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Westfield profit falls 35.7%

In a period focused on strengthening its asset portfolio and positioning itself to generate greater shareholder value, property developer Westfield Group (ASX: WDC) has delivered results that were largely in line with forecasts for its half year and significant progress was made on the current and future development pipelines.

In an effort to remain at the forefront of the property development industry, Westfield has been focused on redeveloping and expanding its most dominant stores – particularly those located in major cities – whilst divesting in stores that were delivering sub-par returns.

The key highlights for the half-year ending 30 June were:

  • Net profit after tax (NPAT) fell to $514.8 million, down 35.7% from the previous corresponding period
  • Revenue was $1.183 billion, which fell by 0.3% from last year’s $1.186 billion
  • Comparable property net operating income was up 2.7% (it grew 4.3% in the US and 1.8% in Australia and NZ)
  • Net operating cash flow decreased to $747.9 million – a 33.2% fall from last year
  • On-market buyback of 140.7 million WDC securities for $1.44 billion (at an average price of $10.23)
  • Earnings per share of 23.13c, down from last year’s 34.75c
  • Confirmed its interim dividend of 25.5c per share

The company’s net profit was affected by the sales of less-profitable malls, which reduced overall revenue, however, investors should also note the increase in comparable property net operating income. The company believes that this more accurately represents its underlying performance due to the number of asset acquisitions and sales made during the period. This measure climbed by 2.7% for the period.

Outlook

Currently, the group maintains operations in four countries — Australia, New Zealand, the US and UK. It is also exploring its options as it aims to expand further globally. For instance, the company is looking at an opportunity to re-enter the Brazil market after exiting a 50% joint venture during the period, which it said was due to opposing long-term goals held by the partner company.

The group’s co-CEOs Peter Lowy and Steven Lowy said “we have confidence in the Group’s business model and opportunities for growth. We are focused on remaining at the forefront of our industry as we continue to improve the quality of our portfolio through our current development activity and future pipeline, together with acquisition opportunities existing and new markets. We also plan to continue redeploying capital from further joint ventures and non-core asset disposals.”

Foolish takeaway

Soft property conditions have weighed down companies throughout the property sector, including GPT Group (ASX: GPT) and Stockland (ASX: SGP), however, investors should be focused on the long-term, rather than short-term affects. Westfield offers outstanding potential, and at just $11.05 per share, presents as an opportunity to add the group to your portfolio – particularly with the additional incentive of a 4.6% dividend yield.

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Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned in this article.

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