Paul Ingleby, Chief Financial Officer
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Paul Ingleby, Chief Financial Officer October 2003. Contents. The strategy Landmark – the acquisition The growth opportunity Outlook Appendix 1: AWB’s business Appendix 2: Landmark’s business. “The strategy”. Group Structure. AWB Limited. Commercial operations. Pooling operations.

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Paul Ingleby, Chief Financial Officer October 2003

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Paul ingleby chief financial officer october 2003

Paul Ingleby, Chief Financial Officer

October 2003


Contents

Contents

  • The strategy

  • Landmark – the acquisition

  • The growth opportunity

  • Outlook

  • Appendix 1: AWB’s business

  • Appendix 2: Landmark’s business


Paul ingleby chief financial officer october 2003

“The strategy”


Group structure

Group Structure

AWB Limited

Commercial operations

Pooling operations

Pool Management Services

Finance & Risk Management Products

Grain Acquisition & Trading

Supply Chain & Other Investments

Grain Technology

Landmark


Corporate strategy

Milling & Processing

International other grains & commodities

  • End-users Relation-ships

Shipping

Finance & Risk Mgmt.

International wheat

Pool Mgmt.

Integrated Value Chain

Australian other commodities

Value adding products and services

Acquisition & Trading

Supply Chain

  • Producers Relation-ships

Australian other grains

Rural Services

Agricultural inputs and technology

Australian wheat

Agricultural Commodities

Corporate strategy

Vision: “Australia’s leading global manager of agricultural commodity assets, services and flows”


Awb s financial objectives

AWB’s financial objectives

Return on equity

- 15% return on equity in the medium term

Solid EPS growth (including Landmark)

- EPS accretive (pre-goodwill, post synergies, post one-off costs) in 2003-04

- More than 35% EPS accretive by 2005-06

Stable dividend payment

- 11 cents per share for the 2003 final dividend

- Expect to maintain dividend payment at current levels for 2003-04

Efficient capital management

- Surplus capital utilised to part fund the acquisition of Landmark

- Appropriate credit rating

Improve quality of earnings

- Reduced exposure to crop size

- Reduced proportion of earnings subject to principal risk


Paul ingleby chief financial officer october 2003

“Landmark – the acquisition”


Paul ingleby chief financial officer october 2003

Landmark strengthens AWB’s core wheat business & achieves substantial diversification in rural & financial services

  • Integration, extraction of synergies and building of growth platforms will be a major focus in 2003-04

  • Landmark distribution network and Rabobank relationship will be growth enablers in Financial Services

  • AWB will continue to strengthen its grain business by seeking arrangements with bulk handlers allowing competitive access to ports and by securing end user demand

  • Strong focus on cost and capital management will help prioritise business opportunities, whether in existing business streams or beyond


The acquisition of landmark creates a unique one stop shop for the farmer

The acquisition of Landmark creates a unique ‘one stop shop’ for the farmer

Enhanced access to global markets for Australian agriculture

  • Access to over 40 countries around the world

    Cross-selling

  • Cross-selling of products and services to farmers and international customers

    Overhead cost savings

  • Consolidation of AWB and Landmark corporate, head office and network functions, where appropriate

    Supply chain cost savings

  • Consolidation of procurement functions

  • Leveraged logistical capability


Paul ingleby chief financial officer october 2003

AWB and Landmark

Distribution Network

  • Acquisition of Landmark dramatically expands AWB’s foot print across rural Australia

    • Better able to service customers and complement Single Desk marketing / risk management activities

    • Platform to leverage growth for AWB financial services business

AWB office locations (49)

Landmark outlets (430)


Awb and landmark indicative financial position as at acquisition date 1

AWB and LandmarkIndicative financial position as at acquisition date1

Notes

Subject to completion accounts

Indicative only, following placement. Does not include equity raisings under the Share Purchase Plan and Dividend Reinvestment Plan


Paul ingleby chief financial officer october 2003

AWB and Landmark

Profit Opportunities

  • Total EBIT enhancement opportunities, derived primarily from finance growth opportunities, assessed at A$5 - A$10 million in FY2004 increasing to A$30 - A$40 million by FY2006

  • Detailed implementation plan has been established to pursue opportunities from Day 1

Notes:

Net profit after tax, pre goodwill amortisation including all one-off costs

Based on AWB forecasts for FY2004 and FY2006, pre goodwill amortisation, includes all one-off costs for FY2004


Funding the acquisition

Funding the acquisition

A$250m Underwritten Equity Offer in Three Tranches

Placement

Share Purchase Plan (SPP)

Underwritten Dividend Reinvestment Plan (DRP)

Completed

Commences next dividend

(Dec 2003)

Offer mailed out

  • Institutional offer via bookbuild completed on 2 Sept 2003 with 41.1m shares issued at A$3.70. The placement was oversubscribed.

  • The SPP currently on offer to retail shareholders with the offer closing 20 Oct 2003

  • AWB will implement the DRP effective for the final dividend at a 5% discount, underwritten for the next three dividends to the extent that the placement and SPP raise less than A$250 million


Paul ingleby chief financial officer october 2003

“The growth opportunity”


Harvest finance market

Harvest finance market

  • Environmentbecoming increasingly competitive

    • Traditional players – NAB, Rabo, BHC’s

    • Others players– WBC, ANZ, Regionals

    • AWB product enhancements for 2003

  • Performance & take up rates

    • 70% market share

    • Majority Harvest Loan, but other product use increasing

  • Cross sell opportunities between AWB & Landmark

    • Product bundling

    • Landmark finance staff to sell AWB Harvest Finance


  • The opportunity

    The opportunity

    $30b of agribusiness lending in three broad segments

    ‘Farmers’

    ‘Corporations’

    Product set

    Segment ‘B’

    65,000 SME agribusiness customers

    $20b loans

    Segment ‘C’

    5,000 Corporate Enterprise

    $8b loans

    Finance to all agribusiness

    Segment ‘A’

    30,000 Grain / Broadacre

    $2b loans

    Harvest finance to grain growers

    Turnover

    Small

    <$200k

    Medium

    $200k-$1m

    Large

    >$1m

    Source: ABARE, ABS, RBA, APRA, Jun 2002. Neil Clark & Assoc.


    Competitive opportunities

    Competitive opportunities

    Competitors vary in their primary focus of attention

    Major Banks

    Large

    Rabo

    Value Proposition #1:

    Commodity led

    Value Proposition #2:

    Finance led

    Oppor-tunity 1

    Regionals

    • 300 agronomists

    • Broad product range

    • Rural distribution

    • Product bundling

    • Brand appeal to agribusiness

    • Balance sheet strength, funding, liquidity capacity

    • 60 RFM/RFO’s

    • Understanding of agribusiness risk

    • Rural distribution

    • Product bundling

    • Brand appeal to agribusiness

    • Balance sheet strength, funding, liquidity capacity

    Oppor-tunity 2

    Landmark

    ERB

    Small

    Low

    Profitability

    High


    Growth in agribusiness lending

    Growth in Agribusiness lending

    $Bn’s

    50

    10% CAGR

    40

    30

    20

    10

    0

    1997

    1998

    1999

    2000

    2001

    2002

    2003(f)

    2004(f)

    2005(f)

    2006(f)

    Source: ABARE, ABS, RBA, APRA, Jun 2002. Neil Clark & Assoc., Bank Annual Reports. (f) = forecast


    Paul ingleby chief financial officer october 2003

    “Outlook”


    Outlook awb is well positioned as australia s leading agribusiness

    Outlook – AWB is well positioned as Australia’s leading agribusiness

    Agricultural outlook is improving

    - AWB forecast 22 to 24m tonnes of wheat for 2003-04

    - Outlook solid for finance, insurance, fertiliser and real estate

    2002-03 Group NPAT forecast in the range of $40-45m

    2003-04 Group NPAT forecast in the range of $100-110m

    - Pre goodwill amortisation, including all one-off costs

    Ring fencing of National Pool

    - Targeted credit ratings achieved and protected

    Integration of Landmark

    - Total EBIT enhancement opportunities, derived primarily from finance growth opportunities, assessed at $5-$10m in 2003-04 increasing to $30-$40m by 2005-06


    Paul ingleby chief financial officer october 2003

    Appendix 1 : AWB’s Business


    Introduction

    Introduction

    • Australia's major grain marketer and one of theworld's largest wheat managers and marketers – over 60 years experience in marketing Australian wheat

    • AWB markets wheat and other grains to more than 40 countries and is the world’s second largest wheat exporter with 16% global market share (based on 2001-02). The AWB National Pool is a significant contributor to the Australian economy, accounting for around 3% of the total value of Australia’s exports. AWB employs more than 550 people, with a network of 43 offices in Australia and around the world

    • AWB is chosen by most Australian wheat and grain growers to market and financetheir grain

    • AWB operates and manages the AWB National Pool on behalf of AWB (International) Ltd via the Single Desk system


    Dual class share ownership structure

    Dual Class Share Ownership Structure


    Paul ingleby chief financial officer october 2003

    AWB Business Streams

    • Base Fee

    • Out-Performance Incentive

    Pool Management Services

    • AWB National Pool Payment Options

    • AWB Basis Pool

    • AWB riskassist

    Finance & Risk Management Products

    • Grain Contract Acquisition Products

    • Domestic Trading

    • Non-Wheat Trading

    • Global Operations - Geneva

    Grain Acquisition & Trading

    • Chartering

    • AWB Grainflow

    • Offshore Investments

    Supply Chain & Other Investments

    • Agrifood Technology

    • AWB Seeds

    • Research & Development

    Grain Technology


    Ring fence of national pool operations

    Ring fence of National Pool operations

    • Ring fence structure to be effective from 1 October 2003

    • Ratings expected post 1 October 2003

      • AWB Harvest Finance

        • S&P: A1+ (s/t) AA- (l/t) stable

        • Moodys: P-1

      • AWB Commercial Subsidiaries

        • S&P: BBB stable outlook


    Capital requirements going forward

    Capital requirements going forward

    • Level of capital required to support future growth plans

    • No major capital expenditure for 2003-04

    • Expected maintenance capital expenditure of approximately $20-$30m per annum (to 2005-06)


    Paul ingleby chief financial officer october 2003

    Appendix 2 : Landmark’s Business


    Overview of landmark

    Overview of Landmark

    Landmark is Australia’s leading rural distribution network with national coverage and significant growth opportunities

    • Largest merchandise and fertiliser distribution business in Australia

    • Well diversified earnings base across regions, agricultural commodities and business activities

    • High growth finance business that can be further leveraged by AWB

    • Strong insurance agency business

    • Extensive branch network throughout regional Australia with 430 outlets and over 100,000 customers

    • Lower risk agency model relative to peers

    • Experienced management team which has presided over previous successful acquisitions and significant earnings growth


    Landmark a snapshot

    Landmark: a snapshot

    100,000 customers

    Mercha-

    ndise

    $1.1b

    Sales

    Fertiliser

    1.2m

    tonnes

    Livestock

    1.9m

    Cattle

    11m

    Sheep

    Wool

    500k

    bales

    Real

    Estate

    $730m

    sales

    Finance

    $815m

    book

    Insurance

    $119m

    premium

    1,890 employees

    430 outlets


    Paul ingleby chief financial officer october 2003

    Overview of Landmark by business unit

    Wool

    Livestock

    • Handles approximately 20% of livestock trading in Australia

    • Provides saleyard auction services and private treaty services for livestock producers

    • Supplies processors, supermarket chains, lot feeders and live export markets

    • Landmark do not own feedlots or abattoirs

    • Landmark handles approximately 25% of the National Wool Clip (600,000 bales)

    • Provides traditional broking / auction selling services as well as a comprehensive range of Risk Management products

    • 50% interest in Australian Wool Handlers (with BWK), 40% interest in Arcadia

    • Not involved in any downstream processing


    Paul ingleby chief financial officer october 2003

    Overview of Landmark by business unit

    Real Estate

    Insurance

    • Markets large rural properties, residential real estate (regional towns) and clearing sales in country areas throughout Australia

    • Real estate sales of in excess of A$700 million in 2003

    • Landmark offers a range of insurance cover options for rural businesses and households

    • Landmark acts as an agent for WFI and CGU

    • The current arrangements with WFI and CGU will remain in place


    Paul ingleby chief financial officer october 2003

    Overview of Landmark by business unit

    Merchandise

    • Supplies a broad range of agricultural inputs, including agricultural chemicals and veterinary products, to all major agricultural sectors

    • Distributed via 230 company owned branches, 50 franchises and 150 members (ie non-Landmark merchandise stores)

    • Provides agronomic advice for cropping, pasture and cotton enterprises


    Paul ingleby chief financial officer october 2003

    Overview of Landmark by business unit

    Fertiliser

    Finance

    • Acts as an agent for CSBP (owned by Wesfarmers) and others in WA; IncitecPivot and Hi-Fert on the east coast

    • Landmark provides a range of financial products for rural producers including seasonal and term loans, term deposits, cheque accounts and credit cards

    • Acts as an agent for Rabobank and receives a proportion of the net interest on each loan and a share of a ‘bonus pool’ (precise earning arrangements are yet to be determined)

    • Landmark is responsible for loan approvals, however there is one Rabobank credit manager in the Landmark credit team

    • Landmark still ‘owns’ the client

    • 50 Rural Finance Managers located throughout Australia


    Paul ingleby chief financial officer october 2003

    Overview of Landmark by business unit

    Other

    • Other Sales and Gross Profit are derived from the following businesses


    Paul ingleby chief financial officer october 2003

    www.awb.com.au

    For more information contact:

    Delphine Cassidy

    Head of Investor Relations

    T: +61 3 9209 2404

    F: +61 3 9670 1723

    E: [email protected]


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