The Unibail-Rodamco-Westfield (ASX: URW) share price sunk 5.26% to $3.78 yesterday after the shopping centre operator released its half-year results.
Unibail reported that the COVID-19 pandemic has significantly impacted its business. Authorities in many of the markets the company operates imposed restrictions on the opening of shopping centres. Many tenants were unable to trade, and not all retailers continued or restarted operations.
Unibail-Rodamco-Westfield's operations
Unibail operates shopping centres, convention centres, and office buildings in the United States (US) and Europe. With 86% of Unibail's portfolio in retail assets, a large proportion of tenants were unable to trade during COVID-19 lockdowns. On average, Unibail's shopping centres were closed for 67 days. The majority of centres have reopened but the ongoing economic downturn is likely to impact tenants.
The implementation of health and safety measures has been a key element of reopening, with additional cleaning, supplies, and communications required. Unibail reports footfall trends have been encouraging since reopenings and generally better than expected. June footfall for centres open throughout the month was 73.8% of June 2019. But the closures had a devastating impact on tenant sales, which fell 39.4% in Europe over the year to June 2020. June 2020 sales remained 19.7% lower than June 2019 in continental Europe.
Financial impact
The closure of centres meant Unibail has struggled to collect rent, although some governments have provided tenant support packages. Only 41% of rent and service charges were collected in Q2 2020, down from 96% in Q1 2020. Of Q2 2020 rent, 34% was deferred or discounted and 25% is overdue and to be recovered. Many tenant negotiations are ongoing, which may have affected the collection rate. Unibail is hoping to see this improve once negotiations are concluded.
Unibail has identified 201.1 million euros in impacts from COVID-19, including rent reductions, increases in doubtful debtors, lower variable revenues and an increase in financial expenses due to liquidity measures taken during the crisis. This has caused a 1.45 euro reduction in earnings per share. Overall adjusted recurring earnings per share fell from 6.45 euros in 1H 2019 to 4.65 euros in 1H 2020.
About the Unibail share price
The Unibail share price is down 66.5% from its January high, and is actually trading lower than its March low. Like other shopping centre operators, it is struggling with lack of patronage in a post-COVID world. Encouragingly, sales have been impacted less than footfall, and categories such as home and technology have been performing well.
