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SCA Property share price on watch as FY20 profit slumps 22%

The SCA Property Group (ASX: SCP) share price is one to watch this morning after the Aussie real estate investment trust (REIT) reported its full-year earnings.

What were the financial highlights?

SCA Property posted a 22% slump in full-year net profit after tax (NPAT) to $85.5 million during the year. That was largely due to a coronavirus impact of $20.5 million with investment property valuation slipping $87.9 million.

The group’s funds from operations (FFO) edged 0.7% lower compared to FY19 figures to $140.8 million. Adjusted FFO fell 2.4% to $124.3 million as distributions slumped 15.0% from FY19.

The 12.50 cents per unit distribution that was announced this morning represents a 99.4% payout from the retail REIT.

Gearing totalled 25.6% as at 30 June 2020, down from 32.8% last year, largely thanks to $279.3 million of equity raised in April and May 2020.

Net tangible assets came in at $2.22 per unit, down by 2.2% from $2.27 in FY19. For context, the SCA Property share price closed at $2.21 per share on Monday.

What else could move the SCA Property share price?

Management also provided some key operational updates alongside the REIT’s full-year financials.

Supermarket moving annual turnover (MAT) growth came in at 5.1%, up from 2.0% last year, while discount department store MAT jumped 540 basis points to 7.6%.

Mini majors’ sale growth totalled 2.9%, compared to -3.1% in FY19, while specialty sales growth fell 1.1% in FY20.

SCA Property reported portfolio occupancy of 98.2% by gross lettable area (GLA) and has remained relatively stable since December 2014.

The REIT’s specialty vacancy rate came in at 5.1% of GLA, which is just outside the target range of 3–5%. The Aussie REIT did report that its specialty tenants had been relatively resilient, despite the tough economic environment.

The SCA Property share price will be worth keeping an eye on this morning as investors process the latest updates.

The REIT is also looking to improve its tenancy mix with a tilt towards non-discretionary tenants. Maintaining a high retention rate on renewals and a low specialty vacancy rate are other areas of focus during COVID-19.

Foolish takeaway

The SCA Property share price could be on the move in early trade following the full-year result. 

The REIT said it will continue to take a “disciplined approach” to acquisitions and noted its strong balance sheet position.

SCA Property will not provide FY21 guidance due to the ongoing uncertainty, but advised it will target a payout ratio of approximately 100% of adjusted FFO.

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Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Shopping Centres Australasia Property 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.

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