Subdued WA retail weighs on Vicinity Centres

Vicinity Centres will earn less than it expected this year because fewer locals and tourists have been shopping at its centres since the coronavirus outbreak.

The retail property group that owns or manages 63 centres around Australia — including the DFO at Perth Airport and 11 other shopping centres in metropolitan and regional WA — has downgraded its funds from operations guidance due to the likely virus hit to its second half results.

It now expects to generate between 17.2¢ and 17.4¢ per share compared with its previous forecast of 17.6¢ to 17.8¢ per share.

Its shares dropped on the news, falling 11.5¢, or 4.6 per cent, to $2.385 at 8.30am.

Vicinity’s portfolio includes stakes in Melbourne’s landmark Chadstone Shopping Centre and Sydney’s QVB centre.

Managing director Grant Kelley said the coronavirus was having an increasing impact on global travel, trade and, consequently, near-term economic growth expectations.

“At Vicinity, we have seen a material decline in foot traffic at some of our key centres since late January 2020, particularly where there is a high proportion of international visitors, which in turn is impacting sales,” she said.

“As a result, we are forecasting modest reductions in percentage rent, ancillary income and hotel bookings.”

Adding to woes for mall owners who lease space is rise in retailer administrations.

High-profile recent announcements including Jeanswest, Harris Scarfe and Colette by Colette Hayman.

Vicinity posted a net profit for the six months to December 31 of $242.8 million compared with $235.3 million.

Its preferred metric, funds from operations, was $337 million for the first half compared with $349.5 million in the prior first half.

The group will pay shareholders 7.70¢ per stapled security, down from 7.95¢ at the same time last year.

Saranga Ranasinghe, Moody’s Investors Service vice-president and senior analyst, said Vicinity’s flagship Chadstone, premium CBD and DFO property portfolio delivered another strong performance.

But its remaining core portfolio was still weak, particularly its assets in WA, she said.

“As the dominant retail landlord within Australia’s luxury segment, Vicinity remains exposed to reduced international tourist foot traffic, especially affluent travellers from China, as a result of the recent coronavirus outbreak, ” Ms Ranasinghe said.

However, she noted its financial profile remained strong.

VICINITY CENTRES FIRST-HALF RESULTS

• Net profit of $242.8m compared with $235.3m in the same period in the previous year
• Funds from operations of $337m, down from $349.4m
• Distribution of 7.70¢ per stapled security, down from 7.95¢ at the same time last year.

AAP