Challenger Limited · ASX:CGF
Challenger — Challenger Wine Trust — H1 2010 Earnings Presentation
31 slides from Challenger's earnings presentation, Feb 4, 2010
Slide 1: Challenger Wine Trust (ASX:CWT) Results for half-year ended 31 December 2009
Challenger Wine Trust (ASX:CWT) Results for half-year ended 31 December 2009 (1H10) Nick Gill Fund Manager 4F February b 2010
Slide 2: Important notice
Important notice Information contained in this publication is current as at 4 February 2010 unless otherwise specified and is provided by Challenger g Listed Investments Limited ((ABN 94 055 293 644)) ((AFSL 236887)) ((“Challenger”), g ) as Responsible p Entity y of the Challenger Wine Trust (“Trust
Slide 3: Key points
Key points ¾ Operating performance remains sound – Profit from operating activities after tax $7.3 million (FY09: $8.4m) or 4.3 cpu – Occupancy 99.2%; WALE 4.6 years with no lease expiries in FY10 – 1H10 distribution of 3.25 cpu; p ; FY10 distribution guidance g of 7.001 cpu p pprovided ¾ Positioned
Slide 4: Financial results
Fi Financial i l results lt
Slide 5: Operating profit
Operating profit ¾ Profit from operating activities after tax $7.3 million or 4.3 cpu – Net property income $15.5 $15 5 million (1H09 $16 $16.66 million) – Finance costs down $0.4 million (6.7%) to $6.2 million ¾ 1H10 distribution: 3.25 cpu ¾ 1H10 Property p y revaluation decrement of $5.3 million 1
Slide 6: NIV at 61c (pro forma post DRP)
NIV at 61c (pro forma post DRP) $ illi $million CPU Feb-101 Dec-09 Jun-09 Feb-101 Dec-09 Jun-09 Net Tangible Assets (NTA) 85.0 79.5 80.1 0.45 0.47 0.47 Add: Water rights (at cost) 21.5 21.5 21.8 Net Asset Value (NAV) 106.5 101.0 101.9 0.56 0.59 0.60 Add: Water rights fair value 10.8 10.8 11.0 increm
Slide 7: NIV at 61 cents per unit (pro forma post DRP)
NIV at 61 cents per unit ( (pro fforma postt DRP) ¾NIV at 66 cpu p as at 31 December 2009, 61cpu p as at February y 2010 70 +4 -3 -3 +1 +1 -5 unit cents per u 60 66 66 61 50 NIV at 30 Operating Provision for Revaluation Unrealised Other NIV at 31 Net impact of NIV post DRP June 2009 profit for distr
Slide 8: Financial position (pro forma)
Financial position (pro forma) ¾ Gearing1 at 52.3%; ¾ New Zealand borrowings provide natural currency hedge for NZ assets (96% hedged) ¾ Weighted W i ht d average costt off borrowings b i 8 8.04% 04% att h half lf year end d 3-Feb-10 31-Dec-09 30-Jun-09 (pro forma) Total assets2 at fair value $m 267
Slide 9: Financing profile (pro forma)
Financing profile (pro forma) ¾ Total drawn liabilities of $1401 million (from 2 Australian banks) – Next facility expiries May 2011 ¾ CWT is 71% hedged against interest rate movements over the term of tenant leases ¾ $ $26 million of interest rate swaps p maturing g in June 2010 1 Post underwritten
Slide 10: Financial covenants and headroom
Financial covenants and headroom ¾ Post DRP $9.9m borrowings repaid since 30 June 2009 ¾ All banking covenants complied with during 1H10 ¾ LVR1s apply to borrowing facilities from banks CWT position Headroom on Facility Covenant security value2 post underwritten DRP 1 Debt to security value < 57% 52
Slide 11: Portfolio update
P tf li update Portfolio d t
Slide 12: CWT's portfolio
CWT’ss portfolio CWT Warm climate Cool climate Murrumbidgee: •Whitton •Stephendale •Cocoparra Cocoparra & Woods Central NSW: •Balranald •Hermitage Road Winery Hawkes Bay: •Gundagai •Poole’s Rock Winery •Crownthorpe •Cowra •Gimblett Gravels Western Australia: •Sirens South Australia: Murray: •Miamba
Slide 13: Revaluations reduce values by $5.3m
Revaluations reduce values by $5 $5.3m 3m ¾ 11 of 22 properties revalued (39% of portfolio value) ¾ All properties revalued since June 2009 Fair Value at Fair Value Climate Region 31 Dec 09 Pre-valuation Change % of Portfolio ($m) ($m) ($m) Change (%) 1 Warm Murray River 21% 55.1 55.3 (0.2) -0.3% Wa
Slide 14: Portfolio snapshot at 31 December 2009
Portfolio snapshot at 31 December 2009 New 31 Dec 2009 30 June 2009 Australia Zealand1 Total Total Number of assets 18 4 22 24 Portfolio carrying value $m 184.9 66.6 251.5 257.1 Portfolio fair (market) value2 $m 195.7 66.6 262.3 268.2 % total portfolio value3 % 75% 25% 100% 100% Total area ha 4,711
Slide 15: Portfolio diversification
Portfolio diversification ¾ 95% of portfolio leased to wine companies Climate diversification (by fair value) Tenant diversification (by fair value) as at 31 December 2009 as at 31 December 2009 Other Warburn Australia - 7% New Zealand Estate Cool Climate, 9% Australian 25% 26% Vintage 35% Delegat's
Slide 16: CWT's major tenants
CWT’ss major tenants CWT ¾ Australian Vintage g Limited (35%) ( ) ⎯ ASX listed company in wine sector ⎯ Wine brands include McGuigan, Sunnyvale, Nepenthe, M, Tempus Two and Yaldara ⎯ 2009 Winner of the International White Winemaker of the Year (London International Wine Challenge) ¾ Delegat’s Wine E
Slide 17: Selection of tenant's brands from CWT vineyards
Selection of tenant’s tenant s brands from CWT vineyards 17
Slide 18: Lease expiry profile and activity
Lease expiry profile and activity ¾ 99.2% portfolio occupancy at 31 Dec 09 ¾ WALE at 4.6 years (5.0 years at 30 Jun 09) ¾ No expiries in FY10 and 15.3% of portfolio by income expiring in FY11 Weighted Maturity Profile as at 31 December 2009 Lease expiries in FY11 27.9% 26.2% Gundagai G d i vineyard
Slide 19: Australasian vineyard industry conditions
A t l i vineyard Australasian i d iindustry d t conditions diti
Slide 20: Over supply correction
Just in: 2009 figures for % of grapes left on vine Over supply correction or dropped on ground 8 2% 8.2% Grape Crush (kt) Source ABS 1329.0 – Australian Wine and Grape Industry, 2009WFA Vintage Report, ¾ The industry is calling on 2,500 ABARE wine grape projections 6.0% 5.6% reduction of between 275
Slide 21: Impact of contract reduction
Impact of contract reduction ¾ Wine companies moving to rebalance their supply of grapes with wine sales demand ¾ Grape contracts not being renewed ¾ Circa 450,000 tonnes of Source: AWBC grape contracts will expire by June 2013. Equivalent to 37 000h 37,000ha ¾ CWT’s WALE 4.6 years – expect to see t
Slide 22: Size of operations key to survival
Size of operations key to survival ¾ Size provides economies of scale, attractive to Size of Vineyard Operations wine company tenants CWT's portfolio vs comparible South Australian regions ¾ 93.7% of total CWT 90% property portfolio are 80% There were 2,322 grape growers the greater than 50ha 70% in
Slide 23: New Zealand
New Zealand ¾ Winery intake is levelling off after the over supply in 2008. E f Enforced d yield i ld reduction d ti kkeptt 2009 low ¾ The over supply has impacted grape prices i andd pressuring i export prices into 2010 ¾ In the year ending 31 July 2009, NZ exports reached $NZ1b ¾ US consumption of
Slide 24: Summary
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Slide 25: Summary
Summary ¾ The industry has commenced transformation in reaction to oversupply – Vineyard removal has begun – Yield restrictions initiated – Reduced availability of grape contracts enforce change ¾ CWT operating performance remains sound – Long lease streams to established wine company tenants – Larg
Slide 26: Questions
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Slide 27: Contacts
Contacts Nick Gill Fund Manager Tel: + 61 (0)2 9994 7291 Email: ngill@challenger.com.au Luke Keighery Investor Relations Tel: + 61 (0)2 9994 7633 Email: lkeighery@challenger lkeighery@challenger.com.au com au Website www.challenger.com.au/cwt 27
Slide 28: Appendices
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Slide 29: Detailed income statement
Detailed income statement 1H10 1H09 Variance $000 $000 $000 % Net property income 15,480 16,635 (1,155) (6.9) Other income 117 476 (359) (75.4) Finance costs (6,185) (6,627) 442 6.7 Management fees (1,023) (1,211) 188 15.5 Operating expenses (950) (606) (344) (56 8) (56.8) Profit from operating acti
Slide 30: Movements in fair value and carrying value
Movements in fair value and carrying value Fair value Carrying value $000 $000 30 J 30-Jun-09 09 268 147 268,147 257 111 257,111 Acquisitions & upgrades 353 353 Disposals p ((2,000) , ) ((1,577) , ) Deferred leasing incentive 447 447 Revaluation changes (5,160) (5,160) Water rights fair value increm
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Challenger Wine Trust — H1 2010 Earnings Presentation on 6ix