Release Date: February 20, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Irish Residential Properties REIT PLC (RSHPF, Financial) returned to earnings growth in 2024, with adjusted EBITDA earnings increasing by 1.4%.
- The company achieved effective full occupancy at 99.4% and rent collections above 99%, demonstrating strong operational performance.
- A strategic asset recycling program resulted in the sale of units at a premium, contributing to an 8.7% growth in adjusted earnings excluding fair value movements.
- The company plans to continue paying 85% of property rental income as a dividend to shareholders, maintaining a stable return.
- A EUR5 million share buyback program is set to be launched, funded from excess reserves, reflecting the company's strong financial position.
Negative Points
- The current rent regulation structure, with a 2% cap on rental increases, is negatively impacting the business and the supply of housing in Ireland.
- Adjusted EBITDA reduced by 5% due to the impact of the asset recycling program and previous asset disposals.
- A reduction of EUR33.7 million in the value of assets was recorded, primarily due to yield expansion in the first half of 2024.
- Non-recurring costs of EUR3.4 million were incurred, including expenses related to shareholder activism and strategic reviews.
- The regulatory environment remains a challenge, with rent regulations set to expire in December 2025, creating uncertainty in the market.
Q & A Highlights
Q: Can you provide more details on the cost management initiatives that supported the NRI margin expansion in H2 2024, and what is the outlook for 2025?
A: Eddie Byrne, CEO: The NRI margin improvement was due to numerous small initiatives, such as exiting the Cork market, centralizing contracts for better economies of scale, and focusing on cost base management. We expect this improvement to continue in 2025. Brian Fagan, CFO: We counteracted embedded inflation and the impact of disposals, aiming to maintain and improve margins into 2025.
Q: Could you elaborate on the retrofit strategy and its potential impact?
A: Eddie Byrne, CEO: About 92% of our portfolio is already BER rated A to C, limiting retrofit opportunities. We target under 100 units for retrofitting, which requires tenant turnover. The strategy offers attractive returns but is applicable to a limited portion of our portfolio.
Q: What are you observing in the transaction market, and are there any expected regulatory changes?
A: Eddie Byrne, CEO: The market seems to have bottomed out with some activity resuming. We expect more transactions in the second half of the year. Regarding regulation, changes are anticipated towards the end of the year, as current regulations expire in December.
Q: What is the timeline for the sale of the 315-unit portfolio, and can cost initiatives be extended across the portfolio?
A: Eddie Byrne, CEO: We aim to complete the sale within three to five years, with a minimum of 50 units expected to be sold this year. We are exploring ways to accelerate the process. Cost initiatives have been applied to 6% of the portfolio, with plans to extend to 8-10% annually.
Q: How do you plan to address the challenges posed by current rent regulations?
A: Eddie Byrne, CEO: We advocate for a balanced regulatory system that protects renters while encouraging investment. Recent government statements suggest a willingness to explore alternatives to current rent pressure zones, which is encouraging for future regulatory changes.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
