SCG Scentre Group

   By Rebecca Thurlow 
 

SYDNEY--Westfield Corp. (WFD.AU), one of the world's biggest owners of shopping malls, said annual net profit fell 41% as property revenue slipped following US$1.7 billion in asset sales the year before, and it was squeezed by the depreciation of the British pound.

Westfield, which has interests in 35 shopping centers in the U.S. and the U.K. including the World Trade Center mall in New York, on Thursday reported a net profit of US$1.37 billion for the year through December against a year-earlier profit of US$2.32 billion.

Operational performance over the year was solid, and more than US$1 billlion in revaluation gains were achieved thanks to completed developments, said Peter Lowy and Steven Lowy, the company's joint chief executive officers.

The company recorded a more than US$1.1 billion deferred tax credit for 2015, including a change in applicable rates and for the revaluation and depreciation of property investments.

Sydney-based Westfield, which has a market value of 18.7 billion Australian dollars (US$14.4 billion), spun off its Australian and New Zealand malls into a separate company called Scentre Group (SCG.AU) in a deal that was completed in mid-2014.

After the demerger, it began reducing its holdings of regional assets and increasing its investment in better performing flagship stores in major centers such as London and New York. In 2015, it sold six assets deemed non-core for US$1.3 billion.

The company said it will pay a final dividend of 12.55 US cents a security, steady on a year ago, for a full-year payout of 25.1 cents. Westfield forecast total distributions of 25.5 cents a security in 2017.

Funds from operations--a smoothed measure of operating cash flow that excludes depreciation, amortization and gains on asset sales--rose by 3.8%, on a constant-currency basis, to 33.7 cents a share. The result was at the lower end of guidance released by Westfield in September. It forecast funds from operations for the coming year would be between 33.8 and 34 cents.

Revenue fell by 7.3% to US$1.8 billion from US$1.94 billion in 2015.

Several large retailers in the U.S. have closed stores in recent months including Macy's Inc. and Sears.

In August, Westfield officially opened its US$1.5 billion World Trade Center mall in New York, a milestone in the company's strategy to create and operate flagship assets in leading markets. Westfield expects the Lower Manhattan mall to be the most productive shopping center in its portfolio and generate up to US$1 billion in annual sales. It expects almost 100 million customer visits a year to the mall, taking its total customer visits each year to half a billion, a 25% increase.

The company's US$9.5 billion development pipeline includes US$3.7 billion in projects under construction, such as Century City in Los Angeles and UTC in San Diego, as well as future projects including Valley Fair in San Jose California and Westfield Milan in Italy. The Milan project, the company's first development in continental Europe, is expected to launch in early 2018 and complete in 2020.

In May, Westfield decided to keep its primary stock market listing in Australia after reviewing the merits of moving it to the U.S. where most of its properties are located. Chairman Frank Lowy said that since the spinoff of Westfield's Australian shopping centers into a separately listed company in 2014, the stock has done very well relative to its global peers. This trading performance, along with the complexity and disruption associated with moving the listing, led the board to conclude that the benefits of such a move were currently marginal.

Westfield said specialty sales per square meter rose 2.2% for the year, with the pace of growth in its flagship operations outpacing its regional malls. Unlike a department store, a specialty outlet is one that focuses on a particular niche, such as clothes or electronics.

Write to Rebecca Thurlow at rebecca.thurlow@wsj.com

(END) Dow Jones Newswires

February 22, 2017 17:27 ET (22:27 GMT)

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