Scentre notches up 10 per cent increase in shoppers to Westfield centres

The company behind Westfield shopping centres has ramped up its strategy to create destinations with a 10 per cent increase in visitors this year and a jump in earnings.

Scentre Group is focusing on driving up numbers to its shopping centres through its successful customer activation program after recording an almost 10 per cent increase in visitors to its Westfield empire so far this year.

Scentre chief executive Elliott Rusanow said the company’s strategic focus to give people more reasons to visit its 42 Westfield destinations has delivered a strong operating performance and continued growth in earnings and distributions.

“So far this year, we have increased customer visitations to 314 million - 9.8 per cent more than the same period in 2022,” he said.

“This has been driven by our unique customer activation program, including our partnerships with Disney and Netball Australia, to create extraordinary experiences for our customers at our Westfield destinations.

“This week we announced a new partnership with Live Nation which will bring exclusive, live

and free music performances into our destinations, creating even more reasons for people to

visit and spend their time with us.”

The company reported that Net Operating Income increased by 10 per cent to $971.9m, the highest level the Group has ever achieved in a first half period. Funds From Operations (FFO) reached $556.6m in the same period - a rise of 13.3 per cent which was in line with the Group’s full year guidance.

Elliott Rusanow at the Westfield Sydney shopping centre

Westfield tenants achieved record annual sales of $27.8bn, an increase of $4.9bn or 21.6 per cent compared to the same period in 2021-22.

Demand for space continued to be strong with occupancy increasing to 99 per cent compared to 98.8 per cent in the six months to June 20, 2022. On average, specialty rent escalations increased by 8.1 per cent and new lease spreads improved to 2.6 per cent

The Group reconfirmed that it expected FFO to be in 20.75 to 21.25 cents per security for 2023, representing 3.4 per cent to 5.9 per cent growth for the year. This equates to growth in FFO for the second half of 2023 of between 5.6 per cent to 10.9 per cent.

Distributions are expected to be at least 16.5 cents per security for 2023, representing at

least 4.8 per cent growth for the year.

Scentre shares closed almost 3.79 per cent up to $2.74 on Tuesday.

The company recorded a 68.9 per cent drop in its interim statutory profit to $149.4m for the first half after an unrealised property valuation decrease of $392.5m. Property values were 0.6 per cent lower compared to December 31, 2022.

An artist’s impression of the new look Westfield Knox.

However, Mr Rusanow said unlike other property sectors the focus of the business has always been cashflow and he labelled valuations as a “reflection of accountancy standards”.

“While valuations have declined they would have declined even more if it was purely based on capitalisation rate. It was offset by the excellent performance of the operating side of the business,” he said.

The group spent about $150m on capital works and the remaining stages of Westfield Knox in Melbourne will open by the end of 2023 and work continues to progress for the development of 101 Castlereagh Street in Sydney’s CBD.

However, Mr Rusanow said they had a “fairly muted level of additional cap ex”.

“Our real focus is driving more people to come because we know we can generate better returns, risk adjusted,” he said.

“Spending far less money and giving people a reason to come that has led to much better growth in bottom line earnings.”

Matthew Moore, Senior Vice President, Moody’s Investors Service said Scentre Group’s strong operating results and robust earnings for the first half of 2023 were credit positive.

“We expect the quality of Scentre’s assets, combined with further earnings support from the Group’s strong leasing structures, should position it well to deal with inflationary pressures impacting its tenants and their customers,” he said.