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Vicinity Centres share price falls after delivering mixed results

Sebastian Bowen
Disappointing results

The Vicinity Centres (ASX: VCX) share price is down 1.98% in today’s trade after the company reported a mixed bag of earnings for the 2019 financial year (FY19).

Here are some of the highlights from Vicinity’s ASX release this morning:

  • Statutory net profit after tax of $346.1 million, down from $1,219 million in 2018
  • Funds from operations (FFO) of $689.3 million or 18 cents per share – growth of 2%
  • Occupancy rate at 99.5% – down from 99.7% in 20918
  • Asset sales worth $670 million completed
  • Net property income (NPI) growth of 1.5%
  • Western Australian assets underperform, with NPI down 2.5%
  • Distribution will be 15.9 cents per share, from 16.3 cents per share in the prior year – a drop of 2.45%
  • Net tangible asset value of $2.92 per share (down from $2.97  in 2018)
  • Gearing level at 27.1%

Mr Grant Kelley, CEO and Managing Director stated in the release:

We have delivered a solid financial result in a challenging retail environment, which demonstrates the strength and resilience of our portfolio and the execution of the strategy that we commenced a year ago. We continued to strengthen our portfolio through divestments, active asset management and progressing our developments, resulting in improved portfolio metrics and better positioning Vicinity for the future.

Commenting on the company’s capital management, Mr Kelley added that the Vicinity “balance sheet is strong and our investment grade credit ratings remain stable. Gearing of 27.1% is at the lower end of our 25% to 35% target range and we have well diversified funding sources.”

Mr Kelley is confident in Vicinity’s development pipeline, with development plans expected to be lodged next year for new Sydney centres at Box Hill and Bankstown, as well as a major redevelopment of the Chatswood Chase centre. The company also highlighted 100% occupancy rates for its flagship Queen Victoria Building and Strand Arcade centres in Sydney.

However, the company was cautious in its guidance for FY20, predicting FFO of 17.8–18 cents per share for the coming year. This is assuming no significant growth over the near-term future and shows the ongoing headwinds that physical retail store operators continue to face.

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Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2019