Mirvac Group (ASX:MGR) share price struggles following FY21 results

The Australian property player has revealed its earnings performance.

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The Mirvac Group (ASX: MGR) share price is on the move in early trade after the Australian property group reported its FY21 earnings before the bell.

Let’s investigate further.

Mirvac share price hits 52-week high after reporting 61% statutory profit growth

The Mirvac Group share price opened at $3.07, a 52-week high for the development company.

However, the price quickly retreated, and by mid-morning, it was changing hands for $2.99, down 0.33%.

Some key investment highlights from the report include:

  • Statutory profit of $901 million, up 61% year on year
  • Operating profit of $550 million, down 9% from $602 million in June 2020
  • Dividends per share of 9.9 cents, an increase of 9%, signifying total distributions of $390 million
  • Gearing of 22.8%, and return on invested capital (ROIC) of 7.2%, up from 5.2% a year prior
  • Reduction in the group’s carbon footprint by 80% across the portfolio
  • Residential settlements of 2,526 lots exceeded guidance of 2,200 lots
  • Highest number of residential sales since FY16 at 3,375 sales.

What happened in FY21 for Mirvac Group?

Positively for the Mirvac Group share price, a strong growth schedule in its core operations over the year underscored a healthy performance from the company.

Net operating income came in at $581 million, up 5% from June 2020, whereas operating cash flow was up 41% year on year at $635 million.

One particular takeout was a valuation gain of $121 million in its commercial and mixed-use segment. This was driven by “retained ownership interest in completed developments”, in addition to fair value gains on investment properties “under construction”.

Mirvac also gained about 200 basis points of gross development margin from the year prior. It maintained liquidity of $867 million from its balance sheet and “undrawn bank facilities”.

As a result, the company maintained its A-/A3 credit ratings with rating agencies Fitch Ratings and Moody’s Investors Service.

Finally, Mirvac revealed its property pipeline now extends to approximately $28 billion, after the group’s first build-to-rent project was launched to include another 1,860 apartments in the pipeline. The estimated end value of these projects is about $1.4 billion.

What did management say?

Speaking on the Group’s performance, Mirvac CEO Susan Lloyd-Hurwitz said:

We saw momentum accelerate right across the business in FY21, with our powerhouse asset creation capability continuing to generate significant value. We secured the highest number of residential sales since FY16, made key disposals well above book value, and our outperforming investment portfolio achieved significant property revaluation gains and strong cash collection rates.

Regarding capital management, Hurwitz added:

A continued focus on prudent capital management during FY21 has enabled the Group to manage the volatility caused by the global pandemic, providing us with flexibility and sufficient financial headroom to capitalise on improving market and business conditions.

What’s next for Mirvac?

Mirvac expects to settle “greater than” 2,500 lots in FY22, with strong margins supported by its portfolio of predominantly master-planned communities.

In addition, Mirvac also sees itself “benefiting from strong residential conditions” over the coming periods. As such, it foresees a “residential pre-sales balance of $1.2 billion”, with over “90% of FY22 EBIT now secured”.

The company also provided FY22 guidance on earnings and its dividend distribution schedule.

It estimates earnings per share (EPS) of “at least” 15 cents for FY22, calling for a 7.1% year on year increase.

Moreover, Mirvac also forecasts dividends per share of 10.2 cents, signifying a growth of 3%.

Mirvac’s full-year guidance is “based on the assumption that business conditions will normalise in the last quarter of CY21” when Covid vaccination numbers increase.

The Mirvac Group share price has climbed 12.8% this year to date, extending its 12-month gains to 40.3%.

This has outpaced S&P/ASX 200 Index (ASX: XJO) returns of about 23.8% over the past year.

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The author Zach Bristow has no positions in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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