The Shopping Cntrs Austrls Prprty Gp Re Ltd (ASX: SCP) share price was trading 2.71% higher today following the release of its 2020 financial results.
SCA Property Group owns two internally managed real estate investment trusts (REITs) which own & manage neighbourhood and sub-regional shopping centres located across Australia.
The shopping centres are predominately anchored by non-discretionary retailers with long-term leases such as Woolworths Group Ltd (ASX: WOW), Coles Group Limited (ASX: COL) and Wesfarmers Ltd (ASX: WES) businesses.
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SCA – Key Results
| This period | Change | |
| NTA (per share) | 2.22 | -2% |
| Net profit | 85.5 | -22% |
| Funds from operations (FFO) | 140.8 | -0.7% |
| Dividends/distributions (cents per share) | 12.5 | -15% |
Source: Shopping Cntrs Austrls Prprty Gp Re Ltd announcements; author calculations, AUD millions unless otherwise stated.
There are two convenient ways to analyse most property manager and REIT-style businesses: the value of assets (NTA) and funds from operations (FFO) — a measure of the cash flow.
As can be seen above, SCA’s NTA came in at $2.22 per share, down 2%. While net profit was $85.5 million, down 22%, the company said its funds from operations (FFO), which include things like net rental income plus depreciation and amortisation, was mostly in-line with last year. If we adjust the figure for maintenance costs, leasing costs and incentives, the AFFO was down 2.4% year over year.
“Throughout the COVID-19 pandemic, our convenience-based centres have been relatively resilient,” CEO Anthony Mellowes said.
“Our anchor tenants have experienced strong sales growth, turnover rent has increased and we have continued to conclude leasing deals with 75 renewals and 55 new lease deals completed during the COVID-19 period of March to June 2020.”
SCA occupancy rate stood at 98.2% at June 30th, which is perhaps a higher rate of occupancy than investors were expecting. This means around 2% of offices or spaces were vacant. However, it is worth noting that the worst of store closures, especially in Victoria, could lay ahead.
“Specialty vacancy is stable at 5.1%, specialty occupancy costs are stable at 10.0% and approximately 92% of tenants are now open and trading including approximately 63% in Victoria,” Mellowes added.
Finally, SCA Property Group will pay a distribution of 5 cents per unit/share, bringing the full-year distributions to 12.5 cents per share. That’s 15% less than last year but represents 99.4% of adjusted FFO.
What Happens Next?
Going forward, SCA said its focus in FY21 will, obviously, be the ability to generate sustainable rents from its occupants. The company added: “This may mean continuing to offer waivers and deferrals to tenants that are part of our long-term tenancy mix plans, that leasing spreads may remain negative and that lease incentives may remain elevated.”
Importantly, the company’s gearing ratio, or the level of debt compared to the asset value, was 25.6%. The company declined to offer guidance for the year ahead.
Is the worst (or best) ahead of SCA? Before you buy or sell shares, take a look at our ASX dividend shares page for daily share ideas.
