24/8/2016

RFF results highlight earnings growth & new acquisitions

Rural Funds Management Ltd (RFM), as responsible entity and manager of the Rural Funds Group (RFF), today announced the fund’s 2016 annual financial results.

FY16 highlights:

  • Adjusted funds from operations (AFFO) increased from $11.0m to $14.3m or 9.09 cents to 9.26 cents on a per unit basis
  • Earnings per unit increased from 8.38 cents to 22.46 cents
  • Adjusted NAV per unit increased from $1.22 to $1.43
  • FY17 forecast distribution of 9.64 cpu, an 8% increase, maintained
  • Weighted Average Lease Expiry increased from 12.2yrs to 13.8yrs

Growth in the adjusted Net Asset Value (NAV) was driven by revaluations of mature almond orchards.  Revaluations also increased earnings by 168% to 22.46 cents per unit, compared to the prior corresponding period.

AFFO grew primarily as a result of capital expenditure of $73.8m for almond developments.  This was in part funded from a $35.0m equity raising completed in October 2015.  RFM is forecasting an additional $126.0m of capital expenditure to be deployed on almond orchards over the next four years, fully funded from debt and retained earnings.

In February 2016, RFF made its first acquisition in Western Australia (WA), with a 9% stake in Perth Markets Limited, which is expected to be earnings accretive and provides an introduction to the WA agricultural sector.

The fund took an initial step into the macadamia industry in March 2016 with the acquisition of three orchards outside Bundaberg, Queensland.

In May 2016, a scheduled rent review of a mature almond orchard resulted in a material rental increase and subsequently the announcement of FY17 forecast AFFO increase of 34% and a distribution growth of 8%. Beyond this one-off increase, the distribution growth rate is expected to return to the previous forecast of 4%.

Outside of the FY16 period, RFF completed a $61.0m equity raising to fund acquisitions in three sectors. Funds have been deployed to purchase three cattle properties in northern and central Queensland, and fund an additional 1,000 ha of almond orchard development on Kerarbury and the three Queensland macadamia orchards, which were initially debt funded.

During the year, RFM outlined a climate strategy designed to articulate the benefits of diversifying into geographically dispersed climatic regions.  The cattle and macadamia acquisitions provide exposure to new commodities and new climatic zones at a more northern latitude than the balance of RFF’s portfolio. Further expansion in the Queensland cattle sector is possible and expansion in the macadamia sector will be investigated as RFM continues to pursue new investments.

David Bryant, RFM Managing Director said the FY16 results reflect RFM’s broad strategy of expanding the fund through accretive acquisitions. “Our focus remains on identifying quality agricultural assets that meet our tenants’ requirements. This strategy is delivering improved liquidity, distribution growth and greater asset diversification.”

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