Mirvac Group · ASX:MGR
Mirvac — FY2018 Earnings Presentation
45 slides from Mirvac's earnings presentation, Aug 9, 2018
Slide 1: FY18 Results
FY18 Reimagine Urban Life 09.08.2018 RESULTS
Slide 2: Agenda
FY18 Results AGENDA OVERVIEW FINANCIAL CAPITAL OFFICE & RETAIL RESIDENTIAL SUMMARY RESULTS ALLOCATION INDUSTRIAL & GUIDANCE Susan Lloyd-Hurwitz Shane Gannon Brett Draffen Campbell Hanan Susan MacDonald Stuart Penklis Susan Lloyd-Hurwitz CEO & Managing Director Chief Financial Officer Chief Investmen
Slide 3: Overview
OVERVIEW Susan Lloyd-Hurwitz CEO & Managing Director 664 Collins Street, Melbourne
Slide 4: Reimagine Urban Life – Shaping the Future of Australia's Cities
FY18 Results REIMAGINE URBAN LIFE – SHAPING THE FUTURE OF AUSTRALIA’S CITIES & URBAN AREAS REIMAGINE URBAN LIFE IS BOTH OUR PASSION AND OUR PURPOSE THROUGH WHICH Tramsheds, Sydney WE LEAVE A LEGACY Calibre, Sydney OF SUSTAINABLE, CONNECTED URBAN ENVIRONMENTS UNLOCKING LONG‑ TERM VALUE BY DESIGNING A
Slide 5: Another Year Delivering on Our Promises
FY18 Results ANOTHER YEAR DELIVERING ON OUR PROMISES 11.0 CPSS 18.1% HIGHLY VISIBLE FY18 DPS Residential ROIC AND DEFENSIVE 6% 11.4% CASH FLOWS, growth Group ROIC SUSTAINABLE DISTRIBUTION SINCE FY13 GROWTH AND 4.8% p.a. DPS ATTRACTIVE 7.4% p.a. EPS ROIC 7.4% p.a. NTA Delivered 15.6 CPSS $2.31 CPSS C
Slide 6: Mirvac Well Placed to Take Advantage of Opportunities
FY18 Results MIRVAC WELL PLACED TO TAKE ADVANTAGE OF OPPORTUNITIES >> Now firmly in a new phase of the property cycle >> Mirvac is well prepared – divested secondary assets – creating Australia’s youngest, lowest capex office and industrial portfolio – building and refining our bespoke urban retail
Slide 7: Transitioning for the Future
FY18 Results TRANSITIONING FOR THE FUTURE The growth engine of the business is transferring FORECAST FY19-21 to the Investment portfolio > Acceleration of passive earnings growth is fuelling consistent strong distribution growth ~$1bn 85-90% Passive capital Active EBIT allocation > Forecast ~$1bn of
Slide 8: Creating Shareholder Wealth
FY18 Results CREATING SHAREHOLDER WEALTH Urban Strategy EPS growth DPS growth 2-4% FY19 guidance 5% FY19 guidance 9 %+ 3 year average ROIC target Consistent execution of disciplined urban strategy to deliver earnings, distribution growth and ROIC above WACC 09 AUGUST 2018 07
Slide 9: Building Culture as a Source of Competitive Advantage
FY18 Results BUILDING CULTURE AS A SOURCE OF COMPETITIVE ADVANTAGE PEOPLE & CULTURE > Employee engagement of 90%, 3% above the Global High Performing Norm, demonstrating the strength of our purpose, values and culture 90% 2018 > Awarded the Employer of Choice for Gender Equality citation for fourth
Slide 10: This Changes Everything – Sustainability Reimagined
FY18 Results THIS CHANGES EVERYTHING – SUSTAINABILITY REIMAGINED > Refined our target focus areas to six key areas, aligned with key global ESG issues most relevant to Mirvac and our stakeholders > Continue to deliver on our targets and leave a legacy we can all be proud of CLIMATE CHANGE NATURAL RE
Slide 11: Launched Australian Build-to-Rent Club
FY18 Results LAUNCHED AUSTRALIAN BUILD-TO-RENT CLUB > Mirvac has secured Clean Energy Finance Corporation (CEFC) as THE CUSTOMER PROBLEM cornerstone investor and intends to grow the ABTRC with discussions with additional club investors ongoing Limited No security options of tenure > Indigo at Pavili
Slide 12: Financial Results
FINANCIAL RESULTS Shane Gannon Chief Financial Officer St Leonards Square, Sydney (artist impression)
Slide 13: Continuing to Deliver a Strong Financial Trajectory
FY18 Results CONTINUING TO DELIVER A STRONG FINANCIAL TRAJECTORY STATUTORY PROFIT OPERATING EPS NTA PER SECURITY DPS 15.6c $2.31 11.0c $1,250m $1,164m 15.5 cents $2.30 11.0 cents $1,033m $1,089m $2.13 1,000 14.5 GR 14.4c GR 10.5 AG R 10.4c CA 2.10 CA C S TA DP S EP rN 750 13.5 ar a 10.0 ar 9.9c ye y
Slide 14: Results Delivered at Top End of Guidance
FY18 Results RESULTS DELIVERED AT TOP END OF GUIDANCE OPERATING RESULTS FY17 FY18 Strong increase in O&I driven by leasing, 11% office NOI growth $m $m and development EBIT from 664 Collins Street, MEL completion Office & Industrial 319 381 19% Retail LFL NOI growth of 3% and purchase of remaining s
Slide 15: Robust Balance Sheet and Cash Flow
FY18 Results ROBUST BALANCE SHEET AND CASH FLOW > Well positioned to continue to fund growth and distribution DIVERSIFIED Bank 14% DEBT SOURCES > Gearing of 21.3% 1 at the lower end of the target range of 20-30% USPP 46% > 6.8 years weighted average debt maturity with limited expiries in any one yea
Slide 16: Recurring Income Supporting Distribution Growth
FY18 Results RECURRING INCOME SUPPORTING DISTRIBUTION GROWTH > Distribution continues to be funded from growing DISTRIBUTION COMFORTABLY FUNDED BY OPERATING CASH FLOWS operating cash flows $800m > Recurring income boosted by asset creation and $663m third-party capital, while low gearing levels main
Slide 17: FY19 Accounting Changes
FY18 Results FY19 ACCOUNTING CHANGES NEW OPERATING PROFIT MEASURE COMPARABLE OPERATING PROFIT AND EPS Mirvac’s current operating profit definition excludes security-based FY18 FY18 EPS FY19 EPS (cpss) ($m) (cpss) comparable guidance payments expense and certain amortisation expenses Operating profit
Slide 18: Capital Allocation
CAPITAL ALLOCATION Brett Draffen Chief Investment Officer The Finery, Sydney
Slide 19: Focus on Gateway Cities of Sydney & Melbourne
FY18 Results FOCUS ON GATEWAY CITIES OF SYDNEY & MELBOURNE $138bn NSW & VIC Australia’s largest & Australia’s largest Australia’s largest Main contributors Australia’s key Largest beneficiaries Government infrastructure deepest employment populations with and most important to Australia’s GDP gatewa
Slide 20: Delivering Returns Above Cost of Capital
FY18 Results DELIVERING RETURNS ABOVE COST OF CAPITAL OFFICE AND INDUSTRIAL ROIC RETAIL ROIC 12.4% 7.3% GROUP ROIC 11.4% FY16 FY17 FY18 FY16 FY17 FY18 18.1% 11.4% FY16 FY17 FY18 FY16 FY17 FY18 RESIDENTIAL ROIC GROUP ROIC Targeting 9%+ 3 year average Group ROIC 09 AUGUST 2018 19
Slide 21: Capital Allocation Flexing with the Cycle
FY18 Results CAPITAL ALLOCATION FLEXING WITH THE CYCLE > Passive capital as a percentage of total capital increasing as ACTIVE AND PASSIVE CAPITAL ALLOCATION development pipeline completes Active allocation reducing as passive investment assets continue to grow following development completions > Pr
Slide 22: Strong Visibility of Future Pipeline
FY18 Results STRONG VISIBILITY OF FUTURE PIPELINE MAJOR CONTRIBUTORS 1 FY19 FY20 FUTURE PIPELINE Development Profits & Fair Value Uplifts 2 Development Profits & Fair Value Uplifts 2 Development Pipeline >> Australian Technology Park, SYD 2 >> 477 Collins Street, MEL 2 78% pre-let >> 477 Collins Str
Slide 23: Office and Industrial
OFFICE AND INDUSTRIAL Campbell Hanan Head of Office & Industrial 664 Collins Street, Melbourne
Slide 24: Office Portfolio Transition Now Accelerating
FY18 Results OFFICE PORTFOLIO TRANSITION NOW ACCELERATING STRONG PERFORMANCE CONTINUES STRONG INCREASE IN RECURRING OFFICE NOI > FY18 divisional O&I EBIT increased 19% to $381m $270m > Acceleration of Office NOI increasing 11% to $270m 260 11% > Occupancy remains high at 97.5% 1 250 > ~75,000 sqm of
Slide 25: Industrial Providing High Quality Income
FY18 Results INDUSTRIAL PROVIDING HIGH QUALITY INCOME > Industrial benefiting from strong tenant demand and 100% MAJOR INDUSTRIAL LEASING DEALS % portfolio Sydney weighting Top leasing deals Tenant Area NLA > ~104,400 sqm of leasing activity including developments increasing 36 Gow Street, Sydney NS
Slide 26: Building Resilient Recurring Income
FY18 Results BUILDING RESILIENT RECURRING INCOME Mirvac’s ability to create high-quality commercial assets generates: ADDITIONAL HIGH-QUALITY INCOME FROM OFFICE & INDUSTRIAL DEVELOPMENTS 1 ~$95m $3.1bn ACTIVE DEVELOPMENT PIPELINE NOI GROWTH > Stable long-term recurring income 100 ($m) NOI > Superior
Slide 27: Future Resilience from Creating a Modern Portfolio
FY18 Results FUTURE RESILIENCE FROM CREATING A MODERN PORTFOLIO > Developing high quality modern assets $5.4bn 477 80 ATP & $3.1bn of new Office & COLLINS STREET ANN STREET LOCOMOTIVE Office & Industrial > Majority of portfolio younger Industrial assets created or being MEL BNE WORKSHOPS committed d
Slide 28: Strong Office and Industrial Outlook
FY18 Results STRONG OFFICE AND INDUSTRIAL OUTLOOK STRENGTH IN SYDNEY AND MELBOURNE OFFICE MARKETS SYDNEY CBD – OFFICE VACANCY VS PRIME EFFECTIVE RENTS > Vacancy rates continue to fall, supported by solid tenant demand 14% 40% particularly in Melbourne 12 30 > Strong prime net effective rental growth
Slide 29: Retail
RETAIL Susan MacDonald Head of Retail Broadway, Sydney
Slide 30: Urban Retail Delivering Outperformance
FY18 Results URBAN RETAIL DELIVERING OUTPERFORMANCE > Urban and metro assets outperforming METRO OUTPACING COUNTRY PERFORMANCE > Solid 3.0% like-for-like income growth 1.1 Relative return vs Total Retail > Net valuation uplift of 3.0% supported by urban catchments 3% cumulative outperformance and dy
Slide 31: Growth Outlook Against a Competitive Landscape
FY18 Results GROWTH OUTLOOK AGAINST A COMPETITIVE LANDSCAPE GROWTH DRIVERS MIRVAC OUTLOOK VS MARKET SYDNEY – CHANGE IN TOTAL INCOME BY LOCATION 2 > Mirvac centres benefiting from catchments with higher density Stanhope Village Cherrybrook Village REAL and larger increases in total income CONTRIBUTOR
Slide 32: Physical Retail Integral in the Urban & Metro Environment
FY18 Results PHYSICAL RETAIL INTEGRAL IN THE URBAN & METRO ENVIRONMENT WORKING ACROSS SECTORS DELIVERS 275 KENT STREET GREAT AMENITY LOCOMOTIVE WORKSHOPS SYD AND EXPERIENCES FOR OUR TENANTS SYD AND CUSTOMERS Activating ground plane with 80 ANN STREET > 25,000sqm ST LEONARDS SQUARE BNE of retail expo
Slide 33: Our Focus Remains Adamantly Urban in FY19
FY18 Results OUR FOCUS REMAINS ADAMANTLY URBAN IN FY19 >> The retail market continues to be increasingly competitive >> We anticipate performance metrics to evolve in retail real estate >> Investor demand remains strong for urban and metro markets >> Mirvac’s urban portfolio, with overweight to Sydn
Slide 34: Residential
RESIDENTIAL Stuart Penklis Head of Residential Ovo, Green Square, Sydney
Slide 35: FY18 Targets Delivered
FY18 Results FY18 TARGETS DELIVERED >> Mirvac’s brand combined with high-quality product in desirable locations STRONG RESIDENTIAL PERFORMANCE continues to produce strong results in a moderating market 4,000 lots 30% 25 3,000 20 Achieved a record Gross margins ROIC Defaults 3,400 25.4% 18.1% <2% 2,0
Slide 36: The Mirvac Difference – It's in the Detail
FY18 Results THE MIRVAC DIFFERENCE – “IT’S IN THE DETAIL” OLIVINE EASTBOURNE MEL Place Customer MEL Creating exceptional living experiences GREEN Legacy Quality TULLAMORE SQUARE MEL SYD 09 AUGUST 2018 35
Slide 37: Restocking – Right Time and Right Place
FY18 Results RESTOCKING – RIGHT TIME AND RIGHT PLACE > High embedded margins given pipeline age and location MIRVAC HISTORICAL ACQUISITIONS VS RESIDENTIAL PRICES > Mirvac acquired 18,542 lots between FY11-15 in Sydney 12,000 lots acquired Residential Property Price Index (ABS) 1 180 and Melbourne wh
Slide 38: Strategic Overweight to Victorian MPC
FY18 Results STRATEGIC OVERWEIGHT TO VICTORIAN MPC > Melbourne benefiting from strong population growth, relative affordability, employment strength and strong major infrastructure initiatives 4,030 LOTS DONNYBROOK > 80% of pipeline delivering house and land catering to the middle and greenfield mar
Slide 39: Planning for the Next Generation of Residential
FY18 Results PLANNING FOR THE NEXT GENERATION OF RESIDENTIAL > 4,000 potential lots to be added into the pipeline 1 KEY PROJECTS 505 GEORGE ST, SYD COONARA AVE, SYD BURSWOOD, PER GREEN SQUARE, SYD HARBOURSIDE, SYD ALTONA NORTH, MEL Artists impression, Artists impression, Artists impression, Artists
Slide 40: Mirvac Positioning and Outlook
FY18 Results MIRVAC POSITIONING AND OUTLOOK > The residential market is moderating as expected with more focus EXPECTED RESIDENTIAL EBIT CONTRIBUTION placed on location and quality > Lending conditions for investors and foreign buyers have tightened FY14–18 FY19–21 expected Masterplanned Masterplann
Slide 41: Summary & Guidance
SUMMARY & GUIDANCE 477 Collins Street, Melbourne Susan Lloyd-Hurwitz CEO & Managing Director
Slide 42: Strong Income Growth and Earnings Resilience Underpinned by Urban Strategy
FY18 Results STRONG INCOME GROWTH AND EARNINGS RESILIENCE UNDERPINNED BY URBAN STRATEGY As we look to the future, our transformational urban strategy will deliver Secure and growing yield, driven by our ~$10bn modern investment Disciplined growth Highly visible residential portfolio, and the through
Slide 43: FY19 Guidance
FY18 Results FY19 GUIDANCE > FY19 expected to be another solid year with operating EPS guidance of 16.8-17.1 cpss 1 representing growth of 2-4% 2 > DPS guidance of 11.6 cpss representing growth of 5% on FY18 DPS FY19 guidance 5% 12.0 cents FY19 guidance 11.6 2-4% 3 DPS CAGR r 11.0 5% 6 yea 11.0 DPS
Slide 44: Important Notice
FY18 Results IMPORTANT NOTICE Mirvac Group comprises Mirvac Limited (ABN 92 003 280 699) and Mirvac Property Trust (ARSN 086 780 645). An investment in Mirvac stapled securities is subject to investment and other known and unknown risks, some of This presentation (“Presentation”) has been prepared b
Slide 45: Thank You
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