ARC Funds Limited · ASX:ARC
ARC Funds — Shareholder Meeting (October 2018)
16 slides from ARC Funds's shareholder meeting presentation, Oct 18, 2018
Slide 1: AGM Presentation – 18 October 2018
For personal use only AGM Presentation – 18 October 2018 1
Slide 2: 2018 Full Year Results and Review
For personal use only 2018 Full Year Results and Review • Net Profit after Tax of $1.28m • Driven by uplift in value of Namoi Cotton investment • Operating costs and business developments remain under control • No debt and current cash balance of $600k • Agrivest fund raising project not achieved, e
Slide 3: The major themes of investment and where we are seeking opportunities
For personal use only The major themes of investment and where we are seeking opportunities • Plant Based Foods and Proteins: this includes chickpeas, lentils, mungbeans and Almonds • Natural Fibres: we have an investment in the cotton industry and are doing more work on large scale wool production
Slide 4: New ARC Investment Opportunity: Cattle Finance
For personal use only New ARC Investment Opportunity: Cattle Finance • We believe a significant business opportunity exists to provide livestock financing to the beef and dairy sectors to enable producers to fully stock farms and also increase productivity • We are seeking to invest and acquire spec
Slide 5: Why does this opportunity exist?
For personal use only Why does this opportunity exist? • Traditional lending institutions apply lending ratio’s to rural enterprises of generally no more than 50% being the upper limit for debt as a proportion of total assets, or a 50% LVR (Loan to Value Ratio) lending covenant • This is also applie
Slide 6: How does the security work for a Lender?
For personal use only How does the security work for a Lender? The NLIS (National Livestock Identification Scheme) ear tag scheme that operates in Australia has created the unique opportunity for specific security (collateral) to be created over each individual animal using the NLIS tags. Individual
Slide 7: How does the security work for a Lender?
For personal use only How does the security work for a Lender? • The NLIS tag is monitored and scanned as the animal moves between locations recording the location with a PIC (Property Identification Code) and the movements are recorded on the national NLIS database in real time. Hence the actual lo
Slide 8: What is a PMSI as a means of Security?
For personal use only What is a PMSI as a means of Security? A purchase money security interest (PMSI) is a security interest or claim on property that enables a lender who provides financing for the acquisition of goods or equipment to obtain priority ranking ahead of other secured creditors Where
Slide 9: How big is the market? Firstly, Beef Cattle
For personal use only How big is the market? Firstly, Beef Cattle • The Australian cattle herd was 26.2 million head at 30 June 2017 (ABS Agricultural Commodities 2016–17) • There were 12.2 million beef cows and heifers aged one year and over as at June 2017 (ABS Agricultural Commodities 2016– 17) •
Slide 10: What does it mean for a Beef Loan book?
For personal use only What does it mean for a Beef Loan book? • We estimate the entire Australian Beef herd of 26.2m head if valued at $800 per head would equate to approximately $21 billion worth of cattle, which includes 12.2m cows or breeders • If you look at the number of cattle processed in Aus
Slide 11: The Australian Dairy Industry…
For personal use only The Australian Dairy Industry… National dairy herd 1.51m cows Average herd size 261 cows Average annual milk production per cow 5,819 litres Milk production 9,015m litres Source: Dairy Australia 11
Slide 12: What does it mean for a Dairy Loan book?
For personal use only What does it mean for a Dairy Loan book? • National herd of 1.51m cows in production • Dairy cows are more valuable than beef cattle and produce higher gross returns and greater cashflow generation, 5819 litres of annual milk production at 45 cents per litre = $2618 per cow per
Slide 13: What is the overall total potential market to be financed?
For personal use only What is the overall total potential market to be financed? • If we add both the immediate addressable markets of the beef industry of $5 billion and the Dairy Industry of $2 billion, this is a total potential market of $7 billion • If you assume 50% is already financed by owner
Slide 14: So what are the returns of the sector and what are the next steps?
For personal use only So what are the returns of the sector and what are the next steps? • Current gross lending spreads are between 400 and 600 basis points • Net operating margins are about 300 basis points pre-tax, for example a $100m loan book could generate $3m in pre-tax earnings per annum • A
Slide 15: Summary
For personal use only Summary • Progress is being made on the Namoi Cotton investment, more value to be created, James Jackson now on the Board at Namoi Cotton • ARC financial position remains solid • Near term objective is to develop ARC business with cashflow positive investments, whilst still see
Slide 16: Further Shareholder enquiries, please contact
For personal use only Further Shareholder enquiries, please contact: Mr James Jackson Executive Chairman T: 0402 435 762 E: james.jackson@ruralcapital.com.au 16