Glenveagh Properties PLC (GVR) Earnings Call Transcript & Summary

Hello and welcome to the Glenveagh 2020 Full Year Results Call. My name is Rosie, and I'll be your coordinator for today's event. Please note, this call is being recorded. [Operator Instructions] I will now hand you over to Stephen Garvey to begin today's conference. Thank you.

Thank you, Rosie. Good morning and welcome to the 2020 final results for Glenveagh Properties. Joining me on the call today are my colleagues, Michael Rice, our CFO; and Conor Murtagh, Director of IR and Strategy. To start, can I ask you to please to turn to Page 4 and results highlights. Reservations and completions, customer leads plus 169% in H2 2020. Average weekly private reservation rate per site, plus 31% in H2 2020. 950 units sold, signed or reserved or 83% of our target deliveries for 2021. Construction capabilities, 700 units now sold completed in 2021, 17% down on '19 deliveries. 23 sites opened since IPO, with a further 6 sites scheduled to open in 2021 once present restrictions are lifted. With construction being allowed to operate during the January period to complete private housing and all social developments allowed to complete up to the 28th of April, the company can now reaffirm its target of 1,150 units for 2021. This is plus 36% versus our 2019 deliveries. Capital management. EUR 91 million deduction in land investment achieved to date, while still maintaining the same number of plot numbers in the business. Targeted investment of EUR 202 million in work in progress investment underpins our 1,150 unit completions in 2021. Net cash position of EUR 36 million versus EUR 53 million in 2019. Overall, robust performance in 2020, demonstrating the operational capability, which gives us comfort to deliver our '21 targets. Turning to Page 5. Our approach to living and working with COVID. Firstly, the health and safety, well-being of all our people were prioritized during the period. COVID-19 operating procedures are fully embedded across the business. Oversight and enforcement controls are delivering internal and external validation of our operating procedures. Emphasis on operational delivery has positioned the group to deliver a comparatively strong outturn in 2021. Moving to Page 6. The financial summary, which Michael will cover in more detail in the financial section. But the key highlights: revenue of EUR 232.3 million primarily relates to the sale of 700 units across 16 selling sites. Core gross margin of 14.1% includes the impact of COVID-19 costs and adverse sales mix, targeted with investment of just under EUR 202 million versus EUR 172 million in 2019, leaves the business well-positioned to deliver in 2021. Significant net assets of EUR 853 million and a strong net cash position of EUR 36 million at year-end. Completion now of a new 5-year EUR 250 million refinancing, comprising of a component of EUR 100 million term and EUR 150 million RCF, leaves the business well-positioned for 2021 and beyond. Turning to Page 8. The demographics continue to support a strong housing need. Continued population growth and age profile are key contributors to the growing housing need in Ireland as for the charts on the right. In the 12 months to April 2020, the population grew by 1.1% or 56,000 people. Natural increase of 27,000 and a net migration of 29,000 all contributed to this. A large cohort of the population or just under 1 million people are now at the key home buying phase. Further growth to 2030, or just over 8% or 380,000 people is expected. Our headship rate remains one of the highest in the EU. Moving to Page 9. The Irish economy has remained resilient. Economically, Ireland entered 2020 with good momentum, neutral fiscal position, robust GDP growth and a growing labor market, all supported by the multinational sector of pharma and IT. Ireland was one of the few countries globally to experience growth in GDP in 2020. All of this allowed the Irish government to implement a fiscal expansion to cushion the blow of the pandemic for our people and our economy. Looking at the core domestic demand, however, performance was more closely aligned with our European peers, which you can see on the next slide. Savings rate. The reduction in consumer spending, combined with earnings growth, has led to a spike in household savings. Savings levels is now the highest in the EU. Spending redirected to other areas such as home improvement and property acquisition. And we have seen this across our recent reservations with notable increases in deposit levels from our customers. Turning to Page 11. Lower paid sector and younger age categories continue to be the worst affected by the pandemic. Ireland's lockdown is one of the most stringent and long-lasting in a global context. This required some significant financial measures to be introduced by the Irish government to support those worse affected. Ultimately, this is having a limited impact on housing demand, given the income and age profile of the persons most affected. Turning to Page 12. The government have acted to support future housing supply. The first budget of the new government announced in October following the July stimulus package had a number of key measures. The first one, expansion of help-to-buy from EUR 20,000 to EUR 30,000. Two, a 5-year targeted increase in the social housing stock of up to 50,000 units. 13,000 units expected to be delivered in 2021. This is expected to have to require direct purchases from developers at market rates. Three, the shared equity scheme, expected to be modeled on the U.K. scheme with cap values of approximately EUR 400,000, anticipated to be activated in H2 2021. Four, new rental tenure created of cost rental, target of 400 units in 2021, with expected funding to grow in the future periods, if the model is proven to be successful. Five, infrastructure, increased funding for utility providers such as Irish Water. Also, new mechanisms created to facilitate the delivery of infrastructure works outside of the site boundary in conjunction with developers. Finally, the Land Development Agency Bill has just been published. It sets out functions of the land development agency, which are wide-ranging. This is expected to ensure the faster delivery of houses on state land, ultimately with partnership with the private sector. Turning to Page 13. Commencements have heavily been impacted by COVID-19 restrictions, a pronounced drop-off in commencements due to the closure of construction sites. And as per the charts on the right, has had a drastic effect. The decline is most evident in the Greater Dublin Area, excluding Dublin. Greater weighting of apartments and lower levels of land transactions will also have an impact on future deliveries. And we are seeing the smaller developers not progressing their sites on the ground. Turning to Page 15, and our strategic focus remains unchanged. Disciplined investment across the 3 target segments of suburban, urban and partnerships, scaling and standardizing the processes of our construction capability, delivering for our customers in places that they want to live at prices that they can afford. Optimizing our capital employed in land and work-in-progress, while all the time pursuing our environmental and social agenda. All of these strategic focuses will deliver strong returns for shareholders into the future. Turning to Page 16. Our complementary business segments remain highly attractive. Suburban, the deepest demand in the market, particularly for our suburban product, most fragmented supply, particularly with the smaller developers, aligned with buyer income and buyer aspirations. Easier optimization of construction process. Urban, a structural occupier shift to rental product, the institutionalization of the rental sector, which is also being supported by government. Capital light where forward funds can be applied, gives the business long-term earnings visibility. Partnerships, strong return on capital employed increases business resilience and reduce cyclical risk to the business, fits with both suburban and urban segments of the business and gives the business access to both land and deliveries into the future. Moving to Page 17, and our development portfolio has been strategically designed to implement all of this. 80% of our portfolio is located in the Greater Dublin Area, where the most housing need is required. 96% of our portfolio is targeted at the affordable end of the market below EUR 450,000. The 70% of the portfolio is in the suburban side of the business, where we see the strongest demand. But ultimately, we have optionality in the business. We can deliver almost 43% of the suburban product for PRS or institutions as well. Turning to Page 19 on the operational review. Construction progress, 23 sites opened since IPO, 5 completed sites, including 2 noncore of high-end sites. Actively constructing on 18 sites during 2020 in the pandemic. Visibility now on 6 new opening sites in 2021. Once -- that will deliver for the business in 2022, once present restrictions are lifted. Turning to Page 20. Planning and infrastructure progress. Planning status of the landbank has transformed rapidly as per the chart in the middle, 23 applications granted are awaiting decision, 13 applications or 1,600 units successful. 10 applications or 2,000 units are waiting decision, 7,000 units at pre-lodgement are design stage. Overall, 70% of the landbank is expected to be planned or lodged by year-end. Looking at the chart on the far right, and I think this shows the progress that the business has really made during COVID. In 2018, less than 3% or just under 10 units of the 275 units we delivered had utility connections. Fast forward to 2021, and that is now at 85%, which completely derisked the delivery for 2021 once restrictions are fully lifted. Now the team is starting to turn their focus on deliveries into '22 and 2023. Turning to Page 21 and a new product that we are bringing to the market. The Irish planning system increasingly encourages higher densities, up to 40 to 50 units per hectare in our suburban locations, which forces a large element of apartments on those developments. We have brought the first of the -- of a kind scheme where more own door housing can be delivered on schemes, which eliminates an extreme large portion of our apartments. What are the benefits? Development standards for private and public open space are maintained. But ultimately, we are enhancing the living environment for our future customers. And this is also bringing more viability to our schemes in these locations. Moving to Page 22. Infrastructure-led delivery, how we have recalibrated the business in 2020. Developer-led solutions in partnership with infrastructure suppliers such as Irish Water is increasing the pace of our site connections. This has facilitated an infrastructure-led approach to our housing sites, which has brought across several benefits. Firstly, focused site development teams where they concentrate solely on infrastructure services and utility. This has optimized the lead time between the site development works and when superstructure can start on site. This has all led to derisking and removing downstream delays in the process. The benefits on the cost side, we're seeing a reduced preliminary cost on our sites, improving our time lines and leaner construction when superstructure can start. And the ability once superstructure does commence to ramp up volumes on those sites. Turning to Page 23 and our customer offering. Investment in the redevelopment digital strategy is facilitating an online private viewing-led customer journey. Showhouses now operate with smart technology, allowing for a contactless walkthrough when permitted under the COVID-19 restrictions. These initiatives have helped to improve the quantity and the quality of our customer leads, which grew by 169% in H2 2020. Average weekly reservation rates per site grew by 31% in the same period, reflecting both the improved quality of our leads and the pent-up demand. What are we doing going forward? We are now starting to target our buyers 12 months before our developments ever commence. We are targeting our buyers when they are thinking of buying a home, not when they want to buy a home. This is helping to add to our database, so when we do launch developments, we have a substantial reservation list. Moving to Page 24. Our sales for 2020. Continued sales outlets and new openings delivered 700 units for the business in 2020. Strong reservations from core and noncore selling sites, with 950 units now sold, signed or reserved for 2021. New launches at existing new sites have seen really strong demand in the first number of weeks of 2021. This has reduced the amount of stock remaining on these phases. And the team can now start focusing before the summer on building the order book for 2022. Moving to sustainability on Page 26 and our approach. Sustainability pillars are aligned with the group's strategic objectives. Putting our customers at the heart of what we do, while creating sustainable homes and communities for them to live in, environmentally considerate and efficient operations, how we plan our work, but more importantly, how we deliver on that work, while at all times partnering with our supply chain, attracting, inspiring, investing and training in our people, while at all times keeping our people safe. These are all anchored by governance commitments, KPI and risk management. Finally, turning to Page 17 (sic) [ Page 27 ]. Sustainability report highlights. For 2020, we've made a commitment for dropping our CO2 emissions by approximately 25%. 72% of our overall portfolio is affordable homes. All our homes today from November 2020 have a minimum energy rating of A2. And with minimum modifications and investment can be brought to an A1 standard. And finally, our B grading in our CDP score for 2020 have been a phenomenal achievement for the business and its first outturn on this. I'd like to pass you over now to Michael, who will go through the financial section in more detail.

Thanks, Stephen, and Good morning, everyone. As Stephen mentioned, Glenveagh's performance for 2020 was significantly impacted by the outbreak of COVID-19. Our construction sites were closed for a 6-week period in April and May due to the government-enforced lockdown, which is normally one of our most productive times of the year. During the shutdown and on reopening, cash management was hugely important for the business, with our focus on finishing the units closest to completion to ensure a quick and recurring cash generation. Having reviewed the impact of COVID-19 on the business, we amended a number of our key financial targets for 2020 at the time of our interim results in September, including delivery and margin targets. The group's original delivery target of 1,000 units was amended to 650 core units with additional noncore units to be delivered over an accelerated time line of 12 months to 30 June, 2021. Our gross margin target for 2020 was reduced by approximately 400 basis points to 14% due to longer construction programs, increased health and safety measures and the cost of inefficiencies onsite due to social distancing. Starting on Slide 29, our income statement for the year. Total group revenue for the year was EUR 232 million, with all but EUR 1 million of that relating to unit sales from our 700 unit completions. Our core revenue from 665 units was EUR 207 million, which is marginally ahead of our amended target of 650 units. Our ASP on our core units was 311,000, showing our continued focus on suburban starter home schemes. As you may remember from our interim results, we took the decision in the first half of the year to accelerate the sale of our noncore units to maximize cash generation and deliver a net cash inflow of more than EUR 100 million over a 12-month period. This decision resulted in an asset impairment charge of EUR 20.3 million, which you can see on the face of the income statement. Of that EUR 100 million, EUR 24 million was received in 2020 and at year-end, a further EUR 70 million was contracted or reserved for 2021. As of today, this is now EUR 54 million of cash received to date and a further EUR 42 million contracted or reserved, therefore, demonstrating that the business has performed very strongly in realizing the cash in the time frame set out. The group's gross profit for the year amounted to EUR 9.5 million versus EUR 51.5 million in 2019 and an overall gross margin of 4.1% versus 18.1% in 2019. The gross margin on our core units is 14.1%, which reflects costs associated with our COVID-19 safety measures and operating protocols in addition to negative mix effects as units from our new higher-margin sites were delayed due to COVID-19. A significant portion of the mix effect and the impact of increased COVID-19 costs are expected to ease this year, and we expect the gross margin for 2021 to be in excess of 16%, with further margin progression in 2022 towards our current spot gross margin of 17%. Our operating loss for the year was EUR 12.7 million versus profit of EUR 29.4 million in 2019, which includes the previously mentioned one-off impairment of EUR 20.3 million. The group generated an underlying operating profit of EUR 7.6 million and an operating margin of 3.3%. The group's central costs for the year were EUR 20.2 million and along with EUR 2 million of depreciation and amortization, gives total administrative expenses of EUR 22.2 million, which is broadly consistent with 2019. Currently, we expect our central costs, including depreciation, to return to our pre-COVID growth trajectory and come in around EUR 28 million for 2021. Slide 30 shows our balance sheet at 31 December. Overall inventory number of EUR 821 million is split between land of EUR 619 million and work-in-progress of EUR 202 million. We have decreased our land portfolio to EUR 619 million from EUR 668 million a year ago and EUR 710 million 18 months ago, showing significant progress in decreasing our net investment in land as part of our overall commitment to improve balance sheet efficiency. We have continued to invest in work-in-progress in line with the growth trajectory of the business with a year-end balance of EUR 202 million, an increase of EUR 29 million from EUR 173 million at the end of 2019. This well-invested work-in-progress is fully supported by the 950 contracted or reserved units and will allow us to close these units relatively quickly once the current lockdown measures are lifted. Our noncore developments contribute EUR 58 million to year-end work-in-progress, and this highlights the importance of the strategy to accelerate the exit from these completed sites and generate in excess of EUR 100 million in cash within the 12-month time frame. The group's core work-in-progress is EUR 144 million and spread across 18 active construction sites, which equates to an average of less than EUR 8 million per site, which is where we'd expect an efficient starter home size to be. Building on the narrative of the noncore disposal, Slide 31 highlights the optionality that the accelerated exit gives the business. It allows us to focus not only financial resources but also management's time on the core segments of the business. It will assist in funding the significant ramp-up to 3,000 units. It improves and strengthens the balance sheet by converting fully constructed inventory into cash quickly and allows us to capitalize on any future opportunities that enhance the value of the business. Slide 32 gives additional color on the reduction of our landbank over the last 18 months. As you can see, we have already reduced the landbank by EUR 91 million to EUR 619 million at 31 December, and we are well on our way to hitting the targeted reduction of EUR 100 million. Going forward, further investment efficiencies are expected through our investment in strategic and structured land acquisitions such as subject to planning deals, which we've recently completed to us and also through partnership wins. Moving to Slide 33. And as I said at the outset, cash management was hugely important for the business during the shutdown and on reopening with our focus on finishing the units closest to completion to ensure a quick and recurring cash generation. The business reduced its net cash outflow from operating activities to EUR 11 million in 2020 from EUR 70 million in 2019, which is a very strong performance given the COVID restrictions in place during the year. A significant driver of this reduction was through reduction in inventory spend, which was effectively 0 for the year versus a spend of EUR 119 million in 2019. Within this net 0 spend, there was investment in WIP of EUR 39 million, but offsetting this, we had a net cash inflow of EUR 39 million from land. We finished the year at a net cash position of EUR 36 million, which demonstrates that the business managed its financing through the various COVID-19 challenges very effectively and leaves the business in a strong balance sheet -- with a strong balance sheet for the continued growth of the business. In the last few weeks, we finalized our new 5-year EUR 250 million debt facility. The facility consists of EUR 100 million term debt component as well as a committed RCF of EUR 150 million. We have also increased the number of banks participating in the syndicate from 3 to 4. The structure and quantum of the new facility will provide a mature funding base and strong optionality for the business for the next 5 years while continuing our significant growth trajectory in reaching our target of 3,000 units per annum. On Slide 34, I'll conclude, and I want to reiterate the strategic priorities for the business and the progress we've made against each of them. On the reduction in net investment -- net land investment, we have achieved a EUR 91 million net reduction to date. On the increased unit output, we've amended and adapted our construction programs to maintain our target of 1,150 units for the year. We continue with our goal of 3,000 units in 2024 or quicker if possible. On our improved operating margin, where we've got guidance of in excess of 16% for gross margin in 2021 with further margin progression in 2022 towards our current spot portfolio margin of 17%. At scale, our central costs are expected to be [ still ] 4% of revenue. Forward funding of urban projects, the attractiveness of the asset class continues to increase, but the tightening of processes is very much dependent on the normalization of the operating environment. The market fundamentals remain strong, and we certainly maintained and potentially improved our operational capabilities during COVID, and we are very well-positioned once the construction restrictions are lifted. Our strategy and areas of focus are very much unchanged, but to complement the guidance already in place, we plan to give further guidance on a range of measures at the AGM, such as capital allocation, a leverage policy and medium-term return on equity targets. I'll now hand you back to Stephen to run through a quick conclusion.

Thank you, Michael. Turning to the conclusion section. Attractive customer offering is driving reservations and completions, as you can see from our order book of 950 units. Construction capabilities have highlighted our ability to deliver no matter what the challenges presented to us. We are recognized as a partner of choice for institutions and the state when you see the amount of institutional product we are delivering to the overall market. Disciplined capital management will deliver strong returns into the future for the business and its shareholders, while all the time delivering the greatest social benefit at the lowest environmental cost. Finally, the key attractions of the business. The fundamentals remain highly favorable and are more sustainable than ever. Glenveagh's focus on 3 attractive segments in the Irish market in both suburban, urban and partnership will deliver the greatest returns into the future for our shareholders. The opportunity to create the leading homebuilding platform in Ireland is there in front of us, and we have the operation to deliver on 3,000 units per annum. Finally, I'd like to thank all the staff who work with Glenveagh and along with Glenveagh for how they rose to the challenge presented by COVID during 2020 and 2021. I'd like to pass you back now for any questions.

[Operator Instructions] Our first question comes from the line of Colin Sheridan from Davy.

A few for me, if I may. Maybe just starting on build costs. I mean you've clearly given some guidance on that this morning. I wonder if you could give us a little bit more color in terms of where there might be any pressures from an inflation perspective, then whether that extends any supply chain problems? I mean, has there been any shortages? Or is it just inflation coming through at the moment? And secondly, then, I mean you've clearly got a very strong set of numbers in terms of sales in H2 from last year, and that's continued into this year. Can you give us maybe a bit more of a feel for how that's progressing in more recent weeks with the extension of the lockdown and whether that demand has continued through February. And then finally, I mean, I see you've got a pretty comprehensive sustainability report published today. I mean, could you maybe just walk us through how much impact you think sustainability is having on your customers' decision-making process?

Yes. Thanks, Colin. I will deal with the first 2, and then maybe I'll let Conor come in on the third one. I suppose build cost, yes, so we said we are seeing about 3%. The predominant -- obviously there was new wage agreements agreed at the end of November and 2021, which obviously we've implemented across the business. So that was approximately 3% in wages. Probably where we've seen the pressure on price increases is predominantly related to the commodity side of the business in relation to like the timber, iron ore, things like that. It's been basically materials we've seen where the pressure has. Supply chain issues in the system absolutely were there in 2020. And that obviously related to -- obviously China going down first, then that spread into Europe in the first quarter and into the second and going through the second quarter. And we've seen that effect predominantly here in the third quarter of 2020. But I would say they're probably abated at this stage. We've negotiated all our material packages now for the next 18 to 24 months. So we feel in a pretty good position. The other thing, too, what I would say about the business is we're probably carrying about 3 months in advance at all times at the moment just to give us that protection to make sure that we have the material onboard. I suppose a lot of our planning came around Brexit. We originally were planning for Brexit in 2019, rolled on another year, and I suppose we had those tools in place to make sure we could work with that. On the subcontractor side, we would probably see minimal enough inflation. You're seeing benefits of the office market is probably going to be cooler for the next 12 to 24 months in the sense of just speculative projects that are not going to commence. So we see no pressures on that side. We may see a few benefits into the future. Then generally on the subcontractor side, I suppose we would feel pretty confident this is the ways we think how the year is going to go. If you think about the position we're at, at the moment, there's an element of infrastructure in front of all sites. But what's probably happening and what will happen quite early once things are lifted, stock will be completed quite quickly. And you should see a freeing up of labor into the third quarter of this year, the likes of your plumbers and electricians, your internal plastering, things like that will become a lot slacker because the commencements simply aren't on the ground and the smaller developers won't be very active out there. So we probably see benefits into the third quarter of the year. On the reservations front, absolutely seeing strong momentum throughout the second half of 2020. I would say we are in a very good position by the first half anyway. We were building a substantial order book even at the very start of COVID. But the momentum definitely kicked on into the second half. For the first 8 weeks of the year, it's been very strong out there. I would say that our customer is very comfortable with the digital facilities that we are offering them. They're very comfortable to walk through that process, engage with the sales team. They've done all their research before they engage with the team. And that's available to them. So pretty much as soon as they can -- when they are able to make any decision, they move quite quickly. I suppose the most positive thing for us that we see in our reservations is the limited amount of cancellations. So that just goes down to the quality of the leads that we're now getting in the business. So that's very strong. So [Technical Difficulty] for 8 weeks has been very robust. As I said in the presentation, we are pretty limited now on what we can sell into. And I suppose the sales team will start focusing -- probably before the start of the summer, we'll start focusing on looking at the order book into 2022 because it is limited on what we can deliver for 2021 at this stage. On the sustainability, I'll give it to Conor here to...

Yes. Just on the customer demand on the sustainability, Colin, I think the demographic of our customer, they are very focused. And on the environmental side, what we're also concerned about is the lifecycle cost and -- of ownership of the dwelling. And we have some stuff in the report there where our houses are costing less than EUR 380 a year to heat. All of our homes are A2. And I suppose that's driving us to do more. We've now -- on a number of our schemes, we have the option for customers to upgrade to -- from an A2 house to an A1 house just by installing an additional solar panel on the roof. And I suppose they're also engaging with us on the after-sales process in terms of how they roll in and operate and the new systems that we have in their house to make sure that they can run them in the most efficient manner. So it's -- yes, it's definitely something that's moved up the purchaser's agenda, and it's something we're working with them on to do more.

The next question comes from the line of Dudley Shanley from Goodbody.

Just a couple of questions, if I may. First of all, Stephen, you mentioned a couple of times that the smaller developers won't be progressing sites later in the year is your belief. What's the big barrier for progression of sites there? Then secondly, I was just wondering, help-to-buy, obviously the expansion of the scheme from 20,000 to 30,000 has been [indiscernible]. How many customers do you think are actually using that in terms of your recent bookings? And then finally, I was wondering if you could talk us through I guess reworking your projects in terms of being able to maintain completions guidance for the full year despite having your hands tied behind your back for the first 4 months or so?

Yes. Sure. Morning, Dudley. Yes, the smaller developers on what we're seeing on the ground, I suppose there's a couple of elements. I would say -- and I probably quoted this in the September results that we certainly got a sense that the smaller developers, when the pandemic came into Ireland, were extremely -- they were extremely nervous and I suppose they're focused on finishing off what they're doing. I suppose there's a couple of key points that you're just looking at that's in the data. First of all, if you look at the transaction levels in the overall land market, that's an indication that the smaller developers are not buying sites out there at the moment. Or they're limited to the buying. I'd say you're also seeing the funding side of that where they're using alternative financing being more conservative at the moment. And just unsure of the terms that they're going to lend into the future. So I'd say those aspects are probably prohibiting the smaller guys more than anything. Help-to-buy, absolutely it was a positive step from the government. It was well-indicated in the program from government. We certainly welcome it. Ultimately, it's helping people get on the property ladder. So we just see it as a benefit. Yes, a lot of our customers do avail of it. If you look at the amount of our portfolio, our suburban product, if you take an average of 350,000, they're qualifying. So absolutely, they're taking up. But we're also seeing our customers as well coming in where a customer last year might have wanted to buy maybe could have only went for a 2-bedroom home. There now has aspirations to reach for a 3-bedroom home. And a lot of that has been driven by, I suppose, fundamentally, they've had a larger saving pool brought to the table when they're buying their home, but also just their working lives now has dramatically changed in the last 12 months. And they're looking at the future for the next 2 to 5 years, are they working 3 days a week in the office and 2 days at home? And certainly, they're designing their lives to cater for that, and we're seeing that demand across the board. Just on reiterating the 1,150 units for this year. And I suppose we came out in January the 6th with our results for 2020. Obviously, we came out at a bad moment because the government were just coming out with their restrictions. While it was very unclear at the time was how long the restrictions will go on for, but what exactly was the detail behind the restrictions. I suppose locally we got indications from -- we came out in Wednesday, but by the Friday evening, the government had given us the access to deliver all private homes up to the end of January, and then all social units could remain under construction. So we -- I suppose for us, and we've seen this in the business, we've seen a strong delivery of closings in the early part of the year, say, versus this time last year, which was really helped by January. But also then obviously being able to deliver on our social units to the end of April has been a huge advantage as well. If you think of developments like we have a minimum of 10% social housing, you'll have an element of turnkey on top of that. But we've also got developments where you've got our enhanced lease product that is directly linked to social housing and the government. And that's the likes of our Adelaide Road in Bray and an element of our lease of development. So that is all really benefit, and I suppose we've made really good progress on that front. But then I suppose if you look at the WIP invested and where we came to year-end, I suppose strategically we refocused the business around September. I would say that when we've seen the government come out with a commitment to deliver 13,000 houses, we made sure that we got all our social developments up and running and put that into the order book quickly because I suppose we are concerned if anything happened into the future lockdowns. Social housing with that commitment would be allowed to operate. But then also on our sites, I suppose, the ways we come about thinking about it, we did a lot of infrastructure upfront. And I suppose the construction teams really concentrated on delivering road, services, utilities into their sites. And that has really narrowed the construction gap from the time to deliver. So all the sites that we need now to deliver in 2021, have all the water, all the sewage, have all the roads, the services, the public parks, et cetera, et cetera. And that has closed down the actual superstructure time period. We can now turn a house in around 16 to 18 weeks, depending on its -- on the topology of that house and what we're delivering. So that has opened up the task a bit for us that we feel, yes, we're not going to have a lot, but we feel comfortable that we're able to deliver the 1,150 units for 2021.

The next question comes from the line of Glynis Johnson from Jefferies.

I actually have 2 sort of bigger picture questions, actually. The first one just in terms of government policy. You've obviously highlighted a number of positives. But I'm wondering if you can just talk about if there's anything we need to be thinking about in terms of governments looking for almost some sort of quid pro quo? I'm thinking particularly in terms of tightening regulations in terms of build, maybe pushing you above that A2 standard. But also I appreciate you mentioned the Part V, but is there anything else you need to be thinking about? And then the second one is in terms of fire safety. Obviously in the U.K., there's been a great deal of discussion about fire safety and fire regulation of build. I just wonder if you can just talk us through what -- or how you see that impacting yourselves in terms of what you've previously built, but also going forward?

Absolutely. Yes, I suppose government policy, I would say this is definitely a government that is focused on increasing supply. The government's own research, and particularly the housing department, have indicated that they believe that natural housing demand on a per annum basis is a minimum of 33,000 units. That's not taking into account any shortfall. I suppose what I see on the regulation, obviously we flagged Part V, but we see that dropping more and more. And the minister realizes that to get supply up, he needs to create viability on the projects. So I think that will be countercyclical to deliver. I think it's focused by creating the land development agency, that will be more focused on delivering affordable and social homes on those developments. So I think private developers will be allowed to operate on private schemes just to deliver the majority of product to the private customer. On building regulations, and I suppose it's been a journey for the last probably 12 to 13 years. I would say in 2007, when the housing crisis -- that the housing crash came upon Ireland, that probably building regulations were poorly regulated. Our codes were substantially -- they were poor in standard to -- across the board. There has been a dramatic improvement on that over the last 10 years. We introduced a system called BCAR, where the developer and the assigned certifiers take responsibility for delivering housing. And they have quite onerous codes on them. So that has improved the building standards dramatically. The track and trace of our developments in the sense of knowing every input product that goes into the developments and the systems we have behind that, we can identify a load of stone when it comes into a site exactly where it is and what it has been applied to. So I think our building standards has improved. So I don't think there's much work to be done there. Our energy rating, obviously we moved to NZEB last year, which is -- it's a phenomenal achievement over the number of years. 10 years ago, we were building B3 rated house today. We're now delivering at a minimum A2. Moving it to A1 is not going to have a dramatic impact on cost. As Conor outlined, we're actually now offering that to our customers, and it has a minimal cost. Fire safety and overall fire regulations in Ireland are quite substantial. And we've seen that on our testing on, be it timber frame kits, be it on apartment developments, be it on the insulation we use. All of those issues, I would say, our fire codes are actually much higher than the U.K. So I don't think there's an improvement required there to move our standards up. I'd say it's more the U.K. might be catching up with where Ireland is today.

Okay. So there's no need to remediate anything that you may have already built to bring it up to what may be a higher fire code?

Absolutely not, no.