Vicinity Centres will earn less than it expected this year because fewer locals and tourists have been shopping at its centres since the coronavirus outbreak.
The retail property group that owns or manages 63 centres around Australia has downgraded its funds from operations guidance due to the likely virus hit to its second half results.
It now expects to generate between 17.2 and 17.4 cents per share compared with its previous forecast of 17.6 to 17.8 cents a share.
Its shares dropped on the news, falling 11.5 cents, or 4.6 per cent, to $2.385 at 1130 AEDT.
Vicinity’s portfolio includes stakes in Melbourne’s landmark Chadstone Shopping Centre and Sydney’s QVB centre.
Managing director Grant Kelley said the novel coronavirus was having an increasing impact on global travel, trade and, consequently, near-term economic growth expectations.
“At Vicinity, we have seen a material decline in foot traffic at some of our key centres since late January 2020, particularly where there is a high proportion of international visitors, which in turn is impacting sales.
“As a result, we are forecasting modest reductions in percentage rent, ancillary income and hotel bookings.”
Adding to woes for mall owners who lease space is rise in retailer administrations.
High-profile recent announcements including Jeanswest, Harris Scarfe and Colette by Colette Hayman.
Vicinity posted a net profit for the six months to December 31 of $242.8 million compared with $235.3 million.
Its preferred metric, funds from operations, was $337 million for the first half compared with $349.5 million in the prior first half.
The group will pay shareholders 7.70 cents per stapled security, down from 7.95 cents at the same time last year.
Saranga Ranasinghe, Moody’s Investors Service vice-president and senior analyst, said Vicinity’s flagship Chadstone, premium CBD and DFO property portfolio delivered another strong performance.
But its remaining core portfolio was still weak, particularly its assets in Western Australia, she said.
“As the dominant retail landlord within Australia’s luxury segment, Vicinity remains exposed to reduced international tourist foot traffic, especially affluent travellers from China, as a result of the recent coronavirus outbreak, ” Ms Ranasinghe said.
However, she noted its financial profile remained strong.
VICINITY CENTRES FIRST-HALF RESULTS
Net profit of $242.8m compared with $235.3m in the same period in the previous year
Funds from operations of $337m, down from $349.4m
Distribution of 7.70 cents per stapled security, down from 7.95 cents at the same time last year.