Mirvac backs residential recovery as it turns in $901m profit

Mirvac has a bullish outlook as housing is expected to surge again but it hinges on business conditions getting back to normal.

Mirvac managing director and CEO, Susan Lloyd-Hurwitz, reported a strong result on the back of strong residential conditions, but this is expected to normalise at the end of the year. Picture: Jane Dempster

Strong demand from buyers through the current housing boom helped to underpin property developer Mirvac’s strong full-year result but the company is bracing for market conditions to moderate as the county gets back to normal.

While the company continues to look at the diversity of its portfolio, the residential arm of the business flourished over the 12-month reporting period on the back of the national housing boom, recording the largest yearly increase in sales — 85 per cent — in more than five years.

“We see very strong continued momentum in the residential property market,” Mirvac chief executive Susan Lloyd-Hurwitz said

“We’ve got a strong amount of interest from owner-occupiers who have had a high level of support from the government was stimulus, but even post that support, we’ve seen very strong sales, particularly in first time buyers in Melbourne.

“We’re finding very high levels of attraction for people wanting to remain in their local area, wanting to upgrade into an apartment for significantly less than a house would cost so we see very supportive conditions continued low interest rates.”

Sydney’s Green Square and Quay Waterfront in Brisbane have been two launches to have proven this point, with sales dominated by owner occupiers looking to right-size or upgrade from their current homes.

Property settlements totalled 2,526 to outpace earlier guidance, while Mirvac also recorded $1.2bn in pre-sales. There is more in the pipeline this year, with a further seven projects to launch FY22 in what is the largest apartment release program since 2016.

Overall, the group achieved a strong overall result for the 2021 financial year, with statutory profit up 61 per cent to $901m.

Earnings per security of 14c, beat guidance of greater than 13.7c per security. But like many businesses, Mirvac was not left unscathed by the pandemic, with the company‘s operating profit slipped by 9 per cent to $550m.

Analysts agreed the year ended as expected, with Barrenjoey declaring there were “largely no surprises”.

Mirvac shares closed down 0.7 per cent on Thursday, at $2.98 each.

The developer anticipates the market will normalise as vaccine rollouts start to meet targets towards the end of the 2021 calendar year.

“Evidence is abundantly clear internationally that when high levels of vaccination are reached severe health outcomes go down, and while the virus will never be eliminated the economies can more safely open up,” Ms Lloyd-Hurwitz said.

“I see no reason why Australia would be any different.”

While Mirvac is not considering mandatory vaccination for workers, the company is strongly encouraging immunisation.

Despite eyeing vaccine targets as a herald for the removal of lockdown restrictions, the business has not factored a reopening of international borders into its forecasts due to uncertainty.

The developer used the crisis to extend its development pipeline to about $28bn, across mixed use, office, industrial, residential and build to rent. It also launched its first build to rent project, LIV Indigo at Sydney Olympic Park, which is 80 per cent leased and extended the build to rent pipeline to about $1.4bn across four projects.

Mirvac gave operating earnings per security guidance of at least 15c per security for the 2022, financial year, which represents an increase in earnings of at least 7.1 per cent. It gave distribution guidance of 10.2c per security for the same period, representing growth of 3 per cent.