Rural Funds Group · ASX:RFF
Rural Funds — H1 FY2016 Earnings Presentation
46 slides from Rural Funds's earnings presentation, Feb 24, 2016
Slide 1: Financial results presentation half year ended 31 December 2015
For personal use only Rural Funds Group (RFF) Financial results presentation half year ended 31 December 2015 24 February 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. Fund details Daniel Yap 6. Appendices Financial Controller James Powell Investor Relations & Distribution Manager 3
Slide 4: Highlights
For personal use only Highlights
Slide 5: HY2016 highlights
Highlights For personal use only HY2016 highlights Further details Net profit before income tax of $5.2m Slide 9 Adjusted funds from operations (AFFO) of Slide 10 $6.2m in line with previous forecast Net Asset Value (NAV) of $1.12 per unit, Slide 39 adjusted NAV of $1.18 per unit Gearing of 33.8% Sl
Slide 6: Results summary
Results summary For personal use only Metrics as at 31 December 2015 Income Net profit before income tax $5,182,000 AFFO $6.2m (pre-tax) and AFFO per Total comprehensive income $4,932,000 unit 4.3 cents in line with previous Adjusted funds from operations (AFFO) $6,194,000 forecast to 30 June 2016
Slide 7: Property reconciliation
Property reconciliation For personal use only Adjusted property assets reconciliation HY2016 300,000,000 36,696,000 1,004,000 294,720,000 290,000,000 280,000,000 270,000,000 7,854,000 260,000,000 249,020,000 -1,009,000 579,000 576,000 250,000,000 240,000,000 Adjusted Poultry Almond Vineyard Tocabil
Slide 8: Results
For personal use only Results
Slide 9: HY2016 results: statement of comprehensive income
HY2016 results For personal use only Summarised statement of comprehensive income Revenue has increased primarily as a 6 mths ended 6 mths ended result of increased assets due to 31 December 31 December planned capital expenditure 2015 2014 $ $ Finance costs consistent despite increase in debt,
Slide 10: HY2016 results: Composition of AFFO (pre-tax)
HY2016 results For personal use only Composition of AFFO (pre-tax) AFFO is pre-tax and excludes fair 6 mths ended 6 mths ended value adjustments, depreciation and 31 December 2015 31 December 2014 impairment to represent RFF’s $ $ property rental business Property revenue 12,453,000 10,686,000 A
Slide 11: Capital management
For personal use only Capital management
Slide 12: Capital management
Capital management For personal use only Equity Debt Bank approval for macadamia and Perth 28% increase for period 30 June 2015 to Unit price Limit Markets transactions. Outright limit to be 31 December 2015 ($1.10 to $1.40) increased after the reporting period Facility expires December 2018, curren
Slide 13: Macadamia acquisition
Macadamia acquisition For personal use only Macadamia orchards location Negotiated an option to acquire three macadamia orchards, announced 29 January 2016 Orchards located near Bundaberg in Queensland 259 hectares of macadamia trees 234 ha leased to a tax effective managed investment scheme
Slide 14: Macadamia acquisition: 2007 Macgrove Project
Macadamia acquisition For personal use only 2007 Macgrove Project Transaction is conditional on RFM being appointed responsible entity of the project, Growers meeting to be held on Wednesday, 24 February 2016. This is consistent with the existing RFM Almond Funds structure RFM will also acquire
Slide 15: Perth Markets
Perth Markets For personal use only Perth Markets On 12 February 2016 RFF announced the acquisition of an 8.96% stake in Perth Markets Limited (PML) for $5.275m PML is a consortium consisting of Brisbane Markets Ltd, Adelaide Markets Ltd, United Crates and RFF as well as wholesalers and retailer
Slide 16: Tocabil development update
Tocabil development update February 2016 For personal use only August 2015 • Orchard development on schedule: 400 ha planted 2015 calendar year, and a further 200 ha planned for 2016 • RFF has acquired 5,314ML1 of water entitlements to date, with a further staged acquisition of Pump station under co
Slide 17: Kerarbury development update
Kerarbury development update For personal use only Kerarbury development Orchard development on schedule: 1,200 ha to be planted 2016 calendar year (increase of 200 ha) and a further 300 ha in 2017. Additional 2017 plantings are being investigated RFF has acquired 15,082 ML of water entitlements
Slide 18: Debt facility
Debt facility For personal use only Debt metrics Key changes for FY15: Negotiated lower debt cost, 31 Dec 2015 30 June 2015 effective FY16 Term debt facility limit1, 2 $136.0m $103.0m Increased amount and tenor of interest rate hedges to more closely align with Term debt drawn $103.0m $89.7m w
Slide 19: Outlook
For personal use only Outlook
Slide 20: Forecasts
Forecasts For personal use only FY16 distributions AFFO and distributions on track to previously forecast 30 June 2016 result Record date CPU 30 September 2015 (paid 30 October 2015) 2.23 FY16 declared distributions are expected to be majority tax deferred 31 December 2015 (paid 29 January 2016)
Slide 21: RFF objective
RFF objective For personal use only RFM has communicated the following objective for RFF: • Increase market liquidity by growing net assets RFM continues to pursue this objective by: 1. Increasing AFFO per unit and distributions 2. Improving the market's understanding of RFF 3. Increasing market
Slide 22: 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 The investment strategy is to invest across the full range of the asset continuum shown below, with the objective of ensuring the asset mix
Slide 23: Climatic diversification
Climatic diversification For personal use only RFM has conducted a study on rainfall variability correlation across Australia to identify the likelihood of above or below average seasons occurring in the same year across different locations1 While the majority of RFFs existing assets fall within
Slide 24: Acquisition opportunities
Acquisition opportunities For personal use only In seeking further opportunities to expand the portfolio RFM has identified new sectors that consider climatic diversification across three uncorrelated climatic regions (South Eastern, Northern and Western Australia): – Cattle properties • Large sca
Slide 25: Australian cattle industry – demand
Australian cattle industry – demand GDP per capita and beef consumption1 For personal use only 25 United States There is a strong positive relationship between income levels and the consumption of beef2 Beef consumption per capita (kg) 20 Israel Australia Chile Canada As China’s middle class con
Slide 26: Australian cattle industry – supply
Australian cattle industry – supply For personal use only Total herd – historical and forecast1 • Destocking due to drought resulted in high slaughter numbers • The Australian cattle herd is forecast to decline to 26.2 million head by 30 June 2016, the lowest level since 1994 • The slaughter of fema
Slide 27: Australian cattle investment rationale
Australian cattle investment rationale For personal use only • An investment in the cattle sector may be attractive for the following reasons: – Large industry with comparative advantage – Potential for high capital and income growth • Land value and rental growth is yet to reflect historical high c
Slide 28: Fund details
For personal use only Fund details
Slide 29: Overview
Overview RFF is the only diversified agricultural REIT listed on the ASX For personal use only Asset locations Rural Funds Management Ltd (RFM) is the responsible entity for RFF RFM is a farm and fund manager with almost 20 years experience New South Wales South RFM has over a decade of farmin
Slide 30: Snapshot
Snapshot For personal use only Key statistics 31 December 2015 Key forecasts FY16 Total assets $302.4m Distributions per unit FY16 8.93 cents Net Asset Value (NAV) $184.0m Distribution growth rate 4% Units on issue 164.4m Distribution payment frequency Quarterly NAV per unit $1.12 Adjusted Funds fro
Slide 31: Performance and distributions
Performance and distributions For personal use only FY16 February 2014: Compliance listed on ASX FY14 FY15 forecast March 2015: Announced $15.0m equity AFFO (cpu) 6.00 9.09 9.58 raising at $1.05 per unit as part of funding Distributions (cpu) 8.521 8.59 8.93 package to develop Tocabil, a 600 ha
Slide 32: Assets and lessees overview
Assets and lessees overview For personal use only Assets Almonds Poultry Vineyards Other & macadamias farms • Select Harvests • RFM Poultry (NSX: • Treasury Wine • 70+ Livestock (ASX: SHV) RFP) Estates (ASX: TWE) Operators (lessees for - Australia’s largest - World’s largest listed livestock owned b
Slide 33: Key assets further details
Key assets further details For personal use only Almond orchards Poultry farms Vineyards Two established almond orchards located near 154 sheds on 17 farms. Consisting of 134 sheds Seven vineyards with 666 ha planted to vines Hillston, NSW, of which 1,221 ha leased to SHV, on 13 farms in Griffith, N
Slide 34: Diversified assets
Diversified assets For personal use only Pro forma portfolio diversification incorporating Portfolio diversification by adjusted asset values1 Tocabil & Kerarbury developments2 4% 2% 4% 3% 10% 23% 13% 30% 17% 35% 26% 33% Poultry farms Almond orchards Poultry farms Almond orchards Almond orchards und
Slide 35: Diversified lessees
Diversified lessees For personal use only Pro forma forecast revenue incorporating FY16 forecast revenue by lessee1 Tocabil & Kerarbury developments2 5% 4% 10% 13% 30% 39% 11% 15% 10% 13% 15% 35% RFM Poultry (NSX: RFP) Olam Orchards Australia RFM Poultry (NSX: RFP) Olam Orchards Australia RFM Almond
Slide 36: Appendices
For personal use only Appendices
Slide 37: Reconciliation of net profit after tax to AFFO
HY2016 results For personal use only Reconciliation of net profit after tax to AFFO Table adds back non cash items to 6 mths ended 6 mths ended reconcile net profit after tax to AFFO 31 December 2015 31 December 2014 Major items for HY2016 $ $ Net profit before tax 5,182,000 3,903,000 – $0.82m u
Slide 38: Summarised balance sheet
HY2016 results For personal use only Summarised balance sheet Net assets $184.1m As at As at NAV per unit $1.12 31 December 2015 30 June 2015 $ $ Adjusted NAV per unit $1.18 (refer to Cash 2,925,000 712,000 slide 39 for reconciliation) Property investments 276,906,000 239,445,000 Equity rais
Slide 39: Adjusted balance sheet
HY2016 results For personal use only Adjusted balance sheet RFF owns significant water Statutory Adjusted entitlements, sufficient for the ongoing balance sheet balance sheet operation of each key asset at Revaluation of at Water entitlements are regularly traded 31 December water 31 December in
Slide 40: Property investment reconciliation
HY2016 results For personal use only Property investment reconciliation Investment Biological Intangible Financial Total property assets assets1 assets2 $ $ $ $ $ Balance as at 30 June 2015 142,380,000 67,580,000 28,965,000 520,000 239,445,000 Acquisition – Kerarbury 9,336,000 - 10,360,000 7,718,000
Slide 41: Macadamia industry
Macadamia industry • Australia is the world’s largest supplier of macadamia kernel (31%) and the second largest producer (27%) For personal use only • The value of the Australian industry has doubled since 2010, reaching $200m in 2015 and producing over 40,000 tonnes nut is shell per annum • There a
Slide 42: Agricultural property leasing
Agricultural property leasing RFF uses a leasing model in an underserviced domestic sector For personal use only Observations: Australian property sectors1 – Academic research demonstrates that leasing assets provides capital management benefits and 160 flexibility to lessees and is linked to high
Slide 43: About RFM
About RFM RFM is one of the oldest and most experienced agricultural funds management organisations in For personal use only Australia Rural Funds Management Limited (RFM) is an experienced fund and asset manager that specialises in Australian agriculture Established in 1997, RFM operates as an
Slide 44: Fund and farm manager
Fund and farm manager RFM has a unique skill set in both farm and funds management For personal use only RFM performs an oversight role as a fund and asset manager including: – Overseeing compliance to the financial, farming and reporting aspect of each lease – Water management including obtaining
Slide 45: 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 Contact • Joined RFM in 2003 • RFM Company Secretary • Former director of broking firm JBWere with more than • Responsible for reviewing and
Slide 46: Corporate information
Corporate information For personal use only 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: +61 2 6281 5077 Website: www.ruralfunds.com.au For further information: For media enquiries: Investor rel