Irish Residential Properties REIT Plc (IRES) Earnings Call Transcript & Summary

Hello, everybody, and welcome to the Irish Residential Properties REIT 2021 Results Call. My name is Bethany, and I will be your operator today. [Operator Instructions] I will now hand the call over to Sarah Stokes of Investor Relations. Sarah, over to you.

Good morning, and thank you for joining Irish Residential Property REIT's Earnings Call this morning. My name is Sarah Stokes, and I'm joined today by our CEO, Margaret Sweeney; and Finance Director, Brian Fagan, to present our full year results for the 12 months to 31 December, 2021. The presentation we are making today is available to stand out on our Investor Relations website at www.iresreit.ie And our 2021 results presentation release is also available there. Turning to Slide 2. Before we begin, we would like to remind everyone that certain statements we are making today may be considered forward-looking and are subject to various risks and uncertainties that could cause the actual results to differ materially from those expressed or implied by these forward-looking statements. I direct you to our securities filings for a discussion of these risks and uncertainties. I will now turn over to our CEO, Margaret Sweeney, to go through the 2021 highlights.

Thank you, Sarah. Good morning to everyone, and thank you for joining our call today. I'll start on Page 4 of our presentation, which Sarah mentioned is available on our website. I am delighted to report a strong set of results despite the continued challenging environment revolving over the last 2 years. We have a solid outturn for 2021. At 31 December, we were providing 3,829 high-quality professional managed homes across 36 properties in Dublin and Cork. We strengthened our occupancy to 99.1%. And this, along with new investments, were the main drivers of the increase in our rental income for the year to 79.7% (sic) [ EURO 79.7 million ] an increase of 6.7%. The business is highly cash generative, and we had strong rent collection rate of 99.2%. The strength of our operating platform delivered this consistent performance with underlying EPRA earnings increasing to EUR 37 million for the year. We also continue to deliver on our growth strategy, and we see continuing attractive opportunities to deliver on our effective 3-pronged strategy. In 2021, we made investment in new supply at the Phoenix Park where we acquired 146 apartments. We have 238 new units due in H1 2022, and that's from our recent acquisition of Ashbrook in Clontarf, a very attractive development, and 2 developments -- 2 new developments coming onstream at Bakers Yard on the North Circular Road and the Merrion Road in Dublin, both new developments due to be delivered in the first half of 2022. So overall, we have pipeline growth of over 20% from these developments and also our own sites that we have in our pipeline as well. Our strategy is also to embed ESG across all aspects of the business, and this continued throughout 2021. We've made new appointments to the Board and management with expertise in European real estate and development. Stefanie Frensch joined us as a new nonexecutive director during 2021, and Brian Fagan joined us as our Finance Director. So turning to Page 5, which sets out more detail on the strong performance and on our balance sheet. Our strong operating performance is underpinned by a very strong balance sheet. We are well positioned to navigate this change dynamic that we're seeing as we head into 2022. Our balance sheet is strong with good liquidity and long-dated maturities on our debt with maturities across the grid from 2026 to 2032. We also have good headroom in our bank facilities. And approximately 30% of our debt is hedged, and we are somewhat inflated as well in our business from energy cost inflation. The scale of our platform was close to 4,000 modern homes gives us opportunities going forward. We have well-diversified properties with an average age of 12 years and with 94% of the portfolio in the Building Energy Range A-C. Our assets were valued at nearly EUR 1.5 billion at 31 December by independent valuers, CBRE and Savills. We continue to see strong transaction activity in PRS during 2021 under a 2-year compression. This resulted in a revaluation gain in 2021 of EUR 34.9 million under an EPRA net initial yield on our assets of 4.2% at 31 December 2021. As a result, our EPRA NTA increased to 166.5 cents an increase of 4.1% year-on-year. Turning to Slide 6. We completed the internalization of the management of the company on 31 January with the acquisition of CAPREIT subsidiary, IRES Fund Management. This provides a fully integrated business and in an Irish company, providing long-term rental accommodation in the market. The investment management agreement terminated step up point, and we have a transition services agreement in place for a period of 3 months. The operating platform was acquired at an attractive price with overall costs coming out at less than 1 year's at fees. And is this fully internal, and integrated business. This enables the company to build operational capability with new technology as well as scalability of the platform, thereby, delivering economies of scale. We have a very experienced operations and investment team with years of knowledge working in the local market. This provides attractive opportunities, such as the nearly 300 units we acquired at Phoenix Park and Ashbrook properties over the last 12 months. I-RES is also a partner of choice with builders and developers, given us capabilities and proven track record as well as our ability to help value via development initiatives and operating expertise. We see increasing transaction opportunity aligned with our strategic objectives. We're also investing in using technology and digital capability and partnering with Yardi and Microsoft as our 2 preferred technology partners. This will enhance our service offering to residents as well as operational efficiency and data analysis capability going forward. I will now pass you over to Brian Fagan, Brian joined us as our Finance Director at the end of April last year. And this is Brian's first time reporting to you following the internalization of the management of the company on 31st of January of this year. Over to you, Brian.

Thank you, Margaret. Turning now to Slide 8, where I will discuss our financial performance for the year in greater detail. Our results for 2020 will again demonstrate the strong resilience of our high-quality assets and the strong fundamentals of our business. We have delivered another year of growth and had a strong 2021 across our important operational KPIs. Revenue from investment properties increased by 6.7% to EUR 79.7 million, and net rental income grew by 5.4% to EUR 63 million in the period due to acquisitions and organic rental growth. Occupancy in the portfolio strengthened to 99.1% at 31 December 2021 versus 98.4% in 2020. While our total rent collections for the portfolio were excellent at 99.2%. This strong occupancy and rental collection performance further underlines the resilient characteristics of the business. The NRI margin moderated to 79.1% for 2021 compared to 80% for 2020. The decrease is attributable to increased repairs and maintenance, higher OMC service charges, some uptick in turnovers in the final quarter and is also a result of no rent increases taking place on renewals until October 2021 as the company has made a decision not to put through rent increases during the pandemic. Adjusted EPRA earnings increased 1.9% to EUR 37 million. We had nonrecurring costs of EUR 5.4 million in 2021, the majority of which relate to internalization and IT. We will deal with these on a separate slide. EPRA earnings adjusted remained stable at EUR 0.07 per share. We have a strong record of delivering consistent and incremental growth in our dividends to shareholders. The 2021 final dividend per share of EUR 0.038 has been proposed, bringing the total for the year to EUR 0.0599. This compares with EUR 0.059 for 2020. Turning now to Slide 9. Managing has maintained a strong balance sheet with adequate liquidity is one of our key financial priorities for the business. The company has total credit facilities of EUR 800 million with a weighted average debt maturity of 5.2 years and no debt maturities before April 2026. The weighted average cost of debt was 2.3% for 2021, including amortization of deferred financing costs. The company has a revolving credit facility of EUR 600 million with a consortium of 5 banks. Post year-end, the terms of this facility has been extended out to 2026. The EUR 200 million in outstanding private placement notes have a weighted average cost -- interest cost of 1.92% inclusive of swap costs and the weighted average maturity of 7.9 years as at 31 December 2021. The first repayment becomes due in March 2027. Gearing increased marginally during the period with the LTV reaching 40.7% at year-end. The ratio increased further to 41.8% on the completion of the acquisition of Ashbrook in January 2022. Our gearing ratio remains at the lower end of our target leverage range of 40% to 45%. Turning now to Slide 10. As at 31 December 2021, the portfolio was valued at EUR 1.49 billion, up 8.2% from the 2020 year-end. The increase reflects our acquisition activity over the period and a fair value gain on our portfolio of EUR 34.9 million due to years of compression, offset somewhat by the onetime impact of changes in stamp duty legislation EUR 8.6 million. The rent reversion in the portfolio was 9.4% at 31 December 2021. Our IFRS valuations are carried out by 2 independent valuers, CBRE and Savills, who performed their work in accordance with Red Book valuation standards and IFRS 13. Valuations are undertaken twice a year, and there is a policy of rotating the properties between the valuers. EPRA NTA per share increased by 4.1% to EUR 1.665. The makeup of the movement is set out in the pictorial on the slide. Proceeding to Slide 11, which touches upon the costs associated with internalization. In January 2022, I-RES purchased 100% of the shares of the manager on a liability-free, cash-free basis for EUR 1. The consideration is subject to adjustment pursuant to a completion accounts process. This includes an initial payment by the company on completion of approximately EUR 1.1 million in respect of cash acquired on a further payment due 60 business days post completion for working capital and fixed assets. The IMA is terminated on 31st of January 2022. A transitional service agreement has now been put in place for 3 months to facilitate the migration of data and implementation of new IT systems with an estimated cost of circa EUR 360,000 per month. One-off costs associated with delivering internalization are estimated to be EUR 6 million, with EUR 4.2 million being incurred in 2021 and the remainder in 2022. The company also received approval from the Central Bank of Ireland to acquire the shares of the manager. This approval is subject to certain procedural conditions. In particular, there is a requirement that all aspects of the Investment Manager's Business be transferred to the company and that an application be submitted within 5 months of the date of completion to the CBI that the company to become authorized as an internally managed AIF. As Margaret outlined earlier on the call, we view the internalization as a major milestone for the business and a long-term net positive. We firmly believe that the I-RES REIT structure provides a number of opportunities in terms of synergies with new technology, economies of scale and focus on customer service, which will have further enhance our operations for the benefit of all our stakeholders. Continuing now to Slide 13. On this slide, I've outlined the strong operating performance of the portfolio despite a more challenging operating environment seen due to government-enforced COVID-19 restrictions during the first half of 2021. The performance reflects the quality of our properties, comprising of modern homes with an average age of 12 years in very attractive locations with extensive amenity offerings in the local area, and all of which are close to good transport links. We are primarily focused on the mid-tier market segment with average rents of EUR 1,678 per month, which are approximately 9.4% reversion. We continue to be focused on our environment, and the I-RES portfolio is second to known in the Irish market, with nearly 59% of our properties posting BER ratings of A-B and with 94% rated C or better. This is why we consistently see such sustainably high occupancy rates. Proceeding now to Slide 14. Over the last 3 years, we have successfully executed on our strategy, growing our portfolio about 47% over that period. We have delivered on our 3-pronged strategy of growth which involves accretive acquisitions, development of our own sites and partnering with developers and forward purchase opportunities. The company has a pipeline of 825 units that can be delivered over coming years. This provides us with locked in growth and clear visibility of our future cash flows and how we will continue to grow our rental income for the benefit of the business and our shareholders. During 2022, we expect to take delivery of 108 units at Ashbrook; 69 units at Merrion Road and 61 units at Bakers Yard. Upon delivery of these units, our portfolio will grow to 4,067 homes, which further highlights the management team's proven ability to deliver on its growth strategy despite the uncertain market backdrop of the last 2 years. Moving on to Slide 15, which is one of our own developments, so [ Canal ] at Rockbrook, Sandyford for [indiscernible] and Dublin. We have planning permission for 428 residential units with associated commercial space. Now the expected time line for this project is 2022 to 2024, so '25. The property is located adjacent to light rail and also existing IRES performing assets. Reflecting our commitment to sustainability, the project will be designed to A BER and will also be nZEB compliant. I will now pass back to Margaret.

Thank you, Brian. The climate and ESG considerations continue to take a priority for us across the company from the Board. I'm impressed by how all of the I-RES team right across the business are embracing sustainability. We have developed a multiyear strategy and continue to work on putting in place key building blocks to underpin the development of performance targets. We recently appointed Michelle Ang as Head of Sustainability and Corporate Development. Across our portfolio, we have 100% renewable energy for common areas, and we work closely with our tenants, and hopefully with our scale, can help to share in achieving efficiencies and energy going forward and hopefully in relation to energy costs add to the benefit of everyone. We are also committed to positively influencing the communities we operate in, delivering sustainable living solutions and creating long-term value for all of our stakeholders. During 2021, we achieved some significant milestones in an effort to build a standardized, transparent and comprehensive ESG disclosure framework. We published our inaugural sustainability report in 2021. And we are committed to publish this on an annual basis. We report our performance measures and metrics in line with EPRA Sustainability Benchmark, SBPR. And in our first year, we received a Gold Star award the Most Improved Company award. We also submitted to GRESB Assessment and with strong performance noted in management, posting disclosure, stakeholder engagement and talent and community. And we will continue to embrace an improvement plan in line with the requirements of GRESB. Diversity and inclusion is also embedded in the way we do our business, and we are delighted to disclose our recent diversity and inclusion award as the best practice leader in European Women On Board Gender Equality Index, which we received over the last few weeks. 55% of our employees in the company are female, and also we had strong female representation at Board level, making up 43% of the Board's composition. So we will continue to -- on our journey to embed sustainability into the business and working alongside our Board Sustainability Committee. Turning now to Slide 19. I believe the fundamentals underpinning our business continue to remain very supportive. Investor interest in the Irish residential investment market remains strong with EUR 2.1 billion worth of transactions closing in 2021, according to Savills. Prime doubling yields for multifamily has a firm at 3.6% in Q4 2021. And CBRE and Savills, both expect to remain stable. There is an ongoing need to increase supply of new homes in Ireland. COVID impacted output over the last 2 years. However, forecasts expect this year to deliver over 26,000 new homes. This, however, is against an estimated demand of 34,000 new homes needed every year for a young ongoing population. Irish population is forecast to grow by 20% between 2016 and 2014, reaching 5.7 million, and this is driven by the highest growth rate in Europe and inward migration supported by strong FDI inflow. Rental stock is at a record low nationally and in Dublin. The PRS market represented by institutional ownership in Ireland is approximately 5% of the total market for private residential accommodation. The government published recently its ‘Housing For All’ policy to deliver housing needs across all tenures from ownership to rental and concentrated the need for partnership with the private sector to deliver on these ambitious targets. We continue to assess and stay abreast of developments as the long-term commitment to continuing to provide supply into the market. Turning to Slide 20. In terms of the broader economic outlook, there has been a very strong recovery in the economy, and unemployment despite Omicron, with increasing job creation across many sectors. Modified domestic demand, which is a good indicator of underlying demand, which excludes some of the impact of trade and IP and aircraft leasing by companies, and is also an important indicator of underlying demand, grew by 5.5% in 2021. There have been significant improvements in the Irish labor market with the COVID-19 adjusted measures unemployment of 7.8%. That compares with 27.1% this time last year. The population of Dublin is forecast to grow at circa 1% per annum to 2040. And IPA are reporting strong job increase despite the multinational sector into Ireland. So all in all, it's underpinning a significant requirement for new homes across both ownership and [indiscernible] in Ireland going forward. Turning to Page 21. We are cognizant of the risk posed by growing inflation, with Irish inflation reaching 5.5% in December 2021. In terms of our developments, we use fixed price contracts to minimize cost inflation risk through the construction of new developments. In addition, with our forward purchase contracts, we secure those at a fixed price agreement with third-party partners. This applies to our Bakers Yard development and also our Merrion Road developments, which were due to deliver in the first half of this year. Our scale and internalization provides opportunities for operating efficiencies as well as working with our tenants to assist them and minimizing the impact of energy costs. Turning to Page 23. In summary, the Irish multifamily sector is attractive and positioned for continued growth. This is underpinned by favorable demographics and slight shifts as well as the continuing demand for housing across all segments of the market. Ireland has a young population who expect professionally managed accommodation. The yields of multifamily assets remain attractive, and we continue to assess risks for -- covering across regulatory, political and ESG risks. We have a strong balance sheet underpinning the business, and the internalization of the management to a fully integrated company with a strong operating platform provides flexibility and further opportunity for the business going forward. And as Brian said, we have a proven ability to deliver on our strategy despite the market backdrop over the last 2 years, and we look forward to continuing to do this for all our stakeholders going forward. Thank you. So now we're going to turn it over to questions.

[Operator Instructions] Our first question comes from Colin Grant at Davy.

I have two questions. I'll just start with the first one. It's just rental affordability, Margaret. If you could just give us some overview as to how you find affordability for rents for your tenants across your portfolio now and compare that maybe to where they were when rent caps were introduced. I'd just be interested to get a sense of the trend in that. Maybe start with that, please.

Colin, thank you for joining the call. So yes, affordability is obviously very critical really and one that everyone is very conscious of and particularly in the current environment. So our average rents for 2021 were at slightly under EUR 1,700 per month. And on the rents, we have the majority of 2 bed apartments. We are -- all of our properties are also in at rent pressure zones and subject to rent regulation. What we've seen over the last number of years, particularly with rent regulation being in place, is that we see actually a parallel now between pay increases in Ireland and also rent increases. So in the rounds, actually, in terms of the affordability index, actually, that hasn't actually changed because both of those are running more in parallel with each other.

Great. Just a secondary, one. I want to come on to something you highlighted in your presentation, which is that 94% of your properties now have a BER rating between A and C. And I'm just wondering whether you've done any work on what the impact of that is on utility bills for tenants and increasing the relative attractiveness of I-RES properties versus the broader rental market, and about the other advantages of having, I suppose, an energy-efficient portfolio is in general.

Thanks, Colin. Yes, no, we actually have a very modern portfolio. As Brian said -- set out, the average age is 12 years. We're well diversified. And I think we're very fortunate to have a good energy profile across all the properties. And that obviously will feed through in terms of actually -- that cost of living and also into the cost of energy bills. I think also with the integration of the full management of the business, that gives us opportunities to look at economies of scale and hopefully sharing benefits on that with our residents going forward. In terms of energy efficiency as well, it means a lot of our focus on investment is actually in adding new supply. So like the Bakers Yard development we mentioned and also Merrion. And we would -- and our common areas across the properties have moved to 100% renewable energy in the properties we fully own and control. And that's also an important feature. So it's an ongoing, data collection is important. So with the new technology that we're having, that will assist us as well in terms of trying to get better measurement of that across our properties and working with our tenants to try and see how we can actually benefit everyone in that process.

And just on that point, Margaret, is there a risk for some of the tenant and rental properties that exist in the markets that are lower than C rating? That they are increasingly noncompetitive or uneconomic? How does stuff develop, do you think?

Well, looking at both requirements really coming from Europe and also from the government in terms of our climate action bill and the targets to get -- reduce carbon emissions by 50% over the next -- by 2030 and also produce more significant to net zero, that does require a lot of focus on energy, it's important -- and the building sector and the property sector are also, it's an important factor for us as a sector to embrace that. So I think in terms of filling energy ratings as a long way to measure performance and an important one. So I think on the older buildings, we will be more focused probably on retrofitting and needing to put capital and investment into that. I think our focus looking at our portfolio is to ensure that we apply a good bit of capital to adding new supply into the market. And that will be, I think, the difference, I think, compared to applying investment more to retrofitting existing buildings.

The next question comes from Colm Lauder at Goodbody.

Maybe just if I start with a follow-up question from Colin earlier, just looking at rental affordability. And I know it's a figure you've discussed before. But just to give us sort of an example to compare to other European rental markets. Do you have an idea of what the average rent is now within your portfolio versus the disposable incomes of the principal tenants? And obviously, a useful international comparator?

Yes. So we would actually -- there was always have been a rule of thumb. Colm, thank you for joining us as well. It have always been a rule of thumb. I think, around 1/3 of disposable income, roughly 1/3 of income going on [indiscernible], but that's mortgage for the rent. And obviously, newer generations may have a different dynamic around that. It depends on how much you apply to your car and public transport, et cetera. So there would have been a rule of thumb. That's something we've always been very conscious of, Colm. So when looking at our investment decision-making under rents, we would always actually bear that in mind. We have the density of 2-bed apartments. And usually, we find there's at least 2 incomes if not even more because of sharing. So it works out on average for EUR 840 per month, and that's based at December 2021. The [ wagers ] which were about 9% below market rates at this stage, there are high-quality modern apartments, as Brian set out. So in comparison to Europe, I think the dynamics of bigger paying market would be different, Colm. Mentioned there the building energy ratings. As Brian said, the stock here is actually very new in Ireland, average age of 12 years. There was a heat map a couple of years ago and has set out actually the age profile of housing stock across Europe, U.K. and Ireland, which was what was very telling and notable, about how modern the stock actually in our end until there's reason to do. That should help in terms of actually ongoing living costs into the future where you're seeing this increase in inflation and cost of living increases.

Okay. And have you noticed any or observed any changes in turnover rates over the course of this year, particularly as the economy reopened and people were able to move around more? Obviously, understandable that turnover rates were depressed in 2020 and early 2021. But have you noticed any change within the portfolio, particularly in the second half?

So what we have an average is roughly 20% turnover rate in the portfolio, which certainly would give that average sort of stay of 5 years and a cost 20% turns. So to put it at a good tenure and long tenure in our properties. And so we're actually seeing probably, because the supply side is actually so stressed and we just recently came out to say that since they set up the index in 2006, it's never seen such a low level of sale of stock for rental in the country. So in that context, we're seeing turnover around 20%, which is the debt of average tenure 5 years.

Okay. And maybe just moving on to future potential supply then. It's nice to see a slide with some timings around Rockbrook. It'd be just good to understand ambitions around that. Obviously, it's a major scheme, capital-intensive development. Are we to understand that, that will be phased? Or how would it be structured? How would it be funded? Is it was interesting to note that you have an expected time line for 2022 to see some progress on it. But so it would be good understanding, one, your timing ambitions around it; and two, how you plan to develop it, either it will be a phased scheme or in one particular single development?

Colm, Brian here. Yes, from a production point of view, it will be phased. Probably it will be phased -- in terms of the production, it says, it will be based over sort of a 24-month period. In terms of financing the development, we're exploring a number of options, right, okay, which involving potential financing partners -- long-term financing partners in relation to that development change.

Okay. And just one very final question, just more on the outlook and just bringing it back to your principal risk statement. Obviously, it's just interesting to know that you've upgraded the view of political interference be it in the REIT regime or in rent controls from medium to high. But you also have a comment as well that engagement with government on policy matters is challenging for industry, if you could perhaps just elaborate on both those points, please?

Housing is obviously a very important sector in Ireland, and we are seeing -- and I think COVID over the last 2 years has impacted on supply into the sector as well at a time when we're growing, young growing population, very strong economic rebind as well. So in that sense, it's a regulated sector as well. And we would very much work within the framework we are given. And we continue to stay abreast of any changes. I think it is a sector that requires long-term investment. Long-term patient capital is the way we should attract to actually ensure we get good supply into the sector. And we continue to stay abreast of developments, but it does need that stability and predictability and related to the policy environment because it's long-term investment decision making. But we constantly assess risk, both in terms of regulation, in terms of ESG across the business and stay abreast of it.

[Operator Instructions] The next question comes from Jonathan Kelcher at TD Securities.

First question just on, I guess, rent growth. You guys didn't put any increases through until October. Did you -- when you did start pushing them through, did you do 2% on all the leases that you were able to at once? Or is it more staggered?

So yes, Jonathan, this was probably the middle of the night for you. So I appreciate you getting up this early. Thank you very much. We -- our rents would actually be staggered across the year. It depends on rent supply from when somebody actually picks up a new lease. So it tends to be very phased out through the whole year, depending on a lease commences. And there is also within the Irish regulations, it would have been up to July 4%. And then the new regulations provided for indexation in line with Harmless Consumer Price Index from July, and that was then regulated to a maximum of 2% in December. So we would have applied the increases in line with that regulation. As you said, we started to see application of increases came in the last quarter, quarter 4 of 2021.

Okay. Sorry. So just to clarify, you got -- you would have had 4% for some of them, and then post December, it switches to 2%?

That's Correct.

That's correct, Jonathan. I mean, the majority of them would have been at that 4-odd-percent rate, approximately 2/3 of our portfolio, okay? We were -- we applied the 4% rate. We gave notice at the end of June, beginning of July. We have to give a 90 days to a no oldest period. And that kicked in at the beginning of October. And then the change in the rent regulations, as Margaret already referred to, back been in December. So the 2% kicked in, in December.

Okay. That is helpful. And then you also -- I guess, the rent reversion is 9.4%. What opportunities do you have to close that gap?

Realistically, we would always comply with the regulation. So it's very much more in the medium term, Jonathan, because at the current regulation, rent inflation would at a maximum of 2% grow. And also, we're conscious in some of our newer portfolios. They would be at market. So we just can't just each of the different properties they're assessed differently in terms of actually where the rents are at and also the capacity of the market. So I think it's moving more to medium term.

Yes. It is a top line in -- Jonathan. I mean, that statistic or natural price has come in right on the previous year.

Okay. And then just lastly on the operating cost side. I guess your margins decreased a little bit in 2021, partially because you didn't increase rents for most of the year. How do you see your margins sort of playing out in 2022? Do you think you get back to the 80% you were in 2020?

That's an objective certainly, Jonathan.

Yes. So the business is quite stable, Jonathan. You can see that coming through in the results, fairly stable, consistent performance and operating performance for the business. That's been doing that for a number of years. And there are those headwinds in relation to inflation coming through. And I think with the full integration of the management of the business, putting in new technology, our ambition would be that through those economies of scale and new technology, we will achieve operational efficiencies. So as Brian said, our target is always to stabilize around 80% and thereon.

We have no further questions, so I'll hand the floor back to Margaret, Brian and Sarah to conclude the call.

So first of all, I'd just like to say thank you all very much. We appreciate you taking the time this morning to come and hear our presentation, and look forward to engaging with you over the coming days. Thank you.

Thank you.

Thanks.

This concludes today's conference call. Thank you for joining. You may now disconnect your lines.