New Zealand Rural Land Co. Ltd. · NZX:NZL
New Zealand Rural Land — H1 2022 Earnings Presentation
40 slides from New Zealand Rural Land's earnings presentation, Feb 22, 2022
Slide 1: Interim Results HY22 Presentation
NEW ZEALAND Rural Land Co S U S TA I N A B L E A O T E A R O A INTERIM RESULTS HY22 PRESENTATION PERIOD ENDING 31 DECEMBER 2021 22 February 2022 www.nzrlc.co.nz listed on: NEW ZEALAND RURAL LAND COMPANY 1
Slide 2: Disclaimer
DISCLAIMER The information and opinions in this presentation were prepared by New Zealand Rural Land Company (NZL). NZL makes no representation or warranty as to the accuracy or completeness of the information in this report. Opinions including estimates and projections in this report constitute the
Slide 3: Section 1: HY22 Interim Results
SECTION 1 HY22: INTERIM RESULTS NEW ZEALAND RURAL LAND COMPANY 3
Slide 4: HY22: Key Metrics
1 HY22: KEY METRICS I N T E R I M R E S U LT S $3.17m $221.37m NPAT Total Assets 2.12cps 2.01cps AFFO Interim Dividend NZL Share Price vs Unaudited NAV Per Share (NAVPS) $1.6 $1.4 $1.2 NZL Share Price Trading at 12.5% $1.0 Discount to $0.8 NAVPS* $1.3596 $0.6 $1.19 $0.4 $0.2 $0.0 NZL Share Price as
Slide 5: HY22: Highlights
1 HY22: HIGHLIGHTS I N T E R I M R E S U LT S TOTAL ASSETS FFO & AFFO NZL has total assets of Funds From Operations (FFO) and $221.37m*, composed primarily Adjusted Funds From Operations of 10,812ha of premium rural land. (AFFO) for the period were $2.69m (2.78cps) and $2.05m (2.12cps) respectively.
Slide 6: Section 2: HY22 Market Conditions and Operations
SECTION 2 HY22: MARKET CONDITIONS AND OPERATIONS NEW ZEALAND RURAL LAND COMPANY 6
Slide 7: HY22: Update on Market Conditions (1)
2 HY22: UPDATE ON MARKET CONDITIONS (1) MARKET CONDITIONS Dairy Land Price vs Milk Price 320.0 280.0 Land Price CAGR +4.65% 240.0 200.0 160.0 MILK PRICE AT AN ALL-TIME HIGH The Farmgate Milk Price has been trending higher for two 120.0 Milk Price CAGR +4.68% decades. Fonterra’s farmgate milk price h
Slide 8: HY22: Update on Market Conditions (2)
2 HY22: UPDATE ON MARKET CONDITIONS (2) MARKET CONDITIONS Foreigners Prevented from Investing in Farmland by OIO Restrictions Constrained Agri Lending Curtailing New Zealand Buyers Dairy Forestry 12% 60,000 10% Rolling YoY change in New Zealand dairy farm debt NZ Hectares of land purchased by foreig
Slide 9: HY22: Update on Market Conditions (3)
2 HY22: UPDATE ON MARKET CONDITIONS (3) MARKET CONDITIONS Quarterly Change in CPI 9.0 8.0 7.0 +5.9% 6.0 30-Year High 5.0 4.0 3.0 2.0 1.0 0.0 -1.0 Source: Stats New Zealand, www.stats.govt.nz/indicators/consumer-price-index-cpi 30 YEAR HIGH INFLATION LEASE Inflation reached a 30-year high of +5.9% in
Slide 10: HY22: Operational Update
2 HY22: OPERATIONAL UPDATE O P E R AT I O N S ACQUISITION PIPELINE CARBON AND BIODIVERSITY NZL continues to have an attractive acquisition NZL has commissioned studies to better pipeline with a number of opportunities currently understand carbon sequestration opportunities on under due diligence. ma
Slide 11: HY22: Attractiveness of Target Sub-Sectors
2 HY22: ATTRACTIVENESS OF TARGET SUB-SECTORS O P E R AT I O N S KEY Current Assessment of Sub-Sector Attractiveness and NZL Pipeline Update CURRENTLY CURRENTLY MOST LEAST DESIRABLE DESIRABLE GREEN DAIRY POULTRY VITICULTURE HORTICULTURE FORESTRY ENERGY NEW ZEALAND RURAL LAND COMPANY 11
Slide 12: Section 3: NZL's Sustainable Structural Advantage
SECTION 3 NZL’S SUSTAINABLE STRUCTURAL ADVANTAGE NEW ZEALAND RURAL LAND COMPANY 12
Slide 13: NZL Is Advantaged with a Sustainable Model
3 NZL IS ADVANTAGED WITH A SUSTAINABLE MODEL N Z L’ S A D VA N TA G E STRUCTURAL SUSTAINABLE STRUCTURAL RISK RETURNS TRENDS PRACTICES ADVANTAGE Increasing scarcity of New Zealand has the Access to transactions. Ownership of just the land Predictable, attractive productive land in New world’s lowest
Slide 14: Structural Trends: Global Tailwinds Set to Endure
3 STRUCTURAL TRENDS: GLOBAL TAILWINDS SET TO ENDURE N Z L’ S A D VA N TA G E Global Population (billions) vs Arable Land Per Person (ha) MORE FOOD NEEDED GLOBALLY WITH LESS LAND TO PRODUCE IT 12 0.40 The global population is growing rapidly and arable land is becoming 10 scarcer. 0.32 8 The producti
Slide 15: Structural Trends: Domestic Tailwinds Also Set to Endure
Su 49 ply 3 Su 9 MT p 4 MT pply STRUCTURAL TRENDS: DOMESTIC TAILWINDS ALSO SET TO ENDURE N Z L’ S A D VA N TA G E De New Zealand Dairy Farm Land Availability Declining Growing Dairy Deficit 79 ma T M n DemandDemand d 79 MT 79 MT 1.8 1.6 Deficit/Gap Deficit/Gap -30 -30 MT -30 MT e D DemandDemand MT f
Slide 16: Leadership in Sustainable Practices
3 LEADERSHIP IN SUSTAINABLE PRACTICES N Z L’ S A D VA N TA G E 1. NEW ZEALAND’S CREDENTIALS 2. WHAT MAKES NZL A LEADER IN SUSTAINABLITY FOR NEW ZEALAND’S New Zealand has the world’s lowest carbon emissions per gram of protein produced. PRIMARY SECTOR? Key milk producing regions such as Europe and No
Slide 17: Our Sustainable Structural Advantage
3 OUR SUSTAINABLE STRUCTURAL ADVANTAGE N Z L’ S A D VA N TA G E ACCESS ACCESS TO TO TRANSACTIONS CAPITAL THE NZL ACCESS TO ADVANTAGE QUALITY DOMESTIC TENANT BUYER PARTNERSHIPS DUE DILIGENCE AND LEASE STRUCTURE/S Refer to Appendix page 39 for further detail NEW ZEALAND RURAL LAND COMPANY 17
Slide 18: Risk: vs. Traditional Rural
3 RISK: vs. TRADITIONAL RURAL N Z L’ S A D VA N TA G E NZL vs. TRADITIONAL RURAL / FARMING INVESTMENTS By only owning the land NZL has no direct exposure to the operational risks of farming. NO DIRECT NO DIRECT LIMITED EXPOSURE EXPOSURE EXPOSURE to on-farm risks to volatile to environmental (via eit
Slide 19: Risk: vs. Urban Property
3 RISK: vs. URBAN PROPERTY N Z L’ S A D VA N TA G E NZL vs. URBAN PROPERTY By only owning rural land NZL has a number of advatanges over traditional REITs: Credit quality of tenants Rural land assets have a much lower depreciable asset base Low obsolescence risk NZL’s tenants are required to Rural l
Slide 20: Returns: Attractive Risk-Adjusted Returns
3 RETURNS: ATTRACTIVE RISK-ADJUSTED RETURNS N Z L’ S A D VA N TA G E Long Term New Zealand Farm Price Returns 5000 CAGR: +6.6% p.a. 4000 3000 CONSISTENT RURAL LAND PRICE GROWTH 2000 Since 1996 the value of rural land in New Zealand has 1000 grown considerably, with REINZ’s Rural Land Price Index 0 i
Slide 21: Section 4: HY22 Results
SECTION 4 HY22 RESULTS NEW ZEALAND RURAL LAND COMPANY 21
Slide 22: HY22: Financial Performance
4 HY22: FINANCIAL PERFORMANCE H Y 2 2 R E S U LT S 31 December 2021 31 December 2020* Unaudited Unaudited Gross Rental Income Rental Income 3,766 - Net Rental Income 3,766 - Less Overhead Costs Directors Fees Insurance (103) (40) (89) (2) +$3.17m After Tax Income for the period Marketing Expenses -
Slide 23: HY22: Adjusted Funds From Operations
4 HY22: ADJUSTED FUNDS FROM OPERATIONS H Y 2 2 R E S U LT S 31 December 2021 Unaudited 31 December 2020* Unaudited +2.78cps Net Profit After Tax 3,168 (209) FFO for the period Adjusted for: Unrealised Net Gain on Derivatives (930) - Deferred Tax Expense 351 - +2.12cps Capitalised Incentive Adjustmen
Slide 24: HY22: Current Balance Sheet
4 HY22: CURRENT BALANCE SHEET H Y 2 2 R E S U LT S 31 December 2021 30 June 2021 Unaudited Audited Current Assets Cash and Cash Equivalents 2,427 20,496 Trade and Other Receivables 316 668 Current Tax Receivable 24 23 Total Current Assets 2,767 21,187 Non-Current Assets Investment Property 199,554 1
Slide 25: HY22: AFFO & Dividend Forecasts Based on Current Portfolio
4 HY22: AFFO & DIVIDEND FORECASTS BASED ON CURRENT PORTFOLIO H Y 2 2 R E S U LT S FORECAST ADJUSTED FUNDS FROM OPERATIONS (AFFO) AFFO per share and equivalent yield* per share FY22 to FY24 AFFO is the organisation’s underlying and recurring earnings from its 7.00 operations adjusted for maintenance
Slide 26: HY22: Debt Summary
4 HY22: DEBT SUMMARY H Y 2 2 R E S U LT S Key Metrics Debt Drawn ($m) 31 December 2021 88.5 38.5% Loan to Value Ratio (Covenant) 38.5% Loan to Value Ratio as measured Interest Coverage Ratio (Covenant) 19.4x under banking covenants Weighted Average Term to Expiry (Years) 2.8 Weighted Average Debt Co
Slide 27: HY22: Portfolio Overview
4 HY22: PORTFOLIO OVERVIEW H Y 2 2 R E S U LT S Location otago/southland canterbury total Land Area (ha) 4,482 6,330 10,812 rural asset class Dairy Dairy Dairy walt (years) 10.4 10.3 10.3 # Tenants 3 3 5 Occupancy 100% 100% 100% NEW ZEALAND RURAL LAND COMPANY 27
Slide 28: HY22: Tenant Concentration and Lease Profiles
4 HY22: TENANT CONCENTRATION AND LEASE PROFILES H Y 2 2 R E S U LT S Tenant Concentration as % of Lease Value Lease Expiry Profile by Value $7.0 11% $6.0 $5.0 33% $4.0 $3.0 $2.0 39% $1.0 5% $0.0 FY22 FY23 FY24 FY25 FY26 FY27 FY28 FY29 FY30 FY31 FY32 FY33 12% Tenancy 1 Tenancy 2 Tenancy 3 Tenancy 4 T
Slide 29: HY22: NZL Foreign Ownership
4 HY22: NZL FOREIGN OWNERSHIP H Y 2 2 R E S U LT S NEW ZEALAND BUYER CURRENT LISTED CURRENT NZL FOREIGN COMPANY FOREIGN OWNERSHIP NZL is highly advantaged OWNERSHIP RULES because it is a New Zealand As at 31 December 2021, Under the Overseas Investment NZL has foreign domiciled buyer of rural land A
Slide 30: Questions on HY22 ...
QUESTIONS ON HY22 ... NEW ZEALAND RURAL LAND COMPANY 30
Slide 31: Section 5: Management Structure, People & Shareholdings
SECTION 5 MANAGEMENT STRUCTURE, PEOPLE & SHAREHOLDINGS NEW ZEALAND RURAL LAND COMPANY 31
Slide 32: NZL Externally Managed Structure
5 NZL EXTERNALLY MANAGED STRUCTURE STRUCTURE Accountants NEW ZEALAND Rural Land Co Auditors SUS TAIN ABLE AOTEAROA NE W ZE AL AND Rur al L and Management Registry Listed 50.0% Listed Clyde & Rena 20.0% Holland 16.5% Richard Milsom 7.5% ROB SARAH TIA CHRISTOPHER CAMPBELL KENNEDY GREENAWAY SWASBROOK H
Slide 33: NZL Key People as at December 2021
5 NZL KEY PEOPLE AS AT 31 DECEMBER 2021 PEOPLE NEW ZEALAND Rural Land Co SUS TAIN ABLE AOTEAROA ROB CAMPBELL SARAH KENNEDY TIA GREENAWAY CHRISTOPHER SWASBROOK Independent Chair Independent Director Independent Director Non-Independent Director Chair – WEL Group Limited Director - Comvita NZ Hailing
Slide 34: Manager & Director Ownership Interests
5 MANAGER & DIRECTOR OWNERSHIP INTERESTS SHAREHOLDINGS NZL’s Director and Manager Shareholding Interests as at 31 December 2021: All Directors & Shareholders of the Manager are investors in NZL (including Independent Chair of the Manager - Shelley Ruha). # Shares Clyde & Rena Holland 9,589,329 Eleva
Slide 35: Section 6: Index Inclusions, Investor Contacts & Broker Research Coverage
SECTION 6 INDEX INCLUSIONS, INVESTOR CONTACTS & BROKER RESEARCH COVERAGE NEW ZEALAND RURAL LAND COMPANY 35
Slide 36: NZL New Index Inclusion
6 NZL NEW INDEX INCLUSION INDEX INCLUSION NEW INDEX INCLUSION FROM 18 MARCH 2022 FTSE Global Micro Cap Index CURRENT INDEX INCLUSIONS S&P / NZX All Real Estate Index NEW ZEALAND RURAL LAND COMPANY 36
Slide 37: NZL Investor Contacts & Broker Research Coverage
6 NZL INVESTOR CONTACTS & BROKER RESEARCH COVERAGE C O N TA C T S & C O V E R A G E NZL Investor Contacts Broker Research Coverage Christopher Swasbrook Richard Milsom chris@nzrlc.co.nz richard@nzrlm.co.nz +64 21 928 262 +64 21 274 2476 Kieran Carling Arie Dekker Level 4, The Blade Level 4, The Blad
Slide 38: Section 7: Appendix
SECTION 7 APPENDIX NEW ZEALAND RURAL LAND COMPANY 38
Slide 39: Our Sustainable Structural Advantage
7 OUR SUSTAINABLE STRUCTURAL ADVANTAGE APPENDIX ACCESS TO ACCESS TO CAPITAL TRANSACTIONS • NZX listed • First mover • Relationship with Rabobank • Profile and other rural lenders ACCESS ACCESS • Volume • Network TO TO • Reputation TRANSACTIONS CAPITAL • Listed Company DOMESTICALLY DOMICILED THE NZL
Slide 40: New Zealand Rural Land Co
NEW ZEALAND Rural Land Co SUS TAIN ABLE AOTEAROA New Zealand Rural Land Company +64 9 379 6493 Level 4, 12 St Marks Road info@nzrlc.co.nz Remuera www.nzrlc.co.nz Auckland 1050 nzrlc New Zealand nzrlc listed on: NEW ZEALAND RURAL LAND COMPANY 40
New Zealand Rural Land Company — H1 2022 Earnings Presentation on 6ix