Profit takes a hit at SCA Property Group

Written on the 6 August 2019 by Paris Faint

Profit takes a hit at SCA Property Group

Despite raising $1.3 billion in capital during the past financial year, SCA Property Group (ASX: SCP) has come up short on profit.

The company reported a statutory net profit of $109.6 million representing a 37.4 per cent drop on FY18.

SCA largely blames acquisition transaction costs and a weak property valuation uplift for the inferior result but remains optimistic that its new suite of assets will bring the goods in FY20.

During the past year, SCA Property raised $887.3 million in debt and a further $409.4 million in equity to support twelve major acquisitions.

The group bought ten convenience-based shopping centres worth $573 million from Vicinity in October 2018, plus Wagga Wagga's Stuart Mall for $73 million and Miami One on the Gold Coast for $31.9 million.

Chief financial officer Mark Fleming says the company is in a strong financial position and remains poised to tackle further investment opportunities.

"We remain focused on appropriate capital management to support both growth initiatives and our ongoing operations," says Fleming.

"Our successful debt and equity capital raisings during the period demonstrate that the strong support we enjoy in both debt and equity markets, and we remain well placed to take advantage of investment opportunities in the future as they arise."

CEO Anthony Mellowes (pictured) reiterated that SCA's newly acquired centres are performing in line with strategies and expectations.

"We are continuing to work toward improving the performance and value of these centres to improve tenancy mix, set sustainable rents and achieve cost efficiencies," he says.

"We have a track record of successfully executing on these strategies and over time we expect the performance of the acquired centres to align with our existing centres."

SCA's priority in FY20 will be to sustainably improve the centres it bought this year, but it warns the Vicinity portfolio won't become a profitable cash cow for at least another 12 months.

The company says it is "aware of the pressures" currently facing Aussie retailers, and it assumes rent renewals will be negative for the next year before returning to growth.

SCA plans to target more resilient retail categories including food, liquor, pharmacy and medical.

The company will pay a final dividend of 7.45 cents per unit this month to bring the full year distribution to 14.7 cents per unit, up 5.8 per cent on FY18.

SCA shares are currently worth $2.55. Its market cap is $2.36 billion.

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Author: Paris Faint

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