Mirvac issues massive WA, Queensland writedown
Mirvac has been forced to write down some Queensland and Western Australian residential projects by $273.2 million, reflecting the tough housing markets and bad weather in the past two years.
Investor reaction was swift with the securities down 2.67 per cent to $1.56.
It was the first major action taken by the recently-appointed chief executive Susan Lloyd-Hurwitz as part of the group's quarterly review of its operations. It comes a week before Mirvac releases its profit for the six months to December 31, 2012.
Ms Lloyd-Hurwitz said today at an investor briefing that while it was disappointing to make the write down it was necessary for transparency purposes.
But she added that it was not expected to have any significant impact on the overall earnings outlook for Mirvac, and she reaffirmed that the group remained on track to deliver 2013 operating earnings per security (EPS) in line with guidance at 10.7 to 10.8 cents and a distribution of 8.5 to 8.7 cents per security.
Analysts said the majority of the write downs were in the apartments sector with the land impairment being focussed on one project between Brisbane and Gold Coast. But they added that a market recovery is not expected to improve to the same extent as previously expected.
"The provisions taken are predominantly the result of changes observed in various micro markets in which Mirvac operates and reflect revised expectations for these markets," Ms Lloyd-Hurwitz said.
"Price points and sales rates over the past six months, including the recent spring and summer sales periods, have shown that the velocity and extent of a market recovery are not likely to eventuate as previously expected.
"As a sector we have shifted to a new environment of lower growth and it is our responsibility to ensure that the capital we invest going forward reflects this new paradigm."
Ms Lloyd-Hurwitz said that the developments in NSW, such as the mixed use Harold Park Paceway in Glebe, Sydney and Yarra's Edge, Melbourne were performing in line with the company's forecasts.
But she added that selected underperforming projects will be sold as "englobo" lots to generate cash and avoid investing additional capital into underperforming projects.