How Mirvac’s Living Sector Surge Sets Up FY26 Growth
Mirvac Group reported a solid FY25 operating profit of $474 million, maintaining strong momentum in its living sector and residential pre-sales. The company is poised for growth in FY26, supported by easing interest rates and a robust development pipeline.
- Operating profit of $474 million, in line with guidance but down from FY24
- Living sector EBIT surged 184% to $54 million with new build-to-rent completions
- Residential pre-sales increased 39% to $1.9 billion, boosting future earnings visibility
- Strong balance sheet with gearing at 27.6% and $1.2 billion liquidity
- FY26 earnings guidance targets 6.7% to 8.3% growth in operating earnings
Steady Performance Amid Market Challenges
Mirvac Group has released its full-year results for FY25, reporting an operating profit after tax of $474 million, translating to 12.0 cents per stapled security. While this represents a decline from FY24's $552 million and 14.0 cents per security, the results were comfortably within the company's guidance, reflecting disciplined execution amid a complex market environment.
The statutory profit swung to a positive $68 million from a loss of $805 million the previous year, underscoring improved operational stability. Net tangible assets per security stood at $2.26, slightly down from $2.36 in FY24, signaling a cautious but steady asset base.
Living Sector Expansion and Residential Momentum
A standout feature of Mirvac's FY25 was the significant expansion in its living sector. The company completed three new build-to-rent assets in Melbourne and Brisbane, contributing to a 184% jump in living sector EBIT to $54 million. This strategic pivot aligns with growing demand for quality rental housing and positions Mirvac as a leader in this space.
Residential sales activity also gained traction, with 2,100 lots exchanged, a 39% increase over FY24, and pre-sales reaching $1.9 billion. These figures provide strong visibility into future earnings and reflect buyer preference for Mirvac's masterplanned communities, particularly in Sydney, Brisbane, and Melbourne. Despite a slight dip in gross margins to 15%, impacted by some impaired projects, management expects a return to the typical 18-22% range in FY26.
Robust Investment Portfolio and Capital Management
Mirvac's investment portfolio maintained high occupancy at 98%, with positive leasing spreads across office, retail, industrial, and living sectors. The company successfully executed capital partnering initiatives, including a 49% sell-down of an industrial development at SEED, Badgerys Creek, to Australian Retirement Trust, and secured partners for residential projects in Sydney.
Financially, Mirvac preserved a strong balance sheet with headline gearing at 27.6%, comfortably within its 20-30% target range. Liquidity remains robust at $1.2 billion, supported by cash and undrawn bank facilities. Debt maturity averages 4.2 years with 57% hedged, positioning the company well to benefit from anticipated easing in interest rates.
Development Pipeline and Funds Management
The development pipeline saw meaningful progress, with completions of LIV Aston in Melbourne and LIV Anura and LIV Albert in Brisbane and Melbourne respectively. Mirvac also advanced construction at key Sydney projects, including Harbourside and 55 Pitt Street, with pre-leasing activity gaining momentum.
Funds under management grew to $16.2 billion, bolstered by $1.6 billion of new capital raised during the year. The Mirvac Industrial Venture and Build to Rent Venture expanded, with the latter now the largest operating portfolio of its kind in Australia. The Mirvac Wholesale Office Fund also performed strongly, maintaining a gearing level of 26.3% and ranking highly among its peers.
Outlook – Poised for Growth in FY26
Looking ahead, CEO Campbell Hanan expressed confidence in improved market conditions driven by lower inflation and easing interest rates. Mirvac targets operating earnings growth of 6.7% to 8.3% and distribution growth of 5.6% in FY26. Key growth drivers include new development income, capital partnering initiatives, improved residential sales and margins, and an increased residential release program focused on middle-ring projects.
Mirvac’s integrated model, combining development expertise with capital partnerships, is expected to unlock approximately $540 million in value creation through EBIT and revaluation uplift, alongside further funds under management growth. This positions the company well to capitalize on evolving market dynamics and housing demand.
Bottom Line?
Mirvac’s FY25 results set the stage for a return to growth, but execution on its ambitious pipeline and market conditions will be critical in FY26.
Questions in the middle?
- How will Mirvac manage margin recovery in residential amid ongoing market pressures?
- What impact will further interest rate changes have on Mirvac’s debt servicing and capital costs?
- Can Mirvac sustain and expand its capital partnerships to fuel future development growth?