Challenger Limited · ASX:CGF
Challenger — Challenger Infrastructure Fund — FY2010 Earnings Presentation
68 slides from Challenger's earnings presentation, Aug 19, 2010
Slide 1: Challenger Infrastructure Fund Full Year Results Presentation
Challenger Infrastructure Fund Full Year Results Presentation – August 2010 Chief Executive – Emil Pahljina 19 August 2010
Slide 2: Important notice
Important notice Information contained in this publication is current as at 19 August 2010 unless otherwise specified and is provided by Challenger Listed Investments Limited (ABN 94 055 293 644) (AFSL 236887) (“CLIL”), as Responsible Entity of CIF Investment Trust 1 (ARSN 114 139 703) and CIF Inves
Slide 3: CIF - FY10 Operating summary
CIF - FY10 Operating summary Solid EBITDA performance from both LBC and Inexus Resilient Proven earnings resilience in difficult markets operating Confirmation of final year distribution of 7cpu to be paid 30 August performance 2010 bringing FY10 distribution to 14cpu 2010, Guidance for 1H11
Slide 4: CIF - Financial performance
CIF - Financial performance $A millions – Continuingg Business1 FY10 FY09 %M Mvtt Statutory Results Proportionate EBITDA2 $156.5 $149.9 4% Inexus EBITDA3 (100%) $78 7 $78.7 $71 4 $71.4 10% LBC EBITDA (100%) $138.3 $139.7 (1)% NPAT attributable to security holders ($210.7) ($139.8) (51)% Operating ca
Slide 5: CIF - Net Asset Value of $2.19 per unit
CIF - Net Asset Value of $2 $2.19 19 per unit CIF NAV CIF NAV per unit adversely 2.50 0.23 2.50 0.01 0.08 0.07 0.06 2.19 2.00 impacted by Inexus valuation (23 cents) and foreign exchange $ 1.50 (8 cents) 1.00 Inexus equity valuation reduced by 0.50 23.8% reflecting: 0.00 More conservative view
Slide 6: CIF - Financial flexibility
CIF - Financial flexibility Post sale of 1H11 Southern Distribution Water & Guidance repayment of of 7 cpu Identified 300 RPS accretive growth capex over 3 years 8 19 Flexibility for 230 219 24 capital management 200 22 initiatives $m 80 100 93 0 Cash Balance Interest & Other On-market buyback Cash
Slide 7: CIF - De-leveraging and de-risking
CIF - De-leveraging De leveraging and de de-risking risking CIF has significantly reduced Debt Reduction leverage through selective asset sales at or above Net Asset Proportionate net debt / proportionaate EBITDA (multiple x 4 000 4,000 12 Value net debt (A$m) 3,000 9 Proportionate net debt to E
Slide 8: Inexus
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Slide 9: Inexus – Financial performance
Inexus – Financial performance Significant improvement in EBITDA margin driven by continued rollout of existing order book £ millions illi FY10 FY09 %M Mvt T Trend d Revenue £60.3 £57.1 6% K U d l i Underlying EBITDA £43 3 £43.3 £39 1 £39.1 11% K Less: Restructuring costs £0.5 £2.7 (81)% L Start-up
Slide 10: Inexus – Operating performance FY10
Inexus – Operating performance FY10 EBITDA 70 74% Summary 60 72% Solid performance underpinned by security TDA margin Underlying EBIITDA (£m) 50 70% of existing connections with revenue streams 40 68% independent of the economic cycle Underlying EBIT 30 66% Revenues increased £3.2m on pcp from r
Slide 11: Inexus - Ongoing capital management
Inexus - Ongoing capital management Inexus completed an extension of its loan facilities in December 2009 No near term refinancing requirement Management are currently assessing capital structure options ahead of August 2012 maturity date Preferred option will depend on the respective appeti
Slide 12: Inexus – UK housing market
Inexus – UK housing market Market Environment For F the h 12 months h to 31 M March h 2009 new housing starts in the UK reduced 47.5% on pcp Provisional data for housing starts Housing Starts (UK excl. excl Northern Ireland) suggests modest improvement for 2010 Housing starts (UK excl. Northern
Slide 13: Inexus – Sales
Inexus – Sales Utility Asset Equivalents (UAE) Conversion of FY2010 Sales to UAEs Inexus has adopted the concept of UAE to Utility FY10 Sales compare the different types of sales Gas 5,146 The UAE describes the average g expected p Electricity 5,336 income potential of each utility as a Water 2,
Slide 14: Inexus Strategic drivers
Inexus Strategic drivers Inexus- 1 Anticipated reduced demand for single gas and electricity 1. sales: Reduced activity in UK housing District Heating is expected to replace gas in new larger housing developments in the medium term 2. Emissions targets for new developments: Building regulation
Slide 15: Inexus – Strategic outlook
Inexus – Strategic outlook 1. Maximise shareholder value from existing connections and the rollout of the order book: Expense management Ongoing review of order book 2. Materially improve value proposition to developers: Investment in broadening gpproduct offering g to incorporate p fibre, wat
Slide 16: LBC
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Slide 17: LBC – Financial performance
LBC – Financial performance Underlying EBITDA was down 2% representing a solid performance, in a challenging macro economici environment i t $US millions FY10 FY09 % Mvt Trend Revenue $237.7 $244.1 (3%) L Underlying EBITDA $94.3 $96.4 (2%) L Add back: Provisions release and other costs $22.6 $4.8 La
Slide 18: LBC – Operating performance FY10
LBC – Operating performance FY10 EBITDA Summary 300 42% Solid performance in light of significant reduction in chemical trade in both Europe 250 41% (14%) and the US (16%) on pcp Unnderlying EBITDA marggin m) Underlying EBITDA ($m 200 Revenues are down 3% due to lower service 150 40% revenues an
Slide 19: LBC – Strategic drivers
LBC – Strategic drivers 1. Expect gradual recovery in trade for Gulf Coast US Chemical Trade in Imports Finished p &Petroleum Exports p (€ bn))1 ( Products certain chemicals1 700 600 2. Strong demand for storage of transport 500 fuels and base oils in recognised hubs Million Barrels 400 particularly
Slide 20: LBC - Strategic hubs
LBC - Strategic hubs Baton Rouge, On the Rotterdam, 50% Mississippi and part off Europe’s E ’ of the US Gulf Coast petrochemical market. Extensive activity, with an unutilised land bank unutilised land bank H t Houston, l largestt asset with significant unutilised land bank. #1 petrochemical Antwerp
Slide 21: LBC - Expansion track record
LBC - Expansion track record Since acquisition LBC completed over 20 expansion projects at total capital cost of US $184 $184.8m 8m which generated incremental revenue of US $44 0m1 $44.0m USD Total US Europe Additional capacity (m3) 583,000 359,000 224,000 Growth CAPEX $184.8m $92.8m $92.0m Increme
Slide 22: LBC - Strategic outlook
LBC - Strategic outlook 1 LBC will migrate to a more balanced product range 1. of chemicals, base oils and refined petroleum products consistent with market demand 2. LBC have identified 26 expansion projects, of which 14 have been prioritised 3. LBC are seeking g US$100 million of additional capita
Slide 23: Outlook
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Slide 24: CIF – Outlook
CIF – Outlook Continued strong performance in FY11 expected Maximise unit holder value from existing connections and Inexus management of the order book Maximise first mover advantage in multi utility strategy Financial Fi i l performance f for f FY11 is i expected t d to t be b in i line li
Slide 25: Additional information
Additional information
Slide 26: CIF Statutory results
CIF Statutory results $A millions FY10 FY09 % Mvt EBITDA before realised & unrealised items 203.1 254.3 (20)% Depreciation and amortisation (61 5) (61.5) (68 3) (68.3) 10% Financing costs (119.8) (145.9) 18% Realised and unrealised gains/(losses) (184.7) (117.1) (58)% Impairment change (60.4) (102.5
Slide 27: Inexus - Comparative capabilities
Inexus - Comparative capabilities District Gas Water Electricity Fibre Heating Inexus 9 9 9 9 9 IEG 9 9 Fulcrum 9 9 ESP 9 9 Cofely 9 Scottish and Southern Energy 9 9 9 9 BT 9 Virgin Media 9 EON 9 9 DALKIA 9 9 9 27
Slide 28: es A
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Slide 29: Challenger Infrastructure Fund 2010 Reporting Pack
Challenger Infrastructure Fund Reporting Pack – Year Ended 30 June 2010 Challenger Infrastructure Fund comprising: Challenger Investment Trust 1 ARSN 114 139 703 Challenger Investment Trust 2 ARSN 114 139 632 Responsible Entity Challenger Listed Investments Limited ABN 94 055 293 644 AFSL 236887
Slide 30: Responsible Entity and Disclaimer
Responsible Entity Challenger Listed Investments Limited (ABN 94 055 293 644) (AFSL 236887) (CLIL) is the Responsible Entity of CIF Investment Trust 1 (ARSN 114 139 703) and CIF Investment Trust 2 (ARSN 114 139 632) which together form the Challenger Infrastructure Fund (CIF). CLIL is indirectly who
Slide 31: Contents
Contents CIF Group Assets Under Management Page 3 CIF Fund Distributions Page 5 LBC Page 6 Inexus Page 11 CIF Capital Management Page 15 Statutory Consolidated Profit and Loss Page 20 Statutory Consolidated Balance Sheet Page 28 Consolidated Cashflow Statement Page 32 Securities on Issue Page 35 Cha
Slide 32: Introduction
Introduction The CIF Reporting Pack has been prepared to assist analysts and investors in understanding the investments and structure of CIF. The Reporting Pack does not purport to forecast the asset value, income or distribution of CIF or any other entity. Any assumptions or values contained in the
Slide 33: CIF Group Assets Under Management
CIF Group Assets Under Management % mvt. Period ended 30 Jun 2010– A$ millions 30 Jun 2010 31 Dec 2009 30 Jun 2009 30 Jun 2009 LBC 238.9 259.6 282.3 (15%) Inexus 239.5 318.6 334.6 (28%) Southern Water – – 343.0 (100%) Total Assets Under Management 478.4 578.2 960.0 (50%) Asset Net Sale Proceeds Rece
Slide 34: CIF Group Assets Under Management
CIF Group Assets Under Management %mvt. Period ended 30 Jun 2010– A$ millions 30 Jun 2010 31 Dec 2009 30 Jun 2009 30 Jun 2009 LBC Opening Value 259.6 282.3 317.2 Acquisitions / (Disposals) – – – Currency revaluation Impacts (23.6) (22.7) (41.2) Asset revaluation 2.9 – 6.3 Closing value 238.9 259.6 2
Slide 35: CIF Fund Distribution Free Cashflow – Year ended 30 June 2010
CIF Fund Distribution Free Cashflow – Year ended 30 June 2010 CIF AUD Proportionate share Cents per security LBC Inexus Fund Total EBITDA 26.1 19.3 (0.8) 44.6 Non cash items 1 (5.3) – – (5.3) Other (2.3) 2.3 – – Cash EBITDA 18.5 21.6 (0.8) 39.3 Net interest and fees (8.6) (10.8) (0.4) (19.8) Mainten
Slide 36: LBC Key Financial Metrics
LBC Key Financial Metrics1 Performance metrics Year ended $USD millions 30 Jun 2010 30 Jun 2009 30 Jun 2008 Revenue 237.7 244.1 215.8 EBITDA 117.0 101.2 84.5 EBITDA Margin (%) 49% 41% 39% Underlying EBITDA 94.3 96.4 84.5 Underlying EBITDA Margin (%) 40% 40% 39% Utilisation (%) 92% 94% 94% CIF NAV Gr
Slide 37: LBC Segments
CIF NAV per security build up - December 2009 to June 2010 LBC Segments Half year ended 2.60 $USD millions 0.23 30 Jun 2010 30 Jun 2009 30 Jun 2008 LBC USA 2.40 Revenue 87.2 89.2 70.6 NAV ($AUD) Underlying EBITDA 50.7 0.01 0.08 54.1 40.6 Underlying EBITDA Margin (%) 2.50 58% 61% 0.07 57% 2.20 0.06 G
Slide 38: LBC Debt Balances
LBC Debt Balances1 Debt Capital Year ended $USD millions 30 Jun 2010 30 Jun 2009 30 Jun 2008 Senior debt – USD Denominated 387.6 387.6 387.6 – EUR Denominated2 82.5 95.0 105.9 Senior debt 470.1 482.6 493.6 Junior debt – USD Denominated 18.6 18.3 11.8 – EUR Denominated3 56.7 64.3 65.7 Junior debt 75.
Slide 39: LBC Investment Balances
LBC Investment Balances LBC Enterprise Value Year ended e millions 30 Jun 2010 30 Jun 2009 30 Jun 2008 LBC Equity Valuation (100%) Opening value 245.8 324.4 308.1 Acquisitions/(Disposals) – – 16.3 Asset revaluation 3.0 (78.6) 0.1 Closing equity value 248.8 245.8 324.4 Enterprise Value (EV) Equity va
Slide 40: LBC Cashflow and Capital Management
LBC Cashflow and Capital Management Cashflow analysis Year ended $USD millions 30 Jun 2010 30 Jun 2009 30 Jun 2008 EBITDA 117.0 101.2 84.5 Non-cash items 1 (23.3) (8.7) – Other (10.1) (4.0) (11.1) Cash EBITDA 83.7 96.6 73.4 Net interest and fees (38.6) (39.2) (38.6) Maintenance capex (26.3) (19.4) (
Slide 41: Inexus Key Financial Metrics
Inexus Key Financial Metrics1 Performance metrics Year ended £millions 30 Jun 2010 30 Jun 2009 30 Jun 2008 NAV per security build up - June 2010 Revenue 2 60.3 57.1 54.3 2.50 EBITDA2 0.69 0.06 0.06 42.9 34.2 33.9 2.00 Underlying EBITDA 2 43.3 39.1 35.3 1.50 EBITDA Margin 0.75 (%)2 71% 60% 62% Underl
Slide 42: Inexus Debt and Investment Balances
Inexus Debt and Investment Balances Debt Capital Year ended £millions 30 Jun 2010 30 Jun 2009 30 Jun 2008 Senior debt 399.8 392.3 354.2 Junior debt 35.0 35.0 35.0 Total debt 434.8 427.3 389.2 Total facilities available1 461.0 475.0 475.0 Undrawn facilities 26.2 47.7 85.8 Net Debt Year ended £million
Slide 43: Inexus Connections
Inexus Connections Year ended 30 Jun 2010 30 Jun 2009 30 Jun 2008 Sales Gas 5,146 24,360 60,878 Electricity 5,336 17,361 24,377 Water 2,500 12,735 7,883 Fibre 8,131 17,608 6,059 District Heating 2,500 – – Total 23,613 72,064 99,197 Gas Connections Opening gas connections 528,590 489,262 415,878 Addi
Slide 44: Inexus Cashflow and Capital Management
Inexus Cashflow and Capital Management Cashflow analysis Year ended £millions 30 Jun 2010 30 Jun 2009 30 Jun 2008 EBITDA1 42.9 34.2 33.9 Other2 5.0 7.8 13.1 Cash EBITDA 47.9 42.0 47.0 Net interest and fees3 (24.1) (17.1) (14.4) Maintenance capex – – – Net operating cash flow after interest and maint
Slide 45: CIF Capital Management
CIF Capital Management Proportionate Net Debt $Mvt. %Mvt. Year ended 30 Jun 2010 30 Jun 2009 30 Jun 2008 30 Jun 2010- 30 Jun 2010- A$ millions 30 Jun 2009 30 Jun 2009 LBC 448.6 479.7 404.2 (31.1) (6%) Inexus 630.7 694.2 640.1 (63.5) (9%) Southern Water - 1,005.6 1,530.9 (1,005.6) (100%) Fund level d
Slide 46: CIF Capital Management – Maturity Profile
CIF Capital Management Maturity Profile Maturity profile – gross debt FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 Total 30 June 2010 and Local currency millions beyond LBC ($USDm) 8.3 7.8 7.8 553.1 8.7 17.5 603.1 Inexus (£m) – – 434.8 – – – 434.8 Fund level (A$m) – – – – – – – Maturity profile –
Slide 47: CIF Capital Management – Interest Rate Hedging Profile
CIF Capital Management Interest Rate Hedging Profile 1. LBC Interest Rate Hedge (USDm) 2. Inexus Interest Rate Hedge (£m) 800 500 700 450 400 600 350 500 Amount USDm Amount GBPm 300 400 250 300 200 200 150 100 100 50 - - LBC Fixed IR Hedge (USDm) LBC Debt Unhedged (USDm) Inexus Fixed IR Hedge (£m) I
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This page has been left blank intentionally. 18 Challenger Infrastructure Fund Reporting Pack – Year Ended 30 June 2010
Slide 49: Statutory accounts
Statutory accounts
Slide 50: Consolidated Profit and Loss
Consolidated Profit and Loss1 Statutory – Management Presentation Year ended A$ millions 30 Jun 2010 30 Jun 2009 30 Jun 2008 Income Investment income2 0.5 45.6 51.6 Transportation revenue 107.6 105.3 96.7 Tank storage and related revenue 269.6 330.7 251.8 Total revenue 377.6 481.6 400.2 Expenses Cos
Slide 51: Consolidated Profit and Loss
Consolidated Profit and Loss1 Performance metrics Year ended 30 Jun 2010 30 Jun 2009 30 Jun 2008 Distributions Paid ($m) 45.8 68.9 118.3 Distributions per security (cents) 14.0 20.0 34.0 Assets Under Management ($m) 478.4 960.0 1,455.3 NAV ($ per security) 2.19 2.89 3.74 Footnotes 1 CIF consolidated
Slide 52: Statutory Consolidated Profit and Loss – Year ended 30 June 2010
Statutory Consolidated Profit and Loss – Year ended 30 June 2010 Statutory – Management presentation segmented by assets A$ millions Inexus LBC Fund Consolidation Income Investment income1 – – 0.5 0.5 Transportation revenue 107.6 – – 107.6 Tank storage and related revenue – 269.6 – 269.6 Total reven
Slide 53: Footnotes
Footnotes 1 Investment income from non-controlled investments include CIF’s investments in Southern Water. Inexus LBC Fund Consolidation 2 Interest on minority shareholder loans comprise: – Inexus loan notes issued to minorities (0.8) – – (0.8) – Inexus preference shares (4.2) – – (4.2) – LBC loan n
Slide 54: Statutory Consolidated Profit and Loss – Year ended 30 June 2009
Statutory Consolidated Profit and Loss – Year ended 30 June 2009 Statutory – Management presentation segmented by assets Southern A$ millions Inexus LBC Water Fund Consolidation Income Investment income1 – – 45.6 – 45.6 Transportation revenue 105.3 – – – 105.3 Tank storage and related revenue – 330.
Slide 55: Footnotes
Footnotes 1 Investment income from non-controlled investments include CIF’s investments in Southern Water. Southern Inexus LBC Water Fund Consolidation 2 Interest on minority shareholder loans comprise: – Inexus loan notes issued to minorities (1.0) – – – (1.0) – Inexus preference shares (5.0) – – –
Slide 56: Statutory Consolidated Profit and Loss – Year ended 30 June 2008
Statutory Consolidated Profit and Loss – Year ended 30 June 2008 Statutory – Management presentation segmented by assets Southern A$ millions Inexus LBC Water Fund Consolidation Income Investment income1 – – 25.8 25.8 51.6 Transportation revenue 96.7 – – – 96.7 Tank storage and related revenue – 251
Slide 57: Footnotes
Footnotes 1 Investment income from non-controlled investments include CIF’s investments in Arqiva, Wales & West, Northern Gas and Southern Water Southern Inexus LBC Water Fund Consolidation 2 Interest on minority shareholder loans comprise: – Inexus loan notes issued to minorities (1.0) – – – (1.0)
Slide 58: CIF Group Statutory Consolidated Balance Sheet
CIF Group Statutory Consolidated Balance Sheet1 Year ended A$ millions 30 Jun 10 30 Jun 09 30 Jun 08 Assets Cash and cash equivalents 260.7 141.5 236.4 Trade and other receivables 87.5 102.2 365.2 Other assets 1.8 1.9 2.1 Derivatives at fair value – 61.2 66.1 Investments – 343.0 645.8 Deferred tax a
Slide 59: Statutory Consolidated Balance Sheet as at 30 June 2010
CIF Group Statutory Consolidated Balance Sheet as at 30 June 20101 Segmented by asset A$ millions Inexus LBC Fund Consolidation Assets Cash and cash equivalents 5.2 36.4 219.2 260.7 Trade and other receivables 33.4 52.5 1.6 87.5 Other assets 1.2 0.6 – 1.8 Deferred tax assets 2.2 41.5 3.0 46.7 Proper
Slide 60: Statutory Consolidated Balance Sheet as at 30 June 2009
CIF Group Statutory Consolidated Balance Sheet as at 30 June 20091 Segmented by assets Southern A$ millions Inexus LBC Water Fund Consolidation Assets Cash and cash equivalents 6.6 61.2 – 73.8 141.5 Trade and other receivables 17.7 55.3 – 29.2 102.2 Other assets 1.2 0.7 – – 1.9 Derivatives at fair v
Slide 61: Statutory Consolidated Balance Sheet as at 30 June 2008
CIF Group Statutory Consolidated Balance Sheet as at 30 June 20081 Segmented by assets Southern A$ millions Inexus LBC Water Fund Consolidation Assets Cash and cash equivalents 10.8 57.1 – 168.5 236.4 Trade and other receivables 24.5 60.2 – 280.4 365.2 Other assets 1.4 0.7 – – 2.1 Derivatives at fai
Slide 62: Consolidated Cashflow Statement
Consolidated Cashflow Statement Statutory – Management Presentation CIF Group Cashflow Year ended A$ millions 30 Jun 2010 30 Jun 2009 30 Jun 2008 Cashflows from operating activities Receipts from customers 382.3 406.5 352.1 Payments to suppliers (200.0) (229.8) (213.3) Interest received 8.1 9.6 21.7
Slide 63: Consolidated Cashflow Statement (continued)
Consolidated Cashflow Statement Statutory – Management Presentation (continued) Year ended A$ millions 30 Jun 2010 30 Jun 2009 30 Jun 2008 CIF cashflow information Net profit/(loss) after income tax expense (251.1) (174.4) (86.9) Depreciation 61.6 68.3 58.8 Amortisation 6.7 8.1 13.3 Realised movemen
Slide 64: Consolidated Operating Cashflow Statement – Year ended 30 June 2010
Consolidated Operating Cashflow Statement – Year ended 30 June 2010 Segmented by asset1 A$ millions Inexus LBC Fund Consolidation Cashflows from operating activities Receipts from customers 115.0 267.3 – 382.3 Payments to suppliers (29.9) (167.1) (2.9) (200.0) Interest received – 0.4 7.7 8.1 Dividen
Slide 65: Securities on Issue
Securities on Issue Year ended Number of securities (millions) 30 Jun 10 30 Jun 09 30 Jun 08 Total Ordinary Securities: Quoted (CIF) Opening 336.6 348.5 276.3 Additions (+) i) Entitlement Offers – – 69.1 ii) Equity Placements – – – iii) Management Fees – 1.7 3.2 iv) Performance Fees – 0.6 – v) Secur
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This page has been left blank intentionally. 36 Challenger Infrastructure Fund Reporting Pack – Year Ended 30 June 2010
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Slide 68: Challenger contact details
Level 15 255 Pitt Street Sydney NSW 2000 telephone 02 9994 7000 facsimile 02 9994 7777 10816/0810
Challenger Infrastructure Fund — FY2010 Earnings Presentation on 6ix