Rural Funds Group (ASX:RFF) HY21 results summary

Interviews

by Clive Tompkins

Rural Funds Group Limited (ASX:RFF) General Manager - Investor Relations and Marketing, James Powell, presents on the group's HY21 results.

On 18 February, the Rural Funds Group (ASX:RFF) reported the half year results for the period ended 31 December 2020. The key highlights for the results were an earnings improvement compared to the prior period of 94 per cent, producing approximately 17 cents per unit. This was primarily driven by the sale of an asset in the half year. The adjusted funds from operations and distributions which were generated by the group are on track for full-year forecasts. The adjusted net asset value per unit has increased 4 per cent to $2.01 per unit. And finally, the FY22 distribution forecast of 11.73 cents per unit was announced, which is a 4 per cent increase on the current year's forecast distributions, which is in line with the 4 per cent distribution target.

The key property movements for the half year included the disposal of an almond orchard, which RFM had previously developed. That provided a 20 per cent plus gain for the Rural Funds Group. The funds from that sale will be redeployed into other acquisitions within RFF. During the half year, RFF has acquired a number of assets which will be eventually used to convert to macadamia orchards.

As Rural Funds Management, as responsible entity for the Rural Funds Group, had announced at the full year results, we're seeking to increase the investment into the macadamia sector within the portfolio. We have an intention of developing some 5,000 hectares over approximately five years. In the current calendar year, the Rural Funds Group will seek to develop 500 hectares in three locations where we've acquired assets which are suitable to the development of orchards. They include Rockhampton, Bundaberg and Maryborough, where the bulk of the plantings in the current year will be focused.

The development of macadamia orchards represents one of the underlying strategies which RFM is deploying for the benefit of the Rural Funds Group. Specifically, converting assets to higher and better use to achieve higher returns from those agricultural properties. Another strategy which RFM continues to deploy is improving the productivity of other assets within the portfolio. These are primarily focused on, for example, cattle properties in Central Queensland, the leases of which typically have a market rent review mechanism, which will monetise the improvement in the productivity and expected valuation increase in future years. Both of those strategies, productivity improvements and higher and better-use developments, seek to improve the overall returns for the unit holders of the Rural Funds Group.

The financial results for the period ended 31 December 2020 represent another good set of accounts for the Rural Funds Group. Both adjusted funds from operations and distributions per unit generated during that period are on track with full-year forecast. And importantly, RFM as RE of the Rural Funds Group has announced, as part of the half year results, next year's distribution forecast being a 4 per cent increase on the current year's distribution forecast, which is in line with our strategy.


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