Countries: Australia, New Zealand, United Kingdom, United States
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Ladies and gentlemen
I would like to provide you with a summary of our results for the past year.
I'd also like to talk about the prospects for the company in the coming year and beyond.
It is in uncertain times that strong companies show their strength. We are a strong company, and we face the future with confidence. It has been our experience that we have emerged from periods of volatility in an even stronger position than before.
First, let me give you an overview of the results and a brief description of the markets in which we operate.
The last 12 months have been a watershed year for the Westfield Group. It has been a year marked by significant transactions across the US, Australia and New Zealand, and a year that has seen Westfield become the second-largest shopping centre company in the world.
And in the year to 30 June 2002, Westfield Holdings produced a
very good result:
The result was due to the expansion of the business in the United States, where we increased the size of our US portfolio by 50%, and good performances from all parts of the Westfield operation in Australia, the United States, the United Kingdom and New Zealand.
In Australia, our centres recorded sales in excess of $9.2 billion for the year to September, up 7.2 per cent. Specialty store sales have been particularly strong with an improving trend over the past twelve months.
Our intensive leasing program has seen our centres maintain their historically high occupancy rates - remaining consistently above 99%.
There is continuing, steady demand from retailers for space in existing centres as well as new projects such as our landmark redevelopment at Bondi Junction in Sydney's east.
In New Zealand, while retail sales were perhaps not as
strong as in Australia, our 11 centres did perform well with sales
up 2.3% to $NZ1.5 billion. The occupany levels in our New Zealand
centres have also been maintained at historically high levels of
more than 99%.
In Australia and New Zealand, we have a redevelopment pipeline of
more than $1.8 billion involving plans to redevelop 19 centres over
the next five to seven years.
In the United States, retail sales have been sluggish although we have begun to see signs in the past few months that this may be improving.
For the combined US portfolio, total specialty store sales were $US5.7 billion for the year to September, which is steady for the year, but an increase of 1.3 per cent for the last quarter.
While retailers in the US have been operating in a weaker sales environment they have been able to improve profitability by managing their cost structure and inventories of stock more effectively.
Within this environment, the occupancy level of the 39 Westfield centres we held prior to the RNA and Jacobs acquisitions has increased to 95% - a percentage point higher than one year ago, and at the high end of industry standards in the US.
As I said earlier, we have increased the size of our business by
50% in the US through Westfield America Trust's acquiring 22 new
centres from RNA and Jacobs.
I am pleased to advise that, despite the huge growth in the number
of centres in the US, these properties have already been thoroughly
integrated into the Westfield portfolio.
We have put in place Westfield systems and branding and stamped our
management style on the properties.
We are able to achieve this with our experienced executive team
that is, I believe, the equal of any in the shopping centre
industry anywhere in the world. We continually look at how to
retain and recruit the very best and succession planning is now a
big part of our overall strategy.
The introduction of Westfield's management to the RNA and Jacobs
portfolios is already showing results.
The occupancy level in these new US centres has increased by
almost a percentage point - to 90.4% - since we took over
management of the centres just six months ago.
Again, this reflects our intensive approach to leasing and ongoing
demand from retailers for the quality space we provide.
Having successfully integrated the new centres, we are now ready to
take advantage of other opportunities as they might arise.
In the United Kingdom, our seven centres have shown
continual evidence of improvement.
The UK retail market has generally remained very strong, with sales
growing on average by 7.5% in the year to September. Occupancy
levels are now in excess of 99%, again reflecting the introduction
of our leasing strategy and management systems. This compares with
an occupancy rate of 95.3% when we acquired the properties just two
years ago.
We have plans to redevelop most of the UK portfolio and we have
already received planning consent to redevelop the first property -
The Eagle Cente at Derby, in England's East Midlands. This was a
significant milestone for the company.
Planning applications have also been lodged for the
redevelopment and expansion of four other shopping centres in the
UK at Nottingham, Guildford, Swindon and Belfast.
Westfield Holdings is now a significant funds manager with
responsibility for the performance of Westfield Trust and Westfield
America Trust, which are now the largest and second largest listed
property trusts on the Australian Stock Exchange, with market
capitalisations of $7 billion and $6.8 billion respectively.
The trusts have performed well over their lifetime and they
continue to produce good results.
This year is the 20th anniversary of Westfield Trust and it is
worth noting that since listing it has achieved a compound
investment return to June 2002 of 16.2% per annum. This compares
with the All Ordinaries Index return over the same period of 14.6%
and the Property Index which returned 14.1%.
Westfield America Trust has also outperformed its peers since
listing in 1996, recording a compound investment return to June
2002 of 19.8% per annum. This compares with the All Ordinaries
Index return of 9.8% and the Property Index return of 13.9%.
I am pleased to report that Westfield Holdings net profit-after-tax
for the coming year is expected to increase by in excess of 15%,
reflecting Earnings Before Interest and Tax of around $400
million.
We have a comprehensive corporate governance approach in place and
this has served the business well over many years. We continually
review our corporate governance arrangements to ensure we keep pace
with best practice in this rapidly evolving area.
Ladies and gentlemen, our prime objective remains to increase
shareholder value through earnings per share growth by increasing
assets under management for the Westfield Group.
Growth in assets under management, either through acquisition or
redevelopment, leads directly to increased profitability for
Westfield Holdings through an immediate increase in property and
funds management income, and in the medium to longer-term, an
increase in development income.
Indeed, assets under management have increased ten-fold since
1990, with substantial opportunities for further growth,
particularly in the US and UK.
Our development pipeline is very strong. We currently have $5
billion of development projects either under construction or due to
start over the next five years. These projects are spread across
Australia and New Zealand, the US and the UK.
The UK program is an excellent example of how we can grow our
existing business through redevelopment. Through the projects we
have already identified, we plan to double the amount of leasable
area in the UK portfolio, creating a larger and more productive
base for future growth.
I am pleased to confirm today that we plan to generate another $5
billion of projects - much of which will come from the RNA and
Jacobs portfolios in the US and our UK portfolio. That'ss a total
of $10 billion stretching out over the next five to ten years.
I can also report that we are actively preparing a range of
alternative proposals to fund our long-term expansion in the UK. We
plan to put this in place prior to commencement of construction of
the projects - that is, within the next 18 months to two years.
This could take the form of an unlisted wholesale fund that would
provide us with access to the large UK and European managed funds.
Alternatively, it could take the form of a publicly listed property
trust, along the lines of Westfield America Trust, or a combination
of both.
Ladies and gentlemen, as you can see I am optimistic about our
prospects. The company is in good shape, with an excellent team of
executives leading us into the future.
Our results reflect the experience, dedication and hard work of
all Westfield staff and I thank them for their efforts.
I would like to thank the board and acknowledge their active role
in guiding the company.
And last, I would like to thank you, our shareholders, for the
continued faith and support that you show in us.
Westfield Group