Rural Funds Group · ASX:RFF
Rural Funds — FY2022 Earnings Presentation
32 slides from Rural Funds's earnings presentation, Aug 31, 2022
Slide 1: FY22 Financial Results for the year ended 30 June 2022
Managed by: for the year ended 30 June 2022 31 August 2022
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. FY22 financial results 2. Capital management Presenters 3. Acquisition, development and leasing update 4. Portfolio update 5. Forecasts and conclusion David Bryant Tim Sheridan Daniel Yap James Powell Managing Director Chief Operating Chief Financial General Manager – Officer Officer Inv
Slide 4: FY22 financial results
1 FY22 financial results Dryland wheat crop, Lynora Downs, central Queensland, July 2022. 4
Slide 5: FY22 summary
FY22 summary Active period of acquisitions, developments and leasing activity. Key activities during FY22 by sector Key metrics as at 30 June 2022 Cattle • Entered a 10-year lease with Australian Agricultural Company (ASX: AAC) for two existing properties. Portfolio Adjusted NAV • Entered a 20-year
Slide 6: Earnings and balance sheet summary
Earnings and balance sheet summary Earnings per unit up 52% and adjusted net asset value per unit up 24%. Income and earnings metrics 12 months ended 12 months ended Movement Property revenue increased primarily due to income from the acquisitions, increased J&F Guarantee, 30 June 2022 30 June 2021
Slide 7: Property movements
Property movements Adjusted property asset increase of $338m mainly driven by acquisitions of $179m and revaluations of $134m. Adjusted property assets movements ($m) by sector1 Primary contributors to adjusted property assets movement: Acquisitions of $179.2m including: • Cattle properties $44.5m –
Slide 8: Capital management
2 Capital management Water storage at cropping property Mayneland, central Queensland, July 2022. 8
Slide 9: Capital management
Capital management Debt facility refinanced and additional forward dated interest rate hedges entered into. Equity Debt Item Details Item Details Increase of debt facility limit, extension of tenor and updated covenants (LVR Entitlement Offer completed August 2021 ($100.0m at $2.47 per unit) to Equi
Slide 10: Debt facility
Debt facility Proportion of debt hedged 40% and weighted average duration of hedges 8.6 years. Debt facility metrics Debt facility tenor 30 June 2022 30 June 2021 $450m $410.0m 1,2 $400m Term debt facility limit $520.0m $380.0m $64.9 Term debt drawn $455.1m $344.1m $350m Debt facility $345.1 Headroo
Slide 11: Performance
Performance Material outperformance compared to S&P/ASX 300 accumulation index. RFF performance compared to adjusted NAV and S&P/ASX 300 A-REIT accumulation index1 July 2021: $100m raised at $2.47/unit Mkt cap $940m June 2018: $150m raised at $4.27 RFF total return $1.95/unit June 2017: Mkt cap $649
Slide 12: Acquisition, development and leasing update
Acquisition, 3 development and leasing update Macadamia developments at Riverton (foreground) and Rookwood Weir construction (background), central Queensland, May 2022. 12
Slide 13: Acquisition, development and leasing activity
Acquisition, development and leasing activity Entered or extended leases for six properties and acquired additional properties to be developed prior to leasing.1 Central Queensland properties Summary of activities Sector Strategy Activity • Leased to Clarke Creek Energy for 25 years from May 2022 to
Slide 14: Higher and better use development updates
Higher and better use development updates Converting cattle properties and sugarcane farms to generate higher lease income and capital growth potential. Maryborough development sites1 • FY22 development schedule was impacted by above average rainfall – 477 ha have been planted and an additional 523
Slide 15: Productivity improvements
Productivity improvements Productivity improvements complete on Lynora Downs and being implemented on Mayneland and Baamba Plains. Lynora Downs productivity developments • Since the acquisition of Lynora Downs in December 2016, RFM has: • increased water storages from 10,000 ML to 14,142 ML • increa
Slide 16: Portfolio update
4 Portfolio update Harvesting cotton at cropping property Lynora Downs, central Queensland, June 2022. 16
Slide 17: Portfolio overview
Portfolio overview 68 properties located in multiple climatic zones. Assets map, sector information and key lessees1 Note: 1. Shaded areas denote climatic zones differentiated by rainfall seasonality (source: Bureau of Meteorology); see Climatic Diversification discussion paper dated 20 June 2016. N
Slide 18: Revenue by sector and indexation type
Revenue by sector and indexation type Diversification of revenue across five agricultural sectors and majority of leases with inflation-linked indexation (CPI and market rent reviews). FY23f revenue by sector1 Lease indexation mechanisms (by FY23f revenue)1 Notes: 1. Figures shown are subject to rou
Slide 19: Revenue and WALE
Revenue and WALE Weighted average lease expiry (WALE) of 9.1 years and majority of lessees corporate entities. FY23f lease revenue by year of lease expiry1 Corporate lessees2 68% of FY23f lease revenue from corporate lessees Notes: 1. WALE is calculated as the FY23 forecast rent and the year of leas
Slide 20: Sustainability
Sustainability RFM has continued to progress sustainability initiatives. Summary of largest lessees sustainability initiatives1 Net Lessee Lease Summary of sustainability initiatives TCFD zero • During FY22, RFM underwent a review process to identify appropriate target sustainability reporting frame
Slide 21: Forecasts and conclusion
5 Forecasts and conclusion Cattle grazing at Rewan, central Queensland, August 2021. 21
Slide 22: FY23 forecasts
FY23 forecasts FY23 forecast AFFO 10.1 cpu and distributions of 11.73 cpu plus 0.47 cpu franking credit. FY23 forecasts • FY23 forecast AFFO of 10.1 cpu lower than FY22 AFFO of 11.7 cpu primarily due to: • higher assumed interest rates – 2.0 cpu impact1 FY23 • interest costs on development expenditu
Slide 23: Conclusion
Conclusion Leasing of macadamia orchards will have a material impact on AFFO. 1. Positive results for FY22: • EPU up 52% and adjusted NAV up 24%. 2. Challenges in FY23: • higher interest rates • relatively low level of hedging but increasing from FY24 • unleased assets in the development pipeline. 3
Slide 24: Appendices
6 Appendices Dryland wheat crop at the RFF cropping property Lynora Downs, central Queensland, August 2021. 24
Slide 25: FY22 results – summarised comprehensive income
FY22 results – summarised comprehensive income Summarised statement of comprehensive income 12 months ended 12 months ended • Sale of produce and cost of goods sold related to sale of farming proceeds (primarily 30 June 2022 30 June2021 sugar and macadamias). $ $ Property revenue 73,956,000 67,166,0
Slide 26: FY22 results – AFFO composition
FY22 results – AFFO composition Composition of AFFO (pre-tax) 12 months ended 12 months ended • AFFO is pre-tax and excludes fair value adjustments, depreciation and 30 June 2022 30 June 2021 impairment to represent RFF’s property rental business. $ $ Property revenue 71,504,000 67,249,000 • Propert
Slide 27: FY22 results – reconciliation of net profit to AFFO
FY22 results – reconciliation of net profit to AFFO Reconciliation of net profit after tax to AFFO 12 months ended 12 months ended Non-cash items added back to reconcile net profit after tax to AFFO. 30 June 2022 30 June 2021 $ $ Net profit after income tax 209,136,000 119,634,000 Key adjustments in
Slide 28: FY22 results – summarised balance sheet
FY22 results – summarised balance sheet Summarised balance sheet As at As at 30 June 2022 30 June 2021 • Water entitlements are recorded as intangible assets, and held at the $ $ lower of cost less accumulated impairment or fair value in accordance Cash 4,961,000 11,647,000 with accounting standards
Slide 29: FY22 results – total assets reconciliation
FY22 results – total assets reconciliation Total assets reconciliation Adjustment for Investment Bearer Intangible Property-owner Financial assets Plant and water Adjusted Deposits5 Other assets Total property plants assets1, 3 occupied (property)2, 3 equipment entitlements at total assets fair valu
Slide 30: Acquisition and development strategy
Acquisition and development strategy Rural Funds Group is Australia’s first diversified agricultural real estate investment trust. Acquisition and development strategy overview Spectrum of investment opportunities1 Lease agricultural assets predominantly to corporate lessees. Diversify assets by agr
Slide 31: Valuations and capital expenditure
Valuations and capital expenditure Policy to conduct independent valuations at least every two years and rotation of valuers every five years. Valuations, valuers and capex by sector1,2 Notes: 1. Where no independent valuation has been conducted since acquisition, the purchase price and acquisition
Slide 32: Managed by:
Managed by: ACN 077 492 838 David Bryant Tim Sheridan Daniel Yap AFSL 226701 Managing Director, Chief Operating Officer, Chief Financial Officer, 25 years 13 years 9 years Level 2, 2 King Street Deakin ACT 2600 T 02 6203 9700 E investorservices@ruralfunds.com.au W www.ruralfunds.com.au Emma Spear Da