The Vicinity Centres (ASX: VCX) share price ended 5.6% in the red today following the release of its half-year results.
Vicinity Centres is a vertically integrated Australian Real Estate Investment Trust (REIT) that primarily owns and manages Australian shopping centres. Its property services include property investment, retail development, property management, leasing and fund administration.
What did Vicinity Centres announce?
For the half-year to 31 December 2019, Vicinity Centres reported net profit after tax of $242.8 million.
Funds from operations (FFO) came in at $337 million or 8.95 cents per security, representing 1.5% comparable growth. This was underpinned by comparable net property income growth of 2.5% and the on-market securities buy-back during the period.
The company noted that these items were partly offset by the impact of pre-development centres. In these centres, upcoming projects prevent optimal leasing outcomes, reduce fee income and result in lower surrender payments received from tenants.
The FY20 interim distribution paid by the company was 7.70 cents per security which this reflects an adjusted FFO payout ratio of 94.9%. The distribution will be paid on 2 March 2020.
Shopping centre activity
Vicinity Centres reported that its 59 shopping centres maintained high occupancy of 99.5% at 31 December 2019. Foot traffic across the portfolio for the six months to December 2019 was up 0.8% on the prior corresponding period (pcp). However, excluding the Sydney CBD centres which were impacted by the recently completed light rail infrastructure works, foot traffic actually was up 2.0% across the remainder of the portfolio in the period.
The company also noted that its 59 directly-owned retail properties were revalued during the period, recording a net valuation decline for the six months of $81 million or 0.5%.
With this, its Western Australian Core portfolio recorded a decline of 6.1% or $106 million. The core reason for this decline was subdued retail leasing conditions impacting regional centres in the state.
Outlook and revised FY20 guidance
Vicinity Centres commented that it is mindful of the impact the novel coronavirus is having on its retailers and communities.
The company further pointed out that while global uncertainty continues as to the full impact and duration of the outbreak, it is undertaking a range of initiatives to mitigate the impact on its portfolio. This includes regularly communicating with retailers and over the coming weeks, delivering targeted campaigns to support visitation at its most affected centres.
Vicinity's FY20 FFO per security guidance has been revised to a range of 17.2 cents to 17.4 cents, down from the previously guided 17.6 cents to 17.8 cents.
The company noted that full-year distribution payout ratio is expected to be at the upper end of the target range of 95% to 100% of AFFO, and reflects FY20 maintenance capital expenditure and incentives of approximately $80 million to $90 million.
