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Scentre (ASX:SCG) returns to half-year profit

Market News, Real Estate
ASX:SCG      MCAP $18.28B
24 August 2021 11:50 (AEDT)
Scentre Group (ASX:SCG) - CEO, Peter Allen

Source: Scentre Group

Assuming that COVID-19 restrictions will be considerably lifted by the end of October, Scentre Group (SCG) has retained its annual dividend forecast as it enjoys a return to half-year profits.

In the six months ending June 30 2021, the Westfield landlord posted an operating profit of $460.1 million (8.88 cents per share) and funds from operations (FFO) of $463.4 million (8.94 cents per security).

This is in stark contrast to FY20 when the company reported a $3.7 billion loss, thanks primarily to a $4.2 billion reduction in property valuation during the year.

The previously announced six-month distribution of $362.9 million, or seven cents per security will be paid on August 31.

The group generated a net cash inflow of $1.383 billion and a gross cash inflow of $1.383 billion over the six-month period and an operating cash surplus of $487.7 million (after interest, overheads and taxes),

For the six-month period, the statutory profit was $400.4 million, with the mall giant collecting $1.2 billion of gross rent, a 37 per cent increase from the first half of 2020.

The period was dotted with lockdowns in New Zealand, Queensland, Western Australia, Victoria and Sydney, with the results not capturing recent lockdowns that occurred after June 30.

Scentre Group CEO Peter Allen said the group had delivered a strong result despite restrictions.

“In those locations impacted less by lockdowns, we have seen trading conditions better than those experienced in the first half of 2019,” he said.

“Visitation rapidly rebounded when restrictions were eased. Annual sales through our platform were $23.4 billion.

“During the first half of 2021, total sales excluding cinemas and travel exceeded total sales in the first half of 2019, even though there were a number of government lockdowns during the period.”

The group’s membership program, Westfield Plus, has more than 1.9 million members, increasing by 1.4 million since June last year.

During the first half, Scentre executed 1515 leasing transactions, including 619 new merchants. Occupancy is still high, with 98.5 per cent of the portfolio leased as of June 30, 2021.

Portfolio rent per square metre (total area) has increased by 23 per cent since 2010, to $822 per square metre with the portfolio’s overall area increasing by 15 per cent to 3.9 million square metres over the same time period.

The group has $5.7 billion in cash on hand, which is enough to service all debt obligations until early 2024. The interest cover for the period was 3.3 times, and the balance sheet gearing was 27.9 per cent as of June 30, 2021.

Across its wholly-owned portfolio, the group has committed to attaining net-zero Scope 1 and 2 emissions by 2030.

“The Group continues to target a distribution of 14 cents per security for the year to 31 December 2021,” Mr Allen said.

“This is based on the assumption that the current government restrictions substantially ease by the end of October 2021.

“Whilst we are currently operating through a period of government restrictions in key markets, we are confident in the ability of our business to perform.”

Shares in SCG were up 5.69 per cent to $2.70 at 1:25 pm AEST.

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