Rural Funds Group

Thank you for standing by and welcome to the Rural Funds Group FY26 Financial Results presentation. All participants are in a listen-only mode. There will be a presentation followed by a question and answer session. If you wish to ask a question and are joining by phone, you will need to press the star key followed by the number 1 on your telephone keypad. If you are watching the webcast online, please note you can submit a written question at any time by selecting the raised hand icon in the top right corner of your screen. I would now like to hand the conference over to James Powell, General Manager in Investor Relations, Corporate Affairs and... Good morning and welcome to the financial results presentation for the Rural Funds Group for the full year ended 30 June 2026.

My name is James Powell, General Manager of Investor Relations and I'm joined today by David Bryant, Managing Director, Tim Sheridan, Chief Operating Officer and Daniel Yap, Chief Financial Officer. After the presentation we've allowed time to take questions from attendees via the methods outlined by the operator and we encourage our unit holders to participate. Firstly, a brief introduction. The following slide highlights RFS strategy to generate income and capital growth from developing and leasing agricultural assets, which will be a reoccurring theme in today's presentation. Also throughout the presentation, most metrics will be presented on a pro forma basis, adjusting for contracted asset sales announced in July. On this basis, the portfolio represents $1.8 billion of high quality agricultural assets that are mainly leased to a majority of corporate and institutional lessees. Looking at the other attributes of RFS, the fund provides investors with quarterly distributions generated from a diversified portfolio of assets, both by sector and climatic zone, which are leased for an weighted average lease expiry of almost 15 years. Leases are generally triple net and include a range of indexation mechanisms providing structural rental growth. A range of other portfolio metrics are presented on the left hand side of this page. This next page provides a summary of the results highlights for FY26. We are pleased to confirm that FY26 AFFO and distributions are in line with prior forecasts. At our last results, we outlined a commitment to our investors to identify assets to reduce gearing and improve AFFO and earnings. and shortly we will provide details on $315 million of contracted divestments which have achieved these objectives as well as providing other portfolio benefits which are summarised also on this page. I'll now hand over to Tim Sheridan to present the FY26 financial results in more detail.

Thank you James. Good morning everyone. Over the next few slides I'll present the financial results for the financial year ending 30 June 2026, providing a summary of earnings, balance sheet and valuation movements for the Rural Funds Group. The first slide of this section provides a more detailed analysis of RFP's key earning drivers for the period. Net property income from leased assets increased 6%, up $5 million to end the period at over $100 million of net property income. The increase is mainly due to additional rent being generated from the lease of macadamia orchards which are being developed, as well as annual lease indexation mechanisms. Net farming income, that is the operating result on approximately 16% of the assets which are operated by RFF, provided a positive contribution for the period, and an increase on the FY25 result. This was driven by higher cotton yields on operating properties compared to forecast. Whilst setting these results, there has been a decline to the 2026 macadamia price from $4.25 per kilo to $3.80 per kilo. This information was received at the end of July which has caused a reduction to the approved result from this segment. Overall we have recorded a greater contribution to farming income in the second half in line with the timing of various crop harvests as foreshadowed in the half year results. From an expense perspective, fund expenses were largely in line with the prior period, however interest on debt increased by $4.6 million, largely due to a decrease in the interest that is able to be capitalised, reflecting the completion of various asset development programs. Adjusted funds from operations, the net cash earnings measure of the group increased to $45.4 million or 11.7 cents per unit in line with forecast. Earnings for the group which includes non-cash items such as asset revaluations and mark to market of interest rate swaps were significantly higher than the prior corresponding period at $124 million or a $100 million increase on the prior year. The principal drivers for revaluation gains for asset sales which have been contracted are premiums to book values. Finally on this page, RFF paid four distributions during the year, totalling 11.73 cents per unit in line with forecast. The payout ratio of 100.6% reflects the greater AFFO generated during the period and the third consecutive year the payout ratio has improved. Consistent with prior presentations, the next page presents the summarised balance sheet adjusted for the carrying values of water entitlements within the fund. The table also includes a pro forma column so that we can present the 30 June balance sheet including the $255 million of asset sales which were announced in July this year. Some of these assets are yet to settle, however all contracts are now unconditional. My comments will refer to the pro forma numbers, as this is a better reflection of the fund's status. The remainder of the presentation will also just refer to pro forma numbers as James had outlined. During the period, RFF contracted the divestment of six properties and 8,754 megalitres of water entitlements. Collectively, these assets were sold at an average premium of 17.9% to their prior book values. The purpose of these asset sales was threefold. To fund forecast development expenditure, to reduce gearing back to within the target range and to improve the balance sheet flexibility for the group. Adjusted total assets reduced by $150 million or 7.3% to approximately $1.9 billion. This incorporates $300 million of asset divestments, partly offset by $150 million of property valuation movements. Those valuation movements were primarily associated with capital expenditure on macadamia and cropping developments that occurred during the period. Adjusted NAB per unit increased from $3.08 to $3.22 per unit, an increase of $0.14 or 4.5%. The most significant balance sheet change is in the debt. Interest bearing liabilities were reduced from $862 million to $607 million as the proceeds from the announced sales are applied to debt repayment under the pro forma. As a result, gearing reduces from 39.8% at 30 June to 31.8%. That brings gearing comfortably back within the target range of 30 to 35%. The balance sheet is therefore better positioned at the end of this program. We have funded the development activity, increased the NAV per unit and reduced debt and restored financial capacity for the group. This slide provides additional detail on the portfolio valuations as evidenced by the recent transactions. Independent valuations were completed for 60% of the portfolio, representing approximately $1.2 billion of asset independent valuations across cattle, almonds, macadamias, cropping, vineyards and water entitlements. Those independent valuations were broadly in line with existing book values, producing a negative revaluation movement of approximately 0.5%. This is consistent with RFS policy to independently value assets at least once every two years. Director's valuations were applied to the remaining $795 million of the portfolio. Across the total portfolio the revaluation movement was a positive 1.8%. The primary contributor to this was the gain on the contracted asset sales. The dive investments evidence is particularly important. RFF contracted $317.5 million of asset sales at an average premium of approximately 18% to book value. Within that total, four cattle properties were contracted for $234 million at an average premium of 25%. Water entitlements totaling 8,754 megalitres were contracted for $74.4 million, broadly in line with the adjusted book value. Two sugar cane properties were sold for $6.3 million at an average premium of 11%. The overall conclusion is that independent valuations remain broadly supported of carrying values where actual transactions, particularly the cattle property sales, have occurred at a meaningful premium to those days. This provides tangible market evidence supporting RFF's adjusted NAV. Looking now at the capital management aspect of the group. During the year, RFF completed the scheduled refinance of its syndicate debt facility, including a two-year extension of the tenor of a $410 million tranche. Following asset sales, this facility was reduced by $60 million in July 2026 and the facility limit is expected to reduce further as the remaining asset sales settle. On a pro forma basis, RFF has total facilities of $891 million and drawn debt of $590 million. This provides approximately $301 million of undrawn headroom compared with $46 million at 30 June This pro forma headroom is more than sufficient to fund the $47 million of committed capital expenditure forecast for FY27, and therefore the facility limit is expected to be reduced further after the asset sales settle. The reduction in forecast capital expenditure from $116 million in FY26 to the forecast $47 million in FY27 reflects the fact that the major development program are now either complete or well progressed. This is an important transition for the group. The portfolio is moving from a period of relatively intensive development expenditure towards a lower level of capital committed expenditure. The key banking covenants remain comfortably within their limits. The pro forma loan to value ratio is 43.7% against a covenant of 60%. The interest cover ratio is 3.26 times against a covenant of 1.5 times. The weighted average cost of debt for FY26 was 4.69% compared with 4.79% in FY25. Following the asset sales, a significant 82.3% of debt is hedged or fixed on a pro forma basis. The average hedge maturity at 30 June 2026 is 3.3 years. Taken together, these metrics demonstrate that RFF has sufficient liquidity to meet committed development capital expenditure and substantial covenant headroom. This final slide provides more detail on the maturity profile of the facilities and interest rate hedges. The chart on the left hand side provides detail of the debt facility limit and expiries which I've noted on the prior slide. On the right hand side the chart shows the interest rate hedging profile. Approximately $409 million is hedged in FY27 and $410 million is hedged in FY28. reducing gradually thereafter as individual hedges mature. The weighted average hedge rate is approximately 2.7% in FY27, falling to around 2.2% in FY31 and FY32. These hedges exclude the applicable bank margin but provide visibility and protection over RFS base interest rate costs. The key message is that the combination of reduced gearing, 82% fixed debt, $308 million of headroom and strong banking covenants provides a sound position for the Rural Funds Group. This leaves RFF fully funded for its committed capital development expenditure program and it's better placed to manage interest rates and refinance risk while retaining balance sheet flexibility. We'll now hand over to David Bryant to provide a portfolio and strategy update.