Rural Funds Group · ASX:RFF
Rural Funds — FY2020 Earnings Presentation
31 slides from Rural Funds's earnings presentation, Aug 25, 2020
Slide 1: Financial results presentation
Managed by: Financial results presentation for the year ended 30 June 2020 25 August 2020
Slide 2: Disclaimer and glossary of terms
Disclaimer and glossary of terms Disclaimer This presentation has been prepared by Rural Funds Management Limited (ACN 077 492 838, AFSL 226 701) (RFM) as the responsible entity of Rural Funds Group (RFF) and has been authorised for release by the Board of RFM. RFF is a stapled security, incorporati
Slide 3: Contents and Presenters
Contents 1. Financial results 2. Capital management Presenters 3. Portfolio update and forecasts 4. Conclusion 5. Appendices David Bryant Tim Sheridan Daniel Yap James Powell Managing Director Chief Operating Chief Financial General Manager – Officer Officer Investor Relations & Marketing 3
Slide 4: Financial results
1 Financial results Pruned shiraz grapevines at Kleinig vineyard, Barossa Valley, South Australia, August 2020. 4
Slide 5: Key property movements
Key property movements Recycling capital into growth assets. • Key movements: a) Disposals: sale of poultry assets for $74.7m and unencumbered ground Adjusted property assets movements ($m) by category1 water entitlement for $6.7m. b) Cattle: acquisitions totaling $67.7m (eight properties and feedlo
Slide 6: Earnings and balance sheet summary
Earnings and balance sheet summary Forecasts achieved, revenue and earnings increased. Income and earnings metrics 12 months ended 12 months ended • Property revenue increased 8% primarily due to the JBS Australia transactions 30 June 2020 30 June 2019 (feedlot acquisitions and J&F Australia Pty Ltd
Slide 7: Capital management
2 Capital management Beehives adjacent to almond trees in bloom. Striping shows the variation in blossom times caused by different varieties. This creates a longer bloom and pollination period. Mooral, Hillston NSW, August 2020. 7
Slide 8: Capital management
Capital management Limit and tenor being increased. Equity Debt Item Details Item Details Decrease of 16.5% ($2.30 to $1.92) for 28 June 2019 to 30 June 2020. Current RFM has commenced discussions with financiers to refinance the $225.0m Trading price Facility facility due to expire in FY22. RFM exp
Slide 9: Debt facility and interest rate hedges
Debt facility and interest rate hedges Reduced debt costs. Debt facility metrics Debt facility tenor (at 30 June 2020) Proforma 30 June 2020 30 June 2019 30 June 20208 $250m Term debt facility limit1, 2 $400.0m $335.0m $335.0m Debt Term debt drawn $285.9m $297.2m $291.4m $200m facility Headroom $114
Slide 10: Portfolio update and forecasts
3 Portfolio update and forecasts Macadamia orchard harvest, Bundaberg, central Queensland, August 2020. 10
Slide 11: Macadamia orchard developments
Macadamia orchard developments Assets to develop 5,000 ha of macadamia orchards. Rockhampton • Three cattle properties totalling 7,419 ha to develop areas to macadamia orchards over time. • Existing property, Comanche, also suitable for macadamia orchard development. Bundaberg • Developments have co
Slide 12: Investment strategy
Investment strategy Investments across the spectrum seek to achieve distribution growth of 4% p.a. Spectrum of investment opportunities3 • Contracts have been exchanged for the sale of Mooral for $98.0m (subject to various adjustments and inclusions).1 Book value of Mooral as at 30 June 2020 is $79.
Slide 13: Forecasts
Forecasts FY21 distribution increase of 4%. DPU, DPU growth, AFFO payout and adjusted NAV1 • AFFO to decrease as funds are reinvested to macadamia orchard developments which are expected to produce higher income when leased. • Maryborough macadamia plantings to commence late FY21. To fully develop M
Slide 14: Conclusion
4 Conclusion Winter muster at Cobungra, Victorian high country, August 2020. 14
Slide 15: Conclusion
Conclusion Good FY20 financial result. Reconfiguring the portfolio to increase earnings. FY20 financial Portfolio • A good financial result: results highlights highlights • Property revenue growth. 10.85 cents 10.9 years • Numerous positive independent valuations. FY20 DISTRIBUTIONS/UNIT WEIGHTED AV
Slide 16: Appendices
5 Appendices Irrigated wheat three months after sowing, Lynora Downs, central Queensland, August 2020. 16
Slide 17: FY20 results – summarised comprehensive income
FY20 results – summarised comprehensive income Summarised statement of comprehensive income • Property revenue has increased primarily as a result of income from JBS Australia 12 mths ended 12 mths ended (JBS) transactions (feedlot acquisitions and J&F Australia Pty Ltd (J&F) Guarantee 30 June 2020
Slide 18: FY20 results – AFFO composition
FY20 results – AFFO composition Composition of AFFO (pre-tax) 12 mths ended 12 mths ended 30 June 2020 31 June 2019 • AFFO is pre-tax and excludes fair value adjustments, depreciation and impairment $ $ to represent RFF’s property rental business. Property revenue 69,957,000 65,086,000 • Property ex
Slide 19: FY20 results – reconciliation of net profit to AFFO
FY20 results – reconciliation of net profit to AFFO Reconciliation of net profit after tax to AFFO 12 mths ended 12 mths ended • Non-cash items added back to reconcile net profit after tax to AFFO. 30 June 2020 30 June 2019 $ $ • Key adjustments include: Net profit after income tax 48,988,000 33,355
Slide 20: FY20 results – summarised balance sheet
FY20 results – summarised balance sheet Summarised balance sheet As at As at • Water entitlements are recorded as intangible assets, and held at 30 June 2020 30 Jun 2019 the lower of cost or fair value in accordance with accounting $ $ standards and ASIC guidance. The adjustment for water Cash 5,085
Slide 21: FY20 results - total assets reconciliation
FY20 results - total assets reconciliation Total assets reconciliation Adjustment for Investment Bearer Intangible Financial assets – Adjusted Other assets Total water entitlements property plants assets1, 3 property2, 3 total assets at fair value1, 3 $ $ $ $ $ $ $ $ Balance as at 30 June 2019 489,3
Slide 22: Valuations, valuers and lease expiry
Valuations, valuers and lease expiry Independent valuations at least every two years. Rotation of valuers every three years. Note: 1. The Mooral almond orchard sale is conditional on completion of due diligence (within 45 days but subject to possible extensions) and Foreign Investment Review Board a
Slide 23: Sectors and assets
Sectors and assets Diversification of 61 properties, five agricultural sectors and multiple climatic zones. 1 Note: 1. Shaded areas denote climatic zones differentiated by rainfall seasonality. Source: Bureau of Meteorology; see RFF Climatic Diversification discussion paper, 20 Jun 2016. Blue square
Slide 24: Forecast FY21 revenue diversification
Forecast FY21 revenue diversification Diversification by agricultural sector, lessee type and indexation mechanism.1 Agricultural sectors Lessees and counterparts by type2 Indexation and mechanisms Notes: 1. Figures shown are subject to rounding. Forecast includes the disposal of Mooral (expected to
Slide 25: Environment, social and governance (ESG)
Environment, social and governance (ESG) RFM has policies and procedures which address ESG issues. Tahen project In May 2019 Rural Funds Management committed to providing resources and agricultural Environment Social Governance expertise to improve the economic and social prospects of the village of
Slide 26: Lease expiry profile
Lease expiry profile Portfolio WALE of 10.9 years Lease expiry profile1 18.0 16.0 14.0 12.0 FY21 revenue ($m) 10.0 8.0 6.0 4.0 2.0 0.0 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 Year of lease expiry Vineyards Almonds Cattle Macadamias Cropping Note: 1.
Slide 27: Productivity and higher and better use developments
Productivity and higher and better use developments Developments to occur on 44 properties.1 Note: 1. Five year developments refer to development potential of assets. Pasture improvement refers to stylo on RFF’s north Qld properties, and intensive pastures including Leucaena on central Qld propertie
Slide 28: Capital expenditure
Capital expenditure Forecast capex of $29.0m will attract rent as it is deployed. Capital expenditure profile1 Total FY20 FY21f FY22f forecast Description ($m) ($m) ($m) ($m) Almonds 10.8 5.7 0.0 5.7 FY21 capex for remaining Kerarbury water delivery infrastructure. Cattle 3.9 10.8 0.5 11.3 Productiv
Slide 29: Spectrum of investment opportunities
Spectrum of investment opportunities Strategy to invest across the full range of the asset continuum, whilst ensuring the asset mix continues to fund distributions (Explanatory Memorandum, October 2013). Spectrum of investment opportunities1 Higher lease rate compensates for low or negative asset Hi
Slide 30: Rural Funds Management
Rural Funds Management RFM is a fund and farm manager with 23 years experience in Australian agriculture. Key information RFM Board and RFF corporate management (including tenure) Information Details Established 1997 Assets under management $1.3 billion Ownership Directors and staff Guy Paynter Davi
Slide 31: RFM corporate and farm management
Managed by: Rural Funds Management Limited For further information: For further information: RFM corporate and farm management (listed alphabetically by surname) Rural Funds Management Limited ACN 077 492 838 David Bryant ACN 077 492 838 David Bryant AFSL 226701 AFSL 226701 Managing Director Managin