SCentre's released their half year results revealing a $4.0bn write down in value and Funds from Operations down -45% per security.
Westfields strength in dominating dense population centres has become its weakness as customer visitation dropped 55% leaving its tenant base unable to pay 30% of its rent billings in the first half.
The Statutory result for the six-month period was a loss of ($3,613) million including the unrealised non-cash reduction in property valuations of ($4,079) million.
Scentre Group CEO Peter Allen said: “A fundamental strength of our business is the strategic location of the Group’s network of 42 Westfield Living Centres. Our centres are in close proximity to the most densely populated urban areas with more than 16 million people living within a 30-minute drive of one of our centres.
“As customers are returning to our centres, more than 93% of retail stores are open across the portfolio (excluding our Victorian centres). Portfolio occupancy was 98.8% at the end of June 2020.
Westfield has worked to reduce the impact of the Pandemic with strategic initiatives such as Westfield Direct and Westfield Plus, to facilitate customers connecting and interacting with retailers on line. Westfield have more than 500,000 members on Westfield Plus platform.
The Group also acted quickly to secure additional funding to support the groups balance sheet through and beyond the volatile period. So far this year, the Group raised or extended $5.8 billion of additional funding, including $3.4 billion of bank facilities and $2.4 billion of long-term bonds. The Group currently has available liquidity of $4.4 billion, sufficient to cover all maturities to January 2023. Interest cover for the period was 3.6 times and balance sheet gearing at 30 June 2020 was 38.4%.
Mr Allen said, “We led the development of a voluntary code of conduct which was designed to target appropriate assistance and support to small and medium sized retailers (SMEs) during the pandemic. The Code of Conduct (the Code) was mandated by governments throughout Australia and we voluntarily applied these principles to conversations with our New Zealand SME retailers,”
“We acknowledge that this has been a difficult time for our customers and our retail partners. We have supported our retail partners throughout this period on a case-by-case basis. We have done this without receiving financial assistance from Government.
“The shopping centre industry has provided over $1.6 billion of support for retailers during the pandemic. Our industry is unique in that it has provided, and self-funded, a level of financial support beyond any other industry as well as most government pandemic support packages.
SCentre have agreed arrangements with 2,438 of 3,600 retailers, including 1,624 SME businesses. SCentre was at pains to point out that they have maintained the structure of their leases with those retailers and remains based on the mutual agreement to pay a fixed rent. This was clearly a dig at retailers who are seeking to follow Solomon Lew's example by reverting to a full percentage rent basis. Frustrated by those seeking to put more operational risk on the Landlord, SCentre has already locked out Mosaic Brands, owner of Noni B, Millers, Rivers, Katies, Crossroads and EziBuy.
In-store sales for the retailers that traded throughout the six-month period were -8.1% lower compared to the previous corresponding six-month period in 2019. Specialty in-store sales were -12.1% lower for the six-month period compared to the previous corresponding period.
During the half year, SCentre continued to progress the projects that were already underway at Westfield Doncaster (Victoria), Westfield Belconnen (ACT) and Westfield Hornsby (NSW). The $50 million project at Westfield Carindale (Queensland) will complete in September 2020.
The Group continues to implement initiatives that support our strategy to operate as a responsible, sustainable business. During the half, we announced our target to achieve Net Zero Carbon Emissions by 2030. The Group recently committed to the Task Force for Climate-Related Financial Disclosures (TCFD).
Outlook
Mr Allen said: “The underlying fundamentals of the Group’s business remain strong and the business is well positioned to deliver long-term sustainable returns for securityholders through economic cycles.
SCentre did not provide earnings or distribution guidance for the balance of year.
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