Elders Limited · ASX:ELD
Elders — H1 FY2019 Earnings Presentation
45 slides from Elders's earnings presentation, May 20, 2019
Slide 1: 2019 Half-Year Results Investor Presentation
For personal use only Monday, 20 May 2019 2019 Half-Year Results Investor Presentation Attached is the investor presentation in connection with the financial results for the 6 month period ended 31 March 2019. Elders CEO, Mark Allison, and CFO, Richard Davey, will deliver this presentation by webcas
Slide 2: 2019 Half Year End Results Presentation
Elders Limited For personal use only 2019 Half Year End Results Presentation 20 May 2019
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: FY19 Half Year in Review
FY19 Half Year in Review On track to deliver on growth commitment For personal use only Challenging conditions skewing FY19 earnings to 2H: Outlook and guidance: 1. Wool volumes, with the Australian clip down, ▪ Return to average winter cropping season impacting Agency sales ▪ Offset by balanced gro
Slide 5: FY19 Half Year Summary
FY19 Half Year Summary For personal use only ▪ Lost time injuries of 1, prior period nil, LTIFR up from 0.7 to 1.0 ▪ Underlying net profit after tax of $26.4m, down $13.3m ▪ Underlying EBIT of $33.5m, down $12.2m ▪ Underlying EBITDA of $36.0m, down $11.9m ▪ Operating cash outflow of $13.1m for the y
Slide 6: FY19 Priorities
FY19 Priorities Continue to invest in Eight Point Plan for long term growth For personal use only Safety Operational Key Efficiency and Performance Performance Relationships Growth ▪ 1 lost time injury, compared to nil ▪ $36.0m underlying EBITDA, down ▪ Continued to work with key retail ▪ Launch of
Slide 7: Performance by Product
Performance by Product Benefits of acquisitions offset by reduced summer crop plantings, drought affected agency volumes and delayed winter crop For personal use only Underlying profit movement $ million Product margin 2.1 3.7 4.1 0.1 1.6 0.9 0.2 6.0 1.1 39.7 26.4 1H FY18 Agency Real Estate Financia
Slide 8: Performance by Geography
Performance by Geography Impact of drought affecting mainly the North and South Eastern Australia For personal use only Underlying profit movement $ million 2.1 4.3 6.2 1.1 0.7 2.1 1.1 39.7 26.4 Northern Southern Western Interest, tax 1H FY19 1H FY18 Acquisitions International Corporate and Australi
Slide 9: Capital Employed
Capital Employed Return on Capital still strong, although below target of 20% For personal use only ▪ Underlying return on capital was 18.4% reflecting: Underlying Return on Capital 1 o Recent investment activity performance impeded by unfavourable seasonal conditions o Expenditure and Investment in
Slide 10: Operating Cash Flow
Operating Cash Flow Acquisition and seasonal driven increase in working capital For personal use only Operating cash inflow (excluding Titan) of $22.9 Cash flow $ million Working capital movements “Base” million reflected: ▪ Positive EBITDA 13.4 29.0 0.7 0.3 ▪ Higher Livestock working capital at 5.6
Slide 11: Net Debt
Net Debt Increased working capital although significant headroom within financial covenants For personal use only Net debt (excluding Titan) at balance date was $32 Net Debt million higher than March last year because of: ▪ Higher Livestock working capital at balance date Average net debt (excluding
Slide 12: FY19 Outlook
FY19 Outlook Winter cropping conditions expected to return to average in the second half Elders reiterates FY19 guidance and remains confident to deliver: ▪ Underlying EBIT in the range of $72 to $75 million For personal use only ▪ Underlying NPAT in the range of $61 to $64 million ▪ Continue to pur
Slide 13: Strategic Priorities to 2020
Strategic Priorities to 2020 For personal use only 12
Slide 14: Eight Point Plan: years to FY20 goal
Eight Point Plan: 3 years to FY20 goal To deliver 5 – 10% 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 ▪ Consistent with assumptions Livestock prices eased post FY17
Slide 15: Balanced growth plan to FY20
Balanced growth plan to FY20 For personal use only Organic Acquisition 50% Maintain Cost 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 16: Strategic Gaps
Strategic Gaps Stable platform geared for the next wave of growth, under the second Eight Point Plan, including 20 new branches by 2020 Key gaps in market, geographical, product and service areas to be For personal use only filled through organic growth and acquisition, with 20 new branches by 2020
Slide 17: Appendix
For personal use only APPENDIX
Slide 18: Appendix
Appendix For personal use only ▪ Appendix 1: 1H FY19 Results Additional Information ▪ Appendix 2: Business Model ▪ Appendix 3: Market Forces 17
Slide 19: 1H FY19 Results Additional Information
For personal use only 1H FY19 RESULTS ADDITIONAL INFORMATION
Slide 20: Business Segmentation
Business Segmentation For personal use only Average Northern Southern Western Int’l Digital & 1H FY19 $ million Working Australia Australia Australia Geographies Technical Margin Capital Retail Products Farm Supplies and Fertiliser 67.8 214.3 Agency Services Livestock, Wool, and Grain 62.8 48.6 Farm
Slide 21: Business Performance by Product
Business Performance by Product For personal use only Margin by product 1H FY19 1H FY18 $ million (2%) (5%) ▪ Retail: Down due to reduced summer cropping 67.8 69.0 62.8 66.0 ▪ Agency: Impacted by lower wool volumes, with the Australian wool clip down ▪ Financial Services: Margin down on lower Insura
Slide 22: Business Performance by Geography
Business Performance by Geography For personal use only Margin by geography $ million 1H FY19 1H FY18 (2%) (6%) ▪ Northern Australia: Impacted by reduced summer 80.3 82.1 cropping and easing cattle prices 63.9 60.4 ▪ Southern Australia: Down on prior period through 4% lower wool volumes and higher c
Slide 23: Business Model
For personal use only BUSINESS MODEL
Slide 24: 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 25: Business Model
Business Model For personal use only Digital and technical Feed and processing Retail products Agency services Real estate services Financial services services services Farm supplies Livestock Farmland Agri-finance Fee for service Killara Feedlot Fertiliser Wool Residential Insurance Auctions plus (
Slide 26: 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 25
Slide 27: Business Division: Retail Services
Business Division Retail Services For personal use only Business description Retail Services margin ($m) Elders is one of Australia’s leading suppliers of rural farm inputs including seeds, fertilisers, agricultural chemicals, animal health products and general rural merchandise. We also provide pro
Slide 28: Business Division: Agency Services
Business Division Agency Services For personal use only Business description Elders provides a range of marketing options for livestock, wool, and grain. Agency Services margin ($m) - Livestock: our livestock agents and employees operate across Australia conducting on-farm sales to third parties, re
Slide 29: Business Division: Real Estate Services
Business Division Real Estate Services For personal use only Business description Real Estate Services margin ($m) Elders’ real estate services include company owned rural agency services primarily involved in the marketing of farms, stations and lifestyle estates. It also includes a network of resi
Slide 30: Business Division: Financial Services
Business Division Financial Services For personal use only Business description Financial Services margin ($m) Elders distributes a wide range of banking, insurance and financial planning products through its Australian network. We work together with a number of third parties to enable us to deliver
Slide 31: Business Division: Feed and Processing Services
Business Division Feed and Processing Services For personal use only Business description Feed and Processing Services margin ($m) In Australia, Elders operates Killara Feedlot, a beef cattle feedlot near Tamworth in New South Wales. Elders imports, processes and distributes premium Australian meat
Slide 32: Elders Financial Progress FY14 to FY18
Elders Financial Progress FY14 to FY18 For personal use only Contributed by: ▪ Resetting of operational strategy, focusing on running a pure-play agribusiness. ▪ Favourable livestock prices. ▪ Footprint expansion, acquisitions and investments, such as: Ace Ohlsson, Titan, SDEA, Kerr & Co, CGX, Insur
Slide 33: Strong Group Financials
Strong Group Financials For personal use only Sales ($m) Gross margin ($m) 1,491 1,583 1,613 338 355 1,276 285 305 FY15 FY16 FY17 FY18 FY15 FY16 FY17 FY18 Underlying EBIT ($m) Operating cashflow ($m) 71 75 56 82 39 49 (5) (12) FY15 FY16 FY17 FY18 FY15 FY16 FY17 FY18 1 Includes equity accounted profi
Slide 34: Driving improved shareholder returns and sound capital management
Driving improved shareholder returns and sound capital management For personal use only Underlying EPS (cps) Dividends per share (cps) 7.5 51 55 18 48 33 7.5 FY15 FY16 FY17 FY18 FY15 FY16 FY17 1 FY18 2 Average working capital balance ($m) Average net debt balance ($m) 237 161 122 135 137 223 212 216
Slide 35: 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
Slide 36: Market Forces
For personal use only MARKET FORCES
Slide 37: Industry market and outlook
Industry market and outlook Agricultural ▪ The value of Australian agricultural production has increased steadily over recent years. It is estimated to be $58 billion in 2018- production & 19, increasing to a forecast $69 billion in 2023-24. For personal use only exports ▪ Farm exports will grow by
Slide 38: Agricultural Production & Exports
Neutral Agricultural Production & Exports Gross value of Australian farm production Gross volume of Australian farm production For personal use only Billion dollars, nominal Crops Index reference year 1997-98 Livestock +1% 180 66 69 62 62 62 63 160 57 60 58 60 55 140 Crops 36 37 28 34 34 31 29 32 33
Slide 39: Cattle Outlook
Neutral Cattle Outlook Average saleyard cattle price Live Cattle exports Australian Cattle herd c/kg Thousands Million heads For personal use only 30 600 1,400 550 28 -2% 1,200 -1% 500 +8% 26 450 1,000 400 24 350 800 300 22 600 250 20 200 400 14 15 16 17 18 19f 20f 21f 22f 23f 24f 14 15 16 17 18 19f
Slide 40: Sheep and Wool Outlook
Neutral Sheep and Wool Outlook National Sheep flock Shorn wool production NTLI and EMI Thousand tonnes greasy For personal use only Million heads Ac/kg cwt & Ac/kg clean +18% 100 450 -9% 750 2,000 90 -4% 700 1,800 80 400 70 650 +2% 1,600 60 350 600 1,400 50 550 1,200 40 300 30 500 1,000 20 250 450 8
Slide 41: Dairy Outlook
Neutral Dairy Outlook Global dairy prices Australian Dairy Herd Australian Milk Production USD/tonne Mega Litres For personal use only Millions head Butter SMP 2,000 10,000 6,000 Cheese 1,800 -5% 9,500 5,000 1,600 1,400 9,000 4,000 1,200 8,500 1,000 3,000 800 8,000 600 2,000 7,500 400 1,000 200 7,00
Slide 42: Grains and Oilseeds Outlook
Neutral Grains and Oilseeds Outlook Prices Planted Area Production A$/tonne Thousand hectares Million tonnes For personal use only -13% 212 53 202 204 204 205 205 205 600 190 177 -14% 40 40 41 41 41 500 38 37 32 400 300 200 100 14 15 16 17 18 19f 20f 21f 22f 23f 24f 16 17 18 19f 20f 21f 22f 23f 24f
Slide 43: Sugar and Cotton Outlook
Neutral Sugar and Cotton Outlook Planted Area Sugar production & cane grower returns Cotton production & gin-gate returns For personal use only Thousand hectares Thousand tonnes A$/tonne (real) Thousand tonnes A$/tonne (nominal) -44% 557 +1% 500 +4% -42% 5.0 60 1,000 1,000 402 385 50 377 380 4.5 800
Slide 44: Horticulture
Neutral Horticulture For personal use only Other ▪ The gross value of horticulture production is projected to Gross Value of Horticulture Production Grapes increase to $11.3bn (6%) in 2018-19, underpinned by $ billion Vegetables favourable growing conditions in some areas and domestic Fruit & Nuts a
Slide 45: For personal use only
For personal use only