Mirvac promises improvement as residential earnings fall 16pc
Mirvac said a pick-up in the housing market would boost profit this year even as it reported a decline in residential settlements and lower gross profit margins over the year to June.
The ASX-listed developer, investor and landlord on Friday said operating profit after tax fell to $474 million from $552 million a year earlier, even as it reported a swing in net after-tax earnings to a profit of $68 million in the year to June from a loss of $805 million.
The turnaround in statutory earnings reflected the hits the company took a year earlier from greater investment revaluations, joint venture losses and impairments, disguising a 10 per cent decline in full-year revenue to $2.74 billion.
Residential lot settlements fell to 2122 from 2401 a year earlier, and gross residential profit margin fell to 15 per cent, down from 17 per cent. That cut EBIT earnings from its residential business by 15.6 per cent from $212 million to $179 million. The default rate was about 1.2 per cent.
But the company said the lower margins, which included the impact of impaired projects yet to settle, would not be repeated and would return this year to the company’s preferred range of 18 per cent to 22 per cent.
Mirvac also pointed to a pick-up in new sales as a sign of improving conditions. It exchanged 2100 residential lots during the year, up more than one-third on the 1509 of last year and said it also had a further 279 conditional sales on hand.
“We saw a strong pick-up in activity in our residential business, with unconditional sales up almost 40 per cent, and $1.9 billion of residential pre-sales provide good visibility of future earnings,” chief executive Campbell Hanan said.
“This is further supported by new investment income and funds under management growth from upcoming development completions, along with an improved net tangible asset outlook.”
Mirvac declared a final distribution of 4.5¢, the same as in the first half, bringing its total distribution to 9¢.
Operating earnings per security fell to 12¢ from 14¢, at the lower end of the guidance it gave a year ago and repeated in February of between 12¢ and 12.3¢.
Earnings per stapled security swung to 1.7¢ from a loss of 20.4¢ a year earlier, and net tangible asset backing per ordinary share – excluding intangible assets, right-of-use assets, deferred tax assets and deferred tax liabilities – fell to $2.26 from $2.36.
Mirvac is the first of the large REITs to report full-year earnings. Lendlease will report on Monday, followed by Stockland on Wednesday.
Last month, Mirvac said Melbourne’s beleaguered office market was stabilising, as it announced it had leasing commitments for 16 per cent of its new $480 million, 22-storey office building, 7 Spencer, but the sector nationally still faces headwinds.
Earnings before income and tax from its investments business, which includes office assets, slipped 2 per cent to $602 million from $612 million. Mirvac sold $340 million worth of non-core office assets over the year, cutting its portfolio from 21 to 18 properties.
Total investment property revaluation losses narrowed to $102 million from $1.1 billion a year earlier, as improvements in industrial, retail and living sector build-to-rent asset valuations offset the devaluation of office assets, the company said.
Hanan said an improvement in all sectors would lift the company’s earnings in the current year.
“We expect a return to growth in FY26, and subject to no material change in the operating environment, we are targeting operating earnings of between 12.8¢ per security to 13¢ per security, reflecting growth of between 6.7 per cent to 8.3 per cent and distribution of 9.5¢ per security, reflecting growth of 5.6 per cent.”
