Strong residential sales from masterplanned communities and strong commercial rentals have delivered solid first-half results for Mirvac in 2017.
The company posted a net profit of $508 million for the half year to December 21, up 7 per cent from the previous corresponding period. After tax, the group's profits rose 39 per cent to $230 million against 2016's $165 million.
The company has already secured 93 per cent of the expected residential earnings before interest and tax for 2017 and achieved a record $3.1 billion in pre-sales for the first half of the year.
It also settled 970 residential lots in the first half, with the rest of the 3300 settlements expected to occur in the second half of the year.
Office occupancy increased to 97.2 per cent and both Mirvac's industrial and retail occupancy are near 100 per cent.
"While we expect a strong skew of earnings to the second half of the financial year due to the timing of residential settlements, we remain confident in our full-year earnings outlook and have tightened our EPS guidance to the upper end of between 14.2 cents and 14.4 cents per stapled security, representing growth of between 9 per cent and 11 per cent," chief executive Susan Lloyd-Hurwitz said.
Last year, Mirvac reported an uptick in settlement defaults for apartment sales, but have managed to re-sell those units. The group said it would continue to "proactively manage its FIRB exposure and defaults remain at low levels".
"While we anticipate a strong skew of settlements to the second half of the financial year, our return profile is robust with gross margins expected to remain above our through-cycle target of between 18 per cent to 22 per cent for the full year. Pleasingly, we are on track to deliver a residential return on invested capital of more than 15 per cent in 2017," Ms Lloyd-Hurwitz said.
In the first half, Mirvac's residential division delivered the lion's share of revenue but it was office and industrial leasings that contributed most to earnings before interest and tax.
Key highlights of the company's achievements in the office business include leases for over 56,800 square metres with leasing spreads of 5 per cent and average incentives of 19 per cent and commencing construction of the highly touted Australian Technology Park redevelopment in Sydney. 2 Riverside Quay in Melbourne was completed two months ahead of schedule.
The group also leased over 19,500 square metres of industrial space and acquired another site at 274 Victoria Road, Rydalmere in Sydney's west.
In retail, Mirvac also completed the acquisition of a 50 per cent interest in East Village, Zetland NSW in July 2016 for $155 million and acquired a 50 per cent interest in the proposed South Village Shopping Centre development in Kirrawee, NSW.
Mirvac has tightened its 2017 operating earnings per share guidance to between 14.2 and 14.4 cents per stapled security, and reaffirmed distribution guidance of between 10.2 to 10.4 cents per stapled security.
The company will pay an interim dividend of 4.9 cents payable on February 28.
For full coverage of today's earnings, go to the AFR Results Wrap Feb. 16
