Shopping centre operator Scentre Group Ltd (ASX: SCG) announced its full-year earnings results to the market on Tuesday, reporting a strong underlying performance for the period.
What happened?
Scentre Group is the owner and operator of Westfield-branded shopping centres across New Zealand and Australia, and was created as part of the global Westfield restructure in mid-2014.
As a result of the timing of that restructure, the results presented today were not exactly comparable with the prior year. This is because last year's earnings results comprised the earnings of the formerly listed Westfield Group for the first six months of the year, while it was only the latter six months that were the earnings of Scentre Group.
Still, here are some of the highlights:
- Revenue up 32.5% to $2.87 billion
- Net profit down 58.9% to $2.71 billion (again, the 2014 year included six months of income from Westfield Group)
- Funds From Operations (FFO) were $1.2 billion, or 22.58 cents per security, up 3.8% (the company said that figure would have been around 5% had it not been for the sale of high-yielding shopping centres during the period)
- Comparable specialty sales in Australia up 5.3%; average annual specialty sales of $10,826 per square metre (psm)
- Comparable specialty sales in New Zealand up 6.6%; average annual specialty sales of NZ$12,117 psm
The results were reasonable, with Chairman Frank Lowy saying that 'the rationale for the creation of Scentre Group has been validated' as a result.
What happens now?
For the 2016 calendar year, Scentre Group expects another 3% growth in FFO, or 5% on an underlying basis which would again exclude the impact of asset sales. Meanwhile, the company announced a distribution of 20.9 cents per security for the year just ended, which was in line with expectations, and it expects to increase that payment to 21.3 cents per security in 2016. That puts the shares on a forward dividend yield of around 4.8%.
The group will continue to focus on redevelopments of its various shopping centres with a development pipeline in excess of $3 billion, while it will also continue to roll-out new technology throughout its centres to make the shopping experience more dynamic and productive.
As quoted by SBS, the company's CEO Peter Allen said: "People don't just come to shopping centres anymore to shop, they come to experience things, whether that is a leisure activity or food-based."
While I think Scentre Group is a decent company for long-term investors to consider, I prefer the growth prospects of its international counterpart, Westfield Corp Ltd (ASX: WFD).
Westfield Corp owns and operates the international Westfield shopping centres located in the United States and the United Kingdom, where it not only has the ability to benefit from their growing economies, but also help Australian investors profit from the weak Australian dollar. Westfield Corp will report its earnings in the near future, giving investors greater insight into how it is progressing.
