Australian Foundation Investment Co. Ltd. · ASX:AFI
Australian Foundation Investment — Investor Presentation (October 2009)
26 slides from Australian Foundation Investment's investor presentation, Oct 19, 2009
Slide 1: ASX cover letter for Shareholder Information Meeting
For personal use only 19 October 2009 The Manager Company Announcements Office Australian Securities Exchange Limited Exchange Centre Level 4 20 Bridge Street Sydney NSW 2000 Electronic Lodgement Australian Foundation Investment Company Limited Shareholder Information Meeting Dear Sir or Madam Pleas
Slide 2: Australian Foundation Investment Company Shareholder Meeting Sydney October 2009
For personal use only Australian Foundation Investment Company Shareholder Meeting Sydney October 2009
Slide 3: What Happened in the Market - All Ordinaries
For personal use only Value Ju n- 2500 3000 3500 4000 4500 5000 5500 6000 6500 7000 02 O ct -0 2 Fe b- 0 Ju 3 n- 03 O ct -0 3 Fe b- 0 Ju 4 n- 04 O ct -0 4 Fe b- 0 Ju 5 n- 05 O ct 19 -0 5 % Fe b- 06 pa Ju Date n- 06 O ct -0 6 Fe Price Index b- 0 Ju 7 n- 07 O ct -0 7 Fe b- 08 54 % Ju n- 08 fall O fro
Slide 4: All Ordinaries Price Index – A Long Term View
All Ordinaries Price Index – A Long Term View For personal use only
Slide 5: Key Investment Themes for AFIC Over the Year
Key Investment Themes for AFIC Over the Year For personal use only Took a cautious approach in very difficult market conditions - exited some holdings Maintained a relatively high cash balance Participated in deeply discounted placements where attractive long term value was on offer Tried to look th
Slide 6: Operating Profit Analysis – 2009 Full Year vs. 2008 Full Year
Operating Profit Analysis For personal use only – 2009 Full Year vs. 2008 Full Year Major Differences 240 Dividends and $205.1m $199.6m distributions were 200 $214.9m versus $217.4m last year 160 $ million Trading income was 120 negative $12.5m whereas last year this 80 was negative $7.6m 40 Income
Slide 7: Profit for the Year (AIFRS) Profit Analysis
Profit for the Year (AIFRS) Profit Analysis –2009 Full Year vs. 2008 Full Year For personal use only 450 $416.1m Major Items after 400 $211.0m tax 300 Unrealised impairment charge of $107.8m 250 Realised gains on sales 200 of $11.7m $ million $205.1m $199.6m 150 -$96.1m 100 $103.5m Net Operating Pro
Slide 8: AIFRS Impairment Charge
AIFRS Impairment Charge For personal use only Auditors required an impairment charge where a holding: was below its accounting cost base for a minimum of 15 months, or its market value was more than 35% below its accounting cost base These were unrealised losses This was required even if we consider
Slide 9: Accounting Result Impacted by Unrealised Losses
As a result, the Accounting Result was impacted For personal use only by these unrealised losses The unrealised impairment charge of $107.8 million helped reduce the $199.6 million Operating Profit to an accounting profit of $103.5 million It had no effect on net asset backing per share If the balan
Slide 10: Earnings Per Share and Dividends Per Share
Earnings Per Share and Dividends Per Share For personal use only 24.00 22.00 23.7 20.00 21 21 21.2 21 20.5 18.00 19.4 Cents per share 16.00 17.3 17 14.00 16 12.00 10.00 8.00 6.00 4.00 2.00 0.00 2005 2006 2007 2008 2009 Financial year Earnings per share Dividends per share Note: Earnings per share is
Slide 11: Comments on Telstra
Comments on Telstra For personal use only Telstra is entitled to get fair value for its assets Danger of coercive Government favouritism Government's action raises the question of sovereign risk for overseas investors Any agreement with the Government needs to be in the interest of shareholders
Slide 12: Comments on Telstra con’t.
Comments on Telstra con’t. For personal use only Has the strategy of separation worked anywhere else in the world? Who will have the cashflow to fund ongoing infrastructure spend Establishment of a new monopoly Shareholders should make their views known to their elected representatives
Slide 13: Major Acquisitions in the Investment Portfolio 2008/2009
Major Acquisitions in the Investment Portfolio For personal use only (above $5m) 2008/2009 $m Westpac Bank (a) 84.9 Rio Tinto New 34.8 Santos 25.6 National Australia Bank 23.2 QBE Insurance Group 17.9 Commonwealth Bank of Australia 16.7 ANZ Bank 13.7 Incitec Pivot 12.5 (a) Includes shares received a
Slide 14: Major Acquisitions in the Investment Portfolio con’t.
Major Acquisitions in the Investment Portfolio For personal use only (above $5m) 2008/2009 con’t. $m Australia Infrastructure Fund 10.7 Alumina 9.0 Nufarm 7.7 Tox Free Solutions (new to the portfolio) 7.4 Woodside Petroleum 6.9 Orica 6.3 Iluka Resources (new to the portfolio) 5.3
Slide 15: Major Sales 2008/2009 – Takeover Activity
Major Sales (above $5m) 2008/2009 For personal use only TAKEOVER ACTIVITY $m St George Bank(a) 54.4 Queensland Gas Company (b) 46.0 (a) Takeover by Westpac (b) Sold on market into takeover by BG group plc.
Slide 16: Major Sales in the Investment Portfolio con’t.
Major Sales in the Investment Portfolio (above $5m) For personal use only 2008/2009 con’t. OTHER $m Suncorp Metway 29.3 James Hardie N.V. 25.0 ConnectEast Group 21.3 PaperlinX 8.2 News Corporation Non Voting 8.1 Wesfarmers 7.2 Brickworks Preference Shares (c) 7.0 News Corporation 6.2 (c) Redeemed by
Slide 17: Major Purchases 1 July to 30 September 2009
Major Purchases in the Investment Portfolio For personal use only (above $1m) from 1 July to 30 September 2009 $m Comment Hastings Diversified Utilities 15.6 Placement/Underwriting Amcor 11.0 Placement Westpac Banking Corp 9.9 DRP National Australia Bank 6.2 DRP ANZ Banking Group 2.5 DRP QBE Insuran
Slide 18: AFIC’s Investment Structure – September 2009
AFIC’s Investment Structure – For personal use only 30 September 2009 Long Term Investment portfolio: A$4.6 billion Approximately 75 securities Focus on S&P/ASX 200 Trading portfolio: Up to 10% of total portfolio – currently A$55 million or 1.2% Short term positions Options writing strategies Fixed
Slide 19: Top Ordinary Securities – September 2009
Top 25 Ordinary Securities – 30 September 2009 For personal use only % of portfolio $million (excl. cash) * 1 BHP Billiton 537.7 11.6% 2 Westpac Banking Corporation 478.7 10.3% 3 Commonwealth Bank of Australia 438.5 9.4% 4 National Australia Bank 279.0 6.0% 5 Rio Tinto 211.7 4.6% 6 Wesfarmers (a) 20
Slide 20: Top Ordinary Securities – September 2009 con’t.
Top 25 Ordinary Securities – 30 September 2009 For personal use only con’t. % of portfolio $million (excl. cash) * 11 Santos 102.1 2.2% 12 QBE Insurance Group 97.1 2.1% 13 Computershare 91.0 2.0% 14 Amcor 83.7 1.8% 15 Origin Energy 79.2 1.7% * 16 Oil Search 76.7 1.7% 17 Toll Holdings 68.2 1.5% * 18
Slide 21: Top Ordinary Securities – September 2009 con’t.
Top 25 Ordinary Securities – 30 September 2009 For personal use only con’t. % of portfolio $million (excl. cash) 21 Orica 59.0 1.3% 22 AGL Energy 58.6 1.3% 23 Westfield Group 57.6 1.2% 24 Milton Corporation 51.2 1.1% 25 Incitec Pivot 50.8 1.1% Total 3,837.5 As % of Total Portfolio Value 82.5% (exclu
Slide 22: Annualised Portfolio Returns–Year Ended Sept. 2009
Annualised Portfolio Returns–Year Ended 30 Sept. 2009 For personal use only 12% 10.5% 10.9% 10.0% 9.7% 10% 9.2% 8.3% 8% 6% 4.0% 4% 2% 1.7% 0% 1 year return 3 year return 5 year return 10 year return Net Asset per share growth plus dividends S&P/ASX 200 Accumulation Index
Slide 23: Share Price Relative to Net Asset Backing (before tax)
Share Price Relative to Net Asset Backing (before tax) For personal use only 20% Premium 15% 10% 5% 0% -5% -10% Discount -15% NTA (before tax) for 30 September 2009 was $4.79 -20% Sep-99 Sep-01 Sep-03 Sep-05 Sep-07 Sep-09
Slide 24: Comment on Dividends
Comment on Dividends For personal use only Small part of the 2009 final dividend funded from realised capital gains We have probably seen the low point for earnings and dividends however the recovery in dividends may lag the upturn in earnings Directors are conscious franking credits and LIC gains a
Slide 25: Outlook
Outlook For personal use only Monetary and fiscal stimulus is helping the Australian economy Australia facing higher interest rates which may impact the sustainability of growth Developed economies still face major structural issues Australian companies generally well positioned but their outlook co
Slide 26: Australian Foundation Investment Company Shareholder Meetings October 2009
For personal use only Australian Foundation Investment Company Shareholder Meetings October 2009
Australian Foundation Investment Company — Investor Presentation (October 2009) on 6ix