This article is from the Australian Property Journal archive
MIRVAC has posted a 8% slump in interim profit due to a decline in residential earnings, which is skewed towards the second half of the year.
The group’s statutory profit of $465 million for the six months to December 31 down from $508 million in the previous corresponding period, due to lower property revaluation gains as well as the timing of residential lot settlements.
The operating profit was 7% lower at $215 million from $230 million, representing 5.8 cents per stapled security. Mirvac announced a half-year distribution of $186 million, representing 5.0 cents per stapled security.
Residential earnings fell 49% from $69 million to $35 million which reflects the 80-90% settlements timed for the second half of the year. Mirvac settled 735 residential lots, with a further 429 lots settled in January 2018 and it is on track to settle approximately 3,400 lots in FY18.
Defaults remained below 2%, in line with historical averages.
Mirvac also achieved $2.9 billion of residential pre-sales, up from $2.7 billion at 30 June 2017.
CEO Susan Lloyd-Hurwitz said although sales activity has moderated to more normalised levels in Sydney and Melbourne, consistent demand remains for well-located and quality products.
“A number of our forward-looking projects in Sydney are also set to benefit from new transport infrastructure, and our ability to buy at the right time has ensured we can release approximately 13,000 lots over the next four years, while taking a prudent approach to restocking our pipeline,” Lloyd-Hurwitz said.
Office and industrial earnings increased by 4% to $173 million. The portfolio occupancy rose to 98.1% with a long WALE of 6.7 years. Over 50,250 sqm was leased during the period, with leasing spreads of 12.2% and average incentives of 21.4%.
“Our strategic overweight to Sydney and Melbourne, and to Premium and A-grade assets, is supporting strong like-for-like NOI growth of around 10% across the office portfolio, as we create one of Australia’s youngest and lowest capex portfolios. Pleasingly, we are starting to see income accelerate following the low point in earnings in FY17.
“We have an excellent future earnings outlook, with our recently completed office developments and a strong forward-looking commercial development pipeline that has the potential to deliver around $60 million of additional annual NOI, $160 million of development profit and $200 million of NTA uplift by FY21,” Lloyd-Hurwitz said.
Retail earnings were 3% higher at $83 million. Total sales productivity grew to $10,149 per sqm, and comparable specialty sales productivity increased to $10,034 per sqm, up from $9,864 at 30 June 2017. The portfolio achieved comparable moving annual turnover sales growth of 3.7% and comparable specialty sales growth of 5.2%. Over 29,000 sqm of space was leased with average leasing spreads of 2.2%.
“While conditions in the retail sector remain challenging, our urban focus, along with a high exposure to health, tourism and education markets, and a focus on experience-based retailers, ensures our portfolio remains relevant and resilient,” Lloyd-Hurwitz said. “The strategic positioning of our portfolio is reflected in the strong metrics we’ve maintained in the first half of the year; our specialty sales growth of 5.2%, for example, is well ahead of our peers.”
Mirvac reaffirmed its operating EPS guidance for FY18 of between 15.3 cents and 15.6 cents per stapled security (representing growth of between 6 and 8%), and distribution guidance of 11.0 cents per stapled security (representing growth of 6%)
“We remain confident in our ability to deliver operating earnings growth of between 6 and 8% in FY18. Our urban strategy, diversified and integrated business model, and our proven asset creation capability ensures we are on track to deliver strong growth in FY18,” Lloyd-Hurwitz concluded. “We remain confident in our earnings outlook, with clear visibility of future cash flows in FY18 and beyond.”
Australian Property Journal
