Scentre Group books solid profit, eyes Westfield Sydney expansion

The shopping centre owner’s half-year profit has been received poorly by the ratings agency.

Peter Allen, chief executive of the Scentre Group in its Sydney offices.

The Frank Lowy-chaired mall giant Scentre Group has drawn concern from ratings agency Moody’s despite booking a solid increase in interim profit as it looks to expand Westfield Sydney.

Scentre (SCG) today logged a profit of $1.15 billion for the six months through June, an increase of 6.6 per cent year on year.

Revenue for the group, which remains focused on the local market after the US and European assets were spun out of Westfield Group in 2014, fell 5.2 per cent over the six months period to $1.28bn.

“We are pleased with these half-year results which reflect the benefits of focusing on the highest quality shopping centres in Australia and New Zealand,” chief executive Peter Allen said.

“Having completed the acquisition of the adjacent David Jones building, we have the unique opportunity to expand Westfield Sydney, which has the highest specialty sales productivity in Australia, reinforcing the precinct as Sydney’s luxury retail destination” Mr Allen said.

Scentre Group owns and operates interests in 40 Westfield shopping centres, including 16 of the top 25 performing centres in Australia, and has assets under management of $43.3bn.

The result was not well-received by Moody’s however, which tagged it as a “credit negative” result despite retaining its A1 rating on the stock.

“Scentre Group’s financial results for the six months to June 2016 show a strong underlying operating performance,” Maurice O’Connell, a Moody’s vice president, senior credit officer, said.

“However, financial leverage continues to rise and is now at the tolerance level set for the A1 rating.”

No credit rating action was announced, but the agency said a downward revision is a risk.

“Negative rating pressure could evolve if Moody’s foresees a weakening in Scentre Group’s financial metrics due to a weakened operating environment or a substantial ramp-up of capex,” the group said.

Scentre Group will pay a 10.65c dividend.

At 3.55pm (AEST), Scentre shares traded down 0.1 per cent at $5.065, against a broader market rise of 0.6 per cent.