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Scentre Signals Higher Distribution, Faster Earnings Growth in Fiscal Year 2022

   By David Winning 
 

SYDNEY--Scentre Group returned to profit in 2021 despite lockdowns curbing traffic to its malls, and it signaled an improvement in its distribution this year as pandemic restrictions ease across Australia.

Scentre, which owns and operates nearly 40 Westfield branded shopping centers, reported a net profit of 887.9 million Australian dollars (US$641 million) for the 12 months through December. That compared to a A$3.73 billion loss a year ago, which reflected a reduction in property valuations of A$4.25 billion.

Funds from operations--a smoothed measure of operating cash flow that excludes depreciation, amortization and gains on asset sales--rose by 13% to A$862.5 million across the year. Operating profit totaled A$845.8 million.

"During the year, we completed 2,497 lease deals, including 1,090 new merchant deals. We welcomed 267 new brands to the portfolio. As a result, occupancy has increased to 98.7%," said Chief Executive Peter Allen.

Scentre has signaled growing confidence in its outlook as Australia dials back restrictions and shifts toward treating Covid-19 as endemic. Australia's international border reopened to tourists for the first time since Covid-19 hit on Monday, and New South Wales state--where many of Scentre's malls are located--has scrapped density limits among other measures.

Scentre's final distribution of 7.25 cents per security brought its full-year payout to 14.25 cents. The company had updated its guidance in November to say it expected a distribution of "at least" 14.0 cents per security after lockdowns in New South Wales and neighboring Victoria ended. In August, it had only targeted a payout of 14 cents per security.

For 2022, Scentre forecast an annual distribution of at least 15.0 cents per security as Australia's economy recovers and shoppers grow less wary of being in crowded malls.

"Earnings are expected to grow at a higher rate in 2022," Mr. Allen said.

Still, there are gathering economic headwinds that pose a new challenge to mall owners. Among them is an increase in inflation, which is raising the cost of living for many households. Economists expect Australia's central bank to respond to higher inflation this year by raising interest rates for the first time in a decade. Higher borrowing costs would eat into consumers' spending power more.

On Wednesday, Scentre said its gross cash receipts totaled A$2.68 billion during 2021, up 14%.

Scentre said its gearing--a measure of debt relative to equity--was 27.5% at the end of December.

 

Write to David Winning at david.winning@wsj.com

 

(END) Dow Jones Newswires

February 22, 2022 17:12 ET (22:12 GMT)

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