Cairn Homes plc (CRN) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. Welcome to the Cairn Homes plc 2020 Preliminary Results Analyst and Investor Presentation. My name is Vic, and I'll be your host today. Your presenters today are Michael Stanley, Co-Founder and CEO; and Shane Doherty, Chief Financial Officer. [Operator Instructions] Michael, please go ahead.

Thank you, Vic. Good morning, everybody. As Vic mentioned, I'm joined by Shane, our CFO. Declan Murray, Head of Finance (sic) [ Head of Investor Relations ] ; and Ian Cahill, our Head of Finance are in [indiscernible] also. And thank you very much for joining us this morning as we present our results for 2020, and I look forward to the remainder of 2021 and into 2022. As everyone on the call will appreciate, 2020 was an extraordinary year. The uncertainty that pervaded this year has continued into the first quarter of 2020. We are hopeful and somewhat confident that we will be given the green light by government to reopen our sites in early April. Two things have shown through over the challenging months of the pandemic: the unerring commitments to the health and safety of our people, subcontractors and suppliers, and indeed, the residents of the many schemes that we've already constructed and built; and the resilience and adaptability in adhering to those best practices throughout. And I'm very, very grateful for that. So I'm going to move to the operational review on Slide 3. So our 2020 operational review I've already touched on the health and safety and how that was such a high priority for us as a business to operate safely in the COVID environment. Part of that responsibility, obviously, transferred on to the many subcontractors and suppliers. On average, on Cairn sites, we were employing full-time including subcontractors working full-time on our sites over 2,000 people on a daily basis. So you can appreciate the challenge that we faced. And we were very pleased with the success and what we managed to achieve during that period. I do think that the type of support that we gave to our subcontractor base and supply chain will stand to our business, post-COVID. We brought in supplier payment support. We restarted all of the sites as soon as we were allowed to by government and indeed, we started 5 new sites last year. That gave many of our subcontractors, who are self-employed, the confidence to be able to get back to work quickly and continue to support our growth. Our current closed and forward sales is 925 units to a value of EUR 307 million, and this is despite a virtual sales environment. That's an increase of 222 units since we last reported in mid-January, which, for me, not just is an illustration of the demand for new homes in Ireland, but we also think a strong endorsement of Cairn's business model. As these were all virtual sales, people couldn't visit our show houses and showrooms., And I think the work that we've done as a business over the last 4 or 5 years, to build up a reputation for building quality homes and the strength of our brand has absolutely supported our very successful sales in a virtual environment. Moving on to the financial review. We closed 743 units during the year in a challenging year. Obviously, significantly less than we would have hoped to close. But obviously, as Ireland's most active apartment builder, in particular, on schemes like Griffith Avenue and Citywest, Shackleton, Marianella, Rathgar, Donnybrook Gardens, all of these are apartment schemes where our safety protocols were more difficult to implement than housing, and the program of construction was delayed a little bit longer. But we are very confident, as we'll illustrate later in the presentation, that we will bounce back with very significant increases in our volumes this year and particularly into next year as well. Our profit was EUR 24 million for the year, probably closer to EUR 30 million when you exclude those COVID costs, which we think is a resilient financial performance. We are seeing some build cost inflation feeding through the business. There is some pressure on commodity prices, particularly in things like timber and steel and aggregates. But we are well forward covered for this year and indeed, for a portion of our output next year. And it's potentially that -- I would say, potentially some of those increases may be temporary. We are also seeing some house price inflation last year. We're calling that out at 1.4%. That trend has continued, and maybe even slightly higher than 1.4% as we look at Q1 of this year. We have a strong balance sheet, as we said, and we believe we're in a unique position in Ireland to respond quickly once we reopen again in, hopefully, April. Moving on to the macro environment. From speaking to many of our customers and many of the banks that are providing mortgages, young people looking to buy homes in Ireland have saved very, very large sums during this year. It obviously means less holidays and less visits to restaurants. But the experience we're seeing from our customers is that they're, on average, many of them are saving up to EUR 20,000 in the year just gone by. And EUR 14.2 billion is a record amount of savings in Ireland. That certainly is boosting our -- what we would refer to as our realizable demand, as more and more people have the necessary deposits to help them get their mortgage finance. The government initiatives, including post summer increasing Help to Buy from EUR 20,000 to EUR 30,000 has also been a big support. And during this summer, we're expecting to see a shared equity plan more similar to the U.K. shared equity style support, Help to Buy type support to be introduced in Ireland for the first time. It is quite extraordinary that the affordable housing market has grown so much in Ireland, probably not surprising because of the supply deficit in the last number of years, but over 500,000 people earned that salary bracket of EUR 50,000 to EUR 80,000, which is, for us, the value of the market and the addressable market that we feel we are best placed to address. The other point I would make about the COVID environment is the importance of the suitability of the family home, we believe, has been elevated somewhat. That includes positive changes to work practices for many customers. And we did see a significant increase in demand last year in our larger units and 4 bed homes as well as the traditional starter 3 bed home and duplexes. Moving on to our WIP investment support. Both Shane and I agreed that after the first lockdown last year, it was important that we got back building on every site that we were active on. We needed to show confidence, not just to our supply base and subcontractors, but also to provide product for our customers, not just last year, but to have product available to sell for customers in this year. And once we come out of lockdown, we have many units nearing completion, and we will be able to respond quickly to that demand. The year-end is, for us, because of the late start, difficult to predict, which is why we felt it was prudent to guide a circa 20-month target, which we've called out in this presentation today. That equates to our target -- the original target we would have probably had for the 2 years of 2,500 units, which we are now saying we will -- despite the loss of the first quarter and a little bit beyond, we're confident that whatever is not achieved in 2021, we will confidently catch up in 2022. So in summary, and Shane will go through these numbers in more detail, that will mean 2,500 units in the 2-year period, roughly EUR 900 million of turnover and a cumulative profit of EUR 120 million in that period. We will grow our business beyond that to a 2,000-unit company, and we will continue to invest in that growth. Despite that continued with investment and increase, the company will still generate significant free cash as we build through our land bank, and our intention is not to replace that land during that period and beyond. I'll talk a little bit more about that later in the presentation. But I think it is important to emphasize as a company that we can fund our growth, we can massively increase our output. But while we do that, we are going to generate significant cash, and we've talked about that EUR 350 million to EUR 400 million in the next 3 years. Moving on to the next slide. I touched on the success of our virtual sales. There's no doubt demand is high, but I also think that Cairn has built up a reputation, as I said earlier, as a trusted house builder. And I think this has been evidenced by our sales to date and the roughly 222 units that we have sold since we were out talking to you before. Last year, also interestingly, post the Brexit uncertainty, we saw an increase in demand in the higher-priced homes. In fact, last year, we sold over 30 million of homes that we had talked about to you all previously that were we felt a little bit more sticky earlier last year in terms of that Brexit uncertainty and less -- let's say, softer demand at the higher price points. We sold over 30 million homes at those higher price points in the second half of last year with no discount to our target prices. We have a number of additional new launches coming up in the next 1.5 months to 2 months. In fact, that will be the most busy period for the business in the year from a sales perspective. So we do expect to significantly add to our forward sales over the next couple of months. And hopefully, that will include -- allowing -- being able to go back at least to one-to-one appointments where we can bring people into our show homes. Over 4,000 people, since we started business, have chosen a Cairn Home, and we are very proud of that fact. And as you can see from the other statistics we've called out on Page 7, the level of activity that we are seeing has significantly increased and, in fact, doubled when we look at some of the various KPIs, particularly in terms of our online views and brochure downloads. Moving on to Slide 8, the multifamily market. I was reading about investor recently. He talked about -- he invested across multiple asset classes, and he said that while his office investment allowed -- his office investments allowed him to eat, his residential investments allowed him to sleep. And I think, in the current environment, residential -- investment in residential assets will remain very attractive. That's certainly the evidence we're seeing. And Ireland is an attractive location for residential investments. As you can see from Slide 8, residential yields are still quite a bit higher than the U.K. and the European prime yield average. And I suppose it's important to note that the multifamily PRS market in Ireland is still very small relative to those markets with only 5% of the Irish rental market owned by institutional capital or multifamily PRS investors. So there's plenty of additional opportunity. Where Cairn is in a stronger position than most in the market is we've been able to continue because of our finance capability and our liquidity to continue to build these apartment schemes. So unlike other housebuilders, we have product coming to the market, which is very well completed and therefore, ready to rent in many cases. I also believe that, not just our pipeline, but our strength as a counterparty and our track record, make us a very attractive counterparty for many of those institutional investors who know that we have the scale and capability to support their ambitions to grow a residential platform. The other point of note before I leave that slide is to say that the vast majority, all with bar 1 or 2 developments in Ireland that are currently under construction or have commenced, are -- have been sold out. So the very high level of activity in the last 2 years in this area and the low level of construction has meant that what is available on the market is largely committed. And there should be high demand and competition for any new PRS schemes that are coming close to completion. 92% of our 2500-unit target for the next 2 years has full planning permission. Certainly, our first-mover advantage in this sector means that despite a couple of notable setbacks more recently, our land bank is largely ready to go. And that gives us great optionality as we continue to aggressively grow our business, not just the 2,500 units in the next 18 months or 20-odd months, but beyond that period as well. We have a very low-cost land bank. Our historical cost is 11.5% of our net development value, excluding HPI. And I'll talk a little bit later in more detail about the composition of our land bank and our plans to monetize a very significant portion of the land that we invested in, in 2015 and 2016. I'm going to hand over to Shane to bring you through the financial results and our guidance for the next 2 years.

Thank you, Michael, and good morning, everybody. Michael has already called out some of the key financial highlights across 2020, as we look to 2021 and indeed, beyond. So I'd like to turn to Slide 11, initially, and we thought it'd be useful to give you a more detailed update around how we see performance in this financial year and 2022. The rationale for this is underpinned as we exit lockdown in April, which will impact delivery in the short term. We have, however, strong visibility around our pipeline through 2021 and 2022, as Michael said, due to the fact that 92% of our sales pipeline targets have already got planning permission, coupled with strong trading conditions that we currently see for our product across private housing and PRS. This is evidenced, obviously, by our current closed and forward order book unit of 925 units. The net impact of this is that the greatest variable really is the extent to which unit closes between Q4 2021 and Q1 2022 as we assume exiting the current lockdown by the 6th of April. As things stand, therefore, we see a range of delivery in 2021 of between roughly 950 and 1,050. And you'll see that outlined in the top left-hand box on Slide 11. As we exit lockdown, coupled with the increases in productivity levels, we see that range evening out to the extent that we will capture the last 100 units in the 950 scenario in 2022 to hit that overall 2500-unit target over the next 2 years in either scenario. If you apply that same logic to the bottom left-hand box, when we talk about EBIT or operating profit, we're looking at an operating profit range in 2021 of between EUR 40 million and EUR 45 million. And then that balance of profit through open gets delivered in 2022 to really focus and hone in then on that overall expected operating profit of EUR 120 million over the next 2 years. Notwithstanding the short-term impact of the lockdown on 3 months of this year's trading, we also think this is important to give positive assurance around how we can provide substantial increases to the critical KPIs of unit delivery and profit delivery in the near-term to our shareholders. Delivery of 2,500 units and EUR 120 million of operating profit over 2 years as we exit lockdown represents a substantial increase on 2020 performance, with an average operating profit over the next 2 years of roughly EUR 60 million compared to the exit this year of EUR 24 million in 2020. It's important that we execute this increase in revenues and profits also, obviously, by being more efficient across gross margin and operating profit percentage. We stated in our last update to you that we saw underlying gross margin of 18% when the impact of COVID and related costs were excluded. Excluding the impact of any further HPI and CPI, we see gross margin trending towards 19% over the next 2 years. This will obviously flow down to the bottom line operating profit percentage, increasing to an average range then of 13% over the next 2 years, roughly, increasing to 14% in 2022 compared to an average level of just 9% for 2020. Turning next to Slide 12. This sets out an overview of our financial performance for 2020 in that context. In a year where core construction was curtailed for 7 weeks, and marketing activity was significantly curtailed for 10 weeks until the end of June, when show homes were reopened on an appointment-only basis, we generated an operating profit in excess of EUR 24 million. In that context, securing 743 sales and more importantly, the 2021, '22 forward order book of 925, shows the overall resilience and strength of the Cairn operating model. The EUR 262 million in revenue was underpinned by a strong focus on efficiency and cost discipline. Gross margin for 2020 was 16.3%, despite a number of COVID-related costs incurred within that number, and I'll provide more detail on that later. We continue to invest in operating expenditure, innovating and platforms across a number of key disciplines including construction, IT, health and safety. And again, we'll provide more detail on that in our sustainability section of the presentation. As outlined previously, both myself and Michael were very conscious of the tougher operating environment for all of our stakeholders, including our investment throughout 2020. We both, therefore, decided last year that we would forego our bonus for 2020. The result of this, of course, is reflected in our operating expenditure for 2020. Turning to profit before tax. We do see that gap narrowing in future periods as we look to manage our revolving credit facility more efficiently following the decision to fully draw down the facility in March 2020. And that's evidenced by the end of 2020 when only EUR 54 million of our full revolving credit facility, EUR 200 million was drawn down. That resilient performance, of course, continues to be underpinned by a very strong balance sheet position. It's worth pointing out that we trade at a net asset value of EUR 1 per share, and that's really underpinned, as Michael said, by a strong land bank underpin of nearly EUR 700 million, the vast bulk of which was acquired very competitively in 2015 and '16. With our strong operating scale platform, we are very well positioned to grow this KPI through unit delivery and monetization of the land bank, as outlined in the previous slide, when we talk about hitting our 2,500-unit delivery target over the next 2 years. I'll turn now to Slide 13. And you'll note, when we talk about our revenue and sales performance KPIs, that whilst our blended ASP was down year-on-year to EUR 332,000 from EUR 372,000 in 2019, the main reason for that was mix-driven. The average sales price across our starter home remained just above EUR 314,000, excluding VAT. We continue to provide high-quality A-rated starter homes to a large pool of buyers in really active locations around the Greater Dublin Area, in particular. We saw no evidence of pricing declines in our apartment or trade up/trade down housing stock. The ASP decline in apartments was purely down to the impact of Hanover Quay in our numbers in 2019. Also included in our EUR 262 million of revenue was EUR 15 million revenue from the sale of development types. Our strong close and forward order book of 925 and EUR 307 million in revenue underpins our guidance and the confidence we have in the 2500-unit deliveries between 2021 and '22. We anticipate that roughly 760 of those units will close in 2021. and when you couple that with our ongoing WIP investment, we really feel that, that looks very well for unit sales delivery and sales in that period and beyond as we look into the medium term. I'll now turn to Slide 14. Again, I think for the year that's in it and obviously, the impact of COVID, we wanted to take some time out, not just to talk about the underlying gross margin trend for this year, some of which we would have touched on in our last update in September, but also how that looks on a go-forward basis when we look at the impact of COVID-19 costs, in particular. So when we adjust for the impact of COVID in our underlying margin, it's roughly around 18%. We undertook a full review of our sites to ascertain predominantly the addition of preliminary costs associated with full lockdown during April and May and obviously, therefore, the increased lead times that would accrue as a result of COVID-19. And that's where we arrived at the 1.7 million -- 1.7% roughly on 2020 sales. We've completed a similar exercise due to the second lockdown, which commenced in January 2021. And as we said, we expect to exit that at the start of April. This obviously wouldn't have been foreseen when we spoke to you last in September or indeed, at year-end. The exercise is completed, bearing in mind, obviously, that only 10% to 15% of our overall cost type is variable to COVID-related cost changes. And obviously, we've got a significant proportion of our materials that are already procured between 2021 and 2022. So resulting from all of those factors, the impact of 2021 will be lower than 2020 and indeed, 2022 lower again. And what's driving that? Obviously, we've got learnings obtained from the previous lockdowns, particularly in relation to restart productivity; a number of construction programs in 2020 and '21 that we'll be able to catch up over time on the original build programs, getting back to that build target that we spoke about of 2500-unit sales; and finally, a number of our sites remain open on -- albeit on very limited productivity, to fulfill January closings and then subsequently social housing commitments ongoing. When adjusting for all of those COVID impacts, we are, therefore, seeing positive gross margin trends reemerging. When we spoke in September, we anticipated a baseline margin of 18%. We now estimate that, that will be closer to 18.4% underlying, which we'll see in the chart, with the COVID of impact -- COVID-19 impact included and increasing to slightly over 19% in 2022 before we consider anything else in relation to subsequent HPI or build cost inflation. Turning then to Slide 15, our balance sheet position. Again, it is underpinned by our land at historically low cost and WIP investment in the forward order book. So obviously, our land is valued at cost rather than in mark-to-market adjustments. Our net asset position of EUR 750 million is after shareholder returns that have occurred of over EUR 60 million between September 2019 and March 2020. And obviously, our net assets have reduced as a result of those distributions. Our balance sheet is also underpinned by really strong liquidity of EUR 174 million, having built up a really strong profile also of EUR 278 million on our wholly owned land bank of over EUR 690 million. There's no debt maturities over us until December 2022. Our debt to GAV ratio of 20% shows how strongly capitalized our balance sheet is to take advantage of all of those demand considerations that Michael outlined previously, when other housebuilders may be more constrained in the short-term with less well capitalized and liquid balance sheet. Turning to Slide 16 and 17. I'll take those together when we talk about our debt and our overall cash position. Whilst our net debt has increased by EUR 77 million in this period, that can be attributed mainly to the completion of our buyback program and our continued WIP investment. Operating cash generation returned in the second half of the year of EUR 26 million as a result of increased sales. This will continue to increase in the next number of quarters, yielding the benefit from our WIP investment program over 2020, which continues. We estimate free cash generation of around EUR 150 million over the next 2 years. And we'd be looking to target that range then between EUR 350 million and EUR 400 million then over the 3-year time frame. A significant uplift to 2023 follows an extensive period of continued investment in our high-density portfolio, in particular, over the next 2 years as we continue to grow our business and our annual sales run rate in the medium term. All indicative cash generation figures over the next 3 years are before capital allocation considerations, including reduction of current debt levels and structures relating to that capital structure or any strategic land acquisitions. Turning then to Slide 18. As outlined on Slide 11, taking a 2-year view beyond the current lockdown allows us to share, we believe, a very clear view around how we're going to grow profit, liquidity and margin management with a really strong WIP pipeline, which is going to position us really well to continue to take advantage of strong demand that remains in our sector. And this is evidenced by our pipeline and our 2500-unit target over the next 2 years. Assuming no additional impact of COVID beyond anticipated full resite opening in early April, we would expect gross margin percentage levels to increase to roughly 19% over that time frame, with operating profits in around EUR 120 million over the next 2 years. As I said earlier at the outset, the only open question is really the cut-off between Q4 2021 and Q1 2022 as part of the delivery of a 2-year set of targets. We will have obviously increased visibility on that split when we update you on our H1 performance, when we speak to you early in the second half of the year. And obviously, we're conscious that dividend and shareholder returns remain an important consideration for many shareholders [indiscernible] Cairn as a business. The Board will consider the reinstatement of capital returns later in the year, and further details will be provided when we announce our 2021 interim results. I'll now hand the call back over to Michael.

Thank you, Shane. Bringing you to the next section of our presentation, our land bank and market in Section 3 and Slide 20. Cairn acquired an excellent land bank at the right time, investing over EUR 900 million, 77% of which was invested within 1 year of our IPO. We bought many very well-located apartment sites that are now being brought through planning, and we're building on many of those schemes. Many of those sites are -- majority of those sites are in what we'd refer to as Dublin City fringes. And all of them are on excellent rail links and multimodal transport. They have been and will continue to be very attractive to institutional capital. Probably, more importantly for us, over 11,000 of our housing -- of our land bank are housing units, and they are targeted on first-time buyer market, as you can see from the land market composition slide that we've shown here. Only 16% of homes in Ireland today are owned by people in that first-time buyer bracket up to the age of 39. That's based on the consensus in 2016 where that number had fallen from 22% in 2011. Our estimates are that, that number is now closer to 12% or 13% as we think about Ireland today. So there is no doubt in our minds that there is very, very significant demand in this area, and the government now are very focused on helping the industry to resolve the affordable housing crisis in Ireland. Moving on to the next slide. Our overall land bank cost of 11.5% will definitely support our margin growth objectives out into the future years. We've talked about modest margin increase in the period of 2,500 units on the 2-year period, but our ambitions are to grow our gross margin significantly over the coming years. And our land bank costs, our scale and capability, we believe, will support that. We will journey our land bank size from 17,000 units to a more appropriate land bank size, which will probably equate to 4 to 5 years our annual output. And at our current medium-term target of 2,000 units, that means a land bank of 8,000 to 10,000 units. And we will generate significant cash as we unwind that land bank beyond the EUR 350 million to EUR 400 million that we talked about today. Other significant call-outs on this slide include the total net development value without HPI of our land bank based on the value that we would be selling those houses for today and the build cost of those units, and that equates to EUR 6 billion. And our average site cost is EUR 41,000 and just EUR 32,000 per housing plot on what I've already described as very, very well-located and desirable first-time buyer locations. Moving on to the next slide, on Slide 22. There are over 400,000 people, as we illustrate in this slide, that earn salaries either single or combined. These are single incomes, obviously, but many of our homebuyers are -- do -- are couples and therefore, have 2 incomes. But that salary band is between EUR 60,000 and EUR 100,000, and 68% of the units that we build are within that addressable market. That is the value of the market, and it's certainly where we feel we'll be successful. Up to 55% of our buyers have most or all of their deposits covered by the current Help to Buy scheme, which was increased to EUR 30,000. And we've already referred to the very significant savings that have been prevalent in Ireland over the last 12 months. Moving to Slide 23. What we have done here is, in more detail, illustrate the extraordinary gap between the cost of ownership and renting in Ireland, probably more extreme than any developed economy. On the left-hand side, our Cairn 3-bed starter homes across just 4 of our current active sites in Lucan, Citywest, Newcastle and Malahide Road, all very well-located Dublin City sites. And our average selling price there is EUR 373,000 across those schemes. Taking that purchase price in a typical mortgage and a typical interest rate, the cost on a 30-year mortgage to these home buyers is EUR 1,292 a month. When we analyze based on the rental portal what the rentals for those 3-bed houses are currently, we come to an average of EUR 2,300. So that is an extraordinary, almost over EUR 900 per month difference between the cost of rental and the cost of ownership. Something, I think, recognized again by policymakers with the introduction of the shared equity scheme later this year. Moving on to the next slide, and that's shared equity loan. We do have macro-prudential rules in Ireland, as you're all aware, that limit borrowings to 3.5x income, with some exceptions allowed by -- from the commercial banks. What the shared equity scheme will do is it will allow many customers, particularly those in urban areas, to increase their purchasing power. As you can see from the illustration, people on salaries up to EUR 70,000, who previously, based on those macro-prudential rules, could buy a home for EUR 272,000 can now acquire a home, as you'll see in the bottom table, for up to EUR 350,000. What's really important to note, though, that those -- that, that increased purchasing power comes with very acceptable debt servicing ratios and very comparable debt servicing ratios when you look at international comps. And that's really important as we think about a sustainable long-term housebuilding industry. Another stats of note there is despite Ireland always having a very high propensity for homeownership, we are now ranked a very poor 21st in the EU 27 in the category of homeownership in that age cohort. The next section, and in much more detail than we previously would have reported few in the main to its very growing importance for us as a business and also the year that we've been through, we're going to bring you through more detail on our sustainability agenda. I'm going to hand over to Shane, who'll bring you through the next few slides and talk about our progress on how we've transitioned as a business and how we've put sustainability at the center of everything we do as a housebuilding company. Shane?

Thanks, Michael. As Michael said, we're really committed to very open and transparent communications on our sustainability strategy. And to that end, we have established a steering group headed up by our Chairman, John Reynolds, who set to work really understanding what matters to our business and our stakeholders through comprehensive materiality assessment. And what that really allows us to do is to select a really material strategic priorities for sustainability within our business. And you'll see on Slide 26, how we've broken that out and the overall evolution from CSR to really thinking about that ESG lens agenda. We will be engaging with external partners to assist us achieving the goals that we have set ourselves for 2021 and beyond. So if I turn to Slide 27, that will just give you a bit more color around the materiality assessment that we did undertake in 2020. That was an in-depth exercise involving over 200 surveys and one-to-one consultations with our stakeholders. We also held employee innovation labs, which allowed us to bring ideas for improvement for covering a really wide breadth of areas, including water, energy efficiency, workplace awareness drives and biodiversity. The stakeholder consultations were in-depth conversations that went beyond what a survey could uncover, and this included key stakeholders like our customers, our investors and our suppliers. And these priorities are aligned to our key purpose of building homes and creating places where people look to live. Turning to Slide 28. If we just touch on some of our key successes. We delivered, obviously, 743 A-rated homes. We have introduced a new electric vehicle currency policy. And as you can see, our health and safety scores were sustained at very high levels throughout what was a very challenging year on our sites. Turning to Slide 29. What we want to talk about there is obviously our people agenda, which we're really focused on and what we've achieved under what we perceive to be 3 key pillars: connection, consideration and commitment. So a number of things under each of those pillars, which I'll just touch on some of those very briefly. We partnered with a well-established Irish platform, Workvivo, to launch Cairn Live, which is a -- [indiscernible] is a centralized digital communications platform. We established a Cairn Culture Committee, which held a number of virtual social events throughout the course of the year. And then, we obviously established a EUR 5 million support scheme, which we spoke to you about previously in April 2020 for our self-employed employees of our key subcontractors and suppliers. We obviously have -- are very proud of our health and safety record, and that sustained, as I said, at 92% throughout 2020. We successfully adopted work-from-home, with ongoing home assessment and health and safety from the workstation from the home as well. Obviously, in terms of commitment, the retention of our staff, they are critical to our business and indeed the growth aspirations of the company. We retained all of our employees on a full-time basis with no changes to any terms and conditions or remuneration, and we did not avail of any government support. We also have invested very heavy in our people, with 25% of our workforce involved in our top talent and high-performance programs. Continuing on our scaling agenda, we had a 20% growth in our workforce over the last 6 months as well. So by turning to Slide 30, in terms of what will help us achieve our sustainability goals, we talk about some -- how those partnerships have accelerated with our innovation agenda throughout 2020 also. It's really underpinned through the next stage of operational excellence, prioritizing people and critical product delivery, and we just give you a flavor there of some of the people who we've partnered with over the last year. And then, if I turn to Slide 30 (sic) [ Slide 31 ] , just in terms of bringing partnerships to life overall, we just wanted to give you some specific partnership examples that emerged in 2020, and I might just dwell on the first one in particular. We became the first housebuilder in Ireland to utilize the new engineering solution called Rapid Impact Compaction, a soil stabilization method, which can dramatically reduce excavation, haulage and waste. At our Archer’s Wood site, 7,000 HGV journeys to and from site carrying 120,000 tonnes of material would have been needed without this technology. So hopefully, that gives you a good sense of the range of initiatives we're working through with our employees and indeed, our critical external stakeholders. I'll now hand back over to Michael, who'll run you through the outlook for the business.

Thank you, Shane. We're a housebuilders of very significant scale. We don't just build houses. We do create places. Most of our schemes, as you are aware, are north of 500, 600 units. So we can, as a housebuilder, have a very significant impact on our environment. And it's a responsibility we take very seriously. And I'm particularly proud of the fact that we grew our workforce by 20% in the second half of last year. And I believe that we have an exceptional and very talented team across the board to help us drive our ambitious growth as a business in the years ahead. So finally to our outlook on Slide 33. There is no doubt that there are supply challenges in the industry. In fact, commencements in the second half of last year fell very dramatically by about 30% of our commencements, if you look at that, and balance increased by about 10% in the same period. So relative to the market, we've done very well. But that doesn't really make me any more satisfied. We do need a very significant increase in housing to support our economic growth. And we will see very sustained demand across a broad buyer pool, as I think we've illustrated during the presentation. We will, as a company, further -- expand even further. We'll be starting our first time site in Cork shortly, and we will be a national housebuilder, having focused on the Greater Dublin Area in the first few years of our growth as a business as we felt we needed to grow in a very considered way. We have -- and sorry, we will close 2,500 sales by the end of 2022 and we'll achieve a gross margin this year of 18%, increasing to a gross margin of 19% next year. We believe we have peer-leading outputs, EUR 120 million cumulative profit in the next 2 years, cash generation of EUR 350 million to EUR 400 million despite additional significant increases in our WIP spend to further fuel our growth beyond our ambitions for the 2-year period that Shane and I spoke about today. And also, to reemphasize something else Shane talked about, and that's the Board's intention to consider the reinstatement of capital distributions later this year, and further details will be provided when we announce our 2021 interim results. Cairn is a sustainable, efficient and industry-leading homebuilder, delivering attractive returns for our shareholders. And I'd like to thank you very, very much for your attention, and we're very happy to take any questions you may have.

[Operator Instructions] So our first question is from Shane Carberry calling from Goodbody.

Three from me, if I may. Look, just starting with the forward order book and, Michael, one of the things that you touched on was I suppose the construction lockdown that we're in Ireland, and the fact that a lot of these sales came because of virtual selling and virtual viewing, I suppose. So can you talk about the evolution of the order book, and I suppose if it surprised you and if it's taught you anything about your product over the last kind of 8 to 9 weeks? Secondly, just on the build cost front. Look, you mentioned about kind of timber and steel. But if you could just give us a little bit more color on what you're seeing in terms of build cost inflation and maybe also from a labor perspective, and I suppose I'm thinking about has there been any greater availability of labor? You've talked in the past about the loyalty you've built up with some of your subcontractors, and you've had the likes of pay it forward scheme and that sort of thing, et cetera. So I'd be interested to see if there's been any kind of additional availability of labor in that context. And then thirdly, is just on just on HPI and kind of -- you touched on what you're seeing this year. But if you could, I suppose, give us a little bit more color around what you're seeing in the higher end versus the lower end. You seem to suggest that demand was quite buoyant at the higher end. So if you could give us a little bit more color in that lines, it would be great.

No worries. I'll ask Shane to cover the HPI point. The forward order book and sales, no, it probably hasn't surprised me. We -- one of the things we did in the first lockdown is we were probably very alive to the fact that early in the knockdown, the -- what people expected from a home would change and a lot of cases would be elevated. The importance of a family home in a COVID environment is a place not just to live and raise a family, but to deal with, in certain circumstances, work requirements, leisure, recreation. We've always taken a view with the schemes that we've created that we like to provide not just the homes but create places where people could be very happy to live and enjoy not just home life, but say, recreations and parks, schools, [indiscernible] and the other facilities that we promote, including retail. So I think Cairn's approach was well suited, and we were well suited to responding to sort of that increasing need. We were the first company in Ireland to introduce office pods into our showrooms. Our design teams very quickly looked at how we could adapt our internal layouts to try and make the work environment more suitable in our homes. For example, as I said earlier, we saw increased sales in 4-bed units, but we also saw increased demand for things like added conversions where people could -- where we could provide a home office for people. So we respond very quickly. And I still believe that. I still think that it will last post this very difficult crisis that the family home will be elevated in people's importance. The rest of it is pretty obvious. The demographics, the family formation numbers, the demand in Ireland, the very significant lack of supply. So I'm not surprised. We have a very talented sales team led by Sarah Murray. They also put massive efforts in increasing the -- and improving the offering online, which would allow people to virtually get a very good sense of the homes they'd be buying. But they also had an awful lot of reference schemes that they could look at, an awful lot of schemes that we think we've completed very well over the last number of years, and that's back to that point where I think something that I certainly thought would be a challenge for a housebuilder. When I set up this company, we had to build a strong reputation and a strong brand. And that's why we always felt we needed to consider -- grow in a considered way. So I think all that's helped us. And I think genuinely, we're only touching the surface of that demand. We'd expect, when things get back to normal, to have traditional sales to boost the sort of online activity that we've seen recently. Build cost. Labor, I've always said, is not a challenge in Ireland for construction. While we're building, as an economy, [ 8,000 ] to 20,000 homes, even if we're building 30,000 homes, labor wouldn't be the challenge. And we're not seeing inflation on the labor front. If we break down our build cost circa 50-odd percent of our net development value, you can roughly divide that in half. Labor is about 55%, material is 45%, depending on the unit. The materials might be slightly higher in apartments. So the build cost inflation has been delivered on the materials element only at the moment, but we are seeing significant increases in things like timber and steel, and I mentioned aggregates. Part of that I also believe is us getting used to Brexit. A lot of our materials are produced in Ireland, as we said before, but many of them are by international companies. I think many of them are seeing bulging order books, not just in Ireland and abroad. And many of their manufacturing facilities across those materials have been compromised as well over the last number of months. So it's too early to see -- for me to call whether these are spotting and something that will correct. But if we look at it across the business, and if we do carry on with it, with a build cost inflation of 3% or 4% on the material side, it's probably higher. It's probably 5% or 6% on materials. But it blends out about 3% across our whole build cost, as I illustrated, because labor is relatively flat. We're happy that, a, we've managed that well in terms of our forward commission for this year and into next year, very high percentages. We have long-term deals with our subcontractors and suppliers, but we've got to support those subcontractors if they're seeing those material spikes. So it's really, for us, see how that pans out in 12 or 18 months. But I suppose, comforted also by the fact that we probably need a little bit more than 1% HPI to cover that increase in our build cost. And we're certainly seeing trends that are a little bit beyond that 1% at the moment. I probably covered HPI as well. Shane, do you want to talk a bit more?

Yes. I mean, I think probably just -- it's probably worth pointing out that in an Irish context, look, obviously, BCI is obviously something we're very focused on. As a percentage of overall revenue in an Irish context, it tends to be lower than what you would see in the U.K., for example, because hard build costs are about 60% overall of revenue. And the reason why that's lower in Ireland versus the U.K., for example, is that in an Irish context, there are a lot more taxes that are actually payable, whether it's VAT, levies, charges, additional charges. So it therefore means that from a gross margin perspective, it doesn't actually impact you to the same extent. So overall, our materials as a percentage of revenue are probably in the areas of [indiscernible]. But as Michael said, there is obviously significant pressure on a number of commodities. And obviously, we'll be doing our best to manage that as efficiently as we can. But a small bit of HPI probably will help to balance the books overall, we would say.

So our next question is from Jonny Coubrough calling from Numis.

Three questions from me, please. Firstly, on the prospective shared equity scheme. I'd be interested to get your thoughts on how accessible that would be based on your product mix and, in particular, in relation to the site commencements you got planned for this year? The second one would be on the free cash flow guidance that you're setting. I understand you're going to give capital allocation guidance at the interims, but I'd just be keen to hear whether we should expect to see kind of growth debt come down before then? And then the third one would be on demand, and you mentioned there, Michael, that you're seeing strong demand to starter homes and in particular, 3- to 4-bed family homes. So I'll be keen to hear what your expectation is for the outlook for apartments?

No problem, Jonny. I'll start here, Jonny. I mean, it's extraordinary, Jonny, considering our crisis, how few apartments are built in Ireland. And I think that's probably because -- and even more extreme now, unfortunately, post COVID that it's very unlikely that housebuilders in Ireland will be able to start apartment schemes without prefunding. The challenge, Jonny, with prefunding is that institutional buyers are also looking to reduce their risk. So they'd prefer to buy apartments that are obviously nearer completion and, therefore, closer to income. So prefunding does come at a cost, Jonny. If you are using someone else's capital to fund the project, and I suppose where -- this is where Cairn has a relative advantage, I suppose, in Ireland, which might not exist as much in the U.K., where, as you are fully aware, 60%, 70% of the market is satisfied by companies that have very similar balance sheets to ours and are very, very well funded. Many of them much more mature companies than even Cairn is. So that's a kind of a big relative advantage for us, Jonny, I think, when it comes to apartment demand. Firstly, because as I said, much of it is sold because it has -- because, let's say, funders or banks would have not forced but encouraged housebuilders to forward sell. What we can do, Jonny, I suppose, is use our low cost of capital to bring apartment schemes closer to completion and ultimately drive a better profit return from those because we're selling them at a more appropriate time. We've also got more of them through the planning process. And I think most importantly, for us, it's been a learning journey for us in apartment building. We're building to new ranks. We've substantially changed and evolved the way we build apartments in Ireland in order to make them more suitable for market and, in this instance, predominantly more suitable for the rental market, albeit, we are building some apartments or trade down as well. That trade down market, interestingly, has shown significant signs of life after being somewhat depressed for a couple of years, mainly, I think, due to Brexit, where bluntly, people who are trading up or trading down have a choice. And that's why I think demand has been more extreme in the first-time buyer sector where -- over the last couple of years where, irrespective of the economy, people with young families are -- bluntly have to -- feel they have to buy homes as opposed to being discretionary. So I suppose that's important. On shared equity, the initial phase of shared equity will probably only support 2,000 to 3,000 new home buyers. But importantly, I think those people will be looking for homes that are ready for completion. Most of the banks now in Ireland will only give mortgage approvals for 6 months. So it's important to have a available product, and we certainly think it will be a support to the sector. And also, it's important to note that it doesn't replace the EUR 30,000 Help to Buy scheme that's currently in place, which is also important, Jonny. So a good first step for the shared equity relative to the U.K. is relatively small. But as I say, it's important -- we feel it's important that the government do introduce this, particularly for some of the reasons I touched on -- earlier on. Shane, do you want to touch on the free cash flow point?

Yes, absolutely. Look, Jonny, I mean, we were keen obviously to give some kind of sense of how much cash we will generate over the next number of years. I don't want to get into too much detail around the application of that at the moment because I think it is more appropriate to disclose that in more detail when we speak in June -- when we speak after our June results, and we're out of lockdown. However, I think the first thing just to acknowledge is that obviously, that level of cash generation at the EUR 350 million to EUR 400 million does give us a lot of optionality with our shareholders to fundamentally drive return on capital employed, which is obviously the medium-term measure that we're very -- short- to medium-term measure that we're very much focused on around how do we generate as much EBITDA as we can with the most efficient balance sheet that we have, and generating cash and using our debt facility is really important in that context. And look, we're not afraid, obviously, to use our debt facility to its maximum, to go after the opportunity to actually monetize our land bank. And we feel we can do that quicker than anyone else at the moment because of the size of our facility and indeed, the very supportive members of that [indiscernible] that we actually have overall. So I think, look, what we'd be saying in terms of the statement overall, we're not getting into quantum things like that. But I think we would be looking to return to some form of distribution -- conventional distribution policy sooner rather than later. And like the whole idea of special returns and what the overall capital structure looks like, I think that would be a conversation that would follow down the road.

So our next question comes from Colin Sheridan calling from Davy.

Just a few from me, if I may. And first one is just following up on Shane's point on build costs. I mean you've laid out the sort of inflation environment quite well. I just wonder to what extent there may be any supply chain issues within that at the moment? Have you seen shortages of materials, either for yourself or other players around the market at this point in time? Or is this just an inflation story on the materials side at this stage? And the second one then on planning. I mean, you've laid out how strong your planning successes have been over the last couple of years, and it looks like you are almost totally derisked for the next couple of years. I mean, how far out is it realistically before there's any planning risk in the business? I mean, it feels like it's a few years away at least, but if you could maybe give us a little bit of color on that. And then finally, I suppose, one for Shane on the gross margin. I mean, you've clearly laid out progress in the underlying gross margin over the next couple of years from 2020 onwards. I wonder if you could just give us a feel for how much of that improvement is down to inflation that maybe you've already seen at this point in time that will simply fall into the margin over the next couple of years? And how much of that is down to maybe a positive mix effect as you get on kind of newer sites or sites that have had improved planning? And I suppose from that perspective also, whether or not there are then further positive mix impacts in the land bank that we could expect improvements in the future that might be incremental to any inflation assumptions?

Thanks, Colin. Yes. Look, the previous administration, Colin, brought in an evolved planning regime, as you're probably well aware, the SHD process, which was all about strategic housing and trying to support housebuilders to get active. And that was kind of introduced probably at a perfect time for Cairn. There's obviously -- that's going to change at the end of the year, Colin. And hopefully, some of the lessons learned in that SHD process would be adopted in the new planning regime. I don't think we're going to revert back fully to the previous system, which was time-consuming. But if I look at Cairn, we've had 14 successful grants through the SHD process. As you know that you have to be applying for more than 100 units, and our average on those grants, Colin, was in the 100s. We've actually -- we've already started 10 of those 14, Colin, as a business. So that SHD process was probably really important to us. And the fact that it may change at the end of the year is less of recurrence -- return to us than probably the broader industry because we have watched through the vast majority of our land bank either through that system already or the remaining schemes that we've had going through there. Recently, you're aware, we've had one high-profile knock-back, and that will happen for our business. But we're a 37-site company. And over the next 2 years, we will be active, on average, on 20 sites. So what I talked about earlier, Colin, was what we now have probably for the first time in the business is kind of optionality, being able to respond more -- with different schemes that we can start and options rather than for the first few years, we started every scheme that we bought through planning. We'll probably continue largely on that train, Colin, we'll -- as things come through planning, we want to get them started. But having more optionality is certainly good as the market is less easy to predict, shall we say. So 7 new starts this year on mature schemes, and a very, very high percentage of our schemes already through the planning system. Everything that we'll build this year is fully consented, for example, on the guidance that we gave today, and we talked to it at a very high level as we think about the 2 years. The supply chain, its early, Colin, to really draw very solid conclusions around what's going to happen on materials. I had a long conversation with one of the major timber importers, we do use timber frame homes in Ireland, Cairn does, and many housebuilders do. A lot of that timber comes from Scandinavia. And a massive amount of Scandinavian timber was diverted to North America due to the trade embargo between Canada and the U.S. and various challenges under the previous presidential administration in the U.S. So things like that can cause a challenge. That trade issues is now being resolved in North America and should see more of the European timber used in the European market. So things like that can have an impact. Certainly, steel, at the moment, is a challenge. Copper, for example, which is used a lot in electrical wiring, is a commodity that has spiked a lot recently. But like anything else, Colin, these are often commodities, and it's hard for us to predict the long-term pattern. But it's probably logical to assume that with the type of impact that COVID has had on industry more broadly on manufacturing, that some of these trends could be more temporary. But by temporary, certainly could exist for up to 12 months or 12 to 18 months. But as I say, that's just a view. It's hard to predict at this stage.

And then, look, on the gross margin, the underlying mix there. Look, there's -- it's hard to be absolutely specific on how that variance plays out. I would characterize it though probably across 3 key things. The macro, any short-term pricing that we've seen and then any cost changes that we have. So at a macro level, look, our margin probably suffered historically over the last -- forgetting about the impact of COVID, like we were a 20% margin business. That's where we want to get back to. And hopefully, we're giving confidence that that's a journey we can get back on as you look to the gross margin momentum that we're articulating for the next couple of years. Look, I think the reality is that Brexit probably led to a situation on the macro-prudential rules where there was very little HPI for the last number of years, and costs were continuing to take up a bit. So that probably was a macro factor that impacted the overall cost revenue stack. That challenge is always there for us, but we obviously look proactively how we can address that. So on the cost side, notwithstanding the challenges, we're always looking to see how we can get more efficient. So standardization in low-density is something that we look at all the time, particularly on our timber frame kits. Any unit type changes are always on the outside skin. And then on the high-density side, we're always looking at our KPIs from successful projects, how we can bring them to new projects around design constraints, floor, ceiling, highs, balconies, units for core and everything else. So all we're trying to squeeze improvement there. In terms of the actual specific mix, probably a small bit of mix there overall, Colin, but not material in terms of the nudging. And in terms of HPI, I guess, what I'd say is we don't obviously model in HPI into our numbers beyond what we currently have. So obviously, the extent to which our forward order book is priced, that would be in the numbers. And obviously, we do refresh all of our appraisals with live pricing. But we don't actually put any forward guidance into our numbers beyond that. We leave that, obviously, to our analysts to do that. But there's no doubt that we have seen a bit of uptick on pricing, as I think Michael outlined at the start there. We were looking at 1% last year, and it probably has been nudging up modestly in excess of that, I would say, at the start of the year. So all of those factors probably help us to see a room to improve margin.

And the only other thing I'd add, Colin, one of our appendix slides, we talked about some of our new roles and joiners. And as you're aware from what Shane said earlier, we've added significantly in last year to beefing up our talent pool, led by a Chief People Officer, Maura Winston and Maura, indeed, was very essential to -- also to our sustainability agenda as a business. But we added some additional talent. Know-how and knowledge is something that you bring in, but it's also something that we develop as a business. We believe, over the 4 or 5 years, we have become a more efficient housebuilder. We accrue knowledge, we're building in a lot of cases, to new regs, often using OSM and new technologies. Mike Grice joined us a couple of years ago with immense experience from the U.K. Gavin Whelan joined us just this January as Head of Construction. And again, most of Gavin's experience has been in the U.K. on very, very large projects. He's bringing his depth of experience. Niall Daly joined us only last week to head up our procurement and really professionalize our procurement efforts. Niall previously worked for companies like the Kerry Group and Kellogg's. And while he's not a sector expert, he's certainly a procurement expert. So we also recognize that as a company, we've got to continue to invest in talent, Colin, and know-how and capability. And bluntly, going back to land, Colin, the way I think about it, I'd like to think about our business at some point in the future, whether it's many years and possibly a challenge maybe for my successor, they have to be able to buy land at market and be really competitive. And that competitiveness would come from capability and know-how, scale, and a sustainable business. So we do have a significant land advantage, which we certainly won't run out of for many years to come. And indeed, we might even look at strategic opportunities. As that business becomes more capable, we'll be building on other people's land more than our own in years to come. But there are challenges for the future, Colin. But all of it depends on the capability and talent of our business.

So our next question comes from Arnaud Lehmann.

I have 2 questions, if I may. Firstly, I mean, the -- on the demand side, I think the price is relatively clear. Help to Buy is helpful. The shared equity loan scheme clearly should be helpful as well. But isn't the issue in the Irish market around the supply side. And, I guess, in this context, is there any government initiative to improve that? And these are risks that we could see a bit more competition as the kind of pent-up demand comes to the market after the end of the lockdown. That's my first question. And on your guidance, I mean, thank you for laying out your plans for the next couple of years. It feels like you've got very good visibility on 2021. 2022 is a bit further away. What are the main kind of upside and downside risks to your 2022 guidance? Is it on the demand side, your ability to execute, build cost inflation? Or do you feel confident that this is a plan you can execute as long as there is no more COVID disruption?

Yes. I think, look, the COVID environment and the fact that we're not back working yet, we hope that will be early April. Obviously, we, as a management team, would always be conservative in our guidance, and I think that's appropriate. And therefore, we wouldn't guide and illustrate our numbers, not just on units, but on profitability and margin if we weren't very, very comfortable with those numbers. So that's the first thing to say. Those numbers are not the limit of our ambitions, and we would like to try and not just achieve those numbers, but in the right circumstances, beat those numbers. But we're very comfortable that what we've illustrated today are, as I said, relatively conservative estimates. And we like to think that our forward order book should give people confidence on the amount of the -- the amount that were covered for this year and a little bit into next year, about 150 units of that forward order are apartments, which -- forward order book, which will be delivered next year. I do think when we report in the summer, we will see, again, another significant increase in that forward order book. So I'd remain fairly confident on that. And similarly, on margin, we've probably seen flat to minus HPI for the last couple of years at higher price points. We're now seeing some HPI at lower price points. And certainly, government initiatives and savings look like they'll continue to support that. And I think commercial banks are very, very keen to increase their mortgage books. If you look at the mortgage approvals and drawdown numbers over the last 2 quarters, they've seen pretty close, if not record increases. And so the banks are there to do business, and I think that's also important. The government is part of the support there. We've seen Avant enter the market recently. KBC are active, as are the 2 large pillar banks. We'd love to see a bit more competition. We still feel that, that significant gap between Irish mortgage rates and European average mortgage rates is a significant call out, but there are some legacy issues behind that. But we do think, if anything, mortgage rates, and we've seen evidence of this recently, are trending down, and that's really important for our buyers when we look at affordability. In relation to the government and supply more generally, this government is looking to significantly boost the capability of the Land Development Agency, a relative new entity that's going to look at state land and try and accelerate the delivery of houses and models like cost rental on state land. We obviously engage with those parties very regularly. It's very obvious from those conversations that if this administration is going to make any difference in the near term, they are going to need to see more output from private housebuilders on private land as well as increasing affordable initiatives on state land. And as I said, in my quotation, today, the housing crisis needs parallel solutions. And I think what you're pointing to is that we'll only fix this housing crisis if all elements of the market and all stakeholders are working together. So as I said earlier, it's not good that in Ireland, we've got a very, very small number of scale housebuilders with very robust balance sheet and then we've got this massive long tail of largely single or 2 development housebuilders who find it difficult to scale. And that's one of the major challenges for this administration. And it's probably one of the reasons why, unfortunately, that supply-demand imbalance is going to remain quite extreme for a number of years. Good for Cairn but not good for Ireland would be my summary.

So our next question is from Ronan Dunphy.

Very comprehensive answers there. So I'll just keep it to one, and maybe just looking at the forward sales book. I mean, you mentioned there in the last answer. So they're at 775, I think, for delivery for this year, which isn't far off the full year completion number really, and presumably, they'll be weighted heavily towards quarter 4. So just thinking about sort of the strategy in terms of forward selling and in maybe a normal environment, is the strategy to sell 6 months in advance because of the disruption this year, that's sort of been pushed out a bit. And then, are you at the point where you're effectively sold out on some sites, and you're not looking to take any more forward orders just given that the time frame when they might actually be delivered? And just I suppose you're thinking around it at the moment given that everything is a bit disrupted?

Yes. Yes. No, thanks, Ronan, and probably reasonable assumptions but can't give you any goals to us for anything being correct. They're all actually the opposites. We don't sell beyond units that, by and large, are completed within actually 3 to 6 months. And, in fact, selling nothing generally beyond 6 months unless it's institutional buyers in the PRS sector. And again, even in that market, we're largely bringing schemes to completion before we actually offer them for sale. So that's just not something that we do, and we wouldn't do that. We don't need to. We don't have that funding challenge around them that many have where they may need to forward sell longer. We can use our balance sheet to ensure that we get an appropriate price for all of the homes that we want to sell at a current market price. And that's obviously very important. So I think that's the first thing to say. The other thing I'd have to correct you on is that our closures won't all come in Q4. In fact, Q2 and Q3 will be very large quarters for us. This year, we have a lot of stock that was becoming ready for completion before the lockdown in mid-January. So that gives us more confidence as well, Ronan. It's not about Q4 this year. It's very much about Q2 and 3. We've got an awful lot of customers, unfortunately, at the moment that are actually just waiting to move in and, in a lot of cases, just not allowed or not comfortable to move in, in a COVID environment. So it's going to be a big -- not a big challenge, yes, actually, a big challenge for us when we reopen in April, we have to logistically get a lot of people into their homes quite quickly and do that in a safe way, while protecting the health and safety of existing residents and them and our own teams, Ronan.

[Operator Instructions] So our next question is from Oliver Isaac.

Michael, I think you mentioned potentially growing to a 2,000-unit business in the medium term, and is that correct? Did I hear that right? And just thinking about maybe the timing of that. Is that potentially a 2024 proposition, the 2,000, or will it take a bit longer to sort of get to that run rate? I think previously when you talked about sort of the 1,700 to the 1,800 medium-term guide, you were still basing that on a sales rate of sort of 2 units per week per outlet. Is that sort of the same underlying assumption you're making there with the 2,000, which we'd should be thinking about? And then just secondly, just thinking about sort of the mix of the business going forward. I think, if we look at sort of the split between houses and apartments over sort of 2020 and even 2019, there's obviously quite a big shift towards to houses and when you look at sort of the land bank, where it's more sort of 70-30 split. How fast should we sort of expect the business to sort of trend towards that 70-30? And is that 70-30 sort of the right runway of mix between the 2 sort of products going forward?

No worries. Yes. Look, I think what we've tried to do today is appropriately give as much certainty and guidance for the next 2 years and be really clear about what we'll achieve for the remainder of this year and next year, that 2,500 units. But we have always said that Cairn is an ambitious company. We haven't said at any point that 2,000 is the maximum number of units that we would do as a housebuilder. What we've always said is that we need what, we believe, to be an appropriate and achievable objective as a business and can we grow this business to 2,000 units in the short to medium term, while still making substantial profits and making returns to shareholders. And that's our key objective, and we still absolutely fundamentally have that target in sight in the medium term. It doesn't necessarily mean it's our long-term ambition or the appropriate level for Cairn to be delivering as a mature business. Talk today, for example, about becoming more regional in our approach to house building and starting schemes. We have land in Cork and Galway, Kilkenny and other locations outside of Dublin. So I don't want to call out the 2,000 in terms of the time, but I equally don't want to say that that's our long-term objective either. If you look at the guidance that Shane did talk people through today, we called out 2022 at 1,450 to 1,550 as a range, and that's only in 2022. So when you talk about 2024 at 2,000 units, that would be reasonably modest growth for our company to achieve that, is as much as I could say, in the 2 years after 2022, if you look at the growth rate we've illustrated in today's presentation. So I hope that answers the question on the -- as much as I can in terms of our ambitions and target. Our mix, I suppose -- you touched on -- look, the interesting thing about the Irish market, and if you think about Cairn, particularly on a large housebuilder in Ireland then maybe compares a little bit to the U.K. The U.K. is a market size, which is much, much bigger, over 10x our market size. And what that allows some of the housebuilders to do in the U.K. is be product specialist. And, in fact, you have companies that are very, very big companies like Persimmon maybe or Barratt that builds a lot of regional housing and then maybe more apartment specialists like Berkeley or whatever. I've always said that to be a scaled housebuilder in Ireland, we will have to be an expert housebuilder and an expert apartment builder because we're dealing in a smaller market, and we have to bring the full breadth of product to the market and be good at all of it, if that makes sense. So while that balance may shift as demand patterns shift, what we're seeing at the moment is probably most of our activity directed towards apartment schemes where we can -- where the ultimate owner is bringing that product in at affordable rent levels, places like Citywest and schemes that we're currently building on, where rental levels are at that kind of lower price point, and we have a very significant pipeline of apartment projects that are attractive, not just in locations that will rent at reasonably -- or at that lower band, but also with good access and rail links into the city center for people that are working there. And then on the housing side, our main focus will definitely be on starter homes. We do have some sites, smaller number, that are more in the higher price point, let's say, trade up, trade down. But most of our commencements, if not all of our commencements this year will be targeted towards that lower price point for housing and indeed, the lower rental sector -- lower-priced rental sector as well.

I'll now hand over back to Michael.

Thank you. Appreciate your help today, and just thank everybody, again, for joining the call, and we look forward to meeting many of you, albeit virtually, over the next few days. And thank you for your continued support, and talk to you all very shortly.

Ladies and gentlemen, this concludes today's call. You may now disconnect your lines.