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Scentre Group profit almost halves, shares tumble

Westfield shopping centre owner and operator Scentre Group’s shares have fallen after flagging operating earnings growth for the year following a drop in net profit.

The group, which has 42 Westfield centres, has posted a full-year net profit of AU$1.179 billion (NZ$1.23 billion), down 48.4 per cent from AU$2.287 billion (NZ$2.39 billion) a year ago after big costs including property revaluations dragged the number down.

But the company’s funds from operations, the primary earnings metric of the company, came in at AU$1.344 billion (NZ$1.41 billion), up 0.4 per cent from AU$1.3395 billion (NZ$1.4 billion) in 2018.

That was 3.2 per cent higher than the prior year on a pro forma basis, which adjusts for sales and acquisitions during the year including the AU$1.52 billion (NZ$1.59 billion) divestment of Sydney office towers.

The group’s shares were trading AU1.98 per cent lower at AU$3.705 at 1403 AEDT.

Chief executive Peter Allen was pleased with their financial performance and said earnings and distributions grew in line with guidance, and that annual customer visits to centres was set to grow to 548 million.

“For over 60 years, our business has constantly been adapted to be at the forefront of consumer change,” Allen said. 

“Our ability to directly engage with the customer and deliver what they want will continue to deliver long-term sustainable earnings growth.”

Distribution per security will be AU22.60 (NZ23.65) cents for the full 2019 financial year compared with AU22.16 (NZ23.19) cents in 2018. 

The company is forecasting distribution for 2020 at AU23.28 (NZ24.36) cents per security.

Moody’s Investors Service vice president Matthew Moore said the results were in line with their expectations and reflect a still solid overall operating performance. 

There was mostly stable net operating income growth during the year, although down from 2018, and high occupancy rates, he said.

However, leasing spreads remain negative and showed further deterioration in the period, reflecting the challenging retail environment, Mr Moore said.

Scentre believes its operating earnings for the 2020 full year will be between AU24.75 and AU24.80 (NZ25.9 and NZ25.96) cents per security, or about 3.1 per cent higher.

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