Mirvac builds $565m profit as carbon positive target hit early

Mirvac Group (ASX: MGR) today announced a 44 per cent rise in net profit in the December half after also hitting its net positive carbon footprint targets nine years ahead of schedule.

By fast-tracking emissions reduction through energy efficiency and switching to 100 per cent renewable electricity, Mirvac has become the first Australian property group to achieve a net positive target.

“We’ve been able to meet our net positive target early by maximising energy efficiency, transitioning away from fossil fuels by building all-electric, and investing in a small amount of high-quality, community focussed, nature-based carbon offsets,” Mirvac’s CEO & managing director, Susan Lloyd-Hurwitz, confirmed.

Mirvac will apply its criteria to assess the social and environmental integrity of the offset purchase on a restoration and reconciliation project in Noosa, Queensland. The offset purchase, which sees the business partnering with Greenfleet, is consistent with the National Greenhouse and Energy Reporting Act.

Alongside a statutory profit of $565 million, operating profit for the half-year rose by nine per cent to $297 million, as Mirvac benefited from a strong performance of its residential and commercial business portfolios.  

“Today’s result reflects our continued focus on carefully navigating the ongoing disruption caused by the global pandemic while highlighting the strength of our diversified and integrated business model,” Lloyd-Hurwitz, said.

“As we expected, the extended lockdowns in the first half of the financial year impacted the performance of our Integrated Investment Portfolio, concentrated in Retail.

“However, this was offset by a strong performance in our development businesses.”

Managing assets across the office, retail, and industrial sectors, the business has $17 billion worth of assets currently under management, mostly located across Australia's four largest cities Sydney, Melbourne, Brisbane and Perth.

Despite the government residential stimulus winding down, the diversified developer observed strong sales momentum with 95 per cent of forecast EBIT (earnings before interest and tax) for FY22 already secured.

Effective pre-leasing and execution of commercial and mixed-use assets over the past six months has supported earnings and asset revaluations, feeding into the business strategy of creating high-quality assets that will deliver future solid incomes.

“Our strong capital position continues to provide long-term stability and financial headroom to support existing and future growth opportunities, and positions us well as we activate our significant development pipeline over the coming years,” Lloyd-Hurwitz said.

“Our substantial liquidity, together with a solid operating cash flow and debt profile, also supports our ability to adequately fund distributions.”

Looking forward, the business settled 1,303 residential lots (up 21 per cent on 1H21) and remain on track to deliver more than 2,500 lot settlements in FY22. The company expect three residential apartment projects to be released in 2H22.

In the commercial space, the business commenced construction on the Switchyard Industrial Estate in Auburn, Sydney, and have had approval for a mixed-use development at Waterloo Metro Quarter, Sydney.

Substantial liquidity of $750 million in cash and committed undrawn bank facilities are accessible to the business.

“While we had expected to see conditions normalise in the first half of 2022, the spread of Omicron has presented a number of challenges,” Lloyd-Hurwitz said.

“This includes the impact of supply chain constraints and labour shortages on business activity, and the extension of the Commercial Code of Conduct for our retail tenants is also likely to put pressure on cash collection rates in the short term.

“However, our strong balance sheet, the secure income stream from our high-quality Investment portfolio, our robust commercial development pipeline, and a high level of residential pre-sales ensures our business remains resilient.”

Mirvac opened its flagship build to rent property, LIV Indigo, Sydney Olympic Park, in September 2020. Although currently only representing 4 per cent of the business’s property portfolio, Mirvac is looking to expand further into developing and managing residential communities in sought-after city locations.

Currently under construction are LIV Albert Fields in inner north Melbourne, LIV Aston in the dockland of Melbourne, LIV Munro close to Queen Victoria Market in Melbourne and LIV Anura in Brisbane CBD.

Mirvac announced an interim distribution of 5.1¢ up from 4.8¢ a year earlier.

Shares in Mirvac (ASX: MGR) slid 2.3 per cent during the trading day on the back of the published half-yearly results.