Elders achieves 5-10pc growth

Elders chief executive officer Mark Allison was pleased to tell shareholders that the company had increased dividends to 18 cents a share for the full year, up from 15c/share in the 2017 financial year.   

“We have continued on from the strong financial performance in FY17, achieving the 5-10pc growth per annum through three the cycles as we set out to do,” he said.

“We've achieved this through our diversification that we've talked about over the past four years.”

But Mr Allison said the impact of higher retail debtors due to both late season activity and a delay of receipts due to public holidays at year’s end has resulted in an operating cash outflow of $12m, compared to an inflow of $81m the previous year.

“Pleasingly debtor receipts banked in the first week of October 2018 were $30m higher than the previous year,” he said.

“Additionally, some seasonal stock has also been carried over into the new financial year.”

Mr Allison said average net debt also rose by $24m to $161m at the end of September, in line with both business growth and increased investment activity during the year.

“Our funding is largely comprised of self-liquidating facilities,” he said.

“Debt levels fluctuate with sales activities and the dates upon which receivables are sold into our receivables funding program.

“For these reasons, we are of the view that average debt and cash levels are a far better guide to the health of our business than period end levels.”

The retail side of the business posted a $14.5m margin improvement, with contributions from the acquisition of NSW-based horticulture operation Ace Ohlsson and organic growth in southern Australia. 

“Agency was down $3.4m with declining cattle prices having an impact on margin, which was partially offset by solid wool performance and increased sheep trading volumes,” Mr Allison said.

“Real estate improved by $1.7m to $33.6m with the increase from footprint expansion offset by subdued activity in key residential markets.

“Elders’ Financial Services earnings were boosted by acquisitions and organic growth in loan book balances, rising from $35.1m at the end of FY17 to $38.3m at the end of this reporting period.

“Feed and processing margins increased across all business units, with Killara feedlot continuing to perform due to high utilisation levels driving efficiencies in cattle performance.

“Costs increased by $13.8m to $280.4m to drive Eight Point Plan initiatives, including acquisition and organic footprint growth.”

Mr Allison said these acquisitions included Kerr & Co Livestock in western Vic, Titan Ag in the retail sector and a 20pc stake in Clear Grain Exchange.

“The Eight Point Plan continues to guide our sustainable growth and our business units are constantly reviewed to ensure they are generating a consistent return on capital at a level which creates sustainable wealth for our shareholders,” he said.

This portfolio review process prompted the company to divest its Indonesian feedlot and processing assets, because of high cattle costs and changing Indonesian government policies.

“We remain steadfast in our target to achieve 5-10pc growth year-on-year, with half from acquisition and half from organic growth,” Mr Allison said.

IN his departing speech, outgoing Elders chairman Hutch Ranck touched on a few other achievements by the company in the past year, including re-entering the S&P/ASX 200 index, reducing the number of injuries in the workplace, and “returning Elders to its roots in agriculture and attaining a sustainable financial position”.

Mr Ranck has been on the Elders board for a decade, with five as chairman.

He hands the mantle to recently-appointed director and former banker Michael Carroll.

“Michael shares a long-standing passion for agriculture and brings relevant industry experience, which we are confident will greatly contribute to Elders’ ongoing performance particularly as the company continues its growth initiatives,” Mr Ranck said.

Mr Carroll said he looked forward to ensuring the board’s direction was clear and not ambiguous.

“I greatly admire Elders’ turnaround in the past five years, the board and the executives can justifiably be very proud of its achievement,” he said.

“Hutch is leaving the company in great shape, a very strong foundation I aim to build on.”