Federation Centres shakes off Centro ghost

The shopping mall group previously known as Centro has returned to profitability and secured a higher debt rating.

Federation Centres changed its name from Centro Retail Australia in January, following a complete restructure in December 2011. The change was the culmination of a difficult period for the group, which collapsed under a mountain of debt after the global financial crisis.

After paying out an expensive class action, the new company on Friday has announced a net profit of $115.9 million for the six months to December 31.

The result compares with its $100.1 million loss in the previous corresponding period in 2011.

Shares in Federation Centres closed 1.27 per cent, or three cents, higher at $2.39 after it announced a debt reduction strategy and the securing of an A minus credit rating from Standard & Poor's.

Federation chief executive Steven Sewell told analysts the group would sell stakes at five shopping malls in Sydney, Melbourne and Mandurah in Western Australia help reduce debt.

"Federation Centres has now secured strategic partnership alliances on over $2 billion worth of assets, which has released over $1 billion of working capital providing significant future financial flexibility," he said.

Morningstar property analyst Tony Sherlock said the securing of an A minus credit rating for secured bank debt from Standard & Poor's would enable the group to more easily borrow more wholesale funds.

"They're making good progress," Mr Sherlock said, adding a focus on refinancing debt showed the company had shaken the debt ghosts of the former Centro group.

The company's balance sheet gearing will improve by $371 million from July when superannuation group ISPT finalises the purchase of a 50 per cent stake in the five Federation malls.

The money will be used to refurbish existing malls as the company embarks on a $1.1 billion redevelopment program over five years.

Mr Sewell said the company maintained its guidance of three per cent income growth for the full year.

Revenue had risen five-fold to $258.8 million, from $48.2 million, the company said.

Rental renewals grew 3.5 per cent as occupancy levels were maintained at almost full capacity although the department store category was subdued.

The results for the first half of 2012/13 did not include funds used for its part payment of a $200 million class action settlement in June 2012.

The Federal Court approved the settlement after Centro shareholders proved the company had engaged in deceptive conduct relating the lack to disclosure about its true debt levels in 2007.

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