Elders Limited · ASX:ELD
Elders — H1 FY23 Earnings Presentation
42 slides from Elders's earnings presentation, May 16, 2023
Slide 1: 2023 Half-Year Results Investor Presentation
Monday 15 May 2023 2023 Half-Year Results Investor Presentation Attached is the Elders Limited (ASX:ELD) investor presentation in connection with the financial results for the 6-month period ended 31 March 2023. Elders’ Managing Director and Chief Executive Officer, Mark Allison, and Acting Chief Fi
Slide 2: FY23 Half Year Report Presentation
FY23 Half Year Report Presentation 15 May 2023 Presented by Mark Allison Managing Director and CEO Paul Rossiter Group Treasurer and Acting CFO 1
Slide 3: Disclaimer and Important Information
DISCLAIMER AND IMPORTANT INFORMATION 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, and where derived from
Slide 4: Agenda
Agenda Executive Overview Financial Results Growing and Transforming our Business Market Outlook Questions 3
Slide 5: Key Investment Drivers
Key Investment Drivers Australia's most trusted agribusiness brand ▪ Compelling Total Shareholder Return 1 EPS Growth ▪ 30% 10yr EPS CAGR ▪ ROC >15% and dividend payout of between 40-60% ▪ Multi-faceted agribusiness Geographic and product 2 diversification ▪ Diversified product offerings and locatio
Slide 6: Earnings Growth and Resilience Despite Seasonal Variability
Earnings Growth and Resilience Despite Seasonal Variability Resilient earnings growth with geographical, product and service diversity insulating against severe weather events Underlying El Niño 2017-2019 Drought La Niña EBIT $232m FY23 Guidance Drought $200m³ Underlying EBIT Range $167m Bushfires $
Slide 7: HY23 Highlights
HY23 Highlights PEOPLE CUSTOMERS COMMUNITY SHAREHOLDERS 11.9 #1 $0.3m 32.3 cents TRIFR1 most trusted to RFDS, continuation underlying earnings agribusiness brand of the three-year per share 79% sponsorship employee 51 23.0 cents engagement net promoter $1.1m dividends score2 sponsorships and per sha
Slide 8: HY23 Financial Summary
HY23 Financial Summary Comparison to very favourable trading conditions in HY22 SALES GROSS MARGIN UNDERLYING EBIT $1.7b $305.8m $82.8m +9% -6% -38% from $1.5b from $326.4m from $132.9m COSTS COST TO EARN RATIO RETURN ON CAPITAL Costs / gross margin R12 EBIT/ R12 avg net operating assets $223.0m 73%
Slide 9: Sustainability
Sustainability OUR PRINCIPLES OUR PRIORITIES OUR PROGRESS ▪ We provide our customers and clients • Increasing the amount of solar power we ▪ Formed a dedicated Strategy, with the goods and services they need generate onsite Sustainability and innovation function ▪ We support our people and the • Dee
Slide 10: Safety, Health & Well-Being
Safety, Health & Well-Being Lost time injuries (LTI) 9 2 lost time injuries 6 in HY23 4 Average 3 2 2 10% compound reduction in FY19 FY20 FY21 FY22 HY23 TRIFR since FY19 Total recordable injuries frequency rate (TRIFR)1 100% branch risk radar2 18.7 -10% completed during 17.8 Safety Week 15.0 12.6 11
Slide 11: Financials
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Slide 12: HY23 Industry Backdrop
HY23 FY22 IN REVIEW The first half of FY22 was characterised by historically Industry high livestock prices, very high real estate turnover and supply chain disruption which brought forward client LIVESTOCK PRICES¹ procurement Cattle (c/kg cwt) Backdrop This created the historically unusual scenario
Slide 13: HY23 Financial Performance: Summary
HY23 Financial Performance: Summary FY23 EBIT guidance between $180m - $200m Sales Revenue ($m) Underlying EBIT ($m) 3,445 +24.9% +22.6% 232 200¹ 2,549 167 180¹ 2,093 1,626 121 74 1,657 133 1,515 1,101 74 83 733 900 53 34 FY19 FY20 FY21 FY22 HY23 FY19 FY20 FY21 FY22 FY23 Costs ($m) vs Cost to Earn (
Slide 14: HY23 Financial Performance: Summary
HY23 Financial Performance: Summary Resilient performance despite delayed start to winter crop compared to HY22 Key metrics ($m) HY23 HY22 Var Var % Sales revenue 1,657.3 1,514.8 142.5 9% Gross margin 305.8 326.4 (20.6) (6%) Gross margin % 18.5% 21.5% (3.0%) n/a Costs 223.0 193.6 29.4 15% Un
Slide 15: HY23 Product Performance
HY23 Product Performance Mixed results across the product portfolio compared to strong market conditions in HY22 Rural Products Gross Margin by Category ($m) Change in product margin ($m) 179 177 Fertiliser HY22 HY22 HY23 91.2 NPAT Wholesale Products 117 AgChem Retail 140.7 145.5 89 Animal Health 4.
Slide 16: HY23 Gross Margin Diversification
Ready HY23 Gross Margin Diversification A diversified business model provides earnings resilience +2.1% Total Gross Margin ($m) -22.1% Positive contribution from 326 306 backward integration and network 82.2 80.9 sales growth, partially offset by 79.2 temporary gross margin compression HY22 HY23 64.
Slide 17: HY23 Geographical Diversification
HY23 Geographical Diversification Geographical diversification mitigates the impact of events like the East coast floods Western Australia Queensland & 9.1% 22.4% Northern Territory 31 16 25 10 HY22 HY23 HY22 HY23 South Australia New South Wales 17.2% 22.1% 25 28 24 19 HY22 HY23 HY22 HY23 Tasmania 3
Slide 18: HY23 Cost Drivers
HY23 Cost Drivers Investment in people to support network growth and transformational projects driving costs ▪ Network growth +116 FTE Cost ($m) vs Cost to Earn (%) PEOPLE HY22 Costs 193.6 HY22 HY23 ▪ Acquisitive growth +57 FTE ▪ Transformational growth +29 FTE ³ +12.5% 421 ▪ Graduate program +37 FT
Slide 19: HY23 Capital Allocation
HY23 Capital Allocation Working capital expected to decline in H2 following the 2023 winter crop Return on Capital (%)1 YTD Average Working Capital ($m) -10.9 27.8% 693 26.2% 586 607 21.6% 3 Year Avg 16.9% HY22 FY22 HY23 HY22 FY22 HY23 Trade & Other Receivables ($m) Inventories² ($m) Trade & Other P
Slide 20: HY23 Cash Flow
HY23 Cash Flow H1 cashflows are historically negative as working capital builds for the winter crop Operating cash flow ($m) Cash conversion (%)2 130.1 -111% (8.9) 29.2 82.8 27.0 (72.3) -61% -172% (121.5) HY22 HY23 Working Capital to Sales (%)3 23.8 (47.0) +1.6% (86.9) 19% 17% EBIT Depreciation Othe
Slide 21: HY23 Net Debt
HY23 Net Debt Leverage headroom provides options for future growth Net debt, balance date ($m) Leverage ratio Interest cover Gearing ratio Average net debt / EBITDA EBITDA / net interest Average net debt / closing equity +197.2 +0.4 +8.3 Including / excluding AASB 16 581.7 1.6 35.0 -19.9 46.2 37.9 1
Slide 22: HY23 Dividend and Earnings Per Share
HY23 Dividend and Earnings Per Share Growth drivers delivering compelling returns through the cycles Underlying Earnings per Share (cents) Adjusted Underlying Earnings per Share (cents)¹ ² 2H Adjusted underlying EPS HY FY +16.0% 134 HY 97 97 97 97 70 39 54 70 53 39 53 32 44 28 58 43 58 31 43 32 24 2
Slide 23: Growing and Transforming our Business
Growing and Transforming our Business
Slide 24: Elders Executive Overview
Elders Executive Overview Highly experienced and diversified team EXCO AVERAGE TENURE: 11 YEARS MARK PAUL ANNA KIIM PETER OLIVIA VIV JEREMY TOM ALLISON ROSSITER BENNETT LIM HASTINGS RICHARDSON DA ROS COWAN RUSSO Managing Director & CEO Group Treasurer and EGM Strategy, EGM Business General Counsel C
Slide 25: We Are Delivering On Our Third Eight Point Plan
We Are Delivering On Our Third Eight Point Plan 1 5 WIN DEVELOP A ▪ Solar farm development at Killara Feedlot near completion MARKET SHARE ▪ Increased our points of presence by 26 locations in HY23 SUSTAINABILITY ▪ Solar installations completed on several branches ▪ 6 Acquisitions in HY23 PROGRAM ▪
Slide 26: Eight Point Plan: Shareholder Returns, Sustainability, Trusted Brand
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 Australia minimum 15% ROC governance RURAL AGENCY REAL ESTATE FINANCIAL T
Slide 27: Growth Pillars
Growth Pillars Multi-Faceted strategy to drive growth through the cycles to FY26 Geographic Backward Transformational Transformational Expansion Integration Projects Investment Market Share Gross Margin Capture Cost and Capital Efficiency New Channels to Market ▪ Strong pipeline of bolt on acquisiti
Slide 28: Our Networks are Growing
Our Networks are Growing Dual growth strategy covering Elders and AIRR providing sustainable contribution to 5-10% EBIT growth LISMORE Points of Presence Growth Since FY19 BASE GROWTH CURRENT CAGR FY19 MEMBERS GREENFIELD ACQUISITION HY23 ELDERS 523 - 10 46 579 2.95% COFFS HARBOUR KEMPSEY AIRR¹ 355 1
Slide 29: Significant Opportunity for Further Geographic Growth
Significant Opportunity for Further Geographic Growth Points of presence increased by 26 locations +26 NEW LOCATIONS SINCE MARCH 2022 GROWTH OPPORTUNITIES TO GAIN MARKET SHARE AND GROW MEMBER BASE IN NEW GEOGRAPHIES Elders’ Points of Presence Strategic Geographic Locations Elders Market Growth Oppor
Slide 30: Investing Now for Future Growth
Investing Estimated Benefits to Flow Now for Future Growth Benefits FY23 FY24 FY25 FY26+ Transformational projects to ▪ Investment in sourcing capability will drive benefits through FY26 unlock significant value across our and beyond from cost and portfolio RURAL PRODUCTS SUPPLY CHAIN OPTIMISATION ▪
Slide 31: Systems Modernisation Program
Systems Modernisation Program Systems transformation to improve cost and capital efficiency through FY26 and beyond FY22 HY23 Wave 1 $m $m CAPEX 4.5 4.5 PROJECTS COMPLETED OPEX - underlying 4.4 2.4 OPEX- non underlying 0.7 1.7 WORKDAY AEM Total 9.6 8.6 Wave 2 EN-ROUTE ▪ $0.8m of CAPEX recognised in
Slide 32: We Are Committed To Attracting & Retaining The Best People
We Are Committed To Attracting & Retaining The Best People More people, highly skilled, engaged and diverse WE HAVE MORE PEOPLE… …WHO ARE HIGHLY ENGAGED… …AND DIVERSE FTEs Engagement1 Female non-executive Women in senior directors executive positions 8.5% CAGR +1.0% 2,585 2,701 2,451 79% 79% 2,294 7
Slide 33: Key Investment Drivers
Key Investment Drivers Australia's most trusted agribusiness brand 1 EPS Growth Geographic and product 2 diversification Attractive market and 3 Company outlook Transformational initiatives 4 benefits Significant pipeline of 5 new opportunities Robust balance sheet 6 supporting growth 32
Slide 34: Market Outlook
Market Outlook
Slide 35: Market Outlook
Market Outlook Favourable cropping outlook with expectations of reduced volatility from livestock and cropping input prices RURAL AGENCY FINANCIAL FEED & COSTS AND REAL ESTATE PRODUCTS SERVICES SERVICES PROCESSING CAPITAL ▪ Winter crop outlook ▪ Cattle volumes are ▪ Residential demand is ▪ Favourabl
Slide 36: ABARES March Market Outlook
ABARES March Market Outlook Strong crop outlook moderated by subdued livestock prices Beef & Veal1 Sheep1 Wool1 Winter Cropping2 Summer Cropping2 Average saleyard prices (c/kg) Average saleyard prices (c/kg) Eastern Market Indicator (c/kg) Area planted (‘000 ha) Area planted (‘000 ha) +1.9% -0.5% +2
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Slide 38: Appendix
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Slide 39: Business Model
Business Model Diversification by product, service, market segment and geography RURAL PRODUCTS FEED & DIGITAL AND REAL ESTATE FINANCIAL AGENCY SERVICES PROCESSING TECHNICAL WHOLESALE SERVICES SERVICES RETAIL PRODUCTS SERVICES SERVICES PRODUCTS Fee for Service Rural Products Rural Products Livestock
Slide 40: Gross Margin Sensitivity
Gross Margin Sensitivity Movements in market factors are mostly mitigated by our diversified portfolio $m 6 5 4 3 2 1 +$50 +100k head +$10 +500k head +$25m +50bps +100bps +100bps +10% 0 -$50 -100k head -$10 -500k head -$25m -50bps -100bps -100bps -10% -1 -2 -3 -4 -5 -6 Cattle Price Cattle Volumes Sh
Slide 41: Elders Capital Management Framework
Elders Capital Management Framework Aligned with Elders Eight Point Plan to deliver Total Shareholder Return (TSR) in the top quartile of ASX200 companies at investment grade risk KEY FEATURES OF OUR CAPITAL MANAGEMENT FRAMEWORK CAPITAL MANAGEMENT FRAMEWORK Compelling Total Shareholder Return (TSR)
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