Centro Retail Group, which owns 19 shopping centres in WA, has returned to profitability due to more stable property valuations for its shopping centres in Australia and the United States.
Centro Retail Group, which owns 19 shopping centres in WA, has returned to profitability due to more stable property valuations for its shopping centres in Australia and the United States.
However the owner of over 400 retail properties has forecast a challenging year ahead as it deal with a restructure and cash flow issues.
Centro Retail posted a net profit of $113.3 million for the year to June 30, up from a loss of $2.7 billion in the previous corresponding period.
The group's preferred measure of performance, underlying profit, was $160 million in the year to June, down 14 per cent from $186 million in the previous corresponding period.
The fall was due to the stronger Australian dollar and lower income due to lower average occupancy in its US properties, Centro Retail Group said.
No distribution was declared, compared to 0.3755 cents per security in the prior year.
Chief executive Robert Tsenin said it had been a challenging year for the group and a number of financial and structural constraints will continue to impact the business in the year ahead.
"CER will again face considerable challenges in the 2011 financial year as it embarks upon a restructure and recapitalisation," he said in the group's financial report on Monday.
The group has a significantly over-hedged US dollar position, due to falling values of its US assets and impairments on Super LLC investment, Mr Tsenin said.
Super LCC is a joint venture between Centro Properties and the trust covering shopping centres in the US.
"CER now faces a major risk with the first of the remaining five outstanding hedge contracts," Mr Tsenin said.
Due to expire in December 2011, the contract has a liability worth $45 million.
Cash flow also remains under pressure due to the higher cost of debt, the cost of the group's restructuring, and the obligations of its hedging and debt arrangements, he said.
Negotiations are under way for the refinancing of significant debt maturities in the current financial year, Mr Tsenin said.
"Given the complexity of our structure and the cross-ownership arrangements in place, a reorganisation will be complex and take time to achieve," he said.
"CER is working with its advisers and, where appropriate (associated entity) Centro Properties Group, on analysing and developing a path forward.
"Whilst this work is ongoing, active management of our property operations and financial risks will continue and we will maintain our focus on these areas in the year ahead."
The group's total assets were worth $7 billion at June 30, down from $7.5 billion a year earlier, mainly due to the impact of the higher Australia dollar.
The Australian portfolio of 29 properties performed well in the year, with occupancy at 99.6 per cent and rental income growth of 4.3 per cent, Centro Retail said.
Centro owns several centres around Perth and in regional WA including the Galleria shopping centre in Morley and centres in Albany, Dianella, Karratha, Victoria Park and Warwick.
