Challenger Limited · ASX:CGF
Challenger — Challenger Infrastructure Fund — FY2009 Earnings Presentation
68 slides from Challenger's earnings presentation, Aug 20, 2009
Slide 1: Challenger Infrastructure Fund Full Year Results Presentation – August 2009
Challenger Infrastructure Fund Full Year Results Presentation – August 2009 Chief Executive - Steve Bickerton Chief Financial Officer - Lucas Barry 20 A Augustt 2009
Slide 2: Important Notice
Important Notice Information contained in this publication is current as at 20 August 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 Inves
Slide 3: Agenda
Agenda 1 2009 F 1. Fullll Y Year R Results lt 2. Financial Performance 3. Asset Performance 4. Capital Management 5. Summary and Outlook 3
Slide 4: 1. 2009 Full Year Results
1. 2009 Full Year Results
Slide 5: 2009 Highlights
2009 Highlights Resilient - Strong financial result with double digit EBITDA growth across all assets - High percentage of contracted revenues delivering resilient financial asset performance performance - Improved operational efficiencies - Compliant with all financial covenants Capital - Sale of 1
Slide 6: 2. Financial Performance
2. Financial Performance
Slide 7: Solid Financial Performance
Solid Financial Performance Double digit EBITDA growth across all assets CIF - Revenue growth 20% pcp - Underlying Proportionate EBITDA growth 25% pcp1 - Underlying Proportionate EBITDA margin growth 22% pcp1 - $107 million cash on balance sheet Inexus - Revenue growth of 11% pcp, reflecting build o
Slide 8: CIF Financial Performance
CIF Financial Performance Underlying Proportionate EBITDA grew by 25% pcp FY09 FY08 % Mvt Trend Underlying Proportionate EBITDA1 $329.6m $263.3m 25% K Underlying Proportionate EBITDA Margin 55% 45% 22% K Proportionate EBITDA2 $367.3m $314.8m 17% K Distribution Per Unit 20cpu 34cpu (41%) L 1 Underlyi
Slide 9: CIF Financial Performance – Statutory Consolidated
CIF Financial Performance – Statutory Consolidated FY09 FY08 % Mvt Trend Revenue $481.6m $400.2m 20% K Expenses ($250.0m) ($216.8m) (15%) K Realised gains $31.7m $33.9m (7%) L Depreciation ($68.3m) ($58.8m) (16%) K EBIT before specific items $194.9m $158.5m 23% K Net financing costs ($133.4m) ($124.
Slide 10: Net Asset Value of $2.89 per Security
Net Asset Value of $2 $2.89 89 per Security CIF NAV Major assumption changes in 3.50 0.18 30 June 2009 NAV: 3.30 0.09 0.02 0.14 • NAV updated to include 3.10 impact of current economic NAV ($AUD) 0.09 0.03 2.90 3.35 conditions 2.70 2.89 • Southern Water valuation 2.50 updated to include draft 31 Dec
Slide 11: 3. Asset Performance
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Slide 12: Inexus – Financial Performance
Inexus – Financial Performance St Strong revenue and d EBITDA growth th FY09 FY08 % Mvt Trend Revenue £48.5m £43.5m 11% K EBITDA £25.6m £23.1m 11% K Underlying EBITDA1 £30.5m £24.4m 25% K Underlying y g EBITDA Margin g 63% 56% 13% K Sales 72,064 99,197 (27%) L Connections2 47,500 82,584 (43%) L 1 Un
Slide 13: Inexus – Operating Performance
Inexus – Operating Performance Underlying EBITDA Highlights 35 70% - Revenue growth of 11% from highly 30 60% predictable regulated asset base 25 50% - Underlying U d l i EBITDA growth th off 25% from f (£m) 20 40% 15 30% build out of order book and opex 10 20% management 5 10% 0 0% - Delivery D li
Slide 14: LBC – Financial Performance
LBC – Financial Performance Successful investment strategy delivering EBITDA growth ($US) FY09 FY08 % Mvt Trend Revenue $244.1m $215.8m 13% K EBITDA $101.2m $84.5m 20% K Underlying EBITDA1 $96.4m $84.5m 14% K Underlying EBITDA Margin 40% 39% 3% K Utilisation 94% 94% - Q Growth Capex $56.1m $103.6m (
Slide 15: LBC – Operating Performance
LBC – Operating Performance U d l i Underlying EBITDA and d margin i Highlights 100 40% - Revenue growth of 13% delivering 14% 90 80 35% growth in underlying EBITDA 30% 70 25% - Growth G capex investment delivering 10% % ($USDm) 60 (%) 50 40 20% capacity growth 15% 30 20 10% - 94% utilisation rate m
Slide 16: Southern Water – Financial Performance
Southern Water – Financial Performance St Strong revenue and d EBITDA growth th FY09 FY081 % Mvt Trend Revenue £685.8m £448.4m n/a n/a EBITDA £497.3m £321.4m n/a n/a EBITDA Margin 72% 72% 1% K Nominal Closing RCV2 £3,415m £3,247m 5% K 1 FY08 refers to period of ownership (15 October 2007 to 30 June
Slide 17: Southern Water – Operating Performance
Southern Water – Operating Performance R Regulated l t d Revenue R Highlights: - Revenue growth of 8%1 100% 80% growth of 11%1 driven byy capital - EBITDA g p 60% program and opex management 40% - Over 99% of EBITDA is generated by 20% g regulated business 0% 31 March 2008 31 March 2009 - RCV growth
Slide 18: 4. Capital Management
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Slide 19: Capital Management Initiatives
Capital Management Initiatives • Sale of 1/3 Southern Water in December 2008 for £100m • Proceeds used for: - Repayment of £50.7 million of RPS, A$118.5 million remaining - Reduction of CIF’s CIF s proportional net debt by A$560 million - $20.9 million used on on-market buyback of 14.3 million secur
Slide 20: Strong Operating Cash flow Generation
Strong Operating Cash flow Generation • Cash flow1 of 49 cents p per stapled p security y ((before g growth capex, p debt repayment and distributions) • 2009 distribution of 20 cents per stapled security 120 100 38 100 80 Centts per unit 8 60 54 5 49 40 20 0 Cash EBITDA Net Interest and Maintenance
Slide 21: Proportionate Debt Maturity Profile
Proportionate Debt Maturity Profile1 • Next major refinance point – August 2010 Inexus refinance AUD $ million A 21
Slide 22: 5. Summary and Outlook
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Slide 23: 2009 Summary
2009 Summary Resilient - Strong financial result with double digit EBITDA growth across all assets - High percentage of contracted revenues delivering resilient financial asset performance performance - Improved operational efficiencies - Compliant with all financial covenants Capital - Sale of 1/3
Slide 24: Outlook – Resilient Assets; Continued Focus on Operational Performance
Outlook – Resilient Assets; Continued F Focus on Operational O ti lP Performance f LBC - Maximise M i i operational ti l performance f off strategically t t i ll llocated t dE European tterminal i l assets - Investment of LBC cash flow in highly accretive growth capex to deliver ongoing revenue and
Slide 25: Questions
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Slide 26: Contacts
Contacts Steve Bickerton Chief Executive Tel: 61 2 9994 7327 Email: sbickerton@challenger.com.au L Lucas B Barry Chief Financial Officer Tel: 61 2 9994 7022 Email: lbarry@challenger lbarry@challenger.com.au com au Jenny Warat Investor Relations Manager Tel: 61 2 9994 7663 Email: jjwarat@challenger.c
Slide 27: Challenger Infrastructure Fund Reporting Pack – Year Ended June 2009
Challenger Infrastructure Fund Challenger Infrastructure Fund Reporting Pack – Year Ended 30 June 2009 Challenger Infrastructure Fund Comprising: CIF Investment Trust 1 ARSN 114 139 703 CIF Investment Trust 2 ARSN 114 139 632 Responsible Entity Challenger Listed Investments Limited ABN 94 055 293 64
Slide 28: 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 29: 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 understanding the investments and structure of CIF. The Reporting Pack does CIF Group Assets Under Management Page 2 not purport to forecast the asset valu
Slide 30: CIF Group Assets Under Management
Challenger Infrastructure Fund Reporting Pack CIF Group Assets Under Management %Mvt. Half year ended 30 Jun 2009- A$ millions 30 Jun 2009 31 Dec 2008 30 Jun 2008 31 Dec 2007 30 Jun 2007 31 Dec 2006 30 Jun 2006 31 Dec 2005 30 Jun 2008 LBC 282.3 317.2 352.6 363.8 323.7 – – – (20%) Inexus 334.6 371.9
Slide 31: CIF Group Assets Under Management (movements)
Challenger Infrastructure Fund Reporting Pack CIF Group Assets Under Management %Mvt. Half year ended 30 Jun 2009– A$ millions 30 Jun 2009 31 Dec 2008 30 Jun 2008 31 Dec 2007 30 Jun 2007 31 Dec 2006 30 Jun 2006 31 Dec 2005 30 Jun 2008 LBC Opening Value 317.2 352.6 363.8 323.7 – – – – Acquisitions/(D
Slide 32: CIF Fund Distributions
Challenger Infrastructure Fund Reporting Pack CIF Fund Distributions Year ended A$ millions 30 Jun 2009 30 Jun 2008 30 Jun 2007 30 Jun 20061 Asset Distributions – Inexus 11.4 53.4 47.6 9.3 – LBC Terminals – 28.2 – – – Southern Water 33.3 23.2 – – – Arqiva – 23.0 12.4 18.4 – Wales & West – 8.3 7.1 6.
Slide 33: CIF Fund Distribution Free Cashflow
Challenger Infrastructure Fund Reporting Pack CIF Fund Distribution Free Cashflow – Year ended 30 June 2009 CIF AUD Proportionate share Southern Cents per security LBC Inexus Water Fund Total EBITDA 27.1 14.9 66.8 (1.5) 107.4 Other (2.3) 1.2 (7.8) – (9.0) Cash EBITDA 24.8 16.1 59.0 (1.5) 98.4 Net in
Slide 34: CIF Proportionate EBITDA from Continuing Operations
Challenger Infrastructure Fund Reporting Pack CIF Proportionate EBITDA from Continuing Operations Year ended A$ millions 30 Jun 2009 30 Jun 2008 30 Jun 2007 Asset EBITDA (CIF Share) – LBC 92.6 61.6 3.9 – Inexus 44.6 41.2 37.4 – Southern Water 207.9 167.31 – – Arqiva – 16.52 19.7 – North DN – 12.63 1
Slide 35: LBC Key Financial Metrics
Challenger Infrastructure Fund Reporting Pack LBC Key Financial Metrics1 LBC EBITDA Region – June 2009 Performance metrics Year ended $USD millions 30 June 2009 30 Jun 2008 Revenue 244.1 215.8 EBITDA 101.2 84.5 EBITDA Margin (%) 41% 39% Underlying EBITDA 96.4 84.5 Underlying EBITDA Margin (%) 40% 39
Slide 36: Footnotes
Challenger Infrastructure Fund Reporting Pack Footnotes 1 All metrics are shown for 100% of LBC unless otherwise stated. 2 Capacity for year ended 30 June 2008 has been restated to exclude capacity under construction. 3 EUR/USD conversion are at the following rates 30 June 2009 30 Jun 2008 EUR/USD A
Slide 37: LBC Debt Balances
Challenger Infrastructure Fund Reporting Pack LBC Debt Balances1 Debt Capital Year ended $USD millions 30 Jun 2009 30 Jun 2008 Senior debt – USD Denominated 387.6 387.6 – EUR Denominated2 95.0 105.9 Senior debt 482.6 493.6 Junior debt – USD Denominated 18.3 11.8 – EUR Denominated3 64.3 65.7 Junior d
Slide 38: Footnotes
Challenger Infrastructure Fund Reporting Pack Footnotes 1 All metrics are shown for 100% of LBC unless otherwise stated. Year ended 30 Jun 2009 30 Jun 2008 2 Senior debt EUR Denominated (bm) 67.2 67.2 EUR/USD Closing Rate 1.4134 1.5764 EUR Denominated ($USDm) 95.0 105.9 3 Junior debt EUR Denominated
Slide 39: LBC Investment Balances
Challenger Infrastructure Fund Reporting Pack LBC Investment Balances LBC Enterprise Value Year ended e millions 30 Jun 2009 30 Jun 2008 LBC Equity Valuation (100%) Opening Value 324.4 308.1 Acquisitions/(Disposals)1 – 16.3 Asset revaluation (78.6) 0.1 Closing equity value 245.8 324.4 Enterprise Val
Slide 40: LBC Cash flow and capital management
Challenger Infrastructure Fund Reporting Pack LBC Cash flow and capital management Cash flow analysis Year ended LBC Operating Cashflow $USD millions 30 Jun 2009 30 Jun 2008 EBITDA 101.2 84.5 Other1 (4.6) (11.1) Cash EBITDA 96.6 73.4 Net interest and fees (39.2) (38.6) Maintenance CAPEX (19.4) (23.0
Slide 41: Inexus Key Financial Metrics
Challenger Infrastructure Fund Reporting Pack Inexus Key Financial Metrics1 Performance metrics Year ended £millions 30 Jun 2009 30 Jun 2008 30 Jun 2007 30 Jun 20062 Revenue 48.5 43.5 32.0 23.4 EBITDA 25.6 23.1 18.9 11.8 Underlying EBITDA 30.5 24.4 18.9 11.8 EBITDA Margin (%) 53% 53% 59% 50% Underly
Slide 42: Inexus Cash flow and capital management
Challenger Infrastructure Fund Reporting Pack Inexus Cash flow and capital management Cash flow analysis Year ended £ millions 30 Jun 2009 30 Jun 2008 30 Jun 2007 EBITDA 25.6 23.1 18.9 Other 2.0 0.2 0.6 Cash EBITDA 27.6 23.3 19.5 Net interest and fees (17.1) (14.4) (11.2) Maintenance capex – – – Net
Slide 43: Inexus Connections
Challenger Infrastructure Fund Reporting Pack Inexus Connections Year ended 30 Jun 2009 30 Jun 2008 30 Jun 2007 30 Jun 2006 Inexus Connections and Order Book Sales Gas 24,522 60,878 77,278 67,035 Electricity 17,361 24,377 28,641 15,365 Water 12,573 7,883 – – Fibre 17,608 6,059 – – Total 72,064 99,19
Slide 44: Inexus Debt and Investment Balances
Challenger Infrastructure Fund Reporting Pack Inexus Debt and Investment Balances Debt Capital Year ended £millions 30 Jun 2009 30 Jun 2008 30 Jun 2007 30 Jun 2006 Senior debt 392.3 354.2 301.8 272.8 Junior debt 35.0 35.0 35.0 35.0 Total debt 427.3 389.2 336.8 307.8 Total facilities available 475.0
Slide 45: Southern Water Key Financial Metrics
Challenger Infrastructure Fund Reporting Pack Southern Water Key Financial Metrics1 Performance metrics Year ended £millions 30 Jun 2009 30 Jun 20082 Revenue 685.8 448.4 EBITDA 497.3 321.4 EBITDA Margin (%) 73% 72% Distributions paid to CIF 13.8 9.6 % Revenue regulated 99% 99% % Revenue unregulated
Slide 46: Southern Water Debt and Investment Balances
Challenger Infrastructure Fund Reporting Pack Southern Water Debt and Investment Balances Debt Capital Year ended £ millions 30 Jun 2009 30 Jun 2008 Senior debt 3,368.2 3,099.3 Junior debt 231.2 234.2 Total debt 3,599.5 3,333.5 Total facilities available 3,869.5 Undrawn Facilities 270.0 Net Debt Yea
Slide 47: CIF Capital Management – Proportionate Net Debt
Challenger Infrastructure Fund Reporting Pack CIF Capital Management Proportionate Net Debt $Mvt. %Mvt. Year ended 30 Jun 2009– 30 Jun 2009– A$ millions 30 Jun 2009 30 Jun 2008 30 Jun 2007 30 Jun 2008 30 Jun 2008 LBC 479.7 404.2 345.4 75.5 19% Inexus 694.2 640.1 635.8 54.2 9% Southern Water 1,005.6
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 30 June 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 Total Local currency millions and beyond LBC ($USDm) 16.1 9.0 9.0 9.0 575.5 6.5 14.2 639.2 Inexus (£m) – 427.3 – –
Slide 50: CIF Capital Management – Interest Rate Hedging Profile
Challenger Infrastructure Fund Reporting Pack CIF Capital ManagementCIF Capital Management CIF Capital Management CIF Capital Management CIF Interest Capital Rate Management Hedging Profile Interest Interest Rate Hedging ProfileRate Hedging Profile Interest Rate Hedging Profile Interest Rate Hedging
Slide 51: Consolidated Profit and Loss
Challenger Infrastructure Fund Reporting Pack Consolidated Profit and Loss1 Statutory – Management Presentation Year ended A$ millions 30 Jun 2009 30 Jun 2008 30 Jun 2007 30 Jun 20062 Income Investment income3 45.6 51.6 27.6 24.7 Transportation revenue 105.3 96.7 78.7 55.8 Tank storage revenue 330.7
Slide 52: Performance metrics
Challenger Infrastructure Fund Reporting Pack Performance metrics Year ended 30 Jun 2009 30 Jun 2008 30 Jun 2007 30 Jun 20062 EBITDA margin (%) 55% 54% 56% 68% Distributions Paid ($m) 68.9 118.3 83.6 34.1 Distributions per security (cents) 20.0 34.0 32.1 14.2 Assets Under Management ($m) 1,033.8 1,4
Slide 53: Statutory Consolidated Profit and Loss – Year ended June 2009
Challenger Infrastructure Fund Reporting Pack Statutory Consolidated Profit and Loss – Year ended 30 June 2009 Statutory – Management presentation segmented by assets Southern Fund and A$ millions Inexus LBC Water Other Consolidation Income Investment income1 – – 45.6 – 45.6 Transportation revenue 1
Slide 54: Statutory Consolidated Profit and Loss – Year ended June 2008
Challenger Infrastructure Fund Reporting Pack Statutory Consolidated Profit and Loss – Year ended 30 June 2008 Statutory – Management presentation segmented by assets Southern Fund and A$ millions Inexus LBC Water Other Consolidation Income Investment income1 – – 25.8 25.8 51.6 Transportation revenu
Slide 55: Statutory Consolidated Profit and Loss – Year ended June 2007
Challenger Infrastructure Fund Reporting Pack Statutory Consolidated Profit and Loss – Year ended 30 June 2007 Statutory – Management presentation segmented by assets Southern Fund and A$ millions Inexus LBC Water Other Consolidation Income Investment income1 – – – 27.6 27.6 Transportation revenue 7
Slide 56: CIF Group Statutory Consolidated Balance Sheet
Challenger Infrastructure Fund Reporting Pack CIF Group Statutory Consolidated Balance Sheet1 Year ended A$ millions 30 Jun 2009 30 Jun 2008 30 Jun 2007 30 Jun 2006 Assets Cash and cash equivalents 141.5 236.4 127.4 36.6 Trade and other receivables 102.2 365.22 65.1 438.1 Other assets 1.9 2.1 1.9 0.
Slide 57: CIF Group Statutory Consolidated Balance Sheet as at June 2009
Challenger Infrastructure Fund Reporting Pack CIF Group Statutory Consolidated Balance Sheet as at 30 June 20091 Segmented by asset Southern Fund and A$ millions Inexus LBC Water Other Consolidation Assets Cash and cash equivalents 6.6 61.2 – 73.8 141.5 Trade and other receivables 17.7 55.3 – 29.2 1
Slide 58: CIF Group Statutory 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 and A$ millions Inexus LBC Water Other Consolidation Assets Cash and cash equivalents 10.8 57.1 – 168.5 236.4 Trade and other receivables 24.5 60.2 – 280.
Slide 59: CIF Group Statutory Consolidated Balance Sheet as at June 2007
Challenger Infrastructure Fund Reporting Pack CIF Group Statutory Consolidated Balance Sheet as at 30 June 20071 Segmented Southern Fund and A$ millions Inexus LBC Water Minorities Consolidation Assets Cash and cash equivalents 5.4 76.0 – 45.9 127.4 Trade and other receivables 20.7 43.4 – 1.0 65.1 O
Slide 60: Consolidated Cashflow Statement
Challenger Infrastructure Fund Reporting Pack Consolidated Cashflow Statement Statutory – Management Presentation CIF Group Cashflow Year ended A$ million 30 Jun 2009 30 Jun 2008 30 Jun 2007 30 Jun 2006 Cashflows from operating activities Receipts from customers 406.5 352.1 94.2 58.5 Payments to sup
Slide 61: Consolidated Cashflow Statement (continued)
Challenger Infrastructure Fund Reporting Pack Consolidated Cashflow Statement Statutory – Management Presentation (continued) Year ended A$ millions 30 Jun 2009 30 Jun 2008 30 Jun 2007 30 Jun 2006 CIF Cashflow Information Net profit/(loss) after income tax expense (174.4) (86.9) 40.4 (20.7) Deprecia
Slide 62: Consolidated Operating Cashflow Statement – Year ended June 2009
Challenger Infrastructure Fund Reporting Pack Consolidated Operating Cashflow Statement – Year ended 30 June 2009 Segmented by asset1 Fund and A$ millions Inexus LBC Other Consolidation Cashflows from operating activities Receipts from customers 99.9 306.7 – 406.5 Payments to suppliers (52.6) (171.3
Slide 63: Consolidated Cashflow Statement – Year ended June 2008
Challenger Infrastructure Fund Reporting Pack Consolidated Cashflow Statement – Year ended 30 June 2008 Segmented by asset1 Fund and $A millions Inexus LBC Minorities Consolidation Cashflows from operating activities Receipts from customers 99.0 253.2 – 352.1 Payments to suppliers (45.1) (166.8) (1.
Slide 64: Consolidated Cashflow Statement – Year ended June 2007
Challenger Infrastructure Fund Reporting Pack Consolidated Cashflow Statement – Year ended 30 June 2007 Segmented by asset1 Fund and $A millions Inexus LBC Minorities Consolidation Cashflows from operating activities Receipts from customers 73.9 20.3 – 94.2 Payments to suppliers (34.7) (11.3) (0.4)
Slide 65: Securities on Issue
Challenger Infrastructure Fund Reporting Pack Securities on Issue Year ended Number of securities (millions) 30 Jun 2009 30 Jun 2008 30 Jun 2007 30 Jun 2006 Total Ordinary Securities: Quoted (CIF) Opening 348.5 276.3 240.0 – Additions (+) i) Initial Public Offering – – – 180.0 ii) Entitlement Offers
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