Charter Hall : Interim Financial Report

Charter Hall

Group

Interim Financial Report

For the half year ended 31 December 2021

Comprising the stapling of ordinary shares in Charter Hall Limited (ACN 113 531 150) and units in the Charter Hall Property Trust (ARSN 113 339 147)

Important notice

This financial report has been prepared and issued by Charter Hall Limited (ACN 113 531 150) and Charter Hall Funds Management Limited (ACN 082 991 786, AFSL 262861) (CHFML) as Responsible Entity of the Charter Hall Property Trust (ARSN 113 339 147) (together, the Charter Hall Group or Group). The Charter Hall Group is incorporated and domiciled in Australia. The registered office of the Charter Hall Group is Level 20, No. 1 Martin Place, Sydney NSW 2000. The information contained in this report has been compiled to comply with legal and regulatory requirements and to assist the recipient in assessing the performance of the Group independently and does not relate to, and is not relevant for, any other purpose.

This report is not intended to be and does not constitute an offer or a recommendation to acquire any securities in the Charter Hall Group. The receipt of this report by any person and any information contained herein or subsequently communicated to any person in connection with the Charter Hall Group is not to be taken as constituting the giving of investment, legal, or tax advice by the Charter Hall Group, its related bodies corporate, its Directors or employees to any such person. Each recipient should consult their own counsel, accountant, and other advisers, as to legal, tax, business, financial and other considerations in relation to the Charter Hall Group.

Neither the Charter Hall Group, their related bodies corporate, Directors, employees nor any other person who may be taken to have been involved in the preparation of this report represents or warrants that the information contained in this report, provided either orally or in writing to a recipient in the course of its evaluation of the Charter Hall Group or the matters contained in this report, is accurate or complete.

Historical performance is not a reliable indicator of future performance. Due care and attention has been exercised in the preparation of forecast information; however, forecasts, by their very nature, are subject to uncertainty and contingencies, many of which are outside the control of the Group. Actual results may vary from any forecasts, and any variation may be materially positive or negative.

CHFML does not receive fees in respect of the general financial product advice it may provide; however, entities within the Charter Hall Group receive fees for operating the Charter Hall Property Trust in accordance with its constitution. Entities within the Group may also receive fees for managing the assets of, and providing resources to, the Charter Hall Property Trust. All information herein is current as at 31 December 2021 unless otherwise stated. All references to dollars ($) or A$ are Australian dollars unless otherwise stated.

© Charter Hall

Cover photo: 10 Shelley Street, Sydney NSW.

	Directors' report	3
	Auditor's independence declaration	8
	Consolidated statements of comprehensive income	9
	Consolidated balance sheets	11
	Consolidated statement of changes in equity - Charter Hall Group	12
	Consolidated statement of changes in equity - Charter Hall Property Trust Group	13
	Consolidated cash flow statements	14
	Notes to the consolidated financial statements	15
	1	Segment information	15
	2	Investment in associates	18
	3	Investments in joint ventures	20
	4	Revenue	21
	5	Distributions/Dividends paid and payable	21
	6	Earnings per stapled security	22
	7	Receivables and other assets	23
Contents	8	Investment properties	23
10	Borrowings	24
	9	Intangible assets	24
	11	Contributed equity	25
	12	Non-controlling interests	26
	13	Fair value measurement	26
	14	Commitments	28
	15	Contingent liabilities	28
	16	Events occurring after the reporting date	28
	17	Summary of significant accounting policies	29
	Directors' declaration to securityholders	30
	Independent auditor's report	31

Charter Hall Group Directors' Report 2022

Directors' report

For the half year ended 31 December 2021

The Directors of Charter Hall Limited and the Directors of Charter Hall Funds Management Limited, the Responsible Entity (RE) of Charter Hall Property Trust, present their report together with the consolidated interim financial report of the Charter Hall Group (Group or CHC) and the consolidated interim financial report of the Charter Hall Property Trust Group (CHPT) for the half year ended 31 December 2021, and the independent auditor's report thereon. The interim financial report of the Group comprises Charter Hall Limited (Company or CHL) and its controlled entities, which include Charter Hall Funds Management Limited as the RE of Charter Hall Property Trust (Trust) and CHPT and its controlled entities. The interim financial report of the Charter Hall Property Trust Group comprises the Trust and its controlled entities.

Charter Hall Limited and Charter Hall Funds Management Limited have identical Boards of Directors. The term Board hereafter should be read as a reference to both these Boards.

The units in the Trust are 'stapled' to the shares in the Company. A stapled security comprises one Company share and one Trust unit. The stapled securities cannot be traded or dealt with separately.

Directors

The following persons were Directors of the Group during the half year and up to the date of this report.

‒	David Clarke	‒ Chair and Independent Non-Executive Director
‒	Jacqueline Chow	‒	Independent Non-Executive Director
‒	Philip Garling	‒ Independent Non-Executive Director (resigned 11 November 2021)
‒	David Harrison	‒ Managing Director and Group CEO
‒	Karen Moses	‒	Independent Non-Executive Director
‒	Greg Paramor AO	‒	Independent Non-Executive Director
‒	David Ross	‒	Independent Non-Executive Director

Distributions/Dividends - Charter Hall Group

Distributions/dividends paid/payable to stapled securityholders during the half year were as follows:

Interim ordinary distribution of 11.33 cents and interim ordinary dividend of 8.33 cents per stapled security for the six months ended 31 December 2021 payable on 28 February 2022

Total Distributions/Dividends paid and payable to stapled securityholders

31 Dec 2021 $'m

91.6

91.6

Operating and financial review

The Group recorded a statutory profit after tax attributable to stapled securityholders for the half year to 31 December 2021 of $517.8 million compared to a profit of $173.2 million for the half year ended 31 December 2020.

Operating earnings amounted to $263.9 million for the half year to 31 December 2021, compared to $129.3 million for the half year ended 31 December 2020, an increase of 104.1%. Operating earnings is a financial measure which represents statutory profit after tax adjusted for the items in the table below. Operating earnings is used by the Board to make strategic decisions and as a guide to assessing an appropriate distribution to declare.

	31 Dec	31 Dec
	2021	2020
	$'m	$'m
Operating earnings attributable to stapled securityholders	263.9	129.3
Add: Net fair value movements from investment properties on equity accounted
investments1	266.9	66.6
Add: Net gain/(loss) on disposal of property investments1	(6.3)	3.0
Less: Non-operating income tax benefit/(expense)	(0.9)	-
Less: Realised and unrealised net gains/(losses) on derivatives1	11.9	1.4
Less: Reversal of impairment/(impairment) of equity accounted investments	4.1	(6.9)
Less: Performance fees expense1	(19.1)	(7.8)
Less: Non-operating pursuit costs	1.8	(3.7)
Less: Amortisation of intangibles	(0.4)	(1.1)
Less: Other1	(4.1)	(7.6)
Statutory profit after tax attributable to stapled securityholders	517.8	173.2

1 Includes the Group's proportionate share of non-operating items of equity accounted investments on a look through basis.

3

Charter Hall Group Directors' Report 2022

Directors' report

For the half year ended 31 December 2021

Operating and financial review continued

The 31 December 2021 financial results with comparatives are summarised as follows:

					Charter Hall Property
	Charter Hall Group	Trust Group
	31 Dec	31 Dec	31 Dec	31 Dec
	2021	2020	2021	2020
Revenue ($ million)1	566.1		248.3		18.4	13.3
Basic weighted average number of stapled securities per Note 6 (million)	465.9		465.8		465.9	465.8
Statutory profit after tax for stapled securityholders ($ million)	517.8		173.2		307.5	104.7
Statutory earnings per stapled security (EPS) (cents)	111.2		37.2		66.0	22.5
Operating earnings for stapled securityholders ($ million)	263.9		129.3		n/a	n/a
Operating earnings per stapled security (cents)	56.6		27.8		n/a	n/a
Distribution/dividend per stapled security (cents)	19.7		18.6		11.3	11.1
Property investment segment earnings ($ million)2
71.6		60.4		n/a	n/a
Development investment segment earnings ($ million)2	27.0		7.2		n/a	n/a
Funds management segment revenue ($ million)2	327.0		149.9		n/a	n/a
Total segment earnings2	425.6		217.5		n/a	n/a
	31 Dec	30 Jun	31 Dec	30 Jun
	2021	2021	2021	2021
Total assets ($ million)	4,108.7		3,284.7		3,212.6	2,658.5
Total liabilities ($ million)	918.6		775.9		684.0	615.2
Total net assets ($ million)	3,190.1		2,508.8		2,528.6	2,043.3
Net assets attributable to non-controlling interest ($ million)3	250.3		137.5		250.3	137.5
Net assets attributable to stapled securityholders ($ million)	2,939.8		2,371.3		2,278.3	1,905.8
Stapled securities on issue (million)	473.0		465.8		473.0	465.8
Net assets per stapled security ($)	6.22		5.09		4.82	4.09
Net tangible assets (NTA) attributable to stapled securityholders
($ million)4	2,855.3		2,286.5		2,278.3	1,905.8
NTA per stapled security ($)4	6.04		4.91		4.82	4.09
Balance sheet gearing5	7.3%	5.0%	n/a	n/a
Funds under management (FUM) ($ million)6	79,486.9		52,288.9		n/a	n/a

1. Gross revenue does not include the Group's share of net profits of associates and joint ventures of $325.7 million (31 December 2020: $104.9 million).
2. Segment earnings and revenue is used by the Board in assessing the performance and allocating of resources to its operating segments.
3. Represents the 78.6% (30 June 2021: 67.7%) non-controlling interest share of the Charter Hall Direct Long WALE Fund (DLWF).
4. NTA attributable to stapled securityholders and NTA per stapled security ($) are calculated using assets less liabilities, net of intangible assets and related deferred tax and non-controlling interests in DLWF. NTA includes right of use assets.
5. Gearing is calculated as interest-bearing debt drawn (excluding hedged foreign exchange movements subsequent to the related debt drawing date and DLWF net of cash, divided by total assets net of cash, derivative assets and DLWF).
6. Includes 100% of Paradice Investment Management Funds Management Portfolio ($18.2bn), of which the Group owns 50%.

4