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Scentre Group’s Funds from Operations (FFO) for the six months to 31 December 2014 were $578 million, representing 10.88 cents per security and a distribution of 10.2 cents per security, in line with forecasts. AIFRS profit for same period was $1.3 billion, which includes property revaluations of $648.9 million, also in line with forecasts. Return on contributed equity was 11.0%.
The underlying operational results demonstrated a continuation of the improving sales environment in Australia and New Zealand, with excellent specialty sales productivity, continued growth in average rents and comparable net operating income.
In Australia, for the 12 months to 31 December 2014 average specialty store sales increased to $10,200 per square metre, representing comparable growth of 3.6%. There was growth across nearly all specialty store categories with fashion up 3.0%, footwear up 3.9%, jewellery up 9.7% and leisure and retail services up 3.1% and 2.8% respectively.
Discount department stores declined by 3.5% for the year, with an improvement evident in the fourth quarter at 0.7% down. Supermarkets also improved in the fourth quarter with an increase of 2.8% compared to an increase of 1.8% for the 12 months. Comparable net property income increased by 2.4% for the period.
In New Zealand specialty retail sales grew by 2.3% for the 12 months to 31 December to an average of NZ$8,765 per square metre with the fourth quarter up by 3.2%.
Across both markets comparable property net operating income increased by 2.2% for the 12 months to 31 December 2014 and the portfolio remained more than 99.5% leased.
During the year the Group completed a major redevelopment at Westfield Garden City and the first and second-stage openings at Westfield Miranda, and opened the $440 million third-party design and construction project at Macquarie Centre in Sydney for AMP Capital.
Scentre Group has commenced two new developments in 2015 at Westfield Chatswood in Sydney and Westfield North Lakes in Brisbane with a combined value of $190 million (SCG share $150 million).
The $110 million development at Chatswood will create a new, five-level mall facing Victoria Avenue and introduce Top Shop, four additional mini-majors, and a new Asian-inspired dining food market. The project is expected to be completed in late 2015.
The $80 million development (SCG share: $40 million) at North Lakes will introduce a new entertainment and dining precinct including an eight-screen cinema and an adjacent casual dining precinct. The existing Coles will also be expanded to become the largest in the trade area, supported by an expanded fresh food precinct. The development is anticipated to be completed by early 2016.
Scentre Group also continues to progress the $670 million third-party design and construction project at Pacific Fair on the Gold Coast for AMP Capital which is due for completion in 2016.
Scentre Group’s excellent financial metrics include a strong balance sheet, and gearing of 34.9% as at 31 December 2014, within the target 30-35% range announced at the time of the restructure. The Group has strong credit ratings of A1 (stable) from Moody’s and A (stable) from Standard & Poors.
Immediately following the establishment of Scentre Group on 30 June 2014, a successful A$3.1 billion four-tranche debut bond offering was executed in the euromarkets, which received strong investor support. The Group subsequently raised A$400 million from a domestic bond issue and A$1.5 billion from two US$ bond issues. The net proceeds from these issues were used to refinance the A$5 billion bridge facility established as part of the restructure in June 2014.
In 2014, Scentre Group announced a NZ$2.1 billion joint venture with existing joint venture partner GIC, in a transaction which settled in the first quarter of this year. The joint venture is over five shopping centres in New Zealand, three of which have development plans. The Group’s relationship with GIC spans more than seven years and includes joint ownership of Westfield Parramatta and Westfield Whitford City in Australia.
Scentre Group forecasts FFO for 2015 to grow by 3.5% to 22.5 cents per security, with the distribution forecast to increase to 20.9 cents per security.