Challenger Limited · ASX:CGF
Challenger — Challenger Wine Trust — H1 FY2008 Earnings Presentation
34 slides from Challenger's earnings presentation, Feb 5, 2008
Slide 1: Challenger Wine Trust Half-year results
Challenger Wine Trust Half-year results for the six months ended 31 December 2007 Nick Gill Fund Manager, Challenger Wine Trust 5 February 2008
Slide 2: Important Notice
Important Notice Information contained in this publication is current as at 5 February 2008 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 Wine Trust (“Trust”). This docume
Slide 3: Highlights
Highlights • Growth in net property income driving strong financial results • Active management renewing portfolio – $59.1 million in transactions completed during period • Strengthened portfolio composition and diversification • Vineyard sector conditions improving • Targeted growth opportunities •
Slide 4: Financial results
Financial results
Slide 5: Solid financial performance
Solid financial performance • Profit from operating activities $8.8 million – up 22.4% on pcp – Net property income up $1.2 million – Gain on asset sales of $0.9 million – Trust expenses up $0.5 million • Distribution per unit 4.68 cents – up 0.9% on pcp 31-Dec-07 31-Dec-06 Variance $000 $000 $000 %
Slide 6: Key drivers of growth in net property income
Key drivers of growth in net property income • Net property income up $1.2 million or 8.3% as a result of income from: – Newly acquired assets – Completed developments – Underlying stable portfolio performance Net property income 31-Dec-07 31-Dec-06 Variance $000 $000 $000 % Stable portfolio 7,540 7
Slide 7: Uplift in NAV and NTA per unit
Uplift in NAV and NTA per unit 31-Dec-07 30-Jun-07 • Uplift in NAV per unit (3.3%) and Total assets ($000) 335,749 297,489 NTA per unit (1.2%) reflects: Net assets ($000) 162,291 156,194 – Net impact of transactions completed Net tangible assets ($000) 140,758 139,199 during period Units on issue (0
Slide 8: Positive impact of asset valuations
Positive impact of asset valuations • Nine assets independently revalued during period (18.5% portfolio value) – Uplift of $5.3 million in fair value or $3.8 million in carrying value recorded* – Rarangi Vineyards – up $2.7 million reflecting strong demand and limited supply of suitable land in regi
Slide 9: Financial position
Financial position • Gearing 49.3% at 31 December 2007 (within preferred range 45-55%) • Interest rates effectively 100% hedged for duration of lease terms – Weighted average term to maturity 6.2 years • New Zealand borrowings provide 95% natural foreign exchange hedge 31-Dec-07 30-Jun-07 Total asse
Slide 10: Refinancing strategy
Refinancing strategy • Total loan facilities $165.5 million Borrowing facility expiry profile* • Currently consolidating to larger, 120 more flexible facilities with longer 100 duration 80 $m 60 • Terms agreed on new four year 40 $96.9 million facility with existing 20 lender on same margin and simi
Slide 11: Active management renewing portfolio
Active management renewing portfolio
Slide 12: CWT portfolio strategy
CWT portfolio strategy • Target vineyards and developments that provide sustainable operating base and generate above average gross margins per hectare • Build on strong relationships with high quality established wine industry operators • Portfolio diversification overlay – by region, tenant and gr
Slide 13: Transaction and leasing activity enhancing portfolio quality and income security
Transaction and leasing activity enhancing portfolio quality and income security 1. Elimination of Evans and Tate exposure 2. Increased warm climate portfolio water security 3. Enhanced cool climate portfolio quality 13
Slide 14: Elimination of Evans and Tate exposure
1. Elimination of Evans and Tate exposure • Re-leasing of Cocoparra and Woods Vineyards (NSW) to Foster’s Group – Lease terms mirror existing Evans and Tate lease • Initial term 6 years plus 2x 5 year options to renew • FY08 rental includes amount equivalent to lost rental after Evans and Tate enter
Slide 15: Increased warm climate portfolio water security
2. Increased warm climate portfolio water security • Re-allocation of portfolio to areas with higher water security • Acquisition of Stephendale Vineyard for $25 million – High security irrigation water sourced from Murrumbidgee River – current allocation of 90% – Sale and leaseback to Warburn Estat
Slide 16: Enhanced quality of cool climate portfolio
3. Enhanced quality of cool climate portfolio • Acquisition of Miamba vineyards for $11.5 million – Sale and leaseback to Grant Burge Wines – Initial rental yield 9.8% pa with annual reviews of 1.5% – Eight year lease plus 3x 4yr extensions • January 2008 – Sale of small scale Trillians Hill Vineyar
Slide 17: Strengthened portfolio composition and diversification
Strengthened portfolio composition and diversification
Slide 18: Portfolio snapshot at December 2007
Portfolio snapshot at 31 December 2007 Australia New Zealand^ Total 30 June 2007 Number of assets 21 4 25 29 Portfolio fair value ($m) 243.7 75.4 319.2 299.5 % total portfolio value (%) 76.3 23.7 100 100 Total area (ha) 5,009 745 5,754 6,210 Area planted (ha) 3,963 627 4,590 4,192 Occupancy (%) 100
Slide 19: Active management of lease expiry profile
Active management of lease expiry profile • 100% portfolio occupancy • WALE extended to 6.2 years following transaction and leasing activity* • Only 4.9% of portfolio income expiring before June 2009 – of which 2.7% is currently offered for sale Lease expiry profile (by income)* 25% 20% 20.8% 17.8%
Slide 20: Portfolio diversification enhanced
Portfolio diversification enhanced Vineyard type diversification (by value)* Tenant diversification (by value)* Other McGuigan New Zealand - 10.8% Simeon cool climate, Wines* 23.6% Australia - warm Warburn 34.0% climate, 31.0% Estate 8.3% Delegat' s Group Grant Burge 23.6% Wines 5.2% Foster' s Perno
Slide 21: Vineyard sector conditions
Vineyard sector conditions
Slide 22: Lower supply has reduced grape surplus
Lower supply has reduced grape surplus Australian wine production and sales • 2008 grape harvest forecast to be 1.9 1.7 Million litres 1.4 million tonnes* 1.5 – Significantly below 2006 harvest of 1.3 1.9 million tonnes 1.1 0.9 – Limited impact from 2007 frost 2003 2004 2005 2006 2007 – Minimal impa
Slide 23: Demand for grapes strong
Demand for grapes strong Riverina grape prices 700 • Value of grape crop forecast to increase with 653 600 $ per tonne higher grape prices compensating for lower 488 500 425 424 478 harvest volumes 439 400 416 386 • Sustainability of higher grape prices is 300 improving with higher wine prices 2005
Slide 24: Improved warm climate vineyard water availability
Improved warm climate vineyard water availability Murray Darling Basin - selected dam • Good rainfall has improved dam levels and water storage levels allocations across all regions 50% 41% • However, dams still significantly below full 40% capacity and Murray River water allocations 30% 24% 27% 26%
Slide 25: New Zealand vineyard sector conditions
New Zealand vineyard sector conditions • Supply – growth in area planted slowing, Grape prices (1999 - 2006) 2,200 reflecting reduced availability of suitable land 2,000 NZ$ per tonne 1,800 for vineyard development in key wine 1,600 1,400 growing regions 1,200 1,000 • Demand – growth in internationa
Slide 26: Growth opportunities and outlook
Growth opportunities and outlook
Slide 27: Growth opportunities
Growth opportunities • Focussing on opportunities to work with: (a) high quality existing tenant base (b) other established wine companies with strong operational track record to meet their ongoing operational requirements – Sale and leaseback and/or new vineyard developments in New Zealand – Vineya
Slide 28: Outlook and FY08 distribution guidance
Outlook and FY08 distribution guidance • CWT continues to provide a high level of income security and predictability – Portfolio 100% occupied with WALE of 6.2 years – Attractive and stable portfolio yield of 10% pa – Portfolio well diversified by region, tenant and grape variety • Announcement of F
Slide 29: Questions
Questions
Slide 30: Contacts
Contacts Nick Gill Fund Manager Tel: 02 9994 7291 Email: ngill@challenger.com.au Susie McPherson Investor Relations Tel: 02 9994 7958 Email: smcpherson@challenger.com.au 30
Slide 31: Appendix
Appendix
Slide 32: Profit and loss statement
Profit and loss statement 31-Dec-07 31-Dec-06 Variance $000 $000 $000 % Net property income 15,802 14,594 1,208 8.3 Other income 333 257 76 29.6 Gains from sale of assets 861 - 861 - Finance costs (6,150) (5,931) (219) (3.7) Management fees (1,217) (1,144) (73) (6.4) Operating expenses (795) (561) (
Slide 33: Movements in fair value and carrying value
Movements in fair value and carrying value Fair Carrying value value $000 $000 30-Jun-07 291,236 286,989 Acquisitions 42,198 42,198 Disposals (16,890) (16,256) Revaluation changes 5,327 5,327 Water rights at cost - (1,510) Depreciation (105) (105) Foreign currency translation movements (2,613) (2,61
Slide 34: Rental yield analysis
Rental yield analysis Proportion of Average Over/(under) portfolio rental yield renting* (%) (%) (%) Warm climate – Australia 45.3 10.4 3.0 Cool climate – Australia 31.1 11.0 22.4 Cool climate – New Zealand 23.6 7.9 (26.4) Cool climate – total 54.7 9.6 (0.9) Warm climate – total 45.3 10.4 3.0 Austra
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