Scentre share price glows green as operating profits soar 18%

Investors go shopping for Scentre shares amid its latest results…

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Key points

  • Scentre Group shares are trading 3.42% higher to $2.875 on Tuesday
  • The Westfield centre operator delivered substantial improvements across most of its metrics
  • The group is forecasting a 14% increase in funds from operations for the full year

The Scentre Group (ASX: SCG) share price is scampering upwards today as investors absorb the company's latest half-year results.

In early trade, shares in the Westfield shopping centre operator are swapping hands for $2.875 apiece — a tidy gain of 3.42%. For context, the S&P/ASX 200 Index (ASX: XJO) is spluttering lower, dropping 0.57% this morning.

Let's check the details of the company's report.

Scentre share price embraces earnings rebound

  • Revenue up 8.8% from the prior corresponding period to $1,176.3 million
  • Customer visits year-to-date up 5.1% to 277 million
  • Portfolio occupancy up 30 basis points to 98.8%
  • Operating profit up 17.5% to $540.5 million
  • Net operating income up 6% to $883.6 million
  • Distribution of 7.5 cents per share, up 7.1%

What else happened during the half?

Pleasingly, the half involved several notable operational achievements for Scentre Group.

Firstly, the property manager demonstrated some level of inflation resistance. Inflation is now above 6% compared to a year ago. However, Scentre managed to increase its average rent across the portfolio by $5 per square metre, now sitting at $827 per square metre.

Furthermore, average speciality rents increased 5.6% during the reporting period. Management highlighted that its standard lease structure for specialty leases has built-in inflation protection.

Another positive for the Scentre share price was the improvement in gross rent cash collections. This is the lifeblood of Scentre. In the first half of 2022, collections increased 18% to $1,250 million.

What did management say?

In light of the outstanding performance, Scentre Group CEO-elect Elliott Rusanow stated:

Our approach to capital management during the period has seen the Group execute new and extended bank facilities of $2.6 billion, including syndicated bank facilities of $1.4 billion. As a result, the Group has available liquidity of $4.8 billion, sufficient to cover all debt maturities until the fourth quarter of 2025.

Adding:

Our business is in a strong position to deliver long-term growth by being essential to people, their communities and the businesses that interact with them.

What's next?

Looking forward, management kept its forecasts short and sweet. For the full year, the Scentre Group team is expecting a 14.2% increase in funds from operations to 19 cents per share security.

Likewise, income investors should be pleased to know management is expecting growth in its full-year distribution. Scentre's distribution is expected to grow by 5.3% to 15 cents per security for FY22.

Scentre Group share price snapshot

Today's gain is a welcomed sight given the performance of the Scentre share price this year. On a year-to-date basis, shares in the group have tumbled more than 8%. This represents an underperformance of even the broad Aussie benchmark index.

The group now offers a dividend yield of 5.3%. This compares to an industry average yield of 4.4%.

Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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