Scentre Group has posted a trading update for the three months ending March 31 that reveals the Westfield shopping centre operator’s asset base has continued to benefit from above average growth in retail sales.
While the broader retail category has been generally subdued, the group reported Q1 comparable specialty sales are up 5.8 per cent on the previous corresponding period and four per cent on a rolling 12 month basis.
Importantly for the Australasian-focused group, the combination of positive retail sales growth across its portfolio (New Zealand and Australia experienced similar levels of like for like growth in sales per square meter) and high occupancy rates in excess of 99.5 per cent has continued to underpin growth in rental income. For the 12 months to March 31, the group’s comparable speciality store rent increased by one per cent in NZ and 2.4 per cent in Australia.
Having presided over 21 consecutive months of positive specialty retail sales growth, the group’s operating momentum appears to be accelerating. While its retail sales growth for the 12 months to March 31 was 2.1 per cent in NZ and 1.7 per cent in Australia, retail sales growth for the three months to March 31 was 5.1 per cent in NZ and 3.8 per cent in Australia.
The key pockets of strength in the group’s retail sales growth coincide with the hot residential property markets of New South Wales and Victoria, and to a lesser extent NZ. Whether this region specific increase in retail consumption is due to the wealth effect of higher property prices is not known. At any rate, it is worth noting that these three regions account for around 68 per cent of the group’s gross lettable area.
While the group’s trading performance for quarter one has been positive, it is also encouraging to note that management has been actively building on this momentum. Included is the commencement of $505 million of developments year to date, including $105 million on a project in Hurstville, $55 million on a project in Kotara, a $155 million project Casey Central in Victoria, and the issue of around $2 billion in fixed rate bonds.
In terms of management’s explicit guidance for CY15, the group has reiterated its forecast for funds from operations to grow by 22.5 cents per security, with the distribution forecast to increase to 20.9 cents per security. Based on the group’s current share price, this implies a prospective dividend yield of 5.4 per cent.
