Australian Foundation Investment Co. Ltd. · ASX:AFI
Australian Foundation Investment — Investor Presentation (March 2012)
32 slides from Australian Foundation Investment's investor presentation, Mar 19, 2012
Slide 1: Shareholder Information Meetings cover letter to ASX
For personal use only 19 March 2012 The Manager ASX Market Announcements Australian Securities Exchange Exchange Centre Level 4 20 Bridge Street Sydney NSW 2000 Electronic Lodgement Australian Foundation Investment Company Limited Shareholder Information Meetings Dear Sir / Madam Please find attache
Slide 2: Shareholder Meetings March 2012
For personal use only Shareholder Meetings March 2012
Slide 3: Disclaimer
DISCLAIMER For personal use only Australian Foundation Investment Company Limited and its subsidiary AICS (AFSL 303209), their related entities and each of their respective directors, officers and agents (together the Disclosers) have prepared the information contained in these materials in good fai
Slide 4: Profit for the half year was down 7.0%
Profit for the half year was down 7.0% For personal use only HY11 HY10 Key factors: $m $m • Dividends and distributions up Income 113.8 128.6 marginally Admin. Expenses (6.5) (6.0) • Trading Portfolio negative Finance Costs (4.2) (2.0) contribution as market Income Tax 2.3 (5.1) declined Net Operati
Slide 5: Earnings Per Share and Dividends Per Share
Earnings Per Share and Dividends Per Share For personal use only Note: Earnings per share is based on net operating profit per share
Slide 6: Share price remained at a discount over the year
Share price remained at a discount over the year, long term performance in line with the portfolio For personal use only Annualised Returns to 29 February 2012 * After tax and expenses. Ignores benefits of franking and LIC tax credits
Slide 7: Franking credits are an important part of AFIC's investment approach
Franking credits are an important part of AFIC’s investment approach and make a significant For personal use only difference to returns* Annualised Returns to 29 February 2012 * After tax and expenses. Assumes a shareholder can take full advantage of the franking credits. Ignores benefits of LIC tax
Slide 8: AFIC Share Price Relative to Net Asset Backing
AFIC Share Price Relative to Net Asset Backing* - perhaps reflective of the current For personal use only interest in cash/fixed return products Premium/Discount * Before provision for capital gains tax
Slide 9: Funds industry net flow of funds
Funds industry net flow of funds For personal use only $billion Source: Plan for Life September 2011
Slide 10: Investors have moved into cash
Investors have moved into cash For personal use only
Slide 11: The market has struggled to make headway this financial year
The market has struggled to make headway this financial year – percent change since 1 July For personal use only 2011 All Ordinaries Price Index
Slide 12: Recent falls in the market provided opportunities for a long term investor
Recent falls in the market provided For personal use only opportunities for a long term investor
Slide 13: AFIC Convertible Note Issue of $222.7 million
AFIC Convertible Note Issue of $222.7 million For personal use only Fixed interest of 6.25%, conversion price of $5.0864 and maturity date of 28 February 2017 Value on offer for a long term investors so wanted to raise funds without placing further pressure on the share price Effectively tappe
Slide 14: Key Investment Activities
Key Investment Activities For personal use only Made use of funds to build long term holdings at attractive valuations - $100 million of notes money invested Focus on quality companies with good dividend yield even in the face of an uncertain environment Exited some securities where long term
Slide 15: Holdings purchased with funds from the Convertible Note Issue
Holdings purchased with funds from the For personal use only Convertible Note Issue: AMP Engenco Rio Tinto Ansell Hastings Diversified Santos Utilities Fund ANZ Incitec Pivot Sydney Airports ARB Corporation Invocare Telstra ASX IRESS Market Tox Free Solutions Technology Australian Origin Energy Wesf
Slide 16: Positive about diversified resources
We remain positive about diversified resources, although dividend returns should For personal use only be higher In the top 25 at 29 February 2012 Rank Company $ million % of portfolio 1 *BHP Billiton 518.2 11.0 4 *Rio Tinto 242.5 5.2 Total 760.7 16.2 * Indicates that options were outstanding agains
Slide 17: Exposure to companies servicing resources and agriculture sectors
Selected exposure to companies servicing the resources and agriculture sectors For personal use only In the top 25 at 29 February 2012 Rank Company $ million % of portfolio 17 *Orica 79.4 1.7 21 Incitec Pivot 66.2 1.4 24 Bradken 59.6 1.3 Total 205.2 4.4 * Indicates that options were outstanding agai
Slide 18: Major banks are important part of the portfolio
Major banks are important part of the portfolio as they are for many Australians, including For personal use only their superannuation funds In the top 25 at 29 February 2012 Rank Company $ million % of portfolio 2 *Commonwealth Bank 423.2 9.0 3 *Westpac 386.1 8.2 5 *National Australia Bank 238.6 5.
Slide 19: Good exposure to the energy sector
We have good exposure to the energy sector For personal use only In the top 25 at 29 February 2012 Rank Company $ million % of portfolio 10 Woodside Petroleum 112.7 2.4 11 *Santos 112.2 2.4 12 *Oil Search 99.7 2.1 13 *Origin Energy 93.8 2.0 23 AGL Energy 60.8 1.3 Total 479.2 10.2 * Indicates that op
Slide 20: Retail exposure is primarily to the largest companies
Retail exposure is primarily to the largest and more diversified companies For personal use only In the top 25 at 29 February 2012 Rank Company $ million % of portfolio 6 Wesfarmers(a) 223.6 4.8 9 *Woolworths 158.2 3.4 Total 381.8 8.2 (a) Includes $41.8 million of WESN partially protected securities
Slide 21: Financials/insurance representation
Financials/insurance representation – participated in the recent QBE share issue For personal use only In the top 25 at 29 February 2012 Rank Company $ million % of portfolio 16 *AMP 79.7 1.7 19 QBE Insurance 71.8 1.5 22 Computershare 63.1 1.3 Total 214.6 4.5 * Indicates that options were outstandin
Slide 22: Telstra and industrial company exposure
Telstra and industrial company exposure For personal use only In the top 25 at 29 February 2012 Rank Company $ million % of portfolio 8 Telstra 174.1 3.7 14 Amcor 89.6 1.9 20 *Brambles 68.0 1.4 Total 331.7 7.0 * Indicates that options were outstanding against part or all of the holding in the Tradin
Slide 23: Infrastructure exposure
Infrastructure exposure – Hastings has moved into the top 25 For personal use only In the top 25 at 29 February 2012 Rank Company $ million % of portfolio 15 Transurban 86.2 1.8 18 Australian Infrastructure Fund 72.9 1.6 25 Hastings Diversified Utilities Fund 57.4 1.2 Total 216.5 4.6 * Indicates tha
Slide 24: The top holdings represent 82% of the total portfolio
The top 25 holdings represent 82%of the total portfolio For personal use only Relative Sector Exposure at 29 February (excludes cash)
Slide 25: The reporting season reflected recent trends
The reporting season reflected recent trends For personal use only Balance sheets remain strong Dividends a little below expectations Margins remain low Continuing strong demand for resources Many other sectors adjusting to slow growth and high $A Consumers are still cautious
Slide 26: Current issues facing the corporate sector
Current issues facing the corporate sector For personal use only Impact of resources boom and high Australian dollar Revenue growth expected to be low Cost reduction a key focus Concern about access to funds
Slide 27: Current issues facing the corporate sector (continued)
Current issues facing the corporate sector – con’t. For personal use only Cost inflation in capital projects Industrial relations a constant challenge Continued uncertainty about government policies Foreign equity investors cautious about Australia
Slide 28: The medium term outlook
The medium term outlook For personal use only High sovereign debt levels weighing on many developed economies – although the US economy showing some improvement Many companies in Australia are facing subdued earnings expectations Heightened global tensions Demand for resources/energy from As
Slide 29: Strong terms of trade masking a decline in productivity
The strong Australian terms of trade is masking a serious decline in productivity levels – For personal use only contribution to Gross National Income
Slide 30: Forward dividend estimates suggest modest increases for industrials
Forward dividend estimates suggests modest increases for industrial companies For personal use only Source: IRESS, Goldman Sachs Research estimates.
Slide 31: Recent market difficulties have not changed our investment approach
Recent market difficulties have not changed our investment approach For personal use only AFIC remains focused on companies with: strong recurring cash flows a discipline on returns on invested capital good balance sheets We believe the portfolio is well positioned
Slide 32: Australian Foundation Investment Company
AUSTRALIAN FOUNDATION INVESTMENT COMPANY
Australian Foundation Investment Company — Investor Presentation (March 2012) on 6ix