Scentre Reaffirms Annual Guidance, 1st Half Net Profit Falls 69%
By David Winning
SYDNEY--Scentre reaffirmed its guidance for annual funds from operations and its distribution, as its malls continue to show resilience despite the pressure placed by higher interest rates on consumers.
Scentre said it continues to expect funds from operations--a smoothed measure of operating cash flow that excludes depreciation, amortization and gains on asset sales--of 20.75 Australian cents (13.31 U.S. cents) and 21.25 cents in the 12 months through December. If achieved, that would represent growth of up to 5.9% compared with 2022.
The company, which owns and operates nearly 40 Westfield branded shopping centers, forecast a minimum annual distribution of 16.5 cents, up by at least 4.8% on the prior year.
Retail property owners are at a critical juncture as the rapid escalation in interest rates is starting to take its toll on consumers. Many households which took out a fixed-rate mortgage during the pandemic are now seeing those deals expire, limiting their discretionary income and ability to shop in stores.
Official data show retail sales volumes have fallen for three quarters in a row, representing the first time since the global financial crisis in 2008 that this has happened.
For companies like Scentre, any slowdown in spending threatens to derail their recovery from the pandemic, which has so far featured increases in leasing deals, higher rent collection, and an uptick in occupancy. At the same time, higher interest rates mean the cost of a company's own debt is rising.
Scentre reported a net profit of A$149.4 million in the six months through June, down 69% from A$479.8 million a year ago. Funds from operations rose by 1.5% to A$556.6 million in the six-month period.
Write to David Winning at david.winning@wsj.com
(END) Dow Jones Newswires
August 21, 2023 18:44 ET (22:44 GMT)
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