Challenger Limited · ASX:CGF
Challenger — Challenger Wine Trust — HY09 Earnings Presentation
30 slides from Challenger's earnings presentation, Feb 5, 2009
Slide 1: Challenger Wine Trust (ASX:CWT) Results for half-year ended 31 December 2008
Challenger Wine Trust (ASX:CWT) Results for half-year ended 31 December 2008 (HY09) Nick Gill Fund Manager 5 February 2009
Slide 2: Important notice
Important notice Information contained in this publication is current as at 5 February 2009 unless otherwise specified and is provided by Challenger Listed Investments Limited (ABN 94 055 293 644) (AFSL 236887) (“Challenger”), as Responsible Entity of the Challenger Wine Trust (“Trust”). This docume
Slide 3: Key points
Key points ¾ Operating performance remains solid – Net property income of $16.6 million – up 5.3% on pcp – Profit from operating activities after tax of $8.4 million – up 5.6% – Occupancy 98.4%; WALE 5.3 years with low level of expiries in FY09 (4.3%) & FY10 (nil) – 1st half distribution of 4.7 cpu
Slide 4: Financial results
Financial results
Slide 5: Operating profit remains solid
Operating profit remains solid ¾ Profit from operating activities after tax $8.4 million – up 5.6% on pcp – Net property income up $0.8 million (5.3%) to $16.6 million – Finance costs up $0.5 million (8%) to $6.6 million – Operating expenses down 24%; RE & Manager fees flat ¾ Half year ended 31 Dec
Slide 6: NIV at 78c
NIV at 78c ¾ Reduction in NIV mainly due to mark-to-market movement on interest rate swaps (13 cpu) ¾ Water rights are treated as intangible assets held at cost ¾ NTA excludes water rights; NAV includes water rights at cost ¾ NIV includes water rights at independent valuation – reflects real value t
Slide 7: NTA & NIV impacted by interest rate swaps mtm
NTA & NIV impacted by interest rate swaps mtm ¾ NIV at 78 cpu as at 31 December 2008 - Impacted by mark-to-market (mtm) movement on interest rate swaps 100 +4 -4 -3 90 cents per unit - 13 80 94 70 78 60 Opening NIV Gain on foreign Loss on foreign Revaluation Mark to market NIV at 31 December currenc
Slide 8: Financial position as at 31 December 2008
Financial position as at 31 December 2008 ¾ Gearing1 at 50.7%; no new borrowings in HY09 ¾ Interest rates2 effectively 100% hedged for duration of lease terms ¾ New Zealand borrowings provide natural currency hedge for NZ assets ¾ Weighted average cost of borrowings to increase to around 8.6% from M
Slide 9: Finance secured to 2011/2012
Finance secured to 2011/2012 ¾ Total facilities of $167.6 million (from 2 Australian banks) – $159.3 drawn – No facility expiries before 2011 Borrowing facility & swap maturity profile 140 120 Facilities 100 Swaps 80 $m 60 40 20 0 2009 2010 2011 2012 2013 2014+ Calendar year 9
Slide 10: Financial covenants & headroom
Financial covenants & headroom ¾ LVRs1 apply to borrowing facilities from banks ¾ All covenants complied with during HY09 CWT position Headroom on security Facility Covenant at 31 Headroom on debt value December 08 $m % $m % Debt to security value < 1 49.6% $16.9m 13.0% $9.6m 14.9% 57% Debt (includi
Slide 11: Derivative financial instruments – interest rate (IR) swaps
Derivative financial instruments – interest rate (IR) swaps ¾ IR swaps remove volatility by hedging exposure to interest rate fluctuations − At 31 Dec 08 CWT effectively 100% hedged for movements until lease expiry ¾ IR swaps are recorded on balance sheet at fair value (mark-to-market) with gains or
Slide 12: Portfolio update
Portfolio update
Slide 13: Regional map of CWT’s eastern portfolio
Regional map of CWT’s eastern portfolio SA/WA cool region: •Miamba •Summers Hill •Corryton Park •Schubert’s •Chapel Central NSW: •Bethany & Vine Vale •Hermitage Winery •Richmond Grove & Lawsons •Dalswinton & + Inglewood1 •Sirens (WA) •Sandy Hollow1 •Poole’s Rock •Cowra Murrumbidgee: •Whitton •Stephe
Slide 14: Revaluations reduce values by $5.6m
Revaluations reduce values by $5.6m ¾ 9 of 25 properties independently revalued (21% of portfolio value) ¾ Dalswinton/Inglewood and Sandy Hollow vineyards written down in line with sales prices ¾ All properties independently revalued since June 2008 (except Sirens, WA) Portfolio by region % Fair Val
Slide 15: Portfolio snapshot at 31 December 2008
Portfolio snapshot at 31 December 2008 Australia New Zealand1 Total 30 June 2008 Number of assets 21 4 25 25 Portfolio carrying value $m 223.3 74.2 297.5 298.8 Portfolio fair (market) value $m 232.5 74.2 306.7 307.2 % total portfolio value2 % 76 24 100 100 Total area ha 5,067 743 5,809 5,809 Area pl
Slide 16: Portfolio diversification
Portfolio diversification ¾ 76% of portfolio (by fair value) leased to major listed wine companies Geographic diversification (by fair value) Tenant diversification (by fair value) As at 31 December 2008 As at 31 December 2008 Australian Vintage NZ 33% 24% NSW 31% Pernod Ricard Other Pacific 10% 14%
Slide 17: Lease expiry profile and activity
Lease expiry profile and activity ¾ 98.4% portfolio occupancy at 31 Dec 08 (99% as at 7 Aug 08) ¾ WALE at 5.3 years ¾ 4.3% of portfolio by income expiring over FY09 and FY10 Property Lease Activity expiry Hermitage Part Main crushing plant untenanted Road leased Winery Weighted Maturity Profile as a
Slide 18: Australasian vineyard industry conditions
Australasian vineyard industry conditions
Slide 19: Australian grape production
Australian grape production ¾ 2007 grape harvest: 1.4 million tonnes – Impacted by frost and drought – Wine companies use inventory to meet demand ¾ 2008 grape harvest: 1.8 million tonnes ¾ 2009 grape harvest – circa 1.75 million tonnes (but grapes expected to be left on vine) 2.5 Grape harvest 2.0
Slide 20: Supply no longer increasing
Supply no longer increasing ¾ 07/08 was first year of net vine removals – mainly warm climate/white grapes ¾ Expect greater net removals in 08/09 - lack of water availability & lower profitability ¾ Supply outlook: - less production as vines get older - global consumption increasing - long lead time
Slide 21: Grape prices
Grape prices ¾ Expected lack of grapes caused higher contract grape prices in 2008 ¾ Grape prices expected to reverse in 2009 toward 2007 levels due to oversupply ¾ Caution: grape supply can be quickly impacted by weather causing supply shortfalls i.e. frost, hot temperatures 21
Slide 22: New Zealand wine market remains strong
New Zealand wine market remains strong ¾ 2008: large yields with larger than anticipated inventories of sauvignon blanc – lower Australian prices for NZ wine ¾ Demand for NZ wine globally expanding particularly sauvignon blanc ¾ Sauvignon blanc is now No.1 consumed variety in Australia ¾ CWT NZ port
Slide 23: Summary
Summary
Slide 24: Summary
Summary ¾ Operating performance remains solid – Net property income of $16.6 million – up 5.3% on pcp – Profit from operating activities after tax of $8.4 million – up 5.6% – Occupancy 98.4%; WALE 5.3 years with low level of expiries in FY09 (4.3%) & FY10 (nil) – 1st half distribution of 4.7 cpu – F
Slide 25: Questions
Questions
Slide 26: Contacts
Contacts Nick Gill Fund Manager Tel: 02 9994 7291 Email: ngill@challenger.com.au Luke Keighery Investor Relations Tel: 02 9994 7633 Email: lkeighery@challenger.com.au 26
Slide 27: Appendices
Appendices
Slide 28: Detailed income statement
Detailed income statement HY09 HY08 Variance $000 $000 $000 % Net property income 16,635 15,802 833 5.3 Other income 476 333 143 42.9 Finance costs (6,627) (6,150) (477) (7.8) Management fees (1,211) (1,217) 6 0.5 Operating expenses (606) (795) 189 23.8 Profit from operating activities 8,667 7,973 6
Slide 29: Movements in fair value and carrying value
Movements in fair value and carrying value Fair value Carrying value $000 $000 30-Jun-08 307,229 298,851 Acquisitions & upgrades 481 481 Disposals (154) (154) Revaluation changes (4,743) (4,743) Water rights (decrease in carrying value due to recognising - (816) intangible assets at cost) Depreciati
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