35
Tandou Limited (“TAN”) For personal use only
Tandou Limited (“TAN”)
For
per
sona
l use
onl
y
Disclaimer This presentation contains general information about Tandou Limited and its consolidated entities (Tandou) and its activities current as at the date of this presentation. It is provided in summary and does not purport to be complete. This presentation should be read in conjunction with the Appendix 4E and Financial Report for the year ended 30 June 2013. You acknowledge and agree that you will rely on your own independent assessment of any information, statements or representations contained in this presentation and such reliance will be entirely at your own risk.
Disclaimer Tandou Limited and its related corporate bodies, associated entities, each of their respective officers, employees, associates, agents, auditors, independent contractors and advisors do not make any representation, guarantee or warranty, express or implied, as to the accuracy, completeness, currency or reliability (including as to auditing or independent verification) of any information contained in this presentation and do not accept, to the maximum extent permitted by law:
a)Any responsibility arising in any way for any errors in or omissions from any information or for any lack of accuracy, completeness, currency or reliability of any such information made available; b)Any responsibility to provide any other information or notification of matters arising or coming to their notice which may affect any information provided; and c)Any liability for any loss or damage (whether under statute, in contract or tort for negligence or otherwise) suffered or incurred by any person as a result of or in connection with a person or persons using, disclosing, acting on or placing reliance on any information contained in this presentation, whether the loss or damage arises in connection with any negligence, default or lack of care or from any misrepresentation or any other cause.
1
Forward- looking statements This presentation may contain forward-looking statements. All statements other than statements of historical facts included in this presentation are forward-looking statements. Forward-looking statements may include, without limitation, statements relating to Tandou’s financial position and performance, business strategies, plans and objectives of management for future operations. Forward-looking statements involve known and unknown risks, uncertainties and other factors (many of which are beyond Tandou’s control) and which may cause actual results to differ materially from those expressed in the statements contained in this presentation. Some of the important factors that could cause Tandou’s actual results, performance or achievements to differ materially from those in any forward- looking statements include (among other things): level of demand and market prices, climatic conditions, the impact of foreign exchange rates on market prices and operating costs, political uncertainty and general economic conditions in Australia and overseas, the ability to produce, process and transport goods and livestock profitability, the actions of competitors and activities by governmental authorities. No representation, guarantee, or warranty (express or implied is given as to the accuracy, completeness, likelihood of achievement or reasonableness of any forecasts, projections or forward-looking statements contained in this presentation. Except as required by applicable regulations or by law, Tandou does not undertake any obligation to publicly update or review any forward looking statements, whether as a result of new information or future events. This presentation should not be relied upon as a recommendation or forecast by Tandou. .
No offer of securities Nothing in this presentation should be constructed as either an offer to sell or solicitation of an offer to buy or sell Tandou securities in any jurisdiction
For
per
sona
l use
onl
y
Tandou – Overview
Water - Owns one of the largest, most diverse, actively managed water portfolios in the southern connected Murray Darling Basin
Cropping - Owns significant cropping assets with history of producing high quality crops (cotton and cereal)
-One of the largest cotton producers in Australia
Diversified income streams -– Water entitlement trading and water allocation sales
– Cotton and grain production
– Organic lamb production
Profit History – Proven consistent profitability and reduced earnings volatility
Not correlated to ASX200 – TAN shares out performed ASX200 Index over the last 5 years by 200%
Location - Corporate office in Mildura in the heart of the Murray Darling Basin and close to the operating business
People - Experienced management team and workforce
3
For
per
sona
l use
onl
y
Tandou 5 Year Share Performance Benchmark ASX 200
For
per
sona
l use
onl
y
5
Location Map Menindee, NSW
Mildura, Vic. (Head Office)
blank
blank
Hay, NSW (South Farm, Glenmea & Pevensey)
Menindee, NSW
For
per
sona
l use
onl
y
6 6
Business Overview
Tandou Limited
Water Operations Farming
Cropping - Tandou
Farm
Pastoral
Investment in
Entitlements
Yield from Annual
Allocations
7,000 ha cotton
4,000 ha cereal Current target 93 GL Hold for the long term capital growth Seek medium term leases Opportunistic value realisation
External sales
Transfer to Cropping Operations
187,000 ha
15,000 Dorper ewes
400 cattle
Cropping - Hay
4,000 ha Cotton
For
per
sona
l use
onl
y
Strategic Focus
Geography - Located in the Murray Darling Basin, the Company’s experienced and knowledgeable team is well placed to take full advantage of its strategic holding in irrigated cropping and water assets
Productivity - Tandou is striving to achieve full and efficient production on its current properties, particularly those properties that have been acquired more recently, in order to drive increased returns
Apply Experience - The Company will use its farming and water knowledge when assessing future opportunities to invest in strategic assets, particularly in the Riverina area, that complement existing operations
Growth - Tandou is planning to grow its portfolio of water and land assets with the aim of generating above average returns from both the use of and trading of water entitlements and allocations
For
per
sona
l use
onl
y
Financial Year 2013 Highlights PBT - 15% increase in profit before tax to $8.609 million (2012:$7.503 million)
NPAT - 16% increase in NPAT to $6,020 million (2012: $5.171 million)
Water Division - 14% earnings growth in the water business with segment earnings before interest & tax (EBIT) to $7.297 million (2012: $6.412 million)
Farming Division - 6% earnings growth in the farming operations increasing segment earnings (EBIT) to $4.182 million (2012: $3.928 million)
Volume Growth - Farming operations successfully harvested a record 7,105 hectares of cotton with production of approximately 72,000 bales (2012: 59,336 bales) and a total winter cereal harvest of 29,500 tonnes. (2012: 11,327 tonnes)
Acquisition - Expansion of Riverina cropping operations with the acquisition of “Glenmea” irrigation property
2014 Crop Outlook - Water availability for full production for the 2014 season, both in the Menindee Lakes system and Murrumbidgee Valley
For
per
sona
l use
onl
y
Profit History (Net Profit After Tax)
Notes: Source: Published Financial Reports 2010 include $4.7 million income tax benefit 2011 was a 6 month Financial Year period
9
For
per
sona
l use
onl
y
Flexibility of Tandou Model Farming and Water EBIT (pre Corporate Costs)
Notes: •Adjusted EBIT taken from Segment Note disclosure in published Financial Reports •2009 and 2010 - 12 months , 31 Dec Y/E •2011 - 6 months •2012 and 2013 - 12 months ,30 June Y/E
10
For
per
sona
l use
onl
y
South Farm Acquisition
Total area 7,450 ha- includes 3,239 ha of developed cropping land
26,000 ML of Murrumbidgee general security water
6,085 ML supplementary water
2,500 ML ground water
12,500 ML storage on farm
For
per
sona
l use
onl
y
Water – Investment in Entitlements
Growth in portfolio
Diversification in portfolio
Valuation of $77 million at HY14
32.4
12
For
per
sona
l use
onl
y
Water Thematic
Model
• Tandou sells water when economic outlook for water sales outperforms cropping
• Tandou trades entitlements generating maximum return from portfolio.
Scarce Resource & Restricted Supply - Water is an increasingly scarce resource
• No new licenses likely to be issued, without new dams
• Projected environmental demand will hold 25–30% of Murray Darling Basin (MDB) water entitlements by 2019
• Australia is one of the only jurisdictions globally to invest in water entitlements
Demand
• Increasing global food demand will increase demand for high value, reliable (i.e. irrigated) food production
13
For
per
sona
l use
onl
y
Water Thematic
Developing Market - Australian water market is immature and inefficient
• Growing in liquidity, functionality and connectedness
• Increasingly presents opportunities
Integration & Experience –Tandou has significant water trading experience
• Benefits from in-house knowledge and consumption
• Can be leveraged across both water sales and purchasing
Scale & Diversity – Tandou has a significant, diverse, actively managed portfolio of water entitlements in the southern connected MDB
• Largest single basin
• Diversity of demand
14
For
per
sona
l use
onl
y
Tandou’s Water World (Southern Connected MDB)
15
For
per
sona
l use
onl
y
16
A Water Entitlement is a perpetual right to a share of water from a specified water
resource. They are exclusive, separate from the land title and legally enforceable. Water
Entitlements can be bought, sold and leased.
A Water Allocation is a function of owning a water entitlement, a volume of water is
allocated to the water entitlement holder each year. This water allocation is available for
consumptive use, or sale to other water users in the market.
Transferable
Divisible
Fungible
Valued at market
Water Title F
or p
erso
nal u
se o
nly
Agriculture Thematic
Model
• Tandou plants crops when returns from cropping outperforms selling water allocations
Water
• Access to significant water storages
• Menindee Lakes under gravity fed irrigation
• Low cost irrigation
• Ability to plan up to three years in advance for cropping when lakes are full at Menindee
• 18,500ML of storage on farms in Riverina
Location
• Located in a dry climatic zone at Tandou Farm allowing the production of high quality cotton
Disease Mitigation
• No close neighbours reduce disease risk
17
For
per
sona
l use
onl
y
Agriculture Thematic
Yield
• Potential to improve yield with new seed and management technology
Integrated
• On-site cotton gin at Tandou Farm
• Enables tight ginning quality control to maximise production
• Minimises freight costs on farm and new gin at Hay proposed
Efficient
• Consistent soil type and large field sizes allow for efficient management
Experience
• Team has significant large scale irrigated production experience
Scale
• One of Australia’s largest cotton producers with capability to produce 110,000 bales of cotton per annum year
For
per
sona
l use
onl
y
Tandou Farm Ginning
Annual Output
70,000 cotton bales
20,000 tonnes of cotton seed Daily capacity of up to 500 bales
Operates 24 hours/day, 140 days/year
A combination Saw and Roller gin
processing both Upland and Pima cotton
Cotton myBMP certified gin Reputation of high quality ginning
19
For
per
sona
l use
onl
y
20
Pastoral
A leading producer of prime organic lamb in Western NSW
Production of up to 20,000 prime organic Dorper lambs for market
Why Dorpers?
a. Highly fertile and productive
b. Easy care with no shearing and crutching
c. No chemical inputs required
d. Thrive in low rain fall environment
For
per
sona
l use
onl
y
Future Opportunities Water
Continue to look for opportunities to realise value
Development of new water products
Impact of average seasons and full environmental buyback on capital value
Cropping
Increase group cotton area by 20% in 2014
• Continue to optimise & increase Tandou Farm cotton area
• Take new area (Riverina) to full cotton production
• Exploring options to expand irrigation area at Glenmea
Yield increases driven by seed management technology
Productivity
Continue to improve ginning operations, driving down ginning costs
More bales with same overhead structure
21
For
per
sona
l use
onl
y
22
Tandou
- Listed investment vehicle of choice for water investment and cropping in Australia. - Maximising yield from water investment and cropping assets.
Well positioned in the water investment sector
A large portfolio of entitlements and a number of years of profitable returns from the water
business.
Active management of portfolio delivering incremental returns to cropping assets.
Successful cropping of cotton and wheat
Provides the option of profitable cropping when returns from selling water allocations become
less than those available from soft commodity production
Growth in cotton and wheat production
Exposure to both water assets and soft commodities
22 22
For
per
sona
l use
onl
y
Contact Guy Kingwill
CEO/Managing Director P: +61 3 50186500 F: +61 3 50186599
23
For
per
sona
l use
onl
y
24
Appendix F
or p
erso
nal u
se o
nly
25
Board Rob Woolley Guy Kingwill Rodger Finlay
Independent Chairman
CEO & Managing Director
Non-Independent Non-Executive Director
Tandou has an experienced Board and Management Team with
proven water and agricultural capabilities, strong corporate
governance and soft commodity production expertise
Rodger is the Deputy Chairman of Rural Equities Limited, which is currently a 10.97% shareholder of Tandou.
Rodger is also an Independent Director of New Zealand Oil and Gas Ltd, Public Trust, Mundane Asset Management and Moeraki Limited.
Appointed CEO of Tandou in March 2006, after commencing with the Company as CFO in June 2005
Extensive management experience through senior executive roles in Australia & with Bayer in the United States
Current Chairman of Tasmanian Forests & Forest Ind. Council and Tasmanian Pure Foods Ltd
Formerly Managing Director of Webster’s Ltd
Over 20 years corporate finance experience as a partner of Deloitte
David Boyd
Independent Non-Executive Director
David has spent more than 50 years in the Australian agricultural industry and is a former Chairman and CEO of Clyde Agriculture
Has served on the
Boards of Cotton Australia, the Australian Wool Exchange, Wool International, and Australian Wool Innovation Limited
For
per
sona
l use
onl
y
Tandou’s Management Team has significant experience
in the Australian agricultural sector
Guy Kingwill – CEO & Managing Director Joined Tandou as CFO in 2005 and
appointed CEO in 2006 Extensive management experience
through senior executive roles in Australia & with Bayer in the United States
Bernie Woollard – Company Secretary Management Accountant and Company
Secretary since 2001 Over 15 years experience in accounting
and finance primarily within the agribusiness sector
Brendan Barry – Water Manager Joined Tandou in 2001 as farm agronomist
- experienced cereal and oilseed cropping Developed significant trading expertise in
the water entitlement and allocation markets since
Pat Sullivan – Cropping Manager Joined Tandou in 1991 and has been Farm
Manager from 2003 until 2012 Cropping Manager since 2012 Extensive experience in agricultural
management -livestock production and irrigation management
Robert Lowe - Tandou Farm Manager Started with Tandou in 1992 19 years experience in managing large, high
yielding irrigated crops, using targeted inputs, latest technologies and production techniques
Paul Martin – Pastoral Manager 15 years pastoral industry experience and
qualified Merino wool classer Moved to Dorper sheep in 2002 as livestock
Manager with one of Australia’s leading organic lamb producers before joining Tandou
Management Team
26
For
per
sona
l use
onl
y
Income Statement ($m) 2012 2013 Variance
Revenue $49.1 $65.7 +34%
EBITDA $10.2 $11.7 +14%
Depreciation & Amortisation $1.8 $2.1
EBIT $8.5 $9.5 +12%
Interest $1.0 $0.9
Profit Before Tax $7.5 $8.6 +15%
Tax $2.3
$2.6
Net Profit After Tax $5.2
$6.0 +16%
Earnings per Share (cents) 3.6 4.2
Dividend per Share (cents) 1.0 1.0
For
per
sona
l use
onl
y
Balance Sheet ($m)
2012 2013
Cash 0.9 1.9
Current Assets - excl Cash 57.2 72.2
Non-Current Assets 36.4 43.2
Total Assets 94.5 118.2
Current Liabilities - excl Borrowings 8.3 12.8
Borrowings 10.4 23.9
Non-Current Liabilities -excl Borrowings - 1.2
Total Liabilities 8.8 37.8
Total Equity 75.7 80.2
Net Debt 9.8 22.1
Gearing 12.9% 27.6%
Net Debt & Gearing •Net Debt $22.1 million •Gearing (Net Debt/Equity) 27.6% Assets •Significant water sales receivable collected in July. •Record cotton crop unginned in inventory ($36 million – see Accounts Note 4) Liabilities •Record wheat harvest proceeds partly received in advance and record cotton crop harvest accruals. •Seasonal Loan borrowings utilised
Investment in Growth, Scale & Productivity •Acquired Riverina property ‘Glenmea’ •Ginning press upgrades
For
per
sona
l use
onl
y
Balance Sheet - Directors Valuations
29
The Group’s assets at Directors’ valuation after taking into consideration Independent valuations performed 1/ Water Uplift - 19,050ML of Lower Darling General Security Entitlements •Book Value $134/ML •Independent valuation $750/ML 2/ PP&E Uplift – Land & Irrigation improvements and Buildings (incl Gin) valuation increased
($m) 30 June 2013
Water uplift @ Directors
Valuation
PP&E uplift @ Directors Valuation
30 June 2013 @
Directors Valuation
Current assets 74.2 1.3 - 75.5
Non current assets 43.9 10.7 7.8 62.4
Total Assets 118.0 12.0 7.8 137.9
Current liabilities 26.6 - - 26.6
Non current liabilities 11.2 - - 11.2
Total Liabilities 37.8 - - 37.8
Net Assets 80.2 12.0 7.8 100.0
Shares on issue 143.1M 143.1M
NTA per share $0.56 $0.70
For
per
sona
l use
onl
y
Cash Flow
30
Operating cash flow •improves by $2.2 million
Investing cash flow - PP&E payment •Glenmea $7.0 million •New Gin Press $1.8 million •Operational Capex $2.8 million
($ m) 2012 2013
Receipts 60.7 71.1
Payments (61.3) (69.4)
Interest received & paid (0.9) (0.9)
Operating Cash Flows (1.4) 0.8
Payments for PP&E (4.9) (11.6)
Proceeds from sale 0.1 0.1
Other Acquisitions - (0.1)
Investing Cash Flows (4.9) (11.6)
Proceeds from borrowings 61.0 26.5
Repayments of borrowings (52.5) (13.0)
Dividends paid 0 (1.4)
Payments for capital raising (0.3) 0
Repayment of finance leases (0.5) (0.3)
Financing Cash Flows 7.7 11.8
Net Cash Movement 1.4 1.0 For
per
sona
l use
onl
y
Segment Summary
31
Cropping Record crops harvested •cereal •cotton Water Significant, profitable trading of water entitlements
($m) 2012 2013 Variance
Farming Revenue 37.5 48.2
Farming Contribution 3.9 4.2 +6%
Water Operations Revenue 28.4 37.5
Water Operations Contribution 6.4 7.3 +14%
Corporate Office Overheads 1.9 2.0
EBIT 8.5 9.5 +12%
*Revenue represents the value of all crops and livestock produced during the period.
For
per
sona
l use
onl
y
Water Segment
32
Sale of $17 million to agricultural investors. Farming segment increased purchase quantity of allocation water. 14% segment EBIT increase.
($m) 2012 2013
Water Entitlements Revenue 22.9 30.0
Water Entitlements Contribution 2.3 2.8
Water Allocations Revenue External 1.6 1.7
Water Allocations Contribution External 1.3 1.1
Fixed expenses 0.3 0.3
Water Operations Contribution External 3.3 3.5
Water Allocations Revenue Internal 4.0 5.9
Water Allocations Contribution Internal 3.1 3.8
Total Water Operations contribution 6.4 7.3
Water Entitlements Value 38.5 31.5
Water Entitlements on hand 38,827ML 33,859ML
Entitlements sold 17,110ML 25,267ML
Entitlements purchased 21,220ML 20,300ML
For
per
sona
l use
onl
y
Farming Segment
33
Record 7,105ha cotton crop harvested with approximately 72,000 bales produced. Record 29,500 tonnes of cereal harvested 21,000 lambs produced and 13,000 sheep sold. Livestock sale prices and valuations fell during year. 6% segment EBIT increase.
($m) 2012 2013
Cotton Revenue 32.2 38.0
Cotton Contribution 7.1 9.2
Cereal Revenue 3.8 9.1
Cereal Contribution 1.0 1.9
Pastoral Revenue 1.4 1.1
Pastoral Contribution 0.7 0.2
Fixed expenses 4.9 7.1
Farming contribution 3.9 4.2
*Revenue represents the value of all crops and livestock produced during the period.
For
per
sona
l use
onl
y
Cropping
34
Year ended 30 June 2012 2013 Variance
Cotton Volume (tonnes) 13,469 16,344 +21%
Cotton Volume (bales) 59,336 72,000 +21%
Cotton Area 6,660 7,105 +7%
Cotton Yield (tonnes/ha) 2.02 2.30 +14%
Cotton Yield (bales/ha) 8.91 10.13 +14%
Wheat Volume (tonnes) 11,327 29,300 +159%
Wheat Area (ha) 2,407 4,120 +71%
Wheat Yield (tonnes/ha) 4.7 7.1 +51%
For
per
sona
l use
onl
y
Contact Guy Kingwill
CEO/Managing Director P: +61 3 50186500 F: +61 3 50186599
Andrew Angus Investor Relations
P: +61 402 823 757 [email protected]
For
per
sona
l use
onl
y
