Centuria Capital Group 1H19 results & outlook with John McBain

Jessica Amir: Hello Jessica Amir for the Finance News Network. Joining me from Centuria Capital Group (ASX:CNI) is Group CEO, John McBain. Hi John and welcome back and thanks for coming in.

John McBain: Thanks Jessica. It’s nice to be here and good to be back on the network.

Jessica Amir: First up. You’ve recently celebrated its 20th anniversary. For those who new to the company, just give us a quick introduction.

John McBain: Centuria Capital Group is an ASX-listed funds manager specialising in listed and unlisted property funds and investment bonds. We have $5.6 billion in assets under management (AUM) and our ASX code is CNI. We have built our business on understanding the needs of our investors, and putting their interests first, and we’ve been doing this for over 20 years.

Jessica Amir: Thanks John. Now to your interim results, take us through the highlights.

John McBain: We’re very pleased to report our interim results. We’ve built on the positive momentum achieved in the last financial year, with a particularly strong performance from our property division. We delivered an operating net profit after tax of $21.7 million and we increased recurring revenues by 30 per cent.
In addition, we grew our assets under management a further 14.3 per cent to $5.6 billion during the half, underpinned by $740 million of strategic property acquisitions and a $160 million revaluation uplift across our property assets. Centuria’s market capitalisation now exceeds $500 million, and we remain focused on S&P/ASX300 index inclusion.

Jessica Amir: And what does your performance mean for shareholders?

John McBain: We delivered operating earnings of 6.5 cents per security and increased distributions to 4.25 cents per security for the half. The increased scale of our funds management platform, now sitting at $5.6 billion means we are well-positioned to take advantage of both organic, as well as corporate growth opportunities.
As a result, full year guidance for 2019 has been reaffirmed at 9.25 cents per security, a 12.5 per cent uplift on FY18.

Jessica Amir: Thanks John, now can you tell us about each of the businesses. What was the story for your listed funds?

John McBain: Both our listed funds have had a transformational half. Centuria Metropolitan REIT (ASX:CMA), or CMA grew to become Australia’s largest pure-play ASX-listed office REIT, with $1.4 billion in assets under management. This growth was supported by a single $645 million real estate transaction, Australia’s third largest transaction in 2018. Centuria Industrial REIT (ASX:CIP), or CIP, expanded its position as Australia’s largest ASX-listed income-focused industrial REIT, with $1.2 billion in assets under management. Centuria Capital Group (ASX:CNI) as a parent, increased its co-investments in both REITs, enhancing alignment with both entities and supporting an uplift in group recurring revenues.

Jessica Amir: And how about the rest of the business?

John McBain: For the eighth quarter in a row we have had six of our unlisted funds in the Top 10 of the Property Council/IPD Australian Unlisted Core Retail Property Funds Index. Our Centuria Diversified Property Fund has grown to $50 million in assets under management. This unlisted fund is always open, has a limited liquidity facility, and is presently in due diligence to acquire its first direct asset. We also re-positioned our investment bonds offering in January with the launch of Centuria LifeGoals product. This is a new product now offering 22 high-quality investment options to investors, with a maximum tax rate of 30 per cent paid within the fund. We are already seeing positive demand for this transparent and flexible product, with more and more people looking for tax-effective ways to build and transfer wealth.

Jessica Amir: Now to your share price. It’s up 9.5 per cent year-to-date (as at 13 March 2019). What can you tell us?

John McBain: We are pleased that we’ve had a bit of a rally during the half. Look I think more people are looking at our stock, more than ever before, as we are approaching potential index inclusion in the ASX300 index. We’ve delivered on our forecasts in distributions and earnings. And a think that’s what people are looking for at the moment.

Jessica Amir: And finally, John before we let you go, what should we expect for the rest of the year?

John McBain: This year will be a time of intense focus on the banking and financial services industries. We’ve always had a strong investor focus but welcome a more industry-wide commitment to meeting community expectations. We believe businesses that stick to their knitting, achieve their forecasts, grow year-on-year, have sound governance and exhibit a really strong investor focus, will continue to be well supported and we want to be part of that peer asset. Crucial to this is a client-centric culture. So, I still personally interview every person that comes into the company and we are trying to ensure we maintain this culture where we are committed to the betterment of our investors.

In the second half our focus will be to aim to deliver high quality, predictable earnings supported by high recurring revenues. As an example, our recent acceptance of the cash offer for PropertyLink Group (ASX:PLG) enables us to deploy the $137 million we will receive into capital management and strategic initiatives, including, supporting our listed and unlisted property fund businesses, through co-investments and acquisitions, rolling out the launch of our new product Centuria LifeGoals product, which has already been well received by financial advisers and self-directed investors alike, as well as supporting new property related business activities which we will announce during the year. As a final reminder, we are providing full year FY19 earnings guidance of 12.7 cents per security.

Jessica Amir: John McBain, thank you so much for your time and congratulations on your first half.

John McBain: Thanks Jessica and thanks for having me on the network.