Challenger Limited · ASX:CGF
Challenger — Challenger Infrastructure Fund — H1 FY2007 Earnings Presentation
26 slides from Challenger's earnings presentation, Feb 14, 2007
Slide 1: Challenger Infrastructure Fund 2007 interim results presentation
Challenger Infrastructure Fund 2007 interim results presentation Steve Bickerton Challenger Infrastructure Fund 14 February 2007 1
Slide 2: Important notice
Important notice Information contained in this publication is current as at 31 December 2006 unless otherwise specified and is provided by Challenger Listed Investments Limited (ABN 94 055 293 644) (AFSL 236887) (“Challenger”), as Responsible Entity of the Challenger Diversified Property Group (“Tru
Slide 3: Highlights
Highlights • 14.4 cpu interim FY07 distribution • FY07 distribution guidance upgraded to 32.1 cpu from 28.8 cpu • 34.3% total return for 6 months ended 31 December 2006 • Inexus performing ahead of expectations • Arqiva continues to find strategic growth opportunities • Gas distribution networks pre
Slide 4: Relative Performance
Investment performance For six months ended 31 December 2006 , CIF delivered • 29.3% price return • 34.3% total return CIF Relative total return performance 140 - six months to 31 December 2006 34.3% 130 Relative Performance 120 18.8% 110 15.0% 100 90 30/06/2006 21/07/2006 11/08/2006 1/09/2006 22/09
Slide 5: Agenda
Agenda • Financial results 6 • Fund update 10 • Asset performance 11 • Investment strategy 17 • Outlook 18 5
Slide 6: Financial results
Financial results • 1H07 representative of the first full six month interim period for CIF • Performance was in line with Manager’s expectation For period ended 31 December 2006 Total revenue $58.2m EBITDA & unrealised gains/(losses) on financial instruments $46.4m Distributions to security holders
Slide 7: FY07 distribution – guidance upgraded
FY07 distribution – guidance upgraded FY07 distribution guidance upgraded to 32.1 cpu Strong performance of Fund assets and release of cash 3.3c 2.4c Base case earnings 32.1c scenario for 28.8c 26.4c investing $131m cash FY07 guidance distribution distribution Feb 07 upgrade upgrade May 06 guidance
Slide 8: FY07 distribution guidance – key variances
FY07 distribution guidance – key variances Revised Prior Source guidance vs guidance Reflecting ($m) ($m) Stronger sales in both gas and Inexus $38.9 $34.4 electricity Northern Gas $8.6 $6.5 Moved to semi annual Networks distributions Bank interest $9.2 $6.1 Higher than forecast bank interest Wales
Slide 9: FY07 forecast distribution – sources
9 Arqiva 4.1c Northern Gas Networks 3.6c Wales & West Utilities 2.9c Inexus 16.1c Bank Interest 3.8 Cash retained ` from prior 3.7c period Operating Expenses (0.3c) PDS forecast working capital 1.6c facility Cancellation of working capital facility (1.6c) FY07 forecast distribution – sources Forecas
Slide 10: Capital structure
Capital structure • 21 August 2006 - second instalment raised $420m – $289m repaid bridge facility taking Fund gearing to zero – $131m cash on balance sheet – Balance sheet in strong position to fund asset acquisitions • 1 January 2007 – market cap increased to $730m* from $563m* – Class B securitie
Slide 11: Asset valuations – Inexus up 12%
Asset valuations – Inexus up 12% • Half year Management asset valuations • Inexus uplift reflects - actual performance to date for gas and electricity business - increased confidence in future electricity sales Asset 30 June 2006 31 Dec 06 Asset Uplift in Management Increase in Asset Values Values m
Slide 12: NAV revaluation uplift of cents per unit
NAV revaluation uplift of 25 cents per unit Post management asset revaluation NAV per security $3.90 5c (1c) $3.90 21c $3.65 Inexus Uplift movements on NAV 30 June Net operating revaluations performance NAV post 2006 assets Forex Notes: 1. Net asset value per security is calculated as the total valu
Slide 13: Inexus – maintains market leading position
Inexus – maintains market leading position • Maintains market leading position in new gas connections market in UK – Estimated gas connections market share 60% (total market estimate at 120,000 new gas connections p.a.)* • Only active independent provider of new electricity connections in UK – Build
Slide 14: Inexus – growth in order book doubled
Inexus – growth in order book doubled • Connection growth in order book doubled the proceeding year Total order 700,000 book 2004 2005 2006 600,000 Total Sales p.a. 56,380 76,048 104,065 500,000 No. of Connections Total 400,000 connections 46,408 49,872 52,714 installed p.a. 300,000 Growth in order
Slide 15: Arqiva – Strategic Opportunities
Arqiva – Strategic Opportunities • Arqiva continues to deliver a mix of income and growth • Achieved a range of strategic outcomes in 1H07 - The leading provider of digital terrestrial operations – Signed BBC digital contract – displaced incumbent to win - Extended geographic reach – Acquired BT Sat
Slide 16: Gas Distribution Networks
Gas Distribution Networks • Summer 2006 - hottest in 300 years Average daily temperature for the – Resulted in lower volumes and revenue 10 warmest and longest UK summers – Regulatory regime recovers significant (May-Sept) 1659-2006* proportion of weather impacted revenue 2006 • December 2006 - Inte
Slide 17: Investment strategy
Investment strategy What is a CIF Opportunity ? Growth orientated utility and infrastructure assets with: - Long-term predictable income streams - Potential for capital growth North America UK Europe Australia Market Position Financial Attraction Growth Potential Ownership Level •Regulated •Strong c
Slide 18: Positive outlook
Positive outlook • Focus for 2007 :- – Inexus • Electricity – continued success in “dual fuel” offering • Water – license application with regulator – Arqiva • Increasing geographic reach with approval of BT satellite acquisition* • Development of opportunities and technology eg mobile technology –
Slide 19: Summary
Summary • 34.3% total return for 6 months ended 30 December 2006 • FY07 distribution guidance upgraded to 32.1 cpu from 28.8 cpu • Inexus performing ahead of expectations • NAV upgraded to $3.90, up 6.8% • Maintain disciplined acquisition approach to continue to build a portfolio of quality assets 1
Slide 20: Questions
challenger & oi 20
Slide 21: CIF contacts
CIF contacts: Steve Bickerton Fund Manager Tel: 02 9994 7327 Email: sbickerton@challenger.com.au Josie Ashton Investor Relations Tel: 02 9994 7898 Email: jashton@challenger.com.au 21
Slide 22: Appendices
Appendices 1. Non consolidated assets – financials 2. Inexus – connections snapshot 3. Portfolio – asset summary 4. Portfolio – hedging summary 22
Slide 23: Assets – financials
Appendix 1 Assets – financials Revenue EBITDA Distribution to for six months for six months CIF for six ended Dec 2006 ended Dec 2006 months ended ($m) ($m) Dec 2006($m) Inexus 38.5 23.6 34.4 Arqiva 407.3 150.9 3.3 Wales & West 388.6 53.1 0.9 Utilities Northern Gas 290.0 79.2 6.5 Networks 23
Slide 24: Inexus – Connections snapshot
Appendix 2 Inexus – Connections snapshot Dec-04 Dec-05 Dec-06 Growth in Connections 46,408 49,872 52,714 New Sales 56,380 76,048 104,065 Existing Gas Connections 243,618 290,026 339,567 New Gas Connections in Year 46,408 49,514 51,322 Gas Order Book 121,000 142,474 163,407 Existing Electricity Conne
Slide 25: Portfolio – asset summary
Appendix 3 Portfolio – asset summary Asset Nature of UK Market Long term Ownership Growth Regulation position cash flow certainty Price Leading gas Ongoing CIF majority Dual regulated and only active demand for stake aligned connections gas and gas through co- with potential Inexus electricity owner
Slide 26: Portfolio – Hedging summary
Appendix 4 Portfolio – Hedging summary Inflation Interest rates Foreign exchange* Direct regulated 100% of borrowings 100% of PDS forecast price adjustment hedged to 2030 distributions hedged to Inexus August 2010 at £1 = A$2.4637 Contracted price Greater than 95% of 100% of PDS forecast adjustment
Challenger Infrastructure Fund — H1 FY2007 Earnings Presentation on 6ix