Charter Hall delivers with further capacity for growth following FY07 Results

21/08/2007 - PDF Version Available

070830_CHC_FY07 v7FINAL

KEY HIGHLIGHTS:

  • DPS of 10.44c – a 47% increase compared to FY06
  • NPAT $43.2m – a 147% increase over FY06
  • Funds under management increased by 108% to $2.8bn

Charter Hall Group (ASX: CHC) is pleased to announce a net profit after tax and fair value adjustments of $43.2m, compared to $17.5m in the previous corresponding period ("PCP"). 

Net profit after tax, before fair value adjustments of $11.5m, was $31.7m, compared to $17.4m in the PCP. Total income was $60.8m, representing a $28.6m, or 89% increase compared to the PCP. 

The increase in net profit compared to the PCP has been driven by the following:

  • higher fund management fees due to growth in funds under management and the successful external equity raisings completed during the year for Core Plus Office Fund (CPOF) and Core Plus Industrial Fund (CPIF).
  • higher distribution income from CPOF (23% interest), CPIF (32% interest, 100% interest until April 2007), Diversified Property Fund (DPF) (12% interest), Charter Hall Umbrella Fund (CHUF) (48.5% interest) and from the 100% owned Core Plus Retail Fund (CPRF).
  • increased Charter Hall Property Trust ("CHPT") rental income due to the acquisition of three additional properties - Melbourne Airport Business Park, Tullamarine (now transferred to CPIF), 25 Nepean Highway, Mentone, Victoria and Home HQ Nunawading, Victoria (both to be transferred to the CPRF sub trust).
  • higher performance and development management fees from projects crystallised and projects managed within the Property Development Portfolio (PDP) and Charter Hall Opportunity Fund 4 (CHOF4) Opportunity Funds.
The distribution for the period, to be paid on 31 August 2007, is 5.67c per stapled security, bringing the total distribution for the year to 10.44c which is a 47% increase on FY06 DPS.

The market capitalisation of the Group has grown from $550m at 30 June 2006 to $1.2bn. Funds under management have grown from $1.3bn to $2.8bn, providing the Group with significant additional recurring earning streams.

Despite significant funds under management growth the Group's gearing is at a slightly lower level to last year at 24% (PCP: 28%). Gearing at this level provides the Group with the capacity to fuel anticipated growth. Importantly, committed equity yet to be allocated within unlisted managed funds provides further asset under management capacity of approximately $2.0bn. 

PROPERTY REVALUATIONS AND FUND/INVESTMENT PERFORMANCE
The Group recorded strong gains in its directly owned properties (CHPT), and in its investments
in unlisted funds and other investments. The major gains were as follows:
  • a $7.0m gain in CHPT's investment in CPOF (an annualised increase of 19%)
  • a $1.0m gain in CHPT's investment in CPIF (an annualised increase of 10%)
  • a $2.8m gain in CHL's interest in Axiom Properties Limited
  • a $6.7m net gain in CHPT directly owned properties; offset by
  • property acquisition costs of $10.5m which were written off on CHPT acquisitions during the year, being mainly attributable to the $130m Bunnings Portfolio.
As well as generating strong valuation growth, the underlying financial performance of the Group's managed funds has been in line with or above expectations. These acquisition costs are to be reimbursed from CPRF investors.

FUND UPDATE
CPOF recently announced its 11th acquisition bringing total assets to approximately $1bn, whilst CPIF announced its 8th asset acquisition bringing the total fund size to close to $300m (on a fully developed basis). DPF also announced its 11th property acquisition bringing total assets to $123m (on a fully developed basis), increasing from $48m as at 30 June 2006.

A wholesale equity raising is expected to be launched for CPRF in Q4 of this year. Following recent acquisitions, such as the Bunning's portfolio and two acquisitions that marked the Group's entry into the New Zealand market, CPRF's seed portfolio provides a diversified retail property portfolio of approximately $400m.

In May 2007 the Group announced the close of Australia's largest opportunistic property fund, Charter Hall Opportunity No.5 (CHOF5). CHOF 5 is the fifth in a series of highly successful and strongly performing opportunistic property funds managed by the Charter Hall Group.

The response by investors to CHOF 5 was extremely positive with applications to the fund being heavily oversubscribed, requiring allocation scale back to the Fund's self imposed maximum cap of $300m in committed equity.

During Q4 FY07, a new managed fund was created known as Charter Hall Umbrella Fund (CHUF), which holds a portfolio of investments in Charter Hall managed funds. A major Australian financial institution acquired a 50% stake in FY07, which will be sold down to retail investors. A PDS will be lodged with ASIC for CHUF in August. The initial fund size will be approximately $150m.

Joint Managing Director David Harrison commented "FY07 has seen a solid expansion of our funds management business, increased equity commitments providing the capacity to increase assets under management to approx $5.0bn and a doubling of our existing assets under management to $2.8bn. We have also added senior resources during this period".

OUTLOOK
The Group has strong capacity and the committed capital to fund significant growth whilst pursuing its co-investment strategy in existing and new unlisted funds.

Market volatility will potentially create opportunities for Charter Hall Group and its managed funds, which are substantially capitalised with equity commitments from large wholesale investors. The Group intends to capitalise on such opportunities.

"We are very pleased with the results achieved for FY07 and the progress made over the past 12 months, particularly in relation to the implementation of our vertically integrated business model, creating a solid platform for significant future growth going forward. The Group is well positioned, with its access to capital and low gearing, to take advantage of a range of opportunities from core through to opportunistic. The strategic acquisition of 50% in national developer CIP, has expanded the Group's market penetration by both asset class and geographically" said Joint Managing Director David Southon.

FURTHER INFORMATION
Please refer to the detailed results presentation for further information on the Group's results and managed funds.


This information has been prepared by Charter Hall Funds Management Limited ABN 31 082 991 786; AFSL 262861 ("CHFML") for information purposes only. This website is not an offer to sell or a solicitation or an offer to subscribe or purchase or a recommendation of any securities referred to herein and the information has not taken into account any potential investors' personal objectives, financial situation or needs. Before investing, you should consider your own objectives, financial situation and needs or you should obtain financial, legal and/or taxation advice.

CHFML does not receive fees in respect of the general financial product advice it may provide, however they will receive fees for operating the schemes of which it is the responsible entity ("Schemes") which, in accordance with the Schemes' Constitutions, are calculated by reference to the value of the assets of the Schemes. Entities within the Charter Hall Group may also receive fees for managing the assets of, and providing resources to the Schemes. For more detail on fees, see our latest annual report. To contact us, call 1300 365 585 (local call cost).