Westfield Half Year Result: WFD turns focus to flagship stores & technology to grow profits

CommSec

After spinning off its Australian and New Zealand management businesses into a separate organisation (Scentre Group), Westfield Corporation is now primarily focussed on operating and building shopping malls in the US and the UK. The group reported a net profit of US$588.9 million in the first half year, an increase of almost 20%. Revenue in the period rose 18.3% to US$987.6 million.

Property focused organisations tend to use funds from operations (FFO) to describe cash flow. To that end, WFD’s Funds from Operations (FFO) delivered US16.5 cents per security for the period. WFD confirmed its expectations that full year FFO will be in the range of US33.8 cents to US34 cents. WFD said it will pay an interim distribution of US12.75 cents per security for the period, an increase of 1.6% and reconfirmed guidance for a 2017 full-year dividend of US25.5 cents per security.

83% of WFD’s shopping centre portfolio is comprised of what the group refers to as ‘Flagship centres’ whose value is more than US$32 billion. These shopping centres cater to a more upmarket experience compared to the remaining regional centres. Specialty retail sales in the Flagship centres rose by a modest 3.3%, contributing to a total increase of only 2.2%. Total net operating income rose 3.5% and was driven by a 4.5% Flagship improvement compared to regional operation which saw net income rise by only 0.5%.

Breaking down the sales by their various segments in the Flagship centres, there was reasonable growth for Leisure and Food Retail which rose 5.7% and 4.5% respectively over the course of the last 6 months, although General Retail fell by almost 9% over the same period.

WFD’s current development pipeline totals US$3.8 billion and is made up of Century City in Los Angeles and UTC in San Diego which are both expected to be completed in 4Q17. The UK’s Westfield London will be finished in 1Q18. While Valley Fair in San Jose and Westfield World Trade Centre in New York will be opening in 2019. WFD is starting pre-development work on US$6.0 billion in future projects in Milan, Los Angeles & London.

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