Challenger Limited · ASX:CGF
Challenger — Challenger Wine Trust — FY2010 Earnings Presentation
29 slides from Challenger's earnings presentation, Aug 27, 2010
Slide 1: Challenger Wine Trust (ASX:CWT) Results for year ended 30 June 2010
Challenger Wine Trust (ASX:CWT) Results for year ended 30 June 2010 (FY10) Nick Gill Fund Manager 27 August 2010
Slide 2: Important notice
Important notice Information contained in this publication is current as at 27 August 2010 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: Key points
Key points ¾ Macro conditions continue to impact industry – Excess wine grape capacity in Australia and New Zealand continues – Grape prices now at near 20-year lows – Strong AUD and NZD, plus impact of the GFC in key export markets, placing additional pressure on the industry – Downward pressure on
Slide 4: Operating profit equivalent to 8.5 cpu
Operating profit equivalent to 8.5 cpu ¾ Profit from operating activities after tax: $15.2 million or 8.5 cpu ¾ Property revaluation decrement: $30.3 million ¾ FY10 distribution: 4.25 cpu; 2H10 distribution: 1.0 cpu FY10 FY09 $’000 $’000 Net property income 30,928 32,620 Financing costs 12,614 13,18
Slide 5: NIV at 49 cpu
NIV1 at 49 cpu ¾ NIV at 49 cpu as at 30 June 2010 ¾ 17 of 21 (85% by value) properties independently revalued at 30 June 2010 − Remaining 4 independently revalued as at 31 December 2009 ¾ Property revaluations reduced NIV by 16 cpu +8 -4 -4 - 16 cents per unit -1 66 49 NIV at 30 Jun 09 FY10 operatin
Slide 6: Industry conditions
Industry conditions
Slide 7: Australian wine industry at a glance
Australian wine industry at a glance ¾ After large vineyard planting late 90’s to early 2000’s – Australia has surplus vineyard capacity ¾ Vineyards being removed to reduce production to adjust to lower demand ¾ Higher barriers to entry should ensure capacity build-up not repeated in medium term ¾ A
Slide 8: Australian grape prices impacting valuations
Australian grape prices impacting valuations ¾ Grape prices down 35% in last two years ¾ Low grape prices impacting vineyard profitability and valuations Grape intake: Australian wine grape prices Grape prices: ‘000 tonnes $/ tonnes weighted average 2,000 1000 1,800 900 1,600 800 1,400 700 1,200 600
Slide 9: New Zealand - a similar story to Australia
New Zealand - a similar story to Australia ¾ Large planting of Sauvignon Blanc in early 2000’s maturing during GFC ¾ Lower grape and wine prices; 2010 Sauvignon Blanc grape prices down 26% ¾ CWT’s NZ tenant is Delegat’s (Oyster Bay). ¾ CWT NZ vineyards planted to Merlot, Chardonnay, Pinot Noir in ad
Slide 10: Portfolio update
Portfolio update
Slide 11: Portfolio snapshot at 30 June 2010
Portfolio snapshot at 30 June 2010 New 30 June 2010 Australia Zealand1 Total Number of assets 17 4 21 Portfolio carrying value $ million 169.2 56.8 226.0 Portfolio fair (market) value2 $ million 178.7 56.8 235.6 % total portfolio value3 % 76% 24% 100% Total area ha 4,643 747 5,390 Planted area ha 3,
Slide 12: FY10 revaluations reduce values by $30.3m
FY10 revaluations reduce values by $30.3m ¾ 17 of 21 properties independently revalued (85% by value) at 30 June 2010 ¾ Remaining 4 properties independently revalued as at 31 December 2009 Fair Value at Fair Value 2H10 % of Portfolio Climate Region 30 June 2010 Pre-valuation Change Change (%) pre-va
Slide 13: Portfolio well diversified
Portfolio well diversified ¾ 98% of portfolio leased to wine companies Climate diversification (by fair value) Tenant diversification (by fair value) as at 30 June 2010 as at 30 June 2010 Other 5% New Zealand Australia - Cool Warburn Estate 24% 10% Australian Climate, 27% Vintage 36% Delegat's Group
Slide 14: Lease expiry profile, WALE 4.1 years
WALE 4.1 years Lease expiry profile (weighted) 28.2% 26.1% 15.7% 9.7% 8.2% 8.5% 3.1% 0.6% 0.0% Vacant FY18 + FY11 FY12 FY13 FY14 FY15 FY16 FY17 14
Slide 15: Lease renewal profile – FY11 and FY12
Lease renewal profile – FY11 and FY12 ¾ FY11 lease renewals represent 15.7% of portfolio by income ¾ FY12 lease renewals represent 3.1% of portfolio by income Property Tenant % of Lease Comments portfolio renewal Gundagai Vineyard Greenvalley 6.3% Sept 10 Terms agreed for sale (NSW) Properties FY11
Slide 16: Capital management
Capital management
Slide 17: Debt facilities and covenants
Debt facilities and covenants ¾ Borrowings $134.7 million from 2 domestic banks ¾ Covenant gearing at 57.0%1, up from 54.0% at 31 December 2009 ¾ LVR headroom reduced Facility Amount Expiry LVR covenant at 30 Jun 10 Position as at Headroom on ($ million) 30 Jun 10 security value as at 30 Jun 10 1 $5
Slide 18: Capital management strategy
Capital management strategy ¾ Actions to date include property sales, DRP, retention of part of operating profit, and amendment to distribution payment cycle ¾ Debt reduced by $17 million in FY10 but not sufficiently offsetting falling property valuations ¾ Covenant gearing now at 57.0%; LVR headroo
Slide 19: Summary
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Slide 20: Summary
Summary ¾ Macro conditions continue to impact industry ¾ CWT operating performance sound ¾ Gearing impacted by property revaluations ¾ Review of capital management alternatives in progress ¾ Wine companies adjusting to new market dynamics ¾ CWT’s wine company tenancies and WALE of 4.1 years provides
Slide 21: Contacts
Contacts Nick Gill Fund Manager Tel: + 61 (0)2 9994 7291 Email: [email protected] Luke Keighery Investor Relations Tel: + 61 (0)2 9994 7633 Email: [email protected] Website www.challenger.com.au/cwt 21
Slide 22: Appendices
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Slide 23: CWT’s property portfolio
CWT’s property portfolio Characteristics of climate Warm Cool classification Percent of vineyards (ha) 41% 59% Average grape yields 16 t/ha 8 t/ha Typical price for grapes < A$500/t > A$500/t Bottle price (at retail level) < A$15 > A$15 Murrumbidgee: •Whitton •Stephendale •Cocoparra & Woods Central
Slide 24: CWT’s major tenants
CWT’s major tenants ¾ Australian Vintage Limited (35%) ⎯ ASX listed company in wine sector ⎯ Wine brands include McGuigan, Sunnyvale, Nepenthe, M, Tempus Two and Yaldara ⎯ 2009 Winner of the International White Winemaker of the Year (London International Wine Challenge) ¾ Delegat’s Wine Estate Limit
Slide 25: Detailed income statement
Detailed income statement FY10 FY09 Variance $000 $000 $000 % Net property income 30,928 32,620 (1,692) (5.2) Other income 249 712 (463) (65.0) Finance costs (12,614) (13,184) 570 4.3 Management fees (2,008) (2,350) 342 14.6 Operating expenses (1,269) (1,294) 25 1.9 Profit from operating activities
Slide 26: Movements in fair value and carrying value
Movements in fair value and carrying value Fair value Carrying value $000 $000 30-Jun-09 268,147 257,111 Acquisitions & upgrades 718 718 Disposals (2,741) (2,318) Deferred leasing incentive 886 886 Revaluation changes & impairment (32,180) (32,180) Water rights fair value decrement - 1,883 Depreciat
Slide 27: NIV at 49 cents
NIV at 49 cents $million Cents per unit Jun-10 Jun-09 Jun-10 Jun-09 Net Tangible Assets (NTA) 63.6 80.1 33 47 Add: Water rights (at cost) 20.9 21.8 Net Asset Value (NAV) 84.5 101.9 44 60 Add: Water rights fair value 8.7 11.0 increment1 Net Independent Value (NIV) 93.2 112.9 49 66 ¾ NIV includes wate
Slide 28: Selection of tenants’ brands from CWT vineyards
Selection of tenants’ brands from CWT vineyards 28
Slide 29: Slide 29