Diversified real estate group Mirvac has reported a statutory net profit after tax of $1.1 billion, marking the third consecutive year Mirvac has achieved a statutory profit of more than $1 billion.
But with the softening in the residential cycle, the group is now shifting its focus to more ”passive” investments that generate recurring income from management fees through its club funds.
While it is not a determined shift in strategy, the new approach will mark a change in direction for some aspects of the group’s business.
The earnings were boosted by a $490 million lift in property value from the strong office market of Sydney and Melbourne.
In June Mirvac tightened its earnings guidance for the 2018 financial year to 15.6¢ per stapled security, being growth of 8 per cent on FY17. This is at the top end of its previous guidance of 15.3¢ to 15.6¢ per security.
This follows the continued delivery of earnings in the group’s residential division since it released its third quarter operational update on 23 April 2018.
The total dividend for 2018 is 12.5 cents per share, up 13.6 per cent. It is payable on August 31.
Mirvac is the largest developer of mid to high-density dwellings in the country.
Chief executive Susan Lloyd-Hurwitz said: “As we have expected, market conditions in the residential sector have normalised. Our reputation for quality and for delivering superior products for our customers has ensured we are still a favoured residential brand among owner-occupiers.
“We achieved our target of about 3400 residential lot settlements during the financial year, and delivered a return on invested capital of 18.1 per cent. Our gross margins of over 25 per cent reflect our strategy to focus on the strong Sydney and Melbourne markets, as well as our ability to buy and sell at the right time in the property cycle.”
”During the next phase of this cycle, our high-quality investment portfolio will be the growth engine of the business,” she said.
This new cycle will see the move into the build-to-rent sector with the launch of a $1 billion club with the Clean Energy Finance Corporation (CEFC) committing to a 30 per cent interest as a cornerstone investor in the first close.
The seed asset for the club, and Mirvac’s first purpose-built build-to-rent asset in Australia, will be Indigo at Mirvac’s Pavilions project at Sydney Olympic Park in NSW, Mirvac’s fourth building in the precinct.
Mirvac will act as the development, investment and property manager.
The group’s office assets remained the strongest performer boosted by the acquisition of 66 Ann Street, Brisbane, as the new Suncorp headquarters, and lease deals in Melbourne.
Mirvac also boosted its industrial business after it entered into an agreement to acquire stage one of a future 244-hectare industrial estate at Badgerys Creek in Western Sydney for $71 million, under a put-and-call option arrangement.
The retail business was flat due to the softening sector, but Mirvac said new developments including the Harbourside centre in Sydney’s Darling Harbour would provide sold rental income in the future.
Mirvac share price was marginally down at $2.34 per security.