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16 November, 2020

Elders continues its record of year on year growth

Elders reported statutory profit after tax of $122.9 million.

AUSTRALIAN agribusiness Elders released its results for the 12 months to September 2020, demonstrating the resilience of its business model in a year marked by drought, bushfire and COVID-19. 

Elders reported statutory profit after tax of $122.9 million. 

Underlying earnings before interest and tax (EBIT) of $119.4m represents an increase of 62% on FY19, while the underlying earnings per share (EPS) of 70.7 cents reflects a 35% increase on FY19. 

The results were achieved despite drought and bushfires in the first half of the year and without any government assistance in the form of JobKeeper or other COVID-19 support measures. 

Elders' Chief Executive Officer and Managing Director, Mark Allison, attributed the outcome to the company’s Eight Point Plan strategy, combined with its nimble response to the year’s extraordinary challenges that arose throughout the year. 

"Our solid business foundations and strict financial discipline, together with a commitment to ensuring the safety and prosperity of clients, communities and staff across Australia, allowed us to succeed despite challenging operating conditions in FY20," Mr Allison said. 

“We now have a business that can make good money in a bad year and great money in a good year.” 

Elders’ return on capital (ROC) of 18.7% was 0.5 percentage points up on FY19. 

If the effect of the Australian Independent Rural Retailers (AIRR) acquisition is excluded, ROC is 20.2%, in line with the 20% ROC hurdle Elders set itself as part of the Eight Point Plan Strategy. 

Elders also announced a fully-franked final dividend of 13 cents per share, taking total dividends paid for the year to 22 cents fully franked, up 22% or 4 cents on the previous year.

The result was driven by gross margin growth across all state geographies and products, combined with continued cost control and capital allocation discipline. 

Elders’ acquisition and integration of leading rural supplies wholesaler AIRR added $44.0 million in wholesale gross margin, which Mr Allison said was well in excess of projections. 

Elders also made excellent progress on its backward integration strategy, selling more of its own branded products at higher margins. 

Within Agency Services, higher livestock prices more than offset the soft market for wool. 

Elders’ Real Estate Services division achieved strong growth, while Financial Services delivered above acquisition case growth for the Livestock in Transit delivery warranty product. 

Launch of the third Eight Point Plan FY20 saw Elders close out its second Eight Point Plan designed to produce consistent financial returns through the agricultural cycles and delivering on its advantage of being a pure-play agribusiness, Mr Allison said. 

“Our FY20 results highlight the resilience of our business, the benefits of our diversification across both geographies and products, and our acquisition strategy,” he said. 

In FY21, Elders embarks on a new, third, Eight Point Plan. 

“Under our newly launched Eight Point Plan, we have again set ambitious financial goals – we are targeting 5 to 10% growth in EBIT and EPS through the agricultural cycles at a compelling ROC of 15%,” Mr Allison said. 

“In addition, in this plan, we have introduced new non-financial goals around sustainability and brand trust. 

Also new is the Systems Modernisation Program – a multi-year investment in a new, best of breed operating platform that will improve client experience and enable internal efficiencies.” 

Safety is an important feature of the new Eight Point Plan and in FY20, Elders reported two Lost Time Injuries (LTI), compared to nine in FY19. 

“We are proud of the improvement in Elders’ safety record but, nonetheless, we strive for zero workplace injuries,” Mr Allison said. 

Sustainability will be a priority, too, with Elders rolling out internal initiatives and practical offerings for customers in FY21. 

“Elders will focus on developing its new, authentic industry-leading sustainability program across health, safety, community, environment and governance to drive profitability, and build a better business for customers, employees, regional and rural Australia, and other stakeholders to associate with, invest in and work in,” Mr Allison said. 

FY21 Outlook Pointing to forecasted increases in summer crop plantings, Mr Allison said Elders expected demand for crop protection and fertiliser to recover. 

Analysts, he said, were forecasting cattle prices to remain relatively high, if softer than the record highs of FY20. 

Elders was also working on the assumption that reduced consumer demand for apparel and disrupted. 

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