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Scentre (ASX:SCG) shares suffer after FY20 result preview

Scentre Group (ASX: SCG) shares are down more than 2% after revealing a preview of its upcoming FY20 half year result to the market.

Scentre is the owner of the Westfield shopping centres across Australia and New Zealand.

Scentre’s HY20 preview

Scentre is expecting to report its half year result to 30 June 2020 later this month. But management wanted to give an update ahead of the release.

The shopping centre business is expecting to report that net operating cashflow (after interest, overheads and tax) will be more than $250 million for the half year. That’s still subject to external audit as well as board review.

In HY19 the business made net cash flow from operating activities of $629.1 million, so it appears that Scentre has suffered a heavy decline in these six months. Scentre hasn’t received any funds from the Australian Government under its jobkeeper scheme.

Scentre will also announce changes to its property values. It’s expecting its property portfolio to reduce in value by about 10% compared to the value at 31 December 2019. This is largely due to the estimated impact of COVID-19.

Management said that it still has available liquidity of $4.4 billion. The board has decided to revert the remuneration for directors and the management team back to previous levels, effective from August 2020.

Summary

Scentre is clearly one of the businesses suffering because retailers are selling more online and less through their physical stores with rent being renegotiated. The Victorian lockdowns won’t help things either.

The land alone is worth a lot of money, so Scentre is still worth a lot – COVID-19 will eventually pass. But the shift to more online shopping could be permanent. I’m not confident about long term growth. For a landlord income play I’d rather go for something like BWP Trust (ASX: BWP) or many other ASX dividend shares.

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At the time of publishing, the author of this article does not have a financial or commercial interest in any of the companies mentioned.

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