Release Date: September 05, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Completed over 800 units in H1, approaching a third of the full-year target of 2,700 units.
- Improved overall gross margin by 190 basis points, largely driven by the suburban portfolio.
- Signed a third partnership agreement and advanced several other transactions, enhancing growth potential.
- Announced a EUR50 million share buyback program, reflecting strong capital returns to shareholders.
- Forward order book now over EUR1.4 billion, indicating strong future revenue streams.
Negative Points
- Revenue in H1 is lower than in the second half, indicating a reliance on H2 performance.
- Increased net debt expected by year-end due to significant land investments.
- Build cost inflation running between 3% and 4%, adding pressure on margins.
- Dependence on government initiatives and partnerships for future growth, which may introduce uncertainties.
- Potential delays in planning and policy implementation could impact future project timelines.
Q & A Highlights
Q: Can you discuss the current build cost environment and any new pressures as market output increases?
A: Stephen Garvey, CEO: The build cost environment has been steady, with minor wage inflation and some material volatility. Labor availability has improved due to the commercial market's slowdown. Overall, build costs are running between 3% and 4%. House price inflation has been stronger, and our standardized product and manufacturing efficiencies are driving significant production benefits.
Q: How is the land market behaving, and what are the returns on the sites you're currently looking at?
A: Stephen Garvey, CEO: The land market is stable, with strategic opportunities available. We are focusing on suburban products and sites with partnership potential. Pricing remains stable, and we are seeing good returns. The ability to blend partnership opportunities with land acquisitions enhances returns and operational efficiencies.
Q: Can you provide more color on the suburban segment's volume skew towards H2 and how Q3 has evolved?
A: Stephen Garvey, CEO: Q3 has shown strong momentum, with units that were delayed in H1 now completing. The suburban segment is performing well, with significant production from our factories. We expect a strong H2, with continued momentum into the next year.
Q: What is the outlook for partnerships, and how many deals do you expect to complete this year?
A: Stephen Garvey, CEO: We see significant growth potential in partnerships, with the state actively participating in the market. We aim to complete six to eight partnership deals this year, leveraging our planning, procurement, and delivery capabilities to drive volume and efficiency.
Q: How do you view leverage in the context of forward funding and cash in advance?
A: Michael Rice, CFO: Forward funding is beneficial for our balance sheet and capital structure. We are comfortable with higher debt levels due to our strong cash flow and operational scale. Forward funds do not significantly impact our debt levels, allowing us to maintain flexibility and leverage.
Q: Can you elaborate on the process of moving forward funds into forward sale negotiations?
A: Stephen Garvey, CEO: We evaluate each project based on timing and counterparties. In some cases, forward commitments are adjusted to align with counterparties' needs, but we ensure funding is secured. The state is increasingly participating in forward funding, providing stability and support.
Q: What is the impact of the Residential Zoned Land Tax (RZLT) on Glenveagh?
A: Stephen Garvey, CEO: The RZLT is viewed positively as it incentivizes landowners to produce housing or move land to those who can. It prevents land hoarding and maintains a steady land supply, benefiting the overall market and our operations.
Q: Can you provide more details on build cost inflation and the greatest sensitivities in terms of trades and products?
A: Stephen Garvey, CEO: Build cost inflation is steady at 3% to 4%. Labor availability has improved, and we are seeing benefits from the commercial market slowdown. Wage agreements are expected to be around 3%. Material costs are stable, with no significant pressures anticipated.
Q: How do you plan to address the H1/H2 phasing imbalance in future years?
A: Stephen Garvey, CEO: The business has grown significantly, and we expect a better balance between H1 and H2 in future years. The maturity of our operations and the full churn of partnership projects will contribute to more even phasing.
Q: What are the key factors driving your confidence in achieving the full-year 2024 guidance?
A: Stephen Garvey, CEO: Our confidence is driven by a strong forward order book, operational scale, standardized products, and manufacturing capabilities. The positive market environment and government support for housing initiatives further underpin our growth and profitability targets.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
