Slide 1: Rural Funds Group Financial results presentation year ended 30 June 2016
For personal use only Rural Funds Group (RFF) Financial results presentation year ended 30 June 2016 24 August 2016
Slide 2: Disclaimer
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 (ARSN 168
Slide 3: Agenda
Agenda For personal use only RFM attendees 1. Highlights David Bryant Managing Director 2. Results 3. Capital management Stuart Waight 4. Outlook Chief Operating Officer 5. Portfolio Daniel Yap 6. Appendices Financial Controller James Powell Investor Relations & Distribution Manager 3
Slide 4: Highlights
For personal use only Highlights
Slide 5: Results highlights
Results highlights For personal use only Further June 16 June 15 Movement details Earnings 22.46 cpu 8.38 cpu +168% s.11 Adjusted funds from operations (AFFO) 9.26 cpu 9.09 cpu +2% s.12 Distributions 8.93 cpu 8.59 cpu +4% s.12 Adjusted NAV per unit $1.43 $1.22 +17% s.31 Gearing 36.7% 35.1% +1.6% s.1
Slide 6: Key events
Key events For personal use only • $35.0m equity raising (at $1.10 per unit) to fund the acquisition of Oct 15 Kerarbury, a property near Darlington Point, NSW. Leased to Olam Orchards Australia for 22.75 yrs to develop a 1,500 ha almond orchard • Outlined climate strategy to articulate the benefits
Slide 7: Property reconciliation
Property reconciliation For personal use only Adjusted property assets reconciliation $480m 11,284,000 441,407,000 50,018,000 $440m $400m 51,900,000 380,105,000 $360m 73,836,000 $320m $280m 249,019,000 (5,350,000) 2,500,000 8,200,000 $240m $200m Adjusted Poultry Vineyard Macadamias Almond Almond Adj
Slide 8: Strategy and performance
Strategy and performance For personal use only Net asset, market cap and liquidity growth $400m $350m RFM has communicated the following strategy for RFF: $300m $250m – expand the scale of the fund through $200m accretive acquisitions (see slide 20) $150m $100m $50m The aims of this strategy are
Slide 9: Results
For personal use only Results
Slide 10: FY16 results – summary
FY16 results – summary For personal use only Metrics as at 30 June 2016 Income Net profit before income tax 35,963,000 AFFO $14.3m (pre-tax) and AFFO per Total comprehensive income 34,774,000 unit 9.26 cents. Adjusted funds from operations (AFFO) 14,342,000 AFFO per unit up from previous forecas
Slide 11: FY16 results – earnings
FY16 results – earnings For personal use only Summarised statement of comprehensive income Revenue has increased primarily as a 12 mths ended 12 mths ended result of increased leased assets due 30 June 2016 30 June 2015 to planned capital expenditure $ $ Property expenses and overheads Property
Slide 12: FY16 results – AFFO
FY16 results – AFFO For personal use only Composition of AFFO (pre-tax) AFFO is pre-tax and excludes fair 12 mths ended 12 mths ended value adjustments, depreciation and 30 June 2016 30 June 2015 impairment to represent RFF’s $ $ property rental business Property revenue 26,549,000 22,218,000 Dire
Slide 13: Capital management
For personal use only Capital management
Slide 14: Capital management
Capital management For personal use only Equity Term debt facility Limit increased to $200.0m on 12 July 2016 Share (Unit) 44% increase for period 30 June 2015 to Limit ($147.5m as at 30 June 2016) price 30 June 2016 ($1.10 to $1.58) Maturity Facility expires December 2018 Distribution Forecast FY17
Slide 15: Almond developments update
Almond developments update For personal use only Tocabil $32m (600 ha) orchard development: – Capital expenditure of $12.6m for the period, bringing the total to $23.0m, in-line with budget – Almond plantings now complete, additional capital expenditure to be deployed for further irrigation infras
Slide 16: Debt facility
Debt facility For personal use only Debt metrics • Key changes for FY16: 30 June 2016 30 June 2015 − Facility limit increase Term debt facility limit1, 2 $200.0m $103.0m − Amortisation of debt removed Term debt drawn $146.5m $89.7m − Increased amount and tenor of interest rate hedges to more closely
Slide 17: Outlook
For personal use only Outlook
Slide 18: Forecasts
Forecasts For personal use only Key forecasts FY17 AFFO and distribution forecasts remain consistent AFFO per unit 12.42 cents with the updated guidance contained within the disclosure on 5 July 2016 Distributions per unit 9.64 cents FY17 distributions are expected to continue to have Payout rat
Slide 19: Development pipeline
Development pipeline For personal use only Retained earnings underpin RFF’s development pipeline in conjunction with raised equity and debt Rent received on all capex shown below Supports increasing NAV, AFFO, distributions and scale Timetable and capital costs FY17 FY18 FY19 FY20 Total Assets
Slide 20: Areas of focus for management
Areas of focus for management For personal use only Climatic zones and RFF assets (see slide 35) RFM will continue to: – perform an oversight role as lessor, including development programs – pursue new investments and lessees that can benefit RFF Investments in differing climatic zones and/or in
Slide 21: Conclusion
Conclusion For personal use only Results in line with forecast Lowering payout ratio, supporting growth REIT structure; stable and growing income yield and the potential for capital growth over time Quality assets and quality leases Managed by a farm and fund manager; operating for almost
Slide 22: Portfolio
For personal use only Portfolio
Slide 23: Snapshot
Snapshot For personal use only Key portfolio metrics Key forecasts FY17 AFFO per unit 12.42 cents Post- transaction Distributions per unit (DPU) 9.64 cents pro forma 30 June 2016 30 June 20161 Payout ratio 78% Adjusted Total Assets2 $407.5m $468.8m Future distribution growth rate 4% Adjusted NAV2 $2
Slide 24: Assets and lessees overview
Assets and lessees overview For personal use only Almonds Poultry Cattle Assets Vineyards Other & macadamias farms assets Select Harvests (ASX: RFM Poultry Treasury Wine Estates Cattle JV Pty Ltd 70+ Livestock SHV) (NSX: RFP) (ASX: TWE) Operators - Wholly owned - Australia’s largest One of the large
Slide 25: Key assets further details
Key assets further details Almond orchards Poultry farms Vineyards Cattle assets For personal use only 1,814 ha across two established 154 sheds on 17 farms. Consisting Seven vineyards with 666 ha planted Three cattle properties forming an almond orchards located near of 134 sheds on 13 farms in Gri
Slide 26: Water entitlements
Water entitlements For personal use only RFF owns significant water entitlements independently valued at $97.9m as at 30 June 2016, sufficient for the ongoing operation of each key asset Australia is internationally recognised as a leader in the regulation of water property rights RFM calculat
Slide 27: Diversified assets and revenue
Diversified assets and revenue For personal use only Adjusted asset values 30 June 2016 Revenue FY17 forecast Other Macadamias 7% Poultry Other, 4% 2% infrastructure Cattle JV, 8% Vineyards 22% RFMP, 25% 10% TWE, 8% RFM Macadamias, 2% Almond orchards under development SHV, 21% 22% Olam, 23% Almond o
Slide 28: Appendices
For personal use only Appendices
Slide 29: FY16 results – reconciliation of net profit after tax to AFFO
FY16 results For personal use only Reconciliation of net profit after tax to AFFO Table adds back non cash items to 12 mths ended 12 mths ended reconcile net profit after tax to AFFO 30 June 2016 30 June 2015 Major items for FY16 $ $ Net profit before tax 35,963,000 9,443,000 – $29.84m property
Slide 30: FY16 results – summarised balance sheet
FY16 results For personal use only Summarised balance sheet Net assets $207.9m As at As at NAV per unit $1.26 30 June 2016 30 June 2015 $ $ Adjusted NAV of $236.3m and $1.43 Cash 3,034,000 712,000 per unit (refer to slide 31 for Property investments 351,691,000 239,445,000 reconciliation) Plan
Slide 31: FY16 results – adjusted balance sheet
FY16 results For personal use only Adjusted balance sheet RFF owns significant water Statutory Adjusted entitlements, sufficient for the ongoing balance sheet Revaluation of balance sheet operation of each key asset at 30 June water at 30 June 2016 entitlements 2016 Water entitlements are regula
Slide 32: Property investment reconciliation
FY16 results For personal use only Property investment reconciliation Investment Biological Intangible Financial Total property assets assets1 assets2 $ $ $ $ $ Balance as at 30 June 2015 142,379,000 67,581,000 28,965,000 520,000 239,445,000 Additions – Macadamias 1,253,000 6,930,000 602,000 - 8,785
Slide 33: Investment case
Investment case RFF uses a leasing model in an underserviced domestic agricultural sector For personal use only Australian property sectors1 Observations: – Academic research demonstrates that leasing 160 assets provides capital management benefits and flexibility to lessees, and is linked to high
Slide 34: Spectrum of investment opportunities
Spectrum of investment opportunities RFF will pursue acquisitions of additional assets to grow the quantum and diversity of its earnings For personal use only Spectrum of investment opportunities1 The investment strategy is to invest across the full range of the asset continuum shown below, with t
Slide 35: Climatic diversification strategy
Climatic diversification strategy For personal use only RFM released a discussion paper on climatic Climatic zones and RFF assets2 diversification to the ASX in June 20161 The paper builds on previous internal research conducted by RFM in 2009 and 2012, which supports climatic diversification of
Slide 36: Responsible entity and manager
Responsible entity and manager For personal use only Rural Funds Management Limited (RFM) is one of the oldest and most experienced agricultural funds management organisations in Australia Established in 1997, RFM operates as an external manager and is currently the responsible entity for seven
Slide 37: RFM board and management team
RFM board and management team RFF is externally managed and governed by a highly experienced management team and board For personal use only Board of directors Contacts • Joined RFM in 2003 • RFM Company Secretary • Former director of broking firm JBWere with more than • Responsible for reviewing an
Slide 38: Corporate information
Corporate information For personal use only Rural Funds Management Ltd ACN 077 492 838 AFSL 226701 Canberra Office Level 2, 2 King Street Deakin ACT 2600 Telephone: +61 2 6203 9700 Facsimile: +61 2 6281 5077 Website: www.ruralfunds.com.au For further information: For media enquiries: Investor relati