Challenger Limited · ASX:CGF
Challenger — Challenger Infrastructure Fund — H1 2009 Earnings Presentation
66 slides from Challenger's earnings presentation, Feb 17, 2009
Slide 1: Challenger Infrastructure Fund Half Year Results Presentation
Challenger Infrastructure Fund Half Year Results Presentation – February 2009 Chief Executive - Steve Bickerton Chief Financial Officer - Lucas Barry 17 February 2009
Slide 2: Important Notice
Important Notice Information contained in this publication is current as at 17 February 2009 unless otherwise specified and is provided by Challenger Listed Investments Limited (ABN 94 055 293 644) (AFSL 236887) (“CLIL”), as Responsible Entity of CIF Investment Trust 1 (ARSN 114 139 703) and CIF Inv
Slide 3: Agenda
Agenda 1. 2009 Half Year Results 2. Asset Performance 3. Outlook 3
Slide 4: 2009 Half Year Results
1. 2009 Half Year Results
Slide 5: Highlights
Highlights Earnings - Highly predictable yet diversified cashflow – 62% regulated revenues Quality - Revenue of $251.9m up 28% pcp - Underlying Proportionate EBITDA growth of 19% pcp1 Capital - Sale of £100 million of Southern Water at NAV Management - Reduction in total proportional net debt by $1.
Slide 6: Earnings Quality – Resilient Asset Performance
Earnings Quality – Resilient Asset Performance CIF - Revenue growth 28% pcp - Underlying Proportionate EBITDA growth 19% pcp1 Inexus - Revenue growth of 24% pcp, reflecting build out of the order book - Underlying EBITDA growth of 28% pcp - Record half year sales of 59,981 (25% pcp), reflecting pote
Slide 7: Capital Management – Derisking & Prudent Management of Fund
Capital Management – Derisking & Prudent Management of Fund ¾ Completed sale of 1/3 of CIF’s stake in Southern Water for £100m - Sale price at NAV - Repaid £50.7 million of Redeemable Preference Securities (RPS) - Reducing CIF’s proportional net debt by A$560 million - $102 million of cash held at F
Slide 8: Distributions – Strong Operating Cashflow Generation
Distributions – Strong Operating Cashflow Generation ¾ Free cash flow of 31 cents per stapled security1 ¾ Interim distribution of 12 cents per stapled security 0.60 60 54 0.54 18 0.18 50 0.50 40 0.40 Cents per security 6 0.06 31 0.31 0.13 13 30 0.30 0.20 12 0.12 20 0.1 100 6 0.06 0.00 0 Operating Ca
Slide 9: Net Asset Value of $3.35 per Security
Net Asset Value of $3.35 per Security1 4.00 3.74 0.02 0.24 0.32 0.04 0.16 0.07 3.50 3.35 3.00 $AUD per security 2.50 2.00 1.50 1.00 0.50 0.00 NAV 30 Jun Southern Water Inexus LBC FX Spot Net Hedging Working Capital NAV 31 Dec 2008 2008 Notes: 1. Net asset value per security is calculated as the Dire
Slide 10: Financial Performance
2. Financial Performance
Slide 11: CIF Financial Performance – Statutory Consolidated
CIF Financial Performance – Statutory Consolidated 1H09 1H08 % Mvt Trend Revenue $251.9m $196.4m 28% K Expenses ($137.5m) ($108.0m) 27% K Realised gains $19.1m $8.2m 133% K Depreciation ($34.0m) ($28.3m) 20% K EBIT before specific items $99.5m $68.2m 46% K Financing costs ($76.4m) ($63.5m) 20% K Net
Slide 12: CIF Financial Performance
CIF Financial Performance Underlying Proportionate EBITDA grew by 19% pcp 1H09 1H08 % Mvt Trend Underlying Proportionate EBITDA1 $208.0m $175.4m 19% K Underlying Proportionate EBITDA Margin 65% 59% 10% K Proportionate EBITDA2 $197.9m $175.0m 13% K Distribution Per Unit 12.0 14.5 -17% L 1 Underlying
Slide 13: Inexus – Financial Performance
Inexus – Financial Performance Growth in underlying EBITDA of 28% pcp in difficult market conditions 1H09 1H08 % Mvt Trend Revenue £24.6m £19.9m 24% K Underlying EBITDA1 £14.5m £11.3m 28% K Underlying EBITDA Margin 58.8% 56.9% 3% K Sales 59,981 47,885 25% K Connections 29,558 36,870 20% L 1 Underlyi
Slide 14: Inexus – Operating Performance
Inexus – Operating Performance Underlying EBITDA Highlights - Operating in market that has experienced 16 lowest level of housing starts since 1950 14 12 - Revenue growth of 24% pcp 10 £ million 8 - Highly predictable revenue and EBITDA from 6 in the ground assets 4 2 - Underlying EBITDA growth of 2
Slide 15: LBC – Financial Performance
LBC – Financial Performance Financial Performance 1H09 1H08 % Mvt Trend Revenue €86.1m €72.0m 20% K Underlying EBITDA1 €35.3m €27.6m 28% K EBITDA Margin 41.0% 38.3% 7% K Utilisation 95% 95% 0% Q Growth Capex €29.5m €33.1m 11% L Maintenance Capex €7.9m €7.4m 7% K 1 Underlying EBITDA excludes restruct
Slide 16: LBC – Operating Performance
LBC – Operating Performance Revenue Highlights 90 - Starting to realise benefits of growth capex 85 investment 80 - 28% growth in underlying EBITDA 75 € million 70 - 20% growth in revenue 65 60 - 52% growth in operating cashflow 55 50 - Utilisation maintained at 95% 1H08 2H08 1H09 - Cash reserves an
Slide 17: Southern Water – Financial Performance
Southern Water – Financial Performance Financial Performance 1H09 1H081 % Mvt Trend Revenue £335.0m £313.1m 7% K EBITDA £248.0m £218.8m 13% K EBITDA Margin 74.0% 69.9% 6% K Nominal Closing RCV2 3,236 2,980 9% K 1 HY08 refers to 6 months ended 31 December 2007. Interest acquired 15 October 2007. 2 Es
Slide 18: Southern Water – Operating Performance
Southern Water – Operating Performance Revenue Composition Highlights: - Southern Water continues to perform in line 100% with expectations 80% - EBITDA growth of 13% driven by capital 60% program 40% - RCV growth of ~9% consistent with regulatory 20% plan 0% 1H07 1H08 - Brighton & Hove received pla
Slide 19: Summary and Outlook
3. Summary and Outlook
Slide 20: Outlook – Inexus
Outlook – Inexus Multi-utility strategy offsets lowest level of housing starts since 1950 ¾ Primary focus on August 2010 refinance options and long term hedging strategy ¾ Lower housing starts will naturally slow growth capex ¾ Proactive response to UK housing market conditions via focus on multi-ut
Slide 21: Outlook – LBC
Outlook – LBC Global economic downturn presents difficult operating conditions ¾ Significant capex investment of €64.3 million over last twelve months, revenue yet to fully reflect these completed growth projects ¾ Capex investment expected to slow in response to economic conditions ¾ LBC will delev
Slide 22: Outlook – Southern Water
Outlook – Southern Water Delivery of draft AMP5 outcomes in current economic conditions ¾ UK government focused on investment in infrastructure as recession stimulus response ¾ Reset to provide certainty to March 2015 - Final Determination released in November 2009 - RCV growth expected to be consis
Slide 23: Fund Outlook – Challenging economic, financial and capital markets
Fund Outlook – Challenging economic, financial and capital markets High Quality - Highly predictable yet diversified cashflow – 62% regulated revenues Assets - Proportional weighted average debt maturity of ~ 11 years - Highly predictable EBITDA in 2009 - Strong financial position to respond to diff
Slide 24: HY2009 Summary
HY2009 Summary Earnings - Highly predictable yet diversified cashflow – 62% regulated revenues Quality - Revenue of $251.9m up 28% pcp - Underlying Proportionate EBITDA growth of 19% pcp1 Capital - Sale of £100 million of Southern Water at NAV Management - Reduction in total proportional net debt by
Slide 25: Questions
challenger @ >
Slide 26: Contacts
Contacts Steve Bickerton Chief Executive Tel: 61 2 9994 7327 Email: sbickerton@challenger.com.au Lucas Barry Chief Financial Officer Tel: 61 2 9994 7022 Email: lbarry@challenger.com.au Jenny Warat-Hughes Investor Relations Manager Tel: 61 2 9994 7663 Email: jhughes@challenger.com.au Website: www.cha
Slide 27: Appendix
challenger @ >
Slide 28: Proportionate Debt Maturity Profile
Proportionate Debt Maturity Profile1 ¾ Proportional weighted average maturity of ~11 years1 ¾ Next major refinance point – August 2010 Inexus refinance 1,000 900 800 700 600 AUD $ million 500 400 300 200 100 0 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 and beyond LBC Inexus Southern Wat
Slide 29: Fund Reporting Pack – Half Year Ended December 2008
Challenger Infrastructure Fund Challenger Infrastructure Fund Reporting Pack Challenger Infrastructure Fund Reporting Pack – Half Year Ended 31 December 2008 Challenger Infrastructure Fund Comprising: CIF Investment Trust 1 ARSN 114 139 703 CIF Investment Trust 2 ARSN 114 139 632 Responsible Entity
Slide 30: Responsible Entity and Disclaimer
Responsible Entity Challenger Listed Investments Limited (ABN 94 055 293 644) (AFSL 236887) (CLIL) is the Responsible Entity of CIF Investment Trust 1 (ARSN 114 139 703) and CIF Investment Trust 2 (ARSN 114 139 632) which together form the Challenger Infrastructure Fund (CIF). CLIL is indirectly who
Slide 31: Reporting Pack Contents and Introduction
Challenger Infrastructure Fund Reporting Pack Contents Introduction The CIF Reporting Pack has been prepared to assist analysts and investors in CIF Group Assets Under Management Page 2 understanding the investments and structure of CIF. The Reporting Pack does not purport to forecast the asset valu
Slide 32: CIF Group Assets Under Management
Challenger Infrastructure Fund Reporting Pack CIF Group Assets Under Management %Mvt. Half year ended 31 Dec 2008- A$ millions 31 Dec 2008 30 Jun 2008 31 Dec 2007 30 Jun 2007 31 Dec 2006 30 Jun 2006 31 Dec 2005 31 Dec 2007 LBC 317.2 352.6 363.8 323.7 – – – (12.8%) Inexus 371.9 457.2 543.7 545.5 474.
Slide 33: CIF Group Assets Under Management
Challenger Infrastructure Fund Reporting Pack CIF Group Assets Under Management %Mvt. Half year ended 31 Dec 2008– A$ millions 31 Dec 2008 30 Jun 2008 31 Dec 2007 30 Jun 2007 31 Dec 2006 30 Jun 2006 31 Dec 2005 31 Dec 2007 LBC Opening Value 352.6 363.8 323.7 – – – – Acquisitions/(Disposals) – – 18.1
Slide 34: CIF Fund Distributions
Challenger Infrastructure Fund Reporting Pack CIF Fund Distributions Half year ended A$ millions 31 Dec 2008 30 Jun 2008 31 Dec 2007 30 Jun 2007 31 Dec 2006 30 Jun 2006 31 Dec 20051 Investment Income – Inexus 11.4 26.3 27.1 13.8 33.8 – 9.3 – LBC Terminals – 12.0 16.2 – – – – – Southern Water 33.3 23
Slide 35: CIF Fund Distribution Free Cashflow – December 2008
Challenger Infrastructure Fund Reporting Pack CIF Fund Distribution Free Cashflow – Half year ended 31 December 2008 CIF AUD Proportionate share Southern CIF Free Cash Flow to Distribution waterfall - December 2008 Cents per security LBC Inexus Water Fund Total 0.60 0.54 0.18 EBITDA 11.0 8.2 38.8 (0
Slide 36: CIF Proportionate EBITDA from Continuing Operations
Challenger Infrastructure Fund Reporting Pack CIF Proportionate EBITDA from Continuing Operations CIF Proportionate EBITDA Half year ended A$ millions 31 Dec 2008 30 Jun 2008 31 Dec 2007 Asset EBITDA (CIF Share) – LBC 37.4 31.8 29.7 – Inexus 21.4 20.5 20.7 – Southern Water1 126.1 115.5 51.8 – Arqiva
Slide 37: LBC Key Financial Metrics
Challenger Infrastructure Fund Reporting Pack LBC Key Financial Metrics1 Performance metrics Half year ended e millions 31 Dec 2008 30 Jun 2008 31 Dec 2007 30 Jun 20072 Revenue 86.1 74.6 72.0 11.5 EBITDA 30.9 29.8 27.6 3.7 Underlying EBITDA 35.3 29.8 27.6 3.7 Underlying EBITDA Margin (%) 41% 40% 38%
Slide 38: LBC Distribution Waterfall
1,200,000 90% 1,200,000 80% Capacity (cubic metres) 80% Capacity (cubic metres) 1,000,000 70% 1,000,000 70% Utilisation (%) Utilisation (%) 60% 800,000 800,000 60% 50% 50% 600,000 600,000 40% Challenger Infrastructure Fund Reporting Pack 40% 400,000 400,000 30% 30% 20% 20% 200,000 200,000 10% LBC Di
Slide 39: LBC Debt and Investment Balance
Challenger Infrastructure Fund Reporting Pack LBC Debt and Investment Balance Debt Capital Half year ended e millions 31 Dec 2008 30 Jun 2008 31 Dec 2007 30 June 2007 Senior debt – USD Denominated ($USDm) 387.6 387.6 363.2 352.0 – EUR Denominated (am) 67.2 67.2 70.0 65.0 Senior debt (em)1 345.7 313.
Slide 40: LBC Enterprise Value
Challenger Infrastructure Fund Reporting Pack LBC Debt and Investment Balance LBC Enterprise Value Half year ended e million 31 Dec 2008 30 Jun 2008 31 Dec 2007 30 Jun 2007 Equity Valuation (100%) Opening Value 324.4 330.0 309.0 – Acquisitions/(Disposals) 1 – – 15.4 309.0 Asset revaluation (84.1) (5
Slide 41: Inexus Key Financial Metrics
Chart 10 LBC Operating Cashflow 45 40 35 Challenger Infrastructure Fund Reporting Pack Euro (millions) 30 Inexus2520 Key Financial Metrics1 15 Performance 10 metrics Half year ended 5 £ millions 31 Dec 2008 30 Jun 2008 31 Dec 2007 30 Jun 2007 31 Dec 2006 30 Jun 2006 31 Dec 20052 0 Revenue 31 Dec 200
Slide 42: Inexus Distribution Waterfall
Challenger Infrastructure Fund Reporting Pack Inexus Distribution Waterfall1 Distribution Waterfall Half year ended £ millions 31 Dec 2008 30 Jun 2008 31 Dec 2007 Revenue 24.6 23.6 19.9 Underlying EBITDA 2 14.5 13.3 11.1 Other 3 0.1 (1.5) 1.7 Operating Cashflow 14.5 11.7 12.8 Net interest and fees (
Slide 43: Inexus Connections
Challenger Infrastructure Fund Reporting Pack Inexus Connections Half year ended 31 Dec 2008 30 Jun 2008 31 Dec 2007 30 Jun 2007 31 Dec 2006 30 Jun 2006 31 Dec 2005 Sales Gas 19,568 27,065 33,813 35,682 41,596 34,854 32,181 Electricity 14,221 12,245 12,132 11,563 17,078 10,537 4,828 Water 11,085 6,9
Slide 44: Inexus Debt and Investment Balances
Challenger Infrastructure Fund Reporting Pack Inexus Debt and Investment Balances Debt Capital Half year ended £ millions 31 Dec 2008 30 Jun 2008 31 Dec 2007 30 Jun 2007 31 Dec 2006 30 Jun 2006 31 Dec 2005 Senior debt 385.3 354.2 331.8 301.8 277.8 272.8 268.8 Junior debt 35.0 35.0 35.0 35.0 35.0 35.
Slide 45: Southern Water Key Financial Metrics
Challenger Infrastructure Fund Reporting Pack Southern Water Key Financial Metrics Performance metrics Half year ended £ millions 31 Dec 2008 30 Jun 2008 31 Dec 20071 Revenue 335.0 318.4 130.0 EBITDA 248.0 231.7 89.7 EBITDA Margin (%) 74% 73% 69% Distributions paid to CIF 13.8 9.6 – % Revenue regula
Slide 46: Southern Water Debt and Investment Balances
Challenger Infrastructure Fund Reporting Pack Southern Water Debt and Investment Balances Debt Capital Half year ended £ millions 31 Dec 2008 30 Jun 2008 31 Dec 2007 Senior debt 3,152.9 3,099.3 3,035.0 Junior debt 238.2 234.2 226.0 Other debt – – – Total debt 3,391.2 3,333.5 3,261.0 Total facilities
Slide 47: CIF Capital Management – Proportionate Net Debt
Challenger Infrastructure Fund Reporting Pack CIF Capital Management Proportionate Net Debt $Mvt. %Mvt. Half year ended 31 Dec 2008– 31 Dec 2008– A$ millions 31 Dec 2008 30 Jun 2008 31 Dec 2007 30 Jun 2007 30 Jun 2008 30 Jun 2008 LBC 561.6 404.2 376.9 345.4 157.4 39.0% Inexus 686.3 640.1 658.6 635.8
Slide 48: CIF Capital Management – Debt Capital (continued)
Challenger Infrastructure Fund Reporting Pack CIF Capital Management Debt Capital (continued) Debt as at 30 June 2008 Ownership (%) Gross Debt Cash1 Net Debt1,2 Proportional Proportional A$ millions Gross Debt Net Debt LBC 66.2% 667.6 (57.1) 610.5 442.0 404.2 Inexus 80.4% 807.2 (10.8) 796.4 648.8 64
Slide 49: CIF Capital Management – Maturity Profile
Challenger Infrastructure Fund Reporting Pack CIF Capital Management Maturity Profile Maturity profile – gross debt 31 December 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 Total Local currency millions and beyond LBC (am) – 5.2 12.7 – – 400.7 34.4 453.0 Inexus (£m) – – 420.3 – – – –
Slide 50: CIF Capital Management – Interest Rate Hedging Profile
Challenger Infrastructure Fund Reporting Pack CIF Capital ManagementCIF Capital Management CIF Capital Management CIF Capital Management CIF Interest Capital Rate Management Hedging Profile Interest Interest Rate Hedging ProfileRate Hedging Profile Interest Rate Hedging Profile Interest Rate Hedging
Slide 51: Consolidated Profit & Loss
Challenger Infrastructure Fund Reporting Pack Consolidated Profit & Loss1 Statutory – Management Presentation Half year ended A$ millions 31 Dec 2008 30 Jun 2008 31 Dec 2007 30 Jun 2007 31 Dec 2006 30 Jun 2006 31 Dec 20052 Income Investment income3 38.2 27.7 23.9 11.7 15.9 10.2 14.6 Transportation r
Slide 52: Performance metrics
Challenger Infrastructure Fund Reporting Pack Performance metrics Half year ended 31 Dec 2008 30 Jun 2008 31 Dec 2007 30 Jun 2007 31 Dec 2006 30 Jun 2006 31 Dec 2005 EBITDA margin (%) 53% 59% 49% 39% 78% 65% 72% Distributions Paid ($m) 42.0 68.0 50.3 48.9 34.7 19.6 14.5 Distributions per security (c
Slide 53: Statutory Consolidated Profit & Loss – December 2008
Challenger Infrastructure Fund Reporting Pack Statutory Consolidated Profit & Loss – Half year ended 31 December 2008 Statutory – Management presentation segmented by assets Southern Fund & A$ millions Inexus LBC Water Other Consolidation Income Investment income1 – – 38.2 – 38.2 Transportation reve
Slide 54: Statutory Consolidated Profit & Loss – June 2008
Challenger Infrastructure Fund Reporting Pack Statutory Consolidated Profit & Loss – Half year ended 30 June 2008 Statutory – Management presentation segmented by assets Southern Fund & A$ millions Inexus LBC Water Other Consolidation Income Investment income1 – – 21.0 6.7 27.7 Transportation revenu
Slide 55: Statutory Consolidated Profit & Loss – December 2007
Challenger Infrastructure Fund Reporting Pack Statutory Consolidated Profit & Loss – Half year ended 31 December 2007 Statutory – Management presentation segmented by assets Southern Fund & A$ millions Inexus LBC Water Other Consolidation Income Investment income1 – – 4.8 19.1 23.9 Transportation re
Slide 56: CIF Group Statutory Consolidated Balance Sheet
Challenger Infrastructure Fund Reporting Pack CIF Group Statutory Consolidated Balance Sheet1 Half year ended A$ millions 31 Dec 2008 30 Jun 2008 31 Dec 2007 30 Jun 2007 31 Dec 2006 30 Jun 2006 31 Dec 2005 Assets Cash and cash equivalents 198.2 236.4 91.5 127.4 171.5 36.6 66.8 Trade and other receiv
Slide 57: Consolidated Balance Sheet as at December 2008
Challenger Infrastructure Fund Reporting Pack CIF Group Statutory Consolidated Balance Sheet as at 31 December 20081 Segmented by asset Southern Fund & A$ millions Inexus LBC Water Other Consolidation Assets Cash and cash equivalents 12.6 54.8 – 130.8 198.2 Trade and other receivables 23.7 89.1 – 10
Slide 58: Consolidated Balance Sheet as at June 2008
Challenger Infrastructure Fund Reporting Pack CIF Group Statutory Consolidated Balance Sheet as at 30 June 20081 Segmented by asset Southern Fund & A$ millions Inexus LBC Water Other Consolidation Assets Cash & cash equivalents 10.8 57.1 – 168.5 236.4 Trade & other receivables 24.5 60.2 – 280.4 365.
Slide 59: Consolidated Balance Sheet as at December 2007
Challenger Infrastructure Fund Reporting Pack CIF Group Statutory Consolidated Balance Sheet as at 31 December 20071 Segmented by asset Southern Fund & A$ millions Inexus LBC Water Other Consolidation Assets Cash & cash equivalents 12.1 66.0 – 13.5 91.5 Trade & other receivables 25.8 62.7 – 23.8 112
Slide 60: Consolidated Cashflow Statement
Challenger Infrastructure Fund Reporting Pack Consolidated Cashflow Statement Statutory – Management Presentation CIF Group Cashflow Half year ended A$ million 31 Dec 2008 30 Jun 2008 31 Dec 2007 30 Jun 2007 31 Dec 2006 30 Jun 2006 31 Dec 2005 Cashflows from operating activities Receipts from custom
Slide 61: Consolidated Cashflow Statement (continued)
Challenger Infrastructure Fund Reporting Pack Consolidated Cashflow Statement Statutory – Management Presentation (continued) Half year ended A$ millions 31 Dec 2008 30 Jun 2008 31 Dec 2007 30 Jun 2007 31 Dec 2006 30 Jun 2006 31 Dec 2005 CIF Cashflow Information Net profit/(loss) after income tax ex
Slide 62: Consolidated Cashflow Statement – December 2008
Challenger Infrastructure Fund Reporting Pack Consolidated Cashflow Statement – Half year ended 31 December 2008 Segmented by asset1 Fund & A$ millions Inexus LBC Other Consolidation Cashflows from operating activities Receipts from customers 49.7 168.1 5.8 223.5 Payments to suppliers (25.0) (83.2)
Slide 63: Consolidated Cashflow Statement – June 2008
Challenger Infrastructure Fund Reporting Pack Consolidated Cashflow Statement – Half year ended 30 June 2008 Segmented by asset1 Fund & A$ millions Inexus LBC Other Consolidation Cashflows from operating activities Receipts from customers 61.1 128.5 – 189.6 Payments to suppliers (30.4) (93.4) 0.4 (1
Slide 64: Consolidated Cashflow Statement – December 2007
Challenger Infrastructure Fund Reporting Pack Consolidated Cashflow Statement – Half year ended 31 December 2007 Segmented by asset1 Fund & A$ millions Inexus LBC Other Consolidation Cashflows from operating activities Receipts from customers 37.9 124.6 – 162.5 Payments to suppliers (14.7) (73.3) (1
Slide 65: Securities on Issue
Challenger Infrastructure Fund Reporting Pack Securities on Issue Half year ended Number of securities (millions) 31 Dec 2008 30 Jun 2008 31 Dec 2007 30 Jun 2007 31 Dec 2006 30 Jun 2006 31 Dec 2005 Total Ordinary Securities: Quoted (CIF) Opening 348.5 346.7 276.3 240.8 240.0 240.0 – Additions (+) i)
Slide 66: 8365/0209
8365/0209
Challenger Infrastructure Fund — H1 2009 Earnings Presentation on 6ix