Westfield half-year profits up 31% but revenue down amid subdued retail climate

Australia’s largest shopping centre landlord, Westfield, has reported a 31% rise in net profits of $800 million for the six months to the end of June.

However, revenue fell 10.7% over the six-month period to $1.213 billion from $1.358 billion revenue in the six months to June 2011 as retailing remained in a subdued state in Australian despite strong overall macro-economic conditions.

Australian speciality stores recorded growth of just 0.8% over the six-month reporting period, with Westfield Sydney the strongest -performing store in the Australian portfolio in terms of speciality sales – no individual shopping centre figures were provided.

Operating incomes were boosted by a pick-up in retail sales in the US, with speciality sales up 8.7%.

In the UK, retailing and the Westfield brand was boosted by the Westfield Stratford City's London Olympics location, which recording around 5.5 million visits over the two weeks of the Games, “giving the group an unprecedented exposure to a global audience”.

Co-chief executives Peter Lowy and Steven Lowy reconfirmed Westfield's forecast of a distribution of 49.5¢ per security, but warned of a challenging market place for retailers.

Peter Lowy highlighted a “volatile economic environment” while Steven Lowy said the retailing environment remained “subdued”.

“We are clearly in an environment of soft retailing, we need a spark to kick things off,” said Peter Lowy.

“On macro-scale the country is strong, but there does need to be a spark at the consumer level.

He told analysts that retailing had been subdued in Australia for three years, dating back to just after the government stimulus measures in 2009, when the government gave all taxpayers $900 to spend in an initiative aimed at keeping at recession at bay during the GFC.

However, both co-CEOs said Westfield remained in a strong financial position.

The half-year results show that net property income rose 7% to just over $1 billion, with comparable net property income growth the strongest in Australia, up 3.3% from its 42 shopping centres, the strongest-performing region for Westfield.

The US portfolio of 47 stores achieved comparable net property income of 2.5%, and the UK portfolio managed growth of just 0.9%.

The Australian portfolio remains more than 99.5% leased, with average speciality store rent rising 3.2% to $1,524 per square metre – the global portfolio is 97.5% leased.

Westfield completed 1,529 leasing deals over the six-month period, covering 194,000 square metres of retail space.

During the half year, the development of Westfield Sydney was completed, with Westfield reporting that it now has the highest specialty sales productivity in the portfolio.

Currently $1.5 billion worth of projects are under construction, with the group’s share being $1.2 billion. To date, the Group has invested $500m in these projects.

Last week, at Carindale in Brisbane, the $310 million expansion of that centre was completed.  

At Fountain Gate in Melbourne, Stage 1 of the $340 million project opened in May, with the remainder of the project on track for completion in September. 

During the half year, Westfield commenced work on $775 million of new projects including the development of the World Trade Center, the redevelopment at South Shore in New York and $80 million of smaller projects. 

Larry Schlesinger

Larry Schlesinger

Larry Schlesinger was a property writer at Property Observer

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