Mirvac joins the strong profit season for property developers
Strong residential sales contributed to Mirvac posting a strong profit for the year, up from $139 million to $447 million.
And Mirvac signalled plans to "accelerate releases and pushing price where appropriate."
The property group secured $1.2 billion in residential pre-sales contracts and settled 2,482 residential lots.
Some 50% of Mirvac’s future expected revenue will be derived from apartments, the veteran apartment developer announced.
The Mirvac CEO Susan Lloyd-Hurwitz described the year as “tremendously successful” on the profit release today.
"Our residential business performed well in FY14 with market conditions improving in key locations.
"We acquired $248 million of residential development projects over the year, substantially restocking the development pipeline to provide long-term earnings benefits to the group.
"All acquisitions were on-strategy and are expected to deliver a weighted average IRR of more than 18%.
"In addition to this, we completed seven englobo sales ahead of schedule, providing an opportunity for the redeployment of cash across the business."
Total revenue rose 26% to $1.982 billion for the year. Operating profit was $337.6 million.
Lloyd-Hurwitz said Mirvac achieved a 10.5% development return on invested capital at year end, ahead of its target of 10%, and "we substantially restocked our residential and commercial development pipeline to deliver future earnings”.
However the result suggested the strong sales and price momentum in 1H14 carried through at "slightly reduced" pace into 2H14.
"Further price growth expected, albeit at a more modest pace," it suggested though ncreased stock levels were insufficient to overcome national undersupply.
The report acknowledged high levels of activity from offshore buyers in select locations and product types.
"Demand volumes will continue to grow; driven by tight rental vacancy, population growth and strengthening economy."
The report suggested the residential recovery was "likely to extend beyond Sydney into other capital cities" as a result of population growth, sustained low interest rate environment and general undersupply nationally.
Mirvac said it was focussed on "developing and acquiring residential development projects in line with strategic mandates targeted to deliver gross margins of 18% to 22%."
Mirvac said the residential market was supported by strong financial fundamentals
— Modest credit growth does not indicate signs of overheating
— Role of investors in the market is strong, although upgraders have grown by a greater proportion across all markets
— Households have improved net debt positions significantly driven by increased savings.