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How Stephen Gould CA Helped Mirvac Enter COVID-19 On The Right Side Of The Ledger
Chartered Accountant Stephen Gould draws on the acronym VUCA to describe the challenges facing business leaders as they guess — or second guess — the competitive landscape after the coronavirus has eased its virulent grip on the world.
First used in the late 1980s to describe the post Cold War climate, VUCA stands for “volatile, uncertain, complex and ambiguous”.
“That neatly sums up these strange times,” says Gould, the head of strategy, business intelligence and analytics for leading listed property group, Mirvac.
“What’s for certain is that business will not look the same again and that companies will need to re-engineer their workings to suit the new order.”
Fortunately Gould, 47, has the professional toolkit of and rigorous training as a Chartered Accountant to help re-engineer complex entities such as the diversified Mirvac.
His experience in global public accounting helps, having cut his teeth at the big four firm PwC.
So too does the fact he played a leading hand in repositioning Mirvac after the last “black swan” event, the Global Financial Crisis.
As with most of its peers, Mirvac was not in good shape when it emerged from the near-death experience of the GFC, with one broking analyst even titling a report on the stock as “Mirvacuate!”
But the problems were also of the company’s own making, and low staff morale was eroding the company culture.
“Mirvac had gone in multiple directions, it was in airports, forests and caravan parks and really strayed away from its roots,” says CEO Susan Lloyd-Hurwitz. A lowlight was Mirvac’s need to take a bath on its investment in Sydney’s Lane Cove Tunnel, which entered receivership in 2010.
In 2012 the newly appointed Lloyd-Hurwitz launched a soul-searching review of what went wrong — and turned to Gould for a hard-headed analysis of the hard data at hand.
“Stephen played a pivotal role,” she says.
“To a very large part, he led that work in a very disciplined way. We asked the question: ‘what are we good at and what can we prove we are good at’, not ‘what we think we are good at but aren’t good at’.”
Rather than relying on gut feel and taking people at face value, Gould and his team sifted through a decade of historic project performance to work out the patterns driving Mirvac’s successful and underperforming projects.
“It required a deep understanding of the drivers of value creation to be developed,” Gould says. “And this required really granular analysis but also the ability to step back and consider the strategic implications.“
He adds that all of the work was done in house: “We didn’t bring in any consultants and I leveraged heavily on the skills I had learnt during my professional career.”
As a result of this deep probing into the company’s entrails, management pledged to exit peripheral and regional assets and focus on tier-one projects in the core Sydney and Melbourne markets.
“We also realised we had terrific asset creation capabilities,” Gould says. “Generally the financial returns from assets we developed outperformed those we didn’t create.”
The tangible results are reflected in the company’s portfolio, which includes high-quality office buildings such as 8 Chifley Square, 200 George Street and the Australian Technology Park, the new home of the Commonwealth Bank of Australia.
Gould says the group prefers to co-invest with third-party investors. For example, Sunsuper and AMP Capital invested alongside Mirvac with the CBA development, while AMP owns 50 per cent of 200 George St.
“It’s not hard and fast, but our model is to own about half the building and we keep that on the balance sheet. The other half is sold down to the partner and we manage the building on their behalf.
“It’s about diversifying risk and recycling capital. By bringing in partners you take some money off the table and generate fees through managing the building.”
Gould says while no one could have foreseen the pandemic, the actions taken by Mirvac post GFC placed the company in a sound position: “It’s hard to get everything right, and where we don’t get it right, we learn.”
With a touch of serendipity, Mirvac beat the COVID-era capital raising rush by tapping $750m in fresh equity in May last year. This put the company’s balance sheet in a “rock solid position with low gearing with no significant short-term debt maturities,” Gould says.
Lloyd-Hurwitz notes that management acted quickly when the crisis emerged, being one of the first companies to implement working from home arrangements and to withdraw earnings guidance. The board and management team also accepted a 20 per cent pay reduction.
But as Mirvac’s otherwise sound full-year results last month attested, the company is hardly unaffected by COVID as shoppers and workers abide by stay-at-home rules.
“Retail tenants are doing it really tough,” Gould says. “A lot of them are mum and dad operators who have risked everything. I couldn’t imagine the financial and emotional stress they must be under.”
Interestingly Mirvac’s office portfolio has been less affected, underpinned by “resilient” long leases to tenants such as the CBA, Westpac, PwC, Ernst & Young and government agencies.
Offsetting some of the pain, the industrial portfolio has benefited from the COVID-enhanced boom in e-commerce and associated logistics.
Gould adds management remains focused on pushing through the crisis, rather than second guessing conditions when normality — or some semblance thereof — returns.
“We are not doing anything stupid or taking on unnecessary risk, as well as preserving as much cash as possible and winding back discretionary spending.”
Gould is also heavily involved in Mirvac’s award-winning innovation team, Hatch, which is focused on finding the company’s next growth pillars.
He says while there’s a strong “we don’t know” element about the post-COVID settings, Mirvac is confident that the physical office will remain crucial to corporate identity, given its role in fostering collaboration and innovation.
“We think the way businesses use that space might change, but we see ongoing tenant demand for office buildings that are more modern and adaptable.”
Gould has held his current role since he joined Mirvac in 2005. Answering to CFO Shane Gannon, he leads a team of 16 covering financial planning and analysis (budgeting and forecasting) as well as business intelligence.
Lloyd-Hurwitz credits Gould’s rounded training as seminal to the Mirvac turnaround — and it was not all about crunching the numbers and the data.
“He can be incredibly detailed and focused and also incredibly strategic,” she says.
“You don’t often find people who are ambidextrous in their working style like that. They are generally focused in the weeds or gloss over the details and go for the big picture.”
Meanwhile, the “Mirvacuate” slight is nowhere to be heard as the company consolidates its position as an ASX 200 leader.
“No one talks about us like that anymore,” Gould says. “We have earnt the respect of our investors and we continue to deliver on our promises.”
Originally published on theaustralian.com.au
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