Charter Hall’s Growth Surge

22 February 2019

Charter Hall Group announced its half year results for the period to 31 December 2018 this week reporting a 22% growth in FUM and a 13% growth in Earnings. Financial highlights: Operating earnings of $107.5 million and OEPS post-tax of 23.1cps, both up 13.0% on prior corresponding period (pcp) Statutory profit after tax of $133.5 million, an increase of 10.7% on pcp 1H FY19 Distribution of 16.5 cents per security, up 6.0% on pcp 12.3% Total Platform return 1H FY19 Operational performance: Access – Multiple equity sources with $1.2 billion gross equity inflows during the 6 months to 31 December 2018 Deploy – Completed $3.8 billion of gross property transactions comprising $3.1 billion in acquisitions and $0.7 billion in divestments. Group investment capacity of $2.6 billion as at 31 December 2018 Manage – $5.2 billion or 22.4% growth in Funds Under Management (FUM) from 30 June 2018 to $28.4 billion across a portfolio comprising 820 properties, occupancy of 98.1%, WALE of 8 years and over $1.8 billion of rental income Invest – Property Investment (PI) Portfolio increased by 6.7% to $1.8 billion over the six month period Charter Hall’s Managing Director and Group CEO, David Harrison said: “Following an active six months for the Group, we are pleased to announce another positive result achieving growth across all key metrics to deliver 1H FY19 OEPS growth of 13.0% to 23.1cps The Property Investment Portfolios total property return over the five years to 31 December 2018 is 14.2% per annum, outperforming the MSCI/IPD Unlisted Wholesale Property Fund Index which returned 11.1% over the same period. Property Funds Management The Group’s managed funds grew by $5.2 billion to $28.4 billion driven by $2.3 billion of net transactions ($3.8 billion gross), the $1.6 billion acquisition of Folkestone, positive revaluation of $700 million and capex spend on developments of $500 million. The Group experienced $1.2 billion of gross equity inflows comprising $743 million raised in Wholesale Funds and Partnerships, $305 million raised in Direct Funds and $172 million in Listed Funds. This equity was deployed into $3.1 billion of strategic asset acquisitions with a further $2.6 billion additional funding capacity available across the platform. The Group continues to use its cross-sector tenant relationships and the scale of its portfolio to create investment grade opportunities generating significant value through enhancing both income yield and total returns for its funds. Development Activity Development activity continues to drive asset creation and attract capital. Over the last three years, development completions have added $2.6 billion of FUM and have identified further projects with an on-completion value of $5.3 billion. Development activity itself is predominantly undertaken by funds/partnerships with the majority of committed projects being de-risked through pre-leases and fixed price building contracts. Balance Sheet Capital management remains a key focus with $4.1 billion of new and refinanced debt facilities during the period and no material maturities in FY20. With modest 5.5% balance sheet gearing, weighted average debt maturity of 7.1 years and $115 million of cash on hand as at 31 December 2018, the Group maintains financial flexibility and substantial funding capacity across the funds platform with $2.6 billion of available liquidity. Strategy and Outlook The Group’s previous FY19 guidance was for post-tax operating earnings per security growth of 8- 10% over FY18, following the acquisition of Folkestone. Given the strong performance and level of transactions in the first half and based on no material change in current market conditions, the Group’s FY19 guidance is increased to 14%-17% growth in post-tax operating earnings per security over FY18. FY19 guidance includes a $40 million accrual ($20 million in each half) for the CHOT performance fee. The distribution payout ratio is expected to be between 70% and 95% of operating earnings per security post-tax. CQR Trading Chart vs ASX200 AREITs Blue – CQR Purple – ASX200 AREITs #CharterHall