Slide 1: 2020 Half-Year Results Investor Presentation
Monday 18 May 2020 2020 Half-Year Results Investor Presentation Attached is the investor presentation in connection with the financial results for the 6 month period ended 31 March 2020. Elders CEO, Mark Allison, and CFO, Richard Davey, will deliver this presentation by webcast and simultaneous tele
Slide 2: Elders Limited 1H20 Results Presentation
Elders Limited 1H20 Results Presentation 18 May 2020
Slide 3: Disclaimer and Important Information
DISCLAIMER AND IMPORTANT INFORMATION Forward looking statements This presentation is prepared for information purposes only. It contains forward looking statements that are subject to risk factors associated with the agriculture industry many of which are beyond the control of Elders. Elders’ future
Slide 4: Agenda
Agenda ▪ 1H20 Key Highlights………………………..… 4 ▪ Delivery Against Our FY20 Priorities……………. 5 ▪ 1H20 Financial Performance……………….... 6 ▪ FY20 Market Outlook…………………………..…. 12 ▪ Strategic Priorities…………………………….…… 13 ▪ Appendix.............................................................. 20
Slide 5: 1H20 Key Highlights
1H20 KEY HIGHLIGHTS Strong first half across key focus areas ▪ 1 lost time injury (LTI), consistent with prior year with target of zero ▪ LTI frequency rate at 2.2, compared to 1.2 the pcp Safety ▪ Enhanced emphasis on employee and community safety, health and wellbeing in COVID-19 environment ▪ An
Slide 6: Delivery Against Our FY20 Priorities
DELIVERY AGAINST OUR FY20 PRIORITIES Implementation of second Eight Point Plan Safety Operational Efficiency and Key Relationships Performance1 Performance2 Growth ▪ 1 lost time injury (LTI), consistent with ▪ $48.1m underlying NPAT, up $19.8m ▪ Worked closely with industry and ▪ Continued integrati
Slide 7: 1H20 Financial Performance: Summary
1H20 FINANCIAL PERFORMANCE: SUMMARY Strong performance across the board 1H20 Year-on-Year Change 1H19 Financial Metric Result ($m) Result ($m) Pre-AASB 161 Direction $m % Sales revenue 925.2 732.9 192.3 26% Underlying EBITDA 56.5 36.4 20.1 55% Underlying EBIT 52.1 34.0 18.1 53% Underlying prof
Slide 8: 1H20 Financial Performance: Product
1H20 FINANCIAL PERFORMANCE: PRODUCT Additional earnings from AIRR acquisition and outperformance across most products and services Change in product margin ($million)1, 2 ▪ Wholesale Network is up with AIRR acquisition contributing $17.4 Product margin million in gross margin 0.8 0.9 3.7 2.4 8.0 ▪ R
Slide 9: 1H20 Financial Performance: Geography
1H20 FINANCIAL PERFORMANCE: GEOGRAPHY Lower contribution from Northern Australia and increased corporate costs has been offset by acquisitions during the year Change in underlying EBIT by geography ($million)1, 2 ▪ Wholesale Network is up with AIRR acquisition contributing Underlying EBIT $17.4 mill
Slide 10: 1H20 Financial Performance: Capital
1H20 FINANCIAL PERFORMANCE: CAPITAL1 Return on capital is up on LY mainly due to improved Livestock and Retail returns Elders’ underlying return on capital is 17.7%, up on the pcp by 0.6%: Underlying Return on Capital2 ▪ Retail Products improved with a strong finish to the half ▪ Agency Services and
Slide 11: 1H20 Financial Performance: Cash Flow
1H20 FINANCIAL PERFORMANCE: CASH FLOW1 Positive inflow for the half with seasonal Rural Products working capital build Working capital movements 10.6 Operating cash inflow of $11.8 million reflected EBITDA of $60.0 million, offset by increased working capital relating to: 60.0 45.7 ▪ Wholesale Netwo
Slide 12: 1H20 Financial Performance: Net Debt
1H20 FINANCIAL PERFORMANCE: NET DEBT1 Significant headroom in financial covenants Net debt, at balance date Net debt, YTD average Net debt AUD millions AUD millions Whilst our profit has increased on the prior year, we have achieved an improvement on our net debt levels ($3.1 million and $15.0 milli
Slide 13: FY20 Market Outlook
FY20 MARKET OUTLOOK Following rainfall events, there is now a positive outlook for winter crop. Global COVID-19 implications will continue to create some ongoing uncertainty in both market demand and agricultural supply chains. ▪ Recent rainfall has delivered a break in a number of drought affected
Slide 14: Our Second Eight Point Plan: FY18 to FY20
OUR SECOND EIGHT POINT PLAN: FY18 to FY20 We continue to focus on executing against our second Eight Point Plan 13
Slide 15: Eight Point Plan: FY18 to FY20
EIGHT POINT PLAN: FY18 to FY20 Deliver 5-10% growth through the cycles above 20% ROC (15-18% ROC post AIRR) EBIT FY17 to FY20 AIRR Livestock price Livestock price Other market Organic (50%) Organic (50%) Acquisition (50%) Acquisition (50%) Cost (0%) FY20 FY20 FY17 FY17 normalisation normalisation mo
Slide 16: AIRR Acquisition
AIRR ACQUISITION Operational performance, progress on integration and synergies 8 Warehouses and 5 Retail locations Delivery of acquisition synergies ▪ On track to realise full year synergies of $3m - $5m ▪ Increased margins from consolidated buying across Elders group ▪ Improved utilisation of AIRR
Slide 17: Our Second Eight Point Plan: Balanced Growth
OUR SECOND EIGHT POINT PLAN: BALANCED GROWTH We remain focused on balanced growth by organic and acquisitive means, while continuing to maintain our cost base and invest for the future Organic Acquisition Manage Cost 50% 50% ▪ Capture more margin through backward integration ▪ Continue to evaluate a
Slide 18: Our Third Eight Point Plan: FY21 to FY23
OUR THIRD EIGHT POINT PLAN: FY21 to FY23 Development of key priorities and enablers has been progressed 1. Win market share across all business units through customer centricity, sales force effectiveness and strategic acquisitions 2. Capture increased Rural Products gross margin through optimised p
Slide 19: AASB 16 Lease Accounting Standard Impact
AASB 16 LEASE ACCOUNTING STANDARD IMPACT Adopted 1 October 2019 Using the ‘modified retrospective approach’, whereby no comparative period Operating expenses $16.8m information is restated Depreciation $16.0m Recognised Right of Use Asset as equal to the calculated Lease Liabilities Profit & Los
Slide 20: 1H20 Financial Performance (incl. AASB 16)
1H20 FINANCIAL PERFORMANCE (INCL. AASB 16) Minimal impact on earnings; material impact on ROC and net debt 1H20 Pre-AASB 1H19 1H20 Statutory 1H20 Adjustment 16 Statutory Financial Metric Sales revenue 925.2 - 925.2 732.9 Underlying EBITDA 73.3 16.8 56.5 36.4 Underlying EBIT 52.8 0.8 52.1 34.0 Underl
Slide 21: Appendix
APPENDIX 20
Slide 22: Business Model
BUSINESS MODEL* Diversification by product, service, market segment, geography and channel Rural Products Feed and Real Estate Digital and Agency Services Financial Services Processing Services Technical Services Retail Products Wholesale Products Services Fee for Service Farm Supplies Farm Supplies
Slide 23: Points of Presence
POINTS OF PRESENCE We have over 500 points of presence in Australia, catering to the needs of a variety of agricultural regions. We also supply a further 350+ sites with product through our AIRR wholesale business. Elders Zones and Points of Presence Agricultural Land Use in Australia 1 2 1 Elders O
Slide 24: Strategic Opportunities
STRATEGIC OPPORTUNITIES Significant growth opportunities to gain share by serving new customers, in new geographies with our multiple product and service portfolio There are a range of opportunities available to assist us to win greater share of existing customers needs, and meet the product and ser
Slide 25: AIRR Overview
AIRR OVERVIEW AIRR is a national wholesale platform with scale Overview 8 Warehouses and 5 Retail locations ▪ Established in 2006 ▪ Member based buying and marketing group for independent rural merchandise and pet and produce stores ▪ National wholesale business with network of eight warehouses ▪ 6,
Slide 26: AIRR Overview (cont.)
AIRR OVERVIEW (CONT.) Strong track record of quality growth and financial discipline AIRR’s EBITDA profile ($m) AIRR’s growth strategy 22 21 ▪ Grow AIRR and Tuckers member base 19 ▪ Leverage buying, marketing and selling strengths to 17 create sales and margin growth ▪ Expand AIRR warehouse footprin
Slide 27: 1H20 Results by Business Segmentation
1H20 RESULTS BY BUSINESS SEGMENTATION Rural Products and Agency Services account for nearly 80% gross margin before SG&A costs Northern Southern Western International 1H20 Margin Avg. Working Central Other Australia Australia Australia Geographies ($m) Capital ($m) Wholesale (AIRR) Farm and Pet Supp
Slide 28: Rural Products
RURAL PRODUCTS Continued growth in margin since FY14, spread across all three geographies Business description Rural Products margin FY19 margin split by geography AUD millions Percent Elders is one of Australia’s leading suppliers of rural farm inputs including seeds, fertilisers, agricultural chem
Slide 29: Agency Services
AGENCY SERVICES South geography accounts for over 50% of margin; reduction in margin from FY17 onward due to easing cattle prices Business description Agency Services margin FY19 margin split by geography AUD millions Percent Elders provides a range of marketing options for livestock, wool, and grai
Slide 30: Real Estate Services
REAL ESTATE SERVICES Continued increase in margin from FY14 onward, with a fair spread across all geographies Business description Real Estate Services margin FY19 margin split by geography AUD millions Percent Elders’ real estate services include company owned rural agency services primarily involv
Slide 31: Financial Services
FINANCIAL SERVICES Consistent growth in EBIT contribution since FY15; FY19 margin decreased ($6 million) in line with new Rural Bank distribution agreement, offset by personnel cost savings of $6 million Business description Financial Services margin FY19 margin split by geography AUD millions Perce
Slide 32: Feed and Processing Services
FEED AND PROCESSING SERVICES Fluctuations in results since FY14, however FY19 was the best performing year to date Business description Feed & Processing margin FY19 margin split by geography AUD millions Percent In Australia, Elders operates Killara Feedlot, a beef cattle feedlot near Tamworth in N
Slide 33: Elders Financial Progress Since FY14
ELDERS FINANCIAL PROGRESS SINCE FY14 Under the first and second Eight Point Plan, underlying EBIT has almost tripled Underlying EBIT Results performance has been driven by: AUD millions ▪ Resetting of operational strategy, focusing 75 74 on running a pure-play agribusiness 71 Series1 1H Series2 2H ▪
Slide 34: Profit Sensitivity
PROFIT SENSITIVITY 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 Retail sales -$50m -$25m
Slide 35: Industry and Market Outlook (Long Term)
INDUSTRY AND MARKET OUTLOOK (LONG TERM) Long Term Market Relevance Market Summary of Outlook Outlook to Elders ▪ The value of Australian agricultural production has increased steadily over recent years. It is estimated to be $59 billion in 2019-20, and remain Agricultural constant until 2024-25. Neu