively priced accommodation in well-connected locations. Our portfolio average monthly rent is EUR 1,774, with approximately 80% of units costing below EUR 2,000 a month. As we have already touched on, we delivered exceptionally high occupancy leasing and turnovers. I will now hand you back to Margaret, who will touch on our sustainability and ESG progress.
Thank you, Brian. Turning to slide 16, sustainability and ESG are central to our strategy, and we have embedded this focus across all parts of the business.
We have an excellent team in Ireland with a culture of commitment, respect, innovation, and value add, and I am very proud to say that the Irish team has fully embraced sustainability and ESG and working collaboratively with our residents, suppliers, and other partners to improve our impact on the planet, our communities, and our business. Maintaining the highest levels of transparency and disclosure is one of our key objectives, and we have made significant progress across several key rating criteria during 2023. We received the sBPR Gold Award from EPRA again in 2023. We have also made progress on GRESB, achieving a score of 65 and moving into the two-star category. We invest in our people, and IRES CEO have had a particular focus on organizational effectiveness, training and development, as well as health and well-being and building organizational capability.
I'm delighted to say we achieved a 90% satisfaction score in this year's employee survey, along with further improvement in our resident satisfaction levels. We actively engage with our residents to improve our service standards, and we take feedback annually from over 1,300 respondents, including their views on sustainability. Now, turning to slide 17, our commitment to sustainable living is embedded in our long-term investment approach, property operations, maintenance, and interactions with stakeholders, including our customers, employees, partners, and the wider community. We have three core pillars underpinning our sustainability strategy: operating responsibly, protecting the environment, and building communities. We are delivering across a whole range of initiatives in support of our ESG strategy, which is also aligned with the UN Sustainable Development Goals, and our efforts include carbon reduction initiatives, energy-efficient upgrades, waste reduction measures, nature-focused projects, and social impact programs.
These endeavours align with our commitment to reducing our carbon impact and making a positive contribution to the communities in which we operate. As previously mentioned, we have been working to increase our decarbonization efforts. We reduced our Scope 1 and 2 greenhouse gas emissions by 41% and 26% in 2022, and following on from this achievement, we again reduced our like-for-like Scope 1 and 2 greenhouse gas emissions by nearly 60% in 2023. As mentioned earlier, 90% of our buildings hold Building Energy Ratings between A and C, which is further evidence of the modern and high-quality nature of our assets portfolio. Now, turning to slide 19, I would like to touch upon the Irish economic outlook. Demand for Irish private residential continues to be supported by some of the strongest fundamentals globally.
Ireland's GDP growth is expected to continue outperforming the Euro area average in both 2024 and 2025, and this is driven by a low unemployment rate, which reached near-historically low levels in 2023, finishing the year at 4.9%, which is 1.5% below the Euro area unemployment rate. Our overall inflation, which has been persistently high in recent years and averaged 5.2% in 2023, is forecasted to decline to 2.2% in 2024, according to the Central Bank of Ireland. Turning now to slide 20, where we outline the strong supply and demand fundamentals that underpin our business and which continue to be supportive of long-term sustainable income and growth. A growing population and shifts in demographics are shaping the need for more housing and rental accommodation in Ireland. Ireland's population exceeded estimates by reaching 5.1 million people in the 2022 census.
This is an 8% increase from the last census in 2016, and estimates for 2023 showed the population rose by over 97,000 people, which was the largest 12-month increase since 2008. Ireland's population is forecast to continue its strong growth due to a high birth rate and inward migration supported by strong FDI and jobs inflow. We also have one of the youngest populations in the EU and a highly educated workforce, which is attracting international companies and expansion across many industries, including pharma, IT, financial services, and professional services, amongst others. Our housing delivery has not kept pace with population growth, resulting in a significant deficit in our housing stock. Ireland completed approximately 32,000 homes in 2023, which is above the government target level of 30,000 but significantly below what some independent research and economists estimate is needed, which is upwards of 60,000 new homes per year.
Illustrating this dislocation between supply and demand has been the significant growth in average monthly rents across the country and in Dublin, with the average monthly rent in Dublin standing at EUR 2,113 in Q3 2023, which was up from EUR 2,022 on the same period last year. This reflects a significant reversionary element in the Irish portfolio, as mentioned by Brian. These powerful economic, social, and demographic forces are continuing to drive demand for rental accommodation in Ireland, and in contrast, the supply of new homes is lagging demand. To recap, we continue to execute on our strategy that we set out at the end of 2022 across all strategic pillars to deliver value for shareholders. We reported another strong operational and financial performance for 2023, despite the challenges in the macroeconomic and market backdrop.
We continue to deliver revenue growth despite some reduction in portfolio size and also held our occupancy as well as our margins for NRI and Adjusted EBITDA. Our market-leading, technology-led, scalable operating platform has allowed us to streamline our operations and unlock cost and process efficiencies, which are reflected in today's results. Supporting our platform is a highly skilled and capable team who collectively drive our operational performance. Our modern assets portfolio of high-quality and well-located assets continues to exhibit strong income and operating metrics. Our sustainability credentials continue to improve, as evidenced by our improvement in building energy ratings, with 90% of our portfolio now rated A, B, and C. We successfully executed on our asset and capital management strategy, as outlined by Brian.
Despite a challenging market for transactions, we efficiently completed EUR 96.5 million of asset disposals and deployed the proceeds to strengthen our balance sheet and protect the earnings profile. We are focused on retaining our strong financial position through disciplined capital allocation and recycling. Retaining our robust financial position and strong balance sheet continues to be a priority. 83% of our drawn debt is fixed at low interest rates, and we have no debt maturities until 2026. We continue to be committed to our sustainability agenda and executing our ESG strategy across our three core pillars.
As previously outlined and reflecting signs of improvement in the macroeconomic climate, the Irish Board is undertaking a strategic review led by our newly appointed chair, Hugh Scott-Barrett, with non-executive directors Denise Turner and Philip Burns, and supported by Savills, a leading real estate advisory firm with local and international knowledge, in conjunction with our existing international financial advisors and brokers. This review will be comprehensive, conducted as expeditiously as practically possible, and will actively value for shareholders from ongoing business operations and performance, and as part of the strategic review commencing today. Before I finish, I should mention as well, and you will all be aware from the company announcement in October last year, that I will be retiring at the end of April and supporting the transition to a new CEO.
It's been my privilege to lead I-RES as CEO for more than six years and being on the board for eight years. I've enjoyed working with an outstanding team to build a scalable and quality business in the Irish market, as well as delivering transformative change with a market-leading, technology-led operating platform. This will be my last results call, and so I'd like to thank all of you for your support to I-RES and to me personally over the last six years. The board has well advanced with the succession process for a new CEO and expects to be able to provide an update to the market in the coming weeks. Thank you all for your attention, and we would now be happy to take questions. Thank you.
If you would like to register a question, please press star followed by one on your telephone keypad and ensure you are unmuted locally. If you would like to withdraw your question, please press star followed by two. So that's star followed by one on your telephone keypad to ask a question. Our first question today is from John Cronin from Goodbody. John, please go ahead. Your line is open.
Morning, Margaret, and morning, Brian. Thanks for taking my questions, and congratulations, Margaret, on your decision and best wishes for the future. This is your last results call, as you say. Two questions from me.
What one is in relation to the strategic review process, and I suppose looking to understand maybe more broadly, what kind of bandwidth do you see that you have as a board while this process is ongoing in respect to perhaps opportunistic strategic options that emerge during the course of the review period, whether it be asset sales or various other potential actions? Do you feel, I suppose, somewhat constrained in terms of what you can do while it is ongoing? And also, what would be helpful is, and I appreciate you set out this morning that you will provide status updates through the process, which is helpful, but what kind of timeframe are you currently thinking approximately around getting to completion of that review, or is it just too early to tell at this stage?
And then secondly, on the incoming CEO appointment process, can you give us an update in terms of where that is at, how advanced or not as the case may be at this stage, and likely timeframes based on your best estimates at this juncture if you can help us there? Thanks.
You know, thank you, John, and thank you for joining our call as well this morning. So, dealing with firstly the strategic review. As you know, it's as we announced, it's commencing today and being led by our new chairman, Hugh Scott-Barrett. We actually think the company has very strong fundamentals, as is evidenced from the performance today, very stable, solid fundamentals to the business, good strong demand drivers underpinning the business as well. And we see very much a key focus.
We are commencing a strategic review, but equally, we also have a good business that we need to keep focus on and run. So we don't see actually, you know, that in any way that we would need to keep business as usual focused at the same high level of performance that we've been delivering to date and evidenced in today's results. So we would also continue to do that while also there will be a strategic review. I think as the Chairman has outlined, the plans are to provide a substantive update to the market ahead of the EGM in May 2024 and will keep good progress updates to that market. The new subcommittee leading the strategic review has also been announced today, and also the advisors supporting the committee in doing that.
As you know, it's going to be comprehensive, going to look at all options. And in terms of, as you say yourself, it probably is, as you know, the nature of these things, they tend to evolve. It's too early to say when it will complete, but the proposal is that it should happen at pace. And you should be aware as well, we fall within the rules of the Takeover Panel during this period as well. So in relation to then, the incoming.
Absolutely. But look, I guess, look, you know, for example, where buyers will emerge for some of the assets, I mean, do you feel like you're kind of locked into not doing anything in that respect until the outcome is known, or I mean, presumably, you can be pragmatic about this throughout to the extent things change or developments emerge?
You could take a view that you might sell a block of assets, or you might buy a block of assets. So, if the case may be, is that a fair assessment? You know, we should just think about it like a kind of status quo in terms of, you know, you'll take any sensible decisions with respect to strategic actions as well as the general running of the business throughout that period.
You know, I think our chairman's been very open. It's going to be a comprehensive review, John. And also, you know, we actually are ensuring that all options are going to be explored, and all opportunities. And, the board and the board committee, in conjunction with the support of the advisors, will ensure, I think, that, you know, all opportunities for unlocking and maximizing value for shareholders, will be actually delivered, through the process.
I think as that process evolves, we will also keep the market well updated in relation to it. Okay. So your second question was in relation to my successor and the process around that. That's actually, as we'd advised, is being led by the board nominations committee, by the chairman with the board nominations committee and a selection committee. That is also well advanced. The board would expect to be able to provide an update to the market in the coming weeks in relation to my successor. Okay.
Thank you. Thanks, John.
Thank you. Thank you. As a final reminder, if anyone would like to register a question, please press star followed by one on your telephone keypad now. We have no further questions, so I'd like to hand back to Margaret for any further or closing remarks.
Thank you, David.
Thank you all for joining us this morning. We appreciate your time and also your questions and hope for that you all have a nice afternoon. Thank you.
Thank you, everyone, for joining today's call. You may now disconnect your lines and have a lovely day.