The operator of Westfield malls in Australia and New Zealand is reassuring investors that it can continue to grow earnings even after it sold four shopping centres in its portfolio.
Scentre Group Ltd's (ASX: SCG) update came as management announced funds from operations (FFO) of 11.38 cents and declared a dividend of 10.45 cents a security as specialty store sales at its malls rose 6.1% to $10,556 per square metre for the six months to end June, 2015.
The result was in-line with company guidance but that didn't stop the stock from jumping 2.5% to $3.70 although it is difficult to compare the group's half year result.
This is because the previous corresponding period includes the performance of Westfield's international operations before the local properties were hived off into Scentre Group leaving the offshore malls in Westfield Corp Ltd (ASX: WFD).
This is why the market isn't reading too much into Scentre's big drop in interim statutory net profit to $1.1 billion from $5.3 billion.
If the restructure and merger were excluded, the adjusted net profit would have nearly doubled over the same period, but again that number is somewhat meaningless.
It is more important to focus on Scentre's sale of four Australian shopping centres for $783 million. Its Figtree, North Rocks, Strathpine and Warrawong malls were sold to private equity firm Blackstone and Challenger to allow Scentre to focus on properties that can generate higher returns.
The group said the strong underlying performance of its remaining assets will offset the earnings hole left by the sale of the four properties and management has left its FFO guidance at 22.5 cents per security for 2015, which is 3.5% ahead of last year, and distribution forecast at 20.9 cents a security.
Proceeds from the sales will be reinvested in the group's development pipeline and the result is unlikely to materially change brokers' estimates for the group with consensus tipping a 4% increase in earnings per share for Scentre in 2016.
Victoria and New South Wales are the best performing geographies for Scentre with resources-dependent Western Australia the only region sliding backwards in the first half.
Among the categories, cinemas are delivering the best sales growth for the group followed by technology and appliances, while general retail, supermarkets and department stores are the worst.
The trends are fairly similar to those reported by Stockland Corporation Ltd (ASX: SGP) and bode well for the outlook for JB Hi-Fi Limited (ASX: JBH) and Dick Smith Holdings Ltd (ASX: DSH).
