Elders Limited · ASX:ELD
Elders — Investor Day (June 2018)
55 slides from Elders's investor day presentation, Jun 6, 2018
Slide 1: Investor Presentation
For personal use only 6 June 2018 Investor Presentation Attached is a presentation to be delivered to institutional investors today by Elders’ Managing Director and CEO, Mark Allison, and a number of Elders’ senior executives. Peter Hastings Company Secretary 1
Slide 2: Elders Limited Investor Education Day
For personal use only Elders Limited Investor Education Day 6 June 2018
Slide 3: Disclaimer and important information
Disclaimer and important information For personal use only Forward looking statements Non-IFRS information This presentation is prepared for informational purposes only. It contains This presentation refers to and discusses underlying profit to enable analysis forward looking statements that are sub
Slide 4: Agenda
Agenda For personal use only Introduction Operational overview Financial review Retail operations Agency operations Real Estate operations Financial Services operations Q&A Closing remarks 3
Slide 5: Elders Limited
Elders Limited Australia’s largest listed rural services and products supplier, operating since 1839 For personal use only Mark Allison Chief Executive Officer Chief Executive Officer and Managing Director of Elders • Australia’s largest listed full service rural and Managing since May 2014 servic
Slide 6: General Manager introduction
Elders Limited Product General Manager introduction For personal use only Nick Fazekas David Adamson General Manager – Retail General Manager – Agency Joined Elders in 2009 Joined Elders in 2000 27 years industry experience in Agricultural services Roles within Elders include Regional Bankin
Slide 7: Operational Overview
For personal use only Overview Operational
Slide 8: Elders transformation and our journey
Elders transformation and our journey For personal use only FY08 to FY13 – Survival Deleveraging debt through divestment of Then non-core assets (2008) FY13 to FY15 – Turnaround Focus on core agribusiness Eight Point Plan embedded Board and leadership refresh Agency Services FY16 to FY
Slide 9: Achievements FY14 to FY17
Achievements FY14 to FY17 Excellent platform and processes established for further profitable growth For personal use only Organic Acquisition Cost Market share gained across retail, Established internal business Prioritised growth pipeline with livestock and wool markets development function
Slide 10: Delivering improvements across the business
Delivering improvements across the business For personal use only Underlying profit movement FY14 to FY17 $ million • Investment in products and platforms (StockCo, Insurance) 0.1 3.6 9.3 27.2 4.8 • Market share gains and acquisitions 4.5 • Price book management • Improved market volumes • Improved
Slide 11: Elders financial progress
Elders financial progress For personal use only EBIT* ($ Million) 71 56 30 2H 39 28 1H 21 23 41 46 11 28 16 10 -8 -11 -19 FY13 FY14 FY15 FY16 FY17 FY18 *Note: Excluding Indonesian feedlot and abattoir and live export 10
Slide 12: Elders today
Elders today For personal use only Iconic Australian agribusiness company 179 years old 2,000 employees 440 points of presence in Australia, Indonesia and China Servicing over 40,000 primary producers across Australia and international markets 11
Slide 13: Business model
Business model For personal use only Digital & Feed & Retail Financial Agency Services Real Estate Services Technical Processing Products Services Services Services ` Property Management Auctions Plus (50%) Elders Indonesia Elders Weather Fee for Service Killara Feedlot Farm Supplies Agri Finance El
Slide 14: Points of presence
Points of presence For personal use only Over 450 points of presence in Australia and overseas including full service branches, real estate and insurance franchises Key produce areas covered through our footprint Targeted expansion of footprint through recruitment and acquisition 13
Slide 15: Progress on FY18 priorities
Progress on FY18 priorities Delivering our promises to stakeholders For personal use only Safety Operational Key Efficiency Performance Performance Relationships and Growth Lost time injuries reduced to 2 $47.8m underlying EBITDA, up Continued to work with key retail Continued to drive branc
Slide 16: Strategic priorities to 2020
Strategic priorities to 2020 For personal use only 15
Slide 17: Technical Services Triangle
Technical Services Triangle For personal use only 1 Key contact for relationships with Universities and industry bodies Industry-level operation – thought leadership Revenue through grants and supplier funded research, extension and commercialisation projects. 20 Fee For Service agronomists
Slide 18: Financial Review
For personal use only Review Financial
Slide 19: FY18 Half Year in review
FY18 Half Year in review Strong performance for the half For personal use only Lost time injuries decreased to 2 from 5, LTIFR down from 1.7 to 0.7 Underlying net profit after tax of $39.7m, up $4.5m Underlying EBITDA of $47.8m, up $4.5m Underlying EBIT of $45.7m, up $4.2m Operating cash i
Slide 20: Half Year financial performance
Half Year financial performance For personal use only Change $ million 1H FY18 1H FY17 $m % Sales revenue 749.7 15.2 2% 734.5 Underlying EBITDA 47.8 4.5 10% 43.3 Underlying EBIT 45.7 4.2 10% 41.5 Underlying profit after tax 39.7 4.5 13% 35.2 Statutory profit after tax 41.4 3.1 8% 38.3 Net debt 91.9
Slide 21: Performance by Product
Performance by Product Continued strong performance in Retail For personal use only Underlying profit movement $ million Product margin 2.7 0.3 0.1 0.7 0.7 8.9 9.4 0.3 39.7 35.2 1H FY17 Retail Agency Real Estate Financial Feed and Digital and Costs Interest, 1H FY18 Underlying Products Services Serv
Slide 22: Performance by Geography
Performance by Geography Geographic diversification with Southern Australia outperformance offsetting Northern Australia For personal use only Underlying profit movement $ million 1.1 0.0 1.2 0.3 6.5 2.2 39.7 35.2 Northern Southern Western Corporate and Interest, 1H FY18 1H FY17 International Austra
Slide 23: Capital employed
Capital employed Return on capital remains above 20% target For personal use only Underlying return on capital at March 2018 was 28.2%, Underlying Return on Capital 1 which is above the targeted 20% benchmark, but lower compared to 31.8% at March 2017: o Continued investment in aligned financial s
Slide 24: Operating cash flow
Operating cash flow Strong profitability and Easter impact For personal use only Operating cash flow of $26.1 million reflected: Cash flow $ million Working capital movements Strong EBITDA cash conversion Variability of Livestock activity leading up 3.3 5.7 2.0 0.1 to balance date 0.6 14.4 Oth
Slide 25: Net debt
Net debt Continued improvement across all key ratios For personal use only Net Debt Average net debt over the two periods were consistent with: o Strong EBITDA cash conversion At balance date o Offset by: YTD average 170 o Investment outflows associated with 143 142 bolt-on acquisitions 92 o Distr
Slide 26: Outlook and Summary
For personal use only Summary Outlook and
Slide 27: FY18 outlook
FY18 outlook Easing cattle prices expected, offset by footprint expansion and acquisition growth For personal use only Retail Products Winter cropping conditions are expected to be average with limited rainfall during April and May across most of Australia. This is anticipated to inhibit grower de
Slide 28: Eight Point Plan: years to FY20 goal
Eight Point Plan: 3 years to FY20 goal Targeting 5 – 10% p.a. quality growth through the cycles For personal use only EBIT FY17 to FY20 Livestock price Other market Organic (50%) Acquisition (50%) Cost (0%) FY20 FY17 normalisation movements Livestock prices expected to ease post FY17 Market shar
Slide 29: Balanced growth plan to FY20
Balanced growth plan to FY20 For personal use only Organic Acquisition Maintain Cost 50% 50% Drive continuous business Continue to evaluate strategically Invest in resourcing to identify, improvement aligned opportunities to expand integrate and support both our business organic and acquisitio
Slide 30: Strategic gaps
Strategic gaps Geared for the next wave of growth, including 20 new branches by 2020 For personal use only Key gaps in product and service areas to be filled through organic growth and acquisition, with 20 new branches by 2020 Retail • Increased market share in high value cropping areas • Increased
Slide 31: Summary
Summary For personal use only Completed Eight Point Plan FY17 commitments o Zero term debt o $60m EBIT (through the cycles) o 20% ROC (through the cycles) o Capital structure simplified (preference share resolution) o Investor grade and dividend paying by FY17 Established stable platform for gro
Slide 32: Retail Operations
For personal use only Retail Operations
Slide 33: Business overview Retail Products
Business overview Retail Products For personal use only Elders has an extensive network across Australia and enjoys leading Margin generated by product market positions across all major products and services Feed and processing Financial services 4% One of Australia’s leading suppliers of rural fa
Slide 34: Retail focus
Business overview Retail Products For personal use only Retail focus Retail margin ($m) Retail has focused on driving profitability through front end retail margin and improved terms of trade with our key suppliers Strategic focus 1. Capital light, return on capital driven business model - Improve
Slide 35: Achievements FY14-FY17 Retail Products
Achievements FY14-FY17 Retail Products Sales increasing with higher margins increasing profitability For personal use only Revenue growth Retail sales ($m) Expansion through strategic acquisitions, filling key segment gaps Increased marketing campaigns with key suppliers and quarterly catalogues
Slide 36: Growth plan to FY20 Retail Products
Growth plan to FY20 Retail Products For personal use only Farm Supplies Fertiliser Capital light; continued focus on improved payment terms, stock concessions and rebates Marketing and digital – build and focused selling campaigns / initiate click and collect online sales Price book management Organ
Slide 37: Agency Operations
For personal use only Agency Operations
Slide 38: Business overview Agency Services
Business overview Agency Services For personal use only Elders provides a range of marketing options for livestock, wool and grain Livestock agents and employees operate across Australia conducting on-farm sales to third parties, regular physical and online public livestock auctions and direct sal
Slide 39: Livestock achievements FY14 to FY17
Livestock achievements FY14 to FY17 Agency Services For personal use only Livestock gross margin ($m) Elders Livestock turnover through StockCo ($m) 104.0 94.7 +78.5% 89.5 73.1 93.2 52.2 0.1 FY14 FY15 FY16 FY17 FY15 FY16 FY17 Sheep Cattle Other Increased livestock turnover through StockCo promotio
Slide 40: Wool and grain achievements FY14 to FY17
Wool and grain achievements FY14 to FY17 Agency Services For personal use only Wool margin ($m) Wool Renegotiated long-term wool logistics and distribution agreement with AWH Implemented alternative selling model (eClips) 17.6 17.0 16.8 Development of financing product (WoolPlus) 15.2 FY14 FY1
Slide 41: Growth plan to FY20 Agency Services
Growth plan to FY20 Agency Services For personal use only Livestock Wool Grain Partner Technical excellence through staff recruitment StockCo growth Increase efficiency Digital growth Digital growth Leveraging key relationships New product development Organic Alternative agency models Inorganic Grow
Slide 42: Real Estate Operations
For personal use only Real Estate Operations
Slide 43: Business overview Real Estate Services
Business overview Real Estate Services For personal use only Margin generated by product Feed and Financial processing Agency services involved in the marketing of farms, services 4% Company owned stations, lifestyle estates and residential properties 11% farmland 142 company owned offices Agenc
Slide 44: Achievements FY14 to FY17 Real Estate Services
Achievements FY14 to FY17 Real Estate Services For personal use only Real Estate sales ($m) Expansion through strategic acquisitions in major population 57 49 51 centres 48 Organic growth through targeted recruitment of quality people, delivering 25% uplift in broadacre turnover Improved brand
Slide 45: Growth plan to FY20 Real Estate Services
Growth plan to FY20 Real Estate Services For personal use only Residential Agency & Home Loans Property Management Broadacre & Water Salespeople recruitment Salespeople recruitment Expanded footprint Organic Digital growth initiatives delivering efficiencies and new revenue streams Increase scale an
Slide 46: Financial Services Operations
For personal use only Financial Ser vices Operations
Slide 47: Business overview Financial Services
Business overview Financial Services For personal use only Financial Services gross margin, equity earn and return on capital Margin generated by product $ Millions, FY14-FY18H1 Feed and Financial processing Financial Planning services 4% Oct16: acquired 30% of Insurance 11% StockCo StockCo Agency D
Slide 48: Business overview Financial Services
Business overview Financial Services For personal use only Elders Agri Finance Elders Insurance Elders Financial Planning Partner Agri term and seasonal Livestock finance Farm Advice loans Business Investment Products Equipment Finance Home & contents Risk Deposits Motor Dist
Slide 49: Achievements Financial Services
Achievements Financial Services For personal use only Agri Finance Insurance Rural Bank performing loan & deposit StockCo drawn balances1 Elders Insurance Gross Written Premium2 balances1 $ Millions $ Millions $ Billions 3.0 Loans FY18 100 800 FY17 FY16 FY18 80 2.5 FY17 600 60 +4% 2.0 400 Deposits F
Slide 50: Growth plan to FY20 Financial Services
Growth plan to FY20 Financial Services For personal use only Agri Finance Insurance Financial Planning Partner Improved salesforce & process efficiency New offerings Organic More leads (advertising and cross-referral) More locations Inorganic Upstream investment Growth will not come at the expense o
Slide 51: Q&A
For personal use only Q&A
Slide 52: For personal use only
For personal use only
Slide 53: Strong group financials
Strong group financials For personal use only Sales ($m) Gross margin ($m) 1,491 1,582 337 1,194 1,276 285 305 260 FY14 FY15 FY16 FY17 FY14 FY15 FY16 FY17 Underlying EBIT ($m) Operating cashflow ($m) 82 71 49 56 15 (5) 39 21 FY14 FY15 FY16 FY17 FY14 FY15 FY16 FY17 52
Slide 54: Driving improved shareholder returns and sound capital management
Driving improved shareholder returns and sound capital management For personal use only Underlying EPS (cps) Dividends per share (cps) 7.5 62 62 41 47 7.5 FY14 FY15 FY16 FY17 FY14 FY15 FY16 FY17 Average working capital balance ($m) Average net debt balance ($m) 223 228 221 216 122 135 137 212 FY14 F
Slide 55: Profit Sensitivity
Profit Sensitivity For personal use only Underlying EBITDA $(10m) $(7.5m) $(5m) $(2.5m) EBITDA +$2.5m +$5m +$7.5m +$10m Sheep price -$20 -$10 +$10 +$20 Cattle price -$100 -$50 +$50 +$100 Sheep volume -1m head -500k head +500k head +1m head Cattle volume -200k head -100k head +100k head +200k head Re