Irish Builder - Stephen Garvey

Yeah, so I suppose my visual act won't tell you my true age. I'm about 40, I'm 41 years of age. I've been in the construction industry for almost 20 years at this stage. I suppose I was an early school leaver, and my dad said two things: if you want to go out and work for yourself, you better get a job quickly, and pretty much put me out on a construction site at a young age. And my dad had a small business, he was a subcontractor. Pretty much from that stage then I suppose I saw where we could change things, and I suppose I asked my dad, there was only four of us working together at the time, and said look, take it over or make a few improvements, I suppose as the ways I pushed it. And in fairness to him, he let me, and I suppose I grew up quite rapidly from there. I scaled it up to about 100 people within about two to three years. And I suppose I stayed a subcontractor in the construction industry for probably up to about 25, 26, and obviously in 2003 then I formed Bridgedale Homes and grew a house building business from there. I suppose I'd learned a lot of things being a subcontractor. I'd worked with a lot of the major contractors and the house builders in the country at the time, and I suppose Ireland was going through a phenomenal period. We had the thing called the Celtic Tiger, probably lasted from about 96 up to all the way up to 2007. I suppose what that was, it was really my generation. We christened our generation the Pope's generation. The Pope came here in 1979 and a lot of children were born at that point in time, and that generation had come through, and I suppose they were the big driver of the economy overall. So in 2003 I set up Bridgedale with another colleague of mine, and I suppose we concentrated on small sites to start, you know, delivering a number of units throughout the year. It was very much a hands-on approach, you know, controlling everything, managing costs, but also learning the skill set of building homes directly ourselves. And we did that up to about 2006, and I suppose in 2006 we looked at the overall market, and I suppose the thing that stuck out to us was things had slightly got out of control. The inflation that was in house price and the inflation that was in the land market didn't make sense, and it was very much debt fueled. And I suppose we started to de-leverage at that stage, we started to reduce our assets across the board. I had no idea how bad it was going to get. I thought it was just an Irish phenomenon. I suppose what really woke me up was I went to New York in November 2008, and I know Lehman had collapsed at that time, but I remember watching Citigroup and their share price going down, down. This is the world is about to change, and change bad. So I suppose I came home and I looked at our book and I said look, we need to get out of this as quickly as possible. And our attitude was, you know, move assets as quickly as possible. And we did that, and in fairness we were working with RBS who was our main bank at the time. They obviously were in retrenchment mode, so you know RBS would have been exposed to a lot of international markets, but sure enough they had to retrench their own national market. They were being forced by governments, and so they simply didn't have the capital to lend, and anyone that came in with a good proposal it just got shot down with immediate effect. But we traded our way through the whole crisis. Ironically, we built more houses out of the crash than we did into the crash. We kept the workforce together. You know, it was very difficult times here in Ireland up to 2010, 2011. Obviously the IMF came into Ireland in 2011. Pretty much an austerity package was introduced of about 70 million euros, which was quite draconian on the entire economy. But I suppose one thing for Ireland was it accepted its pain early. It knew what it had to do, it knew to a certain degree, and I suppose the public embraced it. They had a certain responsibility in this, and they had a responsibility to take the country out of the mess it was in. So I suppose everyone rowed in. You could see things turning better around 2012. We were starting smaller developments. We bought one off RBS, they were basically selling off their developments. They financed us on some of them, we finished them out, we did profit shares with them. But they were retrenching, and the Irish banks obviously were in a complete shutdown at that stage. So I suppose that roll on 2014 and how things moved from there was I suppose we were looking for capital. There was none simply on the ground, it didn't exist. If you spoke to a domestic investor, they literally said look, don't believe in this residential thing, not for me. I've seen where the country has gone. So it was really international markets you had to look to. And I suppose from there I kind of met Justin. We met one day in a room that was set up by someone who said look, it'd be very good for you two parties to meet. I had no idea who Justin was, and Justin had no idea who I was. But I quickly learned who Oaktree was, and he quickly learned who Bridgedale was. So I suppose there was a coming together. I know Oaktree wanted to invest in Ireland, we saw that we needed international capital to do it, and I suppose from there we kind of set the whole thing in motion of scaling up. I suppose there was no real outline at the start for where this would go. It was a case of, unlike all private equity, invest for a period of time and then monetize. But I suppose the story evolved and we could see things on the ground that look, there was a big opportunity to create a house builder here. And I suppose it was going about that and setting the seeds in place to grow a business properly. And I suppose we brought it to full fruition in 2017 by bringing it to the stock exchange. And we raised 550 million in the initial raise. And yeah, the story is from there as they say.

Yeah, so my dad obviously he, like all fathers, are set in their ways and either way doing things. And you know, he would always, and I reference him, he would instill this to me. Like he'd never let me walk away from you know shoddy work or anything like that. He says just because someone else can do it that way, it doesn't mean you can do it. And I always remember that, and it always kind of stood to me. I thought that was a great you know as the years moved on. I suppose when I was 16 or 17 I couldn't see the value of it, but when I was older I could really see what he meant. And I suppose that was something that stuck with me. I suppose I saw things differently in the sense of, you know, I saw house builders who went out and the ways they built sometimes didn't make sense to me. The ways that their build programs were aligned, how they set up their sites. A lot of those things you scratch your head and wonder, is this the most efficient system? Is there not a pile of money being wasted? But I suppose you had to look from the context of where they were. The majority of house builders in Ireland at that time were all privately controlled companies and were debt fueled to a certain degree, and predominantly by the Irish banks, and money was coming in quite freely, and all they wanted to do was just you know invest, invest, and worry about it down the road. So I suppose I could see you know this wasn't possibly the ways you could do things. You could do different things. And one thing I always noticed was we go in and do a show house launch at a weekend, and we might sell say 50, 60, 100 units, and then we go like no tomorrow to build those 50, 60, 100 units in breakneck speed. And I always scratched my head and said, what if we sold them in tranches of 20, built 20, and go with the next 20? And I thought it was a very strange philosophy. And I thought, you know what, if you built half the houses and maximize the profit you could get it at the other side. And so sometimes I thought we were a bit busy for the sake of being busy, and I thought there was a better way of doing it. So things like that I thought you know certainly the philosophy in house building, and it was one thing that stuck with me, was it was an industry that was extremely slow to change, and it would not adapt to new ways, it would not adapt to technology. And not that I was the most IT savvy person myself, but I just thought it was always the same ways of doing the same things, and there was no belief in doing things differently. So I kind of came to that philosophy: you could do things differently, it could be more efficient how you'd use your money, you could be more efficient how you built your product, but also by embracing technology it could streamline the process. And I think you're seeing that in the sector across the board. Like the productivity in construction is on the floor, but I suppose that's where the huge opportunity is to improve that and bring the sector along. And I think there's a minimal amount of players out there who actually believe in this. They believe in doing the same things day in day out, and they don't embrace that. But I think that's something that we really embrace here, and I think it's something that goes through the business. And you know all the people in this business pretty much will be of the same culture as myself, that you know we have to adopt new technology. There is a better way of doing it, and to a better degree we become the disruptors across the business.

Yeah, I suppose my dad, like he was very much set in his ways, and he was a great tradesman, but he could only bring it so far. And that's where he always had ambition to bring it further, but he just never would take the final step. And I suppose that's something I've been always very comfortable with, taking the next step. Never has really bothered me. Happy to lean into something. And yes, it'll go wrong sometime, but you have to take that risk to see how it goes. And I suppose I was also off the benefit I was so young at the time. I was doing really well for myself, I made really decent money, and so I had no fear. And I suppose when we struck out, we kind of said look, this is an opportunity. We had an ambition to become the biggest or anything like that, but it was, we've worked for these people, this is not that complicated, let's just go and try and do it. And I suppose that was definitely the way our attitude was.

Yeah, I think one thing: never take anything for granted. That was definitely one thing. And I think that everything that you have to look at it, every action has a reaction. And it was amazing the snowball effect of how everything was crumbling and how it had the knock-on contagion into everything else. And that was the astonishing thing. And I think it's easy, like everything in hindsight, looking back on something you could really see the faults of things. But I suppose the thing for me was how badly people had got exposed, and including ourselves. We were slightly exposed as well, but not as bad as others. You know, don't take everything for granted was the big thing that I always, you know, you have to delve into the detail, you have to understand. And that was the big thing. But like everything, in every crisis it creates opportunities as well. And I suppose the one thing that stuck out to me is, as bad as it looked at that point in time in 2008 and 2009, there was going to be opportunity on the other side. And I suppose the big thing that stuck out to me was the old way of doing things and the generation that had delivered on that was probably going to be wiped out by that financial crisis. And you know, it stuck out to me that once I got home and I realized how bad house prices potentially were going to fall and how bad it would get, you knew everyone was going to be wiped out. And I suppose what stuck out to me was, here's the opportunity. Things have to change now, and there will be demand for housing into the future, but the people who were there to do it are now going to be gone. And I suppose that's the way I came out of that, thinking of that. And you know, I look at that every day as everything is going to be that opportunity, same as other things that are happening across the globe today. Yeah, seeing the opportunity rather than the gloom and doom.

And it was very interesting. So I was called on a Thursday and said look, it was by an agent in Dublin, and just asked me look, this counterparty has been in with them, and this agent obviously saw us as being boots on the ground, we had a good knowledge of things, we were doing quite well. I suppose we were attractive, we were a much younger company. And they said look, this would be an interesting meeting, and they just gave me the name of the person and the company, and I had no idea who this was, never heard of them before. And hadn't paid much attention, of course when you start to put it into Google you start saying okay, right, what am I going in for here? And I knew they wanted to look at one particular asset. They had a big interest in one particular asset, and I knew a little bit about it, and it was a substantial asset. I wouldn't have been involved in it, but interestingly I knew it was one of the banks that had a massive exposure to it. And I understood it a bit, and I suppose when I went into the meeting I understood everything about the asset. And when they just asked me about it, I was able to give them a full debriefing. I suppose the way I summarized it is, if I was you, I wouldn't bother spending my money in here, you're going to be stuck on it for years. And they kind of took back and said, jesus, that's a bit strange. And that was just a fair assumption. I said these are the conundrums you are not going to get over anytime soon, and you're going to be looking, and I said there's much better opportunities out there. I suppose it was just, I you know, in fairness to the Oaktree guys, they do this day in day out, they meet lots of people. What they found very interesting was I had a different view of things and I thought about a lot of things. And interestingly, I suppose they said I had said something about IRR, and I think I'd related the asset to the weight of IRR or something, and they said that's the first time they ever heard a house builder talk about IRR. And I says, well that's how you're going to evaluate it in the end of the day, so why don't you get to the crunch, does it work or does it not? And they were kind of taken aback by that. And in fairness to Justin and a colleague at the meeting, I suppose we rambled on for probably an hour and a half, and I talked about different things and things that I'd seen and stuff like that, and I suppose I talked about where I thought the future would go and how things would pan out. And to be genuine about it, I only thought it was going to be an hour and a half meeting, I'd move on and they'd move on, things like that. But Justin followed up with me then about a few days after, he says look, I'd like to meet you again. And we did. We followed up. In fairness to Justin, he spent a lot of time in Ireland. He had pretty much been investing. He had tried to come in in about 2009 with Goldman Sachs to invest in McInerney's, which was the last PLC that had been in Ireland. They had a heavy exposure in the UK as well, and he tried to do that deal but unfortunately wasn't able to get it done because the Irish banks, the Irish banks were already going to get paid because NAMA had been set up, so they were guaranteed a certain sense in the dollar no matter what. So if you could not do that, there was no point negotiating it. So yeah, he'd been a bit disappointed. He really wanted to get into Ireland. He saw it on two fronts: he really wanted to play the commercial space in the office space, he had seen how it had evolved, how Ireland had started to become attractive, and he saw this as a potential opportunity there. And then obviously he had a long-term ambition on the residential sector. He really liked it, and they were trying to do it in the UK. You know, a lot of platforms on the go in the UK. They had Ontology in London, and then the Pegasus Life that was more a retirement living thing, and there was a lot of crossover there. So he liked the space. So I suppose we probably, to a degree I describe it, we dated for about four or five months. And then one day I was asked look, would you come over to London? I'd like you to meet the team, and Justin's boss was there, an eccentric character I have to say, and I hit it off with him pretty early. And he bought into the whole philosophy of what we're doing. I suppose they committed to putting 100 million into Ireland, not sure how they wanted it, not sure how they wanted in the end today what was the long term, but they could see the immediate future and I suppose that was something that they wanted to capture pretty quickly. So I suppose we struck a partnership. We would manage the assets for them, they would invest, we would match some of the capital across the board that we couldn't match to what they could. We were never going to have the same checkbook, but it was interesting. And I suppose we had a fair assumption of what we wanted to do and what they wanted to do. And then obviously as things evolved, and you know Justin obviously his timeline at Oaktree, he'd done 12 years when he left it, as he would say he had done enough at that stage, and he wanted to see what the rest of the world looked like. And I suppose you know, floating Glenveagh was a big opportunity for him. You know, engaging with the international community, the international investors, he had seen companies do it but he'd never done it for himself to a certain degree. So in fairness, that's where his real skill set was. It was actually talking to other investors, and his lawyer background easily lent itself to working out prospectus and bringing lawyers to the top floor, and he found that very comfortable. Whereas I suppose what helped me was it freed up my time then to concentrate on actually growing the business and concentrating on all those things. But you know, at a point in time we both knew Justin was the lawyer, I was the builder. He'd always said to me, I don't really know how to lay the bricks, but I'll do all the other stuff for as long as I can. And it worked well, it was a good partnership. And in fairness to him, I think look, he wants to go off and do his own things in the future, and he sees his opportunities out there.

Yeah, and we look at it very differently to a few people. We really believe it's all about the home you build or the product you produce, and land has only a certain percentage of that. And I always describe it as the pie with 100. The land represents 10 to 15% of that, your margin represents you know 15 to 20%, and then obviously the middle piece is the big element in the room, which is the raw building itself and the soft costs around that. I suppose that's something that we've really concentrated on more and more, and that's where really our drivers are. And I suppose it's very simply, it's just looking at the process involved in building the house, and do you require them? And I suppose more and more what we're leaning towards is, and this would be the philosophy in the business, that this is more a manufacturing business. And if you can make this a lean manufacturing business, it's raw inputs of land combined with all of that, you get out the other end of it a home. Yes, there's a lot of planning about where those homes need to be located, at what price point those houses need to be at, all of that comes into that. But the biggest elephant in the room to play for is actually the raw building of it all. And I suppose our philosophy is over the next number of years, bringing that mindset to the game where we can actually say look, instead of having 200 people work on site, why can't we get this down to 30 people on site? Why do we need our auctioneers to visit our show homes at all? Why can't we bring this to an online platform where the customer engages? And I suppose ultimately, what can we offer the customer down the road in the sense of how do we make ourselves different? And I suppose where we'd ultimately like to go is be the one-stop shop. When you visit Glenveagh, you can acquire a home, but we can sort out your mortgage, we can sort out your life insurance, we can sort out your furniture pack, etc., etc., etc. Our homes that we built will comply with whatever climate change agenda is out there. Bringing all that to work, and I suppose bringing a product that isn't efficient in its construction but meets the everyday needs of the customer. I suppose that's really where we're striving to go with this. And I think you can see that you know we've been able to scale up the business quite rapidly. We've taken from 250 homes or 275 homes to 844. Things were on a great trajectory before COVID has been a bit of a stumbling block, but I would describe it as a bad pothole on the road that we've hit. It hasn't punctured any tires, but on with the journey we go.

I think it helps you scale the business faster. So ideally, on our direct site, so on a normal development we would have about 10 to 12 people. So normally you would have all the site management on site, and then you'd have obviously an element of direct labor, and then maybe machine drivers. The rest then is broken into smaller packages that are broken into packages to subcontractors. And we think this is the best model because it helps us scale the business faster, it grows the overall workforce quicker, and it de-risks from a delivery side as well because those packages were never overexposed to one contractor. I suppose the difference with us versus a lot of other delivery partners is they bring in large contractors, and to a certain degree they're hostages of fortune to a certain degree. And it's interesting, like our subcontractor packages, we had a lot of pushback from say our plumbing contractors here. We came in with a different mindset. Normally in an M&E package, the subcontractor, the plumbing contractor, will supply all the product. So he supplied the labor of doing the house and then he supplied the heat pump, the sanitary, etc., etc. But we set up a central procurement department, and the reason we did that was tenfold because simply we looked at the amount of units we were going to produce a year, we could bring better buying power to the table. And by us controlling those packages and then letting the subcontractor tap into our suppliers, it reduced the cost on an ongoing basis. But the subcontractor, we were never overexposed. We could say, there's the labor, we'll supply all the product, you get on with the service required. There was a lot of pushback, but eventually they bought into it, and we're now seeing the success in the business.

It is, yeah. So we have, yeah, we've obviously a number of ongoing things. So we've a factory in Dundalk, it'll be to the north of the city. It's about, we bought the facility for about 5.5 million in total. And that has the capacity to produce about 1200 units per annum. This is the first step of it, and it's pretty much a simple timber frame factory at the moment. But what we want to do over a period of time is modularize it more and more, so more of the product that will arrive on site to a better degree is going to be assembled or will be easy assembly. And we're seeing the benefits of that. You know, as the government will ramp up supply here, our demand supply to be ramped up, you know we have the infrastructure in place to deliver that. We see this as a space to grow for us over the next number of years. Along with that then, we have an in-earth quarry that we acquired probably back in 2018. And there's a couple of big things that are happening in Dublin over the next number of years. The government intend to invest in the Metro North line, which will go from the city centre to the airport. I know a lot of people aren't doing any flying at the moment, but it's still on the ongoing, and it's going to be a big stimulus for government. And that is going to take all the capacity that's in the system at the moment to dispose of in-earth materials. And we're probably the only house builder now that has actual capacity in the system. So things like that, it's future thinking. Where do we need to invest and how can we control the supply chain as much as possible? So I'd say we're in phase one of it. I think it's going to be a number of phases, it will evolve as things move on, but I think it's a big opportunity, particularly where we want to scale this business to.

Yeah, and I suppose the big one that sticks out to me, well there's two that stick out to me. Obviously, and I suppose I look at return on capital employed. Obviously you've got NVR in the States. They're a phenomenal growth stock, they've been a phenomenal machine, they're really really efficient, and the size of the business is phenomenal. And there's others obviously in the US, I wouldn't be as familiar with the US because obviously it's you're not as close on the ground. But obviously in Europe and particularly in the UK, I suppose the one that has stood out, maybe not on their quality but certainly on their efficiency, have been Persimmon. And their model of being efficient in their land purchase but then at the price point that they're delivering their product. And I suppose I described it to one investor one day, when I look at the price point that Persimmon deliver their product, they're nearly a utility for the government to a better degree. The government needs them more than ever because certainly they regulate the market at the price point, but they dominate at such a scale as well. And I suppose I've just looked at them. Not everything would I replicate, absolutely not, but there's a lot of their business that I see a lot of benefits. And I suppose they're the biggest, they're probably the biggest now in the UK at this stage. They've weathered every period, you know, they never have to do anything in any financial crisis, they weather through. And I suppose to a better degree, they're nearly as necessary as food to a degree. They're required and they'll be supported to another degree.

Yeah, so a big thing we're rolling out, and I suppose dealing with COVID, and COVID came in, this was no one really expected to be the way it was. I suppose one thing that we had embraced is obviously the engagement on our online platform and showing and marketing the houses from there. Just a couple of things quickly. I suppose what we introduced quickly was the virtual viewing. And now that wasn't new technology, but certainly rolling that out faster certainly got engagement across the board, and our order books showed that. And the other thing that we introduced just on COVID was smart viewing. And I suppose this was a technology basically where we would have our show homes, we would introduce this package. So basically, you could come onto our online system, ask to view the home, and basically like I'm talking to you here, you'd arrive up at the home, you type in a code, the doors would open, the lights would go on, the heating would turn on, and you could literally walk around the house. And I suppose then we strategically position cameras around the homes, so we didn't physically have to be there with you. You could interact with us online. And a lot of our buyers really like that because it actually suited them really well because obviously with the pandemic you couldn't do one-to-one viewings during lockdown. But the interesting thing was what we really found engaging with, at times people want to come through so say seven or eight o'clock in the evening, maybe the kids are put to bed, and people want to go out and view a house, and maybe the parents come over to mind the children or the babysitter or whatever. That was, people could come out and get a freedom, and instead of spending 10 or 15 minutes with a sales agent, they could spend an hour actually absorbing the house, and it gave them a little bit more comfort. So things like that absolutely. That was you know, and I suppose having the ability as being a scale player but being able to invest that money early versus other competitors, you know was it an advantage to us. And then I think across the business, it's really we just look at how do you make this business simple. Don't make it complicated, take it back to simplicity. And we just look at processes. You know, with the likes of Aconex introduced across the business, and that's a construction management tool where the latest drawings are all uploaded, so any changes that are made are made across the board, and it replicates and it disregards everything below that. And we're seeing the benefits of that across the business. The biggest thing we've had to invest in that is actually training people in the skill set to know that. And you know, you have to have the culture here to do that. And I suppose then somewhere we've been needing is obviously drones. And like I know we get slagged here now and again, we have our own drone department. And I suppose there was at one stage there was more people working in that than there was in sales, and people were saying what are you doing with this, where are you going? I suppose we looked at it this way very simply. We examined a couple of things, and in fairness we got a very good guy in here at the start, and he was exceptional, he'd done an awful lot of work on drones. And we incentivized him to move this on, and in fairness he did. We looked at it and we looked at surveying a site. So typically a site of 30 or 40 acres, you go in your survey, it takes people three or four days to do the survey, and it can cost up to 50 grand to do it because it's all about generating this study afterwards. We were able to bring it back and we could fly a drone over our sites, and pretty much just at one point you mark out your spot and the drone would fly over. The drone could do it in a day, it didn't cost us very much. Things like that. We've also then adapted to bring the drones on further. So the drones now can fly over our sites once a week. They go out and they fly over the site, and they can measure the digs and the earth movements on site. So when our QS or commercial team are negotiating packages with their subcontractors or issuing and filing payments, they can actually measure. The subcontractor might have his amount in, but because our drone footage has been flying over every week, we can measure against that. So again, we don't have to move our QS teams onto site. So we see the benefits of that. We can do our legal boundaries now with drone footage because the drones can pick up exactly where the boundaries are, and you can mark it out on the map. So you're starting to see all the benefits of that. I suppose then what we try to do is look at the technology in our machinery. And obviously we use, you know, across the business now we're trying to push all battery-operated tools, so remove generators and things like that. That has made the workforce a lot more efficient because they're not spending 20 minutes or 30 minutes a day dragging generators around the site. Now with battery tools, they get out of their vehicle and they get to work straight away. Our online inductions are all run online. You know, you don't have a person sitting down on a one-to-one basis. He does it the evening before he goes on the site, and he's fully aware of what he does. And then finally, I suppose GPS on the big machinery on site. To give you an example of what this is, and probably will become at one stage in the next number of years, I won't be surprised if the driver that's in the digger is removed. And the technology is there today for GPS. So instead of having to go out and mark out where the building is, we send the coordinates to the machine, it picks it up, and it digs as per the coordinates. But the other benefit then is we can set the dig level of the actual digs itself. So if the subcontractor, the person driving the machine, hits bad ground, they can't exceed a depth level unless we give them the clearance to do it. So when you're actually measuring all your digging, unless you've got permission from the business to do it, you couldn't have exceeded a level. And I suppose all of those things are a way of controlling costs. And I suppose that's embracing the technologies that are out there, but it is now starting to move rapidly. And I suppose that's the good thing I see.

Yeah, I suppose there's a couple of things. First of all, the supply demand imbalance in Ireland is the first thing that's in your favor in the sense of, you know, this country needs 30,000 houses or 35,000 houses a year. We're building 15, 16 this year, obviously with the pandemic. So there's a huge amount of white space out there, there's a huge market share you can grow into. So that's the first box tick. I think simply what we're trying to do across the business is, if you want to scale up to that scale of delivering houses, you need to standardize not only your house but standardize the processes to deliver your house. And that's simply what we're at day in day out now. Has it been as fast as you want? Absolutely not, but it is coming through the system. I think that's simply looking at how many house types have you, what's the biggest demographic you can feed that house type into, and then how do you simplify the processes to do that. And I suppose that's an ongoing process that we see in here. I think it's very simple, you know, if there's a market dynamic out there that wants a certain house type at a certain price point, how do you make that as efficient as possible and how do you make the process of producing that as efficient as possible? I suppose that's the real drive in here. So I suppose we don't fear delivering. I know it looks a big number, and we think it's just simply replicate.

The business on an ongoing basis and grow into that. I think the numbers you can kind of see that is we are on the growth path. Over time, we'll prove that we'll get there. When you get to the scale, the real benefit is when you become the scale player, the real opportunity then is what can you squeeze out of it when you get to that site? How do you dominate the position? That's really where we want to go, how do you become the market leader where others can't go?

And I suppose the big thing for us on the partnership side is obviously we've done a lot of talking about this for the last 12 months. I know investors have been very patient to wait to see the first one. But the ironic thing is you do an awful lot of work up front with these projects. You can spend something like 12 to 18 months to actually invest in this, and we need a team working on it, four or five people consistently working on these projects. You do all your designing up front for the product you're going to produce, you do all your build programs up front, you do all your material specs et cetera and your pricing. I suppose what's attractive for us is obviously it's going to be a big space. In the recent budget that government announced, they're committed to delivering another 10,000 units of social housing next year, and it's a very ambitious program by government to deliver social housing. There's a huge debt the market out there. The government sees that there's over 100,000 people on the waiting list for social housing, so it's a huge space. I think the big benefit for us is if I simply take the project that we've been successful on, it's a project of 53 acres. It's in total housing and apartments, it's going to be 850 units, and we have six months to lodge an application when we sign the final documents and we get it into production. But the build program on that site is going to be quite aggressive. You'll have to deliver it over a four to four and a half year period, so you're going to be producing about 200 units per annum.

But I suppose the big thing is the payment for the land section of that. We didn't have to pay for that up front. We pay on a phase basis at a discount basis because ultimately 50% of this product is de-risked because it goes back to the state. 25% will go for social housing and 25% will go for affordable. The benefits we see is, first of all, we don't have that big land spend. We get access working with the local authorities and government on that front. Secondly, a large element of the project is de-risked because it's sold back to government. We see the benefits of really tying it into the two segments that work with the business at the moment: suburban housing is going to be in a lot of these developments, and urban element of apartments is also going to be on this. The big thing for us is proof of concept. The government are only going to the table with this at this stage; they've been quite delayed. But the government have committed to the Land Development Agency to deliver about 150,000 plots of land into the system over the next number of years. So this is a big space to play for. If you have a proof of concept where you can show to the government 'look, we're well capable of delivering this, we can deliver to the scale you want, at the speed you want, at the cost you want', I think that's a huge opportunity for this business to have a natural partner to work with. If you look at companies that have done this really well in the UK, you look at someone like Countryside, where nearly 80% of their business over the next number of years will move to partner with government. So we see this as a big opportunity. Going back to that return on capital employed, that will be a huge driver of that into the future. Ultimately, as I outlined at the capital markets, where I could see our land bank over the next number of years, if we're delivering say 3,000 units per annum, today we've about 14,500 plots of land that we've fully paid for. But over the next number of years, if the partnership business was a success and could take off, we could free up a lot of capital on that side of the business and we wouldn't have to invest in it, so it drives the entire returns for the business.

Yeah, and I suppose two things. I think the big thing for us is making sure that our money is working for us at all times. The business isn't there at this moment in time; it's growing into that. It's about returning, making your cash work as hard as possible. The ways we look at investing: if we buy a field today, how quickly can we get into that field, how quickly can we exit? Just spin a focus sometimes on being focused on margin. I actually think you have to look the other way: if you can turn your money at twice the pace, you can take a lesser margin because you're doing it at twice the momentum. So that's the focus over the next number of years. This business will become extremely cash generative. Obviously we made the commitment that we would take €100 million out of the net cash position and invest in land by 2021; we're well on the way to doing that. Ultimately, once the business has excess liquidity or excess capital, it will return to shareholders. How that policy is deriving, there's a couple of things: is it a balance between a dividend and a buyback? It's a judgement in a period of time. But the most important thing you have to do for investors is give them clarity and give them a line of sight. If you're heading on that path, how long you'll be on that path and what way you do it. There's no point what I wouldn't like to do is 'oh guys, we found an extra' (using hypothetical circumstances now, with €50 million) 'we're going to troll back to shareholders'. I would actually like to show shareholders a path of a consistent return, whatever way that is made up. You've got to look at the futures as well: are there opportunities where you could expand it greater? Are there opportunities where you could expand into other markets? It's evaluating the value term of that at that point in time. So it's better not to have a predetermined policy; it's better to keep an open approach and evaluate your options at that time.

Yeah, so they're an eclectic bunch. Sometimes I describe them and there's a good blend. Something that I strived for was, first of all, the culture that we want to embrace. We have a huge opportunity in front of us. I want you not to fear it, I want you to embrace it. I do say to the guys and the girls sometimes: you will make mistakes, I will not punish you for making mistakes so long as you don't replicate the mistakes. Everyone makes mistakes. I would always like them to lean into it, not lean away from it. That's what we strive to do. It's a very young management team across the board. I know I look into the 50s here or something, but across the board it's quite young, quite dynamic. The other thing: I often spoke with people, I go out to meet them and interview them, and they'd say 'oh you have to do it this way', but I'd always look to the people 'but you can do it this way' and that would always make me attractive to some of the people that we would have here. There was an element of Bridgedale staff that came across with the IPO. We've enhanced that, we've brought people from different sectors: we brought people in from CBRE, people from Savills. I think there's a very good mix and it's a culture of we can see what's in front of us, we want to go and do it and get on with it. That's pretty much what you can see. They work hard and they like it too. I do challenge them. I love seeing the ways they work against each other sometimes, a competitive tension that drives people to strive further. So it's a very good mix.

I've been very lucky, in fairness. I have people who are now probably coming up to 10 or 15 years with the business. I've seen how they've grown with the business. The big thing for me is trying to get people under them as quickly as possible so they can teach the next generation and bring them with them. That's very much what I like to do. I probably had one of the youngest project managers in Ireland, who was 28 years of age, running one of our largest projects. My view on him was: how do I get other people now in with him? I remember he took on a 33-year-old and said 'what am I going to do here?' But it was to get into the mindset: you need to bring the next generation with you, show them what we taught you, and we can replicate that across the business. That's what we try to do on an ongoing basis. It doesn't always work; you'll always find someone that doesn't work out, doesn't believe in it. But ultimately we're all in the same boat.

Yeah, I do watch it. It's interesting. The big thing we're investing in in the business is obviously training. You've got to get training right at the top level first because if it's not right it can't flow down. I do always kind of pitch it two ways: I ask the manager 'what does your team need, what training do they need?' But then I reverse it the other way because I go out to the team and I ask 'what training do you need?' It's interesting to see the dynamics between the managers that are managing the people versus the people that may be under that person, and that tells me a lot about how that person is getting on. The board sets out the KPIs for the business on an annual basis, and it's not just related to revenue or margin, it's also about customer satisfaction, health and safety. It's good to have that balance because in a business that's quite risky because you have a lot of staff and a lot of risk, it's good to have that balance. Everyone's responsible, but also everyone understands that each department has to work together to make it a success. Tying that all in together is probably the most successful thing. We carry out reviews on an ongoing basis. We try to enhance it. The other thing is we're trying to show career progression for people: you're doing this today but there's an opportunity as this business scales up that you could be doing this. We're trying to incentivize that across the business.

Yeah, it's a couple of phenomenons. You have to remember where Ireland was and where the government was, where regulators were. Up to 2006 we were probably building about 80,000 units a year, so as a country we should be well able to do this. It seems like everything at this moment in time, the pendulum swings one way and it swings the other way. It's now starting to swing back, and if we got to a midpoint it would be very good. It is definitely on the right trajectory. First of all, you have a dysfunctional credit system in the sense of supporting builders. That's why I really liked the journey of having sustainable capital or permanent capital; I can really see the benefits of that. I look at a lot of the competitors on the ground and they simply can't get access to credit, or if they get access it's at very expensive money, so that doesn't work for them. They don't have the scale behind them for where we're intending on going. They can't get the process in place, so their cost base is simply more expensive than us. Regulation ironically actually hurts the smaller player more than it hurts the big player. Ireland obviously came through not only a financial crisis, but the government looked at a lot of things: planning policy, building policy, building control. A lot of regulation has been implemented over the last number of years, probably some more necessary than was required. But the ironic thing is instead of helping the smaller player, it pushes the smaller player out of the market. Where we see the benefits: Irish Water is the utility company you have to deal with for all your water connections. We have a team of six people dedicated to dealing with them day in day out. If I was a player building 50 houses, I'd need one person to deal with them, and I have no dilution of cost there. So for the small player, that's very difficult. So I think that's been one prohibitor.

I think obviously there's been a change in this government that has been introduced, and housing is a key pillar for what they're going to deliver. They can see where the inefficiencies are. Things like the macro-prudential rules that were brought in in 2016 or 2017 to prohibit banks from excess credit expansion, ironically what it's done is it has pushed a lot of people who should be in the housing market out of it. Now the government sees the problems there and they see how they're going to support that. I think there's a lot of initiatives that are being rolled out. I think this government are really alive to the issues in front of them. They also realize they have a short period of time to do this; they need to make changes really quickly. Governments usually survive for four or five years, but unfortunately housing takes two to three years before you see the initiatives you introduce come true. This government can't wait two or three years to introduce those policies; they have to act quickly, and I think they are in that formula. I don't think land is an issue at all. I think land is not going to be an issue into the future. I think the methodology and how we do things has to change. The industry is moving there, but also the government needs to move into the space as well. That is slowly coming true. Will we get back to building 33, 34,000? Absolutely, it will take time and it will take a journey. The problem for the government is they may not have that time or that luxury.

So I think absolutely you can do it. I have no fear of it. I think it's simply coming to the mindset of how you should do it and how you're going to do it. The naysayers that don't want to do it or don't believe it can be done are also of the mindset that they shouldn't share the pie with someone either, and that's where the philosophy breaks down. If I look at a lot of small developers, they believe they need to have a large stake in the pie, but they have no pie at all. Whereas I'd be of the belief a small share of a really big pie is better than anything. They're not of that mindset and that's their biggest problem. Sharing that is really difficult. The ambition of building that, and to a certain degree they are happy to knock us, which is fine. Where we've come from: if you want to do this and you want to do it right, you need to structure it this way, and that's the benefit for ourselves and Cairn. So sharing the pie, it can be done as long as you share the pie and build it together.

I think probably yeah. If you look at the fundamentals in the UK, there's a couple of fundamentals. Obviously there's the dominance of the PLCs; they're the dominant player in the market today. The PLCs have done really well in giving a path to government what they need to do, and the government have followed a lot of those steps. The other thing the PLCs in the UK have really shown is their discipline in land buying. In the previous crash they got overexposed, but definitely all the way through this they've done that really well, and that land market has been really controlled to a certain degree in the sense that input costs haven't changed as much as in previous cycles. So it's been that discipline. They've been so focused on return on capital, particularly the really good operators, that brought that discipline to the table. Ireland is probably 10 to 15 years behind that space. Where they were in 2012, 13, 14, we're just moving to that space now. Both ourselves and Cairn bring that to the table: we understand how we evaluate, how we look at a piece of property. You say 'this is how we're going to do it'. I've seen land buyers who have said 'you're mad, no it won't take', and I've seen them having to be run out of the building to say 'that's not for us, good luck, get out'. You have to bring that. I remember I stood up to one developer one day. The guys were all in the room, this was a pretty heavy developer in the day, very well respected. We were buying a piece of land off them and he came in with a list of demands, and I said 'there's the door, get out of it quick'. The lads were astonished 'you can't be serious'. I said 'absolutely, if you don't stand up to him now, he's going to bully his way'. Ironically, three days went by, he rang me up again he says 'I'd like to come and see you again'. I said 'don't even waste your time, not interested unless you've kept some mindset'. He said 'I'd like to meet you'. We eventually got to a deal and wrapped it up in six weeks later. You just had to bring them to that point. It was an education for the guys in the room as well: 'guys, remember who you are here, remember the position you have to protect, and do it that way'. In fairness, that's being rolled out across the business now.

Yeah, there's a number of things when you look at Ireland. Ireland has changed. The biggest change for Ireland has been the European Union; simply going into the European Union opened up mass markets for Ireland. Having that federal structure to a better degree broadened Ireland. Having the single currency has been a game changer. Our 12.5% corporate tax absolutely has been a benefit to Ireland and the attraction of multinationals. You have Google, Amazon, Facebook, you name them, they're here. The interesting thing is sometimes I describe Dublin as a bit like Seattle or San Francisco: once one comes, they all follow because they all work together, and they all rob talent from each other. That's why they're always located in a hub together. That's been the big expansionary thing about Dublin: the IT sector, what they do and how they interact. Other sectors that have really been, you look at our pharmaceutical industry, it's on a phenomenal growth path and has been a real benefit to the economy overall.

The big thing is, as I say, every action causes reaction. We made a massive investment in education 10, 15, 20 years ago, and you've seen the benefits of that coming through the system. Look at our population dynamics: we're an extremely young population, a growing population, one of the fastest growing populations in Europe. When I started working first, our population was 50% below where it is today, and you can see that trajectory. We've also been a welcoming society. The social fabric holds really well. When you come into Ireland, you're not only welcomed but you are here to stay. One of our largest growing populations is the Polish population; they came here in 2005 and 2006, and it has grown over the years. Where Ireland ultimately could get - I know it's an open economy, but the benefits you have to look on the other side: it's an English-speaking economy. When Brexit does eventually happen, Ireland has to surely see benefits. Yes, there are things that are going to be hurt, but there's also upside. I think Europe has changed its mindset as well from where it was to where it is going. In 2008 and 2009, it was all about debt control and Germany telling the rest of us what to do. The whole dynamic has changed versus this pandemic: Europe realizes the issues that happened all the way through the crisis and has changed its mindset. It now needs to invest in its economy, bring its economy and society to the next generation. A couple of things to the fore: obviously climate change, everyone realizes what it is and what it's going to do. Europe is in that strive. We need to invest. The shackles are being thrown off. So I think all of those - ironically, what I would say is I can see all the benefits for Europe because it has its mindset where it's gone. If I was to look at Britain, I can't see that far at this moment in time; it is heading in the opposite direction.

Yeah, I'll deal on the sales front. Obviously we have that supply-demand imbalance which is now greater than ever. The government trajectory and positivity around the government has been a positive for the housing market, giving a clear and decisive message. The ironic thing about the pandemic - and I know this might sound a bit - housing to a certain degree has been left behind for the last 10 years. People didn't believe in buying a house; they believed in renting. The view was 'let's spend our money freely, go on holidays, do all the nice things'. The ironic thing is that the pandemic has woken the customer to how important having their own home is. What we're seeing on the buyer front is people who probably sat on the fence for the last four or five years, a renter in the market, has now suddenly become a buyer. They need a home because their home is not only where they live, it's now where they work, where they entertain themselves, it's everything. The investment has gone across. The ironic thing across the entire housing markets now in continental Europe and the US, not only are people investing in new homes but they're also renovating their homes. People are now seeing the value of their home on every front. That discretionary spend that went into travel, hotels, pubs, restaurants has been taken off the table and is now invested in one front: the home, and obviously IT to support that.

Yeah, that was the thing. What we concentrated on was obviously the affordable end of the market and the product we could supply. Most of our stock lent itself, a couple of tweaks here and there, and the home is quite adaptable for people's needs. The biggest thing we're seeing across the board is people want to buy a three-bedroom or four-bedroom home; that's the main goal. They need their own space but also want to be in a community. The big thing we're seeing, just some anecdotal evidence, they're not buying in an independent decision; they're talking to their friends and colleagues. It's almost a herd mentality. It's not one person coming from Google, it's three people coming from Google. We're actually seeing that in the rental market as well; we are presently renting out a certain amount of stock and we're seeing the same thing. Do I think it's here to stay? I think the pandemic did something to awaken people's love affair with property again and owning their own home. They've realized how important it is. I think you're going to see that feed out over the next number of years. I think it is sustainable. The good thing for us is we are not where we were in 2005 or 2006 in terms of supply dynamics, and that's the biggest thing we need to watch. Interest rates are coming down to all-time lows; they are still high in Ireland compared to European average but on the right trajectory. The biggest thing for me is everyone is concerned about unemployment. The unfortunate thing about this pandemic is it has probably affected the most vulnerable in society, people on low-paid or unsecured jobs. The governments are going to have to step in and support those people. The Irish government ramping up social housing will take care of an element of that, but that should spread across globally. When I look at the majority of our customers, their job status hasn't changed, their pay circumstances haven't changed. The only thing is they're not in the office five days a week. That's the biggest thing. That's the market we're feeding into. Ireland having such an IT exposure has a massive demand for that.

Yeah, that's our ambition. If we can come to a system where our production of our house, you can't get the entire product mobile, but where a large element of it can be produced mobile, that gives us a huge opportunity. Certainly there's a lot of white space in Ireland. Then there is potential, if we are a success here, are there other markets that may be attractive to our model? I think there is, but we need to get conquered here first to make sure we get it right. We'll look for the right opportunities where our philosophy would match in with what we do, how we can manage it. As you move through markets, there are language risks, different regulations. You need to take all that into account. Over time, it's certainly something we'll examine. We have plenty of road in front of us at this moment in time, but I wouldn't put it off. It's just picking the right market.

Very hard to do that, particularly when you're a founder and CEO, you're not sure how to give the correct answer. For us, the most important thing is, if I look at it from my mindset, how can I create a sustainable business? How can I create a business that is sustainable and can evolve to what will be in front of it? That would be the biggest thing. Scale is it 3,000? Is it 5,000 units? It's really what is sustainable, what can this business grow into? My ultimate goal would be how sustainable is this business, how does the product evolve over the next number of years? I look at someone like Amazon, what they've achieved in their space. They went out 20 years ago to achieve, said here's how we're going to go about it. They went about it by monetizing it in a way that no one else could. When everyone else was chasing margin, they chased no margin, they chased market share. When they became the dominant player, then they could squeeze it out. In the same way, to a degree we couldn't live without Amazon today. 10 or 20 years ago we said we can't live without bricks and mortar; look how it has evolved. You just have to make sure that the culture evolves. House building and the house product itself is probably one of the last frontiers that has yet to be conquered. The product you could deliver to the customers and the ways you could deliver that product could be in for huge change over the next number of years.

No, I think that's an opportunity. There's a lot of people who have started modular or tried to start it. A couple of the UK developers tried themselves and failed, not failed but it didn't work for them, they couldn't find efficiencies. Ultimately, to do modular you need to standardize your product, replicate as much as possible, make it simple. The other thing a lot of modular failures have been is they go from the outside in: they see this is how the product has to look from the outside. You have to come from the other side: what fits into modular from the inside, and then go out. Certainly I see it as a space that we can go into. Do you have to get to total volumetric, 3D volumetric? I don't know, there's different aspects you can look at. You can look at the supply chain, how you manage it as it arrives on site. Ultimately it has to be moved on site. The biggest thing is transportation of the product. There are a lot of ways you can do it. Timber frame for us answers the immediate question. The other thing you've got to look into is what is going to be sustainable into the future: climate action, carbon taxes, etc. Does your product have to evolve into that? I do give our sales team a lot of credit; they don't make this enough of an issue: the house we produce today is an A-rated home. Look at a house produced 10 or 15 years ago with energy efficiency; the utility cost for a second-hand house versus new house is nearly 60% today, but customers don't realize that. So there's a lot of things you can bring to the table. There are going to be certain things you can do over the next number of years, but the space isn't totally defined yet for us.

Yeah, I would have said at the start of all of this that being in the public markets and seeing the companies that were in it would have been daunting. I left school quite early. The ironic thing is I learned more, and every day I come in I realize it's a school day. I thought two or three years ago I knew everything. When I looked back, I knew nothing. I learned. That's the thing: the day when I can't come in and see I can't learn more is probably the day I should move on. I want to create that business that is sustainable, make a difference to everyone, not only the shareholders but society as a whole. It's a huge opportunity. The housing market and house production is probably one of the last frontiers that can change dramatically. That's something I get excited about. It's a space we can really grow into. I'm not ego driven. What I would like to do is hand it to the next generation so they can bring it to the next leap. I think there's a huge opportunity out there; all the tailwinds are in the right direction for us at this point in time.