Mirvac First to Update Market17 March 2020
Mirvac are the first of the major property groups to provide an update to the market following the outbreak of Coronavirus in Australia.
Whilst it is too early to know the full extent of the impact on the business given pandemic is still in its infancy, Mirvac has taken the right step to ensure that the market is kept informed of it's view of the future earnings from the business.
In February the group announced its operating EPS guidance for FY20 of between 17.6 cents and 17.8 cents per stapled security (growth of between 3 and 4 per cent), and distribution guidance of 12.2 cents per stapled security (5 per cent growth), however today Mirvac announced it has withdrawn this guidance.
The Group is likely to face significant and immediate pressure from retailers in its retail centres. Approximately 21% of Mirvac's earnings are generated from its 16 retail assets of which 65% are either regional or sub regional centres and heavily reliant on speciality tenant rental income. Two thirds of the portfolio is also located in Sydney, home to the highest CV cases so far.
Mirvac's Office and Industrial portfolio is unlikely to be immediately impacted, however the depth of any recession and the speed of return to normal conditions will determine the impact on tenant demand, vacancy rates and market rentals.
The Groups Development business is also under pressure. The Group has a residential development pipeline of some 27,000 lots of which 68% are in master planned communities and 32% in apartments. The Group settled 1,200 lots in the first half of FY2020 and expected a similar number in the second half. These results may also be in jeopardy as investors and owner occupiers pair back their appetite due to concerns about employment.
Whilst Mirvac has not made any comments on any of its business units, it has withdrawn all of its previous forward-looking statements, including comments about active and passive earnings.
Mirvac advised that the Group’s balance sheet and debt position continues to remain robust and the Group is well positioned with $944 million of cash and committed undrawn bank facilities available and gearing levels of 20.8% as at 31 December 2019.
The Group has $200 million of debt maturing in the next 12 months which can be repaid from available facilities and continues to hold A3/Acredit ratings with stable outlook from Moody’s and Fitch.
Mirvac’s CEO & Managing Director, Susan Lloyd-Hurwitz said, “As the effects of the COVID-19 outbreak impact Australia and our business, we are taking swift and prudent measures across the business, to not only protect our employees and stakeholders, but also provide transparency in what is an ever-changing environment.
“Our immediate priority remains the safety and wellbeing of our employees, customers and visitors to our Mirvac sites and the communities we serve.”
The Group will continue to provide updates as and when appropriate.