It wasn’t housing (although that did very well), but the office and industrial property assets of Mirvac (MGR) were the drivers in the company’s earnings topping the $1 billion mark for the first time in 2015-16.
In fact it wasn’t so much the operating performance in the company’s various divisions, but the revaluation gains from the surge in property prices across the country and especially in Sydney and Melbourne.
The company revealed total revaluation gains of $577 million from the industrial/office and retail business. That was up $417 million from 2014-15 – a trebling from the $160 million recorded in the year to June 2015.
The Sydney-based real estate group reported a 42% jump in revenue to $3.05 billion for the 12 months to June 30 from 2014-15.
The company’s office and industrial assets which contributed $796 million to a total statutory profit of $1.033 billion, which was up 69% on earnings the year before. That figure includes revaluation gains in its office, industrial and retail businesses). First half earnings were also up 69%.
Operating profits up a more sedate 6% to $482 million from $455 million in the year to June, 2015-and a more accurate guide to the company’s performance than the figure including revaluations (which could very well disappear in the next year).
Earnings from residential land divisions business jumped 50% to $196 million from the year before’s $130 million, and profit from its retail arm jumped to $243 million.
Residential settlement defaults – the big worry for many property developers exposed to Asian buyers – were less than one per cent.
The group said it negotiated 258 Foreign Investment Review Board settlements (on behalf of offshore buyers) and secured residential pre-sales for the year of $2.9 billion, up almost $1 billion on the previous year.
The largest volume of sales were from the Woodlea subdivision on Melbourne’s north-west and its Googong project in NSW. The office portfolio was boosted by recycling assets with sales of $1.6 billion since 2014. New developments were added at 200 George Street in Sydney, Treasury Building in Perth, 699 Bourke Street in Melbourne and 8 Chifley Square in Sydney.
In its residential property business Mirvac said “We anticipate strong earnings growth in our residential business in FY17, with an increase of over 15 per cent in expected lot settlements to over 3,300 lots. Importantly we have secured 84 per cent of expected development EBIT for FY17 through pre-sales, and 55 per cent of FY18.
“Our strong residential pipeline provides us with more than 14,000 potential lot settlements over the next four years, which gives us excellent visibility of future earnings, and allows us to continue to be selective in where and how we acquire new sites.”
Mirvac said operating earnings were 13 cents a security, at the top of its narrow 12.9c-13c for each security guidance.
It also met its most recent forecast for distributions per security of 9.9 cents with distributions totalling $366 million for the year.
“We have delivered another solid result for FY16 at the top of our guidance range, reflecting our well defined urban strategy and the substantial transformation of the business over the past four years,” Mirvac chief executive Susan Lloyd-Hurwitz said.
The company tipped earnings per share growth of around 10% for fiscal 2017, with an EPS guidance range of 14 – 14.4 cents for each security.
Mirvac securities rose 3.2% to $2.22.
