A strong and adaptable strategy, clear purpose, deep values and, above all, the trust and partnerships we have built with our people, investors, customers and communities, have seen us stay the course in a year that has tested all Australians.
This has been a year of challenges for business and society. With a backdrop of weak economic growth, bushfires and the onset of COVID-19, we have all been forced to adapt and respond to an uncertain external environment. Against this backdrop, I am pleased to report that Charter Hall has enjoyed strong momentum by focusing on its strategic pillars of access, deploy, manage, and invest.
Our approach of partnering with our tenants to meet their property needs continues to deliver results for securityholders, with operating earnings per security (OEPS) growth of 46% over the previous financial year. Annual dividend growth continued with an increase of 6% over FY19. Our focus on delivering resilient and growing income streams for our investors has driven the performance of our funds and continues to attract investor equity, with $5.1 billion of equity inflows for the year.
While this annual report measures our performance for the year to 30 June 2020, we see long term performance as the true test of success. This is Charter Hall’s 15th year as a listed company and in that time, we have delivered securityholders a total shareholder return of 15.7% return per year on average.
Working in partnership dominated our approach to the challenges presented by COVID-19. With the onset of the pandemic, we moved quickly and decisively to establish working from home routines for our people in non-frontline roles. We also launched a number of wellbeing initiatives to support our people to realise their individual potential, work productively and contribute to our community. So, I was particularly pleased to see that 87% of our people reported “good” or “excellent” levels of wellbeing. Recognising too that we needed to partner with our customers to resolve issues that affected us all, our teams introduced new hygiene regimes, changed our environments to accommodate social distancing and communicated tirelessly with our customers to keep them updated.
Taking an active approach to partnership builds trust and resilience across our many relationships. We work with some of Australia’s biggest corporates and our relationships are multi-levelled and multi-sectored.
Our current portfolio comprises more than 1,300 properties, with over 4,000 tenancies, delivering over $2.1 billion of net rental income a year.
Today, with your support, we manage and invest in one of Australia’s leading real estate platforms. Our funds under management (FUM) of $41.8 billion as at 20 August 2020 represents the largest sector diversified commercial property portfolio in Australia.
Entrepreneurial spirit runs deep within Charter Hall. We continue to be an active market participant, investing alongside our capital partners to access attractive investment opportunities. Our focus on high quality assets leased to quality tenants on long weighted average leases is unchanged. These assets are the most enduring in value and underpin the resilience of our portfolios.
Strengthening our diversity
The range and extent of our activities requires many inputs to be effective and competitive. We depend on talented people and their different experiences, backgrounds and perspectives to drive our growth and sustain our future. As a Board and management team, we realise the importance of creating equity, removing barriers to inclusion, and genuinely engaging with internal and external communities to drive long-term organisational and systemic change.
This year, we were recognised by the Women’s Index (Future Super) as one of the leading ASX listed companies to demonstrate gender equality.
We continue our involvement with the Property Council of Australia’s 500 Women in Property. We now have 30.4% female participation in senior executive positions and 54.6% across our workplace.
Through our membership of Pride in Diversity and the property industry initiative Interbuild, we have also continued to grow our support for LGBT+ employees nationally.
The new ways of working emerging as a result of COVID-19 underline the importance of ensuring all our people feel supported and valued, and that they see a place and a future for themselves at Charter Hall.
Serving our customers and securityholders
As your Board, we focus on providing clear governance and oversight to assist management in continuing to deliver for stakeholders. Our role is to serve you and to maintain and build trust. Embedding a high standard of ethics into our business and building belief and goodwill in the Group, and the people who manage your investment is paramount.
Despite an uncertain external environment in FY20, I am pleased to report that Charter Hall continues to gain momentum in the business. In particular, the record equity flows demonstrate our customer centric approach continues to be supported by our investor customers. Additionally, the repeat tenant customer metrics, retention rates and customer interviews suggest the Group has an equal focus on both tenant and investor customers.
One of our roles as your Board is to ensure that the team remains focused on delivering against the Group’s strategy, whilst ensuring all stakeholders are fairly treated and the culture of “doing the right thing” permeates throughout the Group. While our results demonstrate our performance focus, front and centre for us is our role as guardians of other people’s capital over the long term. That’s why our purpose, developed with input from investors, tenants and employees, is about achieving better futures and mutual success through bringing aspirations to life.
The Charter Hall Board continues to comprise a majority of independent directors, in line with best practice. All Directors actively engage in the business to ensure the continued execution of the Group strategy. Our Non-Executive Directors apply a diverse mix of skills and expertise to provide a strong overall contribution to the success of the Group. This approach puts the Group in a resilient position to pursue further growth.
Our climate resilience approach
The built environment in Australia represents 23% of the country’s carbon emissions, so the environmental impacts of what we do are potentially far reaching. This year, we have again stepped up our efforts to be a sustainable organisation. We now have 212 Green Star Performance ratings across the portfolio - maintaining Australia’s largest Green Star footprint.
We continue to see improvements in our NABERS energy ratings across our sectors. This year we became the largest office portfolio to participate in the NABERS Sustainable Portfolios Index 2020. All our funds and 62 commercial assets are included in the Index, with our Charter Hall Long WALE REIT (CLW) placed in the top three portfolios.
Our values ensure we remain strong as we grow and nurture the business through this turbulent time of technological, environmental, community expectation and societal change.
We have mapped our future against various climate scenarios and defined our pathway to net zero for Scope 1 and 2 emissions for the whole Group by 2030.
Further, our industrial & logistics portfolio has committed to achieving net zero Scope 1 and 2 emissions by 2022.
We’ve increased our renewable energy footprint from 2.5MW in 2018 to 21MW of solar PV installed across the portfolio. Our retail power purchase agreements (PPAs) with Clean Peak Energy and Solgen will help the Group realise our short-term sustainability targets and contribute towards our longer-term aspirations. Last year, our retail team began an ambitious solar power and battery storage rollout plan that will over time see us generate 31,000MWh of 100% renewable energy across our retail centres. We now have first and second stage agreements in place for solar systems at 28 of our convenience-plus retail centres.
Our climate governance initiatives this year have also included developing a roadmap to align with the recommendations of the Taskforce for Climate-related Financial Disclosures (TCFD). This roadmap recognises that in order for us to deliver on our purpose of securing a better future for all, we have a responsibility to understand the potential impact of climate change and to take active, meaningful steps from Board level to mitigate the impact.
As a signatory to the United Nations Global Compact, we continue to engage in collaborative projects to advance the Sustainable Development Goals and make the UN Global Compact and its principles part of our strategy and culture.
This year, all our employees completed training in our obligations under the Modern Slavery Act and a survey of our priority 1 suppliers showed a strong understanding of the basic facts around modern slavery. Our Modern Slavery and Human Rights Working Group monitors our modern slavery and human rights risk.
Our commitment to communities
The double impacts of the Australian bushfires and COVID-19 prompted us to step up our involvement with communities even further. Through our commitment to the philanthropic movement Pledge 1%, our people are heavily engaged in our communities. They contributed 2,000 hours in volunteering, and we donated over 45,000sqm in space, valued at $1.9 million, for community use. We donated $933,000 to assist communities, including $500,000 for bushfire relief and long-term recovery.
Recognising that COVID-19 has put households under a lot of stress, we continued our support of social enterprises, including Two Good Co., which helps vulnerable women who have experienced domestic violence.
We also reviewed our community investment approach to ensure that we were continuing to engage with communities in the most effective ways. Through this review, we identified that creating inclusion through employment of vulnerable young Australians provides a pathway to address social issues impacting communities in which we operate. This will now be the focus of our community investment.
Economic growth in Australia faces a challenging future, with the impacts of COVID 19 set to continue to disrupt the outlook. Globally, the backdrop is similarly challenged, with lower interest rates expected in many geographies for an extended period.
We remain well positioned, with a leadership team focused on delivering results for our securityholders and capital partners. Across our platform we have high-quality assets and sector-leading lease expiry terms delivering resilient performance and shared growth. We have access to over $5 billion in available investment capacity through existing cash balances, and available lines in our funds and on our balance sheet. This capacity provides a resilience against any short-term volatility, and an ability to move quickly to capture opportunities, while also providing a meaningful avenue for future growth.
I would like to take this opportunity to thank tenants, investors and securityholders for your support, my fellow Directors and the Executive Committee for your dedication and our people and their families for your passion, commitment and sacrifice throughout a very difficult year to deliver remarkable performances.