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SCentre Group reduce outlook for earnings growth


Scentre Group released its results for the 12 months to 31 December 2018, with Funds From Operations (FFO) of $1.34 billion representing 25.24 cents per security, up 3.9% and a distribution of 22.16 cents per security, up 2%.

Despite meeting the previous forecast guidance, the market was disappointed that the outlook for 2019 FFO is up only 3%, as opposed to the 4% guidance and 3.9% delivered for in 2018.

Statutory profits for the group were down 45% on last year due predominantly to the significantly lower valuation gains recorded for the portfolio up $1.1Billion as opposed to the $3.0Bn for the pcp.

Scentre defended speculation of a growing vacancy issue advising that occupancy across the portfolio continues to be greater than 99% as it has been for more than 20 years and that SCentre are well adapt to changing customer expectations with more than 35% of the stores offering physical experiences like dining, entertainment, health, fitness and beauty services, which can only be consumed on-site, with newer Centre's containing up to 50% of such stores.

Peter Allen, Scentre Group CEO, indicated that annual customer visitation increased by 5 million to 535 million and annual in-store sales increased by $1 billion to $24 billion.

Statutory profit for the Group was $2.3 billion for the year including revaluation uplifts of $1.1 billion across the portfolio. This was underpinned by the completion of developments, net income growth and improvement in capitalisation rates for high quality assets. Scentre Group has total assets of $39.1 billion and assets under management of $54.2 billion. The Group has a strong financial position with gearing at period end of 33.9% and interest cover at 3.5 times.

Operations

Comparable net operating income increased 2.5% for the 12 months, driven primarily by contracted annual rent escalations. During the year, the Group successfully completed over $1.1 billion (SCG share: $810 million) of developments which are earnings accretive and deliver attractive long-term returns.

Collectively these projects added more than 106,000 sqm to the portfolio across

The Group also commenced the NZ$790 million redevelopment of Westfield Newmarket in Auckland

Outlook

The Group forecasts FFO growth for the 12 months ending 31 December 2019 of approximately 3%. The distribution for 2019 is forecast to be 22.60 cents per security, an increase of 2%.

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