Massive hit to property values pushes Scentre Group to $3.73b loss

Massive hit to property values pushes Scentre Group to $3.73b loss

A massive hit to property valuations has pushed Westfield shopping centre operator Scentre Group (ASX: SCG) to a $3.73 billion loss in 2020.

The result, for the 12 months to the end of December, reveals the extent of the impact of COVID lockdowns on the company's business with operating profit also slumping 40 per cent to $763.4 million.

But it's the revaluation of the company's property portfolio that bore the brunt of the latest result, with Scentre slashing $4.25 billion off the value of its properties. The portfolio is currently valued at $33.5 billion.

The 2020 full-year loss compares with a profit of $1.18 billion recorded in 2019.

Scentre Group recorded a 17.4 per cent slide in revenue last year to $2.16 billion, although the group notes that conditions recovered over the second half of the year with receipts from operations up 22.5 per cent on the first half.

Scentre, which operates 42 retail centres in Australia and New Zealand, did not receive any government support such as JobKeeper during the pandemic. This is despite adhering to the code of conduct in relation to assisting its retailers with rent relief.

Scentre Group managed to collect 70 per cent of rents it was due, or about $900 million, in the first half of the year, jumping to 93 per cent, or $1.2 billion in the second half. The company says it was able to achieve 100 per cent of gross billings in the final quarter.

Despite a challenging year, Scentre Group CEO Peter Allen says demand for space across the company's portfolio remains strong with a 98.5 per cent occupancy rate at the end of December.

The group completed 2,625 lease deals during the year, including 848 new merchants.

"Our business fundamentals remain strong and our strategy, focused on the customer, positions the group for long-term growth," says Allen.

"We were proactive and deliberate in the decisions we made. We trialled a number of initiatives, such as aggregated 'click and collect' that facilitated our retail partners connecting with customers during periods of government restrictions.

"The learnings form the basis for strategic initiatives we are pursuing.

"Our capital management actions were focused on strengthening our financial position and preserving value for the long term by not raising equity from our securityholders."

Scentre Group is making a final distribution of 7c per stapled security after abandoning an interim payment. The full-year payout compares with 22.6c per security in 2019.

"Whilst uncertainty remains in 2021, subject to no material change in conditions, the group expects to distribute at least 14c per security for 2021," say Allen.

"The group plans to retain earnings to cover operating and leasing capital expenditure, fund strategic initiatives and reduce net debt."

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