Mirvac’s urban strategy delivered excellent results in FY17, with operating earnings up 11 per cent and distributions up 5 per cent, at the top end of guidance provided.
The 2017 financial year was an outstanding year for Mirvac, and our ambition to reimagine urban life by creating, owning and managing high-quality assets in Australia’s largest cities has delivered strong results across the Group, positioning us well for the future.
Mirvac is an integrated, urban property group and a key contributor to Australia’s major cities.
Mirvac’s urban strategy and a strong focus on capital management delivered growth in FY17, and has ensured the Group is well placed for the year ahead.
In February this year, we launched Marrick & Co in Sydney’s inner west: a 220-apartment development on the old Marrickville Hospital site.
Mirvac has a priority focus on the health and safety of its employees, contractors and customers, and in FY17, we launched a refreshed policy and focus to strengthen our safety practices, behaviours and culture across our business, while supporting the wellbeing of our people, places and the communities in which we operate.
Developing a Reconciliation Action Plan (RAP) has been one of Mirvac’s key cultural goals over the past 12 months.
This Changes Everything is Mirvac’s sustainability strategy, comprised of four focus areas with long-term missions.
This Changes Everything FY17 at a glance
Mirvac’s Residential business is founded on a reputation for delivering superior product in Australia’s key cities of Sydney, Melbourne, Brisbane and Perth.
With activities across both apartments and masterplanned communities, the Group’s integrated model ensures that expertise from all aspects of the business can be utilised; from construction and design to development and sales and marketing.
For the year ended FY17, Residential delivered earnings before interest and tax of $302m.
Mirvac’s focus on delivering high-quality masterplanned communities and apartments ensured a strong result in FY17. Highlights across the Residential business for the year ended 30 June 2017 included:
Residential delivered earnings
before interest and tax of
achieved a Residential return on invested capital of 18 per cent, above the Group’s target of 15 per cent and driven by outperformance in masterplanned communities in Melbourne and apartments in Sydney;
settled a record 3,311 residential lots and achieved strong residential gross margins of 25 per cent, above the Group’s through-cycle target of between 18 and 22 per cent;
defaults remained at below 2 per cent;
secured future income to the Group, with $2.7bn 1 of pre-sales contracts on hand. Mirvac’s existing pipeline supports approximately 15,000 lot settlements over the next four years;
secured 74 per cent of expected Residential EBIT for FY18
Achieved a Residential ROIC of
maintained strong sales activity reflecting quality, well-located product, with approximately 3,100 residential contracts exchanged; and
continued to deliver quality residential product in the Group’s core metropolitan markets, with approximately 3,000 lots released during the financial year across both new and existing projects. Successful sales across new masterplanned communities and apartments releases included:
The Group continued to carefully restock the residential development pipeline with discipline, with new acquisitions including:
an 8.4 hectare masterplanned community development site that sits approximately 20 kilometres outside of Brisbane’s CBD. The site has the potential to deliver approximately 140 residential lots and is expected to be launched in late-2017;
a 2.2 hectare masterplanned community development site that sits approximately 11 kilometres north-west of Brisbane CBD and has the potential to deliver approximately 80 land lots and townhouses; and
a 6.1 hectare masterplanned community development site which lies approximately seven kilometres north-west of Brisbane CBD and has the potential to deliver approximately 98 land lots and townhouses.
The outlook for capital city residential markets remains mixed, varying from state to state and at a sub-market level. Employment opportunities have ensured that population growth in the south-east states remains strong, with overseas migration in Sydney close to the highest levels on record, and an uplift in interstate and overseas migration supporting strong growth in Melbourne. In Brisbane, positive employment growth and better affordability have led to an uplift in migration. In Perth, housing conditions remain challenging, however, the economy is showing early signs of stabilising and employment is lifting. This demonstrates that urban cities with better employment opportunities, knowledge centres and new infrastructure will continue to see ongoing demand for quality product in desirable locations, supporting Mirvac’s urban strategy.
SHARE OF EXPECTED FUTURE REVENUE BY PRODUCT
SHARE OF EXPECTED FUTURE REVENUE BY GEOGRAPHY
Stricter lending criteria both domestically and offshore
has sparked concern over the ability of purchasers to settle. To mitigate settlement risk, Mirvac has a range of strategies in place, and carefully and proactively monitors its settlement risk profile. In addition to a requirement of a 10 per cent deposit from purchasers, Mirvac has a structured communication and engagement program with its customers and lenders, and undertakes a thorough risk assessment of its exposure to foreign investment. Mirvac’s proven track record of managing its settlement risk is demonstrated by a history of low defaults.
1. Adjusted for Mirvac’s share of joint ventures and Mirvac managed funds.
2. Site acquired in March 2017, with settlement expected in August 2017.
3.These future looking statements should be read in conjunction with future releases to the ASX.