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Scentre Group's earnings meet expectations

Nicholas Grove  |  21 Feb 2017Text size  Decrease  Increase  |  

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Scentre Group's (ASX: SCG) funds from operations (FFO)--a preferred measure of operating performance among real estate investment trusts--rose 3.2 per cent to $1.238 billion in the year to 31 December 2016, representing 23.3 cents per security and in line with Morningstar's forecast.

The owner of Westfield shopping centres declared a distribution of 21.3 cents per security, up 2 per cent on the previous year, also in line with Morningstar's expectations.

Scentre's profit for the year was $2.991 billion, up 10.4 per cent on 2015 and including revaluations of $1.6 billion.

These revaluations reflect the strong net operating income growth throughout the portfolio, the value creation from the completion of major redevelopments and the continued improvement in capitalisation rates, the company said.

Scentre said it is in a strong financial position with total assets of $34.1 billion, gearing of 33.3 per cent and liquidity of $2.8 billion as at 31 December 2016.

"We are very pleased with these results, which are above guidance and reflect our strong operational performance across the portfolio," Scentre Group CEO Peter Allen said in a statement.

"During 2016 we completed major redevelopments with above-forecast yields and commenced $605 million of new developments as planned. 

"Our long-term strategy is to own the highest-quality shopping centre portfolio in Australia and New Zealand. We have now completed the divestment of nine shopping centres that did not meet this objective, which has refined our portfolio to meet the dynamic needs of both retailers and consumers."

For 2017, Scentre Group expects FFO growth of approximately 4.25 per cent and a 2 per cent increase in the distribution to 21.73 cents per security.

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Nicholas Grove is a Morningstar journalist.

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