Rural Funds Group · ASX:RFF
Rural Funds — HY2020 Earnings Presentation
36 slides from Rural Funds's earnings presentation, Mar 2, 2020
Slide 1: Financial results presentation for the half year ended 31 December 2019
Managing good assets with good people For personal use only Financial results presentation for the half year ended 31 December 2019 March 2020
Slide 2: Disclaimer
Managed by: Disclaimer For personal use only 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). RFF is a stapled security, incorporating Rural Funds Trust (ARSN 112 951 578) and RF Active (
Slide 3: Contents and RFM presenters
Managed by: Contents RFM presenters For personal use only 1. Financial results David Bryant Managing Director 2. Portfolio and strategy update Tim Sheridan Chief Operating Officer 3. Fund update 4. Outlook and conclusion Daniel Yap Chief Financial Officer 5. Appendices James Powell General Manager -
Slide 4: Financial results
1 Financial For personal use only results Swan Ridge orchard, Bundaberg Qld, June 2019.
Slide 5: Key activities and highlights
Managed by: Key activities and highlights Acquisitions/disposals, leasing activity and response to short seller allegations. For personal use only • Contracts to acquire six cattle properties (inc. two Acquisitions feedlots) and two properties to be converted to Continuing to execute on acquisitio
Slide 6: Adjusted property assets
Managed by: Adjusted property assets Natal 18% following rollout of productivity capex. For personal use only Adjusted property assets movements ($m) by sector1 Key movements: a) Cattle: acquisitions of $13.3m (Beef City feedlot and cropping land), revaluations of $10.0m (predominantly Natal propert
Slide 7: Earnings and balance sheet summary
Managed by: Earnings and balance sheet summary AFFO pu ↑ 11% driven by JBS transactions. For personal use only Income and earnings metrics 6 months ended 6 months ended • Property revenue increased 22% and AFFO 31 Dec 2019 31 Dec 2018 per unit increased 11% largely due to the JBS Property revenue -
Slide 8: Debt facility and interest rate hedges
Managed by: Debt facility and interest rate hedges Debt facility capacity of $111.6m.1 For personal use only Debt metrics Debt facility tenor expiry 31 December 2019 30 June 2019 2,3 $250m Term debt facility limit $335.0m $335.0m Debt Term debt drawn $277.7m $291.4m facility $200m Headroom $57.3m $4
Slide 9: Portfolio and strategy update
2 Portfolio and strategy For personal use only update Forage sorghum, two months after sowing, between rows of Leucaena under center pivot irrigation at Comanche, central QLD, January 2020.
Slide 10: Portfolio update
Managed by: Portfolio update No properties are drought or materially bushfire impacted. For personal use only Cattle properties • No properties are impacted by drought: – Almond orchards and vineyards are supported by various categories of water entitlements, including high security and ground water
Slide 11: Strategy
Managed by: Strategy RFF’s strategy is to achieve 4% per annum distribution growth by leasing and improving farms. For personal use only Rural Funds Management • RFM’s agricultural operating knowledge is key to Farm and Funds RFM operational achieving this strategy through: Established operations ma
Slide 12: Opportunity 3: J&F limited Guarantee
Managed by: Opportunity 3: J&F limited Guarantee The J&F limited Guarantee is backed by a subsidiary of JBS S.A. the worlds largest meat processor with a market capitalisation of A$24.0b.1 For personal use only Proposed increase to the J&F limited Guarantee2 • JBS have requested an increase in the c
Slide 13: Opportunity 1 & 2: development examples
Managed by: Opportunity 1 & 2: development examples RFM continues to rollout productivity and higher and better use developments. For personal use only Productivity improvement: Higher and better use: Comanche Macadamia developments 6,998 ha existing grazing area Sugar cane farm to be developed to m
Slide 14: Opportunity 1 & 2: developments
Managed by: Opportunity 1 & 2: developments Productivity and higher and better use developments occurring on 18 properties. For personal use only Notes: 1. Pasture development refers to stylo on RFF’s north Qld properties, and intensive pastures including Leucaena on central Qld properties. Cultivat
Slide 15: Fund update
3 Fund update For personal use only Cotton crop with open bolls prior to picking (foreground) and replenished water storages following recent rains (background), Lynora Downs, central Qld, February 2020.
Slide 16: Sectors and assets
Managed by: Sectors and assets Diversification of 38 properties, five agricultural sectors and multiple climatic zones.1 For personal use only Note: 1. Shaded areas denote climatic zones differentiated by rainfall seasonality. Source: Bureau of Meteorology; see RFF Climatic Diversification discussio
Slide 17: Portfolio diversification
Managed by: Portfolio diversification Diversification by sector, asset type, climatic zone and indexation mechanism. For personal use only Sector (FY20f revenue) Climatic zone (FY20f revenue) 2% 1% 7% 4% Almonds Southern 5% Cattle 23% Northern Poultry Western 7% 45% Vineyards Cotton 76% Macadamias 3
Slide 18: Quality lessees and counterparties
Managed by: Quality lessees and counterparties Most lessees are corporate entities and listed on domestic or international securities exchanges. For personal use only Lessee type by FY20f revenue1 Note: 1. Lessees shown by annualised FY20f revenue and reflecting the sale of the poultry assets. Olam
Slide 19: Environment, social and governance (ESG)
Managed by: Environment, social and governance (ESG) RFM has policies and procedures which address ESG issues. For personal use only Environment Social Governance Climate change Animal welfare Compliance committee • Climate diversification • RFM has policies and • RFM has an internal strategy. proce
Slide 20: Outlook and conclusion
4 Outlook and For personal use only conclusion Almond trees in their third year of growth, Kerarbury, Darlington Point NSW, February 2020.
Slide 21: Track record
Managed by: Track record RFM has established a successful track record of acquiring and improving income generating assets to increase net asset value and AFFO. For personal use only Historical financial metrics1 Notes: 1. Adjusted assets incorporates most recent independent property valuations, inc
Slide 22: Continued AFFO and distribution growth
Managed by: Continued AFFO and distribution growth Distributions growth of at least 4% per unit has been funded from increasing AFFO per unit. For personal use only DPU, DPU growth, AFFO retention and payout ratio1 Note: 1. Revised FY20 AFFO forecast assumes $7.5m increase to J&F Guarantee from Apri
Slide 23: Conclusion
Managed by: Conclusion Positive results, delivering on strategy. Attractive investment attributes. For personal use only • Positive HY20 results: Investment Attributes – AFFO per unit growth of 11% and EPU growth of 16% Based on FY21 DPU driven by acquisitions, leasing activity and valuations. Attra
Slide 24: Appendices
5 Appendices For personal use only Almond harvest at Mooral, Hillston NSW, February 2020.
Slide 25: HY20 results - comprehensive income
Managed by: HY20 results - comprehensive income Summarised statement of comprehensive income 6 mths ended 6 mths ended For personal use only 31 December 31 December 2019 2018 • Property revenue has increased primarily as a $ $ Restated1 result of income from new investments, Property revenue 37,592,
Slide 26: HY20 results – AFFO and forecasts
Managed by: HY20 results – AFFO and forecasts Composition of AFFO (pre-tax) For personal use only 6 mths ended 6 mths ended • AFFO is pre-tax and excludes fair value 31 December 19 31 December 18 adjustments, depreciation and impairment to represent RFF’s property rental business. $ $ Property reven
Slide 27: HY20 results - reconciliation of net profit
Managed by: HY20 results - reconciliation of net profit For personal use only Reconciliation of net profit after tax to AFFO 6 mths ended 6 mths ended • Non cash items added back to reconcile net profit after tax to AFFO. 31 Dec 2019 31 Dec 2018 $ $ restated1 • Key adjustments include: Net profit af
Slide 28: HY20 results - summarised balance sheet
Managed by: HY20 results - summarised balance sheet For personal use only Summarised balance sheet As at As at • Accounting standards and ASIC guidance require water entitlements to be recorded as 31 December 2019 30 Jun 2019 intangible assets, and held at the lower of $ $ cost or fair value. The ad
Slide 29: HY20 results - total assets reconciliation
Managed by: HY20 results - total assets reconciliation Total assets reconciliation For personal use only Adjustment Financial Investment Bearer Intangible for water Adjusted total assets - Other assets Total property plants assets1,3 entitlements at assets property2,3 fair values1,3 $ $ $ $ $ $ $ $
Slide 30: Valuations, valuers and lease expiry
Managed by: Valuations, valuers and lease expiry RFM has a policy to independently value assets at least every two financial years and rotate valuers every three years. For personal use only ADJUSTED WEIGHTED WEIGHTED ACQUISITION PROPERTY VALUE VALUATION AVERAGE AVERAGE PROPERTY BY SECTOR STATE BRIE
Slide 31: Lease expiry profile
Managed by: Lease expiry profile Portfolio WALE of 11.5 years. For personal use only Lease expiry profile 16.0 14.0 12.0 FY20 revenue ($m) 10.0 8.0 6.0 4.0 2.0 0.0 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 Vineyards Almonds Cattle Macadamias Cotton Notes: 1. Calculated as the FY20 forecast r
Slide 32: Capital expenditure
Managed by: Capital expenditure Forecast capex of $25.8m will attract rent as it is deployed. For personal use only Capital expenditure profile Total 1H20 2H20f FY21f forecast Description ($m) ($m) ($m) ($m) FY20 and FY21 capex primarily for remaining Kerarbury Almonds 8.0 6.7 0.7 7.4 water delivery
Slide 33: Spectrum of investment opportunities
Managed by: 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). For personal use only Spectrum of investment opportunities1 Portfolio update Higher
Slide 34: Rural Funds Management
Managed by: Rural Funds Management RFM is a fund and farm manager with 23 years’ experience in Australian agriculture. For personal use only Key information Board and management team contacts and tenure Established 1997 Assets under management $1.2 billion Ownership Directors and staff Guy Paynter D
Slide 35: Glossary and table of abbreviations
Managed by: Glossary and table of abbreviations Term Definition Term Definition For personal use only Adjusted Net Asset Value (NAV) adjusted for the independent valuation of ha Hectare(s) – an area of 10,000m2 NAV water entitlements Adjusted Total assets adjusted for the independent valuation of wa
Slide 36: Rural Funds Management Limited
Rural Funds Management Limited ACN 077 492 838 AFSL 226701 Canberra Office Level 2, 2 King Street Deakin ACT 2600 Telephone: +61 2 6203 9700 Facsimile: 1800 625 518 Website: ruralfunds.com.au For personal use only Managing good assets with good people For further information: Investor relations enqu