Challenger Limited · ASX:CGF
Challenger — Challenger Infrastructure Fund — FY2007 Earnings Presentation
36 slides from Challenger's earnings presentation, Aug 16, 2007
Slide 1: Challenger Infrastructure Fund 2007 full year results presentation
Challenger Infrastructure Fund 2007 full year results presentation Steve Bickerton Chief Executive Challenger Infrastructure Fund 16 August 2007 1
Slide 2: Important notice
Important notice Information contained in this publication is current as at 30 June 2007 unless otherwise specified and is provided by Challenger Listed Investments Limited (ABN 94 055 293 644) (AFSL 236887) (“Challenger”), as Responsible Entity of the CIF Investment Trust 1 (ARSN 114 139 703) and C
Slide 3: FY07 Highlights
FY07 Highlights • 82% increase in assets under management since 30 June 2006 – Acquired controlling stake in LBC Group – Increased investment in Arqiva • FY07 distribution 32.1cpu, 86% tax deferred • Inexus continues to outperform acquisition expectations • On track to meet FY08 distribution guidanc
Slide 4: FY07 in review
FY07 in review 19 April 2007 CIF led consortium signs 1 June 2007 4 April 2007 Sale and Purchase LBC financial CIF partakes in Arqiva Agreement for LBC close 14 February 2007 funded by A$134m (15%) rights issue to fund 4.50 2007 Interim Results - institutional placement acquisition of National 22 Au
Slide 5: Strategic Objectives
Strategic Objectives • CIF is a diversified global portfolio of high quality infrastructure and utility assets • CIF’s investment criteria is set to identify high quality assets that have long-term, predictable cash-flows with the potential for capital growth • CIF’s investment goal is to deliver a
Slide 6: LBC Group
LBC Group • Description – Second largest independent bulk chemical storage terminals company globally • 2.2 million m³ of capacity • 12 terminals in USA and Western Europe • Acquired 66% stake for $336m – Enterprise value A$1.1bn – Paid 9.2x EBITDA (incl. transaction costs) LBC Houston, Texas USA –
Slide 7: Improved diversification
Improved diversification Increased asset diversification by asset value 30 June 2006 30 June 2007 Northern Northern Wales & Gas, Gas , 7% West, 13% Inexus, 7% 36% Wales & West, Inexus, 13% 57% Arqiva, 24% Arqiva, LBC, 17% 26% Increased geographic diversification by asset value 30 June 2006 30 June 2
Slide 8: LBC highlights CIF's investment criteria
LBC highlights CIF’s investment criteria CIF investment criteria LBC Commentary • Facilities either integrated or proximate to customers operations or Regulated industry or near monopoly market position located in strategic locations • Limited number of viable sites with operating permits High barri
Slide 9: LBC has organic growth potential
LBC has organic growth potential • Growth outlook is attractive – Existing customers requiring additional capacity – Global chemical producers looking for global storage solutions – Ongoing increase for storage to facilitate the import/export of chemicals – Increase in demand for bio fuel storage •
Slide 10: LBC complements CIF's existing assets
LBC complements CIF’s existing assets • Inexus – Growing market share in electricity connections market – Launch of water connections business once licence granted – Bundling of gas, electricity and water connections will underpin market leadership – Other potential “last mile” services being consid
Slide 11: Growing distributions
Growing distributions • FY07 full year distribution upgraded to 32.1cpu from 28.8cpu at interim results • 6% forecast distribution growth in FY08 • Medium term distribution growth guidance of 5% pa • Tax effective distributions, – 86% tax deferred in FY07 – Forecast 65% tax deferred in FY08 Medium t
Slide 12: Growth in asset values
Growth in asset values • NAV increased 5% to $4.10 from $3.90 as at 31 December 2006 20.8% uplift reflects ongoing strength in gas and electricity connection sales 31 December 2006 Asset Values in Local Currency 30 June 2007 250 +10.2% uplift reflects strengthened position of 200 Arqiva following ac
Slide 13: Relative Performance
Strategy is delivering • For 12 months ended 30 June 2007 , CIF delivered – 37.2% price return – 53.5% total return • Market Capitalisation¹ $1.4bn² increased from $298m³ at beginning of period • CIF included in the S&P/ASX 300 from March 2007 CIF Accumulation Index Relative Performance* - 12 months
Slide 14: Asset Update
Asset Update 14
Slide 15: LBC
LBC FY07 Revenue by region • 96% capacity utilisation for 6 months ended 30 June 2007 France, 31% Europe, – 92% utilisation in France 36% – 95% utilisation across the rest of Europe – 99% in North America • Maintenance capex expected to be €10-15m in FY08 USA, 33% • Expansionary capex on target – ER
Slide 16: Inexus
Inexus Total Connections – 30 June 2007 • Gas maintaining market leading position 700,000 – Sales exceeded budget by 21% 600,000 • Electricity exceeding expectations 18.5% CAGR – Sales exceeded budget by 25% 500,000 • 30% growth in the order book – Average duration increased to 4 years reflecting 40
Slide 17: Arqiva
Arqiva • Progression towards DSO is underway and on schedule – Antenna systems and mast strengthening programme on schedule – Scottish Border region will be the first to switch to digital only in 2008/09 • Contract wins cement Arqiva leading provider of digital terrestrial services – Secured 4 of th
Slide 18: Gas Distribution Networks
Gas Distribution Networks • Ongoing upgrade of networks – UK Heath and Safety Executive has enforced nation wide iron gas mains replacement programme • 5 years into 30 year replacement programme • 100% recoverable (50% through RAV and 50% allowed revenue) • Summer 2006 hottest in 300 years – Impacte
Slide 19: Outlook
Outlook 19
Slide 20: 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 Asia Australia & NZ Market Position Financial Attraction Growth Potential Ownership Level •Regulated
Slide 21: Flexibility and capacity
Flexibility and capacity • Manager is focused on delivering CIF Market Capitalisation* $1,600 $4.50 – Acquisition flexibility for the Fund – Optimal capital structure for the assets $1,400 $4.00 $3.50 • Balance sheet flexibility increased $1,200 Market Capitalisation ($millions) – $802m of equity ra
Slide 22: Outlook
Outlook • CIF’s assets will continue to deliver predictable income streams and organic growth – Fund and Asset management teams focused on developing and delivering organic growth strategies • On track to meet FY08 guidance of 34.0cpu • Confident in medium term guidance of 5% distribution growth pa
Slide 23: Questions
Questions 23
Slide 24: CIF contacts
CIF contacts: Steve Bickerton Chief Executive Tel: 02 9994 7327 Email: sbickerton@challenger.com.au Josie Ashton Investor Relations Tel: 02 9994 7898 Email: jashton@challenger.com.au 24
Slide 25: Appendices
Appendices 1. Financials 2. FY07 distribution – Actual vs PDS 3. Reconciliation of FY07 EBITDA; Consolidated to CIF parent 4. CIF Parent EBITDA vs Forecast 5. Portfolio – Summary 6. Portfolio – Hedging summary 7. Asset – Financials 8. Asset – Distributions 9. Asset – Valuations 10. Reconciliation of
Slide 26: Financials
Appendix 1 Financials % FY07* FY06** change Total revenue^ $134.0m $82.6m 62% EBITDA & unrealised items^ $79.0m $56.7m 39% Assets Under Management $1,352m $743m 82% Distributions to security holders $83.6m $34.1m Large Full year distribution per security 32.1cpu 14.2cpu' Large ^ CIF consolidated * F
Slide 27: FY07 distribution – actual vs 2007 PDS
Appendix 2 FY07 distribution – actual vs 2007 PDS 2007 Source Actual vs PDS Reflecting ($m) ($m) Inexus 48.2 47.0 Timing benefit Arqiva 12.3 12.4 Inline Wales & West 7.0 7.1 Inline Utilities Northern Gas 8.6 8.6 Inline Networks 5.4 4.3 Net Interest on increased Other cash holdings 27 * Comprises of
Slide 28: Reconciliation of FY07 EBITDA; Consolidated to CIF Parent
Reconciliation of FY07 EBITDA; Appendix 3 - Consolidated to CIF Parent FY07 Actual A$M Consolidated EBITDA 79.0 Inexus EBITDA (46.5) LBC EBITDA (6.0) Distributions from Controlled Investments 47.9 Other items* 0.9 CIF Parent EBITDA 75.3 * Comprised of Inexus and LBC external interest income and othe
Slide 29: CIF Parent EBITDA vs Forecast
Appendix 4 CIF Parent EBITDA vs Forecast CIF Parent FY07 FY07 Variance Notes Actual PDS PDS $m $m $m Investment revenue Distributions - Minority 28.9 29.1 (0.2) Movements due to FX. Investments Distributions - Controlled 47.9 46.7 1.2 Inexus distribution timing Investments difference Other income (*
Slide 30: Portfolio – Summary
Appendix 5 Portfolio – Summary Equity ownership Description of Business Leading Independent Gas Transporter (IGT) and Independent Distribution Inexus 80.4% Network Operator (IDNO) in the UK, providing the ‘last mile’ of gas and electricity connections to new dwellings. Second largest independent ope
Slide 31: Portfolio – Hedging summary
Appendix 6 Portfolio – Hedging summary Inflation Interest rates Foreign exchange Direct regulated 100% of borrowings Forecast distributions Inexus price adjustment hedged to 2030 hedged on rolling 5 year basis Contracts have 100% of current Forecast distributions annual inflation and borrowings are
Slide 32: Asset – Financials
Appendix 7 Asset – Financials EBITDA margin Revenue (£m) EBITDA (£m) (%) FY06 FY07 FY06 FY07 FY06 FY07 Inexus* 23.3 32.0 13.6 18.9 58.3 59.1 Arqiva 323.4 362.8 122.1 127.3 37.8 35.1 Wales & West 230.8 233.8 57.2 52.3 24.8 22.4 Utilities Northern Gas 280.1 260.9 95.8 80.0 34.2 30.7 Networks 6 months
Slide 33: Asset – Distributions
Appendix 8 Asset – Distributions Forecast distribution Distributions paid to CIF (cps) to CIF (cps) FY06 FY07 FY08 Inexus 3.9 18.5 15.2 LBC* n/a n/a 8.9* Arqiva 7.7 4.7 6.6 Wales & West 2.8 2.7 2.2 Utilities Northern Gas 2.3 3.3 2.4 Networks ** CIF acquired LBC 1 June 2007 and will pay a 13 month di
Slide 34: Asset – Valuations
Appendix 9 Asset – Valuations 31 Dec 2006 30 June 2007 Change in 31 Dec 2006 30 June Change in Asset Values Asset Values independent Asset Values in 2007 Asset independent in local in local valuation Australian Values in valuation currency currency 30 June 2007 dollars Australian 30 June 2007 in (£
Slide 35: Reconciliation of securities on issue
Appendix 10 Reconciliation of securities on issue Total Securities Date Description Securities on Issue Issued Class A Class B 30-Jun-06 Opening Balance 149,985,716 89,991,430 239,977,146 09-Oct-06 Management Fees 853,622 150,839,338 89,991,430 240,830,768 02-Jan-07 Conversion to Class A 44,995,715
Slide 36: Inexus – Connections snapshot
Appendix 11 Inexus – Connections snapshot Jun-04 Jun-05 Jun-06 Jun-07 New gas sales 62,869 67,035 77,278 New electricity sales 5,229 15,365 28,641 Opening gas connections 265,028 314,006 364,535 New gas connections constructed 48,978 50,529 51,343 Closing gas connections 314,006 364,535 415,878 Open
Challenger Infrastructure Fund — FY2007 Earnings Presentation on 6ix