Shopping centre behemoth Westfield Group (ASX: WDC) today released its full-year results in what joint chief executives Peter and Steven Lowy described as a solid performance for the global portfolio, despite the fact that net profit after tax (NPAT) fell by 6.7% to $1.6 billion.
While the fall in NPAT can be attributed to the sale of a number of less profitable assets from its portfolio, there were certainly positive signs as Funds From Operations (FFO) – a key metric which accounts for the impacts of asset sales as well as the company's share buyback program – were in line with company guidance, rising 2.3% to 66.51c per share. Revenue also climbed 7.4% to $2.39 billion and assets under management increased by $5.6 billion to $70 billion as at December 31.
Globally, the group recognised high productivity and growth in specialty sales. Comparable specialty retail sales rose 5.7% in the United States for the year, 3.2% in the UK, and they also grew 0.4% and 1.4% in New Zealand and Australia respectively. Specialty sales productivity of US$667 per square foot were achieved in the group's international portfolio, while specialty sales productivity of $9,901 per meter were achieved in Australia.
What was particularly pleasing from the report was the strength in sales over the last four months in Australia, which the company said had been the best period in four years. Sales were up 3% in the December quarter and 4% in January, showing a clear indication of improving consumer confidence.
Restructure
Given that the proposal to split its domestic and international assets has the support of the WDC board as well as the independent directors of Westfield Retail Trust (ASX: WRT), the company will not change the terms of the restructure at this stage. Investors can expect the Explanatory Memorandum to be available in April 2014 while the vote, which will require a 75% approval rate, will be held in May.
More details regarding the proposal can be found here , while ways in which analysts have suggested the proposal could be sweetened for WRT shareholders can be found here.
Other highlights
- Dividend distributions remained in line with forecasts at 51c per share, an increase of 3% compared to 2012
- Westfield London and Stratford City achieved combined annual sales of nearly £2 billion, an increase of 3.1% compared to 2012.
- Increased ownership in the retail development of Westfield World Trade Centre in New York from 50% to 100% (set to open in 2015)
- 150.3 million securities were repurchased under the company's share buyback program
Outlook
Westfield has forecast a distribution of 52.5c per security in 2014 as well as FFO of 68.6c per security, which would represent an increase of 3.2% from 2013.
Conditions are likely to remain volatile, particularly as retailers continue to struggle against the rapidly expanding online retail sector but this will be combated by a continued focus on strengthening its balance sheet. A number of non-core assets are likely to be sold by the group while redevelopments of its stronger shopping centres will continue to take place.
Foolish takeaway
Since the restructure was announced on 4 December 2013, shares in the Group have been lacklustre while shares in the Trust have risen marginally. Regardless of whether the deal is approved, I have my eye on Westfield Group given its strong overseas prospects and strong management team. The redevelopments of Westfield London and Croydon (in London's south) as well as the Ground Zero site in New York should prove to be fantastic assets for the company in the long-term.
While shares are trading at $10.45 (after falling 2.2% following today's result), they are certainly looking attractive.
