SCentre Group have released some preliminary results for the half year ended June 2020 with expected Net Operating Cashflow to be in excess of $250m and valuations to be down -10%.
The full results will be announced on the 25th August however the preliminary results reveal a devastating blow to the Group from COVID19. Whilst SCentre have not been explicit in their release, the earnings from the first half appear to reveal a -60% decline in first half earnings. In the correspondence half of 2019, SCentre reported Net cash flows from operating activities to be $629m. We presume SCentre are being consistent in their reporting approach and whilst the final figure may exceed $250m by a reasonable margin, the news will still not be great.
The Group have not previously provided any significant advice in relation to COVID19 impacts. The Group has reported that customer visitation was down across March and April by -60% on the previous year and that 60% of stores closed for most of April, generating no sales revenue. Conditions improved in May, however the mandatory Code of Conduct meant significant cuts to SCentre's revenue was inevitable.
In May the Group announced it would not make an interim distribution for the Half Year ending 30 June 2020.
The outlook is not great either with a return to lock down in Victoria affecting 7 retail Centres accounting for 15% of the portfolio by value.
Scentre have advised that the results are a preliminary estimate and remains subject to external audit review and Board review and approval. The Group has not received any funds from the Australian Government under its JobKeeper scheme.
The results to be announced will also include lower re-valuations of the Group's property portfolio. Scentre Group expects the carrying value of the property portfolio, at 30 June 2020, will reduce by approximately 10% from the carrying value at 31 December 2019. This reduction is expected and follows the results previously announced by GPT on their portfolio.
The change in carrying value is a non-cash item and is not included in the Group's Operating Earnings or Funds from Operations (FFO). The draft valuations are preliminary and remain subject to finalisation, external auditor review and the Board's approval.
The Group's dramatic reduction in cash flow and values is principally due to the impact of the COVID-19 pandemic.
Scentre Group maintains available liquidity of $4.4 billion at 30 June 2020.
In April 2020 the Group announced that, in light of the COVID-19 pandemic, temporary arrangements to reduce base Board fees and fixed remuneration for the executive team (including the Senior Leadership Team). These arrangements commenced from 1 May 2020 and, as announced, would be reviewed by the Board in August 2020.
The Board has reviewed these arrangements and has determined that Board fees and fixed remuneration for the executive team will revert to their previous levels, effective from 1 August 2020. This decision is a slap in the face to investors who have lost value and income, nor retailers, many of whom will not survive the pandemic.
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