Charter Hall Group (ASX:CHC) (‘Charter Hall’ or the ‘Group’) today announced its full year results for the 12 months to 30 June 2013.

Results summary:

• Statutory profit after tax of $54.8 million, up from $16.7 million on the prior corresponding period (pcp)
• Operating earnings of $71.8 million, up 12.9% from $63.6 million on pcp
• Operating earnings of 23.94 cents per security (cps), up 11.3% on pcp
• Distribution of 20.2 cents per security (cps), up 11.0% on pcp
• Net Tangible Assets (NTA) per security of $2.13, in line with 30 June 2012

Operational performance:

• 18% growth in Australian funds under management, 38% increase over the past three years
• Secured $1.0 billion of net equity inflows during the year
• Completed $3.1 billion of property transactions during the year
• Co-invested a further $99 million into property funds during the year, partially funded by $58 million of recycled capital

Increased property funds investment yield from 6.7% to 7.5%

Charter Hall's Joint Managing Director, David Harrison, said:

“We have had another active year which has seen us deliver an 11.3% increase in operating earnings per security and a 16% increase in total funds under management (FUM) to $10.3 billion. Total securityholder return was 80.6% for the year. In line with our strategy of accessing, deploying, managing and investing equity in core Australian real estate we secured $1.0 billion of net equity commitments during the year which enabled us to acquire $2.1 billion of Australian office, retail and industrial property assets".

Charter Hall’s business is focused on its two key earnings streams being the earnings generated from the services provided by its integrated property funds management platform, and property investment income generated from co-investing alongside its capital partners in property funds and partnerships.

The following table sets out the earnings for each of the key earnings streams for the 12 months ended 30 June 2013:

Property Investments – Operating Earnings of $44.5 million

Charter Hall’s property investments total $603 million at 30 June 2013. The annualised property funds investment earnings yield increased from 6.7% for the 2012 financial year to 7.5% for the 2013 financial year as a result of the active management of the Group’s investment portfolio and lower borrowing costs in the managed funds.

Over the past two years, Charter Hall has realised $126 million of capital from its co-investments and reinvested $117 million into higher yielding investments. Over the next 18 months, the Group aims to recycle a further $112 million of capital, with committed asset sales of $48 million since year end.

The property investment portfolio is secured by a 5.6 year weighted average lease expiry, 97% occupancy and has weighted average rent reviews of 3.8%.

Property Funds Management – Operating Earnings of $27.3 million

With a focus on Australian office, retail and industrial property, the Group’s Australian property FUM increased by 18% to $9.9 billion, with total FUM of $10.3 billion.

The Group secured $1.2 billion in gross equity during the year across its wholesale pooled, wholesale partnership, listed and retail investor funds, enabling it to acquire $2.1 billion of Australian property. Office acquisitions include Bankwest Place, Perth and Bank of Queensland, Brisbane office assets in partnership with wholesale partners and the $172 million acquisition of 9 Castlereagh Street in Sydney by the Core Plus Office Fund.

In the retail property sector, Charter Hall Retail REIT successfully raised $119 million of capital from its institutional and retail investors during the year, with this equity used to fund the acquisition of three supermarket anchored centres for $101 million. The Group also established a new wholesale partnership with Telstra Super in October 2012 to acquire a $207 million portfolio of Bunnings properties.

Charter Hall has actively increased its exposure to the industrial sector, acquiring interests in ten properties through its new Core Logistics Partnership, the Direct Industrial Fund No. 1 and No. 2 and the Core Plus Industrial Fund. The Group and its managed funds continue to actively look to acquire additional quality industrial assets.

Charter Hall is also progressing the realisation of a number of identified funds, totalling $570 million of funds under management which have reached or are approaching the end of their investment term.

Strategy and outlook

Charter Hall’s strategy is to access, deploy, manage and invest equity into core real estate sectors to create value and provide sustainable income and capital returns for securityholders and external investors. Charter Hall is focused on:

• Executing strategies to achieve the objectives of its investors
• Enhancing return on equity and continuing to improve the quality of earnings for securityholders
• through:
  • Sourcing equity to invest into core real estate sectors targeting growth in the Australian FUM
  • platform of 6-10% per annum
  • Realising and redeploying a further $112 million of capital in property and development investments over the next 2 years
  • Driving further growth in property investment portfolio earnings and capital value
  • Diversifying sources of debt funding for the managed funds platform
  • Continuing to capitalise on a scalable operating platform to service FUM growth
• Reweighting the property investment portfolio increasing the proportion of retail and industrial investments

Charter Hall’s Joint Managing Director, David Southon, said:

 “Given the attractive yield proposition for property relative to other asset classes and having regard to our current low interest rate environment, we expect many investors - across both institutional and retail platforms – will continue to increase their exposure to Australian property. Charter Hall is well positioned to capture these inflows and we will continue to partner with both new and existing investors to invest in quality office, retail and industrial property. We have already made positive progress on this strategy in the first two months of FY14, completing the $150 million Core Plus Industrial Fund equity raising and establishing a new retail partnership for the acquisition of Keperra Square in Brisbane,”

Barring unexpected events, we are forecasting FY14 Operating Earnings per security growth of approximately 7%.

View CHC FY13 Results Presentation

View CHC FY13 Appendix 4E

View CHC FY13 Webcast