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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Glenveagh Properties Plc | LSE:GLV | London | Ordinary Share | IE00BD6JX574 | ORD EUR0.001 (CDI) |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| -0.01 | -0.78% | 1.265 | 1.23 | 1.30 | 61,443 | 16:35:20 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Gen Contractor-oth Residentl | 607.94M | 47.11M | 0.0738 | 17.21 | 810.43M |
From Apr 2019 to Apr 2024
TIDMGLV
RNS Number : 4274Q
Glenveagh Properties PLC
26 February 2021
26 February 2021
Glenveagh Properties plc
Final Results 2020
STRONG PERFORMANCE IN 2020 DEMONSTRATING OPERATIONAL CAPABILITY
Glenveagh Properties plc ("Glenveagh" or the "Group") a leading Irish homebuilder announces its Final Results for the year ended 31 December 2020.
SUMMARY FINANCIALS
Hot Features
Premium
Year ended Year ended Change
31 December 31 December
2020 2019
------------------------------------- ------------------------ ------------------------ ------------------
Units 700 844 (17%)
------------------------------------- ------------------------ ------------------------ ------------------
Total Revenue EUR'm(1) 232 285 (19%)
------------------------------------- ------------------------ ------------------------ ------------------
Core ASP EUR'k (2) 311 321 (3%)
------------------------------------- ------------------------ ------------------------ ------------------
Gross profit 9.5 51.5 (81%)
------------------------------------- ------------------------ ------------------------ ------------------
Underlying gross profit
EUR'm(3) 29.8 51.5 (43%)
------------------------------------- ------------------------ ------------------------ ------------------
Underlying profit before
tax EUR'm (3) 4.5 26.7 (83%)
------------------------------------- ------------------------ ------------------------ ------------------
Land EUR'm 619 668 (7%)
------------------------------------- ------------------------ ------------------------ ------------------
Work-in-progress EUR'm 202 173 17%
------------------------------------- ------------------------ ------------------------ ------------------
Net cash EUR'm 36 53 (32%)
------------------------------------- ------------------------ ------------------------ ------------------
ATTRACTIVE CUSTOMER OFFERING DRIVING RESERVATIONS AND COMPLETIONS
-- Customer leads +169% year-on-year in H2 2020 -- Average weekly private reservation rate per site +31% year-on-year in H2 2020 -- Strong forward sales with 950(4) units currently sold, signed, or reserved (2020:475)
SECTOR LEADING CONSTRUCTION CAPABILITIES HIGHLIGHTED
-- Strong delivery performance with 700-unit sales completed notwithstanding site closures due to Covid-19
-- 1,150 completions expected for 2021(5) despite restrictions on construction due to Covid-19 -- 23 cumulative site openings since IPO with a further six scheduled for 2021
RECOGNISED AS PARTNER OF CHOICE FOR INSTITUTIONS AND THE STATE
-- Contracts exchanged with institutional purchaser for the sale of 132 units across two developments at Bray and Leixlip
-- Contracts exchanged with Real I.S. for the sale of 134 units at Marina Village, with 65 completed to date
-- Reservations in the year-to-date from Approved Housing Body ("AHB") for 85 cost rental units at two Suburban developments
DISCIPLINED CAPITAL MANAGEMENT AND GROUP REFINANCING
-- Accelerated sales of non-core units and sites to facilitate a EUR100 million cash inflow within 12 months, resulting in a EUR20 million impairment
-- EUR54 million of non-core proceeds received to date with a further EUR42 million currently contracted for 2021
-- On track for EUR100 million plus reduction in land with EUR91 million achieved to date -- Targeted EUR202 million WIP investment underpins 1,150(5) deliveries in 2021
-- Robust operational delivery resulted in a net-cash position of EUR36 million (2019: EUR53 million)
-- Current net cash remains broadly in line with year-end position despite restrictions on construction and selling activity
-- Completion of five-year EUR250 million refinancing comprising a term component (EUR100 million) and a committed RCF (EUR150 million)
COMMITMENT TO SUSTAINABILITY
-- Sustainability report published outlining the Group's efforts across our six sustainability pillars
-- Emissions reduction initiatives and corresponding 25% Scope 1 and 2 intensity reduction target outlined
-- Commitments, targets and measurable outcomes published across our sustainability landscape
OUTLOOK AND UPDATED GUIDANCE
In what is a challenging operating environment where the Group has yet to exit a second period of restrictions on housing delivery (with only social housing units progressing), our sector leading delivery capability has enabled the sale of 700 units in 2020 and allowed the Group to target 1,150(5) units for 2021.
Demand for housing from our customers (private, institutional, and state agencies) continues to be strong and market fundamentals are in the Group's favour, more so now than in prior periods.
Management intends to present updated guidance to shareholders as part of our AGM on 27 May which will address the following: capital allocation; leverage policy; and medium-term ROE targets for the Group.
GLENVEAGH'S CHIEF EXECUTIVE STEPHEN GARVEY COMMENTED:
"The Group reacted quickly and effectively to the challenges of the Covid-19 pandemic, with the safety and wellbeing of our people, customers and local communities our priority. At the same time, we delivered a robust outcome for 2020, completing 700 units and are well-placed to deliver 1,150 units in 2021 despite restrictions on our construction operations.
I believe that the current challenges have broadened the long-term opportunity for the Group, with the fall-off in land transactions and commencement activity within the industry in 2020 a signal of the continuing gap between supply and demand. Our well capitalised platform which delivers across three business segments with access and affordability at the heart of our offering is best placed to help address this undersupply. And our ambition remains to scale the business to 3,000 units by 2024.
In, our first standalone Sustainability Report since we became a public company in 2017, we set out our approach to reducing Green House Gas ("GHG") emissions from our own operations and our supply chain, and the steps we are taking to reduce, re-use and recycle raw materials and resources.
We also explain the measures we are taking to keep our people and our contractors safe, to source responsibly, to attract, retain and inspire our people, to put customers at the heart of everything we do, and to create sustainable communities.
I would like to thank all our staff and industry partners who, despite the challenges faced, ensured we continued to operate safely and deliver for our customers and the communities in which we operate".
RESULTS PRESENTATION
A conference call for analysts and investors will take place at 8.30am this morning to present the financial and operational results followed by a Q&A session. Please pre-register at the link below to ensure your attendance is confirmed ahead of the commencement of the call:
-- Click this link to register for the conference
Notes
1. Includes EUR24m of non-core revenues in each of 2019 and 2020 2. Change due largely to mix effects 3. Pre-asset impairment of EUR20.3 million in H1 2020 4. At 25 February, all scheduled for delivery in 2021
5. Including core and non-core. Assumes restrictions on residential construction end no later than 5 April
For further information please contact:
Investors: Media:
Glenveagh Properties plc Gordon MRM
Michael Rice (CFO) Ray Gordon 087 241 7373
Conor Murtagh (Director, Strategy David Clerkin 087 830 1779
& IR) glenveagh@gordonmrm.ie
investors@glenveagh.ie
----------------------------
Note to Editors
Glenveagh Properties plc, listed on Euronext Dublin and the London Stock Exchange, is a leading Irish homebuilder.
We are dedicated to expanding access to high-quality new homes, with a focus on first time buyers and young families. We believe that everyone should have access to high quality homes in flourishing communities across Ireland.
We are focused on three core markets - suburban housing, urban apartments and partnerships with local authorities and state agencies. Since IPO we have opened 23 sites, delivering more than 1,800 units with 1,150 in the pipeline for 2021 and 3,000 units per annum from 2024. The landbank we've assembled can deliver housing that is both in demand and affordable.
www.glenveagh.ie
GLENVEAGH PROPERTIES PLC: BUSINESS AND FINANCIAL REVIEW
1. BUSINESS REVIEW i. Group Sales a. Overview
The Group's focus on starter-homes and PRS in affordable rental locations continued to produce positive results from a sales perspective with Glenveagh completing the sale of 700 units in 2020 and delivering to date reservations or completions on 83% of unit deliveries for 2021 notwithstanding the challenging operating environment due to COVID-19.
Having deliberately directed construction resource to units which were signed or reserved at the time our sites resumed construction in May, 700 unit completions represented a robust outcome for the period - a 17% decline on prior year despite the significant disruption caused earlier in the pandemic.
As anticipated, the Group's approach of concentrating on signing and reserving units in H1 with completions primarily occurring in H2 resulted in a delivery profile that was H2 weighted with 577 or 82% of closings occurring in H2. Our current expectation is that the weighting towards H2 in 2021 will be less pronounced despite the restrictions on construction experienced this year(5) .
The Group's redeveloped digital strategy is continuing to ensure that a high volume of potential home buyers view our homes, delivering more qualified prospects for the sales team. This strategy has also positively impacted website traffic and has delivered a substantial increase in leads which grew by 169% year-on-year in H2.
At the same time, prospective purchasers have increased levels of deposits from savings and are also benefitting from the expansion of the help-to-buy scheme from EUR20,000 to EUR30,000. The combination of these two effects is both widening access to housing at lower price points and shifting purchasing habits towards homes with an additional bedroom for those with improved affordability.
Our revised digital strategy, improved customer experience and a widening of the pool of qualified purchasers helped increase average weekly private reservation rates by 31% in H2.
House Price Inflation ("HPI") in the Group's starter-home focused Suburban segment accelerated from a neutral or marginally positive position in H1 2020 to 3% in H2 2020. Most of the impact of the increase in HPI is likely to become visible from 2022 with most closings during 2021 completed based on H1 2020 pricing.
b. Suburban Starter-Home Sales
The solid momentum on existing open sites carried forward from 2019 with strong completions achieved on our multi-year sites at Cois Glaisin, Taylor Hill, Cluain Adain and Ledwill Park.
We were particularly pleased with the performance of our new selling sites where reservations were ahead of expectations with pricing moving in a positive direction following early launches. New sites that delivered sales for the first time in 2020 included Barnhall Meadows, Bellingsmore, Oldbridge Manor and Silver Banks.
Starter-home sites which concluded in the period include Cnoc Dubh and Knightsgate.
Given the strong reservations achieved to date, new site and phase launches in 2021 will be focused on units delivering from 2022.
As outlined at the time of our interim results in September, interest from institutions continued to increase across our Suburban portfolio. To further drive momentum and return on capital across our active sites, we identified available deliveries for Suburban PRS for 2021 and 2022 and signed our first transaction in December for 61 Suburban duplex and housing units in Leixlip, Co. Kildare. The transaction is reflective of our efforts to maximise velocity by selling units across a range of segments on our larger sites which have the capability to deliver over 100 units per annum.
c. Urban Sales
The PRS sector in Ireland came through 2020 with considerable resilience and the sector is now recognised as a long term and stable asset class, with low vacancy and voids even in times of significant economic upheaval.
Investment into PRS in Ireland has continued with several high-profile transactions by institutional investors who have an existing presence in Ireland completing transactions at attractive yields in recent months.
PRS transactions in the final six months of the year accounted for EUR1.029 billion, 53% of the overall investment market in the Dublin region with offices coming in at 29%, followed by industrial at 13% and retail at 4% [i] .
Against this backdrop, in December, the Group exchanged contracts for the sale of 71 Urban apartment units in Bray, Co. Wicklow. The transaction is a further demonstration of Glenveagh's ability to partner with institutions and government bodies to deliver sustainable rental product in attractive locations.
The extent of institutional demand for high-quality residential product has not diminished and the Group continues to expect to forward fund and forward sell a further series of Urban apartment developments.
d. Non-core and high-end developments
At the Group's development at Marina Village, contracts have been exchanged with Real I.S. for 134 units, with 65 completed to date. The balance of the units are expected to complete in H1 2021.
Reflecting the sales progress delivered to date at our high-end sites, our Proby Place and Holsteiner Park developments are now sold-out.
The selling prices achieved across the Group's non-core disposals have been in line with management expectations.
ii. Partnerships
As outlined at the time of the Group's Investor Day 2020, we have identified a significant pipeline of units that have the potential to be tendered by local authorities in the coming years.
Following the completion of a competitive tender process in August, the Group was selected as preferred bidder on its first Partnership scheme of approximately 800 units at Oscar Traynor Road, Dublin. However, in November elected councillors on Dublin City Council voted against the transaction proceeding. Nevertheless, the Group remains committed to ensuring that a solution can be brought forward that ensures much needed housing is delivered on the site within the shortest possible timeframe.
Separately, our Partnerships team are actively tendering on schemes which, if awarded, could deliver an additional 1,200 units across multiple tenure types.
While the exact format of future housing schemes has yet to be finalised, there is a significant need for housing on State lands across a range of tenures, and a requirement for the private sector to support that housing delivery. Given the Group's construction capabilities, private market expertise, and strong balance sheet, Glenveagh remains best placed to participate in these processes going forward.
iii. Group Construction Progress
Introduction
The resilience of the Group's construction progress despite the difficult circumstances demonstrates the high calibre and commitment of the construction team assembled and the effectiveness of the Group's strategy of working with a large pool of independent sub-contractors across our sites.
2020 Summary
Reflective of Glenveagh's approach to prioritising the health and safety of our people, significant time was spent during the first closure period of April / May developing and implementing protocols which would allow sites to return to operating safely.
On 18 May the Group commenced the opening of approximately 80% of active sites. While this gradual reopening impacted productivity, particularly in the early stages, it facilitated the embedding of the Covid-19 operating procedures across all our sites. As a result, despite operating under more restrictive operating procedures, productivity was running at approximately 80% of pre-Covid-19 levels when all sites were back operational as instances of Covid-19 on site remained very low throughout the period. To further reduce the risks associated with the spread of Covid-19, antigen testing has now been rolled-out across the Group's operations.
A feature of the Group's construction operations over the last 12 months was increasing volume from our larger sites to minimize site duration and further increase return on capital. As a result of this approach and the closure of smaller non-core sites at Proby Place and Holsteiner Park, the Group expects to deliver 1,150(5) units in 2021 from a reduced number of sites vs 2020. This forms part of the Group's approach to optimising it's investment in land over the coming years and positioning newly opened sites in 2021 to deliver significant volumes from 2022 onwards.
Despite the recent challenges, we have maintained and enhanced the Group's infrastructure and capacity with the capability to deliver 1,150(5) units in 2021 from existing construction sites with all required planning permissions in place. In January 2021 construction was limited to private housing which could be completed before 31 January and social housing which could be delivered before the end of February. Following the introduction of updated guidance in early February, at present, construction is limited to social housing which can be completed before the end of April. The expectation underpinning our 1,150 unit guidance for 2021 is that full operations will resume no later than 5 April.
Managing CPI
Notwithstanding the increasing availability of sub-contractors to Glenveagh, the new Covid-19 operating protocols, when implemented to a high standard (with minimum 2-metres social distancing maintained), result in an additional cost of delivery. Additionally, the industry was required to implement a 3% Sectoral Employment Order wage increase from October which both the Group and our sub-contractors had visibility from earlier in the year and as such was reflected in pricing for future work during the period.
However, with Covid-19 costs largely accounted for, a significant portion of our costs locked-in for 2020 (approximately 80%), and more labour availability, we expect CPI in 2021 to be approximately 3%.
In future periods the series of construction cost reduction initiatives that are on-going will positively impact CPI. These initiatives include the Group's timber frame factory and soil recovery facility which are now both operational and will benefit from a more predictable production schedule as sites re-open.
Furthermore, the Group's continued roll-out of standardised house types combined with newly developed high-density housing schemes currently in the planning processes will assist in managing CPI into future periods.
iv. Planning
98% of the Group's lands are zoned residential with approximately 4,300 available planned units.
The Group's progress on the planning front continues to convert into lodgements and grants. During the period, the Group was successful on 13 planning applications with a further 10 lodged and awaiting a decision. The 23 applications combined will deliver over 3,600 planned units with 1,700 granted to date. Furthermore approximately 6,000 units are in the design process pre-lodgement.
Suburban Planning
Of the planning applications lodged in the period, 18 relate to the Suburban segment and include units at Taylor Hill, Ruxton Oaks, Oldbridge Manor, Ledwill Park, The Hawthorns, and Mount Woods.
An increasing feature of suburban planning is a requirement to drive densities upwards to 40 units per hectare. To deliver the best customer proposition which complies with these requirements, the planning team have developed new innovative own-door high-density suburban housing solutions which negate the need for apartments on several of the Group's sites. Subject to planning approval, the Group expects the first of such schemes to be available from 2022.
Urban Planning
In 2020 we also progressed our Urban development portfolio in terms of planning applications:
-- A planning application was granted in January on a portion of the non-residential elements of the Castleforbes site (hotel and office) where Glenveagh has entered a pre-let transaction with Whitbread plc for a proposed 262-bedroom hotel ranging in height from 6-9 storeys. The detailed design of this Hotel is complete in anticipation of a start date on site in 2021;
o A planning application for a PRS scheme through the SHD process was also made in respect of the remainder of the Castleforbes site. The scheme comprises approx. 702 units and 4,217 sqm of non-residential uses including food and beverage offering, a creche, cultural building and live / work units. A decision is expected in Q2 2021;
-- In December an application was submitted at the Group's site in Cork Docklands for 1,002 units;
-- A site which the Group acquired in H1 2020, Cluain Mhuire, Blackrock, Co. Dublin is already in the planning process (141 units) and a decision is expected in Q2.
v. Development Land Portfolio Management
Overall transactional activity in the land market in Ireland was down significantly in 2020 as a continuation of recent trends was exacerbated by Covid-19. In total, 65 land sales were completed totalling approximately EUR511 million - less than half of the volume traded in 2019 [ii] . This trend is reflective of a market where it is becoming increasingly difficult for private market participants to source funding from alternative lenders, further reducing the number of potential purchasers over the last 12 months.
The Group continues to take a disciplined and strategic approach to land acquisitions concentrating on opportunities which have the potential to enhance the Group's return on capital. With our net euro investment in land now complete, we are focused on refining our development land portfolio to drive return on capital and position the Group to deliver its medium and long-term output targets.
In 2020 the Group strategically added to its development land portfolio via three [iii] attractive land acquisitions totalling EUR16 million (excl. stamp duty and acquisition costs) capable of delivering 475 units).
Furthermore, while the land market in Ireland continues to mature, we are continuously looking at ways to reduce site duration and improve return on capital. With that approach in mind, the Group has exchanged contracts on its first two 'subject to planning' transactions totalling approximately EUR9 million (227 units).
Looking ahead, three further sites are under negotiation or have exchanged contracts which benefit from an existing planning permission, allowing the Group to minimise site duration and maximise ROCE.
vi. Sustainability Agenda Progress
Meeting the demand for affordable housing is one part of the story; doing so responsibly is the other. We are taking the necessary steps to deliver the social benefit of affordable housing in a way which minimises impact on the environment, including using land in the most efficient way, driving down waste, reusing resources, reducing emissions during construction and delivering A rated energy efficient homes across all our developments.
During 2020 we began to put in place systems to measure and reduce our impact on the environment - including reporting Scope 1 and Scope 2 emissions - and to ensure we continue to operate in a socially responsible and ethical way.
In a preview of the Group's annual report, we have published the sustainability report, where we set out our approach to reducing GHG emissions from our own operations and our supply chain, and the steps we are taking to reduce, re-use and recycle raw materials and resources.
As part of our environmental strategy, we have also set a 25% emissions intensity reduction target for 2025 with a view to fully align our following target with a global aspiration of net zero greenhouse gas emissions by 2050.
We have revamped our reporting to align with Sustainable Accounting Standards Board ("SASB") and support the Task Force on Climate-related Financial Disclosures (TCFD). We also reported our approach to the management of environmental risk via CDP for the first time in FY20.
Further progress has been made with the commencement of the integration of ISO 14001 - the international standard for environmental management - into our operations, with a view to achieving certification in 2021. As part of this process, we have developed and documented a comprehensive Environmental Management System.
2. FINANCIAL REVIEW i. Group performance
Total unit completions for the year were 700 units (2019: 844 units), with 665 units delivered by our core sites and 35 units delivered by our non-core sites.
Total group revenue was EUR232.3 million (2019: EUR284.6 million) for the year which primarily relates to unit sales of EUR230.9 million (2019: EUR280.0 million) generated from the 700 unit completions. The Group generated core revenue of EUR208.7 million predominantly from 665 core units, marginally ahead of our amended target of 650 units. The Average Selling Price on our core units was EUR311k (2019: EUR321k) reflecting the Group's focus on Suburban starter-home schemes.
Glenveagh delivered the 665 core units from 15 selling sites and finished the year with 544 ([iv]) core units contracted or reserved for 2021 (2019: 240) providing further evidence of the strong demand and maturing sales profile within the business.
In the first half of the year, management reviewed the Group's non-core assets, which make up less than 2% of our overall landbank, in the context of its overall Group strategy. The decision was made to accelerate the sale of the Group's non-core units and sites to maximise cash generation. This facilitated a substantial exit from non-core units and sites within 12 months (versus more than 48 months at historic private reservation rates), delivering a net cash inflow of more than EUR100 million.
The decision to accelerate the sale of non-core units and sites resulted in an asset impairment charge of EUR20.3 million. Of the Group's net realisation target of more than EUR100 million, EUR24 million was received in 2020 with a further EUR70 million contracted or reserved at year end for 2021.
The Group's gross profit for the year amounted to EUR9.5 million (2019: EUR51.5 million) with an overall gross margin of 4.1% (2019: 18.1%), which includes both the one-off impairment of EUR20.3 million as well as the disposal of non-core units.
The underlying core gross margin is 14.1% and reflects costs associated with our Covid-19 safety measures and operating protocols, in addition to negative mix effects as units at the Group's 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 abate from 2021.
Gross Margin for 2021 is expected to increase to in excess of 16% with continued margin progression in 2022 towards our current spot portfolio margin of 17%.
Our operating loss was EUR12.7 million (2019: profit of EUR29.4 million), which includes the one-off impairment of EUR20.3 million. Pre this impairment, the Group generated an underlying operating profit of EUR7.6 million and an operating margin of 3.3%. The Group's central costs for the year were EUR20.2 million (2019: EUR20.7 million), which along with EUR2.0 million (2019: EUR1.4 million) of depreciation and amortisation gives total administrative expenses of EUR22.2 million (2019: EUR22.1 million).
Net finance costs for the year were EUR3.0 million (2019: EUR2.7 million), primarily reflecting interest on the drawn portion of our Revolving Credit Facility, commitment fees on the undrawn element of the facility and arrangement fees, which are being amortised over the life of the facility.
Overall, the Group delivered a loss after tax of EUR13.9 million (2019: profit of EUR22.8 million) and a loss per share of 1.60 cent (2019: earnings per share of 2.62 cent).
ii. Balance Sheet
The Group's net asset value has decreased to EUR853.5 million at 31 December 2020 (2019: EUR866.5 million) due to the losses incurred in the year.
The Group has decreased its land portfolio to EUR619.3 million (2019: EUR667.8 million) at 31 December with the Group showing significant progress in reducing its net investment in land as part of its overall commitment to improve Balance Sheet efficiency.
The Group has continued to invest in work in progress in line with the growth strategy of the business with a year-end balance of EUR201.9 million (2019: EUR172.7 million). This well invested work in progress is fully supported by contracted or reserved units and will allow us to close these units relatively quickly once the current lockdown measures are lifted.
The Group's non-core developments contribute EUR58.2 million to work in progress at 31 December and this significant balance highlights the importance of the strategy to accelerate the exit from these completed non-core sites and generate in excess of EUR100 million in cash. The Group's core work in progress is EUR143.7 million and spread across 18 active construction sites, which equates to an average work in progress figure of less than EUR8 million per site, which is in line with management's expectations for an efficient starter home development.
The Balance Sheet now reflects the approval by the Irish High Court of the Group's application to redesignate EUR700.0 million of Share Premium to Retained Earnings to allow for potential future distributions under section 117 of the Companies Act 2014.
iii. Cash flow
The Group had a net cash inflow in the year of EUR44.1 million (2019: outflow of EUR37.5 million) and ended the year in a net cash position of EUR36.0 million (2019: EUR53.1 million).
The business reduced its net cash outflow from operating activities to EUR10.7 million (2019: EUR69.6 million), which is a strong performance given the Covid-19 restrictions in place during the year. The Group had a net cash inflow from inventory for the year of EUR0.1 million (2019: Cash outflow of EUR118.6 million) with a net spend of EUR38.8 million on work in progress and a net cash inflow of EUR38.9 million from land, which is in line with the Group's strategy of continued investment in work in progress and the reduction in our net investment in land.
The net cash position of EUR36.0 million (2019: EUR53.1 million) at year-end is reflective of EUR137.3 million of cash, EUR99.9 million of debt from our Revolving Credit Facility and EUR1.3 million of lease liabilities. This strong cash position at year end demonstrates that the business managed its financing through the various Covid-19 challenges very effectivel y and leaves the business with a strong balance sheet for the continued growth of the business.
iv. Group financing
Subsequent to the year end, the Group finalised a new 5-year debt facility. The facility is EUR250 million in total, consisting of EUR100 million term debt and a committed Revolving Credit Facility of EUR150 million. To ensure the optimal balance and structure within the syndicate, the Group increased the number of financial institutions participating in the syndicate from three to four. Notwithstanding the difficult current climate, the Group is pleased with the pricing obtained in the market, which was broadly in line with the existing facility while also achieving an extension in the tenor of the facilities to five years.
The structure and quantum of this facility will support the significant growth of the business over the next 5 years and will provide the flexibility and funding to allow the business to reach its target of 3,000 units per annum.
The quantum available to the Group and the significant interest from financial institutions during the refinancing process continues to demonstrate that Glenveagh is a very strong counterparty and a partner of choice within the industry.
Principal risks and uncertainties
The Board has undertaken a review of the principal risks and uncertainties facing the business particularly in the context of the Covid-19 pandemic which will continue to influence the Group's risk management outlook in the coming months. This has resulted in changes to certain risks identified in the 2019 annual report as well as the addition of a new overall business risk related to the pandemic. Set out below are the Group's updated principal risks and uncertainties which could have a material risk on the Group achieving our strategic objectives together with the key mitigation considerations relevant to each risk.
Our risk Risk or uncertainty Key Mitigating Considerations
category and potential impact
External Covid-19 The Group has increased the
risk frequency of Executive Committee
Covid-19 has exposed meetings and Board updates
the Company to the to respond to the pandemic
impact of a macro risk with Covid-19 being a standing
related to an economic agenda point at all meetings.
slowdown and specific
risks as a result of The Group has increased the
government measures frequency of cashflow and sales
taken to contain the reporting to facilitate accurate
virus impacting availability business continuity planning.
and supply of materials
and labour, a reluctance The Group has updated and will
of buyers to transact continue to review on an on-going
in the current environment basis forecasts, cashflows
and interruption to and estimates about future
the business operations business performance.
due to the absence
of staff and sub-contractors. The Group has kept in constant
contact with Government and
Local Authority representatives
in addition to reviewing Government
responses to Covid-19.
The Group has put in place
a transparent and timely communications
strategy to update the market
and all stakeholders (employees,
sub-contractors, suppliers,
investors etc.) of the business
in relation to the plans put
in place by the Group in response
to Covid-19.
The Group has put in place
a number of specific actions
related to on-site health and
safety and construction, project
management, sales activity
and office operations which
are outlined in the risk specific
to each area.
--------------------------------- -----------------------------------------
External Adverse Macroeconomic The Group aims to maintain
risk Conditions a reasonable but limited stock
of land (c.5 years). The Group
Glenveagh operates has made significant progress
in a property market in 2020 in reducing its net
that is cyclical by investment in land in line
nature which can lead with strategy.
to volatility of property
values and market conditions. The Group avoids any long-term
exposure through strict land
Geopolitical uncertainty acquisition policies which
(including Brexit) are reviewed and updated on
could lead to a potential a regular basis to meet market
adverse impact on the sentiment and demand.
Group's asset valuation
and financial performance The Group has a robust acquisition
due to factors such policy and approval process
as slowdown in economic in place to ensure the best
growth, increased interest value is achieved on assets
rates and decline in and that they are aligned to
consumer confidence. the strategic objectives of
the Group.
The Urban and Partnerships
segments will assist in reducing
the cyclical nature of the
business through the delivery
of apartments and houses for
the rental market as well as
schemes with local authorities
or other government bodies.
Management and the Board actively
monitor the geopolitical risks
and seeks expert industry advice
where required.
--------------------------------- -----------------------------------------
External Mortgage Availability Management and the Board continuously
risk and Affordability monitor government policy around
mortgage availability.
Glenveagh understands
that affordable mortgage The Group regularly engages
finance is a crucial with mortgage advisors to gain
funding source for valuable insights into the
buyers in the residential market and the impact of regulatory
market in Ireland. changes impacting mortgage
lending.
Constraints on the
availability and costs The Group has increased the
of mortgage financing frequency of cashflow and sales
and any adverse impact reporting to facilitate accurate
on this as a result business continuity planning.
of Covid-19 may have
a negative impact on The Group has increased the
sales of the Group's frequency of Executive Committee
products due to a potential meetings and Board updates
decline in customer to respond to the pandemic
demand and ultimately with Covid-19 being a standing
the profitability of agenda point at all meetings.
the Group.
The Group's strategy can facilitate
the adjustment of delivery
velocity if required.
--------------------------------- -----------------------------------------
External Adverse changes to The Group's management and
risk government policy and Board monitor government policy
regulations on an ongoing basis.
A change in the domestic Group management's site by
political environment site forecasts are conservative
and/or government policy by nature and allow for expected
(including tax legislation, negative changes in government
support of the housebuilding policy and regulation.
sector, Part V allowance
and first-time buyer The Group has the capability
assistance) could adversely to redesign developments as
affect the Group's appropriate should it be required.
financial performance.
The Group will consider alternative
sales strategies where required
to align to any changes in
the domestic political environment.
--------------------------------- -----------------------------------------
Operational Availability and increased The Group has fixed cost contracts
risk cost of materials and in place with sub- contractors
labour and suppliers where possible.
Shortages or increased The Group has the potential
costs of materials to expand its purchasing network
and labour could lead should it be required and maintains
to an increase in construction flexibility by not having an
costs and delays in overreliance on any one supplier.
the completion of homes.
The Group engages in financial
As a result of Covid-19, planning and continuously monitors
there is a risk to and reviews budget versus actual
the Group of shortages costings.
in skilled sub-contractors
which are critical The Group continuously evaluates
to construction operations partnerships at a site level
and the delivery of with outsource labour providers
units in line with to ensure agreements are in
the Group's delivery line with the market rates.
matrix.
The Group has strong relationships
If the Group is unable across the construction industry
to control its costs in Ireland and with our existing
or pass on any increase and wider sub-contractor network.
in costs to the purchasers
of the Group's product, The Group's size and reputation
source the requisite in the market remains highly
labour, and / or renegotiate attractive to sub-contractors
improved terms with and suppliers.
suppliers and contractors,
the Group's margins
may reduce which could
have an adverse impact
on the Group's business
operations and financial
condition.
--------------------------------- -----------------------------------------
Operational Inadequate Project The Group has fixed cost contracts
risk Management in place with sub-contractors
and suppliers where possible.
Inadequate oversight
of the cost and delivery The Group employs highly experienced
of development projects and qualified commercial and
adversely affects expected finance teams who oversee a
return on investment. robust financial planning process
for each development and continuously
The delivery matrix monitor and review the budget
of development projects versus actual costings. This
could be impacted by includes regular updates to
the spread of Covid-19. the Executive Committee and
Board of Directors
The organisational structure
of the Commercial department
ensures oversight of all site
costs as the business matures
in line with the business plan.
The Group's integrated ERP
system provides commercial
reporting, automated payment
and sub-contractor accrual
functions. The system eliminates
manual processes and provides
for real time reporting for
more accurate decision making
at a project, sub project,
element and cost object level.
The Group has updated and will
continuously review all site
delivery matrix and update
these as necessary to reflect
the impact of Covid-19.
The Group has engaged in continuous
communications with our sub-contractor
network and supply chain to
ensure they are aware of the
Group's plans and to reduce
the impact of current restrictions
and to ensure a smooth return
to normal operations.
--------------------------------- -----------------------------------------
Operational Insufficient health The Group ensures all staff
risk and safety procedures are appropriately and adequately
trained.
Glenveagh is focused
on the wellbeing of The Group has a Grade A Safe-T
its employees, contractors certificate which is the industry
/ sub-contractors and Health & Safety auditing standard.
the general public.
The Group undertakes monthly
The Group understands Health & Safety audits through
that failure to implement both internal and external
and adhere to the highest parties.
standard of Health
& Safety practices The Group circulates a weekly
can lead to a significant incident monitoring report
risk to health, safety, to construction management.
and welfare of staff
and other parties resulting The Group has undertaken significant
in increased costs investment to implement best
and negatively impact practice and public health
the timely and safe advice for the return to working
delivery of a project. on site and in the office in
response to Covid-19.
Additionally, any failure
in health or safety There is adequate insurance
performance or compliance, cover in place to deal with
including delays in any
responding to changes claims that may arise from
in health & safety claims due to injury.
regulations may result
in financial and /
or other penalties.
--------------------------------- -----------------------------------------
Operational Employee development The Group offers competitive
risk and retention and attractive remuneration
The success of the packages and where appropriate
Group is dependent long-term interest alignment.
on recruiting, retaining
and developing highly The Group offers the opportunity
skilled, competent for advancement through creating
people. The Group is a positive working environment.
aware that loss of
key personnel and/ There is a Graduate Programme
or the inability to in place across all departments
attract / retain adequately to develop and ensure progression
skilled and qualified within the business for all
people could lead to: employees.
-- Poor operational
and financial performance The Group has in place a performance
-- Inadequate staff management and appraisal process
knowledge and understanding which includes open channels
of policies & procedures. of communication and feedback
-- Reduced control and development plans for employees.
environment.
-- Insufficient transfer The Group is developing a succession
of knowledge amongst plan to ensure continuity of
staff to allow for quality service and knowledge
succession planning. retention.
-- Demotivated staff;
and The Group has a dedicated Learning
-- Failure to achieve/ and Development manager with
deliver on the Group's a focus on developing and deploying
strategic objectives. CPD and upskilling of skilling
of staff.
The Group has implemented flexible
working arrangements for staff
following the Covid-19 pandemic
as well as offering support
to ensure employees have suitable
working from home arrangements.
The Group ensures that all
staff have access to relevant
internal and external training.
--------------------------------- -----------------------------------------
Operational Data protection and The Group's Head of IT leads
& reputational cyber security the Group's initiatives in
risk mitigating the risk of cyber
The Group uses information and data security breaches
technology to perform further.
operational and marketing
activities and to maintain The Group has a personal data
its business records. retention policy in place to
appropriately manage the information
A cyber-attack could held.
lead to potential data
breaches or disruption The Group uses internal and
to the Group's systems external back-up systems under
and operations which the supervision of a third-party
in turn could lead service provider pursuant to
to damage to the Group's agreements that specify certain
reputation and potential security and service level
loss of customers and standards.
revenue.
The Group has in place sensitive
Any security or privacy data password protection and
breach of the information all such information is stored
technology systems in secure locations and fully
may also expose the encrypted systems.
Group to liability
and regulatory scrutiny. The Group is proactively managing
the cyber threat, is continuously
monitoring and evolving systems
internally and have engaged
a third party to assist and
ensure that best practices
are implemented to identify
and remediate any potential
weaknesses or control gaps.
--------------------------------- -----------------------------------------
Reputational Decline in Product The Group has in place robust
risk Quality quality control procedures
and strictly adheres to Building
Delivery of the highest Control (Amendment) Regulations
quality homes is central requiring (among other stipulations)
to the success of Glenveagh. the appointment of suitably
qualified engineers and architects.
The Group continues
to focus on ensuring The Group has a dedicated Quality
our products meet the Manager to manage and report
desired standards and on site quality.
is aware that significant
negative incidents The Group has a dedicated Environmental
including construction Officer to advise on the business
defects, material environmental challenges from an environmental
liabilities (including perspective on a daily basis.
hazardous or toxic
substances), quality The Group has an experienced
deficiencies or perceptions and professional support team
thereof could adversely in place.
impact the Group's
sales and possibly The Group has a dedicated customer
result in litigation service after-sales team.
cases against the Group
with a potentially
negative impact on
the Group's brand and
customer satisfaction
which are crucial to
the Group's performance.
--------------------------------- -----------------------------------------
S
Gle nveagh Properties PLC
Consolidated statement of profit or
loss and other
comprehensive income
For the financial year ended 31
December 2020 2020 2019
Before
exceptional Exceptional
Note Total items items Total
EUR'000 EUR'000 EUR'000 EUR'000
Revenue 10 232,296 284,637 - 284,637
Cost of sales (202,530) (233,150) - (233,150)
Impairment of Inventories 20 (20,291) - - -
Gross profit 9,475 51,487 - 51,487
Administrative expenses 11 (22,188) (21,005) (1,125) (22,130)
Operating (loss) / profit (12,713) 30,482 (1,125 29,357
Finance expense 12 (3,033) (2,666) - (2,666)
(Loss) / profit before tax 13 (15,746) 27,816 (1,125) 26,691
Income tax credit / (charge) 17 1,844 (3,944) 93 (3,851)
(Loss) / profit after tax attributable
to the
owners of the Company (13,902) 23,872 (1,032) 22,840
Other comprehensive income - - - -
Total comprehensive (loss) / income for
the year
attributable of the owners of the
Company (13,902) 22,840
Basic (loss) / earnings per share
(cents) 16 (1.60) 2.62
Diluted (loss) / earnings per share
(cents) 16 (1.60) 2.62
Glenveagh Properties PLC
Consolidated balance sheet
as at 31 December 2020
Note 2020 2019
EUR'000 EUR'000
Assets
Non-current assets
Property, plant and equipment 18 21,087 18,142
Intangible assets 19 712 944
Deferred tax asset 17 1,415 128
Restricted cash 24 708 1,500
23,922 20,714
Current assets
Inventory 20 821,169 840,487
Trade and other receivables 21 14,605 12,241
Income tax receivable 21 -
Cash and cash equivalents 27 137,276 93,224
973,071 945,952
Total assets 996,993 966,666
Equity
Share capital 26 1,052 1,052
Share premium 26 179,281 879,281
Retained earnings 629,044 (57,821)
Share-based payment reserve 44,129 44,035
Total equity 853,506 866,547
Liabilities
Non-current liabilities
Lease liabilities 28 287 319
287 319
Current liabilities
Trade and other payables 22 42,237 56,218
Income tax payable - 3,737
Loans and borrowings 23 99,934 39,569
Lease liabilities 28 1,029 276
143,200 99,800
Total liabilities 143,487 100,119
Total liabilities and equity 996,993 966,666
Michael Rice Stephen Garvey 25 February 2021
Director Director
Glenveagh Properties PLC
Consolidated statement of changes in equity
for the financial year ended 31 December 2020
Share Capital Share-based
Ordinary Founder Share payment Retained Total
shares shares premium reserve earnings equity
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
Balance as at 1 January 2020 871 181 879,281 44,035 (57,821) 866,547
Total comprehensive loss for the
financial year
Loss for the financial year - - - - (13,902) (13,902)
Other comprehensive income - - - - - -
871 181 879,281 44,035 (71,723) 852,645
Transactions with owners of the Company
Equity-settled share-based payments - - - 861 - 861
Lapsed share options (Note 15) - - - (767) 767 -
Share premium reduction and transfer
to distributable reserves (Note 26) - - (700,000) - 700,000 -
- - (700,000) 94 700,767 861
Balance as at 31 December 2020 871 181 179,281 44,129 629,044 853,506
Glenveagh Properties PLC
Consolidated statement of changes in equity
for the financial year ended 31 December 2019
Share Capital Share-based
Ordinary Founder Share payment Retained Total
shares shares premium reserve earnings equity
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
Balance as at 1 January 2019 871 181 879,281 43,443 (80,661) 843,115
Total comprehensive income for the
financial year
Profit for the financial year - - - - 22,840 22,840
Other comprehensive income - - - - - -
871 181 879,281 43,443 (57,821) 865,955
Transactions with owners of the Company
Equity-settled share-based payments - - - 592 - 592
- - - 592 - 592
Balance as at 31 December 2019 871 181 879,281 44,035 (57,821) 866,547
Glenveagh Properties PLC
Consolidated statement of cash flows
For the financial year ended 31 December 2020
2020 2019
Note EUR'000 EUR'000
Cash flows from operating activities
(Loss) / profit for the financial year (13,902) 22,840
Adjustments for:
Depreciation and amortisation 2,031 1,391
Impairment of Inventories 20 20,291 -
Finance costs 12 3,033 2,666
Equity-settled share-based payment
expense 15 861 592
Tax (credit) / charge 17 (1,844) 3,851
Profit on disposal of property, plant
and equipment 13 (33) (456)
10,437 30,884
Changes in:
Inventories 124 (118,605)
Trade and other receivables (2,343) (1,036)
Trade and other payables (13,916) 21,346
Cash used in operating activities (5,698) (67,411)
Interest paid (2,638) (2,472)
Tax (paid) / refund (3,201) 276
Transfer from restricted cash 24 792 -
Net cash used in operating activities (10,745) (69,607)
Cash flows from investing activities
Acquisition of property, plant and equipment 18 (3,982) (7,747) Acquisition of intangible assets 19 (174) (491) Proceeds from the sale of property, plant and equipment 41 1,160 Net cash used in investing activities (4,115) (7,078) Cash flows from financing activities Proceeds from loans and borrowings 23 70,000 120,000 Repayment of loans and borrowings 23 (10,000) (80,000) Payment of lease liabilities (1,088) (792) Net cash from financing activities 58,912 39,208 Net increase / (decrease) in cash and cash equivalents 44,052 (37,477) Cash and cash equivalents at the beginning of the year 93,224 130,701 Cash and cash equivalents at the end of the year 137,276 93,224
Glenveagh Properties PLC
Notes to the consolidated financial statements
For the financial year ended 31 December 2020
1 Reporting entity
Glenveagh Properties PLC ("the Company) is domiciled in the Republic of Ireland. The Company's registered office is 15 Merrion Square North, Dublin 2. These consolidated financial statements comprise the Company and its subsidiaries (together referred to as "the Group") and cover the financial year ended 31 December 2020. The Group's principal activities are the construction and sale of houses and apartments for the private buyer, local authorities and the private rental sector.
2 Statement of compliance
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS's) as adopted by the European Union which comprise standards and interpretations approved by the International Accounting Standards Board (IASB), and those parts of the Companies Act 2014 applicable to companies reporting under IFRS and Article 4 of the IAS regulation.
3 Functional and presentation currency
These consolidated financial statements are presented in Euro which is the Company's functional currency. All amounts have been rounded to the nearest thousand unless otherwise indicated.
4 Use of judgements and estimates
The preparation of the Group's financial statements under International Financial Reporting Standards ("IFRS"), as adopted by the European Union, requires the Directors to make judgments and estimates that affect the application of policies and the reported amounts of assets, liabilities, income, expenses and related disclosures. Actual results may differ from these estimates.
Critical accounting judgements
Management applies the Group's accounting policies as described in Note 8 when making critical accounting judgements, of which no individual judgement is deemed to have a significant impact upon the financial statements.
Key sources of estimation uncertainty
The key source of significant estimation uncertainty impacting these financial statements involves assessing the carrying value of inventories as detailed below.
(a) Carrying value of work-in-progress, estimation of costs to complete and impact on profit recognition
The Group holds inventories stated at the lower of cost and net realisable value. Such inventories include land and development rights, work-in-progress and completed units. As residential development is largely speculative by nature, not all inventories are covered by forward sales contracts. Furthermore, due to the nature of the Group's activity and, in particular the scale of its developments and the length of the development cycle, the Group has to allocate site-wide development costs between units being built and/or completed in the current year and those for future years. It also has to forecast the costs to complete on such developments. These estimates impact management's assessment of the net realisable value of the Group's inventory balance and also determine the extent of profit or loss that should be recognised in respect of each development in each reporting period.
In making such assessments and allocations, there is a degree of inherent estimation uncertainty. The Group has established internal controls designed to effectively assess and centrally review inventory carrying values and ensure the appropriateness of the estimates made. These assessments and allocations evolve over the life of the development in line with the risk profile, and
4 Use of judgements and estimates (continued)
Key sources of estimation uncertainty (continued)
(a) Carrying value of work-in-progress, estimation of costs to complete and impact on profit recognition (continued)
accordingly the margin recognised reflects these evolving assessments, particularly in relation to the Group's long-term developments.
Covid-19 was declared a global pandemic by the World Health Organisation during the year and the impact of the pandemic has been considered in the Group's assessment of the carrying value of its inventories at 31 December 2020, particularly with regard to the potential implications for future selling prices, development expenditure and construction programming. While the exact impact of Covid-19 remains uncertain, management has considered a number of scenarios on each of its active developments and the consequential impact on future profitability based on current facts and circumstances together with any implications for future projects in undertaking its net realisable value calculations.
As part of the assessment, which included a consideration of the market capitalisation of the Group and the macro-economic factors that influenced such market capitalisation, the Group has re-evaluated its most likely exit strategies on its remaining high end, private customer units in the context of the current market environment and reflected these in its net realisable value calculations at the balance sheet date. The revised sales strategy on these developments is to exit within 12 months versus in excess of 48 months at previously forecasted sales rates. The results of this exercise required an impairment charge on two of our higher Average Selling Price ("ASP") active sites and a small number of other higher ASP sites in the portfolio where construction has not commenced. Further detail in respect of the impairment charge for the year is included in Note 20.
Management have performed a sensitivity analysis to assess the impact of a change in estimated costs for developments on which sales were recognised in the year. A 1% increase in estimated costs recognised in the year, which is considered to be reasonably possible, would reduce the Group's gross margin by approximately 58bps.
5 Measurement of fair values
A number of the Group's accounting policies and disclosures require the measurement of fair values, both for financial and non-financial assets and liabilities. Fair value is defined in IFRS 13, Fair Value Measurement, as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When measuring the fair value of an asset or liability, the Group uses market observable data as far as possible. Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows:
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
Further information about the assumptions made in measuring fair values is included in the following notes:
-- Note 15 Share-based payments; and -- Note 27 Financial instruments and financial risk management. 6 Changes in significant accounting policies
A number of amendments to standards (IFRS 3 Business Combinations and Interest Rate Benchmark Reform) are effective from 1 January 2020 but they do not have a material effect on the Group's financial statements.
(i) New significant accounting policies
(a) Accounting for government grants and disclosure of government assistance
Grants that compensate the group for expenses incurred are recognised in the consolidated statement of profit or loss and other comprehensive income by offsetting against expenses on a systematic basis in the periods in which the expenses are recognised, unless the conditions for receiving the grant are met after the related expenses have been recognised. In this case, the grant is recognised when it becomes receivable.
There have been no other changes to significant accounting policies during the financial year ended to 31 December 2020.
(ii) Standards not yet effective
(b) Interest rate benchmark reform - Phase 2 (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4, and IFRS 16)
The amendments address issues that might affect financial reporting as a result of the reform of an interest rate benchmark, including the effects of changes to contractual cashflows, arising from the replacement of an interest rate benchmark with an alternative benchmark rate. The amendments provide practical relief from certain requirements in IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 relating to:
- changes in the basis for determining contractual cash flows of financial assets, financial liabilities and lease liabilities.
The amendments will require an entity to account for a change in the basis for determining the contractual cash flows of a financial asset or financial liability that is required by interest rate benchmark reform by updating the effective interest rate of the financial asset or financial liability.
At 31 December 2020, the Group has EUR250.0 million (of which EUR125.0 million is committed) EURIBOR secured bank loans that will be subject to IBOR reform. The Group expects that the interest rate benchmark for these loans will be changed to Euro Short-Term Rate (EURSTR) in 2021 and that no significant modification gain or loss will arise as a result of applying the amendments to these changes.
The amendments will require the Group to disclose additional information about the entity's exposure to risks arising from interest rate benchmark reform and related risk management activities.
The Group plans to apply the amendments from 1 January 2021. Application will not impact amounts reported for 2020 or prior periods.
6 Changes in significant accounting policies (continued) (iii) Other standards
The following new and amended standards are not expected to have a significant impact on the Group's consolidated financial statements.
- IFRS 16 Leases: Covid-19 related rent concessions (amendment) - IAS 16 Property, Plant and Equipment: Proceeds for intend use (amendment) - IFRS 3 Business Combinations: Reference to conceptual framework (amendment) - IAS 1 Presentation of Financial Statements: Reference to Conceptual Framework (amendment) 7 Going concern
The Group has recorded a loss before tax of EUR15.7 million (2019: Profit of EUR26.7 million) which included a non-cash impairment charge of EUR20.3 million (2019: EURNil) relating to the Group's inventory balance. The Group has a cash balance of EUR137.3 million (31 December 2019: EUR93.2 million) and under the terms of its current debt facility, the Group is required to maintain a minimum cash balance of EUR25.0 million. It has committed undrawn funds available of EUR25.0 million (31 December 2019: EUR85.0 million) with a further uncommitted facility of EUR125.0 million (31 December 2019: EUR125.0 million).
The Group has successfully completed a debt refinancing process and has put in place a new EUR250.0 million facility. The new facility is for a period of five years and has a term component of EUR100.0 million and a committed Revolving Credit Facility of EUR150.0 million. The facility is with a syndicate of domestic and international banks and will provide the debt funding the business. The Directors are satisfied that this facility will support the growth of the business and provide adequate funding to allow the business to achieve its strategic objectives. The Group's forecast includes the terms of the new debt facility in advance of the expiration of the current facility in April 2021 to complement the Group's future operating cash flow in financing its working capital requirement over the forecast period.
Management has prepared a detailed cash flow forecast in order to assess the Group's ability to continue as a going concern for at least a period of twelve months from the signing of these financial statements. The preparation of this forecast considered the potential and likely implications of the Covid-19 pandemic on the Group's financial performance and position over the forecast period including but not limited to the impact on selling prices and strategies, development costs and construction programs.
The Group is forecasting compliance with all covenant requirements under the current and future facility including the interest cover covenant which is based on earnings before interest, tax, depreciation and amortisation (EBITDA) excluding the non-cash impairment charge. In addition, the Group expects to be profitable, generate positive cashflows and be a in a net cash position next year. Other assumptions within the forecast include the Group's expected selling prices and sales strategies as well as its investment in work in progress which reflect updated development programs as a result of the ongoing impact of Covid-19.
While acknowledging the uncertainty that remains with regard to the exact impact of Covid-19 including the potential risk of further Government restrictions on construction activity on the Group's cash flow forecast, the Directors confirm that they believe the Group has the appropriate working capital management strategy, operational flexibility and resources in place to continue in operational existence for the foreseeable future and has accordingly prepared the consolidated financial statements on a going concern basis.
8 Significant accounting policies
The Group has consistently applied the following accounting policies to all periods presented in these consolidated financial statements, except if mentioned otherwise.
8.1 Basis of consolidation
(i) Business combinations
The Group accounts for business combinations using the acquisition method when control is transferred to the Group. The consideration transferred in the acquisition is generally measured at fair value, as are the identifiable net assets acquired. Any goodwill that arises is tested annually for impairment. Any gain on a bargain purchase is recognised in profit or loss immediately. Transaction costs are expensed as incurred, except if related to the issue of debt or equity securities.
The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts are generally recognised in profit or loss. Any contingent consideration is measured at fair value at the date of acquisition. If an obligation to pay contingent consideration that meets the definition of a financial instrument is classified as equity, then it is not remeasured, and settlement is accounted for within equity. Otherwise, other contingent consideration is
remeasured at fair value each reporting date and subsequent changes in the fair value of the contingent consideration are recognised in profit or loss.
(ii) Subsidiaries
Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial statements of subsidiaries are included in the consolidated financial statements from the date on which control commences until the date on which control ceases.
(iii) Joint operations
Joint operations arise where the Group has joint control of an operation with other parties, in which the parties have direct rights to the assets and obligations of the operation. The Group accounts for its share of the jointly controlled assets and liabilities and income and expenditure on a line by line basis in the consolidated financial statements.
(iv) Transactions eliminated on consolidation
Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated.
8.2 Revenue
The Group develops and sells residential properties and non-core land. Revenue is recognised at the point in time when control over the property has been transferred to the customer, which occurs at legal completion. Revenue is measured at the transaction price agreed under the contract.
8.3 Expenditure
Expenditure recorded in inventory is expensed through cost of sales at the time of the related property sale. The amount of cost related to each property includes its share of the overall site costs. Administration expense is recognised in respect of goods and services received when supplied in accordance with contractual terms.
8 Significant accounting policies (continued)
8.4 Taxation
Income tax expense comprises current and deferred tax. It is recognised in profit or loss except to the extent that it relates to a business combination, or items recognised directly in equity or in OCI.
(i) Current tax
Current tax comprises the expected tax payable or receivable on the taxable income or loss for the year and any adjustment to the tax payable or receivable in respect of previous years. The amount of current tax payable or receivable is the best estimate of the tax amount expected to be paid or received that reflects uncertainty related to income taxes, if any. It is measured using tax rates enacted or substantively enacted at the reporting date. Current tax also includes any tax arising from dividends.
Current tax assets and liabilities are offset only if certain criteria are met.
(ii) Deferred tax
Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes.
Deferred tax is not recognised for:
- temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss;
- temporary differences related to investments in subsidiaries, associates and joint arrangements to the extent that the Group is able to control the timing of the reversal of the temporary differences and it is probable that they will not reverse in the foreseeable future; and
- taxable temporary differences arising on the initial recognition of goodwill.
Deferred tax assets are recognised for unused tax losses, unused tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be used. Future taxable profits are determined based on the reversal of relevant taxable temporary differences. If the amount of taxable temporary differences is insufficient to recognise a deferred tax asset in full, then future taxable profits, adjusted for reversals of existing temporary differences, are considered, based on the business plans for individual subsidiaries in the Group. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised; such reductions are reversed when the probability of future taxable profits improves.
Unrecognised deferred tax assets are reassessed at each reporting date and recognised to the extent that it has become probable that future taxable profits will be available against which they can be used.
Deferred tax is measured at the tax rates that are expected to be applied to temporary difference when they reverse, using tax rates enacted or substantively enacted at the reporting date, and reflects uncertainty related to income taxes, if any.
8 Significant accounting policies (continued)
8.4 Taxation (continued)
(ii) Deferred tax (continued)
The measurement of deferred tax reflects the tax consequences that would follow from the manner in which the Group expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities. For this purpose, the carrying amount of investment property measured at fair value is presumed to be recovered through sale, and the Group has not rebutted this presumption. Deferred tax assets and liabilities are offset only if certain criteria are met.
8.5 Share-based payment arrangements
The grant date fair value of equity-settled share-based payment arrangements granted to employees is generally recognised as an expense, with a corresponding increase in equity, over the vesting period of the awards. The amount recognised as an expense is adjusted to reflect the number of awards for which the related service and non-market performance conditions are expected to be met, such that the amount ultimately recognised is based on the number of awards that meet the related service and non-market performance conditions at the vesting date. For share-based payment awards with non-vesting conditions or market conditions, the grant date fair value of the share-based payment is measured to reflect such conditions and there is no true-up for differences between expected and actual outcomes.
8.6 Exceptional items
Exceptional items are those that are separately disclosed by virtue of their nature or amount in order to highlight such items within the consolidated statement of profit or loss for the financial year. Group management exercises judgement in assessing each particular item which, by virtue of its scale or nature, should be highlighted as an exceptional item. Exceptional items are included within the profit or loss caption to which they relate.
During the financial year, there were no costs considered exceptional items (Note 11). The Directors believe that separate presentation of exceptional expenses is useful to the reader as it allows clear presentation of the results of the underlying business and is relevant for an understanding of the Group's performance in the financial year.
8.7 Property, plant and equipment
Property, plant and equipment is carried at historic purchase cost less accumulated depreciation. Cost includes the original purchase price of the asset and the costs attributable to bringing the asset to its working condition for its intended use. Depreciation is provided to write off the cost of the assets on a straight-line basis to their residual value over their estimated useful lives at the following annual rates:
-- Buildings 2.5% -- Plant and machinery 14-20% -- Fixtures and fittings 20% -- Computer Equipment 33%
The assets' residual values, carrying values and useful lives are reviewed on an annual basis and adjusted if appropriate at each reporting date.
Where an impairment is identified, the recoverable amount of the asset is identified and an impairment loss, where appropriate, is recognised in the statement of profit or loss and other comprehensive income.
8 Significant accounting policies (continued)
8.7 Property, plant and equipment (continued)
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised within administration expenses in the statement of profit or loss and other comprehensive income.
Subsequent expenditure is capitalised only if it is probable that the future economic benefits associated with the expenditure will flow to the Group.
8.8 Intangible assets - computer software
Computer software is capitalised as intangible assets as acquired and amortised on a straight-line basis over its estimated useful life of 3 years, in line with the period over which economic benefit from the software is expected to be derived.
The assets' useful economic lives and residual values are reviewed and adjusted, if appropriate, at each reporting date.
8.9 Inventory
Inventory comprises property in the course of development, completed units, land and land development rights.
Inventories are valued at the lower of cost and net realisable value. Direct cost comprises the cost of land, raw materials and development costs but excludes indirect overheads. Land purchased for development, including land in the course of development, is initially recorded at cost.
Where such land is purchased on deferred settlement terms, and the cost differs from the amount that will subsequently be paid in settling the liability, this difference is charged as a finance cost in the statement of profit or loss and other comprehensive income over the period to settlement.
A provision is made, where appropriate, to reduce the value of inventories and work-in-progress to their net realisable value.
8.10 Financial instruments
Financial assets and financial liabilities
Under IFRS 9, financial assets and financial liabilities are initially recognised at fair value and are subsequently measured based on their classification as described below. Their classification depends on the purpose for which the financial instruments were acquired or issued, their characteristics and the Group's designation of such instruments. The standards require that all financial assets and financial liabilities be classified as fair value through profit or loss ("FVTPL"), amortised cost, or fair value through other comprehensive income ("FVOCI").
8 Significant accounting policies (continued)
8.10 Financial instruments (continued)
Classification of financial instruments
The following summarises the classification and measurement the Group has elected to apply to each of its significant categories of financial instruments:
IFRS 9
Type Classification
------------------------------ ----------------
Financial assets
Amortised
Cash and cash equivalents cost
Amortised
Other receivables cost
Amortised
Restricted cash cost
Amortised
Construction bonds cost
Financial liabilities
Amortised
Bank indebtedness cost
Accounts payable and accrued Amortised
liabilities cost
Cash and cash equivalents
Cash and cash equivalents include cash and short-term investments with an original maturity of three months or less. Interest earned or accrued on these financial assets is included in other income.
Other receivables
Such receivables are included in current assets, except for those with maturities more than 12 months after the reporting date, which are classified as non-current assets. Loans and other receivables are included in trade and other receivables on the consolidated balance sheets and are accounted for at amortised cost. These assets are subsequently measured at amortised cost. The amortised cost is reduced by impairment losses. The Group recognises impairment losses on an 'expected credit loss' model (ECL model) basis in line with the requirements of IFRS 9. Interest income and impairment are recognised in profit or loss. Any gain or loss on derecognition is recognised in profit or loss.
Restricted cash
Restricted cash includes cash amounts which are classified as non-current assets and held in escrow until the completion of certain criteria.
Construction bonds
Construction bonds includes amounts receivable in relation to the completion of construction activities on sites. These assets are included in trade and other receivables on the consolidated balance sheets and are accounted for at amortised cost.
Other liabilities
Such financial liabilities are recorded at amortised cost and include all liabilities.
8.11 Provisions
Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events and it is probable that an outflow of resources will be required to settle that obligation, and the amount has been reliably estimated. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability, where the effect of discounting is considered significant. The unwinding of the discount is recognised as a finance cost.
8 Significant accounting policies (continued)
8.12 Pensions
The Group operates a defined contribution scheme. The assets of the scheme are held separately from those of the Group in a separate fund. Obligations for contributions to defined contribution plans are expensed as the related service is provided.
8.13 Leases
i. As a lessee
At commencement or on modification of a contract that contains a lease component, the Group allocates the consideration in the contract to each lease component and non-lease component on the basis of its relative stand-alone prices. However, for the leases of property the Group has elected not to separate non-lease components and account for the lease and non-lease components as a single lease component. The Group recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received.
The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the end of the lease term, unless the lease transfers ownership of the underlying asset to the Group by the end of the lease term or the cost of the right-of-use asset reflects that the Group will exercise a purchase option. In that case the right-of-use asset will be depreciated over the useful life of the underlying asset, which is determined on the same basis as those of property and motor vehicles. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease, or, if that rate cannot be readily determined, the Group's incremental borrowing rate. Generally, the Group uses its incremental borrowing rate as the discount rate.
The Group determines its incremental borrowing rate with reference to its current financing sources and makes certain adjustments to reflect the terms of the lease and type of the asset leased.
Lease payments included in the measurement of the lease liability comprise the following:
- fixed payments, including in-substance fixed payments;
- variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date;
- amounts expected to be payable under a residual value guarantee; and
- the exercise price under a purchase option that the Group is reasonably certain to exercise, lease payments in an optional renewal period if the Group is reasonably certain to exercise an extension option, and penalties for early termination of a lease unless the Group is reasonably certain not to terminate early.
The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a change in the future lease payments arising from a change in an index or rate, if there is a change in the Group's estimate of the amount expected to be payable under a residual value guarantee, if the Group changes its assessment of whether it will exercise a purchase, extension or termination option or if there is a revised in-substance fixed lease payment.
8 Significant accounting policies (continued)
8.13 Leases (continued)
i. As a lessee (continued)
When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero. The Group presents right-of-use assets that do not meet the definition of investment property in 'property, plant and equipment' and lease liabilities in 'lease liability' in the statement of financial position.
Short-term leases and leases of low-value assets
The Group has elected not to recognise right-of-use assets and lease liabilities for leases of low-value assets and short-term lease. The Group recognises the lease payments associated with these leases as an expense on a straight-line basis over the lease term.
ii) As a lessor
In certain instances the Group acts as a lessor in relation to certain property assets. These arrangements are not material to the Group's consolidated financial statements.
8.14 Government Grants
Grants that compensate the group for expenses incurred are recognised in the consolidated statement of profit or loss and other comprehensive income by offsetting against expenses on a systematic basis in the periods in which the expenses are recognised, unless the conditions for receiving the grant are met after the related expenses have been recognised. In this case, the grant is recognised when it becomes receivable.
8.15 Share capital
(i) Ordinary shares
Incremental costs directly attributable to the issue of ordinary shares are recognised as a deduction from equity (retained earnings).
(ii) Founder Shares
Founder Shares were initially issued as ordinary shares and subsequently re-designated as Founder Shares. Following re-designation, the instruments are accounted for as equity-settled share-based payments as set out at Note 8.5 above.
8.16 Finance income and costs
The Group's finance income and finance costs include:
-- Interest income -- Interest expense
Interest income and expense is recognised using the effective interest method.
9 Segmental information
The Group has considered the requirements of IFRS 8 Operating Segments in the context of how the business is managed and resources are allocated.
In 2019, the Group was organised into two key reportable operating segments being Glenveagh Homes and Glenveagh Living.
During the year, the Group's operating segments changed in line with our refined strategy and are set out below. As a result of the change in the Group's reportable segments, the Group has restated the previously reported segment information for the year ended 31 December 2019.
The Group is organised into three key reportable segments, being Suburban, Urban and Partnerships. Internal reporting to the Chief Operating Decision Maker ("CODM") is provided on this basis. The CODM has been identified as the Executive Committee.
The Group currently operates solely in the Republic of Ireland and therefore no geographically segmented financial information is provided.
Suburban
The Suburban segment is focussed primarily on high quality housing (with some low rise apartments) with demand coming from private buyers and institutions. Our core Suburban product is affordable (EUR350,000 or below) and located in well serviced communities predominantly in the Greater Dublin Area and Cork.
Urban
Urban's strategic focus is developing apartments to deliver to institutional investors. The apartments are located primarily in Dublin and Cork, but also on sites adjacent to significant rail transportation hubs. Urban's strategy is to deliver the product to institutional investors through a forward sale, or forward fund transaction providing longer term earnings visibility.
Partnerships
A Partnership will typically involve the Government, local authorities, or state agencies contributing their land on a reduced cost, or phased basis into a development agreement with Glenveagh. Approx. 50% of the product is delivered back to the government or local authority via social and affordable homes. This provides longer term access to both land and deliveries for the business and provides financial incentive by reducing risk from a sales perspective.
9 Segmental information (continued)
Segmental financial results
Restated
31 December 31 December
2020 2019
EUR'000 EUR'000
Revenue
Suburban 201,973 255,405
Urban 30,323 29,232
Partnerships - -
Revenue for reportable segments 232,296 284,637
Restated
31 December 31 December
2020 2019
EUR'000 EUR'000
Operating (loss) / profit
Suburban 15,399 38,799
Urban (15,662) 2,312
Partnerships (1,166) (349)
Operating (loss) / profit for
reportable segments (1,429) 40,762
Reconciliation to results for
the period
Segment results - operating
(loss) / profit (1,429) 40,762
Finance expense (3,033) (2,666)
Directors' remuneration (1,574) (2,712)
Corporate function payroll costs (2,741) (3,816)
Depreciation (2,031) (1,155)
Professional fees (1,736) (1,257)
Share-based payment expense (861) (592)
Gain on sale of property, plant
and equipment 33 456
Other corporate costs (2,374) (2,329)
(Loss) / profit before tax (15,746) 26,691
There are no individual costs included within other corporate costs that is greater than the amounts listed in the above table.
27
9 Segmental information (continued)
Segment assets and liabilities
Restated
31 December 2020 31 December 2019
Suburban Urban Partnerships Total Suburban Urban Partnerships Total
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
Segment assets 522,478 298,691 467 821,636 545,681 294,806 675 841,162
Reconciliation
to Consolidated
Balance Sheet
Deferred tax
asset 1,415 128
Trade and other
receivables 14,138 11,566
Income tax
receivable 21 -
Cash and cash
equivalents 137,276 93,224
Restricted cash 708 1,500
Property, plant
and equipment 21,087 18,142
Intangible
assets 712 944
996,993 966,666
Segment
liabilities - - 46 46 - - - -
Reconciliation
to Consolidated
Balance Sheet
Trade and other
payables 42,191 56,218
Loans and
Borrowings 99,934 39,569
Lease
liabilities 1,316 595
Income tax
payable - 3,737
143,487 100,119
10 Revenue 2020 2019
EUR'000 EUR'000
Residential property sales 230,879 280,035
Land sales 673 4,300
Income from property rental and other
income 744 302
232,296 284,637
All revenue is earned in the Republic of Ireland.
11 Exceptional items 2020 2019
EUR'000 EUR'000
Redundancy costs - 817
Hollystown Golf and Leisure Limited
closure costs - 308
- 1,125
There were no costs classified as exceptional items in accordance with the Group's accounting policy set out at Note 8.6 in the financial year.
In the prior financial year, redundancy and restructuring costs and costs associated with the cessation of the Hollystown Golf and Leisure Limited business of EUR1.1m were classified as exceptional items.
12 Finance Expense
2020 2019
EUR'000 EUR'000
Interest on secured bank loans 3,006 2,634
Finance cost on lease liabilities 27 32
3,033 2,666
13 Statutory and other information
2020 2019
EUR'000 EUR'000
Amortisation of intangible assets
(Note 19) 406 299
Depreciation of property, plant and
equipment (Note 18)* 2,722 1,937
Employment costs (Note 14) 24,400 28,567
Profit on disposal of property, plant
and equipment (33) (456)
Audit of Group, Company and subsidiary
financial statements** 200 120
Other assurance services 15 15
Tax advisory services 78 18
Tax compliance services 31 32
324 185
Directors' remuneration
Salaries, fees and other emoluments 1,459 2,605
Pension contributions 115 88
1,574 2,693
*Includes EUR1.1 million (2019: EUR0.8 million) capitalised in inventory during the year ended 31 December 2020
**Included in the auditor's remuneration for the Group is an amount of EUR0.015 million (2019: EUR0.015 million) that relates to the Company's financial statements.
14 Employment costs
The average number of persons employed by the Group (including executive directors) during the financial year was 315 (Executive Committee: 3; Non-executive Directors: 5, Construction: 188; and Other: 119). (2019: Executive Committee: 4; Non-executive Directors: 4, Construction: 198; and Other: 107)
The aggregate payroll costs of these employees for the financial year were:
2020 2019
Before
Exceptional Exceptional
Total items items Total
EUR'000 EUR'000 EUR'000 EUR'000
Wages and salaries 20,535 23,723 745 24,468
Social welfare costs 2,064 2,316 72 2,388
Pension costs - defined contribution 940 1,119 - 1,119
Share-based payment expense
(Note 15) 861 592 - 592
24,400 27,750 817 28,567
EUR11.2 million (2019: EUR12.9 million) of employment costs were capitalised in inventory during the financial year.
As a result of the impact of the Covid-19 pandemic, the Group availed of the Temporary Wage Subsidy Scheme in Ireland from 17 April 2020 to 2 August 2020. The Group fully withdrew from the scheme effective from 3 August 2020.
The Temporary Wage Subsidy Scheme is available to employers who have lost a minimum of 25% of turnover as a result of the Covid-19 pandemic and who kept employees on their payroll during this time. The scheme has been availed of for employees who were temporarily not working (laid off) or on reduced hours and / or reduced pay. All grants received by the Group has been offset against the related costs in cost of sales and administrative expenses in the statement of comprehensive income.
Throughout the duration of involvement the Group was in compliance with all the conditions of the scheme.
15 Share-based payment arrangements
The Group operates three equity-settled share-based payment arrangements being the Founder Share scheme, the Long-Term Incentive Plan ("LTIP") and the Savings Related Share Option Scheme (known as the Save As You Earn or "SAYE" scheme). As described below, options were granted under the terms of the LTIP and SAYE schemes during the financial year.
(a) Founder Share Scheme
The founders of the Company (John Mulcahy, Justin Bickle (beneficially held by Durrow Ventures), and Stephen Garvey) subscribed for a total of 200,000,000 ordinary shares of EUR0.001 each for cash at par value during 2017, which were subsequently converted to Founder Shares in advance of the Company's initial public offering. These shares entitle the Founders to share 20% of the Company's Total Shareholder Return ("TSR") (being the increase in market capitalisation of the Company, plus dividends or distributions in the relevant period) in each of five individual testing periods up to 30 June 2022, subject to achievement of a performance condition related to the Company's share price. Further details in respect of the Founder Shares are outlined in Note 26.
Following the completion of the third test period (which ran from 1 March 2020 until 31 December 2020), it was confirmed that, the performance condition related to the Company's share price was not satisfied and therefore the Founder Share Value in respect of the test period was EURNil and accordingly no Founder Shares were converted to ordinary shares during the financial year.
(b) LTIP
On 28 February 2020, the Remuneration Committee approved the grant of 5,185,560 options to certain members of the management team (which do not include the Founders) in accordance with the terms of the Company's LTIP. These options will vest on completion of a three-year service period from grant date subject to the achievement of certain performance condition hurdles based on the Company's Total Shareholder Return (TSR) and Earnings per Share (EPS) across the vesting period. 50% of the awards will vest based on the Company's TSR with 50% based on EPS targets. The EPS based options will vest based on the Group's Adjusted EPS* for the financial year ended 31 December 2022. 25% of the options will vest should the Group achieve 9.5 cents per share with 100% vesting at 12.5 cents per share. Options will vest on a pro rata basis for performance between 9.5 cents and 12.5 cents per share. The TSR targets are in line with all previous grants under the scheme with 25% of the award vesting once the 3-year annualised TSR reaches 6.25% per annum with the remaining options vesting on a pro rata basis up to 100% if TSR of 12.5% is achieved. The entire grant of options remain outstanding at 31 December 2020. In line with the Group's remuneration policy, LTIP awards granted to Executive Directors from 2020 onwards include a holding period of at least two years post exercise.
Number of Number of
Options Options
2020 2019
LTIP options in issue at 1 January 4,685,800 2,351,743
Granted during the financial year 5,185,560 2,750,293
Forfeited during the financial year (991,726) (416,236)
Lapsed during the financial year (1,204,178) -
LTIP options in issue at 31 December 7,675,456 4,685,800
Exercisable at 31 December - -
15 Share-based payment arrangements (continued)
(b) LTIP (continued)
The fair value of LTIP options granted in the period was measured using a Monte Carlo simulation. Service and non-market conditions attached to the arrangements were not taken into account when measuring fair value. The inputs used in measuring fair value at grant date were as follows:
2020 2019
Tranche Tranche
1 1
Fair value at grant date EUR0.23 EUR0.32
Share price at grant date EUR0.75 EUR0.85
Valuation methodology Monte Carlo Monte Carlo
Exercise price EUR0.001 EUR0.001
Expected volatility 26.6% 27.0%
Expected life 3 years 3 years
Expected dividend yield 0% 0%
Risk free rate -0.8% -0.55%
The exercise price of all options granted under the LTIP to date is EUR0.001 and all options have a 7- year contractual life.
Given the Group did not have an extensive trading history at grant date, expected share price and TSR volatility was based on the volatility of a comparator group of peer companies over the expected life of the equity instruments granted together with consideration of the Group's actual trading volatility to date.
The Group recognised an expense of EUR0.8 million (2019: EUR0.6 million) in the consolidated statement of profit or loss in respect of options granted under the LTIP.
(*Adjusted EPS is defined as Basic Earnings Per Share as calculated in accordance with IAS 33 Earnings Per Share subject to adjustment by the Remuneration Committee at its discretion, for items deemed not reflective of the Group's underlying performance for the financial year.)
(c) SAYE Scheme
On 1 October 2020, the Remuneration Committee approved the grant of 445,500 options to employees of the Group. Under the terms of the scheme, employees may save up to EUR500 per month (2019: EUR500 per month) from their net salaries for a fixed term of three or five years and at the end of the savings period they have the option to buy shares in the Company at a fixed exercise price of EUR0.60.
Details of options outstanding and grant date fair value assumptions
2020 2019
Number Number Number Number
of of of of
Options Options Options Options
3 Year 5 Year 3 Year 5 Year
SAYE options in issue at
1 January 806,340 202,000 341,640 150,000
Granted during the financial
year 355,500 90,000 771,420 195,000
Cancelled during the financial
year (202,800) (37,000) (306,720) (143,000)
SAYE options in issue at
31 December 959,040 255,000 806,340 202,000
15 Share-based payment arrangements (continued)
(c) SAYE Scheme (continued)
Details of options outstanding and grant date fair value assumptions (continued)
2020 2019
3 Year 5 Year 3 Year 5 Year
Fair value at grant date EUR0.25 EUR0.25 EUR0.21 EUR0.21
Share price at grant date EUR0.76 EUR0.76 EUR0.75 EUR0.75
Valuation Methodology Monte Carlo Monte Carlo Monte Carlo Monte Carlo
Exercise price EUR0.60 EUR0.60 EUR0.60 EUR0.60
Expected volatility 34.3 % 35.5 % 27.5% 29.6%
Expected life 3 years 5 years 3 years 5 years
Expected dividend yield 0 % 1.37 % 0% 1.4%
Risk free rate -0.83% -0.81% -0.82% -0.78%
The weighted average exercise price of all options granted under the SAYE to date is EUR0.71.
Given the Group did not have an extensive trading history at grant date, expected share price and TSR volatility was based on the volatility of a comparator group of peer companies over the expected life of the equity instruments granted together with consideration of the Group's actual trading volatility to date.
The Group recognised an expense of EUR0.05 million (2019: EUR0.01 million) in the consolidated statement of profit or loss in respect of options granted under the SAYE scheme.
16 (Loss) / earnings per share
a) Basic (loss) / earnings per share
The calculation of basic (loss) / earnings per share has been based on the profit attributable to ordinary shareholders and the weighted average numbers of shares outstanding for the financial year. There were 871,333,550 ordinary shares in issue at 31 December 2020 (2019: 871,333,550).
2020 2019
(Loss) / profit for the financial year attributable to ordinary shareholders
(EUR'000) (13,902) 22,480
Weighted average number of shares for the financial year 871,333,550 871,333,550
Basic (loss) / earnings per share (cents) (1.60) 2.62
16 (Loss) / earnings per share (continued)
a) Basic (loss) / earnings per share (continued)
2020 2019
No. of shares No. of shares
Reconciliation of weighted average number of shares (basic)
Issued ordinary shares at beginning and end of financial year 871,333,550 871,333,550
Diluted (loss) / earnings per share
2020 2019
(Loss) / profit for the financial year attributable to ordinary shareholders (EUR'000) (13,902) 22,840
Weighted average number of shares for the financial year 871,333,550 871,333,550
Diluted (loss) / earnings per share (cents) (1.60) 2.62
2020* 2019
No. of shares No. of shares
Reconciliation of weighted average number of shares (diluted)
Weighted average number of ordinary shares (basic) 871,333,550 871,333,550
Effect of share options on issue** - -
871,333,550 871,333,550
*The number of potentially issuable shares in the Group held under option or Founder Share arrangements at 31 December 2020 is 188,682,294 (2019: 185,692,638).
**Under IAS 33, Founders Shares and LTIP arrangements have an assumed test period ending on 31 December 2020. Based on this assumed test period no ordinary shares would be issued through the conversion of Founder Shares and LTIP as the performance conditions were not met.
At 31 December 2020 1,202,040 options (2019: 1,116,340) were excluded from the diluted weighted average number of ordinary shares because their effect would have been anti-dilutive. As a result, there was no difference between basic and diluted earnings per share.
17 Income tax
2020 2019
Before
Exceptional Exceptional
items Items Total
EUR'000 EUR'000 EUR'000 EUR'000
Current tax (credit) / charge
for the financial year (557) 3,864 (93) 3,771
Deferred tax (credit) / charge
for the financial year (1,287) 80 - 80
Total income tax (credit)
/ charge (1,844) 3,944 (93) 3,851
The tax assessed for the financial year differs from the standard rate of tax in Ireland for the financial year. The differences are explained below.
2020 2019
EUR'000 EUR'000
(Loss) / profit before tax for the financial
year (15,746) 26,691
Tax (credit) / charge at standard Irish income
tax rate of 12.5% (1,968) 3,336
Tax effect of:
Income taxed at the higher rate of corporation
tax 40 222
Non-deductible expenses - other 359 230
Adjustment in respect of prior year (over)/under
accrual (5) -
Other adjustments (270) 63
Total income tax (credit) / charge (1,844) 3,851
Movement in deferred tax balances
Balance at Balance at
1 January Recognised 31 December
in
2020 profit or 2020
loss
EUR'000 EUR'000 EUR'000
Tax losses carried forward 128 1,287 1,415
128 1,287 1,415
The deferred tax asset accrues in Ireland and therefore has no expiry date. Based on the return to profitability forecast in the Group's 3-year strategy plan and the sensitivities that have been applied therein, management has considered it probable that future profits will be available against which the above losses can be recovered and, therefore, the related deferred tax asset can be realised.
18 Property, plant and Land & Fixtures Plant & Computer
equipment
buildings & fittings machinery equipment Total
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
Cost
At 1 January 2020 13,166 762 6,308 553 20,789
Additions 2,097 420 3,137 143 5,797
Disposals - (20) (400) (2) (422)
At 31 December 2020 15,263 1,162 9,045 694 26,164
Accumulated depreciation
At 1 January 2020 (779) (228) (1,396) (244) (2,647)
Charge for the financial
year (914) (171) (1,436) (201) (2,722)
Disposals - 10 281 1 292
At 31 December 2020 (1,693) (389) (2,551) (444) (5,077)
Net book value
At 31 December 2020 13,570 773 6,494 250 21,087
Land & Fixtures Plant & Computer
buildings & fittings machinery equipment Total
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
Cost
At 1 January 2019 7,713 748 3,341 407 12,209
Recognition of right-of-use
asset on initial application
of IFRS 16 876 - 351 - 1,227
Adjusted at 1 January
2019 8,589 748 3,692 407 13,436
Additions 5,281 21 2,616 146 8,064
Disposals (704) (7) - - (711)
At 31 December 2019 13,166 762 6,308 553 20,789
Accumulated depreciation
At 1 January 2019 (36) (89) (500) (87) (712)
Charge for the financial
year (743) (141) (896) (157) (1,937)
Disposals - 2 - - 2
At 31 December 2019 (779) (228) (1,396) (244) (2,647)
Net book value
At 31 December 2019 12,387 534 4,912 309 18,142
The depreciation charge for the year includes EUR1.1 million (2019: EUR0.8 million) which was capitalised in inventory at 31 December 2020.
18 Property plant and equipment (continued)
Property plant and equipment includes right of use assets of EUR1.3 million (2019: EUR0.6 million) related to leased properties and motor vehicles. During the year, the Group entered into new lease agreements for the use of motor vehicles (EUR0.3 million) and land and buildings for its office facility in Maynooth, Co. Kildare (EUR1.5 million). The land and buildings lease commenced in June 2020 for a duration of two years. On lease commencement, the Group recognised EUR1.8 million (2019: EUR0.1 million) of right-of-use assets and lease liabilities.
19 Intangible assets
Computer
Licence Software Total
EUR'000 EUR'000 EUR'000
Cost
At 1 January 2020 149 1,225 1,374
Additions - 194 194
Disposals - (60) (60)
At 31 December 2020 149 1,359 1,508
Accumulated amortisation
At 1 January 2020 (100) (330) (430)
Charge for the year - (406) (406)
Disposals - 40 40
At 31 December 2020 (100) (696) (796)
Net book value
At 31 December 2020 49 663 712
Computer
Licence Software Total
EUR'000 EUR'000 EUR'000
Cost
At 1 January 2019 149 709 858
Additions - 516 516
At 31 December 2019 149 1,225 1,374
Accumulated amortisation
At 1 January 2019 - (131) (131)
Charge for the year (100) (199) (299)
At 31 December 2019 (100) (330) (430)
Net book value
At 31 December 2019 49 895 944
20 Inventory
2020 2019
EUR'000 EUR'000
Land held for development 605,244 647,513
Development expenditure (ii) 201,917 172,683
Development rights (iii) 14,008 20,291
821,169 840,487
EUR198.9 million (2019: EUR227.3 million) of inventory was recognised in 'cost of sales' during the year ended 31 December 2020.
(i) Impairment of inventories
During the financial year, the Group amended its sales strategy on its remaining high end, private customer units which was reflected in its net realisable value calculations at the balance sheet date. The revised sales strategy on these developments is to exit within 12 months versus in excess of 48 months at previously forecasted sales rates. The Group also identified three non-core assets which are also suited to higher ASP product on which construction has not commenced and has amended its exit strategy on these sites from development to site sale.
This assessment has resulted in an impairment charge of EUR20.3 million which was recognised in cost of sales in the financial year with EUR10.3 million allocated to land and the remainder (EUR10.0 million) allocated to work in progress.
(ii) Employment cost capitalised
EUR11.2 million of employment costs (net of Temporary Wage Subsidy Scheme Payments received which have been accounted for in accordance with IAS 20 'Accounting for Government Grants and Disclosure of Government Assistance') incurred in the year have been capitalised in inventory (2019: EUR12.9 million) .
(iii) Development rights
Tallaght, Dublin 24 / Gateway Retail Park, Co. Galway
In March 2018, the Group entered into an Acquisition and Profit Share Agreement ("APSA") with Targeted Investment Opportunities ICAV ("TIO"), a wholly owned subsidiary of OCM Luxembourg EPF III S.a.r.l. Under the terms of the APSA, the Group acquired certain development rights in respect of sites at The Square Shopping Centre, Tallaght, Dublin 24 and Gateway Retail Park, Knocknacarra, Co. Galway for aggregate consideration of approximately EUR13.9 million (including stamp duty and acquisition costs). The development rights will (subject to planning) entitle the Group to develop at least 750 residential units under two joint business plans to be undertaken with Sigma Retail Partners (on behalf of TIO) which will also entitle TIO to control and benefit from any retail development at both sites. The Directors have determined that joint control over both sites exists and the arrangements have been accounted for as joint operations in accordance with IFRS 11 Joint Arrangements. For further information regarding the APSA, see Note 29 of these financial statements.
Maryborough Ridge, Cork
In December 2018, the Group entered into a licence agreement to develop 18.65 acres at Maryborough Ridge, Cork. During 2020, the Group accelerated the licence fee payments required to exit the agreement. At 31 December 2020, an amount of EUR6.9 million (2019: EUR6.4 million) that was previously included in development rights is now included within land held for development.
21 Trade and other receivables
2020 2019
EUR'000 EUR'000
Trade receivables 1,948 3,412
Other receivables 1,985 2,482
Prepayments 462 393
Construction bonds 7,670 4,401
Deposits for sites 2,540 1,553
14,605 12,241
The carrying value of all financial assets and trade and other receivables is approximate to their fair value and are repayable on demand.
22 Trade and other payables
2020 2019
EUR'000 EUR'000
Trade payables 3,457 7,455
Payroll and other taxes 1,671 2,755
Inventory accruals 17,416 22,017
Other accruals 5,874 5,709
VAT payable 13,819 18,282
42,237 56,218
Non-current - -
Current 42,237 56,218
42,237 56,218
The carrying value of all financial liabilities and trade and other payables is approximate to their fair value and are repayable on demand.
23 Loans and Borrowings
(a) Loans and borrowings
The Group is party to a Revolving Credit Facility for a total of EUR250.0 million (of which EUR125.0 million is committed) with a syndicate of domestic and international banks for a term of 3 years at an interest rate of one-month EURIBOR (subject to a floor of 0 per cent.) plus a margin of 2.5%. At 31 December 2020, EUR100.0 million (31 December 2019: EUR40.0 million) had been drawn on the facility. Pursuant to the RCF agreement, there is a fixed and floating charge in place over certain land assets of the Group as continuing security for the discharge of any amounts drawn down.
31 December 31 December
2020 2019
EUR'000 EUR'000
Revolving Credit Facility 100,000 40,000
Unamortised borrowing costs (104) (446)
Interest accrued 38 15
Total loans and borrowings 99,934 39,569
_________ _________
The Group's RCF was entered into with AIB, Barclays and HSBC and is subject to primary financial covenants calculated on a quarterly basis:
- A maximum net debt to net assets ratio; and - A minimum EBITDA to net interest coverage ratio calculated on a trailing 12 month basis 23 Loans and Borrowings (continued)
(b) Reconciliation of movements of liabilities to cash flows arising from financing activities
2020 Cash flows Non-cash changes
-----------------------------------------------------------------------
Opening Credit Credit Payment Interest Amortisation Interest Interest New leases Closing 2020
2020 facility facility of lease Paid of transaction on RCF on lease
drawdown repayment liability costs liability
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
Liabilities
Loans and
borrowings 40,000 70,000 (10,000) - - - - - - 100,000
Unamortised
transaction
costs (446) - - - - 342 - - - (104)
Lease
liability 595 - - (1,088) - - - 27 1,782 1,316
Interest
accrual 15 - - - (2,638) - 2,660 - - 38
40,164 70,000 (10,000) (1,088) (2,638) 342 2,660 27 1,782 101,250
43
23 Loans and Borrowings (continued)
(b) Reconciliation of movements of liabilities to cash flows arising from financing activities (continued)
2019 Cash flows Non cash changes
-----------------------------------------------------------------------
Opening Credit Credit Payment Interest Amortisation Interest Interest IFRS 16 New leases Closing
2019 facility facility of lease Paid of transaction on RCF on lease - transition 2019
drawdown repayment liability costs liability adjustment
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
Liabilities
Loans and
borrowings - 120,000 (80,000) - - - - - - - 40,000
Unamortised
transaction
costs (788) - - - - 342 - - - - (446)
Lease
liability 38 - - (792) - - - 32 1,227 90 595
Interest
accrual 196 - - - (2,472) - 2,291 - - - 15
(554) 120,000 (80,000) (792) (2,472) 342 2,291 32 1,227 90 40,164
44
23 Loans and Borrowings (continued)
(c) Net funds reconciliation
31 December 31 December
2020 2019
EUR'000 EUR'000
Cash and cash equivalents 137,276 93,224
Loans and borrowings (99,934) (39,569)
Lease liabilities (1,316) (595)
Total net funds 36,026 53,060
(d) Lease Liabilities
Lease liabilities are payable as follows:
31 December 2020
--------------------------------------
Present value Future value
of minimum of minimum
lease lease
payments Interest payments
EUR'000 EUR'000 EUR'000
Less than one year 1,029 49 1,078
Between one and two years 283 11 294
More than two years 4 1 5
1,316 61 1,377
24 Restricted cash
2020 2019
EUR'000 EUR'000
Balance at 1 January 1,500 1,500
Transfers to cash and cash equivalents (792) -
708 1,500
The restricted cash balance relates to funds held in escrow until the completion of certain infrastructural works relating to the Group's residential development at Balbriggan, Co. Dublin. In November 2020, EUR0.8 million of the funds were received following the completion of the first phase of these works. At 31 December 2020, the estimated fair value of restricted cash is equivalent to its carrying value.
25 Subsidiaries
The principal subsidiary companies and the percentage shareholdings held by Glenveagh Properties PLC, either directly or indirectly, pursuant to Section 314 of the Companies Act 2014 at 31 December 2020 are as follows:
Company Principal activity % Reg.office Glenveagh Properties (Holdings) Limited Holding company 100% 1 Glenveagh Treasury DAC Financing activities 100% 2 Glenveagh Contracting Limited Property development 100% 2 Glenveagh Homes Limited Property development 100% 2 Greystones Devco Limited Property development 100% 2 Marina Quarter Limited Property development 100% 2 GLV Bay Lane Limited Property development 100% 2 Glenveagh Living Limited Property development 100% 1 GL Partnership Opportunities DAC Property development 100% 1 Castleforbes Development Company DAC* Property development 100% 1 Hollystown Golf & Leisure Limited Golf Club operations 100% 2 1 15 Merrion Square North, Dublin 2, D02 YN15 2 Block B, Maynooth Business Campus, Maynooth, Co. Kildare, W23W5X7
*In July 2020 by special resolution and approval of the Registrar of Companies the entity formally know as GL Partnerships Opportunities II DAC was renamed Castleforbes Development Company DAC.
Pursuant to section 316 of the Companies Act 2014, a full list of subsidiaries will be annexed to the Company's Annual Return to be filed in the Companies Registration Office in Ireland.
26 Capital and reserves
(a) Authorised share capital
2020 2019
Number of Number of
shares EUR'000 shares EUR'000
Ordinary Shares of EUR0.001
each 1,000,000,000 1,000 1,000,000,000 1,000
Founder Shares of EUR0.001
each 200,000,000 200 200,000,000 200
Deferred Shares of EUR0.001
each 200,000,000 200 200,000,000 200
1,400,000,000 1,400 1,400,000,000 1,400
(b) Issued and fully paid share capital and share premium
At 31 December 2020 Share Share
Number of capital premium
shares EUR'000 EUR'000
Ordinary Shares of EUR0.001
each 871,333,550 871 179,281
Founder Shares of EUR0.001
each 181,006,838 181 -
1,052,340,388 1,052 179,281
At 31 December 2019 Share Share
Number of Capital premium
shares EUR'000 EUR'000
Ordinary Shares of EUR0.001
each 871,333,550 871 879,281
Founder Shares of EUR0.001
each 181,006,838 181 -
1,052,340,388 1,052 879,281
26 Capital and reserves (continued)
(c) Reconciliation of shares in issue
In respect of current year Ordinary Founder Share Share
shares shares capital premium
'000 '000 EUR'000 EUR'000
In issue at 1 January 2020 871,333 181,007 1,052 879,281
Share premium transfer to
distributable reserves - - - (700,000)
871,333 181,007 1,052 179,281
In respect of prior year Ordinary Founder Share Share
shares shares capital premium
'000 '000 EUR'000 EUR'000
In issue at 1 January 2019 871,333 181,007 1,052 879,281
871,333 181,007 1,052 879,281
(d) Rights of shares in issue
Ordinary Shares
The holders of Ordinary Shares are entitled to one vote per Ordinary Share at general meetings of the Company and are entitled to receive dividends as declared by the Company.
Founder Shares
Founder Shares do not confer on any holder thereof the right to receive notice of, attend, speak or vote at general meetings of the Company except in relation to resolutions regarding the voluntary winding up of the Company or the granting of further Founder Shares. Founder Shares do not entitle their holder to receive dividends.
Founder Shares entitle the Founders of the Company namely, Justin Bickle (through Durrow Ventures), Stephen Garvey and John Mulcahy to share 20% of the Company's TSR (calculated by reference to the change of control price plus dividends and distributions made) between admission and the change of control (less the value of any ordinary shares (at their original conversion or redemption price)) which have previously been converted or redeemed in the five years following the IPO of the Company.
This entitlement is subject to the achievement of a performance condition related to the Company's share price, specifically that a compound rate of return of 12.5% (adjusted for any dividends or other distributions and returns of capital made but excluding the value of any Founder Shares which have been redeemed) is achieved across five testing periods.
Following completion of the third test period (which ran from 1 March 2020 until 31 December 2020), it was confirmed that, the performance hurdle condition was not satisfied and therefore the Founder Shares Value for the test period was zero, and accordingly no Founder Shares were converted to ordinary shares in respect of this test period.
26 Capital and reserves (continued) (d) Rights of shares in issue (continued)
Capital re-organisation
During the year, further to resolutions passed by shareholders of the Company on 17 December 2019, the Irish High Court approved the Group's application on 16 March 2020 to redesignate EUR700.0 million of Share Premium to Retained Earnings to allow for future distributions under section 117 of the Companies Act 2014.
(e) Nature and purpose of reserves
Share based payment reserve
The share-based payment reserve comprises amounts equivalent to the cumulative cost of awards by the Group under equity settled share-based payment arrangements being the Group's Long Term Incentive Plan and the SAYE scheme. On vesting, the cost of awards previously recognised in the share-based payments reserve is transferred to retained earnings. Details of the share awards, in addition to awards which lapsed in the year, are disclosed in Note 15.
27 Financial instruments and financial risk management
The consolidated financial assets and financial liabilities are set out below. While all financial assets and liabilities are measured at amortised cost, the carrying amounts of the consolidated financial assets and financial liabilities approximate to fair value. Trade and other receivables and trade and other payables approximate to their fair value as the transactions which give rise to these balances arise in the normal course of trade and, where relevant, with industry standard payment terms and have a short period to maturity (less than one year).
Financial instruments: financial assets
2020 2019
The consolidated financial assets can
be summarised as follows: EUR'000 EUR'000
Trade receivables 1,948 3,412
Other receivables 1,985 2,482
Construction bonds 7,670 4,401
Deposits for sites 2,540 1,553
Cash and cash equivalents 137,276 93,224
Restricted cash (non-current) 708 1,500
Total financial assets 152,127 106,572
Cash and cash equivalents are short-term deposits held at variable rates.
27 Financial instruments and financial risk management (continued)
Financial instruments: financial liabilities
2020 2019
EUR'000 EUR'000
Trade payables 3,457 7,455
Lease liabilities 1,316 595
Inventory accruals 17,416 22,017
Other accruals 5,874 5,709
Loans & borrowings 99,934 39,569
Total financial liabilities 127,997 75,345
Trade payables and other current liabilities are non-interest bearing.
Financial risk management objectives and policies
As all of the operations carried out by the Group are in Euro there is no direct currency risk, and therefore the Group's main financial risks are primarily:
- liquidity risk - the risk that suitable funding for the Group's activities may not be available;
- credit risk - the risk that a counter-party will default on their contractual obligations resulting in a financial loss to the Group; and
- market risk - the risk that changes in market prices, such as interest rates and equity prices will affect the Group's income or the value of its holdings of financial instruments.
This note presents information and quantitative disclosures about the Group's exposure to each of the above risks, its objectives, policies and processes for measuring and managing risk, and the Group's management of capital.
Liquidity risk
Liquidity risk is the risk that the Group may not be able to generate sufficient cash reserves to settle its obligations in full as they fall due or can only do so on terms that are materially disadvantageous. The Group's approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring, unacceptable losses or risking damage to the Group's reputation. The Group's liquidity forecasts consider all planned development expenditure. Management monitors the adequacy of the Group's liquidity reserves against rolling cash flow forecasts. In addition, the Group's liquidity risk management policy involves monitoring short-term and long-term cash flow forecasts. Set out below are details of the Group's contractual cash flows arising from its financial liabilities and funds available to meet these liabilities.
27 Financial instruments and financial risk management (continued)
Financial risk management objectives and policies (continued)
Liquidity risk (continued)
31 December 2020
Carrying Contractual Less than 1 year More than
amount cash flows 1 year to 2 years 2 years
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
Lease liabilities 1,316 1,377 1,078 295 4
Trade payables 3,457 3,457 3,457 - -
Inventory accruals 17,416 17,416 17,416 - -
Other accruals 5,874 5,874 5,874 - -
Loans and borrowings 99,934 100,010 100,010 - -
127,997 128,134 127,835 295 4
31 December 2019
Carrying Contractual Less than 1 year More than
amount cash flows 1 year to 2 years 2 years
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
Finance lease obligations 595 595 276 319 -
Trade payables 7,455 7,455 7,455 - -
Inventory accruals 22,017 22,017 22,017 - -
Other accruals 5,709 5,709 5,709 - -
Loans and borrowings 39,569 41,244 40,862 382 -
75,345 77,020 76,319 701 -
27 Financial instruments and financial risk management (continued)
Financial risk management objectives and policies (continued)
Liquidity risk (continued)
Funds available
2020 2019
EUR'000 EUR'000
Revolving credit facility* (undrawn committed) 25,000 85,000
Cash and cash equivalents 137,526 93,224
162,526 178,224
*The Group's RCF contains a mechanism through which the committed amount can be increased up to EUR250.0 million.
The Group's RCF is subject to primary financial covenants calculated on a quarterly basis:
- A maximum net debt to net assets ratio; and - A minimum EBITDA to net interest coverage ratio.
Credit risk
The Group's exposure to credit risk encompasses the financial assets being: trade and receivables and cash and cash equivalents. Credit risk is managed by regularly monitoring the Group's credit exposure to each counter-party to ensure credit quality of customers and financial institutions in line with internal limits approved by the Board.
There has been no impairment of trade receivables in the year presented. The impairment loss allowance allocated against trade receivables, cash and cash equivalents and restricted cash is not material. The credit risk on cash and cash equivalents is limited because counter-parties are leading international banks with minimum long-term BBB- credit-ratings assigned by international credit agencies. The maximum amount of credit exposure is the financial assets in this note.
Market risk
The Group's exposure to market risk relates to changes to interest rates and stems predominately from its debt obligations. In 2018, the Group entered in to a RCF for a total of EUR250.0 million (of which EUR125.0 million is committed) with a syndicate of domestic and international banks for a term of 3 years at an interest rate of EURIBOR (subject to a floor of 0 per cent.) plus 2.5%. EUR100.0 million (2019: EUR40.0 million) had been drawn on the facility at 31 December 2020. The Group has an exposure to cash flow interest rate risk where there are changes in the EURIBOR rates.
Interest rate risk reflects the Group's exposure to fluctuations in interest rates in the market. This risk arises from bank loans that are drawn under the Group's RCF with variable interest rates based upon EURIBOR. At the year ended 31 December 2020 it is estimated that an increase of
100 basis points to EURIBOR would have decreased the Group's profit before tax by EUR0.093 million assuming all other variables remain constant and the rate change is only applied to the loans that are exposed to movement sin EURIBOR.
27 Financial instruments and financial risk management (continued)
Financial risk management objectives and policies (continued)
Market risk (continued)
A fundamental review and reform of major interest rate benchmarks has been undertaken globally. There is now roadmap setting out actions to ensure a transition from interbank offered rates (IBORs) by the end of 2021. From 2021 financial firms will be able to offer non-IBOR linked interest rates and have formalised plans to amend legacy agreements.
IBOR continues to be used as a reference rate in financial markets and is used in the valuation of instruments with maturities. Therefore, the Group believes the current market structure supports the valuation of our debt obligations as at 31 December 2020.
The Group expects that the interest rate benchmark will be changed to Euro Short-Term Rate (EURSTR) in 2021 and that no significant modification gain or loss will arise as a result of applying the amendments to these changes.
Capital management
The Group finances its operations by a combination of shareholders' funds and working capital. The Group's objective when managing capital is to maintain an appropriate capital structure in the business to allow management to focus on creating sustainable long-term value for its shareholders, with flexibility to take advantage of opportunities as they arise in the short and medium term. This allows the Group to take advantage of prevailing market conditions by investing in land and work-in-progress at the right point in the cycle.
28 Leases A. Leases as lessee (IFRS 16)
The Group leases a property and motor vehicles. The leases typically run for a period of 1-3 years, with an option to renew the lease after that date. Lease payments are renegotiated every 1-3 years to reflect market rentals.
The Group leases certain motor vehicles with contract terms of one year. These leases are short term and leases of low-value items. The Group has elected not to recognise right-of-use assets and lease liabilities for these leases.
Information about leases for which the Group is a lessee is presented below.
i. Right-of-use assets
Right-of-use assets related to leased properties (that do not meet the definition of investment property) and motor vehicles are presented as property, plant and equipment (see Note 18).
28 Leases continued)
A. Leases as lessee (IFRS 16) (continued)
i. Right-of-use assets (continued)
Motor
Property Vehicles Total
EUR'000 EUR'000 EUR'000
2020
Balance at 1 January 280 293 573
Additions to right-of-use
assets 1,455 303 1,758
Depreciation charge for
the year (711) (304) (1,015)
Balance at 31 December 1,024 292 1,316
Motor
Property Vehicles Total
EUR'000 EUR'000 EUR'000
2019
Balance at 1 January 876 351 1,227
Additions to right-of-use
assets - 90 90
Depreciation charge for
the year (596) (148) (744)
Balance at 31 December 280 293 573
ii. Amounts recognised in profit or loss
2020 2019
EUR'000 EUR'000
2020 - Leases under IFRS
16
Interest on lease liabilities 27 32
Expenses relating to short-term
leases 12 80
iii. Amounts recognised in statement of cash flows
2020 2019
EUR'000 EUR'000
Total cash outflow on leases 1,088 792
B. Leases as lessor
In certain instances, the Group acts as a lessor in relation to certain property assets. These arrangements are not material to the Group's consolidated financial statements.
29 Related party transactions (i) Key Management Personnel remuneration
Key management personnel comprise the Non-Executive Directors and the Executive Committee. The aggregate compensation paid or payable to key management personnel in respect of the financial year was the following:
2020 2019
EUR'000 EUR'000
Short-term employee benefits 1,460 2,912
Post-employment benefits 115 116
LTIP and SAYE share-based payment
expense 99 66
1,674 3,094
Compensation of the Group's key management personnel includes salaries, non-cash benefits and contributions to a post-employment defined contribution plan.
(ii) Other related party transaction
Acquisition of development rights
The Group entered into the APSA with TIO, a wholly owned subsidiary of OCM Luxembourg EPF III S.a.r.l. (OCM) (and an entity in which John Mulcahy is a director) on 12 March 2018.
Under the terms of the APSA, the Group acquired certain development rights in respect of sites at The Square Shopping Centre, Tallaght, Dublin 24 and Gateway Retail Park, Knocknacarra, Co. Galway for aggregate consideration of approximately EUR13.9 million (including stamp duty and transaction costs). The development rights will (subject to planning) entitle the Group to develop at least 750 residential units under two joint business plans to be undertaken with Sigma Retail Partners (on behalf of TIO) which will also entitle TIO to control and benefit from any retail development at both sites.The Directors have determined that joint control over both sites exists and the arrangements have been accounted for as joint operations in accordance with IFRS 11 Joint Arrangements. This accounting treatment was re-assessed at the end of the reporting period and the Directors concluded that it remains appropriate.
The APSA also stipulates that TIO would be entitled to share, on a 50/50 basis, any residual profit remaining after the Group's purchase consideration plus interest and residential development cost plus 20% has been deducted from sales revenue in relation to the residential development opportunity at The Square Shopping Centre, Tallaght, Dublin 24, Gateway Retail Park, Knocknacarra, Co. Galway and a third site, Bray Retail Park, Bray, Co. Wicklow.
The agreement defines certain default events including TIO not possessing good and marketable title over the development sites and TIO not transferring good and marketable title over the development sites. On the occurrence of a default event, the Group shall be entitled to recover the aggregate purchase consideration in respect of the development rights. OCM has agreed to guarantee this obligation of TIO.
30 Commitments and contingent liabilities
(a) Commitments arising from development land acquisitions
In addition to the contingent liabilities outlined in Note 29 above, the Group had the following commitments at 31 December 2020 relating to development land acquisitions:
Land acquisition subject to re-zoning
During 2018, the Group contracted to acquire 66 acres of currently unzoned land in the Greater Dublin Area subject to appropriate residential zoning being awarded in the next local authority development plan on at least 30 acres of the site.
Once this minimum threshold is achieved, the Group has committed to acquiring the entire site at a fixed price per acre on land zoned for residential development with the remaining land to be acquired at market value.
Hollystown Golf and Leisure Limited ("HGL")
During 2018, the Group acquired 100 per cent of the share capital of HGL.
Under the terms of an overage covenant signed in connection with the acquisition, the Group has committed to paying the vendor an amount equal to an agreed percentage of the uplift in market value of the property should any lands owned by HGL, that are not currently zoned for residential development be awarded a residential zoning.
This commitment has been treated as contingent consideration and the fair value of the contingent consideration at the acquisition date was initially recognised at EURnil. At the reporting date, the fair value of this contingent consideration was considered insignificant.
Contracted acquisitions
At 31 December 2020, the Group had contracted to acquire five development sites; two in North County Dublin, two in Co. Kildare and one in Co. Kilkenny for aggregate consideration of approximately EUR24 million (excluding stamp duty and legal fees). Deposits totalling EUR2.3 million were paid pre-year end and are included within trade and other receivables at 31 December 2020.
31 Subsequent events
On 12 February 2021, the Group has successfully completed a debt refinancing process and has put in place a new EUR250.0 million facility. The new facility is for a period of five years and has a term component of EUR100.0 million and a committed Revolving Credit Facility of EUR150.0 million. The facility is with a syndicate of domestic and international banks and will provide the debt funding for the business.
At 31 December 2020 the Group had contracted to sell 134 units in Marina Village, Greystones, Co. Wicklow, 71 units in Dargan Hall, Bray, Co. Wicklow and 61 units in Barnhall Meadows, Leixlip, Co. Kildare for a total consideration of EUR119.0 million.
On 3 February 2021, the Group completed the first phase of the contracted sales at the Marina Village development comprising of 65 units for a consideration of EUR31.7 million.
On 6 January 2021, the Government announced a third national lockdown in response to Covid-19 which required all non-essential construction to stop on 8 January 2021 with the exception of private housing that will be completed by 31 January 2021 and social housing that will be completed by 28 February 2021. Selling activity has continued virtually throughout the period and our forecast sales activity for 2021 remains unchanged subject to Government confirmation that a reopening of the sites will commence on 5 April 2021. The third national Covid-19 lockdown is a non-adjusting post balance sheet event.
32 Profit / (Loss) of the Parent Company
The parent company of the Group is Glenveagh Properties PLC. In accordance with section 304 of the Companies Act 2014, the Company is availing of the exemption from presenting its individual statement of profit or loss and other comprehensive income to the Annual General Meeting and from filing it at the Companies Registration Office. The Company's profit after tax for the financial year was EUR0.034 million (for the period ended 31 December 2019: loss of EUR1.1m).
33 Approved financial statements
The Board of Directors approved the financial statements on 25 February 2021.
[i] Source: Hooke & MacDonald - The Dublin Residential Investment Report H2 2020
[ii] Source: CBRE
[iii] Of the three acquisitions, one site totalling EUR6m signed in 2020 but completed in early 2021
[iv] As at 31 December 2020
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