Mirvac has delivered another strong performance in the financial year 2016, reflecting the strength of our well-defined urban strategy and the substantial transformation of the business that has occurred over the past four years.
We have significantly improved the quality of our office, industrial and retail portfolios through our unique asset creation capability and a targeted acquisition and divestment program. Our residential business has benefited considerably from our disciplined approach to allocating capital and is now delivering strong earnings and solid returns, with a robust future pipeline.
With a strong focus on capital management, the Group’s gearing was at the lower end of the target range of between 20 and 30 per cent, and we priced AU$536 million US Private Placement in June this year, which, once settled, will see the weighted average debt maturity increase from 4.0 years at the end of the financial year to over 5.0 years. The strength of our balance sheet means we will continue to have the flexibility to grow the business in the future.
We have done a considerable amount of work to transform the business over the past four years, and this has positioned us extremely well to deliver growth over the next three years, and importantly, long-term value for our securityholders.
Our integrated, diversified and focused approach, which is at the core of what we do, is underpinned by our expertise as a creator, owner and manager of urban assets, as well as our deep understanding of our customer. Our multi-sector exposure allows us to flex our activities through cycles, and our unique asset creation capabilities allow us to extract value through redevelopment, repositioning and rezoning opportunities. In order to continue delivering on our strategy, we maintain an appropriate capital structure by prudently managing our balance sheet and leveraging third party capital. You can read more about our strategy here.
Executing against our strategy, we have delivered outstanding results in FY16, including a statutory profit of over $1.0 billion and an operating profit of $482 million. The significant increase to our statutory profit was driven by a $580 million revaluation uplift across our investment portfolio, and our solid earnings growth of six per cent was supported by a record number of residential settlements for the year.
Within our Office & Industrial sector, we delivered an operating EBIT of $358 million, a decrease on the previous financial year as a result of divestments in FY15, although this was partially offset by assets we acquired. Within our urban Retail portfolio, we delivered an operating EBIT of $117 million, again, impacted by asset sales in FY15 and offset by acquisitions and completed developments; and we are pleased to say our Residential business delivered an operating EBIT of $196 million, driven by a 24 per cent increase in residential lot settlements and gross margins above our target range.
Our commercial and residential development activities delivered a ROIC of 14 per cent in FY16, well ahead of our FY17 target of 12 per cent, and we paid distributions of 9.9 cents per stapled security, a five per cent increase on the previous year.
We have restructured our segment note reporting to better complement the sector-focused organisational restructure that was announced in June last year. Our aim is to simplify the way we present our financial results to the market and deliver greater transparency across each division. You will see the changes to our reporting structure in the pages in the full Annual Report document.
The solid results we have delivered in FY16 clearly demonstrate the successful and ongoing transformation of Mirvac to an urban-focused property group, as well as our ability to maximise the value of the assets we own, manage and create.
Over the past four years, we have carefully positioned our investment portfolio towards key urban locations. Our office portfolio, for instance, which comprises 93 per cent of Premium and A-grade assets, has an 81 per cent concentration to the Sydney and Melbourne CBDs; our industrial portfolio has an 85 per cent weighting to key logistics nodes in Sydney and our retail portfolio is 87 per cent weighted towards densely-populated urban areas.
Our residential business is likewise largely overweight to the stronger performing Sydney and Melbourne markets; however, we still see the value of certain key locations in Brisbane and Perth.
This urban focus has helped to deliver a strong performance across the business, with positive metrics and strong leasing activity across each of our investment portfolios and a high level of sales in our residential business, demonstrated by a record $2.9 billion of residential pre-sales on hand as at 30 June 2016.
We have continued to demonstrate our asset creation capability with the completion of the Treasury Building in Perth; the Stage 2 expansion of Orion Springfield Central in Springfield; and 200 George Street in Sydney, Mirvac’s new Sydney headquarters. Underpinning our ability to create world-class assets is the Group’s unique integrated model, which allows us to manage each stage of a project in-house: from site acquisition, to design and construction, leasing, sales and marketing and asset and portfolio management.
The move to 200 George Street in July this year was certainly a highlight for the business. A truly remarkable building, 200 George Street, known as the EY Centre, showcases our ability to maximise the potential of our assets, and with teams from all across the business involved in the delivery of this project, it is a true representation of the integrated model at work.
Another key strength of Mirvac is our ability to adapt to the property cycle, acquiring, divesting and developing at the right time. In FY16, we acquired $370 million of assets across the office, industrial and retail sectors, ensuring that the assets we acquired were either those that we were confident we could unlock value in, such as Toombul Shopping Centre in Brisbane, or assets that will provide us with steady, growing and uncomplicated returns, as with the high-performing East Village in Sydney, in which we have a 50 per cent interest.
In a period of strong capital demand, we disposed of over $880 million of non-aligned office and retail assets, further improving the quality of the portfolio as we continue to position the Group towards key urban locations. Our successful divestment program has allowed us to allocate capital more efficiently within the business.
Attracting third-party capital remains a focus for the Group to allow us to continue to grow our business, and in FY16 we signed agreements with two significant capital partners, Ping An Real Estate and China Investment Corporation, within our Residential and our Office & Industrial businesses respectively. We will continue to focus on leveraging third-party capital in each of our sectors to grow our portfolios, reduce our risk and maximise the strength of the integrated model.
We could not do what we do without our people, who continue to be our most valuable asset. A number of initiatives were implemented across the Group in FY16 to create long-lasting and beneficial change in the way we work and enhance employee engagement. These initiatives have included giving our employees the ability to choose when and where they work and ensuring they have access to the technology to enable them to do so. We are committed to providing all staff – from our office workers to our centre management teams and construction workers on site – with the opportunity to incorporate greater work-life balance into their lives.
Our continued focus on providing our people with a diverse and inclusive environment continued during the financial year, with a number of initiatives rolled out. Pleasingly, our work in this area was recognised with the PCA's inaugural Diversity Award, as well as an 'Employer of Choice for Gender Equality' citation from the Workplace Gender Equality Agency for the second consecutive year.
Leadership and career development have also been areas we have invested in throughout the financial year, with a number of programs aimed at enhancing our leadership capabilities and employee development opportunities.
Our This Changes Everything sustainability strategy has continued to deliver sizeable benefits to our business, and our Innovation program, Hatch, is facilitating a new way of thinking and a more inclusive workforce. As always, we have remained committed to ensuring safety at Mirvac is a top priority, and our Work Safe, Stay Safe initiative continues to be embedded in our processes. We are now looking at ways we can further enhance our HSE strategy, with an aim to launch a new strategy in the next financial year.
We have made significant progress in transforming the business over the past four years, and we are optimistic about the future performance of the Group. As a result of our healthy balance sheet, high-performing investment portfolio and strong residential business, we are targeting EPS growth of eight to 11 per cent for FY17, and a three-year average Group ROIC of nine per cent or more.
Importantly, we have a clear and ongoing focus to position the business in line with our strategy to ensure we can deliver long-term value for our securityholders for many years to come.
We would like to take this opportunity to thank the Board, management and all Mirvac employees for their hard work and dedication to the Group, and congratulate them on another successful year. We would also like to thank you, our securityholders, for your ongoing commitment to Mirvac and we look forward to delivering value to you over the long term.
John Mulcahy, Chairman
Susan Lloyd-Hurwitz, CEO & Managing Director