Australian Foundation Investment Co. Ltd. · ASX:AFI
Australian Foundation Investment — Investor Presentation (November 2009)
35 slides from Australian Foundation Investment's investor presentation, Nov 23, 2009
Slide 1: Cover letter to ASX: NZ Shareholder Information Meetings
For personal use only 23 November 2009 The Manager Company Announcements Office Australian Securities Exchange Limited Exchange Centre Level 4 20 Bridge Street Sydney NSW 2000 Electronic Lodgement Australian Foundation Investment Company Limited NZ Shareholder Information Meetings Dear Sir or Madam
Slide 2: Presentation to New Zealand Investors
For personal use only Australian Foundation Investment Company Presentation to New Zealand Investors November 2009
Slide 3: Disclaimer
Disclaimer For personal use only Australian Foundation Investment Company Limited, their related entities and each of their respective directors, officers and agents (together the Disclosers) have prepared the information contained in these materials in good faith. However, no warranty (express or i
Slide 4: Australian Foundation Investment Company
Australian Foundation Investment Company For personal use only We invest shareholders’ capital in a diversified portfolio of quality Australian Listed Companies to achieve: ¾ Dividends which, over time, grow faster than the rate of inflation; and ¾ Attractive total returns over the medium to long te
Slide 5: Our Approach to Investing
Our Approach to Investing For personal use only We BUY to hold for the medium to long term not resale Holdings are kept under constant review but SALES are not common, often driven by takeovers Not pressured from fund flows or the index
Slide 6: AFIC's Investment Structure – October 2009
AFIC’s Investment Structure – 31 October 2009 For personal use only Long Term Investment portfolio: ¾ A$4.6 billion ¾ Approximately 75 securities, focus on S&P/ASX 200 Trading portfolio: ¾ Up to 10% of total portfolio - A$50 million or 1.1% ¾ Short term positions, options writing strategies Fi
Slide 7: What Happened in the Australian Market
For personal use only Value Ju n- 0 2500 3000 3500 4000 4500 5000 5500 6000 6500 O 2 7000 ct -0 Fe 2 b- 0 Ju 3 n- 0 O 3 ct -0 Fe 3 b- 0 Ju 4 n- 0 O 4 ct -0 Fe 4 b- 0 Ju 5 n- 0 19 O 5 % ct -0 pa Fe 5 b- 0 Ju 6 Date n- 0 O 6 ct -0 Fe 6 b- 0 Ju 7 n- 0 O 7 ct -0 Ordinaries Price Index Fe 7 54 b- % 0 Ju
Slide 8: Australian All Ordinaries Price Index – Long Term
Australian All Ordinaries Price Index – Long Term For personal use only
Slide 9: Key Investment Themes for AFIC Over the Year
Key Investment Themes for AFIC Over the Year For personal use only Took a cautious approach in very difficult market conditions - exited some holdings Maintained a relatively high cash balance Participated in deeply discounted placements where attractive long term value was on offer Tried to
Slide 10: Operating Profit Analysis – 2009 vs 2008
Operating Profit Analysis For personal use only – 2009 Full Year vs. 2008 Full Year Major Differences 240 Dividends and $205.1m $199.6m distributions were 200 $214.9m versus $217.4m last year 160 $ million Trading income was 120 negative $12.5m whereas last year this 80 was negative $7.6m 40 Income
Slide 11: Profit for the Year (AIFRS) Profit Analysis
Profit for the Year (AIFRS) Profit Analysis For personal use only –2009 Full Year vs. 2008 Full Year 450 $416.1m Major Items after 400 $211.0m tax 300 Unrealised impairment charge of $107.8m 250 Realised gains on sales 200 $ million of $11.7m $205.1m $199.6m 150 -$96.1m 100 $103.5m Net Operating Pro
Slide 12: AIFRS Impairment Charge
AIFRS Impairment Charge For personal use only ¾ Auditors required an impairment charge where a holding: was below its accounting cost base for a minimum of 15 months, or its market value was more than 35% below its accounting cost base ¾ These were unrealised losses ¾ This was required even if w
Slide 13: Accounting Result Impacted by Unrealised Losses
As a result, the Accounting Result was impacted For personal use only by these unrealised losses ¾ The unrealised impairment charge of $107.8 million helped reduce the $199.6 million Operating Profit to an accounting profit of $103.5 million ¾ It had no effect on net asset backing per share ¾ These
Slide 14: Earnings Per Share and Dividends Per Share
Earnings Per Share and Dividends Per Share For personal use only 24.00 22.00 23.7 20.00 21 21 21.2 21 20.5 18.00 19.4 Cents per share 16.00 17.3 17 14.00 16 12.00 10.00 8.00 6.00 4.00 2.00 0.00 2005 2006 2007 2008 2009 Financial year Earnings per share Dividends per share Note: Earnings per share is
Slide 15: Annualised Returns to October 2009 in A$
Annualised Returns to 31 October 2009 in A$ For personal use only 25% 22.5% 21.4% 20.3% 20% 15% 13.3% 10.8% 10.9% 10% 9.6% 8.8% 9.5% 6.3% 5% 2.5% 0% -0.5% 1 year return 3 year return 5 year return 10 year return -5% Net Asset per share growth plus dividends Share Price growth plus dividends S&P/ASX
Slide 16: Annualised Returns to October 2009 in $NZ
Annualised Returns to 31 October 2009 in $NZ For personal use only 40.00% 35.00% 34.2% 33.0% 31.8% 30.00% 25.00% 20.00% 16.3% 15.00% 12.4% 11.9% 10.7% 10.8% 9.4% 10.00% 5.00% 0.00% 1 year return 5 year return 10 year return Net asset per share growth plus dividends (NZD) Share price growth plus divi
Slide 17: AFIC Share Price Relative to Net Asset Backing
AFIC Share Price Relative to Net Asset Backing For personal use only 20% Premium 15% 10% 5% 0% -5% -10% -15% Discount -20% Oct-99 Oct-01 Oct-03 Oct-05 Oct-07 Oct-09
Slide 18: Top Ordinary Securities (A$) – October 2009
Top 25 Ordinary Securities (A$) – 31 October 2009 For personal use only % of $m portfolio * 1 BHP Billiton 533.8 11.5% 2 Westpac Banking Corporation 480.9 10.3% 3 Commonwealth Bank of Australia 442.7 9.5% * 4 National Australia Bank 271.1 5.8% 5 Rio Tinto 227.9 4.9% 6 Wesfarmers (a) 212.8 4.6% 7 Woo
Slide 19: Top Ordinary Securities (A$) – October 2009
Top 25 Ordinary Securities (A$) – 31 October 2009 For personal use only % of $m portfolio * 11 Santos 101.4 2.2% 12 QBE Insurance Group 91.9 2.0% 13 Computershare 89.2 1.9% 14 Amcor 86.2 1.9% * 16 Oil Search 81.8 1.8% 15 Origin Energy 78.0 1.7% 17 Toll Holdings 68.6 1.5% * 18 AMP 61.4 1.3% 21 Orica
Slide 20: Top Ordinary Securities (A$) – October 2009
Top 25 Ordinary Securities (A$) – 31 October 2009 For personal use only % of $m portfolio 22 AGL Energy 59.5 1.3% 19 Brambles 55.7 1.2% 23 Westfield Group 50.8 1.1% 24 Milton Corporation 50.6 1.1% 25 Australian Infrastructure Fund 50.3 1.1% Total 3,818.4 As % of Total Portfolio Value 82.1% (excludes
Slide 21: Major Trends in Investment Portfolio Relative to Industry Sector
Major Trends in Investment Portfolio Relative to For personal use only Industry Sector Actively Increasing Holding Energy Consumer Discretionary Banks Consumer Staples Materials Industrials Telecommunications Note AFIC is not typically a seller of shares
Slide 22: Major Purchases in the Investment Portfolio
Major Purchases in the Investment Portfolio (above For personal use only A$2m) since 1 July 2009 to 31 October 2009 $million Comment Hastings Diversified Utilities 15.6 Placement/Underwriting Oil Search 11.8 DRP + Placement Amcor 11.0 Placement Westpac Banking Corp 9.9 DRP Eastern Star Gas 9.2 Purch
Slide 23: Major Sales in the Investment Portfolio
Major Sales in the Investment Portfolio (above For personal use only A$2m) since 1 July 2009 to 31 October 2009 $million Comment Santos FUELS 13.2 Redemption by Company
Slide 24: New Stocks in the Investment Portfolio 2007 to 2009
New Stocks in the Investment Portfolio 2007 to 2009 For personal use only OneSteel (as a result of takeover of Smorgon Steel) Fleetwood Corporation IRESS Market Technology Crane Group Tox Free Solutions Iluka Resources
Slide 25: Comparative Price Index Returns since July 2008
Comparative Price Index Returns since 1 July 2008 For personal use only 10% Financials 0% Industrials -10% S&P/ASX 200 -20% Resources -30% -40% -50% -60% 9 8 9 8 9 9 09 08 -0 0 0 l-0 l-0 -0 n- p- p- - ar ay ov Ju Ju Se Se Ja M M N
Slide 26: Market Recovery From Previous Downturns
Market Recovery From Previous Downturns For personal use only Recovery Phases - Major Market Falls - Daily Moves Index rebased to 100 at trough 1931 1974 1982 1987 1991 2009 180 170 160 150 140 130 120 110 100 0 50 100 150 200 250 300 350 400 450 500 550 600 650 Source: IRESS, GSJBW Research estimat
Slide 27: Prospective PE's back through the long term average
For personal use only Au g- 8 10 12 14 16 18 20 22 Fe 89 b- Au 90 g- Fe 90 b- Au 91 g- Fe 91 b- Au 92 g- Source: GSJBW Research estimates Fe 92 b- Au 93 g- Fe 93 b- Au 94 g- Fe 94 b- Au 95 g- Fe 95 b- Au 96 g- Average: 14.5 Fe 96 b- Au 97 g- Fe 97 b- Au 98 g- Fe 98 b- Au 99 g- Fe 99 b- Au 00 g- Fe 0
Slide 28: Expectations of strong recovery in earnings
Expectations of strong recovery in earnings For personal use only EPS GROWTH FORECASTS Core - ASX 300 Industrials (ex loss makers) (%) 25.0 20.0 FY10 EPS forecasts drifted lower; FY11 higher 15.0 10.0 5.0 ` 0.0 -5.0 -10.0 2007 2008 2009 2010 2011 -15.0 -20.0 6 7 8 9 6 7 8 6 7 8 9 6 9 7 8 -0 -0 -0 -0
Slide 29: Comment on Dividends
Comment on Dividends For personal use only ¾ Small part of the 2009 final dividend funded from realised capital gains ¾ We have probably seen the low point for earnings and dividends however the recovery in dividends may lag the upturn in earnings ¾ Level of dividends paid will be assessed at the ti
Slide 30: Outlook
Outlook For personal use only ¾ Monetary and fiscal stimulus is helping the Australian economy ¾ Australia facing higher interest rates which may impact the sustainability of growth ¾ Developed economies still face major structural issues ¾ Australian companies appear well positioned but their outlo
Slide 31: Australian Foundation Investment Company
AUSTRALIAN FOUNDATION INVESTMENT COMPANY an iy ; D|J\E R|R|T|W/A R|R|H} }IJN]V E)S|T|M E|IN|T|S * % MIRRABOOKA Investments Limited = = AUSTRALIAN FOUNDATION INVESTMENT COMPANY
Slide 32: Major Sales in the Investment Portfolio 2008/2009 – Takeover Activity
Major Sales in the Investment Portfolio (above $5m) For personal use only 2008/2009 TAKEOVER ACTIVITY $m St George Bank(a) 54.4 Queensland Gas Company (b) 46.0 (a) Takeover by Westpac (b) Sold on market into takeover by BG group plc.
Slide 33: Major Sales in the Investment Portfolio 2008/2009 con't
Major Sales in the Investment Portfolio (above $5m) For personal use only 2008/2009 con’t. OTHER $m Suncorp Metway 29.3 James Hardie N.V. 25.0 ConnectEast Group 21.3 PaperlinX 8.2 News Corporation Non Voting 8.1 Wesfarmers 7.2 Brickworks Preference Shares (c) 7.0 News Corporation 6.2 (c) Redeemed by
Slide 34: Relative Performance - Australian and NZ Markets
Relative Performance - Australian and NZ Markets For personal use only 2500 2000 1500 1000 500 0 4 5 5 6 6 7 7 8 8 9 9 t -0 r -0 t -0 r -0 t -0 r -0 t -0 r -0 t -0 r -0 t -0 c p c p c p c p c p c O A O A O A O A O A O ASX Price Index in $NZ S&P/ASX 200 Accumulation Index NZX50 Gross
Slide 35: The Investment Process - Illustrative
The Investment Process - Illustrative For personal use only Investment Committee Overview Investment Team Board/management Profit/EPS Value based Cashflow Margin formation Investment Contrarian buyers Considerations Dividend Industry economics generation Growth capacity Industry position Balance She
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