26 August 2021

Glenveagh Properties plc

Interim Results 2021

Glenveagh Properties plc ("Glenveagh" or the "Group") a leading Irish homebuilder announces its Interim Results for the period ended 30 June 2021.

Speaking today, Stephen Garvey, CEO, said: "Today's results demonstrate the strength of our business proposition and are a testament to the hard work of the Glenveagh team and our partners. Despite the major headwinds caused by Covid-19, we have returned to profitability and increased our output. We have sold, signed, or reserved the 1,150 homes that we expect to deliver this year with a further 300 homes already reserved for next year. We've seen growth across our three core business segments and have made major strides in building a strong platform for future growth.

Ireland is in an accommodation crisis and needs upwards of 35,000 homes a year to keep pace with requirements. In Glenveagh, our focus is on getting supply into the system as quickly as possible and we have a clear path to our target of building 3,000 homes a year by 2024. By innovating and relentlessly focusing on getting affordable, sustainable homes into the market, we are confident that the business will continue to prosper and play its part in addressing one of the key social challenges of recent decades."

Financial Highlights

¹ Excludes the non-core units in Marina Village and includes the Premier Inn hotel forward fund site sale

Operational Highlights

·     322 units closed in the period despite 13 week lockdown; +162% versus H1 2020

·     Completion of the Premier Inn hotel site sale in Castleforbes for approximately €16 million as part of a forward funding transaction of approximately €70 million

·     During the period, the Group secured its first Partnership agreement with Fingal County Council for a proposed development of 1,200 new homes at Ballymastone, Donabate in north County Dublin

·     Strong progress on the share buyback programme with 20.5 million shares purchased in the period and 26 million shares purchased to date

·     The Group acquired nine suburban sites for total consideration of approximately €52 million (excl. fees and tax) capable of delivering over 2,000 units

·     €4.2 million reversal of previous impairment charge in Marina Village with sales execution ahead of expectation

·     The Group currently has 20 active construction sites capable of delivering 4,700 units having opened five new sites in H1 2021 with further openings expected in H2

Current trading

·     All 1,150 units now sold, signed or reserved, with over 1,000 of those units either closed or with a binding contract in place

·     300 units reserved for 2022 following recent launches

·     Average weekly private reservation rate per site +58% year to date

·     The Group has exchanged contracts on the sale of the residential and second hotel sites in Castleforbes for €78.5 million

·     Heads of Terms have been agreed to forward fund 320 urban apartments with completion expected within 6 months

·     Glenveagh is investing €16 million in a second timber frame facility and a soil recovery facility, which will allow for the sustainable growth of the business to 3,000 units and beyond while also controlling costs

·     The Group is delivering two of the State's first ever cost rental transactions with Clúid Housing, an Approved Housing Body, in Taylor Hill, Balbriggan and Barnhall Meadows, Leixlip

Results Presentation

A conference call for analysts and investors will take place at 8.30am this morning to present the financial and operational results followed by a Q&A session. Please pre-register at the link below to ensure your attendance is confirmed ahead of the commencement of the call:

·     Ireland +353 (0) 1 553 0196  / UK +44 (0) 33 0551 0202 / USA +1 646 843 4609;

·     Conference PIN 6957426 followed by *0;

·     Click this link to register for the conference

For further information please contact:

Note to Editors

Glenveagh Properties PLC, listed on Euronext Dublin and the London Stock Exchange, is a leading Irish homebuilder.

We are dedicated to expanding access to high-quality new homes, with a focus on first time buyers and young families. We believe that everyone should have access to high quality homes in flourishing communities across Ireland.

We are focused on three core markets - suburban housing, urban apartments and partnerships with local authorities and state agencies. We currently have 20 active construction sites with 1,150 units in the pipeline for 2021 and 3,000 units per annum from 2024. The land portfolio we have assembled can deliver housing that is both in demand and affordable.

www.glenveagh.ie/corporate

GLENVEAGH PROPERTIES PLC: BUSINESS AND FINANCIAL REVIEW

1.   BUSINESS REVIEW

i.    Group Sales

a.   Overview

The Group had total revenue of €127.5 million (H1 2020: €37.0 million), with the majority of revenue relating to the completion of 322 units (H1 2020: 123 units; H1 2019: 158 units). As anticipated, the weighting towards closings in H1 has improved in 2021 with nearly 30% of our full year unit target closing in H1. This compares very favourably to 18% and 19% in 2020 and 2019 respectively.

In addition to the revenue generated from unit closings, the Group completed the €70 million sale of the Premier Inn hotel in Castleforbes to Union Investment through a forward fund arrangement. The revenue recognised in the period from the land element of the transaction amounted to approximately €16 million.

The Group's redeveloped digital strategy facilitated an online and private viewing led customer journey ensuring a high volume of potential home buyers viewed our homes, delivering more qualified prospects for the sales team. The combination of our digital strategy, improved customer experience and pent-up demand helped increase average weekly private reservation rates by 58% in the year to date.

The benefits of Glenveagh's suburban land assembly strategy, which has been exclusively starter-home focused continued to produce positive results from a sales perspective with 1,000 units for 2021 now sold or with a binding contract in place underpinning the target of 1,150 units for 2021.

House Price Inflation ("HPI") in the Group's starter-home focused Suburban segment has continued to increase from 3% in H2 2020 to 5% in H1 2021. Most of the impact of the increase in HPI is likely to become visible from 2022 with most closings during 2021 completed based on 2020 pricing.

b.   Suburban Starter-Home Sales

The Group closed 197 core units in the period with an ASP of €298k across 11 selling sites. Having started the year with 544 core units reserved, the Group reserved approximately a further 750 units in our suburban starter-home developments, which will be delivered across 2021 and 2022.  This strong momentum on existing open sites carried forward from last year with strong reservation rates achieved again in H1 2021.

c.   Urban Sales

During the period, the Group closed 125 non-core urban units in Marina Village at an ASP of €423k. The group's PRS transaction with Real IS for 134 units contributed 105 units in the period with the additional 20 units being sold to the private market. The remaining 29 units from the Real IS transaction completed in July.

During the period, the Group completed the €70 million sale of the Premier Inn hotel in Castleforbes to Union Investment through a forward fund arrangement. The revenue recognised in the period from the land element of the transaction amounted to approximately €16 million.

On 25 August, the Group exchanged contracts on the sale of the residential and second hotel sites at Castleforbes in Dublin's Docklands for cash consideration of €78.5 million to a subsidiary of Eagle Street Partners Group Limited ("Eagle Street"). Eagle Street is a pan-European real estate investment and asset management firm established by Mr. Justin Bickle (Co-Founder and former CEO of the Group). Eagle Street is owned by its founders and backed by an institutional investor. This transaction is expected to close in Q4 2021.

Alongside the sale of the Premier Inn hotel element of the Docklands site for €16 million, Glenveagh has made significant progress in monetising this key urban development during the financial period reducing the Group's risk in the Docklands while allowing the business to redeploy the proceeds elsewhere in the business to maximise return on capital.

The Group has signed Heads of Terms to forward fund 320 urban apartments with completion expected within six months. A further two developments of a combined 300 units are currently being marketed for forward funds with expected transaction dates in 2022.

These transactions demonstrate the strength of the institutional demand for high-quality residential property and the Group continues to focus on monetising the urban portfolio through a combination of exit options, including forward fund and forward commit transactions.

ii.   Partnerships

During the period, the Group was 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 and the project will deliver much-needed housing in the area, across a mix of private, social, affordable, and cost-rental homes. The Group will now move forward with the formal planning application and would hope to begin development in 2022.

The Group continues to be very supportive of the Partnerships delivery model and is actively engaged on two separate schemes which, if awarded, could deliver an additional 1,400 units across the three tenure types (Private, Social and Affordable).

Given the Group's construction capabilities, private market experience, reputation, and strong balance sheet, Glenveagh remains strongly placed to be the supplier of choice for much needed housing across a range of tenures.

iii.  Development Land Portfolio Management

The Group continues to take a disciplined and strategic approach to land acquisitions concentrating on opportunities which have the potential to enhance the Group's return on capital and position the Group to deliver its medium and long-term output targets.

In H1 2021, the Group added to its development land portfolio via nine new suburban sites, two of which are adjacent to existing sites owned by the Group. Total consideration for these sites was approximately €52 million (excl. fees and taxes) and can deliver over 2,000 units.

Furthermore, while the land market in Ireland continues to mature, we are continuously looking at ways to reduce site duration and improve return on capital. With that approach in mind, the Group exchanged contracts on its first two 'subject to planning' transactions totalling approximately €9 million (227 units).

Looking ahead, three further sites are under negotiation or have exchanged contracts for approximately €12 million which benefit from an existing planning permission for a total of 615 units, allowing the Group to minimise site duration and maximise return on capital.

Inclusive of recent site acquisitions and our first Partnership scheme, the Group's current land portfolio is approximately 16,600 units.

iv.  Planning

The Group, guided by our experienced inhouse planning team, has made significant planning progress during the period with over 2,000 units granted permission across 10 sites and when combined with sites acquired with planning in the period, the Group now has over 6,700 available planned units, which is approximately 40% of our overall land portfolio.  A further 1,300 units across 13 sites are expected to be granted planning in the second half of the year.

The Group lodged planning applications for over 1,000 units in H1 with an expected 1,900 units to be lodged in the second half of the year as the Group continues to create a more active land portfolio to support the continued growth and the opening of new sites.

It has recently been announced that the SHD planning process will be replaced by the Large-Scale Residential Developments process (LSRDs) and this new system has now been approved by the Government. The SHD system had been frustrated by several legal challenges and lengthy delays, with the Government moving to end the process on 29 October which is earlier than previously planned (February 2022). We understand that LSRD developments will be very similar in scale to that for an SHD application, comprising developments of 100 housing units or more, or student accommodation developments comprising 200 bed spaces or more.

The delays experienced in the existing SHD planning process, along with the changes to a new process, have limited the rate at which the wider market can deliver new homes. The Group has been directly impacted by the delays and have had to include a number of contingencies within our delivery programme to 2024. The Group do not have any immediate planning concerns as all planning required to deliver the Group's 1,400-unit target for 2022 is now in place.

v.   Manufacturing

Over the last number of years, the Group has invested in its supply chain to better control costs, ensure quality and to guarantee supply as the business grows to delivering 3,000 units per year. This investment was in the Group's timber frame manufacturing facility in Dundalk and its soil recovery facility in north Dublin, both of which became fully operational in 2021. The benefit of these investments has already been seen and quantified in the business and for that reason, the Group is investing further in the supply chain starting with a €16 million investment in additional timber frame and soil recovery facilities.

The timber frame facility will be strategically located within our Suburban South region to better serve our expanding network of construction sites throughout the country. The purchase of this facility will complete in the coming weeks and will be operational from 2023. When combined with our existing Dundalk facility, the Group will facilitate the manufacture of approximately 2,000 timber frames by 2024.

Our soil recovery capabilities have been augmented with the addition of our new facility in the Suburban South region which will complement our existing facility at Bay Lane in the Suburban North region.

These investments will allow for the sustainable growth of the business to delivering 3,000 units per year and beyond while also controlling the costs in a manner that improves return on capital in the medium term.

vi.  Group Construction Progress

Construction sites were disrupted for the first 13 weeks of the period due to a series of Government imposed rolling lockdowns. In January, construction was limited to private housing which could be completed before 31 January and social housing which could be delivered before the end of February. Following the introduction of updated guidance in early February, construction was then solely limited to social housing which could be completed before the end of April. These restrictions were only lifted on 12 April and our existing construction sites became fully operational but were still subject to social distancing requirements.

A feature of the Group's construction operations over the last 12 months was increasing volume from our larger sites to minimize site duration and further increase return on capital. As a result of this approach, the Group expects to deliver 1,150 units in 2021 from a reduced number of sites vs 2020. This forms part of the Group's approach to optimising its investment in land over the coming years and positioning newly opened sites in 2021 to deliver significant volumes from 2022 onwards.

In addition to the 15 existing sites delivering units in 2021, the Group has recently opened five new suburban sites, as well as construction on the commercial element of Castleforbes, all of which will deliver units from early 2022.

vii. Managing CPI

The Group has seen significant one-off cost increases in the period in a variety of commodities and trades, the most significant of which were timber and resin-based product prices. To partially mitigate these price increases, the business was able to leverage its purchasing power and scale but more importantly the supply chain initiatives that the business invested in over the last number of years. Our timber frame factory and our soil recovery facility allowed the business to shield itself from the full effect of the increases that the wider market experienced, generating significant competitive advantage.

As a result of the initial reaction to the full re-opening of residential construction and the global commodity price increases, the business saw Cost Price Inflation ('CPI') of approximately 5% on tenders in the period, which will largely impact deliveries from 2022.

Looking to future periods, the Group's continued investment in its supply chain will be the main driver in managing CPI.

viii.            Sustainability Agenda Progress

The Group continues to make incremental and meaningful progress on the material areas of focus identified in our 2020 sustainability report. During H1, Glenveagh achieved two certifications from the National Standards Authority of Ireland (NSAI) - ISO 14001 Environmental Management and ISO 45001 Occupational Health and Safety. The ISO 14001 certification will help ensure that our business is focused on reducing our environmental impact, supported by effective management processes. ISO 45001 demonstrates that we are committed to improving employee safety, reducing workplace risks, and creating better, safer working conditions. 

We also built on our disclosures in the period, measuring Scope 3 emissions for the first time and reporting these via the Climate Disclosure Project (CDP) 2021 demonstrating our wider approach to managing climate and environmental issues.

Recognising the importance of the Group's six Sustainability Pillars to our strategy, the Board established an Environmental and Social Responsibility Committee (the "Committee") to lead our ambitious plans in this area, ensuring we deliver homes for people alongside the highest standards of environmental stewardship and responsible business. The Committee is chaired by Non-Executive Director Camilla Hughes and includes the Chief Executive Officer, Stephen Garvey, the Senior Independent Director, Robert Dix, and Non-Executive Director Pat McCann.

A further detailed progress report on our sustainability agenda will be provided at the time of our full-year results.

2.   FINANCIAL REVIEW

i.    Group performance

Total revenue for the period was €127.5 million (H1 2020: €37.0 million). There are three main components of revenue for the first six months of the year:

·     €58.7 million from 197 core suburban units

·     €52.9 million from 125 non-core units in Marina Village, Greystones

·     €15.9 million in our urban segment which predominantly relates to the Premier Inn hotel site sale, part of the forward fund transaction with Union Investment

The Group's revenue and unit completions have increased significantly by 245% and 162% respectively versus the same period last year as the business continues to recover strongly from the impact of Covid-19. The core Average Selling Price ("ASP") for the period was largely consistent with the same period last year at €298k (H1 2020: €300k). The core ASP for the full year is expected to be broadly in line with the first half of the year.

The Group achieved a gross profit of €21.4 million (H1 2020: Gross loss of €15.2 million) for the period, giving an overall gross margin of 16.8%. The gross profit includes a partial reversal of the asset impairment of €4.2 million on our non-core units, that were subject of the impairment in H1 2020, as the business has achieved better than expected prices on these units. The reversal of impairment includes €2.6 million of realised profits from units closed in H1 2021 and €1.6 million relating to units contracted that will close in H2 2021. 

The core gross margin for the business is 23.0% (H1 2020: 13.8%) which reflects the margin on our core suburban units as well as the profits from our Premier Inn hotel forward fund site sale. The core gross margin for H1 is impacted by the strong margin on the Premier Inn hotel site sale which will dilute over the full year as the remaining suburban units close. The Group now expects full year core gross margin to be in excess of 19.5% with the inclusion of the Castleforbes residential and second hotel land sale.

The Group's operating profit for the period was €6.6 million (H1 2020: Loss of €25.9 million) which includes central costs of €13.6 million (H1 2020: €9.8 million), and €1.2 million of depreciation and amortisation giving total administrative costs of €14.8 million (H1 2020: €10.7 million). The central costs are in line with management's expectation but are weighted towards H1 due to the disposal of our previous head office in Merrion Square, Dublin 2, at a loss of €1.6 million, implying normalised H1 central costs of €12 million. The decision to dispose of the premises was taken in the context of our new working requirements post pandemic and these offices becoming surplus to requirements.

The increased finance expense of €2.2 million (H1 2020: €1.4 million) in the period is reflective of the new debt facilities entered into during the period with committed facilities of €250 million versus previous committed facilities of €125 million.

ii.   Balance Sheet and cash management

Following the impact of Covid-19 restrictions in 2020, the Group's focus for the period was to continue to invest in growth while also driving balance sheet efficiency.

A significant part of driving balance sheet efficiency is the Group's new capital allocation policy, the medium-term Return of Equity ('ROE') target and leverage policy. The Group remains disciplined in its approach to the allocation of capital with the overriding objective of enhancing shareholder value. Our capital allocation framework prioritises:

·     Working capital investment across Suburban, Urban and Partnerships;

·     Investment in organisational and supply chain capabilities;

·     The replacement of land to ensure the Group maintains a five-year land portfolio capable of delivering 3,000 units per annum from 2024 where the Group are targeting an ROE of 15%.

The growth opportunities beyond 2024 are significant and the Group must ensure it has the resources to deliver the 3,000 units per annum from 2024, as well as the ability to invest in the next phase of growth. In doing so, we will maintain a strong balance sheet with prudent leverage not exceeding but close to 15% of net assets.

Beyond this, we will consider the return of excess capital to shareholders in a manner which retains flexibility to capitalise on future growth opportunities. During the period, we identified €75 million as being excess capital and on 28 May 2021, we commenced a share buyback programme of up to €75 million. On 30 June 2021, the Group had repurchased 20.5 million shares and, currently, the Group has repurchased 26 million shares. The impact of the repurchase and cancellation of the 20.5 million shares has been reflected in the Balance Sheet on 30 June.

During the period, we focused our investment on capital-efficient land acquisitions and work in progress for our core suburban business.

Land on 30 June is €641.6 million (December 2020: €619.2 million) and this position reflects our investment in the land market in the first half of the year. The Group added to its development land portfolio in the period via nine new suburban sites, two of which are adjacent to existing sites owned by the Group. Total consideration for these sites was approximately €52 million (excl. fees and taxes) and can deliver over 2,000 units.

Our WIP on 30 June is €239.1 million (December 2020: €201.9 million) which predominantly relates to our 20 active construction sites. Our WIP investment in the first half of the year puts the business in a very strong position to close units in the second half of 2021 and early 2022. Having regard to this investment, our work in progress per site is expected to unwind in H2 2021 as signed and reserved units complete.

The Group's focus on re-establishing its investment in growth has given rise to a net cash outflow of €75.0 million (excl. restricted cash movements) in the period. The main area of focus was investment in inventory of €54.8 million and the Group's Share Buyback Programme of €15.7 million. This investment was financed through a combination of the cash generated from the disposal of our non-core units in Marina Village, the site sale of the Premier Inn hotel as part of the forward fund transaction and our new €250 million committed debt facility.

The Group's net debt position on 30 June was €33.5 million and this strong position is further enhanced by available committed funds of €212.3 million, significant net assets of €837 million and strong covenant headroom. The Group's short-term objective continues to be maximising liquidity and maintaining a strong balance sheet while executing on our growth ambitions

Principal risks and uncertainties

Our approach to risk management is embedded across all levels and departments of our business with the wellbeing of our people being at its core. Our risk management framework to identify, assess, mitigate, monitor, and report on the areas of principal risk and uncertainty has underpinned the resilience of our business. The Board will continue to monitor and assess the impact of internal and external factors on the Group's risk management outlook throughout the remainder of the financial year. The Group's principal risks and uncertainties which could have a material impact on the Group achieving our strategic objectives together with the key mitigation considerations relevant to each risk are included in the 2020 Annual Report.

ENDS

Statement of Directors' responsibilities in respect of the condensed consolidated interim financial statements for the half year ended 30 June 2021

The Directors are responsible for preparing the half-yearly financial report in accordance with the Transparency (Directive 2004/109/EC) Regulations 2007 ("Transparency Directive"), and the Transparency Rules of the Central Bank of Ireland.

In preparing the condensed set of financial statements included within the half-yearly financial report, the directors are required to:

-   prepare and present the condensed set of financial statements in accordance with IAS 34 Interim Financial Reporting as adopted by the EU, the Transparency Directive and the Transparency Rules of the Central Bank of Ireland;

-   ensure the condensed set of financial statements has adequate disclosures;

-   select and apply appropriate accounting policies; and

-   make accounting estimates that are reasonable in the circumstances.

The directors are responsible for designing, implementing and maintaining such internal controls as they determine is necessary to enable the preparation of the condensed set of financial statements that is free from material misstatement whether due to fraud or error.

We confirm that to the best of our knowledge:

(1)  The condensed set of consolidated financial statements included within the half-yearly financial report of Glenveagh Properties PLC for the six months ended 30 June 2021 ("the interim financial information") which comprises the condensed consolidated statement of profit or loss and other comprehensive income, the condensed consolidated balance sheet, the condensed consolidated statement of changes in equity, the condensed consolidated statement of cash flows and the related explanatory notes, have been presented and prepared in accordance with IAS 34, Interim Financial Reporting, as adopted by the EU, the Transparency Directive and Transparency Rules of the Central Bank of Ireland.

(2)  The interim financial information presented, as required by the Transparency Directive, includes:

a.   an indication of important events that have occurred during the first 6 months of the financial year, and their impact on the condensed set of consolidated financial statements;

b.   a description of the principal risks and uncertainties for the remaining 6 months of the financial year

c.   related parties' transactions that have taken place in the first 6 months of the current financial year and that have materially affected the financial position or the performance of the enterprise during that period; and

d.   any changes in the related parties' transactions described in the last annual report that could have a material effect on the financial position or performance of the enterprise in the first 6 months of the current financial year. The Directors are responsible for preparing the half-yearly financial report in accordance with the Transparency (Directive 2004/109/EC) Regulations 2007 ("Transparency Directive"), and the Transparency Rules of the Central Bank of Ireland.

On behalf of the Board

Stephen Garvey                                                            Michael Rice                 26 August 2021

Director                                                                         Director