Rural Funds Group (ASX:RFF) General Manager – Investor Relations and Marketing James Powell presents on the group’s FY21 results.
The FY21 adjusted funds from operations or the net cash generated by the group was 11.9 cents per unit, slightly ahead of the prior forecast of 11.7 cents. Distributions totalling 11.28 cents per unit were in line with prior forecasts. Earnings were up 98 per cent compared to the prior year, and this was driven primarily by independent valuations, which were arranged for approximately three-quarters of the assets during FY21, as well as the disposal of an asset. And, finally, the pro forma adjusted net asset value per unit was $2.20 representing a 13 per cent increase on the prior year. The pro forma relates to the entitlement offer, which was completed shortly after the financial year end.
The most significant event was the issuance of $100 million of new equity, which was raised via an entitlement offer in July and August of this year. The offer was conducted at a price of $2.47 per unit, and was well supported by existing investors. During the period, $60 million of new foredated interest rate hedges were entered into by RFM as we seek to take advantage of low debt funding costs. In terms of the debt facility, the overall limit was increased to $380 million in FY21. External borrowings are $290 million on a pro forma basis, and gearing is 25 per cent. This is well below the target gearing range of 30 to 35 per cent, and therefore the group has balance sheet capacity, which can be deployed on acquisitions and development capital expenditure.
Over the past 12 months or so, RFF has acquired significant land and water entitlements for the development of 5,000 hectares of macadamia orchards over time. Over the next year, RFM will complete the initial development of 1000 hectares of macadamia orchards and seek a long-term lessee on terms that are attractive to the unit holders of RFF. After allowing for the macadamia development expenditure, RFF has approximately $100 million of capital that can be allocated to additional cattle and cropping acquisitions.
RFM will continue the strategies of converting assets to higher and better use and seeking acquisitions with productivity development potential. Both strategies seek to increase adjusted funds from operations. RFM is also pleased to confirm FY22 forecast distributions of 11.73 cents per unit, which represents a 4 per cent increase on the prior year.
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