Westfield profits up 18% despite sluggish specialty retail market

The Westfield Group has increased its earnings despite retail conditions in Australia being subdued for most of the year.

Earnings before interest and tax was $2.12 billion, up 3%, while net profit rose 18% to $1.72 billion.

Westfield’s global portfolio comprises 105 shopping centres across five countries with some 22,800 retail outlets.

“The performance for the year has been very good and in line with expectations,” its management team headed by Peter and Steven Lowy advised today.

They said the operating performance had been marked by continuing high occupancy, growth in average rents and comparable specialty sales growth.

Specialty sales grew strongly in the United States, being up 6.3% for the year. But in Australia the specialty sales grew only 0.5%.

Some 99.5% of its Australian/New Zealand space is leased.

There is an average $1,521 per square metre speciality store rent in the region.

Sales productivity of specialty stores sits as at $9,887 per square metre.

In Australia and New Zealand approximately 84% of total annual rental income is derived from specialty stores. Standard specialty shop lease terms are typically five to seven years with current annual contracted increases of either consumer price index (CPI) plus a fixed percentage, or fixed percentage increases.

Anchor retailers generally have lease terms of 20 to 25 years with stepped increases throughout the term which can be fixed, CPI based or sales turnover based.

“We have confidence in the group’s business model and opportunities for growth,” the Lowy statement said.

“We are focused on remaining at the forefront of our industry as we continue to improve the quality of our portfolio through our $12 billion development pipeline together with acquisition opportunities in existing and new markets.

“We also plan to continue redeploying capital from further joint ventures and non-core asset disposals.”

Stakes in $4.1 billion of shopping malls were offloaded during the year. There was around $300 million of property acquired and some $800 million invested in developments.

Net property income was $2.02 billion, which is the same as last year but up 7 per cent on a comparable basis after adjusting for properties that have been sold.

Comparable net operating income for the group was up 3.3%.

Management fee income rose 12% to $128 million and project income jumped 31% to $194 million.

The two income streams represent around 22% of funds from operations, up from 17.5% in the previous financial year.

The Westfield Retail Trust has posted a full-year profit of $830.8 million, down 2.2% given the retail environment.

This article first appeared on Property Observer.