Centuria Capital Group announces FY17 results – more than doubles funds under management with DPS up 43%


John McBain

Centuria Capital Group (ASX: CNI or Centuria) yesterday announced an FY17 operating EPS of 10.3 cps in line with previous guidance. Centuria also confirmed a distribution of 7.5 cents per share for the financial year ended 30 June 2017 as per guidance and up 43% on FY16 results. Funds under management increased by 118%, from $1.9 billion to $4.2 billion during FY17 and market capitalisation grew from $80 million to $290 million over the same period.

During FY17 securityholders enjoyed total returns of 24% and Centuria expects that its operating EPS will grow approximately 5% during FY18 assuming performance fee contribution is consistent with the long term average.

Talking about Centuria’s performance over the 2017 financial year, Group CEO John McBain described the year as ‘transformational’, with an unprecedented level of activity across all divisions, including the acquisition of the $1.4 billion 360 Capital real estate platform.

“This acquisition was a very significant contribution to growth in funds under management and our consequent increase in scale and market presence. The result has been a step-change for Centuria Capital, bringing our business to scale and this activity should enable near-term ASX 300 inclusion.”

“In addition, the majority of 360 Capital’s funds were listed funds which were highly complementary to our platform which was previously skewed toward unlisted property funds,” Mr McBain said.

Mr McBain went on to say that since FY16 Centuria had purchased ten properties for $721 million across the listed and unlisted businesses, of which $517 million were acquired by unlisted funds.

“Our unlisted business had a bumper year, growing by 106% in its own right. It now manages property assets of $1.6 billion, and this year made the largest purchase in our history – the Zenith office tower in Chatswood, which was acquired for $279 million in a joint venture with global investor BlackRock.

In other significant initiatives undertaken during the year, Centuria merged its two office Real Estate Investment Trusts: Centuria Metropolitan REIT (CMA) and Centuria Urban REIT (CUA); and acquired the management of Centuria Industrial REIT (CIP).

Mr McBain said that as a result, CIP is now Australia’s largest pure rent-collecting REIT, with a market capitalisation of $563 million, and CMA is Australia’s dominant metropolitan office REIT, with a market capitalisation of $420 million

“We are very pleased with the performance of both funds this year. The merger of CMA and CUA resulted in a larger and more efficient fund, which went on to acquire a further $150 million in assets since the merger”

“Our aim going forward is to actively grow both funds, as we identify suitable assets,” Mr McBain explained.

The Centuria Diversified Property Fund (CDPF) was also launched this year. CDPF is an open-ended, unlisted diversified property fund which is invested in nine quality office trusts.

“CDPF gives investors all the benefits of direct property exposure from an unlisted fund, but with the addition of daily unit pricing and liquidity via a monthly redemption feature.

“CDPF has performed really well this year. Returns to investors are 19.5% for the 12 months to 30 June 2017, and it has been rated ‘Recommended’ by Lonsec and Core Property. This means it qualifies for inclusion in bank and other large dealer group’s approved product lists,” Mr McBain said.

The investment bonds business also performed strongly this year, with unitised bonds growing by 28% over the 2017 financial year and the business continuing to diversify its distribution channels.

Centuria is the fourth largest player in the market, with $799 million in funds under management, and Mr McBain said that he expects further growth in the coming year.

“We’re seeing accelerated, above-market growth in the investment bond business, supported in part from an increased interest from advisers looking to create, transfer and protect their clients’ wealth. Changes to superannuation regulations and uncertainty regarding negative gearing and family trusts also factor in peoples decision to consider our investment bonds,” he said.

In conclusion, Mr McBain said that FY17 was a year which had seen Centuria significantly increase its scale in the Australian funds management landscape, while retaining a sharp focus on reliable, growing securityholder distributions.

“Our focus moving forward is to utilise our market-leading real estate and financial services capabilities to identify growth opportunities and to use our balance sheet strength to accelerate growth across our listed and unlisted property and investment bonds businesses.

“We have a long track record of creating value for securityholders, and we now have a strong platform to deliver another successful year in FY18,” he said.

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