Elders Limited · ASX:ELD
Elders — H1 FY2018 Earnings Presentation
44 slides from Elders's earnings presentation, May 14, 2018
Slide 1: 2018 Half-Year Results Investor Presentation
Monday, 14 May 2018 2018 Half-Year Results Investor Presentation Attached is the investor presentation in connection with the financial results for the 6 month period ended 31 March 2018. Elders CEO, Mark Allison, and CFO, Richard Davey, will deliver this presentation by webcast and simultaneous tel
Slide 2: Elders Limited 2018 Half Year Results Presentation
Elders Limited 2018 Half Year Results Presentation 14 May 2018
Slide 3: Disclaimer and important information
Disclaimer and important information 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 subject to risk factors a
Slide 4: FY18 Half Year in Review
FY18 Half Year in Review Strong performance for the half 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 inflow of $26.1m for th
Slide 5: Progress on FY18 Priorities
Progress on FY18 Priorities Delivering our promises to stakeholders Safety Operational Key Efficiency Performance Performance Relationships and Growth Lost time injuries reduced to 2 $47.8m underlying EBITDA, up Continued to work with retail key Continued to drive branch efficiency from 5, t
Slide 6: Half Year Financial Performance
Half Year Financial Performance 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 78.5 46% 170.4 Operati
Slide 7: Performance by Product
Performance by Product Continued strong performance in Retail 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 Services Services Processi
Slide 8: Performance by Geography
Performance by Geography Geographic diversification with Southern Australia outperformance offsetting Northern Australia 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 Australia Australia Australi
Slide 9: Capital Employed
Capital Employed Return on capital remains above 20% target 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 services 28.2% 31.8% pr
Slide 10: Operating Cash Flow
Operating Cash Flow Strong profitability and Easter impact 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 Other outflows represents
Slide 11: Net Debt
Net Debt Continued improvement across all key ratios 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 Distribution of dividends t
Slide 12: FY18 Outlook
FY18 Outlook Easing cattle prices expected, offset by footprint expansion and acquisition growth 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 demand for cropping inpu
Slide 13: Strategic Priorities to 2020
Strategic Priorities to 2020 12
Slide 14: Eight Point Plan: 3 years to FY20 goal
Eight Point Plan: 3 years to FY20 goal Targeting 5 – 10% p.a. quality growth through the cycles 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 share gains achieved in FY
Slide 15: Balanced growth plan to FY20
Balanced growth plan to FY20 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 acquisition growth Capture gro
Slide 16: Strategic Gaps
Strategic Gaps Geared for the next wave of growth, including 20 new branches by 2020 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 presence in horticultu
Slide 17: Appendix
APPENDIX
Slide 18: Appendix
Appendix Appendix 1: 1H FY18 results additional information Appendix 2: Business Model Appendix 3: Market Forces Appendix 4: Indonesian Divestment 17
Slide 19: 1H FY18 Results Additional Information
1H FY18 RESULTS ADDITIONAL INFORMATION
Slide 20: Business Segmentation
Business Segmentation Average Northern Southern Western Int’l Digital & 1H FY18 $ million Working Australia Australia Australia Geographies Technical Margin Capital Retail Products Farm Supplies and Fertiliser 69.0 166.8 Agency Services Livestock, Wool, and Grain 65.8 30.4 Farmland, Residential, Pro
Slide 21: Business Performance by Product
Business Performance by Product Margin by product 1H FY18 1H FY17 $ million 16% 1% Retail: Upside driven by a combination of organic 69.0 growth across southern Australia and acquisition 65.8 65.2 growth in horticulture 59.6 Agency: Strong wool performance and additional sheep volumes from acqui
Slide 22: Business Performance by Geography
Business Performance by Geography Margin by geography $ million 1H FY18 1H FY17 12% 1% Northern Australia: Unfavourable conditions impacting 81.9 Livestock and Real Estate margin, offset by the Ace 72.9 Ohlsson acquisition 64.0 63.4 14% Southern Australia: Outperformed last year across most prod
Slide 23: Business Model
BUSINESS MODEL
Slide 24: Elders Limited
Elders Limited Australia’s largest listed rural services and products supplier, operating since 1839 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 services and products suppli
Slide 25: Business Model
Business Model Digital and technical Feed and processing Retail products Agency services Real estate services Financial services services services Farm supplies Livestock Farmland Agri-finance Fees for service Killara Feedlot Fertiliser Wool Residential Insurance Auctions plus (50%) Elders Indonesia
Slide 26: Points of Presence
Points of Presence 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: Achievements FY14 to FY17
Achievements FY14 to FY17 Excellent platform and processes established for further profitable growth Organic Acquisition Cost Market share gained across retail, Established internal business Prioritised growth pipeline with livestock and wool markets development function to evaluate appropriat
Slide 28: Delivering improvements across the business
Delivering improvements across the business 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 supplier terms and con
Slide 29: Business Division: Retail products
Business Division Retail products Business description Retail margin ($m) • Elders is one of Australia’s leading suppliers of rural farm inputs including seeds, fertilisers, agricultural chemicals, animal health products and general rural merchandise. We also provide professional production and crop
Slide 30: Business Division: Agency services
Business Division Agency services Business description Agency margin ($m) • Elders provides a range of marketing options for livestock, wool, and grain Agency - Livestock: our livestock agents and employees services operate across Australia conducting on-farm sales 37% to third parties, regular phys
Slide 31: Business Division: Real estate services
Business Division Real estate services Business description Real estate margin ($m) • Elders’ real estate services include company owned rural agency services primarily involved in the marketing of farms, stations and lifestyle estates • It also includes a network of residential real estate agencies
Slide 32: Business Division: Financial services
Business Division Financial services Business description Financial services margin ($m) • Elders distributes a wide range of banking, funding, insurance and financial planning products through its Financial Australian network services 11% • We work with a number of third parties to enable us to del
Slide 33: Business Division: Feed and processing services
Business Division Feed and processing services Business description Feed and processing services margin ($m) • In Australia, Elders operates Killara Feedlot, a beef cattle Feed and processing 4% feedlot near Tamworth in New South Wales • Elders imports, processes and distributes premium Australian m
Slide 34: Strong group financials
Strong group financials Sales ($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 ($m) 82 71 49 56 15 (5) 39 21 FY14 FY15 FY16 FY17 FY14 FY15 FY16 FY17 33
Slide 35: Driving improved shareholder returns and sound capital management
Driving improved shareholder returns and sound capital management Underlying EPS (cps) Dividends per share (cps) 7.5 62 62 41 47 7.5 FY14 FY15 FY16 FY17 FY14 FY15 FY16 FY17 Average working capital balance ($m) Average net debt balance ($m) 223 228 221 216 122 135 137 212 FY14 FY15 FY16 FY17 FY14 FY1
Slide 36: 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 37: Market Forces
MARKET FORCES
Slide 38: Cattle
Cattle Australian Cattle herd Million heads The herd rebuild is expected to continue in 2018-19. 30 However, seasonal conditions in the north and high beef prices relative to long term averages will incentivise 29 producers to maintain a high rate of turn off, constraining growth. 28 +2% Cattle
Slide 39: Sheep and Wool
Sheep and Wool National Sheep flock Shorn wool production NTLI and EMI Million heads Thousand tonnes greasy +1% Ac/kg cwt & Ac/kg clean +3.2% 74 +3% 350 650 1,800 72 1,600 70 600 +4.3% 68 300 1,400 550 66 1,200 500 64 1,000 62 250 450 800 2014 2015 2016 2017 2018f 2019f 2014 2015 2016 2017 2018f 201
Slide 40: Cropping
Cropping Planted Area In 2018-19 the planted area of wheat is expected to remain unchanged in Thousand hectares response to low world prices, while the planted area for barley, oats, canola and sorghum is expected to increase, following increased profitability. 0% 2016-17 2017-18f 2018-19f In 20
Slide 41: Horticulture
Horticulture Gross Value of Horticulture Production The gross value of horticulture production is projected to $ billion, 2017-18 increase to $10.9bn in 2018-19, underpinned by favourable domestic demand and export opportunities. 12 +5% The challenge for Australia tree nut production is maintain
Slide 42: Indonesian Divestment
INDONESIAN DIVESTMENT
Slide 43: Indonesian Divestment
Indonesian Divestment Divestment update Elders confirms it will divest its Indonesian feed and processing assets following a comprehensive performance review of the business unit in line with the Company’s strategic Eight Point Plan. The divestment will allow circa $13m of capital to be redeploy
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