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Scentre Group share price plummets 4% on full-year earnings

The Scentre Group (ASX: SCG) share price has fallen 4.24% on the ASX this afternoon despite increasing its full-year funds from operations (FFO) by 3.9%.

What did Scentre Group report?

Profit attributable to securityholders fell 45.8% on prior corresponding period (pcp) during the year to $2.29 billion, down from $4.22 in FY17.

Scentre Group’s FFO per security rose 3.9% to 25.24 cents per security (cps) while management also increased the group’s distribution per security by 2.0% pcp to 22.16 cps.

The real estate investment trust (REIT) recorded total revenue of $1.96 billion while earnings before interest and tax (EBIT) came in at $3.07 billion largely due to $1.15 billion of asset revaluations during the year.

Total specialty in-store sales increased 1.5% on pcp while total portfolio sales increased $1 billion to $24 billion for the year.

Scentre Group completed projects including Plenty Valley, Carousel, Coomera, Kotara and Tea Tree Plaza for a total project cost of $1.11 billion during FY18. The group’s Newmarket development remains ongoing for 2019 with an estimated $730 million project cost and more than $3 billion remains in the future development pipeline.

The group’s asset quality remains sound with total assets increasing by $2.5 billion to $40.98 billion, while net assets rose marginally to $23.64 billion at year-end.

Occupancy rates remain strong at 99.3% at year-end as retail demand has been sustained at Westfield locations around the country despite a broad market deterioration in the retail sector over the last 6 months or so.

Foolish Takeaway

Management has forecast FY19 FFO growth of ~3% with a forecast distribution of 22.60 cents per security, however, I’d be wary of further headwinds in the next 12 months for large retailers.

It’s been something of a mixed bag this reporting season for the REITs and I don’t think Scentre is necessarily best-placed for an economic downturn given its significant retail exposure.

If you’re similarly bearish on the REITs, it might be worth taking a look at these top growth shares that have been tipped as market beaters.

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Motley Fool contributor Lachlan Hall has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Scentre Group. 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.