Mirvac reports record settlements, defaults below 2 percent
Leading property group Mirvac said it achieved a record high lot settlements for the year ending June 30, while maintaining less than 2 per cent defaults.
The developer’s 3,311 lot settlements was 17 per cent higher than last year. It secured $2.7 billion in residential pre-sales.
Sydney was the strongest market for apartments, with prices holding stable and also rising while the pace was the slowest in Brisbane and Melbourne.
Mirvac said its statutory profit after tax increased by 13 per cent to $1.16 billion from $1.03 billion, helped by a rise in property values in the investment portfolio and strong operational earnings.
Mirvac said it expects strong residential profits despite a forecast slowdown in apartment pre-sales and a drop in foreign buyer numbers.
“Buying at the right time and in the right locations has ensured we have strong embedded margins across a number of our residential development projects, particularly those in Sydney and Melbourne,” said Mirvac CEO Susan Lloyd-Hurwitz.
“We also expect to benefit from the substantial investment in infrastructure the New South Wales and Victorian governments are making, with a number of our residential projects located near proposed major transport lines.”
Mirvac guided for an operating earnings per share of between 15.3 to 15.6 cpss for FY18, which represents an increase in earnings of between 6 to 8 per cent, and distribution guidance of 11.0 cpss, which represents DPS growth of 6 per cent.
Lloyd-Hurwitz concluded, “Our focused and disciplined urban strategy has consistently delivered stable earnings and distribution growth over the past few years, and we expect FY18 to be another successful year, driven by a secure yield from our high-quality, modern investment portfolio, embedded rental growth, and attractive returns from our high-quality development pipeline.
Shaw and Partners' analyst Peter Zuk was quoted by the Australian Financial Review as saying that Mirvac's growth outlook was "better than expected".
Zuk said strong settlement volumes eased fears on defaults while the group's Melbourne office pre-sales should generate strong profits.
In June, Mirvac’s stock was downgraded to a "hold" by Deutsche Bank analysts, who say a likely slowdown in the apartment development market would hurt the company.
There could be a 20 per cent fall in new apartment project starts in the 2019 financial year.
Mirvac will make a full-year distribution of $386 million, representing a 10.4¢ stapled security, which is at the top end of guidance.