CFS FY profit hit by writedowns

Writedowns on the value of its Melbourne Myer Emporium and readjustments to valuations on other properties has pushed Colonial First State Retail Property Trust's (CFX) full-year profit down almost 40% to $295 million.

CFX, whose portfolio consists of interests in 29 retail properties, said it underperformed the benchmark retail property index by 2.5% in the half to June 30, and suggested that conditions were likely to remain challenged in the year ahead.

On the positive side full-year distributional income came in at $384.6 million, above analyst expectations for $381.3 million.

However, shopping centre sales for the year rose just 2.8% to $6.64 billion dollars, with department stores down 1.2%. A rare bright spot was a 9.4% rise in sales at DFO discount outlets, which rose to $421 million.

That equated to a drop in rental and property income of just under 1% to $725 million. Taking account for an upward valuation in investment properties in the previous year, the total revenue decline was 18%.

Michael Gordon, CFX fund manager said, “While there continue to be challenges in the Australian retail environment, several macroeconomic indicators remain supportive for retail expenditure.

Positive real wages growth continues, the housing market is picking up and the rate of growth in offshore travel has slowed in recent months compared to previous years.

"We remain cautious on retail sales and forecast retail specialty sales growth of 3% for the CFX portfolio over FY14," the group said.

Over the year, CFX wrote down the value of its Myer Melbourne Emporium, due to open in Q1, 2014 by $63 million.

The company announced a distribution of 13.6 cents for the year a 3.8% increase on the previous year.