DESPITE ongoing drought and bushfires in the first half of the year and without claiming any COVID-19 support measures from the government, Elders has reported underlying earnings of $120.6 million, before tax and interest - a 64 per cent increase on last year - and a return on capital of 18.7pc at the company's online annual general meeting today.
At the close-out of its second Eight Point Plan, the company reported an underlying after-tax profit of $107.7m - an increase of 69pc on 2019 - while shareholders will receive a final, fully-franked dividend of 13 cents per share tomorrow, increasing dividends to 22c/share for the full year - a 4c increase on the 2019 financial year.
Elders chief executive officer Mark Allison said despite the challenging year, the company's Eight Point Plan ensured it was able to achieve a "strong financial performance, and continue our commitment to making good money in bad seasons and great money in good seasons".
"These results highlight the resilience of our business model and represents outperformance against the second Eight Point Plan goal of 5-10pc earnings before interest and tax growth through the agricultural cycles," he said.
"The result was driven by strong growth across all state geographies, products and services, combined with an ongoing, highly-disciplined approach to cost and capital management and allocation."
Elders' return on capital of 18.7pc was 0.5 percentage points up on FY19.
- MARK ALLISON
Mr Allison said the performance of the company's rural products division was a highlight this year.
"The acquisition and integration of the AIRR wholesale business provided an EBIT contribution of $21.9m, and has exceeded business case expectations after only 10.5 months of ownership," he said.
"We also made excellent progress on our backward integration strategy, selling more of our own TitanAg branded products at higher margins.
"Elders' return on capital of 18.7pc was 0.5 percentage points up on FY19.
"If the effect of the AIRR acquisition is excluded, our return on capital of 20.2pc is in line with the 20pc ROC hurdle we set ourselves at the start of the second Eight Point Plan period."
Mr Allison said following the coronavirus outbreak in March, the company acted "early and decisively", forming a dedicated COVID-19 response committee.
"The committee oversaw several measures including establishing new ways of working, as well as contactless service arrangements in our branches and on-farm," he said.
"From an operational perspective, COVID-19 created supply chain disruption and border crossing challenges for our business and local communities to navigate.
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"I commend our people for the resilience and adaptability they have demonstrated in maintaining our commitment to our clients through the COVID-19 period and delivering an essential service to Australia's agriculture sector."
Elders chair Ian Wilton also commended the company's 2100 staff that "went above and beyond for our clients and our company".
"You have adapted admirably to the COVID-19 situation, finding new ways of working and keeping each other safe," he said.
"And in times of crisis you have been there for your clients and your communities.
"This was evident during the summer of bushfires, where Elders people fought fires, mended fences, fed livestock and provided a shoulder to lean on for so many."
Mr Wilton said the next period for Elders would be guided by its third Eight Point Plan, which took the company through to 2023.
"As with the previous two Eight Point Plans, the third outlines how we will achieve our ambition of delivering consistent and compelling shareholder returns through the agricultural cycles," he said.
"In this third plan we have also introduced two new stated ambitions - to be the most trusted agribusiness brand in rural and regional Australia, and to deliver authentic and industry-leading sustainability outcomes.
"The strategy will position us to achieve our goals."
Mr Allison said the second ambition would involve the delivery of an industry-leading sustainability program across health and safety, community, environment and governance.
"This year we published our first sustainability report, including a comprehensive review of our current initiatives, and our future sustainability initiatives and targets," he said.
"We believe that an authentic and industry-leading approach to sustainability will drive profitability and build a better business for our customers, our people, regional and rural Australia and other stakeholders to associate with, invest in and work in.
"This program is underpinned by the following four key principles, which are integrated into our way of doing business.
"Firstly, we provide our customers and clients with the goods and services they need.
"Secondly, we support our people and the industries and communities in which we operate.
"Thirdly, we do our part to look after the environment and the animals in our care.
"And finally, we operate ethically and to the highest standards of our One Elders values."
Mr Allison said safety remained central to the company's operations and a priority for all staff, from the boardroom to the saleyard.
"Our new Safety 7 plan outlines this commitment to care for our people, and those who we interact with, each and every day," he said.
"This year we reintroduced our successful Stand Up Speak Up safety video series to the business, a new hazard and incident reporting tool for more accurate and efficient reporting, and new capital equipment to ensure the safety of our team at Killara Feedlot."
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In developing the third Eight Point Plan, Mr Allison said the company worked with investors and key stakeholders to set appropriate objectives.
"In this plan our ambition is to achieve 5-10pc growth in EBIT and EPS (earnings per share) through the cycles at a minimum of 15pc return on capital," he said.
"The five strategic priorities for the next three years include winning market share, capturing more gross margin, strengthening and expanding our service offerings, optimising our feed and processing businesses, and further developing our sustainability program.
"Our three enablers for the third Eight Point Plan include our systems modernisation program, developing the best people in a safe and inclusive environment, and maintaining our unflinching financial discipline.
"Continuing to deliver on the synergies available to us through our acquisition of AIRR and TitanAg will be a key focus in capturing more gross margin.
"While we have made good progress, there is more value to be realised through further utilisation of AIRR warehouses, consolidation and streamlining procurement of products across both businesses, and enhanced margin management and marketing.
"None of this will be possible without our enablers, including continuing to invest in our people, maintaining financial discipline and embarking on a new systems modernisation program which is currently in the design phase.
"The outlook for agricultural commodity production and markets gives us reason for optimism."
We believe our remuneration framework is objective, applied consistently and in line with best practice.
- IAN WILTON
A number of questions were asked following the AGM, including sustainable practices, agtech adption and remuneration packages.
Mr Wilton said the company's remuneration principles, policy and framework were "designed to support the delivery of Elders strategy, drive long-term shareholder value to reward and retain key talent and increase the attraction of talent to Elders".
"Incentives are earned by employees across the whole organisation and all employee salaries are reviewed annually," he said.
"We believe our remuneration framework is objective, applied consistently and in line with best practice."
Mr Wilton said the board spent significant time in the past year reflecting on improvements to remuneration arrangements and outcomes so that shareholder concerns could be thoroughly addressed.
"The board completed a comprehensive review of executive remuneration practices with a focus on the remuneration strategy, frameworks, governance and decision-making processes," he said.
"As part of the review, the board also consulted with shareholder advisory groups and major shareholders.
"As a result, the board has made several changes to our executive remuneration framework for 2021 that are detailed in the FY20 Annual Report."
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