Challenger Limited · ASX:CGF
Challenger — Challenger Wine Trust — FY2007 Earnings Presentation
32 slides from Challenger's earnings presentation, Aug 22, 2007
Slide 1: Challenger Wine Trust 2007 Annual results
Challenger Wine Trust 2007 Annual results Nick Gill – Fund Manager 22 August 2007
Slide 2: Important notice
Important notice Information contained in this publication is current as at 22 August 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 Challenger Wine Trust (“Trust”). This documen
Slide 3: Highlights
Highlights • Solid financial performance – Net operating income $14.3 million – up 8.8% – Distribution per unit 9.10 cents – up 0.4% • High quality portfolio – Income stream backed by 100% occupancy and long term leases to established industry participants – Significant diversification by region, te
Slide 4: Financial results
Financial results
Slide 5: Financial performance
Financial performance • Net operating income $14.3 million – up 8.8% • Key drivers were higher net property income (+2.8%) and lower borrowing costs (+2.3%) Restated Variance 30-Jun-07 30-Jun-06 $000 $000 $000 % Net property income 28,925 28,144 781 2.8 Other income 505 381 124 32.5 Finance costs (1
Slide 6: Breakdown of net property income growth
Breakdown of net property income growth • Net property income up 2.8% as a result of additional income from development projects and annual rental reviews 30-Jun-07 30-Jun-06 Variance $000 $000 $000 % Stable portfolio 11,288 11,115 173 1.5 Development assets/projects* 16,141 14,741 1,400 9.5 Assets
Slide 7: Distributable income
Distributable income • Distributable income $14.3 million – up 8.8% • Distribution per unit 9.10 cents – up 0.4% Restated Variance 30-Jun-07 30-Jun-06 $000 $000 % Net profit 7,875 13,779 Adjusted for: Net fair value movements 6,456 (608) Transfer to/(from) retained earnings (5) 4 Distribution to uni
Slide 8: Financial position
Financial position • Change of accounting treatment of certain water rights • Restated 2006 balance sheet includes: • Recognition of certain water rights as intangible assets of $15.8 million • Write down of $2.3 million due to recognising certain water rights at cost • 2007 net assets, NAV per unit
Slide 9: Net asset value (NAV) movements
Net asset value (NAV) movements Net asset value NTA (NAV) $m cpu cpu Opening balance 30-Jun-06 145,555 0.96 0.96 Intangible assets (water rights) – initial recognition - - (0.10) Intangible assets (water rights) – fair value right down 2,343 (0.02) (0.02) Restated opening balance 30-Jun-06 143,212 0
Slide 10: Movement in asset valuations
Movement in asset valuations $000 • Total asset valuation movements -$6.4m Restated carrying value 287,244 – Equivalent to 2.2% of portfolio value at 30-Jun-06 Capital expenditure 5,152 30 June 2007 Reimbursement of capital (5,970) expenditure • Water rights at cost (-$1.9m) Revaluation changes (4,5
Slide 11: Capital management
Capital management • Gearing 45.2% at 30 June 2007 following conversion of PICE units – Gearing increased to 47.4% following debt funded acquisition on 20 August 2007 – Preferred gearing range 45-55% • Borrowings 100% fixed/hedged with duration in line with lease terms • Weighted average cost of bor
Slide 12: Portfolio update
Portfolio update
Slide 13: Portfolio snapshot
Portfolio snapshot* Australia New Zealand^ Total Number of assets 25 4 29 Portfolio value ($m) 224.2 75.3 299.5 % total portfolio value (%) 75 25 100 Total area (ha) 5,466 744 6,210 Area planted (ha) 3,565 627 4,192 Occupancy (%) 100 100 100 WALE (yrs) 6.1 4.9 5.9 Average rental yield (%) 10.8 8.2 1
Slide 14: Portfolio diversification
Portfolio diversification Geographic diversification (by value)* Tenant diversification (by value)* Delegat' s McGuigan Group Simeon NZ 25.1% Wines 25% SA 34.3% 30% Foster' s Group 1.1% Green Grant VIC Valley Burge 17% Propertie Wines s Other 5.7% WA NSW 5.2% 8.9% Pernod Evans & 25% Ricard Tate 3% P
Slide 15: Portfolio strategy
Portfolio strategy • Target vineyards that provide sustainable operating base through the generation of high gross margins per hectare • Diversification overlay: ongoing preference for diversification by region, tenant and grape variety • Portfolio comprises balance between: – Warm climate vineyards
Slide 16: Warm climate vineyard portfolio
Warm climate vineyard portfolio Warm climate vineyards 40% of CWT portfolio • Large scale commercial Major tenants include McGuigan vineyards which provide grapes Simeon Wines, Green Valley Properties for low cost wine producers • Typically high production yields Yields: 15-35 tonnes/hectare and low
Slide 17: Cool climate vineyard portfolio
Cool climate vineyard portfolio Cool climate vineyards 60% of CWT portfolio • Global varietal presence and Major tenants include Delegat’s Group (Oyster strong brand support Bay brand), Pernod Ricard Pacific (Jacob’s Creek Reserve and Lawsons brands), Grant Burge Wines (Miamba and Filsell brands) •
Slide 18: Active management of lease expiry profile
Active management of lease expiry profile • 100% portfolio occupancy • 6.9% of portfolio income expiring in FY08 & FY09 • Falls to 3.3% after excluding assets identified for sale 25 22.3 Vineyard Expiry portfolio Strategy 22.1 date income % 20 Corryton Park Feb-08 1.1% Currently in negotiations with
Slide 19: Exposure to Evans and Tate Limited
Exposure to Evans and Tate Limited • On 21 August 2007 Evans and Tate Limited announced appointment of Administrator and Receiver and Manager • Evans and Tate Limited is a tenant at CWT’s Cocoparra, Woods and Gnangara Vineyards – FY07 rent $1.7 million, equivalent to 5.8% of CWT’s net property incom
Slide 20: Acquisition of Miamba vineyards
Acquisition of Miamba vineyards Acquisition details Purchase price: $11.5 million (plus costs) Initial yield: 9.8% Acquisition date: 20 August 2007 Property details Total area: 205 ha Area planted: 118 ha Tenant: Grant Burge Wines Lease term: 8 years + 3 x 4yr options (tenant has option to repurchas
Slide 21: Planned assets sales in FY08
Planned assets sales in FY08 • Assets identified for sale – Sale of three assets that no longer meet CWT and McGuigan Simeon Wines long-term requirements – Trillian’s Hill Vineyard to be repurchased by tenant Asset Book value Reason for sale 30-Jun-07 Grande Junction $0.9 million Following cancellat
Slide 22: Australian vineyard industry conditions
Australian vineyard industry conditions
Slide 23: Australian production impacted by weather conditions
Australian production impacted by weather conditions • 2006 grape harvest was 1.87 million tonnes* • 2007 grape harvest estimated to be 1.35 million tonnes* – Impacted by frost and drought – Wine companies using inventory to meet demand • 2008 harvest forecast to be 1.5 million tonnes* – Continued i
Slide 24: Favourable market conditions
Favourable market conditions • Lower production levels reducing surplus stocks • Growing export demand Stock surplus/deficit over ideal stock levels Overseas demand and export availability Note: ‘Ideal’ stocks are based on a 1.83 stocks-to-sales ratio for red wine (financial years end stocks held ag
Slide 25: CWT portfolio exposure to reduced water availability in Murray Darling Basin
CWT portfolio exposure to reduced water availability in Murray Darling Basin • Murrumbidgee River (NSW) – 17% of CWT portfolio – Current announced high security water allocation 30% – Current forecast – 92% probability for 95% allocation by Dec 2007 • Murray River (VIC, SA) – 23% of CWT portfolio –
Slide 26: Outlook
Outlook
Slide 27: Outlook
Outlook • High quality portfolio – Income stream backed by 100% occupancy and long term leases to established industry participants – Significant diversification by region, tenant, water source and grape variety • Transaction activity focussed on: – Enhancing returns – Improving portfolio diversific
Slide 28: Questions
Questions
Slide 29: Contacts
Contacts Nick Gill Fund Manager Tel: 02 9994 7291 Email: [email protected] Susie McPherson Investor Relations Tel: 02 9994 7958 Email: [email protected] 29
Slide 30: Appendices
Appendices
Slide 31: Restatement of 2006 balance sheet
Restatement of 2006 balance sheet • Reclassification of integral infrastructure as investment properties rather than vines • Recognition of water rights as intangible assets at cost rather than embedded in the value of vines • Write down of $2.3 million due to recognising water rights at cost rather
Slide 32: Rental yield analysis
Rental yield analysis Proportion of Average Over/(under) portfolio rental yield renting* (%) (%) (%) Warm climate – Australia 40 10.7 10.7 Cool climate – Australia 35 10.9 19.8 Cool climate – New Zealand 25 8.2 (19.0) Cool climate – total 60 9.7 4.3 Warm climate – total 40 10.7 10.7 Australia – tota