The impact of the UK’s June 23 Brexit vote continues to catch Australian companies unawares.
We have already seen how it hurt the bottom line of QBE in the six months to June while Henderson and the NAB UK bank spin off, CYBG have had their share prices rattled by the volatility in markets.
Yesterday it was the turn of the Lowy family’s main international investment vehicle, Westfield Corp, the owner and manager of the Westfield malls in the US and the UK, to fell the impact of the Brexit volatility with the sharp fall in the value of the pound forcing the shopping mall giant to trim a key metric for the year to December 31.
In its half year report to the ASX Westfield directors revealed they had cut the forecast for its key metric, Funds From Operations (FFO), due to the fall in the British pound.
While Westfield’s Westfield’s FFO was always going to lower on 2015 because of the dilutionary impact of last year’s sales and the loss of income from the Century City development in Los Angeles, the fall in the pound has added to the downward pressure.
The figure was expected to be a narrow range of US34.2-34.5 cents a security. Now the expectation is for US33.7-34 cents.
Adjusting for the assets sales, and the loss of income due to development, FFO will show pro-forma growth of between 3-4% for the year to December, directors estimated.
That’s why directors had the confidence yesterday to confirm its full year distribution forecast at 25.1 US cents a security.
Westfield Corp will pay a first half distribution of US12.55 cents a security – right on guidance for a full year payout of US25.1 cents a security, which is the same as the distribution last year. So in effect no income growth is expected this year from Westfield.
The company said specialty sales at its malls were up 2.1% for the half and net operating income rose 3.9%. Westfield said half year profit rose 5.4% to $US491 million ($A645 million).
Like so many property groups now, profits and operating income have been replaced as the key target by FFO (Funds From Operations). Westfield securities eased 1% to 410.48.
