Elders Limited · ASX:ELD
Elders — Investor Day (November 2023)
82 slides from Elders's investor day presentation, Nov 23, 2023
Slide 1: Elders Investor Day Presentation (ASX cover note)
Thursday 23 November 2023 Elders Investor Day Presentation For personal use only Attached is an Elders Limited (ASX:ELD) presentation to be given today, 23 November 2023, to investors hosted by Elders Limited. The presentation will be given by members of Elders’ management team. Further Information:
Slide 2: Elders Limited Investor Day Presentation
For personal use only Elders Limited Investor Day Presentation 23 November 2023 1
Slide 3: Disclaimer And Important Information
Disclaimer And Important Information For personal use only The material in this presentation has been prepared by Elders Limited and is general background about Elders' activities and performance at the date of this presentation. The information is in summary form, does not purport to be complete, a
Slide 4: Welcome and overview
For personal use only Welcome and overview Presented by Mark Allison Managing Director and CEO 3 3
Slide 5: Agenda
Agenda Session Presentation Speaker Start Welcome and Overview Mark Allison 9:00 AM For personal use only Session 01 FY23 Results Paul Rossiter 9:15 AM Welcome, results and strategy Strategy Anna Bennett 10:00 AM Morning Tea 10:30 AM Systems Modernisation Viv Da Ros 11:00 AM Session 02 Streamline Ol
Slide 6: FY23 Operational Highlights
FY23 Operational Highlights For personal use only 3 43% lost time injuries women in the workforce 10.1 total recordable injuries #1 most trusted 20% frequency rate agribusiness brand women in senior positions amongst farmers fourth year in a row 48 77% employee engagement net promoter score 21 addit
Slide 7: Financial Highlights
Financial Highlights Resilient financial result despite market volatility For personal use only $170.8m 16.0% 163% 1.4x Underlying EBIT Return on Capital Cash Conversion Leverage Ratio R12 EBIT / R12 avg net operating YTD Operating cash flow / YTD Balance date net debt / R12 assets U’NPAT EBITDA -26
Slide 8: Eight Point Plan Evolution
Eight Point Plan Evolution Three generations of the 8PP strategy since FY14, delivering compelling shareholder value proposition FY15 to FY17 FY18 to FY20 FY21 to FY23 For personal use only Financial metrics1: Financial metrics1: Financial metrics1: EBIT +37.5% EBIT +22.8% EBIT +17% EPS +735.2% EPS
Slide 9: FY23 results
For personal use only FY23 results Presented by Paul Rossiter CFO 8 8
Slide 10: Key Investment Drivers
Key Investment Drivers Australia's most trusted agribusiness brand amongst farmers four years in a row For personal use only EPS Growth Geographic, product Attractive market Transformational Significant pipeline Robust balance and channel and company initiatives benefits of new opportunities sheet s
Slide 11: Earnings Growth and Resilience
Earnings Growth and Resilience Second highest EBIT result in the last 10 years notwithstanding volatility across several key markets First Eight Point Plan Second Eight Point Plan Third Eight Point Plan For personal use only Achievement Achievement Achievement EBIT³ +37.5% EPS³ +735.2% EBIT³ +22.8%
Slide 12: Five Year Financial Performance
Five Year Financial Performance Strong track record of delivering 5-10% EBIT and EPS growth through the cycles For personal use only Sales Revenue ($m) Gross Margin ($m) +19.6% +15.1% 3,445 3,321 653 619 2,549 529 2,093 438 1,626 352 FY19 FY20 FY21 FY22 FY23 FY19 FY20 FY21 FY22 FY23 Costs ($m) vs Co
Slide 13: Five Year Shareholder Returns
Five Year Shareholder Returns Compelling shareholder value proposition over time For personal use only Underlying Earnings per Share (cents) Adjusted Underlying Earnings per Share (cents)¹ 97.3 +13.6% 96.7 134.1 69.9 66.3 96.7 87.6 52.6 52.6 69.9 97.3 66.3 FY19 FY20 FY21 FY22 FY23 FY19 FY20 FY21 FY2
Slide 14: FY23 Financial Summary
FY23 Financial Summary Resilient performance despite volatility across multiple markets Key metrics ($m) FY23 FY22 Var Var % For personal use only Sales revenue 3,321.4 3,445.3 (123.9) (4%) Gross margin 619.0 652.7 (33.7) (5%) Gross margin % 18.6% 18.9% (0.3%) n/a Costs 448.2 420.6 27.6 7% U
Slide 15: Gross Margin Diversification
Gross Margin Diversification Continued focus on product diversification through organic and acquisition growth For personal use only -8.2% Total Gross Margin ($m) 172.9 -22.7% 652.7 619.0 529.4 158.8 141.3 147.0 130.4 113.7 FY21 FY22 FY23 -1.9% +39.0% -3.4% -20.4% +21.0% +19.1% 73.1 71.7 58.2 61.2 6
Slide 16: Industry Backdrop – Livestock
Industry Backdrop – Livestock Historically high volatility in cattle and sheep prices has adversely impacted Agency Services gross margin EYCI ($/Head) Mutton ($/Head) For personal use only -1,516 -162 (-70%) (-84%) 2,500 2,159 200 193 2,000 150 1,500 100 1,000 650 50 500 31 0 0 2013 2017 2023 2013
Slide 17: Industry Backdrop – Rural Products
Industry Backdrop – Rural Products Sales volume growth has partially offset the impact from significant market volatility For personal use only Glyphosate 95% ($/kg) UREA Index ($/tonnes)² -695 -8.3 (-62%) 9-Yr Mean (-66%) 10-Yr Mean 15.0 +/-1 Std Dev 1,200 5 Std 3.2 Std 1 Std Dev 1,130 12.6 1,000 D
Slide 18: Net Debt and Financial Ratios
Net Debt and Financial Ratios Strong balance sheet provides flexibility for future growth Leverage ratio Interest cover Gearing ratio For personal use only Net debt, balance date ($m) Balance date net EBITDA / net Balance date net debt +178.4 debt / EBITDA interest / closing equity Excluding AASB 16
Slide 19: Elders Capital Management Framework
Elders Capital Management Framework Elders 8PP aspires to deliver TSR in the top quartile of ASX200 companies at investment grade risk Key Features For personal use only Capital Management Framework of our capital management framework Effective working Optimise Deliver growth Focus on returns capita
Slide 20: Strategy
For personal use only Strategy Presented by Anna Bennett EGM Strategy, Sustainability and Innovation 19 19
Slide 21: New Format, simplified priorities
Option 3 – New Format, simplified priorities For personal use only Compelling shareholder returns Industry leading sustainability outcomes Most trusted Agribusiness brand 5-10% EBIT and EPS growth through the cycles at across health and safety, community, environment and in rural and regional Austra
Slide 22: Sustainability Performance
Sustainability Performance Progress against targets and empowering farmers CLIMATE TARGETS1 OUR FY23 PROGRESS For personal use only Targets set to reduce our Scope 1 and 2 greenhouse gas emissions: ✓ Launched the Elders Sustainability TARGET FY23 FY22 Framework 100% renewable electricity in all Aust
Slide 23: Our Sustainability principles & priorities
Our Sustainability principles & priorities Creating sustainable solutions for our customers and communities For personal use only OUR We provide our We support our people We do our part to look We operate ethically and PRINCIPLES customers and clients and industries and after the environment to the
Slide 24: Innovation – Thomas Elder Sustainable Agriculture
Innovation – Thomas Elder Sustainable Agriculture Helping drive the ongoing evolution of farming in Australia For personal use only Partnering with leading Providing a leading source of Enabling new AgTech Supporting farmers on their research agencies, creating trusted advice, supporting on- solutio
Slide 25: Systems Modernisation
For personal use only Systems Modernisation Presented by Viv Da Ros Chief Information Officer 24 24
Slide 26: AS400
For personal use only AS400 Core system used in Elders today… 25
Slide 27: How will we do it?
How will we do it? The who, when and what of SysMod For personal use only Wave 0 Wave 1 Wave 2 Wave 3 Wave 4 Wave 5 Wave 6 SCOPE Design, planning, Internal financial Livestock and Opportunity to solution & partner Supply chain and New ERP is the and people trading Online retail consolidate onto deci
Slide 28: What will it look like?
What will it look like? Elders branch of the future For personal use only Wi-fi extended to warehouse Mobile sales and inventory device, workstation PC and image scanner Delivery partners New dedicated POS terminal at merchandising counter 27
Slide 29: Costs and benefits
Costs and benefits What value does SysMod bring? For personal use only FY22 FY23 $m $m Wave 1 CAPEX 4.4 8.0 (Completed) OPEX - underlying 4.4 4.0 OPEX - non underlying 0.7 5.4 Total 9.5 17.4 FY23 Budget $m $m Wave 2 CAPEX 2.3 24 - 27 (Ongoing) OPEX – underlying 2.0 - OPEX - non underlying - 16 – 18
Slide 30: Streamline
For personal use only Streamline Presented by Oliver Gaillard Business Improvement Manager 29 29
Slide 31: Streamline Snapshot
Streamline Snapshot Our Rural Products supply chain optimisation program For personal use only OVERVIEW AND BENEFITS KEY MILESTONES TO DATE OUR PRIORITIES ▪ Multi-year program to deliver group- ▪ Appointed key leaders ▪ ‘Branch magic’ preservation balanced wide supply chain planning processes, with
Slide 32: Integrated operating model aligned to S&OP
Integrated operating model aligned to S&OP Our operating model will support optimisation, backward integration and further growth For personal use only Nick Fazekas Tom Russo EGM Rural Products EGM Network Overarching supply Overarching retail STEP 1: chain governance governance FORECASTING ▪ S&OP p
Slide 33: Storage and distribution overview
Storage and distribution overview Transitioning to a model with greater flexibility and oversight Objective For personal use only Movement of Product Transition from a branch-centric storage model to a flexible storage & distribution model with central management of safety stock VIA ▪ Disciplined br
Slide 34: Timeline
Timeline Implementing across 3 phases, with alignment to SysMod WAVE 2 For personal use only WAVE 3 SysMod WAVE 4 WAVE 5 WAVE 6 Q4 FY23 FY24 FY25 FY26 FY27 - PHASE 1 PHASE 2 PHASE 3 ▪ Implement operating model ▪ S&OP automation and expansion ▪ Reach operational ▪ Build organisational capability ▪ Sc
Slide 35: Benefits
Benefits Positive impact on ROC and margin growth For personal use only Annualised gross benefits at full run-rate1,2 ($m) Capital Inventory reduction (safety stock) 50-80 NPAT Interest saving 1-2 Reduced risk of write-downs (factor of less inventory) 1-2 Sourcing derived margin improvement 3-5 Incr
Slide 36: Business Development
For personal use only Business Development Presented by Kiim Lim EGM Business Development 35 35
Slide 37: FY23 growth pipeline achievements
FY23 growth pipeline achievements Our growth pipeline has enabled us to complete 9 acquisitions and open 4 greenfield sites in FY23 For personal use only Opportunities sourced through network relationships, corporate advisors and business brokers FY23 Business Development pipeline activity Assess 59
Slide 38: Business development overview
Business development overview Our systemised process supports acquisition & greenfield opportunities For personal use only A systemised process is in place from offer 07 Post implementation to integration to efficiently manage bolt-on review acquisitions with internally led teams… 06 Completion & In
Slide 39: Acquisition principles
Acquisition principles We focus on opportunities with strong returns & business fit Disciplined in pursuing corporate acquisition growth under the following For personal use only principles: ✓ Aligns with Elders’ strategy, values and sustainability ambitions, particularly safety and environmental ou
Slide 40: FY24 growth pipeline acquisitions completed since October 1
FY24 growth pipeline 3 acquisitions completed since October 1 with >$7m annualised EBIT contribution A strong pipeline continues into FY24 Highlights: For personal use only Key strategic gap areas Industry leading toll formulator with research and development capabilities Completed 1 October, $2m an
Slide 41: Elders Network
For personal use only Elders Network Presented by Tom Russo EGM Network 40 40
Slide 42: Business model
Business model Diversification by product, service, market segment and geography For personal use only Feed and Digital and Rural Products Agency Services Real Estate Services Financial Services Processing Services Technical Services Wholesale Retail Products Products Product and Fee for Service ser
Slide 43: Network snapshot
Network snapshot Our brand strategy An expanding network and multiple brand strategy Australian Points of Presence Primary: leveraging and reinforcing our position as For personal use only the most trusted agribusiness brand in Australia QLD/NT 54 8 29 24 6 $21.0m Secondary: utilising other brands t
Slide 44: Network structure
Network structure Highly tailored businesses operating in diverse market segments For personal use only Branch Elders Griffith (NSW) Elders Naracoorte (SA) Sunfam (QLD) Elders SDEA (WA) Location South-central NSW South-eastern SA Bundaberg, QLD Bunbury, WA Region experiencing shift HQ office located
Slide 45: Network leadership and management structure
Network leadership and management structure Geographical leadership, product area expertise and key account capability For personal use only STATE PRODUCT GENERAL MANAGEMENT GENERAL MANAGEMENT Matt Ericsson Lisa Hewitt Nick Fazekas Dave Adamson State GM State GM EGM GM WA QLD NT Rural Products Agenc
Slide 46: Continuous improvement
Continuous improvement Ongoing commitment to network optimisation For personal use only Deepening customer relationships Adapting our operating model to meet different needs of an evolving client base Investing in our people Attracting, retaining and developing the best people, and maintaining our h
Slide 47: Wholesale Products
For personal use only Wholesale Products Presented by Pete Lourey EGM Wholesale 46 46
Slide 48: AIRR snapshot
AIRR (Australian Independent Rural Retailers) snapshot Our national wholesale platform with scale supporting Elders’ diversification For personal use only 47
Slide 49: Evolution of Australian Independent Rural Retailers
Evolution of Australian Independent Rural Retailers Australia’s number one Rural and Peri-urban national warehouse business Future State For personal use only 2024 - 2027 “One Elders” State 2019 - 2023 Historical State 2008 - 2019 Key callouts: Expected further divergence Key callouts: between the s
Slide 50: AIRR network snapshot
AIRR network snapshot Our brand strategy A nationwide network and multiple brands Primary: leveraging and growing our member base across AIRR & Tuckers For personal use only Secondary: opportunistically acquiring independent stores to grow retail market share 1 1 1. Also captured in Australian Point
Slide 51: Five pillars of revenue
Five pillars of revenue Moving towards $1bn revenue, across five key pillars For personal use only 50
Slide 52: Rural Products
For personal use only Rural Products Presented by Nick Fazekas EGM Rural Products 51 51
Slide 53: Crop Inputs summary
Crop Inputs (Crop Protection, Nutrition) summary Successful response to volatile market and a continued growth focus Crop Inputs FY23 Gross Margin For personal use only Priorities (% Retail Products Gross Margin) Focus is on growing through own brands and 52% Crop Protection expanding segments, and
Slide 54: Crop Protection backwards integration
Crop Protection backwards integration Focus is on product development and margin improvement For personal use only FY23 in review ▪ Targeting 70% of the addressable market ▪ Growth in product pipeline, talent resources and gross margin Priorities Key priorities include driving growth through the pip
Slide 55: Seed summary
Seed summary Maintain growth of sales and seed pipeline development Seed FY23 Gross Margin For personal use only Priorities (% of Retail Products Gross Margin) 9% Priorities include growing through new products and marketing ▪ New pipeline of grain sorghum germplasm FY23 in review within EPG seeds F
Slide 56: Animal Health & General Merchandise summary
Animal Health & General Merchandise summary Category remains resilient with further growth opportunities Animal Health FY23 Gross Margin For personal use only Priorities (% of Retail Products Gross Margin) 15% Further growth and efficiencies can be delivered across our range, and through enhanced se
Slide 57: Agency Services
For personal use only Agency Services Presented by Dave Adamson GM Agency 56 56
Slide 58: Livestock market context
Livestock market context Both cattle and sheep prices faced significant price declines Cattle Price Indicators, Jan-20 to Oct-231, c/kg cwt Price influencers For personal use only 1,200 EYCI2 WYCI2 ▪ Herd build nearing completion 1,000 ▪ Subdued re-stocker demand 800 ▪ Market confidence – price and
Slide 59: Livestock market outlook
Livestock market outlook Pressure expected to alleviate for cattle as prices flatten Prices expected to flatten through to FY24 due to drier conditions, higher turn-off rates and lower restocking demand, For personal use only before stabilising in FY25 as global export prices increase Australian Nat
Slide 60: Livestock progress and priorities
Livestock progress and priorities Focus is on further growth and portfolio diversification FY23 progress: For personal use only ✓ Grew portfolio and increased market share via agency acquisitions ✓ Invested in people, safety and sustainability ✓ Launched information hub Livestock Now to enhance clie
Slide 61: Wool market context and outlook
Wool market context and outlook Wool market relatively flat, and largely driven by economic conditions in key markets Eastern Market Indicator in AUD and USD1, Aug-13 to Aug-23 For personal use only Current context ▪ Finer types selling well, mediums well back on last year ▪ Crossbred wool at histor
Slide 62: Elders Wool – overview, progress and priorities
Rockingham warehouse (WA) Elders Wool – overview, progress and priorities Transforming our wool business Overview: Establishing and investing in an Elders operated wool handling business For personal use only Ravenhall warehouse (VIC) complementing existing offer, around two new centralised wool han
Slide 63: Grain performance, outlook and areas of focus
Grain performance, outlook and areas of focus Increased market share, and further growth opportunities in face of some market headwinds PERFORMANCE For personal use only OUTLOOK PRIORITIES CGX market share1, cumulative tonnes traded Australian winter crop production2, 2023–24 Further opportunity to
Slide 64: Real Estate Services
For personal use only Real Estate Services Presented by Tom Russo EGM Network Mark Barber GM Farmland Agency and Agribusiness Investments 63 63
Slide 65: Elders Real Estate
Elders Real Estate An overview of the Elders Real Estate business For personal use only 13,600 $2.0b PROPERTIES UNDER BROADACRE SALES M ANAGEM ENT1 TURNOVER1 286 $1.7b SALES RESIDENTIAL AGENTS 1 SALES TURNOVER 1 102 $59.5m FRANCHISE GROSS M ARGIN OFFICES CONTRIBUTION Statistics based on FY23 end of
Slide 66: Elders Real Estate gross margin distribution
Elders Real Estate Gross margin distributed between Rural, Residential and PM For personal use only Context Share of Real Estate gross margin excluding other direct costs4 (%) ▪ Residential real estate is valued at $10.1 trillion in Other Australia1 Franchise Property 6.4% management ▪ Regional Resi
Slide 67: Residential Real Estate market context
Residential Real Estate market context Fundamentals for sales and properties under management remain strong For personal use only Outlook for residential properties and properties under management is strong as high demand is met with low supply Low unemployment, low on- The tight rental market and L
Slide 68: Residential Real Estate growth approach
Residential Real Estate growth approach Market share via acquisitions to lead growth ambitions For personal use only Market share Increase market share through recruitment of franchises, agents and acquisitions, with a focus on high priority strategic gaps, while upskilling existing talent Property
Slide 69: Rural Real Estate market context
Rural Real Estate market context Strong buy side factors drive unprecedented demand For personal use only Rural property values remain strong supported by low property turnover Low property turnover by number, Low volumes reflect property Strong retained earnings, while total value of turnover is ow
Slide 70: Rural Real Estate positioning
Rural Real Estate positioning A brand and offer that sets us apart in Rural Real Estate For personal use only Trusted brand Professional sales team backed by the Elders network and technical capability Rural Real Estate’s sustainable Experienced local agents backed by experienced corporate transacti
Slide 71: Rural Real Estate growth approach
Rural Real Estate growth approach Acquisitions, talent and technology to drive further growth For personal use only Acquisitions Continue growing market share through acquisitions, particularly in NSW and QLD / NT Talent Attract and retain top talent through innovative recruitment models Technology
Slide 72: Financial Services
For personal use only Financial Services Presented by Nick Clark GM Financial Services and Network Improvement 71 71
Slide 73: Business overview
Business overview Our product suite includes a range of banking, finance and insurance options Products and services through partnerships Elders products and services For personal use only Livestock in Home Loans Livestock Transit Delivery and Commercial Funding Warranty Finance Partnership with Par
Slide 74: FY23 highlights and outlook
FY23 highlights and outlook Strong performance in FY23 but still room to grow Grew margin, increased presence, Diversified offer supports resilience, For personal use only optimised processes and enhanced with further growth and optimisation offer in FY23 prospects ✓ Gross Margin $53.5m (+21% YOY) ✓
Slide 75: Growth Plan
Growth Plan Incremental growth possible across our full suite, through organic and inorganic pathways Livestock in Home Loans For personal use only Livestock Transit and Funding Delivery Commercial Warranty Finance Seeking mutual growth with partners Enhanced front line staff product understanding a
Slide 76: Feed & Processing Services
For personal use only Feed & Processing Services Presented by Andrew Talbot GM Killara 75 75
Slide 77: Killara FY23 overview and highlights
Killara FY23 overview and highlights Killara has been resilient, supported by growth and diversification focus Livestock industry has faced significant volatility: For personal use only ▪ Feeder cattle prices down ▪ Commodity prices (feed costs) lifting ▪ Despite volatility, head on feed in Australi
Slide 78: Continual improvement areas
Continual improvement areas Setting us up for success in the long-term For personal use only Improving animal welfare 1 (e.g. advancements in microbial usage and reduction in mortalities) Environmental stewardship: Moving towards carbon neutrality by 2030 2 (e.g. transitioning to electricity and ren
Slide 79: Killara priorities
Killara priorities Immediate focus is on growth and operational excellence Killara will continue seeking opportunities to grow, including: For personal use only ✓ Further feedlot expansion ✓ Continued lift in Wagyu segment through 3rd party feeding agreements Operational excellence is also a core fo
Slide 80: Closing Remarks and Q&A
For personal use only Closing Remarks and Q&A Presented by Mark Allison Managing Director and CEO 79 79
Slide 81: Closing summary
Closing summary Well positioned to adapt to market conditions to deliver our 4th Eight Point Plan For personal use only Our 3 previous 8PPs supported growth through recent agricultural cycles 01 We have shown resilience through recent cycles, growing despite adverse weather events and volatility in
Slide 82: For personal use only
For personal use only 81