Our clients and
their needs are our
central focus ~ all
day, every day.
Elders is an Australian company whose principal
business is rural services.
Australian and New Zealand primary producers are
the central focus of our business.
Elders provides the physical, financial and service
inputs for them to achieve the most successful
production and sales from their efforts.
Our trading operations and joint ventures work to
add value and achieve premium prices for Australian
agricultural produce in world markets.
Elders also operates leading businesses in forestry
and automotive component manufacture.
Front cover:
Elders’ clients (top left clockwise):
Russell Hall, the Butterick family,
Glen Ford and his grandson,
Alec Moore and his wife Jo Moore.
1
Elders’ four Strategic Cornerstones
Elders is building its future on four strategic cornerstones
identified as being essential for the achievement of
the excellence that our shareholders and clients desire:
Generating improved returns for
our clients and shareholders by
being the best at understanding
and serving client needs.
Procuring and moving
the right product at the right
time most efficiently.
High
performance
sales
capability
Supply
chain
excellence
Cost and
service-
effective
technology
Superior
capital
management
Developing and applying
technology to improve
outcomes while meeting cost
and service quality standards.
Managing the Company’s
financial resources to advantage
efficient operation and improve
shareholder value.
2
Our Business
Rural Services
• 338 Australian and 26 New
Zealand points of presence
• Farm inputs – supply of
agricultural chemicals,
fertilisers, animal health and
general rural merchandise
• Production advice
• Farm outputs – marketing and
Forestry
• One of Australia’s largest
hardwood plantation managers
(by estate size)
• Manages over 170,000 hectares
across Western Australia,
Victoria, South Australia and
Queensland
• Provider of MIS plantation
sale of livestock, wool and grain
grown hardwood
Futuris Automotive
• Design, manufacture and
supply of automotive interior
systems (seating, steering,
trims, carpets etc)
• Financial and real estate
services
• Trading of livestock, wool
and grain
• Network related – supply
chain assets to leverage the
network distribution and
accumulation capability
Sales Revenue: $1,712 million
Employees*: 2,485
Sales Revenue: $100 million
Employees*: 112
Sales Revenue: $257 million
Employees*: 738
*Full time equivalent employees
at 30 September 2010.
A further 14 FTE employees are
employed in Corporate roles.
3
2010 The Year in Brief
Key Financial Results
Underlying profit to shareholders
$million
2009
2010
Year ended 30 September
2010
2009
3.0
$ million unless indicated otherwise
Sales Revenue from continuing operations
2,069.1
2,341.2
Underlying EBIT
Net interest
Underlying profit before tax
Minority interests
Tax (expense) credit on underlying profit
Underlying profit to shareholders
Non-recurring items after tax
Statutory (or ‘Reported’) profit
Cash flow from operating activities
Borrowings
Net Debt
Net Assets
Earnings per share (cents) - underlying basic
34.0
30.0
4.0
(5.0)
4.0
3.0
37.0
76.9
(39.9)
1.4
14.1
(24.4)
(220.6)
(408.3)
(217.6)
(432.7)
(110.5)
(169.6)
497.6
435.1
1,006.1
0.7
1,199.3
869.5
701.7
(30.1)
Earnings per share (cents)- statutory basic
(51.1)
(534.8)
Gearing
43%
124%
Reporting Period, Terms & Abbreviations
Reporting period
Abbreviations and terms
This document reports on the Company’s
financial and operating performance for
the 2010 Financial Year, which comprised
the 12 months to 30 September 2010.
This is the first 12-month report since Elders
changed its balance date from 30 June to
30 September. The change, made to align
the Company’s financial reporting with
agricultural industry practice, was effected
through a 15 month transitional year to
30 September 2009.
As required by the Corporations Act, the
financial statements contained in the
Annual Financial Report of this document
use the financial results published in
the 2009 Annual Report (ie for the
15-months to 30 September 2009) as
prior year comparatives.
As an aid to the understanding of results on a
like-for-like basis the results for the previous
corresponding period (ie for the 12 months to
30 September 2009) have been calculated
and are utilised in the discussion and analysis
of performance over the pages 4-23 and
64-65 of this document. It should be noted
that these comparatives are unaudited and
provided for comparative purposes only.
4
This Report uses terms and abbreviations
relevant to the Company and its accounts.
The terms “the Company”, “Elders Limited”,
“Elders” and “the Group” are used in
this report to refer to Elders Limited and
or its subsidiaries.
The terms “2010” or “2010 financial year”
refer to the 12 months ended 30 September
2010 unless otherwise stated. References
to 2011 or subsequent years refer to
the 12 months ended 30 September of
that year.
References to 2009 relate to the 12 months
ended 30 September unless otherwise
stated. References to 2008 or preceding
years refer to the 12 months ended 30 June
of that year.
Underlying profit
This document uses analysis of underlying
profit to enable analysis of performance
between periods exclusive of the impact of
non-recurring or ‘one-off’ items. Underlying
profit measures reported by the Company
have been calculated in accordance with
the FINSIA/AICD principles for the reporting
of underlying profit.
5
0
-5
-10
-15
-20
-25
0
-100
-200
-300
-400
-500
1000
800
600
400
200
0
(24.4)
Statutory profit to shareholders
$million
2009
2010
(217.6)
Net Debt
$million
(432.7)
869.5
435.1
2009
2010
A reconciliation of underlying profit to
statutory profit is disclosed in the Discussion
and Analysis of the Financial Statements
on page 64.
Annual Report
This document has been prepared to provide
shareholders with an overview of Elders
Limited’s performance for the 2010 financial
year and its outlook.
The Annual Report is mailed to shareholders
who elect to receive a copy and is available
free of charge on request (see Shareholder
Information printed in this Report). The
Annual Report can be accessed via the
Company’s website at www.elders.com.au
Notice of Meeting
The 2010 Annual General Meeting of
Elders Limited will be held on Thursday,
16 December 2010, commencing at
10.00 am in Hall B, Adelaide Convention
Centre, North Terrace, Adelaide, South
Australia. A formal Notice of Meeting has
been mailed to shareholders. Additional
copies can be obtained from the Company’s
registered office or downloaded from its
website at www.elders.com.au
Safety
Lost Time Injury Frequency Rate reduced from 7.38 to 5.00
Profit and loss
Underlying profit after tax of $3.0 million vs underlying loss of $(24.4) million
Non-recurring items totalling $(220.6) million after tax:
- Forestry related items totalling $(144.9) million
- Rural Services items totalling $0.8 million
- Automotive item of $0.6 million
- Corporate including tax, legal and project costs of items of $(60.9) million
- Discontinued operations and impairment of non-core assets $(16.2) million
Reported loss after tax of $217.6 million compared with loss of $432.7 million
Balance sheet and finance
Net debt of $435.1 million as at 30 September
Borrowings reduced from $1,199.3 million to $497.6 million
Gearing reduced from 124% to 43%
Net underlying interest reduced 61% to $30 million.
Further debt reduction in prospect post-balance date with completion of Rural Bank
shareholding sale
Corporate
Cost-to-Serve project initiated to reset cost base to sustainable level through
$45 million annualised reduction
Rural Services
Sales revenue from continuing operations down 15% to $1,711.9 million
Underlying EBIT of $23.4 million down 36% from $36.5 million
Reported EBIT of $13.7 million up from loss of $(105.2) million
Go-to-Client project launched; a major investment in sales capability, discipline
and building a client-centric company
Forestry
Sales revenue of $100.3 million down from $111.2 million
2010 MIS Project sales of $1.6 million; MIS market contracted to 10% of 2008
level and 28% of 2009 level
Underlying EBIT of $8.5 million, down from $13.8 million in 2009
Reported EBIT loss of $(158.6)million impacted by non-recurring items arising from
collapse of FEA and impact of fungal infection and drought on certain plantations
Plantation woodchip price maintained
Acquired outstanding interests in Albany Chip Terminal (previous interest 50%)
Automotive
Sales revenue up 14% to $256.9 million
Underlying EBIT of $15.0 million up from underlying EBIT loss of $(3.5) million
Chinese operations grew in scale, volume and earnings generated
New supply contracts won in China, Thailand and North America
5
From the Chairman
Elders has the potential to be a great
Australian company again instead
of simply being an Australian company
with a great history.
John Ballard
This is the first annual report by your Company
since I joined the board and assumed the role
of Chairman.
The previous Chairman, Mr Stephen Gerlach,
announced his impending retirement to
the Company’s 2009 annual general meeting of
shareholders, and following a recruitment and
interview process, my appointment was made
in September 2010. I am delighted to be able
to serve the shareholders of one of Australia’s
most historic and important companies. Elders
is a core service provider to the Australian
and New Zealand farm sector and has a brand
and reputation that is synonymous worldwide
for Australian agricultural enterprise.
But, as Elders’ results for 2010 make clear, it is
a Company which is dealing with challenges
in a number of its markets, and moreover, with
a pressing need to provide shareholders with
an attractive return.
The timing of my appointment, subsequent to
a major downgrade to Elders’ earnings
expectations in June, required me to consider
the stark question of whether the Company can
achieve the required turnaround in operating
and shareholder value performance.
Clearly, I concluded affirmatively. Elders has,
in its brand, presence and sheer involvement
in agriculture throughout the country, the
potential to be a great Australian company again
instead of simply being an Australian company
with a great history.
However promising that may sound, the gap in
the Company’s 2010 results compared with
the prospectus expectations of September 2009
has asked some hard questions about Elders’
performance during the year and the tasks
required to regain momentum and to retain
investor confidence and support.
6
The factors responsible for the variances against
prospectus are addressed in detail by the Chief
Executive in his report following. Without
reiterating this analysis, the Company has been
faced with the challenge of dealing with, and
responding to, markets and trends diametrically
opposed to those forecasts.
Elders has not been alone in experiencing
adverse financial consequences from these
factors, but it has been uniquely affected by the
coincidence of price and activity downturns
in rural services markets with unfavourable
events in the forestry sector and its own forestry
operations. The result was a statutory loss
to shareholders of $(217.6) million after tax,
and if non-recurring items are excluded, an
underlying net profit after tax of $3.0 million.
Results such as these are patently unacceptable
and the board has overseen rapid and extensive
action by management to re-set Elders’ debt
and costs, reallocate capital and rationalise
management and structures to levels appropriate
for current markets.
The actions taken and planned are considered to
have the necessary mix of severity and prudence to
restore appropriate balance between sales and
costs and leave Elders appropriately configured for
the environment prevailing.
While the immediate restoration of profit is
essential, the Company is also addressing the tasks
required for realising the sector-leading sales
returns and share price performance that should
be generated from the Elders’ brand and business.
This objective is being addressed in a structured
manner across the business with initiatives to
address specific needs such as lifting sales
effectiveness and capability, supply chain efficiency
and improving returns from forestry assets.
Although the initiatives have varying timelines, the
board expects advances to accumulate over the
course of 2011 with further gains thereafter.
From the Chairman
Elders has the potential to be a great
Australian company again instead
of simply being an Australian company
with a great history.
Board
As noted above, Mr Stephen Gerlach retired from
the board, and as Chairman of the Company,
after 17 years of service, including seven years as
Chairman. Mr Graham Walters, a non-executive
director and Chairman of the Audit Committee
since 2002, also retired during the year. In addition,
Mr Charles Bright, a non-executive director since
2002, has advised he will not seek re-election at
the forthcoming annual general meeting.
On behalf of shareholders, I would like to
acknowledge the sustained contribution made
by Mr Gerlach, Mr Walters and Mr Bright.
In particular, Mr Gerlach has led Elders through
some of its most challenging periods as it
undertook its recapitalisation and refinancing
amidst the volatility and uncertainty following
the Global Financial Crisis.
The Company is committed to ongoing board
renewal and the preservation of an appropriate
balance of fresh thinking with the retention of
valuable corporate knowledge. It is considered the
current board has an appropriate mix: three of the
six ongoing non-executive directors have served
less than two years; two have served between two
years and four years and one has served six years.
There is a growing, and overdue, recognition
within the Australian corporate community
of the importance of gender diversity within both
company boards and management. Elders’ board
does not have gender diversity and it is intended
that this will be redressed in the coming year.
Your Company is committed to an unequivocal and
full discharge of its corporate governance and
continuous disclosure obligations. Elders’ corporate
governance framework and practices are detailed
commencing on page 25 of this report.
In closing I would like to express the appreciation
of the directors for the efforts of the Company’s
employees during the year. Thank you for your
contribution in what has been a demanding year.
John Ballard
Chairman
Superior
capital
management
Capital management was the subject
of significant focus in 2010 as Elders
worked to further improve its capital
efficiency and optimise its financing
structure.
Attention to capital management
included further deleveraging along
with actively managing inventory
levels to maximise cash efficiency and
mitigate re-pricing risk. Additional
focus also was given to creditors to
realise efficiencies through terms.
Attention to cash was reflected in an
improved and stabilised operating
cash flow in what has been a difficult
trading environment.
Further capital management initiatives
have commenced such as a move
towards securitised facilities to ensure
the financing structure is suitable and
further aligned to the business
requirements moving forward into 2011.
The agreement for the sale of Elders’
shareholding in Rural Bank subsequent
to year-end will release capital
committed to a non-cash generating
investment, enable a significant
reduction in debt and provide the
basis for Elders to address banking
covenants that better reflect a
business that is further advanced in
its turnaround.
7
Chief Executive
Officer’s Report to
Shareholders
Malcolm Jackman
Your Company’s financial performance in 2010
was far short of the expectations held after
the recapitalisation and refinancing completed
at the beginning of the year.
Overview
As I outline below, this is not the result of one
single factor but the outcome of a number of
mostly unanticipated market trends and events,
which meant that Elders simply could not generate
the sales revenue and gross profit to realise
its forecasts.
The year’s results have not been accepted
passively. Elders took up the challenge to realign
its costs, debt, management and internal structures
to the markets now prevailing and anticipated.
Elders’ bank debt levels has been cut to their
lowest level in many years.
The reduction of costs has been accompanied by
the roll-out of the Go-to-Client program to
radically reinvigorate, and increase the rewards
and accountability for, sales performance as well as
ensuring the Company is truly client-centric.
The actions taken have been decisive and taken the
Company through a period of intense change in
the period since June, a process which will
continue as Go-to-Client implementation proceeds.
The outcome is that Elders has been reconfigured
for profitable operation in the low-price, low-margin
farm supplies environment that emerged during
2010, and moreover, has committed to its greatest
ever investment in upgrading its revenue
generation capability.
Discussion of Results
Elders recorded a Statutory (Reported) Loss after
tax of $(217.6) million, a result which included
significant non-recurring items totalling a charge
of $(220.6) million and, excluding these results, an
underlying profit of $3.0 million after tax.
8
These results represent an improvement on
those of the previous year, when Elders recorded
an underlying loss after tax of $(24.4) million and
a Reported loss of $(432.7) million.
However, the 2010 results are well below the
profit after tax of $55.7 million forecast in the
recapitalisation prospectus.
In essence, the variance against prospectus
forecast has two sources:
1) The incurrence of non-recurring items.
The non-recurring items principally arose
from Forestry operations and the provisions
and charges arising from the impact of
fungal infection and drought on the Company’s
plantations and the collapse of Forest
Enterprises Australia. Other non-recurring
items including impairment of a livestock
carrying vessel, legal settlements and other
costs and the results and impairment of
discontinued operations. These non-recurring
items are detailed and discussed in the
Discussion and Analysis of the Financial
Statements which commences on page 64.
2) Earnings generation from Rural Services
and Forestry operations was much lower
than anticipated. Collectively, the underlying
EBIT generated from these operations
was $55.6 million below that forecast in
the prospectus.
In the case of Rural Services, market conditions
did not exhibit the recovery anticipated, with
the result that sales were well below budget
expectations. Prices for key farm supplies lines
such as fertiliser and agricultural chemicals
were expected to improve, but instead declined
High
performance
sales
capability
Elders is working to establish itself as
a high performance sales organisation.
The launch of the ‘Go-to-Client’
program in October 2010 was the
culmination of work done over 2010
to research and design a structured,
whole-of-organisation upgrade to
bring Elders’ sales culture, practices
and capability to that required of
a high performance sales organisation.
The program will change Elders
organisational philosophy and
orientation, and transform it from a
delivered service-focus to a truly
client-centric culture.
Program elements include:
- investment in sales training and
coaching for all 2,000 sales and
sales support staff
- the introduction of SalesPlus+ to
structure sales management and
performance reporting systems;
including measures to instil
client-centricity as the core focus;
- reforms to remuneration to incentivise
and reward sales performers who
are highly value accretive;
- the appointment of Zone Sales
Performance Managers, a new
position created to provide
specialist outcome-focussed sales
management support; and
- the ‘Branchise’ initiative to
incentivise branch management
for value creation through alignment
with shareholder value objectives.
Changes will be evident on the front
line with a revised network structure
based around cost effective
satisfaction of client needs and the
introduction of service points and
products to address client need gaps
not being met by previous structures.
Go-to-Client deployment commenced
in October 2010 and will continue
to roll-out through 2011. It has been
informed by, and built upon, the
intensive analysis and evaluation
undertaken of Elders’ clients and their
needs in the Go-to-Market program
over 2008 and 2009.
9
substantially. Rural real estate markets were
flat, with turnover being lower than anticipated,
livestock sales volumes contracted as strong
rainfall encouraged growers to
rebuild herds and stock weights and the
Indonesian live export market was curtailed.
In New Zealand, rural markets were subdued
as the sector experienced its most severe
drought in history.
The Forestry result reflects the negligible MIS
sales achieved following the withdrawal of
bank support for investors and the downturn
in MIS sales generally. Elders Forestry’s MIS
sales for 2010 of $1.6 million, compares with the
prospectus forecast of $45 million.
The impact of these areas of underperformance
against prospectus were offset slightly by gains
where results were stronger than anticipated
such as automotive operations, which exceeded
prospectus forecasts significantly, recording
underlying EBIT of $15.0 million compared to a
forecast $6.7 million.
Faced with market events and trading results that
were clearly outside expectations, Elders acted
to reappraise its underlying business assumptions
and models.
This was not simply a question of documenting
“what happened” but of distinguishing between
cyclical, seasonal and structural factors,
the implications brought by each and, most
importantly, how management of the Company’s
operations and assets can best serve shareholder
value in the prevailing business climate.
The key conclusions of this analysis were:
– Cyclical and seasonal factors were responsible
for the lower than anticipated sales volumes
and activity levels in real estate, livestock and
rural finance markets and in the New Zealand
rural sector. Western Australia also experienced
abnormally dry conditions and lower sales
as a result.
While this has had a substantial adverse impact
2. The creation of a high performance sales
on Elders’ performance against prospectus, these
market segments are anticipated to recover as
the benefits from the positive seasonal conditions
in eastern Australia in 2010 are realised and New
Zealand recovers from drought.
– The revenue and income available from farm
supplies markets has been reduced considerably
by what appear to be structural changes.
These include persistently low prices and
increased availability, and grower acceptance,
of generic agricultural chemicals.
Elders’ average fertiliser price for 2010 was
23% lower than in the preceding year, while
agricultural chemical sales prices were
24% lower.
At this stage, there is no basis for assuming that
the price outlook, and the increased availability
and grower acceptance of generic product will
change substantively in the near future.
– The MIS market in Australia has shrunk to less
than 10% of its former size and no longer has the
scale, acceptance amongst investors or support
from financiers to be considered a reliable source
of earnings on the scale previously generated.
The retail MIS market is now sub-economic.
– Debt levels needed to be reduced further.
As a result of the recapitalisation, Elders reduced
its gross borrowings by 58% and net borrowing
costs by 61% from the position at 30 September
2009. However these reductions were neither
sufficient nor sustainable when compared with
the lower earnings now being generated by rural
services and forestry markets.
Given these conclusions, Elders has been working
since June 2010 on reorganising and refinancing its
businesses to that which is considered sustainable
and adequately profitable given the market
conditions now prevailing.
This exercise has been conducted around four
key principles:
1. The re-setting of the cost base to allow
acceptable returns in the low priced
and competitive conditions that are expected
to continue.
To this end, Elders initiated its Cost-to-Serve
project to secure an 11% reduction in Elders’
cost base and provide immediate improvement
in profitability in 2011. It is intended that the
cost reductions be achieved on an annualised
basis by 31 December 2010. Cost reductions are
on track for this objective.
Management structures have also been flattened
to align with the cost demands of current
markets and to bring the customer closer to
senior executive and board decision making.
For example, the levels of management between
the CEO and branch manager have been halved
from four to two.
10
organisation that will generate the growth in
revenue required for sustainable increases
in earnings.
To this end, Elders initiated the second stage
of its Business Transformation Project with
the ‘The Go-to-Client’ Program. This multi-
faceted program is a commitment to an ongoing
investment in, and structuring of, Elders’
sales capability, and is outlined in the text box
on page 9. The implementation of the program
is an acknowledgement of the critical role of
sales excellence to Elders’ future and its resolve
that the Company succeed.
3. The concentration of effort and capital around
Elders’ core activities where it is anticipated
that Elders can earn sustainable income within
the foreseeable future.
To this end, Elders completed the
implementation of its ‘Aligned Partnerships’
financial products distribution model with the
sale of its 40% shareholding in Rural Bank.
Under a conditional agreement signed in
October 2010, Elders sold its shareholding in
the bank to its joint venture partner Bendigo
and Adelaide Bank in return for proceeds of
$175 million, an increase in network access fees
and the retention of Elders’ distribution rights
through the Elders network.
The restructuring has released capital
otherwise dedicated to bank ownership and
enabled the business to concentrate its efforts
around its core activity of rural distribution.
The sale agreement is due for completion during
November 2010, subsequent to the signing of
this report.
Sales Revenue by Operations
$million
2500
2000
1500
1000
500
0
2009
2010
$million 12 months to 30 September:
2009
2010
Rural Services
Forestry
Automotive
Investment & other
Total
2005.4
111.1
224.6
–
1711.9
100.3
256.9
–
2341.2
2069.1
Cost and
service
effective
technology
The application of technology on cost
and service-effective terms is an
enabling cornerstone for Elders’ sales
performance, capital management and
supply chain excellence objectives.
In 2010 Elders delivered system
enhancements to support current
operations and improvement programs
(Forestry integration; Supply Chain
optimisation; Financial control
improvements; Go-To-Client sales
performance development) and
developed plans for the delivery of a
new enterprise wide technology
platform: Project Connect.
Project Connect has involved
a whole-of-organisation review of
information needs and required future
business capabilities. From this a
set of system requirements has
been produced and a selection of
appropriate tools made.
Focus in 2011 will be on the execution
of Project Connect.
Other reforms were initiated under the
‘concentrate on core sustainable
business’ strategy.
For example, Real Estate operations in
Australia have been restructured with the
decision to concentrate company ownership
on the core traditional broadacre and rural
property markets and franchise those
operations focussed on residential property.
While rural real estate is clearly a core
offering, a review of our New Zealand real estate
operations indicated that they were unlikely
to generate sustainable returns in the
foreseeable future. Faced with a depressed
rural property sector, the New Zealand real
estate operations were not able to reach critical
mass necessary for viable operation and
accordingly have been closed.
4. The re-setting of debt levels and terms to
that appropriate, given the earnings potential
of the business in current markets.
While improvement in EBIT generation is
anticipated through the aforementioned cost
reduction and sale improvement initiatives, debt
levels were higher than desirable given current
trading and markets. Substantial reduction in
debt levels will be achieved through the
application of proceeds arising from completion
of the Rural Bank sale, with pro forma gearing
at 30 September inclusive of these funds
being 27%.
This management plan has reconfigured Elders
for the conditions that have emerged.
Debt and operating costs have been re-set to levels
appropriate for current markets which, it is noted,
are low price and therefore low margin generating
environments. While growth is anticipated as sales
initiatives gain traction and industry conditions
improve, Elders has acted to ensure it is capable
of generating improved returns should current
conditions persist.
Safety
The Lost Time Injury Frequency Rate (LTIFR),
improved during the year with the Company-wide
LTIFR of 5.0 compared with 7.38 for the
12 months to 30 September 2009. There were,
however, different performance trends with
Forestry operations improving considerably
following the divestment of timber processing
operations, Automotive improving and Rural
Services declining slightly.
11
In keeping with the shift from holding company
structure to an ‘owner-operator’ model the
Company established a corporate safety
management function during the year. As a result,
a corporate safety management and improvement
strategy and corporate safety standards have been
established and adopted. The corporate safety
management strategy incorporates minimum
standards, which will apply across all business
units and jurisdictions where Elders operates.
While the sale of Elders’ insurance operations to
QBE and joint venturing of distribution activities
removed a significant source of EBIT generation
in Rural Services, it was also the cornerstone
component in the Company’s recapitalisation at
the beginning of this year. This in turn enabled
the 61% reduction to interest expense achieved in
2010. I am also pleased to report that the Elders
Insurance joint venture has had an outstanding
first year and performed above expectations.
Underlying profit before tax for 2010 was
$4.0 million which compares to the underlying loss
of $(39.9) million recorded in the 12 months to
30 September 2009. After accounting for tax and
minority interests, Elders recorded an underlying
net profit after tax of $3.0 million, up from the
loss in the previous corresponding period of
$(24.4)million.
As reported above, the financial results reported
incorporated a number of non-recurring
items which resulted in the Statutory Loss of
$(217.6) million.
Human Resources
Elders employed 3,349 full time equivalent
employees at 30 September compared with 3,533
at the beginning of the year. The reduction is due
to lower employment numbers in Rural Services,
Forestry and Corporate with the large majority of
the movement attributable to Rural Services.
Elders is currently developing a Diversity Strategy,
and has appointed a Diversity Co-ordinator, to
advance the achievement of appropriate gender
representation at all levels of the Company.
Currently women account for 14% of Elders’
management, 7% of senior management, 11% of
senior executives and 36% of employees.
Review of Operations
Rural Services
Rural Services markets experienced mixed
seasonal and trading conditions during the year.
Seasonal conditions were, with the exception of
Western Australia and New Zealand, amongst the
best recorded for many years. Good rainfall
replenished water and pasture resources,
providing an immediate stimulus to crop planting
in eastern and southern Australia, and flow-on
benefits for future years.
However, the anticipated benefits of this on
confidence and trading activity had yet to emerge
in 2010 and market conditions were relatively tight.
Livestock, wool and real estate market volumes
contracted due to the impact of previous years’
successive poor seasons. While the volume of
cropping inputs rose, prices declined considerably.
The safety management strategy will be used to
drive continuous improvement of Elders’ safety
management systems and, through this, safety
outcomes over the ensuing two years.
Profit
Elders generated sales revenue of $2,069.1 million
from continuing operations during the year which
compares to $2,341.2 million in the 12 months to
30 September 2009. The movement is attributable
to Rural Services and Forestry which recorded
reductions in sales revenue of $293.5 million and
$10.9 million respectively.
Underlying EBIT was $34.0 million, 8% lower
than the previous corresponding period’s result
of $37.0 million, with this movement also being
attributable to lower contributions from Rural
Service and Forestry operations.
It should be noted that the lower Rural Service
EBIT compared with 2009 is the result of a
restructuring of insurance operations in September
2009 which has enabled Elders to increase its
‘bottom line’ after tax income to shareholders.
Underlying EBIT by Operations
$million
50
40
30
20
10
0
-10
-20
-30
2009
2010
$million 12 months to 30 September:
2009
2010
Rural Services
Forestry
Automotive
Investment & other
Total
36.5
13.8
(3.5)
(9.8)
23.4
8.5
15.0
(12.9)
37.0
34.0
12
Elders Rural Services operations contributed
underlying EBIT of $23.4 million in 2010, and
comparison of this with the previous
corresponding result of $36.5 million requires
recognition of the removal of insurance
distribution income discussed under the heading
‘Profit’ above and the financial impact of changes to
debtor financing arrangements between periods.
The effect of these events was that the 2009 result
included net underlying EBIT of $20.5 million that
was not available to the Rural Services operations
in 2010 (but which has been substantially recouped
at the group level by interest savings).
Taking this structural change into account, it is
apparent that the remaining Rural Services
operations increased its EBIT generation in 2010,
despite a 15% reduction in sales revenue brought
by lower agency and livestock volumes and falling
farm supply prices.
As advised in the 2009 Annual Report, the Rural
Services operations are being subjected to a
comprehensive business transformation project
with the objective of lifting sales and performance
levels for clients and shareholders.
Reform of supply chain and procurement functions
was completed in 2010, with the resultant working
capital and efficiency gains.
Whilst the poor seasons and low confidence
levels in parts of Western Australia and New
Zealand are of concern, the general outlook for the
rural sector is positive and much improved. The
progress made, which will be supplemented by the
gains anticipated from the re-setting of the cost
base and the Go-to-Client program, should see the
business generate improved returns given
reasonable conditions.
Forestry
The Australian plantation forestry sector is
undergoing a severe rationalisation forced by the
withdrawal of bank and investor support, the
insolvency of at least five of the sector’s larger
participants and weaker short term demand for
woodfibre from export markets due to global
economic conditions.
Elders Forestry’s results for the year have clearly
been affected by this climate, as well as events
specific to its operations. Underlying EBIT of
$8.5 million and MIS sales of $1.6 million
were recorded in 2010, which compares with the
previous corresponding period’s results of an
underlying EBIT of $13.8 million and MIS sales
of $23.8 million.
The fall in MIS sales is not simply attributable
to investor sentiment but also to the fact that
bank-backed finance packages with terms
commercial for growers were not available for
Elders Forestry to offer in 2010.
Supply
chain
excellence
Supply chain excellence is a critical
element in Elders’ sales and
shareholder value performance.
The sales benefits of “right product-
right time- right price” are self-evident.
But equally important are the cost and
working capital gains from planning
and buying better, optimising logistics
and inventory.
Elders’ journey towards supply chain
excellence is a little over a year into
what is anticipated to be a three to five
year transformation. Efforts over
2010 were focussed on introducing,
embedding and optimising fundamental
changes to its decision-making,
sourcing, storage and freight.
Distribution centres were stocked with
core ranged product. Electronic
interfaces were installed between Elders
and third party information technology
platforms to facilitate timely and
accurate data transfer, backed by a call
centre to provide single-point support
for the sales network on Supply Chain
related issues. Order management
processes were streamlined.
Gains in procurement were made
as a formal and transparent source-to-
contract process was embedded.
Rationalisation of both the product
range and supplier portfolio has
progressed, contributing to a 15% lower
end of year inventory position. Stock
ranges are being optimised and average
stock turns have been improved by
16%.
Implementation of formal Sales and
Operations Planning (S&OP) has
progressed to plan. Sophisticated
demand forecasting, enabled by
state-of-the-art software has now linked
the key functions of marketing, sales
and finance in an integrated process.
A performance management, KPI-
driven culture is emerging and, with the
basics in place, Elders will use 2011 to
drive ongoing improvement in each
individual element of its supply chain.
13
As the Elders Forestry estate is still maturing,
MIS sales have been the principal source of
earnings and cash flow for the business.
Statutory results incorporate this underlying
profit and non-recurring items totalling a charge
of $(167.1) million, resulting in a statutory EBIT
loss of $(158.6)million. The non-recurring items,
which are detailed in the Discussion and Analysis
of 2010 Financial Results, include charges and
provisions to recognise the impact of a fungal
infection on central Queensland plantations and
drought conditions on certain plantings in
Esperance, Western Australia.
The value of the Company’s shareholding in Forest
Enterprises Australia has been written-off following
the entry of that company into administration.
Directors commissioned an independent review
of forestry land carrying values during the year.
While the Company reviews all freehold investment
property values over a rolling three-year schedule,
Directors elected to accelerate this process in
view of the volume of forestry land being taken to
market, and pending, from liquidators of those
forestry companies that became insolvent.
The independent desktop review affirmed the
carrying value of all investment properties held
excepting the Central Queensland properties
given the decision to cease operations and exit
the region.
At an operational level, Elders Forestry has
continued to develop in scale and significance
as the leading supplier of Forestry Stewardship
Council certified woodchips. Sales volumes
rose from 557,000 tonnes to 813,000 tonnes,
against a backdrop of reduced industry demand.
Elders Forestry also moved to 100% ownership
of the Albany Woodchip Terminal (previous
interest 50%); a key infrastructure point for the
extensive plantations in the Albany region of
Western Australia.
Woodchip sales and cash flows are expected to
grow in coming years as plantations mature and
area harvested expands. However, it is apparent
from 2010, that the retail MIS market is effectively
non-existent without bank or investor support.
Elders Forestry has restructured its operations
to reduce costs and optimise cash flow in the
period while harvest and sales volume build.
Fundraising and corporate development strategy
will focus on finding and attracting alternative
funding sources and potential partners with
investment mandates that match the long term
profiles inherent in forestry.
14
Automotive
Futuris Automotive generated underlying EBIT
of $15.0 million from sales of $256.9 million in 2010
which compares to the underlying EBIT Loss of
$(3.5) million from sales of $224.6 million in the
previous corresponding period.
New contracts secured have broadened the
business base for Chinese and Australian
operations and provided the basis for supply of
product into the Thailand and North American
automotive sectors.
Futuris is developing in line with strategy as a
competitive and profitable niche supplier to the
Asian Pacific and North American automotive
sectors. Further growth is in prospect from
existing and potential contracts and Elders will
continue to support development of the business
for shareholder value.
Discussion of sales, earnings and operational
performance for individual operations is contained
in the Discussion and Analysis of Operations
commencing page 16.
Financial position
Elders is in a strong financial position.
At year’s-end, net debt and gearing were
$435.1 million and 43% respectively compared
with $869.5 million and 124% at 30 September
2009. Further and substantive reductions
are anticipated with the completion of the Rural
Bank shareholding sale.
While the major reductions since 30 September
2009 have been achieved through equity issues
and asset sales, Elders has also maintained
a disciplined, conservative and proactive capital
management regime that has enabled it to
weather the balance sheet impact brought by
market conditions.
Borrowings
$million
1200
1000
800
600
400
200
0
2009
2010
$million 12 months to 30 September:
Bank debt
Other debt not subject
2009
2010
1,185.4
313.7
to covenants
13.9
183.9
Conclusion, strategy and
outlook
Strategic framework for
excellence
The market’s and Elders’ expectations for
improved trading conditions were clearly not
realised in 2010.
Volatility, low prices and market collapses,
such as occurred in forestry, have severely
tested, and in some cases impaired, business
plans and assumptions based on the recovery
scenario expected.
While we cannot control markets, we can manage
our Company.
Elders has acted decisively and vigorously to
restructure its business, finances and implement
major overhauls and investment of its sales
practices and focus. Forestry remains a work in
progress as industry rationalisation proceeds
towards stabilisation, new industry entrants
commit and funding mechanisms are established.
The prediction of outcomes for 2011 is a highly
qualified and uncertain exercise. However,
I can confidently state that Elders has made the
changes that can reasonably be expected to
bring improved performance. Elders is a company
with much lower cost, much lower debt and a
much greater focus on its sales than for
many years.
Of course, this in itself is merely a start and
ongoing improvement is required if the Company
is to consistently achieve the excellence that its
shareholders, clients and employees would desire.
This process is being conducted within the
framework of four strategic pillars that have
been featured in this report: superior capital
management, high performance sales capability,
supply chain excellence and cost and service
effective technology.
Work being conducted is at various stages;
the high performance sales and application
of technology pillars are being advanced
through the preparatory and development stages
whilst capital management and supply chain
excellence were the subject of execution and
implementation in 2010. The year 2011 will see
the implementation of the Go-to-Client sales
program, the most significant restructuring of,
and investment in, Elders’ day-to-day-sales
activity ever. The program, its content and intent
is outlined in the text box on page 9.
Like the preceding year, 2010 was a very
demanding year for the Company and all
associated with it. The support of shareholders and
clients, and the efforts of our team of employees
have been vital to the progress made. Thank you
all for your contribution. We look forward to
reporting much improved performance in 2011.
Malcolm Jackman
Chief Executive Officer
15
Discussion and Analysis of Operations
Rural Services
Description of Operations
Network operations include the following product
and service offerings:
• Farm supplies: Elders is one of Australia’s leading
suppliers of rural farm inputs, including seeds,
fertilisers, agricultural chemicals, animal health
products and general rural merchandise, backed
by professional advice on agronomy, genetics and
animal health to primary producers.
• Livestock: Elders provides a range of marketing
activities from agency sales at the farm gate
through to feedlot and export options backed by
animal health advice, production management
solutions and breeding services.
• Wool: Elders is the largest seller of Australian
greasy wool and has an extensive range of
products, services, facilities and alliances to help
growers maximise returns from their wool. These
include wool handling, buying and selling greasy
wool, marketing and selling options and risk
management solutions.
• Grain: Elders exclusively accumulates grain for
Elders Toepfer Grain (“ETG”), a joint venture
between Elders and Toepfer International,
offering growers a range of cash-based grain
marketing options. The joint venture combines
Elders’ strength in grain accumulation with
Toepfer’s expertise in risk management and
global trading.
• Real Estate: Elders primarily operates in the
broadacre, rural residential and lifestyle property
markets. Broadacre and lifestyle property
services are primarily conducted through the
Elders network and supporting real estate
offices. Residential and metropolitan business is
overwhelmingly conducted through franchise
operations.
• Insurance: The Elders Insurance joint venture
(outlined under ‘Network Related’ opposite)
utilises the Elders network as a part of its
distribution of a wide range of insurance cover to
rural and regional Australia.
• Banking: Elders distributes banking products
through the network under a distribution
agreement with Rural Bank.
16
Elders’ network operations are supported by
Trading and Network Related supply chain
interests that leverage or support its relationships
with the Australian and New Zealand farm sectors.
These operations include:
Trading
Live export: Conducted through North Australian
Cattle Company and Universal Live Exports, which
facilitate the trade of feeder and breeding cattle
respectively to international markets, including
Indonesia, Mexico, China and Russia.
Wool trading: Elders provides an indent buying
function and exports greasy wool from Australia to
all major wool importing countries. Elders exports
wool from New Zealand to China and North Asia
and Australasian carpet producers.
Feedlots: Elders operates cattle feedlots in Australia
at Charlton, Victoria and Killara, New South Wales
and in Indonesia (PT Elders Indonesia).
China operations: Elders Fine Foods is involved in
the importation and distribution of Australian
products in China.
Network Related
Rural Bank: Elders holds a 40% interest in Rural
Bank (formerly known as Elders Rural Bank), a
joint venture with Bendigo and Adelaide Bank.
Rural Bank is an APRA regulated authorised
deposit taking institution that specialises in rural
lending and also provides a range of depository
products tailored to meet the needs of rural and
metropolitan customers.
The shareholding is subject to the sale agreement
announced subsequent to year end. Under the
agreement, Elders will sell its shareholding in
Rural Bank to Bendigo and Adelaide Bank, whilst
retaining existing distribution rights.
Elders Insurance: A 75:25 joint venture between
QBE and Elders which distributes insurance
products in rural and regional Australia under the
Elders brand and through the Elders network
under a 20-year agreement.
Rural Services Results
$ million 12 months to 30 September:
2010
2009
Sales – continuing ops
1,711.9
2,005.4
Sales - total
1,797.2
2,404.1
Depreciation & amortisation
(10.2)
(11.4)
Gross Margin:
Network: Australia
New Zealand
Trading
Network Related
Costs:
Australia network
New Zealand
Trading
Network related
Support centres & other
Underlying EBIT
Non-recurring items
Reported EBIT
Operating Cash flow
338.9
250.8
20.7
32.5
34.9
364.5
277.9
22.5
36.2
27.9
(315.5)
(193.4)
(328.0)
(212.1)
(26.7)
(18.5)
(3.0)
(73.9)
23.4
(9.7)
13.7
69.1
(25.8)
(16.7)
(2.8)
(70.6)
36.5
(141.7)
(105.2)
(97.7)
Elders Financial Planning: a 51:49 joint venture
between Millennium 3 (a subsidiary of ANZ) and
Elders that provides financial planning solutions
through advisors.
Australian Wool Handlers (“AWH”): Elders holds a
50% interest in AWH, Australia’s largest wool
logistics company, which handles approximately
half of the national clip.
Elders Toepfer Grain: ETG is a 50:50 joint
venture between Elders and Toepfer International.
ETG leverages the accumulation capability of
the Rural Services network and the international
trading and risk management capabilities of
Toepfer International.
Results
- lower sales generation from Australian
network operations;
- reduced contribution from Trading operations
essentially due to disruption to the Indonesian
live export trade brought by import restrictions;
- improved cost performance, with total costs
being reduced by $12.5 million; and
- slightly higher earnings from Network
Related operations.
Australian Network
Sales revenue generated by the Australian network
of $1,125.6 million for the year was 19% lower
than the previous year’s sales of $1,393.2 million.
Gross margin from Australian network operations
was $250.8 million, 10% lower than in 2009.
Statutory financial results for Rural Services
operations for 2010 were affected by a number of
non-recurring items which totalled a net charge
of $(9.7) million before tax.
These items have been detailed in the Discussion
and Analysis of the Statement of Profit and Loss
on page 64.
Exclusive of these items, Elders recorded
underlying EBIT of $23.4 million from Rural
Services operations compared with $36.5 million
in the twelve months to 30 September 2009.
The key features of 2010 in comparison with the
previous year include:
- the restructuring of insurance operations, the
impact of which had a net unfavourable impact
of $20.9 million compared with the previous year;
The lower revenue, margins and earnings from
Australian network operations are attributable to
lower revenue from the sale of farm supplies
and real estate activities. Revenue from all other
product lines was comparable or slightly higher
than the previous year.
Features of the sales result by service area
included:
- Farm supply sales revenue of $882.3 million
was down from $1,154.6 million in 2009.
The movement is largely due to lower prices for
key agricultural chemicals and fertiliser lines
and lower fertiliser sales. Agricultural chemical
volumes recovered strongly, with volume sold
increasing by 12% over 2009. However, total
revenue from agricultural chemical sales fell by
15% due to lower prices.
17
- Livestock agency revenue of $106.0 million was
3% higher than the previous year’s sales of
$102.8 million. Strong rises in sheep prices more
than offset the impact of lower sales volumes of
sheep and cattle than in the previous year.
Elders sold 9.30 million sheep and 1.96 million
cattle in 2010 compared with 11.76 million sheep
and 2.11 million cattle in the previous year.
Cattle sales realised an average price of $644.90
in 2010 ($633.30 in 2009) while the average
sheep price was $95.40 ($67.40 in 2009).
The lower volumes are largely attributable to
the effects of previous years’ drought on flock
and herd numbers. The improvement in seasonal
conditions during the year, together with
the stronger prices is expected to encourage
improvement in volumes in future years.
- Wool agency revenue of $51.8 million was 9%
higher than the previous corresponding period
due to higher prices. The average price of wool
sold was $972.58 per bale compared with $825.60
per bale in the 12 months to 30 September 2009.
Bales sold fell from 474,916 to 450,707, with the
reduction being attributable to the smaller wool
clip yielded by a smaller national herd.
- Real estate sales revenue declined as turnover
levels in both the broadacre and residential
property sectors declined. Elders sold broadacre
property valued at $818.8 million ($944.6 million
in 2009) and residential property of
$786.3 million ($826.4 million in 2009).
- Financial Services distribution revenue of
$24.9 million was 15% lower due to lower revenue
resulting from the new insurance distribution
arrangement with QBE (where income is
principally sourced through equity share of the
profit of a distribution joint venture) and
reduced bank distribution fees.
Australian network sales revenue
$million
1500
1200
900
600
300
0
2009
2010
$ million, 12 months to 30 September:
2009
2010
Farm supplies
Livestock
Wool
Real Estate
Financial services
Other
1,154.6
102.8
47.6
61.0
29.3
(2.1)
882.3
106.1
51.8
56.8
24.9
3.7
Total
1,393.2
1,125.6
18
- Other Income of $3.7 million includes revenue
earned in the accumulation of grain.
New Zealand
Activity levels in the New Zealand rural sector
were subdued as a result of severe drought
conditions.
New Zealand operations recorded sales revenue
of $135.8 million ($143.7 million in 12 months
to September 2009); comprising farm supplies
sales $43.0 million, wool sales $72.7 million,
livestock $18.5 million, and other of $1.6 million.
The decrease in revenue from New Zealand is due
to lower farm supplies sales, reflecting poor
seasonal conditions.
During the year the decision was made to cease
real estate operations in New Zealand, which have
not been able to achieve sustainable scale in the
depressed rural real estate market.
Trading
Trading operations include Elders’ livestock and
wool trading, feedlot operations, and the Elders
Toepfer Grain joint venture.
Trading operations generated sales of
$434.2 million and a contribution of $14.0 million
in 2010, which compares respectively with sales
of $458.5 million and contribution of $19.5 million
in the previous year.
The movement in financial results can be
attributed to reduced live export earnings and
costs arising from the closure of the Indonesian
market. Revenue from feedlot operation increased.
Network Related
Network related operations comprise Elders’
financial services joint ventures, the Australian
Wool Handlers (AWH) logistics operation, and
Elders Fine Food in China which imports and
distributes Australian agricultural produce.
The Elders Toepfer Grain joint venture contributed
equity accounted earnings of $1.0 million, down
from $1.5 million due to more volatile and less
profitable trading conditions in grain markets.
These operations contributed equity
accounted income of $33.1 million, compared
with $26.3 million for the twelve months to
30 September 2009.
Contributions from the individual operations are
as follows:
$ million
Rural Bank
Elders Insurance
Australian Wool Handlers
Elders Toepfer Grain
Other
2009
22.3
-
2.2
1.5
0.3
2010
22.3
5.6
3.2
1.0
1.0
Business Transformation Project
Feedlots
In 2010 Elders undertook the second year of the
Business Transformation Project, a comprehensive
program designed to deliver a substantial
improvement in the financial performance of rural
services operations.
The Project, which is expected to take four years
to complete, involves the restructuring of
operations and processes and the introduction
of a revitalised sales culture which aims to
establish Elders as the “Productivity Partner of
Choice” within the Australian and New Zealand
rural sectors.
The Project entered its second stage with the
introduction of reforms in supply chain and
procurement, the implementation of standard
management processes and the “Go-to-Client”
initiatives aimed at establishing Elders as a high
performance sales organisation. The Go-to-Client
initiatives were announced during the final
quarter and included the restructuring of sales
management, reporting and incentive systems.
Sustainability
Rural Services operations employed a total of
2,485 FTE employees as at 30 September,
compared with 2,647 FTE at the beginning of the
year. The 6% reduction reflects attrition resulting
from the replacement ‘freeze’ for non-critical
positions vacant and the Cost-to-Serve program
announcement in June.
Rural Services operations recorded a lost time
injury frequency rate of 5.60, slightly worse than
the corresponding figure of 5.38 in the twelve
months to 30 September 2009.
Management of safety when dealing with livestock
was the focus of increased attention in 2010, with
the introduction of additional training to introduce
and establish behaviours for safe working in stock
yards. The training has been accompanied by the
introduction of a policy of zero tolerance of unsafe
or hazardous behaviours for employees working
with livestock.
Elders’ feedlots at Charlton (Victoria) and Killara
(New South Wales) are also subject to local and
state government environmental and animal
welfare legislation. Operations at both feedlots are
subject to quality assurance under the National
Feedlot Accreditation Scheme(NFAS). The NFAS
is independently administered and audited
annually by Aus-Meat. In addition, the operations
are conducted under the provisions of the
Australian Code of Practice for the Welfare of
Cattle in Beef Feedlots (1996) and the Australian
Model Code of Practice for the Welfare of
Animals - Cattle (1992).
No breaches of any relevant Act, code of practice
or accreditation scheme under which Killara or
Charlton feedlots are approved and operate were
reported during the year ended 30 September 2010
or to the date of this Report.
Farm supplies
The majority of Elders’ farm supplies operations
are accredited under the Agsafe co-regulatory
accreditation program. The program provides
accreditation for premises and training and
accreditation for individuals in the safe transport,
handling and storage of agricultural and veterinary
chemicals. Elders’ farm supplies operations are
subject to state environmental regulations
governing the storage, handling and transportation
of dangerous goods such as agricultural and
veterinary chemicals and fertilisers.
Dangerous goods and chemicals
The regulatory environment which exists for the
transporting, handling, storage, sale and use of
dangerous goods and chemicals is complex. Whilst
Agsafe provides assistance through the provision
of accredited training and safety programs each
State and Territory has legislative responsibility
for the regulatory oversight of the industry.
No material incidents were reported in relation to
the handling and storage of dangerous goods
during the year.
Regulation
Community
Elders is committed to meeting its regulatory
obligations not only with external laws, regulations,
codes and standards, but also adherence to
internal policies which are constantly under review.
Saleyards
State, Territory and local government regulations
apply to saleyards owned and/or operated by
Elders, in particular, in relation to effluent
run-off, dust and noise. These regulations vary by
jurisdiction and generally only apply to saleyards
above a prescribed size.
No breaches of these environmental regulations
were reported during the year ended 30 September
2010 or to the date of this Report.
As a rural service organisation, Elders is
committed to supporting the communities which
it serves. Elders provides employment and a range
of services to its network of branches throughout
Australia. Elders branches support local initiatives
and charities and Elders staff members participate
in community service organisations.
At a corporate level, Elders’ initiatives supported
a number of charities and a number of
non-government organisations and initiatives
of relevance to its client base. Elders’ major
commitments are its partnership with Australian
Land Management Group to promote environmental
sustainability on Australian farms and the McGrath
Foundation. Elders’ staff regularly raise funds for
the Foundation and raised over $102,000 to support
the costs of rural and regional breast care nurses.
19
Discussion and Analysis of Operations
Forestry
Elders Forestry is a forestry company engaged in
plantation establishment and management and the
harvest, handling and export sale of woodfibre.
Description of Operations
Elders Forestry’s operations have both Forestry
Stewardship Council and Australian Forest
Standard certification and, as of 30 September
2010, comprised an area under management
of 170,000 hectares. Approximately 28% of the
estate is owned with the balance leased.
Plantation operations consist of hardwood forest,
managed on behalf of investors, funded through
subscription to managed investment schemes
(MIS) or direct investment. MIS sales presently
account for the large majority of plantation
funding raised.
The plantations are predominantly eucalypt,
planted for woodchip, with smaller plantings in
sandalwood which is grown for oil, and teak and
red mahogany which produces high value timber.
They are located in south-west Western Australia,
Kununurra, the Green Triangle region of south-
west Victoria and south-east South Australia and
northern Queensland.
While the solidwood plantations have yet to reach
maturity, Eucalyptus globulus (Tasmanian
Bluegum) in the Albany and Green Triangle
regions are being harvested. Woodchips produced
from these locations are exported and sold to
customers in Japan.
Elders Forestry owns and operates the Albany
Chip Terminal, a woodchip handling and loading
facility with a capacity of in excess of one million
tonnes per annum. Elders Forestry moved
from 50% to 100% ownership of the facility in
August 2010. Financial results from the Albany
Chip Terminal have been fully consolidated
from the date of acquisition and equity accounted
prior to that date.
Elders Forestry also holds a 50% interest in the
SmartFibre joint venture, which handles and
exports woodchip from its port and loading
facilities in Bell Bay, Tasmania. This asset was
originally included in the timber processing assets
which were the subject of a sale agreement
reported in the 2009 Annual Report. However the
SmartFibre interest was retained after the
Australian Consumer and Competition Commission
indicated that it would oppose that element of the
proposed transaction. SmartFibre has been
classified as an asset held for sale.
The sale of all other timber processing assets was
completed in December 2009.
20
Elders Forestry recognises revenue from a number
of sources:
• Establishment income, which brings to account
revenue generated by MIS sales to establish
plantations. MIS sales revenue is recognised over
a three year period starting from the year the
sale is incurred.
• Other forestry related revenue including
management fees, land rental and harvest and
port fees which is included in sales revenue.
• Non-cash income arising from revaluation of
investment properties held and SGARA income
relating to proceeds anticipated from future
harvests of company owned trees.
• Other income which includes agistment, land
sub-leases, building leases and port fee charges.
Results
Elders Forestry recorded a statutory EBIT loss
of $(158.6) million and an underlying EBIT profit
of $8.5 million in 2010. These results compare
to the statutory EBIT loss of $(98.3) million and
underlying EBIT profit of $13.8 million for the
12 months to September 2009.
The statutory EBIT loss includes non-recurring
items totalling a charge of $(167.1) million.
The non-recurring items comprise:
- Charges and provisions of $(72.3) million
attributable to Central Queensland operations
which Elders Forestry was advised during the
year would not produce an economic harvest due
to a fungal infection. Operations in the affected
region have been ceased. The affected plantations
will be terminated, the land remediated and
freehold land sold. The charges and provisions
arising from this include revisions to accrued
income estimates, the writedown of land carrying
values and other provisions including provisions
for onerous leases provisions and replanting.
- The writing down of accrued income estimates
from certain plantations in the Esperance region
by $(16.4) million following receipt of production
estimate reports during the year projecting
yields approximately 50% of original estimates
due to the impact of below average rainfall.
- An onerous lease provision of $(9.5) million on
land lease obligations on properties held outside
of Central Queensland.
- The write-off of the Company’s $32.4 million
investment in Forest Enterprises Australia
(FEA) following the appointment of an
Administrator to that company.
Forestry Financial Results
$ million 12 months to 30 September
Establishment income
Deferred fees
Harvest and port fees
External sales revenue
Other income
Total revenue
Underlying EBITDA
Depreciation & Amortisation
Underlying EBIT
Non-recurring items
Reported EBIT
2010
13.0
50.5
36.8
100.3
13.4
113.7
9.4
(0.9)
8.5
2009
36.7
54.2
20.3
111.2
16.7
127.9
15.4
(1.6)
13.8
(167.1)
(112.1)
(158.6)
(98.3)
- A charge of $(43.8) million to write-off goodwill
attached to the forestry business.
- Other including discount on acquisition of the
Albany Chip Terminal totalling a net benefit of
$7.3 million.
Total revenue of $113.7 million was generated from
continuing operations in 2010, compared with
$127.9 million in the 12 months to 30 September
2009. The movement in revenue resulted
predominantly from the impact of lower MIS sales
in 2009 and 2010 on establishment income and
management fees, offset in part by increased
revenue from harvest and port operations.
Harvest and port fee income of $36.8 million
was 81% higher than last year. Growth in harvest
volumes and greater throughput at the Albany
Chip Terminal were the principal cause of
the increase.
Elders Forestry harvested and sold 813,000 green
metric tonnes of woodfibre in 2010, 46% more
than the 557,000 tonnes in the previous
corresponding period. Approximately 69% of this
figure was from Elders Forestry plantations with
the balance representing handling and sale of
third-party woodfibre.
Income from value appreciation in Investment
Property of $8.8 million was lower than the
previous corresponding period reflecting
production forecasts and agricultural trends.
The 2010 MIS sales will fund the establishment of
approximately 140 hectares of hardwood forest.
Sustainability
Environment
Elders Forestry, as a matter of policy, seeks to
prevent, or otherwise minimise, mitigate or
remediate any adverse impacts of its operations on
the environment. No significant breaches of
relevant environmental legislation or regulations
occurred during the period covered by this report.
Elders Forestry holds ISO14001:1996 accreditation
in respect of its environmental management
system for its Forestry division.
The Company was successfully audited under its
Forest Stewardship Council (FSC) certification
during the year. Approximately 80% of the
Company’s plantations under management are
now FSC certified.
The company was further able to obtain the
Australian Forest Certification Scheme (AFCS)
in March 2010 which includes the Australian
Forestry Standard (AFS) AS 4708, as the
leading management standard which certifies
extensive areas of native forests and plantations
across Australia.
Elders Forestry continued its corporate partnership
with leading environmental organisation, WWF-
Australia. The partnership seeks to encourage
sustainable forestry management practices across
the forestry sector whilst also jointly pursuing the
uptake of credible forest certification by forest
owners across Australia, including the public
authorities who license Elders Forestry’s harvesting
from state-owned native regrowth forests.
Elders Forestry contributes to the communities
where it operates through support for
local sporting, cultural and charity events
and organisations.
Human resources and safety management
Elders Forestry had 112 FTE employees as at
30 September compared with 129 at the beginning
of the year.
Elders Forestry achieved a substantial
improvement in safety performance compared with
the previous year, recording a lost time injury
frequency rate of nil for 2010 compared with 20.98
in the previous year. The divestment of the timber
processing operations is the most significant factor
in this reduction supported by improved safety
management in Forestry operations.
21
Discussion and Analysis of Operations
Automotive
Futuris Automotive’s operations encompass the
design, manufacturing and supply of automotive
seating and interior solutions in Australia, the United
States of America and Thailand and through joint
venture operations in China and South Africa.
Description of operations
Futuris Automotive (Futuris) and its joint ventures
supply products and services for automotive
seating, interiors, controls, aftermarket,
manufacturing solutions as well as infrastructure
for transport and communications. Current
customers include GM Holden, Ford Australia,
Toyota, Chery Automobile, JAC Motors and
Mercedes Benz. New customers for whom Futuris
has secured future supply contracts include
GM (Thailand), Ford (Thailand), Tesla Motors
and BMW (South Africa).
Australian operations include assembly at
Edinburgh Parks South Australia (supplying the
adjacent GM Holden facility), and Campbellfield
Victoria (supplying the adjacent Ford
Broadmeadows facility) and a design and technical
centre at Port Melbourne Victoria. Interior system
operations at these locations include Plexicor,
which produces soft and acoustic trim products
for supply to Toyota, Ford and Holden.
Elders currently holds a 50% shareholding in
Plexicor, with the balance of ownership the subject
of a put option exercisable from 23 November.
Earnings from Plexicor have been equity accounted
for 2010 but as Elders has been deemed to
have assumed effective control of the business at
30 September, the assets and liabilities of Plexicor
have been consolidated as at balance date.
During the year Futuris divested its 35% interest
in Air International Thermal Systems. A loss of
$12.6 million against book value was recorded in
the sale, which has been accounted for in the
Investment and Other segment.
Sales Revenue
$million
300
250
200
150
100
50
0
2009
2010
$ million, 12 months to 30 September:
2009
2010
Sales Revenue
224.6
256.9
Operating Cash Flow
$million
40
35
30
25
20
15
10
5
0
2009
2010
22
$ million, 12 months to 30 September:
2009
2010
Operating Cash Flow
31.8
35.6
Automotive Financial Results
$ million 12 months to 30 September
2010
2009
Continuing Sales revenue
256.9
224.6
Underlying EBITDA
29.8
11.7
Depreciation & Amortisation
(14.8)
(15.2)
Underlying EBIT:
Futuris Automotive
Associates (equity acc)
Underlying EBIT
Non-recurring items
Reported EBIT
Operating cash flow
Capital expenditure
15.4
(0.4)
15.0
0.8
15.9
35.6
9.2
0.2
(3.7)
(3.5)
(59.6)
(63.1)
31.8
4.2
Results
Sustainability
Financial results in 2010 from Futuris improved
significantly, reflecting the stabilisation and
improvement of the motor vehicle industry from
the shocks brought by the Global Financial Crisis
the previous year.
Futuris generated underlying EBIT of $15.0 million
in 2010 which compares to the underlying loss
of $(3.5) million for the twelve months to
30 September 2009. After recognition of non-
recurring items totalling $0.8 million the business
recorded a statutory EBIT of $15.9 million which
compares to the previous corresponding period’s
statutory EBIT loss of $(63.1) million.
The 2010 underlying profit was generated from
sales revenue of $256.9 million compared with
$224.6 million in the 12 months to 30 September
2009. The increase in sales revenue is
attributable to increased volumes supplied
to Australian customers.
Sales revenue figures do not incorporate results
from the equity accounted operations in China.
Activity levels increased in China as the volumes
supplied by Futuris Interiors (Anhui) under
its supply agreement with Chery Automobile
increased and new contracts with JAC Motors
commenced. The Anhui joint venture contributed
equity accounted income of $0.4 million to the
2010 result, up from the loss of $(1.5) million
in the previous corresponding period due to
increased sales.
Futuris established operating facilities during the
year in Thailand and the United States of America
to service supply contracts won in those countries.
Futuris conducts its operations within the
parameters of management plans to ensure its
day-to-day activities are completed safely and in an
environmentally and socially responsible manner.
Environment
Futuris’ key manufacturing plants in Australia are
all accredited to ISO 14001 certification.
The organisation’s operating facilities are subject
to relevant environmental protection legislation
and regulation in the areas in which they operate.
There were no reportable incidents or breaches of
applicable environmental legislation arising from
Futuris’ operations during the year.
Safety
Safety is managed through a series of safety
committees at each operation which report to
senior management on performance. Futuris
recorded a lost time injury frequency rate of 2.67
per million hours worked during the year to
September compared with the preceding year’s
rate of 6.35 per million hours worked.
Human resources
Futuris Automotive employed a total of 738
full time equivalent people in Australia at
30 September compared with 737 at the same time
in the previous year. In addition 345 people are
employed by Futuris Automotive and its offshore
joint ventures (297 as at 30 September 2009).
23
Board of Directors
Mr John C Ballard, MBA, FAICD Chairman Age 64 - Appointed a non-executive director of the Board on
20 September 2010. He is also Chairman of the Elders Nomination and Prudential Committee and a member of
the Elders Remuneration Committee. He has extensive experience across a wide range of industries as both a
senior executive and a Non-executive Director. He was previously Managing Director and Chief Executive Offi cer
of Southcorp Limited, Managing Director Asia Pacifi c, United Biscuits Limited and Managing Director Snack
Foods, Coca-Cola Amatil Limited, a Director of Woolworths Limited and Email Limited, Chairman of Wattyl
Limited, a Director of CSR Limited and subsequently Rinker Limited and a Trustee of the Sydney Opera House
Trust. He is currently a Director of Fonterra Co-operative Group Limited, a Director of Magellan Flagship Fund
Limited, a Director of International Ferro Metals Limited, Chairman of the Advisory Board at Pacifi c Equity
Partners and a Director of the Sydney Neuro Oncology Group. Mr Ballard is a fellow of the Australian Institute of
Company Directors and holds an MBA from Columbia University, New York, with a dual major in Marketing and
International Business. He graduated Beta Gamma Sigma. Mr Ballard is a resident of New South Wales.
Mr James H (Hutch) Ranck, BS Econ Age 62 - Non-executive member of the Board since June 2008. He is also
Chairman of the Elders Occupational Health and Safety Committee and a member of the Elders Nomination and
Prudential and Remuneration Committees. He retired as Managing Director of DuPont Australia & New Zealand
and Group Managing Director for DuPont operations in ASEAN on May 31, 2010. Mr Ranck has had a long and
distinguished career with Du Pont where he has held senior management positions in Australia and overseas in
fi nance, chemicals, pharmaceuticals and agricultural products. He is currently a director of the Australian
Bush Heritage Foundation. Mr Ranck is a resident of New South Wales.
Mr Raymond G Grigg, FSAE-I, FAICD Age 69 - Non-executive director of the Board since February 2004. He is also
a non-executive director of Futuris Automotive Group of companies, and a member of the Elders Audit and
Compliance and Occupational Health and Safety Committees. Mr Grigg has extensive experience and leadership in
senior management within the automotive industry, having joined the Board following a 47 year career with General
Motors Corporation where Mr Grigg held a number of senior positions both in Australia and overseas. At retirement
Mr Grigg was President and Representative Director, General Motors Asia Pacifi c (Japan) as well as Chairman,
CEO and Representative Director of GM Japan. Previous positions held include General Manager-Operations at GM
Holden in Australia and Executive Director, GM International CKD Operations in Germany. Mr Grigg is also Vice-
President of the Royal Automobile Association of SA Inc. and the Australian Automobile Association and a non-
executive director of Adtrans Group Limited and Bedford Industries Inc. Mr Grigg is a resident of South Australia.
Mr Ian G MacDonald, SF, Fin Age 56 - Non-executive director of the Board since November 2006. He is a
member of the Audit and Compliance Committee, and Chair of the Remuneration Committee. He is a director
of Rural Bank Ltd, Elders Forestry Management Ltd and Elders Trustees Ltd. He was a director of Elders
Financial Services Group Ltd, Elders Insurance Ltd and Elders Insurance Agencies Pty Ltd and is a member of
the Australian Institute of Company Directors and a Senior Fellow of the Financial Services Institute of
Australasia. Mr MacDonald has had an extensive career in banking, having served National Australia Bank Ltd
for 34 years in a number of senior management roles, including Chief Operating Officer, Yorkshire Bank,
Executive General Manager, Financial Services Australia, and Group Chief Information Offi cer. Mr MacDonald
is a director of Arab Bank Australia Ltd and CPT Global Ltd. Mr MacDonald is a resident of Victoria.
Mr Malcolm G Jackman, BSc Bcom Age 58 - Executive Director of the Board since October 2008. He is the Chief
Executive and Managing Director of the Elders Group. Prior to joining the Company Mr Jackman was Chief
Executive Offi cer and Managing Director of Coates Hire Ltd, an ASX 200 listed company, from 2003 until its
sale in January 2008. Prior to Coates Mr Jackman was Chief Executive Offi cer of Manpower Australia/New
Zealand from 1996 until 2003. Mr Jackman was also a non-executive director of Rubicor Group Ltd from 2005
until 2008. Mr Jackman is a resident of South Australia.
Mr Rob H Wylie, FCA Age 60 - Non-executive director of the Board since November 2009. He is also Chairman
of the Elders Audit and Compliance Committee. A Chartered Accountant with over 30 years of experience in
accounting, audit and corporate governance, including experience in mergers, acquisitions and corporate
advisory work. Most recently he held senior positions with Deloitte Touche USA LLP. Prior to this he was
Deputy Managing Partner Asia Pacifi c. This followed a long career with Deloitte Australia, including eight
years as national Chairman. Mr Wylie also served on the Global Board of Directors of Deloitte Consulting. He is
a non-executive director of MaxiTRANS Industries and Centro Properties Limited. Mr Wylie is also a former
National President of the Institute of Chartered Accountants in Australia. Mr Wylie is a resident of Victoria.
Mr Mark C Allison, BAgrSc, BEcon, GDM, FAICD Age 49 - Non-executive director of the Board since November
2009. He is also a member of the Elders Occupational Health and Safety Committee. He has extensive experience
spanning 25 years in the agribusiness sector. He is a former Managing Director of Wesfarmers Landmark
Limited and Wesfarmers CSBP Limited. Prior to his appointment at Wesfarmers in 2001, Mr Allison held senior
positions with Orica Limited as General Manager of Crop Care Australasia and with Incitec Limited as General
Manager - Fertilisers. Between 1982 and 1996 Mr Allison performed a series of senior sales, marketing and
technical roles in the Crop Protection, Animal Health and Fertiliser industries. Mr Allison was the Managing
Director of Makhteshim Agan Australasia Pty Ltd from 2005 to 2007 and Managing Director and Chief Executive
Offi cer of Jeminex Limited from 2007 to 2008. Mr Allison is a resident of New South Wales.
Mr Charles E Bright, BA, MA(Oxon) Age 65 - Non-executive member of the Board since May 2002. He is a member
of the Nomination and Prudential Committee and Chairman of BWK AG Supervisory Board. Mr Bright has over
30 years’ experience in investment banking with positions including Chairman of Potter Warburg Securities
and Head of Corporate Finance for HSBC in Australia. Mr Bright also served as Chairman of Australian
Agricultural Company Limited until January 2009 and a director of Tassal Group Limited (August 2005 -
September 2009) and Webster Limited (August 2005 - February 2009). Mr Bright is a resident of Victoria.
Company Secretary
Mr Peter Gordon Hastings, BA LLB GDLP Mr Hastings was appointed Company Secretary in February 2010.
He has held the positions of Group Solicitor or General Counsel with the Elders Group between 1995 and 1998
and 2003 to date.
24
Corporate Governance
Statement
This corporate governance statement summarises
the key elements of the Company’s governance
framework and practices.
The 2010 financial year was again a challenging
year for the Company, for the reasons highlighted
by the Chairman and Chief Executive elsewhere
in this report. In order to navigate this difficult
period, the Company has ensured that its
governance framework is adhered to at all times,
the Board remaining firmly of the belief that good
corporate governance contributes long-term
value to stakeholders. Directors therefore are
committed to ensuring not only that the
Company’s present governance framework is
adhered to, but that the Company keeps abreast
of and implements all generally accepted
enhanced governance arrangements.
The Board is committed to acting in the best
long-term interest of shareholders, customers,
clients, employees and the community. The Board
has in place a Board Charter that consolidates the
principles, policies and practices of its governance
framework as reflected in this statement.
In developing our governance framework we have
taken into account the Corporate Governance
Principles and Recommendations (Best Practice
Recommendations) published by the ASX Corporate
Governance Council (ASXCGC). We believe that
the Company’s governance practices comply in all
substantial respects with the ASXCGC’s Corporate
Governance Principles and Recommendations,
which were revised in August 2007. Published on
our website at www.elders.com.au is a table
comparing the Company’s governance practices
with the ASXCGC’s Corporate Governance
Principles and Recommendations.
The Board notes that in June 2010, the ASX
Corporate Governance Council released
amendments to the 2nd edition of the Corporate
Governance Principles and Recommendations in
relation to diversity, remuneration, trading policies
and briefings. In light of these changes (which do
not apply to the Company until its first reporting
period commencing on or after 1 January 2011),
the Company is actively reviewing its governance
framework in order to incorporate the changes.
The steps taken by the Company to adopt the
changes are set out in this statement.
1. Operation of the Board
Relevant policies and charters:
- Board Charter
- Company Constitution
Role of the Board
The Board is ultimately responsible for the
governance of the Company. It has implemented
governance policies and practices that are
designed to:
• provide clear accountability;
• protect the rights and interests of shareholders
and other stakeholders;
• provide for proper management of the
Company’s assets;
• support the achievement of the Company’s
fiduciary, environmental, safety, social
and other obligations;
• preserve and enhance the Company’s reputation
and standing in the community; and
• support the achievement of shareholder
value within a framework of appropriate risk
assessment and management.
The corporate governance policies and practices
are reinforced by a commitment by the Company to
the highest standards of legislative compliance,
financial integrity and ethical behaviour.
Management and oversight
The Board Charter defines those duties that
are reserved for the Board and its Committees and
those that are delegated to management.
Board
The main responsibilities of the Board as set out
in the Board Charter are to:
• provide input into, and adopt, the strategic plan
and budget of the Company as prepared
by management;
• monitor performance against the business plan
and budget;
25
Delegation of responsibility to
management
The Board delegates responsibility for the day-to-
day operation and administration of the Company
to the Chief Executive, Mr Malcolm Jackman. The
Board monitors the Chief Executive’s performance
on an ongoing basis through regular management
reporting and through the reporting of the various
Board Committees and Group Risk Committee. The
Company has in place a comprehensive delegation
of authority under which the Chief Executive and
the executive management operate. The Board
regularly reviews the obligations set out in the
Board Charter and the delegations of authority.
The process for evaluating the performance of
senior executives is set out in the Remuneration
Report on pages 48 to 49.
Executive Committee
The Executive Committee comprises business unit
managing directors and senior functional
corporate managers who report directly to the
Chief Executive. One of the functions of the
Executive Committee is to assist in the oversight
function and compliance with legislative
obligations of regulated entities within the Group.
Company Secretary
Under the Board Charter, the Company Secretary
is accountable to, and reports directly to, the Board
(through the Chairman where appropriate) on all
governance matters.
• approve and monitor the progress of all material
acquisitions, divestments, contracts and capital
expenditure;
• approve capital raisings (debt or equity)
by the Company;
• oversee the audit, compliance and financial
and operational risk management functions of
the Company;
• oversee the Company’s financial reporting and
communication to the Company’s shareholders
and the investment community and shareholder-
relations generally;
• appoint and remove the Chief Executive and
determine that person’s remuneration (including
termination benefits);
• review the performance of the Board as a whole
and of individual directors; and
• monitor and assess the performance of the
Chief Executive and the Company’s senior
executive team.
Committees
The Board has established a number of Board
Committees (Nomination and Prudential
Committee, Remuneration Committee,
Occupational Health and Safety Committee and
Audit and Compliance Committee) to increase the
Board’s efficiency and effectiveness in fulfilling
the responsibilities set out in its charter. The
role and responsibilities of these Committees are
detailed in formal charters. The responsibilities
and composition of the Board Committees are
detailed on pages 29 to 32.
In addition, a Group Risk Committee comprising
members of the Company’s executive management
operates under a Board-endorsed risk management
policy and reports to the Board on a regular basis.
Composition overview
The current composition of the Board and the Board
Committees is as set out in the table below:
Board
of Directors
Audit and Compliance
Committee
Remuneration
Nomination and
Prudential Committee
OH&S
Committee
J Ballard
M Jackman
M Allison
C Bright
R Grigg
I MacDonald
J Ranck
R Wylie
C
MD
D
D
D
D
D
D
M
M
C
C = Chair MD = Managing Director D =Director M = Member
M
C
M
C
M
M
M
M
C
26
2. Board Structure –
Composition, Independence,
Training and Assessment
Relevant policies and charters:
- Board Charter
- Company Constitution
- Prudential Criteria
- Director Independence Policy
- Board Performance Assessment
- Director Induction and Education
Board composition
The composition of the Board is determined by
the Company’s Constitution and by Board Policy,
which includes the following requirements:
• the number of directors must not be less than
3 or more than 12 ;
• the majority of directors must be independent
non-executive directors; the Chairman should be
an independent director;
• the Board be comprised of directors who
are financially literate and who together have an
appropriate mix and depth of skills, experience
and knowledge; and
• directors (and prospective directors) must
satisfy prudential criteria approved by the
Nomination and Prudential Committee having
regard to guidelines and policies adopted by
relevant regulators. The purpose of these criteria
are to ensure directors are fit and proper to
act as directors of the Company having regard,
amongst other things, to licences held by the
Company and to its ownership interest in Rural
Bank Limited.
Fit and Proper Person Policy
The Company has certain obligations to comply
with APRA Policy Statements, Policy Framework
and Prudential Standards, given its 40%
ownership of Rural Bank Limited, a prudentially
regulated Authorised Deposit Taking Institution.
A significant part of compliance with those
obligations is the Group’s fitness and propriety
testing, which ensures a robust selection process
for directors consistent with the standards set by
APRA. The criteria set down in the Company’s Fit
and Proper Policy are available on the Company’s
website at www.elders.com.au.
The Company’s Fit and Proper policy and process
provide the Company with assurance that existing
and potential directors and persons appointed to
senior executive positions within the Group are
able to satisfy appropriate fitness and propriety
standards that will enable them to discharge their
prudential and general governance responsibilities
throughout the term of their appointment.
Director skills and experience
The Board is to be comprised of individuals with
an appropriate mix and depth of skills, experience
and knowledge in order to meet the Board’s
responsibilities and objectives.
The Board of Directors currently comprises an
independent non-executive chairman who is
elected by the full Board, six other independent
non-executive directors and a managing director/
chief executive. The qualifications, experience,
special responsibilities and period of office of each
director may be found on page 24 of this report.
The Company’s Directors acknowledge that the
Board is composed entirely of male directors and
that the participation of female directors would be
of value to the Company and the Company’s
investors. Accordingly, the Company is actively
developing a diversity policy and guidelines to
address, amongst other things, female
participation on the Board.
Director independence
The Company has adopted an Independence
Policy that is published on the Company’s website.
The Policy states that the majority of the Board
must comprise independent directors.
In determining whether or not a director is to be
considered independent, the Board will have
regard to whether the director:
• is a substantial shareholder in the Company;
• within the last three years, has been an
employee of the Company, a material adviser to
the Company or a principal or employee of
any material adviser to the Company;
• is a material supplier to, or a material customer
of, the Company;
• is directly or indirectly associated with any of
the above persons;
• is otherwise free from any interest and any
business or other relationship which could, or
could reasonably be perceived to, materially
interfere with the director’s ability to act in the
best interests of the Company; and
• is of independent character and judgement.
In assessing materiality, the Company takes a
qualitative approach rather than setting strict
quantitative thresholds. Whether an interest,
relationship or business is ‘material’ is considered
having regard to the nature, circumstances and
activities of the director and from the perspective
of the Company, the persons and entities
with whom the director has an affiliation, and
the director.
The Board does not believe that the period of
service of a director necessarily hinders the
director’s ability to exercise independent thought
and judgement and to act in the best interests
of the Company. The directors believe that
experience and knowledge of the Company’s
operations are important contributors to the
efficient working of the Board and the best
interests of the Company.
27
Directors undertake training and development
on a needs basis. Directors are also regularly
briefed on the Group’s businesses and industry
or technical issues impacting the Group
and directors aim to have at least one meeting
a year in conjunction with a tour of one of
the Company’s operations. At all other times,
non-executive directors are encouraged to visit
the Company’s operations.
Other non-executive director activities/
involvement
In addition to the time spent in preparation for and
attendance at Board and committee meetings,
non-executive directors visit operational sites and
assist the Company in local, national and
international industry matters. Non-executive
directors are also involved in business and
strategic planning meetings.
Board performance assessment
The Board reviews its own performance and that of
its Committees on an ongoing basis. The Chairman
also holds individual discussions with each director
to discuss their performance on a needs basis.
The non-executive directors are responsible for
evaluating the performance of the Chief Executive.
The evaluations are based on specific criteria,
including the Company’s business performance,
whether long-term strategic objectives are being
achieved and the achievement of individual
performance objectives. This process was followed
in respect of the 2010 financial year.
During the 2010 financial year directors
implemented a number of recommendations made
by Colin Carter & Associates in its 2009 review
of board performance. In 2011 it is proposed the
Board will be subject to internal performance
review. In 2012, the Board proposes that it will
again be subject to external review.
The Board Charter prescribes that before
a director is recommended for re-election, the
Chairman consults with the other directors
regarding the director’s effectiveness. Based upon
the outcome of these consultations, the Board
shall then determine whether or not to recommend
the director for re-election.
The Nomination and Prudential Committee assists
in this review process.
Chairman
The Board Charter prescribes that the Chairman
should be an independent director and details his
responsibilities. Mr John Ballard was appointed
Chairman on 20 September 2010, succeeding
Mr Stephen Gerlach who had been Chairman
since 1 July 2003. The Board has determined that
Mr Ballard is an independent non-executive
director, and that Mr Ballard is fit and proper
to act as a director of the Company.
The Chairman’s role includes:
• providing effective leadership to the Board in all
Board matters;
• publicly representing the Board’s views to
stakeholders;
• promoting effective relations between the Board
and management;
• leading the process of review of the performance
of the Board, Committees and individual
directors;
• guiding the setting of agenda items and conduct
of Board and shareholder meetings; and
• overseeing succession of non-executive directors
and the Chief Executive.
Access to independent professional
advice and other resources
Directors may obtain independent, professional
advice, at the Company’s expense, on matters
relevant to the Company’s affairs to assist them
in carrying out their duties as directors, subject
to obtaining prior consent from the Company
Secretary which cannot be unreasonably withheld.
All directors have direct access to and may seek
information directly from the Company’s External
and Internal Auditors provided that all such
enquiries are first advised to the Chairman and
the Chief Executive.
Directors have access to the Company’s
management and company information through
the Chief Executive to assist them in carrying out
their duties as directors.
Director induction and training
Upon appointment, new directors are given a
detailed briefing by the Chairman on key board
issues and by the Chief Executive and senior
executives on the nature of the Company’s business
and its key drivers. New directors are also provided
with appropriate background documentation.
Issues covered in the induction include:
• the Company’s financial, strategic, operational
and risk management position;
• directors’ rights, duties and responsibilities; and
• the role of the Board and the Board committees.
28
Appointment of directors and
re-election
3. Board Committees
The composition of the Board is reviewed on
an annual basis coinciding with the annual general
meeting cycle to ensure that the Board has the
appropriate mix of expertise and experience.
At each annual general meeting (AGM) of the
Company, one third of directors (other than
the managing director and directors who have
been appointed since the previous AGM) and any
other director who will at the conclusion of the
meeting have been in office for three or more years
and AGMs since they were last elected to office are
required to retire and may stand for re-election.
One of the Company’s directors obliged to retire
under this rule is Mr Charles Bright. Mr Bright has
advised the Chairman that he will not be offering
himself for re-election at the forthcoming AGM.
Directors who have filled casual vacancies are
required to be elected at the first AGM following
their appointment to the Board. When a vacancy
exists, or when it is considered that the Board
would benefit from the services of a new director
with particular skills, the Nomination and
Prudential Committee selects candidates with
appropriate expertise and experience for
consideration by the full Board. The Committee
also takes into account the Prudential Criteria and
may seek advice from external consultants if
necessary in selecting candidates for board
positions. The Board then appoints the most
suitable candidate who must stand for election at
the next general meeting of shareholders and
re-election at three yearly intervals. Mr John
Ballard was selected in accordance with the above
process and will stand for election at the
Company’s 2010 AGM.
Formal letters of appointment setting out key
terms and conditions of appointment are in place
for all directors.
The process of Board renewal continued during
the course of the year with the appointment
of Mr John Ballard as director and Chairman on
20 September 2010. As announced prior to
last year’s AGM, Mr Anthoni Salim resigned as a
director of the Company on 30 October 2009.
Dr Jim Fox and Mr Graham Walters retired as
directors of the Company on 18 December 2009
and 31 March 2010 respectively.
Relevant policies and charters:
- Nomination and Prudential
Committee Charter
- Audit and Compliance Committee
Charter
- Remuneration Committee Charter
- Occupational Health and Safety
Committee Charter
Nomination and Prudential Committee
Objective
The Board’s objective in relation to Board
nomination and review is to ensure that:
• the Company has adopted selection,
appointment and review practices that result
in a Board:
> with an effective composition, size, mix of
skill sets and experience and commitment
to adequately discharge its responsibilities
and duties and add value to the Company
and its shareholders;
> that has a proper understanding of, and
competence to deal with, the current and
emerging issues of the businesses of the
Company; and
> can effectively review and challenge the
performance of management and exercise
independent judgement.
• shareholders and other stakeholders
understand and have confidence in those
selection, appointment and review practices.
• the prudential criteria that directors must
satisfy at all times are met. The prudential
criteria are set out in the Fit and Proper
Person Policy section appearing in
the Board Structure part of this statement
above. The Nomination and Prudential
Committee assists the Board in meeting its
prudential objectives.
Membership
The members of the Nomination and
Prudential Committee at the date of this
Report are:
Mr J Ballard (Chairman)
Mr C Bright
Mr J Ranck
During the period in which the Company was
searching for, selecting and appointing a
new Chairman, the Nomination and Prudential
Committee comprised all the members of
the Board.
The Nomination and Prudential Committee
currently comprises three independent
directors and includes the Chairman of the
Board. The Chief Executive Officer has a
standing invitation to attend the Committee
meetings and may participate in discussions
29
on matters concerning the main Board but has
no voting rights with respect to such matters.
Members are appointed for an initial term of
three years but are eligible for re-appointment.
From time to time the Committee meets as the
full Board to consider nomination issues,
including, in the last financial year, selecting a
successor Chairman to Mr Gerlach.
Role
The Nomination and Prudential Committee
operates under a formal charter adopted by
the Board which can be viewed on the
Company’s website at www.elders.com.au.
The Committee’s principal responsibilities are
to regularly review and make
recommendations to the Board on:
• the necessary and desirable competencies of
members of the Boards of the Company and
its subsidiaries and their committees;
• appropriate processes for the review of the
performance of the Boards of the Company
and its subsidiaries;
• appropriate policies with respect to the
maximum period of service and retirement
age for directors;
• appropriate succession plans for the Boards
of the Company and its subsidiaries and the
Chief Executive Officer;
• the appropriate size of the Board so as to
encourage efficient decision-making;
• recommendations for the appointment
(including re-appointment in the case
of directors retiring by rotation) and
removal of directors of the Company and its
subsidiaries;
Remuneration Committee
Objective
The Board’s objective is to ensure that the
Company has adopted remuneration policies
that meet the needs of the company and
encourage a performance oriented culture.
A summary of the Company’s remuneration
policies and practices is set out in the
Remuneration Report on pages 43 to 63.
Membership
The members of the Remuneration Committee
at the date of this Report are:
Mr I MacDonald (Chairman)
Mr J Ballard
Mr J Ranck
The Remuneration Committee comprises three
independent directors and includes the
Chairman of the Board. The Chief Executive
Officer has a standing invitation to attend
Committee meetings but must leave the
meeting during those periods in which
consideration is being given to his
compensation arrangements. Committee
members are appointed for an initial term of
three years but are eligible for re-appointment.
The Company notes that the composition of
the Remuneration Committee meets
Recommendation 8.2 of the amended 2nd
edition of the Corporate Governance Principles
and Recommendations released by the ASX
Corporate Governance Council in June 2010.
• the scope and content of letters of
Role
appointment of non-executive directors;
skills development and continuing education
programs for directors of the Company and
its subsidiaries;
• appropriate induction procedures designed
to allow new directors to participate fully
and actively in board decision-making at the
earliest opportunity and the effectiveness of
those procedures; and
• fulfillment of the Company’s prudential
obligations.
Key Activities During the Year
The Committee oversaw the following
significant activities during the reporting
period:
• appointment of a new Chairman during
the year following the completion of a
comprehensive search;
• implementation of the outcome of an
external review of the effectiveness of the
Board conducted by an external board
performance consultant; and
• continuation of the process of Board renewal
with the appointment of a new director
(being the Chairman) and departure of
three long-standing directors.
The Remuneration Committee operates under
a formal charter adopted by the Board which
can be viewed on the Company’s website at
www.elders.com.au.
The Committee’s principal responsibilities
are to:
• ensure that appropriate policies are in place
for compensation arrangements for the Chief
Executive Officer, senior management, the
Company and its employees generally and
the Board itself;
• advise and make recommendations
to the Board on employee share and
option schemes, executive option
plans, performance incentive packages,
superannuation entitlements, retirement and
termination benefits and policies;
• review the Chief Executive Officer’s
recommendations with respect to the
remuneration of key executives – the direct
report to the Chief Executive – and his plans
for the remuneration of employees in general
to ensure that the Company’s remuneration
policies are sufficiently competitive and
equitable to retain and incentivise a high
quality workforce;
30
Details of the members’ qualifications can be
found on page 24 of this report.
Representatives of Company’s management
attend meetings from time to time at the
discretion and invitation of the Committee.
Role
The Audit and Compliance Committee
operates under a formal charter adopted by
the Board which can be viewed on the
Company’s website at www.elders.com.au.
The Committee’s primary functions are to:
• assist the Board in meeting its oversight
responsibility in relation to:
> integrity of financial statements and
financial accounting policies and practices;
> external auditor’s qualifications,
performance and independence;
> oversight of the performance of the
internal audit function;
> integrity and effectiveness of internal
controls and regulatory compliance;
• improve the effectiveness of the internal
and external audit functions and be a forum
for improving communication between the
Board and the external auditors and,
where applicable, the internal auditors;
• facilitate the maintenance of the
independence of the external auditor;
• provide a structured reporting line for
internal audit facilitating the maintenance
of the objectivity of the internal audit
functions;
• improve the quality of external reporting of
financial information and reports; and
• assist in establishing the objectives, and
the assessment of the performance, of the
internal audit function.
Key Activities During the Year
The Committee oversaw the following
significant activities during the reporting
period:
• completion of the in-sourcing of the internal
audit function, aligning the function’s
objectives with the streamlined business
control structures and overseeing the
appointment of appropriately qualified
professionals;
• oversight of a review of the carrying value of
the Group’s forestry assets; and
• review of the statutory and periodic financial
statements of the Company.
• review any equity plans and make
recommendations to the Board on equity
plans for Directors and the Chief Executive
Officer, in particular. Committee approval is
required for key executive equity plans and
for the terms of any broadly based Group
equity plan;
• review and recommend for Board approval,
where appropriate, any employment
contracts outside normal parameters.
The Company notes that the amendments to
the 2nd edition of the Corporate Governance
Principles and Recommendations released by
the ASX Corporate Governance Council in
June 2010 recommend that the Remuneration
Committee be responsible for review of, and
recommendation to, the Board on remuneration
by gender. The Company’s Remuneration
Committee Charter does not yet include such
an obligation, but will be amended to do so.
Key Activities During the Year
The Committee oversaw the following
significant activities during the reporting
period:
• introduction of a new Long Term Incentive
(LTI) scheme for senior executives of
the Company; and
• ongoing review of the remuneration
arrangements, policy and structure for
the Group. The review is discussed in the
Remuneration Report on page 44.
Audit and Compliance Committee
Objective
The Board is concerned to ensure the integrity
of the Company’s financial reporting and its
regulatory compliance and has established the
Audit and Compliance Committee to assist it in
achieving this objective.
Membership
The members of the Audit and Compliance
Committee at the date of this Report are:
Mr R Wylie (Chairman)
Mr I MacDonald
Mr R Grigg
All members of the Audit and Compliance
Committee are independent, non-executive
directors. At least one member of the
Committee is required to be a qualified
accountant or other financial professional
with experience of accounting and
financial matters. The Committee Chairman,
Mr R Wylie, has extensive experience in
accounting and financial matters having
formerly held a number of senior executive
and non-executive roles with Deloitte in
Australia and the United States. Committee
members are appointed for an initial term of
three years but are eligible for re-appointment.
31
• consider reports submitted by Company
management on health, safety and
environment performance and issues
including reports on material issues such
as serious injury or death or significant
environmental incidents associated with
the Company’s operations;
• receive and consider presentations from
business unit managers on the health and
safety management and performance of
their operations; and
• visit the Company’s operational sites to
familiarise committee members with the
health and safety issues associated with
the operations on those sites and to assure
members that appropriate systems and
controls have been implemented.
Key Activities During the Year
The Committee oversaw the following
significant activities during the reporting
period:
• continued improvement in health and
safety awareness, incident reporting and
management;
• continued improvement in the Group OH&S
Framework Implementation Plan to improve
the safety framework;
• continued improvement in Lost Time
Incident Frequency Rate in most business
units, and continued improvements in safety
performance within the rural services
business despite a marginally higher LTIFR
compared with the prior year; and
• recruitment of a senior dedicated
General Manager, OH&S with enhanced
responsibilities and authority.
Occupational Health and Safety
(OH&S) Committee
The Board is committed to fulfilling the
Company’s obligation to operate its business in
a safe, ethically responsible and sustainable
manner and has established the Occupational
Health and Safety Committee to assist in
meeting this objective.
Membership
The members of the OH&S Committee at the
date of this Report are:
Mr J Ranck (Chairman)
Mr R Grigg
Mr M Allison
The OH&S Committee comprises three
independent directors and is chaired by
Mr H Ranck. Committee members are
appointed for an initial term of three years
but are eligible for re-appointment. The
Chief Executive has a standing invitation to
attend all meetings of the Committee.
Role
The OH&S Committee operates under a formal
charter adopted by the Board which can be
viewed on the Company’s website at
www.elders.com.au. Its primary functions
are to:
• establish the strategic direction and
targets for health and safety management;
• provide a forum for discussion between
the Board and management on health and
safety issues;
• review the Company’s performance in
relation to health and safety matters;
• review the adequacy and performance of
the Company’s health and safety functions
and management;
• review the effectiveness of the Company’s
health and safety policy framework,
management systems and internal controls
including any health and safety standards,
plans and audit process;
• monitor the social and ethical impact of
the Company’s operations and set standards
for social and ethical practices as they
relate to health and safety;
• consider the key risks arising from health
and safety issues;
• monitor progress in the achievement of
health and safety targets;
• monitor and consider the impact of changes
and emerging issues in health and safety
legislation, community expectations,
research findings and technology;
32
4. Attendance at meetings by
Directors
Nine or ten formal Board meetings are scheduled
each year with meetings generally held over one to
two days. Fourteen formal Board meetings were
held during the current financial period to
accommodate additional meeting requirements
associated with specific or urgent matters, as
required. Attendance by directors at Board and
Committee meetings held during the period ended
30 September 2010 is detailed below.
Board of Directors
Audit and Compliance
Committee
Nomination and Prudential
Committee
Attended
Held
Attended
Held
Attended
Held
1
13
13
13
3
14
14
14
13
-
4
12
1
14
14
14
3
14
14
14
14
-
5
14
-
-
-
-
-
7
-
7
-
-
4
4
-
-
-
-
-
8
-
8
-
-
4
4
-
5
4
5
1
4
3
4
4
-
1
3
-
5
4
5
1
4
4
4
4
-
1
4
Remuneration Committee
Occupational Health and
Safety Committee
Other Committees**
Attended
Held
Attended
Held
Attended
Held
-
5
-
-
3
-
-
3
5
-
-
-
-
5
-
-
3
-
-
3
5
-
-
-
-
-
5
-
-
5
-
-
5
-
-
-
-
-
5
-
-
5
-
-
5
-
-
-
-
-
2
-
-
2
7
5
6
-
3
3
-
-
3
-
-
4
7
6
6
-
3
4
J Ballard1
S Gerlach2
M Allison
C Bright
J Fox3
R Grigg
M Jackman
I MacDonald
J Ranck
A Salim4
G Walters5
R Wylie
J Ballard1
S Gerlach2
M Allison
C Bright
J Fox3
R Grigg
M Jackman
I MacDonald
J Ranck
A Salim4
G Walters5
R Wylie
1. Mr Ballard was appointed a director on 20 September 2010
2. Mr Gerlach retired as a director on 21 September 2010
3. Dr Fox retired as a director on 18 December 2009
4. Mr Salim resigned on 30 October 2009
5. Mr Walters retired on 31 March 2010
** Includes Refinancing, Forestry Asset review and other Sub-Committees meetings
Where directors are unable to attend meetings either in person or by telephone
(eg if they are overseas) the Chairman or the Chief Executive endeavours to canvass their
views on key matters prior to the meeting in order to represent their views at the meeting.
33
5. External Audit Independence
Policy
Relevant policies and charters:
- Non-Audit Services Policy
The Company has in place a formal policy that:
• details the Group’s position in respect of the key
issues which may impair, or appear to impair,
external audit independence;
• details the internal procedures implemented to
ensure the independence of auditors; and
• establishes a framework that enables the
Audit and Compliance Committee to evaluate
compliance with the policy and report to the
Board on compliance.
The key principles in the policy are:
• an auditor is not independent if:
> an employment relationship exists, or could
be deemed to exist, between the Company
and the auditor, its officers or former officers,
employees or former employees, or certain
relatives;
> a financial relationship exists between the
auditor and the Company; and
> specific non-audit services (including
information technology and human resources
services) are provided to the Company by
the auditor;
• in relation to the provision of other non-audit
services the following guidelines must
be followed:
> management must consider the actual,
perceived and potential impact upon the
independence of external audit prior to
engaging external audit to undertake any non-
audit service;
> the outsourcing of any internal audit project
to the external auditors or the undertaking
of any joint internal/external audit review,
will require prior Audit and Compliance
Committee approval;
> the Audit and Compliance Committee must
consider whether the provision of such non-
audit services is compatible with maintaining
the external auditors’ independence, by
obtaining assurance and confirmation that
the additional services provided by the
external auditor are not in conflict with the
audit process. In order to assist with this
assessment, management will provide the
Audit and Compliance Committee with details
of the amount of non-audit services undertaken
by the external auditor’s as a proportion of all
audit and non-audit engagements, entered into
by the Group for the period; and
> as a general rule, the Company does not utilise
external auditors for internal audit purposes
or consulting matters, other than services
which are in the nature of audit, such as review
of tax compliance and acting as independent
accountants preparing a report on forecast
financial information for inclusion in
the Company’s capital raising prospectus.
34
The Audit and Compliance Committee is
responsible for ongoing review of the External
Audit Independence Policy and reports to the
Board on the continuing suitability of the policy
and recommended changes to the existing policy
as and when required.
6. Risk Management
Relevant policies and charters:
- Risk Management Policy
- Group Risk Committee Charter
The Board has in place a Risk Management Policy
and Framework to assist the Company in achieving
its risk management objectives – to ensure the
Group’s assets are protected against financial loss,
business risks are identified and properly managed,
legal and regulatory obligations are satisfied, and
business risks are appropriately monitored by
the Board.
Under the Risk Management Policy the Board is
responsible for oversight of the risk management
process and framework. Senior executive
management have primary responsibility for
identification and management of significant risks
within the Group’s businesses and are accountable
to the Board for designing, implementing and
monitoring the process of risk management and
integrating it into the day to day activities of the
Group’s businesses. Business Unit managers are
responsible for monitoring and managing key
business risks for the respective businesses.
All personnel are responsible for managing risks
in their areas.
The Audit and Compliance Committee is
responsible for assessing the effectiveness of
internal processes for determining and managing
key financial and compliance obligations and the
OH&S Committee is responsible for assessing the
effectiveness of internal process for determining
and managing key OH&S risks.
Group Risk Committee
The Group Risk Committee (GRC) assists the
Board in the application of the Company’s Risk
Management Policy and monitoring of compliance
with the policy. The GRC reports to the Board on
risk management on a regular basis through the
Chief Executive.
Membership
The Group Risk Committee comprises the Chief
Executive/Managing Director, Group Executive
team, Company Secretary and General Manager
Risk, Compliance and Audit. Specialist support to
the committee is provided by internal experts as
required, including the General Counsel, General
Manager, Taxation, General Manager OH&S
and National Risk Manager.
The GRC reports to the Board through the Chief
Executive and copies of all GRC minutes are
provided to the next Board meeting and Audit
and Compliance Committee meeting.
During 2010 the GRC reviewed the Group’s
material business risks on a quarterly basis.
Responsibilities
The Committee operates under the Risk
Management Policy and is responsible for:
• oversight of the risk management process;
• considering and, where appropriate, making
recommendations to the Board with respect to
risk appetite, risk framework and policy;
• establishing, approving and reviewing corporate
risk management strategy in line with the Risk
Management Policy;
• reviewing and monitoring Elders’ risk profile
and adherence to the Elders’ risk management
framework;
• receiving, considering and endorsing business
trading charters for submission to Elders’ Board
of Directors for approval;
• reviewing credit limits, mark-to-market trading
positions, and credit committee functions of
Elders and its subsidiaries;
• monitoring the risk management activities of
business divisions and subsidiaries through
receipt and consideration of risk reports from
the Company;
• overseeing compliance by Elders with applicable
Australian Prudential Regulation Authority
compliance obligations and significant related
internal policies;
• providing regular advice to the Board about
GRC activities and making appropriate
recommendations; and
• providing an escalation point for identification
of matters (material business risks) to be drawn
to the attention of the CEO/Board Audit and
Compliance Committee/Board.
The Committee is also responsible for ongoing
review of the risk management framework and
policy and reports to the Board on the continuing
suitability of the framework and policy and
for recommending changes to the framework
and policy as and when required.
Management Certificates
In accordance with the Board Charter, prior to
approving the financial reports of the Company in
respect of FY2010, the Board received from the
Chief Executive and the Chief Financial Officer a
certificate stating that:
• the declaration provided under section 295A of
the Corporations Act is based on a sound system
of risk management and internal control; and
• that the system is operating effectively in all
material respects in relation to financial
reporting risks.
Treasury Policy
The Company’s treasury operation is responsible
for managing currency and interest rate
risks together with managing the Company’s
finance facilities.
Treasury operates within formal policies, and
compliance with key policies is regularly reported
to the Board. The primary objectives are to have an
appropriate debt maturity profile to fund ongoing
working capital and liquidity needs and to
prudently manage exposures to variable interest
rates and foreign exchange movements.
7. Conduct and Ethics
Relevant policies and charters:
- Code of Conduct
- Share Trading Policy
- External Disclosure and Market
Communications Policy
- Fraud Control Policy
- Reporting of Unacceptable
Conduct Policy
- Discrimination and Harassment Policy
- Occupational Health and Safety Policy
Code of Conduct
The Board is committed to promoting conduct and
behaviour that is honest, fair, legal and ethical and
respects the rights of the Company’s shareholders
and other stakeholders in the Company, including
clients and customers, suppliers, creditors and
employees. The Board has adopted a code of
conduct that details the conduct and behaviour it
expects from its members and the employees of
the Company.
The Code, which may be accessed from the
Company’s website, details the Company’s position
with respect to dealings with parties with whom
the Company engages, use of position and company
information, gifts and gratuities and conflicts of
interest and the principles the Company promotes
with respect to honesty and integrity, occupational
health and safety, equal opportunity, legal
compliance, competition, privacy, environment
and community.
The Board has also adopted a Reporting of
Unacceptable Conduct Policy to encourage and
facilitate disclosure of unacceptable conduct,
including fraud or illegal activity, occurring in
the Company. The Policy and the associated
reporting process addresses the issues associated
with alleged improper conduct including
reporting, responsibility, confidentiality and
effective investigation.
35
Share Trading Policy
The Board encourages non-executive directors to
own the Company’s securities to further align their
interests with the interests of other shareholders.
Details of directors’ shareholdings in the Company
can be found on page 59 of this report.
The Company’s Share Trading Policy prohibits
trading by directors or senior executives in
the Company’s securities at all times other than
for a period of six weeks after:
• the announcement of the Company’s full
year results;
• the announcement of the Company’s half
year results;
• the Company’s Annual General Meeting; and
• any rights trading period applying in
External Disclosure and
Market Communications Policy
Under the Policy the Company has instituted
(and monitors) procedures designed to ensure:
• the Company’s compliance with continuous
disclosure obligations contained in applicable
ASX Listing Rules and the Corporations Act
2001. Procedures followed to achieve this include
regular dialogue between senior executives
and the Chief Executive and open lines of
communication between the Chief Executive,
the Chairman and members of the Board in
the consideration of disclosure issues, the
communication of disclosure requirements and
procedures to senior management together
with procedures to facilitate the timely flow of
relevant information to the Chief Executive;
respect of a prospectus issued by the Company,
• the timely release and dissemination
of information (within the requirements of
continuous disclosure obligations) necessary
for the formation of an informed and balanced
view of the Company;
• information disclosed in investor or media
briefings is not “market sensitive”. If market
sensitive information is inadvertently disclosed
during a briefing it will immediately be released
to the market at large through the ASX; and
• that stakeholders have equal opportunity,
subject to reasonable means, to access
information issued externally by the Company.
This is addressed through a broad range of media
including the Company’s website, webcasts of
the Company’s Annual General Meeting and full
year and half year results briefings (which are
announced in advance to the market and also
archived and available to view on the Company’s
website), and an information subscription service
through which interested parties can register for
electronic advice of announcements. All public
releases are archived and available for view on
the Company’s website at www.elders.com.au.
Significant investor briefings (other than the
AGM and the half and full year result briefings
which are webcast and stored as video on the
Company’s website) are generally held by recorded
telephone conference which requires registration.
The Company generally allows investors to access
the recorded facility by telephone for a short
period after the event (usually seven days) and
thereafter to obtain a copy of the transcript
or digital audio recording.
The Board notes that the amendments to the
2nd edition of the Corporate Governance
Principles and Recommendations released by the
ASX Corporate Governance Council in June 2010
include additional recommendations in connection
with briefings. In light of these changes the
Company is reviewing its External Disclosure
and Market Communications Policy with a view
to incorporating the new recommendations.
other than in exceptional circumstances.
Directors or senior executives must not deal in
the Company’s securities at other times or at any
time when directors or senior executives are in
possession of unpublished information that, if
generally available, might materially affect the
price of the Company’s securities. Prior to dealing,
a director must seek clearance from the Chairman
and senior executives must seek clearance from
the Company Secretary.
The Share Trading Policy also prohibits employees
and contractors from trading in the Company’s
securities if they are in possession of price-
sensitive information.
The Share Trading Policy can be found on the
Company’s website at www.elders.com.au.
Continuous disclosure and
communication with shareholders
The Board is committed to timely disclosure of
information and communicating effectively with its
shareholders. This commitment is effected through
the application of the External Disclosure and
Market Communications Policy and a
Communications strategy which includes processes
to ensure that directors and management are
aware of and fulfil their obligations.
Each year the Company communicates to its
shareholders and the investment markets
through a programme of regular announcements.
In addition:
• the Company releases briefings on Company
developments and events to the market as a whole;
• the Company’s senior management interacts
with members of the investment community and
financial and business media through a variety
of forums including results briefings, ‘one on one’
meetings and discussions; and
• background and technical information is provided
to institutional investors, market analysts and
the financial and business media to support major
announcements made to the ASX and minor
announcements made about the Company’s on-
going business activities.
36
Occupational Health and Safety
The Company believes that nothing done in the
course of employment is so important that it
cannot be done safely. For that reason, the
Company has a policy that enshrines the objective
of the Company to provide a safe and healthy
environment for employees, contractors, clients
and visitors. The Company strives to achieve this
objective through:
• compliance measures aimed at ensuring all legal
obligations are met;
• pro-active identification of hazards and
assessment and control of the associated risks;
• providing employees, contractors and visitors
with the knowledge and skill to discharge their
OH&S obligations;
• consultative mechanisms to enable employees
and contractors to contribute to effective OH&S
management;
• setting, measuring and reporting against target;
• ensuring appropriate resources are provided to
the OH&S function;
• integration of safety principles within the
corporate philosophy, business management
systems and commercial operations; and
• constant reinforcement of the safety
message from the most senior management of
the Company.
Disclosure of governance information
Information concerning the Company’s governance
framework and practices, principles and policies
is posted on the Company’s website at
www.elders.com.au in the section marked:
About Us: Corporate Governance.
The Board is also concerned to ensure that
shareholders are in a position to participate
effectively in general meetings and to this end:
• the Company has adopted in all substantial
respects the ASX Corporate Governance Council
guidelines for communication with shareholders
and improving shareholder participation at
general meetings; and
• it is a term of engagement of the Company’s
external auditors that they attend the Company’s
Annual General Meetings and are available to
answer questions about the conduct of the audit
of the Company and the preparation and content
of the auditor’s report in respect of the relevant
reporting period.
Diversity
The Company acknowledges that the amendments
to the 2nd edition of the Corporate Governance
Principles and Recommendations released in
June 2010 includes certain recommendations in
relation to diversity. Those guidelines do not
apply to the Company until the financial year
commencing on 1 October 2011. Notwithstanding
that, the Company is actively working towards
production of its diversity policy and establishing
measurable diversity objectives. The Company
anticipates reporting fully on diversity in its 2011
Annual Report.
Zero tolerance of discrimination and
harassment in the workplace
The Company is committed to ensuring that all
of its employees are treated with integrity
and respect and have the right to work in an
environment free from discrimination and
harassment. That commitment is embodied in a
policy which provides that discriminatory or
harassing behaviour by employees in their
relationships with other employees, potential
employees, customers or people undertaking
work for the Company will not be tolerated.
The policy defines procedures for dealing with
complaints of discrimination or harassment,
including the use of impartial contact officers
to receive and advise on complaints.
37
Directors’ Report
The Directors present their report for the year
ended 30 September 2010.
Directors
Principal Activities
The Directors of the Company in office at the date
of this report are:
The principal activities of the Elders Group during
the year were the:
Non-Executive Directors:
John Charles Ballard (Chairman)
Mark Charles Allison
Charles Ernest Bright
Raymond George Grigg
Ian Graham MacDonald
James Hutchison Ranck
Robert Harvey Wylie
Executive Director:
Malcolm Geoffrey Jackman (Chief Executive
Officer and Managing Director)
Mr J Ballard was appointed Chairman on
20 September 2010. He replaced Mr S Gerlach
who resigned as Chairman effective from
20 September 2010, and as a director on
21 September 2010. Mr G Walters resigned as
director effective 31 March 2010 and Dr J C Fox
did not seek re-election as Deputy Chairman
or Director at the last AGM. All other directors
held their position as director for the whole of
the year and up to the date of this report.
Company Secretary
Peter Gordon Hastings
Mr P G Hastings was appointed Company Secretary
on 26 February 2010. He replaced Ms S C Furey
who resigned as Company Secretary effective
from 26 February 2010 and Mr R E Mallett who
resigned as Company Secretary effective
from 26 February 2010.
A summary of the experience, qualifications and
special responsibilities of each director and the
Company Secretary is provided on page 24.
38
(a) Provision of services and inputs to the
rural sector;
(b) Provision of financial and other services to
rural and regional customers;
(c) Management of investor-funded hardwood
plantations; and
(d) Supply of automotive components.
Results and Review of Operations
The Group recorded a loss for the year, after tax
and non-controlling interest, of $217.6 million
(2009: loss of $466.4 million). A review of the
operations and results of the consolidated entity
and its principal businesses during the year is
contained in pages 3 to 23 of this report.
Significant Changes in the State of Affairs
There were a number of significant changes in the
state of affairs of the consolidated entity during
the year which are referred to on pages 4 to 19 of
this report.
Events Subsequent to Balance Date
No matter or circumstance has arisen since
30 September 2010 which is not otherwise dealt
with in this report or in the consolidated financial
statements, that has significantly affected or may
significantly affect the operations of the Group, the
results of those operations or the state of affairs
of the Group in subsequent financial years.
Likely Developments and Future Results
Discussion of likely developments in the operations
of the consolidated entity and the expected results
for those operations in future financial years is
included in the information on pages 7 to 15 of this
report. Further information about the likely
developments in the operations of the consolidated
entity and the expected results for those
operations in subsequent financial years has not
been included in this report because, in the opinion
of the directors, their inclusion would prejudice the
interests of the consolidated entity.
Share and Other Equity Issues During the Year
The following information summarises the equity issues made by the Company during the year to
30 September 2010:
• No employee options were exercised during the year.
• No fully paid ordinary shares were issued under the Company’s employee share plan during the year.
The Company’s employee share plan was suspended in March 2009.
• A conditional placement of 2,666,666,667 ordinary shares was made at $0.15 per fully paid share on
19 October 2009 to institutional investors as part of an equity raising to reduce Elders debt obligations
and build a stronger balance sheet.
• 1,000,004,393 ordinary shares were issued under the Company’s Share Purchase Plan (SPP) to
participating shareholders on 2 November 2009 at $0.15 per fully paid share. Funds raised from the
SPP were used to retire existing debt.
• A 10:1 share consolidation was completed in January 2010 and Elders Limited now has 448,598,480
ordinary shares on issue.
Dividends and Other Equity Distributions
On 4 September 2009 the Company announced that pursuant to the terms of its debt package, the
Company had suspended distributions to hybrid investors for a period of 2 years and that dividends on
ordinary shares can not be paid until after 31 March 2012 and thereafter only upon satisfaction of
several conditions. Accordingly, no dividends or hybrid distributions were paid during the 12 months
to 30 September 2010.
Share Options
Share options were issued in previous years to company executives as part of the Group’s remuneration
structure. Operation of the Elders Employee Share Option Plan (EESOP) was suspended in 2009 and
will be discontinued. Information on this remuneration structure is provided in the Remuneration Report
commencing on page 43 of this annual report.
The total quantity of options on issue as at 30 September 2010 would represent, if exercised, 0.23% of
the Group’s issued ordinary shares.
Details of options over unissued shares at the date of this report are as follows:
1) Options on Issue:
All options listed in this table are subject to minimum tenure restrictions of 3 years.
Date Options Granted
Number of Options Granted
Exercise Price
Option Expiry Date
25/10/2006
31/10/2006
31/08/2006
01/10/2007
01/07/2003
25/11/2008
253,000
135,300
80,000
200,000
100,000
270,000
1,038,300
$20.20
$21.70
$24.50
$24.50
$13.70
$12.90
25/10/2011
31/10/2011
18/08/2012
01/10/2012
01/07/2013
25/11/2013
39
2) Options issued since the end of the previous financial year
No options have been issued since the end of the previous financial year.
3) Options exercised since the end of the previous financial year
No options have been exercised since the end of the previous financial year.
4) Options lapsed since the end of previous financial year
Date Options Granted
Number of Lapsed Options
Exercise Price
Option Expiry Date
31/03/2005
26/07/2006
04/10/2005
04/10/2005
25/10/2006
25/10/2006
25/07/2006
25/07/2006
31/08/2007
26/09/2008
01/10/2007
01/03/2008
26/09/2008
31/10/2008
26/09/2008
24/10/2005
20,000
10,800
165,500
62,500
15,000
10,000
192,200
20,000
20,000
75,000
25,000
75,000
125,000
311,000
200,000
75,000
1,402,000
$20.00
$22.50
$20.60
$20.60
$18.30
$19.20
$21.70
$21.70
$25.40
$13.20
$24.50
$24.50
$13.20
$12.90
$13.20
$20.60
31/03/2010
08/08/2010
04/10/2010
04/10/2010
31/10/2011
31/10/2011
31/10/2011
31/10/2011
18/08/2012
26/09/2012
01/10/2012
01/03/2013
26/09/2013
31/10/2013
26/09/2014
25/10/2015
Directors’ Interests
At the date of this report, the relevant interests of the directors in shares and other equity securities of
the Group are:
No. of ordinary shares
No. of hybrids
No. of Performance Rights
Non-Executive Directors
M C Allison
J C Ballard
C E Bright
R G Grigg
I G MacDonald
J H Ranck
R H Wylie
Executive Directors
M G Jackman
-
250,000
21,479
16,490
52,668
128,334
6,000
107,168
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,000
856,808
At the date of this report, there are no options on issue to directors.
40
Directors’ Meetings
Details of the number of meetings held by the Board of Directors, and Board committees and the
attendance at those meetings is provided in the Corporate Governance section of this report on page 33.
Indemnifi cation of Offi cers and Auditors
Insurance arrangements established in previous years concerning offi cers of the consolidated entity were
renewed during the period.
The consolidated entity paid an insurance premium in respect of a contract insuring each of the directors
of the Company named earlier in this report and each full time executive offi cer, director and secretary
of Australian Group entities against all liabilities and expenses arising as a result of work performed in
their respective capacities, to the extent permitted by law. The terms of the policy prohibit the disclosure
of the premiums paid.
Each director has entered into a Deed of Access, Insurance and Indemnity which provides:
• that the Company will maintain an insurance policy insuring the director against any liability
incurred by the director in the director’s capacity as an offi cer of the Company to the maximum extent
allowed by law;
• for indemnity against liability as a director, except to the extent of indemnity under the insurance
policy or where prohibited by law; and
• for access to company documents and records, subject to undertakings as to confi dentiality.
The consolidated entity has provided a limited indemnity to its auditor, Ernst & Young, for loss suffered by
Ernst & Young from claims by a third party related to the audit service provided by Ernst & Young,
excluding losses resulting from the proven negligent, wrongful or wilful acts or omissions of Ernst & Young.
Remuneration of Directors and Senior Executives
Details of the remuneration arrangements in place for directors and senior executives of the Group are
set out in the Remuneration Report commencing on page 43 of this Annual Report. In compiling this
report the Group has met the disclosure requirements prescribed in the Australian accounting standards
and the Corporations Act 2001.
Environmental Regulation Performance
The Elders Group is subject to a range of environmental legislation in the places that it operates. Details
of the Group’s Environmental Regulation Performance can be found on pages 19,21 and 23.
Rounding of Amounts
The parent entity is a Group of the kind specifi ed in Australian Securities and Investments Commission
class order 98/0100. In accordance with that class order, amounts in the fi nancial report and Directors’
report have been rounded to the nearest thousand dollars unless specifi cally stated to be otherwise.
1368 VGTPM_Elders AR 1-66.indd 41
1368 VGTPM_Elders AR 1-66.indd 41
41
17/11/10 6:28 PM
17/11/10 6:28 PM
Non-Audit Services and Auditor Independence
Non-audit services provided by the Group’s auditor, Ernst & Young to the Group during the course of
the financial year are disclosed below. Based on advice received from the Audit and Compliance
Committee the Directors are satisfied that the provision of non-audit services is compatible with the
general standard of independence for auditors imposed under the Corporations Act for the
following reasons:
• all non-audit services have been reviewed by the Audit and Compliance Committee to ensure they do
not impact on the impartiality or objectivity of the auditor; and
• the nature and scope of each type of non-audit service provided means that auditor independence
was not compromised.
Ernst & Young received or are due to receive the following amounts for the provision of non-audit
services:
Tax services (primarily compliance)
Other compliance and assurance services
$420,382
$231,876
A copy of the auditor’s independence declaration as required under section 307C of the Corporations
Act 2001 is set out below.
This report has been made in accordance with a resolution of directors.
J C Ballard
Chairman
15 November 2010
M G Jackman
Director
Auditor’s Independence Declaration to the Directors of Elders Limited
In relation to our audit of the financial report of Elders Limited for the financial year ended 30 September
2010, to the best of my knowledge and belief, there have been no contraventions of the auditor
independence requirements of the Corporations Act 2001 or any applicable code of professional conduct.
Ernst & Young
Alan Herald
Partner
15 November 2010
42
Elders Limited
Remuneration Report
2010
This Remuneration Report forms part of the Directors’
Report and details the remuneration arrangements
in place for directors and senior executives of the
Group. In compiling this report the Group has met the
remuneration disclosure requirements prescribed in
the Australian Accounting Standards, the Corporations
Act 2001 and the revised ASX Corporate Governance
Principles and Recommendations (“ASX Corporate
Governance Principles”).
Contents
Section 1
Board Remuneration Committee
45
Section 2
Non-executive directors’ remuneration 45
Section 3
Executive director and senior
executive remuneration
Section 4
Nominated executives’ contract terms
Section 5
Remuneration disclosure tables
Section 6
Equity instruments in relation to
directors and executives
48
56
58
59
43
2010 Remuneration Highlights
Remuneration Outcomes for 2010
Remuneration outcomes in the Elders Group were heavily influenced in 2010 by the poor financial result
of the consolidated Elders Group for the financial year ended 30 September 2010. The results of this
poor performance on remuneration were:
• Limited increases in senior executive fixed salaries (for most senior executives 2%), except in the
case of individuals assuming different or additional duties or responsibilities, and executives from the
automotive division which performed ahead of budget;
• No Short Term Incentives were paid to senior executives or key management personnel, except again,
in the case of the automotive division;
• No shares or instruments convertible to shares were issued under any long term incentive plan, other
than the issue of performance rights to the Chief Executive and Managing Director, Malcolm Jackman,
under the scheme approved by shareholders at the 2009 AGM, and the issue of Service Rights as a
retention incentive for certain senior executives; and
• No increase in non-executive director fees.
Structural Changes in 2010
The remuneration structure of the Elders’ Group has undergone a significant review during 2010 and this
will continue in 2011. Progress during 2010 has been:
• the company began the process of reviewing the salary structure of the Group to determine its
competitiveness and relevance;
• the introduction of new senior executive contracts that provide more contemporary provisions than
the contracts they replace (the significant elements of the key management personnel contracts are
set out in this report); and
• a redesigned long term incentive programme for senior executives with measurable performance
benchmarks.
Elders faces a challenge common to business in cyclical industries; the problem of keeping employees
motivated in the bottom part of the cycle. This problem is compounded in Elders’ case by external and
internal factors that have retarded financial performance. Elders will continue to refashion its
remuneration arrangements in 2011 so that those arrangements assist in driving the behaviours required
to produce acceptable returns to shareholders. In particular the company will, as early as possible in the
2011 financial year, introduce short term incentive programmes that reward sales people appropriately for
outperformance.
CEO and Senior Executive Outcomes for 2010
The table below sets out the cash benefits received by the Chief Executive, Malcolm Jackman, and the
Group’s senior executives in the 2010 financial year.
M Jackman
M Hosking
M de Wit
V Erasmus
M Guerin1
S McClure
S Hughes
R Tanti
Base Salary
1,012,680
630,533
641,250
523,094
1,178,040
322,571
371,560
370,104
STI
0
0
266,500
0
0
0
0
0
LTI
0
0
0
0
0
0
0
0
Total
1,012,680
630,533
907,750
523,094
1,178,040
322,571
371,560
370,104
1 Mr Guerin ceased employment on 1 July 2010. His “base salary” included a payment, made on cessation of
employment, of 12 months’ salary in lieu of notice in accordance with his contract.
44
Section 1. Board Remuneration Committee
The Company’s overall objective is to generate strong returns for shareholders and to deliver enhanced shareholder value
through performance in the short and longer terms. To achieve those objectives the Company needs to have the best,
brightest, most experienced and committed people available to it. The Company’s remuneration strategy is a key factor in
delivering the Company’s overall objective.
Role of Remuneration Committee
The Remuneration Committee assists the Board to ensure that the Company establishes and maintains remuneration
strategies and policies that are aligned with the Company’s overall objectives and accord with best practice as set down in
the ASX Corporate Governance Principles. The role and responsibilities of the Remuneration Committee are set out in
the Corporate Governance Statement on page 30 of this Annual Report and the Committee’s Charter is published on the
Company’s website at www.elders.com.au.
The Remuneration Committee is comprised entirely of non-executive directors and makes all decisions free of the
influence of management, despite being briefed by management.
Group remuneration strategy
The Elders Group remuneration strategy seeks to encourage a performance orientated culture that will:
• provide competitive reward opportunities to attract and retain high calibre executives and to motivate them to pursue
sustainable long term growth and success for Elders, its employees and shareholders;
• align the rewards and interests of Directors and senior executives with the long term growth and success of the Group
within an appropriate control framework;
• demonstrate a clear relationship between senior executive performance and remuneration; and
• be consistent and responsive to the needs of each operating business and the Group as a whole.
The Group remuneration strategy has been developed to allow each operating business the autonomy to manage
remuneration policies and procedures within a single framework established for the Group and in-line with budget targets.
All remuneration determinations for executives above a predetermined level of seniority within the Group, or those
which would otherwise fall outside the established framework, must be individually approved by the Chief Executive, the
Elders Remuneration Committee or the Board, as appropriate.
Section 2. Non-Executive Directors’ Remuneration
A. Board policy
Non-executive directors are remunerated by way of fees in the form of cash and superannuation, as a consequence of
the superannuation guarantee levy, and generally in accordance with Recommendation 8.2 of the ASX Corporate
Governance Principles.
Executive directors do not receive director’s fees.
Non-executive directors do not participate in the Company’s cash or equity incentive plans and directors appointed
after 30 June 2004 do not receive retirement benefits other than superannuation contributions disclosed in this report.
With the retirement of Messrs Gerlach and Fox since last year’s annual report, no serving directors are eligible for a
retirement benefit.
Non-executive directors have formal letters of appointment with the Company. Length of tenure is governed by the
Company’s Constitution and the ASX Limited Listing Rules, which provides that all non-executive directors are subject to
re-election by shareholders every three years.
B. Non-executive directors’ remuneration
Non-executive director fees are reviewed by the Board on an annual basis, taking into consideration the accountability and
time commitment of each director, supported by advice from external remuneration consultants. The fees paid are
generally consistent with those paid to non-executive directors of comparable companies, while remaining within the
aggregate fee limit of $1,800,000 per annum approved by shareholders at the Company’s 2006 Annual General Meeting.
Statutory superannuation guarantee contribution amounts are included in the aggregate fee limit.
45
As at the date of this report, the annual base fee amount paid to each non-executive director, other than the Chairman and
the Deputy Chairman (if one is appointed), is $90,000 per annum. The current Chairman receives an annual composite
base fee of $300,000. At present, the Company does not have a Deputy Chairman, although if one is appointed that position
will attract a fee of $130,000. Additional fees are payable to non-executive directors who sit on the Board Committees.
Members of the Audit and Compliance Committee are paid $16,000 per annum with the Chairman receiving $24,000 per
annum. Members of the Occupational Health and Safety Committee, the Nomination and Prudential Committee and
Remuneration Committee receive $10,000 per annum as part compensation for time spent on committee matters. It has
been decided not to increase base director fees set in 2006 during the 2010 financial year and on and from the AGM,
members of the Nomination and Prudential Committee will not receive a fee for sitting on that Committee.
The Company maintains independent boards for the responsible entities within the group including Elders Forestry
Management Pty Ltd and APT Projects Pty Ltd. Mr I MacDonald acts as a director on these boards and is paid an additional
fee for doing so. The amount of these fees is included in the “Subsidiary Fees and Other Fees” column below.
Further, additional fees are received by two non-executive directors (Messrs Grigg and MacDonald) who continue to sit
on associated boards and board committees as follows:
1. Mr I MacDonald is an Elders’ appointee on the Rural Bank Limited Board (at 30 September 2010, the Company
maintained a 40% share in Rural Bank) and receives director fees from Rural Bank for this directorship. This fee is not
included in the “Subsidiary Fees and Other Fees” column below given it is not paid by the Company; and
2. Mr R Grigg sits as a director on the Futuris Automotive Group Limited Board and receives an additional fee for this
directorship. This fee is included in the “Subsidiary Fees and Other Fees” column below.
The Board encourages non-executive Directors to own securities in the Group to further align their interests with the
interests of other shareholders. Details of Directors’ shareholdings in the Group can be found in table 6a of this Report.
All shares held by Directors were acquired by the Directors on market.
Details of non-executive directors’ remuneration for the 2009 and 2010 financial years are set out in the following table:
Table 2a (A$)
Short Term Payments
Post Employment
Total
Base Board
Fee
Board
Committee
Fees
Subsidiary
Fees and
Other Fees
Superannuation
Other
J C Ballard (Chairman)(1)
2010
S Gerlach (Chairman)(8)
(retired 21 September
2010)
2010
2009(15mths)*
2009(12mths)**
J C Fox (Deputy Chairman)
(retired 18 December
2009)
2010
2009(15mths)*
2009(12mths)**
2010
2010
2009(15mths)*
2009(12mths)**
2010
2009(15mths)*
2009(12mths)**
2010
2009(15mths)*
2009(12mths)**
2010
2009(15mths)*
2009(12mths)**
2010
2009(15mths)*
2009(12mths)**
2010
2009(15mths)*
2009(12mths)**
M C Allison
C E Bright
R G Grigg(8)
I G MacDonald(6)
J H Ranck
A Salim
(resigned 30 October
2009)
G D Walters
(retired 31 March 2010)
R H Wylie
Total
46
60,227
350,000
437,500
350,000
28,068
162,500
130,000
80,454
90,000
112,500
90,000
90,000
112,500
90,000
90,000
112,500
90,000
90,000
112,500
90,000
7,500
112,500
90,000
45,000
112,500
90,000
0
0
0
0
0
0
0
6,641(10)
(3)
(3)
10,225
5,000
(3)
2,500
(5)
26,000
25,000
(5)
18,500
(5)
(6)
22,666
20,000
(6)
16,000
(6)
(2)
(2)
20,000
10,000
5,000
(2)
0
0
0
(7)
12,000
33,125
(7)
27,125
(7)
0
0
0
0
0
37,734
37,734
(4)
(4)
0
0
43,333
43,333
(3)
(3)
50,000
62,500
50,000
(5)
(5)
(5)
(6)
44,886
93,750
(6)
75,000
(6)
0
0
0
0
0
0
(7)
16,458
72,734
(7)
65,234
(7)
3,051
14,824
17,181
13,745
3,301
17,181
13,745
7,838
6,750
14,475
12,225
14,760
17,181
13,745
14,825
17,181
13,745
9,900
11,212
8,737
0
0
0
11,700
17,181
13,745
9,286
0
63,278
(9)
150,000
0
0
(9)
150,000
0
0
514,824
454,681
363,745
181,369
217,415
181,479
0
94,933
2,025
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
109,000
175,308
148,058
180,760
217,181
172,245
172,377
243,431
194,745
119,900
133,712
103,737
7,500
112,500
90,000
85,158
235,540
196,104
112,459
96,235
111,592
89,687
302,025
0
0
1,641,558
1,789,768
1,450,113
2010
80,454
22,719
2010
2009(15mths)*
2009(12mths)**
1,011,703
1,275,000
1,020,000
120,251
93,125
69,125
0
111,344
310,051
271,301
Notes:
(1) J C Ballard was appointed a director and Chairman on 20 September 2010 but received fees for providing advisory services to the Board
between 20 July 2010 and 19 September 2010.
(2)
J H Ranck was paid a pro-rated fee of $10,000 for the 6 months to 30 September 2009 ($5,000 to 30 June 2009) as a member of
both the Remuneration Committee and OH&S Committee. He also received $20,000 for the 12 months to 30 September 2010 as a
member of both the Remuneration Committee and OH&S Committee.
(3) C E Bright was an Elders Board representative on the main operating subsidiary board, Integrated Tree Cropping Ltd (ITC) (now known as
Elders Forestry Pty Ltd) until 13 February 2009, and received ITC subsidiary board fees of $33,333 and ITC Research and Development
Committee fees of $10,000. C Bright is also a member of the Nomination and Prudential Committee and received $10,000 for the financial
period (pro-rated fee of $5,000 for the 6 months to 30 September 2009, and $2,500 for the 3 months to 30 June 2009).
(4)
J C Fox sat on the main operating subsidiary board Elders Rural Services Ltd until February 2009 and received fees of $37,734 (pro-rated
for 6.5 months).
(5) R G Grigg is also an Elders Board representative on the main operating subsidiary board Futuris Automotive Group Ltd and received a
Futuris Automotive subsidiary board fee of $50,000 for the financial period ($62,500 for the 15 months to 30 September 2009 and
$50,000 to 30 June 2009). R Grigg is a member of the Board Audit and Compliance Committee for which he received $16,000 for the
financial period ($20,000 for the 15 months to 30 September 2009, and $16,000 to 30 June 2009). He is also a member of the OH&S
Committee and received $10,000 for the financial period (pro-rated fee of $5,000 for 6 months to 30 September 2009, and $2,500
to 30 June 2009).
(6)
I G MacDonald was an Elders Board representative on the main operating subsidiary board, Elders Financial Services Group Pty Ltd,
for which he received a subsidiary board fee of $93,750 for the 15 months to 30 September 2009 ($75,000 to 30 June 2009).
He is also a director of Elders Forestry Management Pty Ltd and APT Projects Pty Ltd for which he received $44,886 of director fees
for the financial period. Mr MacDonald is also an Elders’ representative on the board of Rural Bank Ltd (RB) in which Elders holds a
40% interest. Mr MacDonald received a RB board fee of $66,093 for the financial period ($81,900 for the 15 months to 30 September
2009, and $65,520 to 30 June 2009), but these fees are not included in the column “Subsidiary Fees & Other Fees” given they are
not paid by the Company. Mr MacDonald also received a fee of $16,000 for the financial period ($20,000 for the 15 months to
30 September 2009, and $16,000 to 30 June 2009) as a member of the Board Audit & Compliance Committee. He was also paid a fee
of $6,666 for the 8 months to 30 September 2010 as Chairman of the Remuneration Committee.
(7) G D Walters was Chairman of the Elders Board Audit & Compliance Committee and received a Committee fee of $12,000 for the financial
period ($30,000 for the 15 months to 30 September 2009, and $24,000 to 30 June 2009). Mr Walters was also an Elders Board
representative on the main operating subsidiary board Elders Financial Services Group Pty Ltd (EFSG) until 1 September 2008 and received
a pro-rata EFSG subsidiary board fee of $12,500 (for three months) and for his role as Chairman of the EFSG Audit Committee
(until 1 September 2008) received a pro-rata fee of $3,125. He was also an Elders Board representative on the main operating subsidiary
board Elders Rural Services Ltd until December 2008 and received pro-rata fees of $27,734 (for six months). Mr Walters also received
$30,000 for the financial period ($32,500 for the 15 months to September 2009 and $25,000 to 30 June 2009) for his role as Chairman
and trustee director on the Mastersuper board. He remains Chairman and trustee director on the Mastersuper board notwithstanding his
retirement as a director of Elders Limited.
(8) Messrs Gerlach and Grigg have chosen to salary sacrifice some or all of their short term payments into superannuation. For simplicity we
have not split the short term payments to disclose the salary sacrificed superannuation portion.
(9) Each director marked (9) had an entitlement of $150,000 paid on retirement. No retirement benefits are available to any continuing directors.
(10) M C Allison is a member of the OH&S Committee and received a fee of $6,641 (pro-rated for 10 months) for the financial period.
* Represents audited numbers for the 15 months to 30 September 2009.
** Represents audited numbers for the 12 months to 30 June 2009.
47
Section 3. Executive Director and Senior Executive Remuneration
The disclosure in this section relates to the remuneration of key management personnel of both the Company and
the consolidated entity (being those persons with authority and responsibility for planning, directing and controlling the
activities of the Company during the financial year).
Key management personnel for the purposes of this report include the following persons who were non-executive
directors and senior executives during the financial year:
Name
Non-executive Directors
Position held
Name
Position held
Senior Executives
John Ballard (appointed 20 September 2010)
Chairman
Malcolm Jackman
Chief Executive & Managing Director
Mark Allison
Charles Bright
Ray Grigg
Hutch Ranck
Director
Director
Director
Director
Mark Hosking
Chief Financial Officer
Mark de Wit
Managing Director Futuris Automotive
Vince Erasmus
Managing Director Elders Forestry
Sam McClure
Ian MacDonald
Director
Shaun Hughes
Rob Wylie
Director
Robert Tanti
Former Non-executive Directors
Stephen Gerlach
(retired 21 September 2010)
Former Executives
Chairman
Mike Guerin
Jim Fox (retired 18 December 2009)
Deputy Chairman
Anthoni Salim (resigned 30 October 2009)
Director
Graham Walters (retired 31 March 2010)
Director
A. Board policy
Group General Manager Strategy and
Business Development
(commenced role on 21 December 2009)
Chief Information Officer
(commenced role on 1 January 2009)
Group General Manager Human Resources
(commenced role on 4 May 2009)
Chief Operating Officer Rural Services
(ceased employment on 1 July 2010)
The Board seeks to align employee remuneration with the commercial needs and performance of each operating business
and the objectives of the consolidated entity as a whole.
The Board has delegated to the Remuneration Committee oversight of the Company’s remuneration policies and practices.
Remuneration polices and practices are benchmarked to the market by external, independent consultants to ensure that
remuneration for executives meets a range of criteria, including:
• that executives are appropriately rewarded having regard to their role and responsibilities
• an appropriate balance between fixed and “at risk” remuneration components is maintained and in relation to the “at risk”
component, an appropriate balance between short term and long term incentives
• performance measures reflect long term drivers of shareholder value
• paying for performance, where superior or upper quartile remuneration is only paid for demonstrable superior
performance
• remuneration is competitive when compared to both internal and external relativities.
The Board reviews and approves the performance and remuneration plans and outcomes for the CEO on the
recommendation of the Chairman and the Remuneration Committee on an annual basis. The plans and outcomes for the
CEO’s direct reports are reviewed and approved annually by the Remuneration Committee on the recommendation of the
CEO and the CEO approves the plans and outcomes for senior executives on the recommendation of the business unit
Managing Directors or relevant line manager. The Remuneration Committee reviews the key elements of employment
contracts for business unit Managing Directors, any non-standard contracts (if any) and the CEO’s recommendations for
equity incentives to senior executives. The Remuneration Committee also reviews incentive programs and employment
terms offered to the wider group.
48
B. Remuneration structure
The remuneration structure has been designed to support the Board’s remuneration policy. Executives’ remuneration is
made up of the following three main elements:
• Total Fixed remuneration – including salary, non-monetary benefits (including Fringe Benefits Tax (FBT) grossed-up) and
superannuation;
• Short-term incentives; and
• Long-term incentives.
A description of each component is set out below. Remuneration packages are strategically structured to ensure a portion of
an executive’s reward depends on meeting individual, business unit or group targets and objectives, including maximising
returns for shareholders. Generally, the portion of ‘at risk’ remuneration (being short and long-term incentive elements)
increases with seniority.
Table 3a. Target Remuneration Structure
d
r
a
w
e
R
l
a
t
o
T
f
o
%
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
41%
32%
27%
23%
25%
38%
33%
27%
27%
39 %
42%
46%
19 %
19 %
62%
Long-term incentive
Short-term incentive
Fixed Remuneration
CEO
CFO
BUMDs
Group Executive
Management
Senior
Management
Management Level
This table highlights the targeted proportion of fixed and “at risk” remuneration components at different executive levels.
C. Total Fixed Remuneration (TFR)
Total Fixed Remuneration is made up of base salary, retirement benefits and any other benefits that the executive has
nominated to receive as part of his or her package. These benefits may include motor vehicle leases, car parking and any
additional superannuation contributions beyond the mandatory 9% Company contributions.
Executives may also receive non-monetary benefits in addition to their stated total remuneration. These may include
miscellaneous benefits, and FBT associated with such benefits.
The level of fixed remuneration is set by reference to market activity for like positions and is determined by the level of
knowledge required to perform the position, the problem solving complexities of the position, level of autonomy to make
decisions and the particular capabilities, talents and experience the individual brings to the position.
Fixed remuneration is reviewed annually and is adjusted to, changes in market relativities, company performance and the
executive’s performance over the previous year, as assessed through the Company’s Performance Development Program
(PDP) (formerly known as Performance Management Evaluation or PME). The PDP assesses employee performance against
a number of agreed key performance indicators.
49
D. Short-term incentives
All executives participate in either an Elders’ Group or a business unit Short Term Incentive Program (STIP). A summary
of the key features of the STIP are set out in the table below:
Objective of STIP
STI objectives are to:
What KPIs are used?
• focus participants on achieving financial year performance goals which contribute to
sustainable shareholder value; and
• provide significant bonus differential based on performance against challenging commercial
personal, people and safety targets.
The KPIs used to assess group performance may vary from year to year and from business to
business, depending on changing business objectives. Both financial and non-financial KPIs
include a target and stretch component to drive performance. Group-wide performance goals are
set for the CEO and CFO and corporate office executives and business unit specific performance
goals are established for executives in each of the business units.
What financial KPIs are used?
Business financial KPIs include Earnings Before Interest and Tax (EBIT) and cash flow
measured as Earnings Before Interest Tax Depreciation and Amortisation. A minimum of 60% of
KPIs at all levels are based on financial measures.
What non-financial KPIs are used?
Non-financial KPIs may include performance measures relating to safety, market, operations
and people.
How and when is performance
assessed?
Exercise of discretion
Service Condition
Following the signing of the Group’s accounts at the end of each financial year each executive’s
performance is assessed by his or her immediate manager against the financial results of the
Group and/or the relevant businesses and against the achievement of personal non-financial
KPIs established at the start of the financial period. Assessments are made on the basis
of whether threshold targets or stretch targets are met and then recommendations for STI
payments are referred to the Chief Executive to ensure a consistent approach and to the
Remuneration Committee for review and approval.
The Chief Executive, in conjunction with the Chairman, has the authority to make discretionary
bonus payments to executives (except in relation to himself) when superior performance
warrants additional reward.
Executives who become eligible to participate in the STIPs during the course of the year, either
through joining the Group or being promoted within the Group may be eligible to receive pro rata
entitlements as long as they have been in the role for at least 3 months.
While the Corporate and Business Unit STIPs share a number of common features the incentive opportunity
and application of performance KPIs varies across the various levels in the executive group. The differences are
highlighted below:
STI Opportunities
(as % of base salary)
Financial vs
Non-financial KPIs
CEO
CFO
Business Unit MDs
Group Management
Executives
Threshold: 0%
Max 120%
Financial 60%
(Budgeted Group EBIT,
Balance Sheet
& Cash flow)
Non-financial 40%
Threshold: 0%
Max 100%
Threshold: 0%
Max 80%
Threshold: 0%
Max 60%
Financial 60%
(Budgeted Group EBIT,
Balance Sheet
& Cash flow)
Financial 60%
(Budgeted Group EBIT,
Balance Sheet
& Cash flow)
Financial 60%
(Budgeted Group EBIT,
Balance Sheet
& Cash flow)
Non-financial 40%
Non-financial 40%
Non-financial 40%
STI Rewards paid in respect
of 2010 financial year
Discretionary Bonus
Nil
Nil
Nil
Nil
$266,500 paid to Mark
DeWit
Nil
Nil
Nil
50
E. Long-term incentives
The Company has a number of long term equity participation and incentive programs in place. These plans are
summarised below:
Number of
Current
Participants as
at 30 September
2009
Number of
Current
Participants as
at 30 September
2010
Number of
Shares/Options/
Rights
Outstanding as
at 30 September
2009
Number of
Shares/Options/
Rights
Outstanding as
at 30 September
2010
Nil
1
Nil
856,808
94
75
2,440,300
1,380,300
3,276
3,276
2,023,846
2,023,846
Name
of Plan
Purpose
Eligibility
Criteria
Elders
Long Term
Incentive
Rights Plan
(ELTIRP)
Elders
Employee
Share
Option Plan
(EESOP)
Elders Loan
Share Plan
(ELSP)
Invitation
only
for eligible
executives.
Invitation
only for
eligible group
executives.
Invitation
only. Offers
range from
$3,000 to
$17,500 per
annum per
employee
depending on
seniority and
current year
performance.
Rights to Elders’ shares are
granted to selected eligible
executives at the 10 day Volume
Weighted Average Price (VWAP)
subject to a minimum of 12
months service and performance
conditions (see below)
determined by the Board at the
time of grant.
This plan replaces the EESOP
and the ELSP described below.
EESOP is a qualifying Division
13A (ITAA 36) employee
option scheme. Options to
acquire Elders shares are
granted to selected eligible
group executives at market
(or premium) price, subject to
a minimum of three years
service and (with the exception
of general issues) performance
of TSR relative to a comparator
group in the ASX 200.
Operation of the EESOP
was suspended in 2009 and will
be discontinued.
The ELSP is designed to provide
an equity participation
opportunity for all selected
eligible group employees,
including executives. Shares are
provided and paid for by way of
a non-recourse, interest free
loan. Dividends are used to
repay the loan. Shares do not
vest for three years. There are
no performance conditions
once issued.
Operation of the ELSP was
suspended in February 2009
following significant
deterioration in the Elders share
price. No shares were issued
under the ELSP during the
financial year.
The ELSP was suspended in
2009 and will be discontinued.
51
E. Long-term incentives (continued)
Name
of Plan
Purpose
Eligibility
Criteria
Number of
Current
Participants as
at 30 September
2009
Number of
Current
Participants as
at 30 September
2010
Number of
Shares/Options/
Rights
Outstanding as
at 30 September
2009
Number of
Shares/Options/
Rights
Outstanding as
at 30 September
2010
64
53
96,498
34,509
All
permanent
employees.
Nil
16
Nil
2,118,911
By
invitation
only
Elders
‘Save as
You Earn’
Plan
(SAYE)
Retention
Plan
(general)
The SAYE plan is a qualifying
Division 13A (ITAA 36) deferred
benefit employee
share scheme, designed to
enable employees to ‘sacrifice’
remuneration entitlements on a
pre-tax basis and receive Elders
shares in-lieu. Tax on these
shares can be deferred for up to
10 years. Elders makes no
contribution to this plan other
than supporting the costs of
administration.
Operation of the SAYE was
suspended in February 2009
following significant
deterioration in the Elders share
price. No shares were issued
under the SAYE Plan during the
financial year.
To retain the services of
certain key employees during
the period of Company “turn-
around”. The Plan recognises
that Australian economic
conditions are generally good
and quality employees have
alternative employment options.
It is important for Elders to
preserve its senior management
team to ensure successful
execution of its business
strategies. This scheme provides
for the issue of service rights to
selected executives in 3
tranches in August 2010,
August 2011 and August 2012
for vesting on
1 August 2013. Shares will
automatically issue on the
vesting date assuming continued
employment (or earlier
termination of employment for a
reason other than resignation or
dismissal for poor performance
or misconduct) and may vest
earlier in the case of takeover.
Notes: All share and option numbers in the EESOP, ELSP and SAYE plans have been adjusted for the effect of the 10:1 share
consolidation conducted by the Company during the year.
The EESOP was the principal Long Term Incentive Plan (LTIP) for executives designed to reward executives for delivering
long-term shareholder returns. The plan was last approved by shareholders in October 2007. Under the plan, participants
are issued with employee options which may create an entitlement to newly issued ordinary shares in the Company if, in
the case of some issues, certain performance conditions are met (and subject to continued employment), or in the case of
other issues, solely upon exercise of the option during an exercise period.
EESOP option allocations are generally approved by the Remuneration Committee following the signing of the Company’s
annual accounts with options being issued following the annual general meeting.
52
Given changes in taxation treatment and general market practices, the Company has determined that the EESOP is no
longer the most appropriate form of long term equity incentive for senior executives. As a result shareholders approved a
performance rights based scheme for the CEO at the Annual General Meeting of the Company on 18 December 2009 and
the Company has resolved to provide a performance rights scheme for other senior executives for 2011 and future years.
Following the resolution of Shareholders at the Company’s 2009 AGM to approve the issue of performance rights to
Mr Jackman, Mr Jackman agreed to forego all rights to options granted to him under the EESOP. As a result, Mr Jackman
holds no employee options over shares in the Company.
As a replacement to the EESOP a number of senior executives (including all those who are key management personnel)
have a contractual right to participate in performance rights based LTIP up to certain percentages of total fixed
remuneration (which percentage differs by employee). However, notwithstanding the right to participate in the LTIP, all
awards under the senior executive LTIP (except the CEO’s LTIP which was approved by shareholders at the Company’s
2009 AGM) are at the Board’s discretion.
The specific performance hurdles and long term incentive allocations vary between the CEO and other senior executives.
The relationship between the performance rights LTIP and Elders’ financial performance are set out below. The Company
has adopted a relative Total Shareholder Return performance hurdle to align the interests of the Chief Executive Officer
and senior management with those of shareholders. This performance measure was selected following consultation with
external remuneration experts as being the most appropriate and widely used measure of shareholder value.
Performance Conditions under the CEO and Executive LTIPs
Issue Date
Number of Performance
Rights Granted
Denominator
Hurdle Description
CEO LTIP Grants
As of
10 November
2009
856,808
performance rights
$1.776
Pursuant to the approval granted by the Shareholders at the 2009
AGM, the CEO was granted performance rights issuing as at
10 November 2009, and to be issued on or about 10 November 2010
and on or about 10 November 2011. Each performance right, which
is issued at no cost to Mr Jackman, will, if exercisable, constitute the
right to acquire 1 ordinary share in the Company. The issue as of
10 November 2009 resulted in 856,808 performance rights being
issued. These rights will be tested as set out below.
Tranche 1 (2009 Allocation)
TSR performance is measured over the two years from 10 November
2009 to 10 November 2011.
Tranche 2 (2009 Allocation)
TSR performance is measured over the three years from 10 November
2009 to 10 November 2012.
Tranche 3 (2009 Allocation)
TSR performance is measured over the four years from 10 November
2009 to 10 November 2013.
For performance rights to become exercisable the percentile ranking
of Elders growth in its TSR relative to such growth in the ASX/S&P
200 Accumulation Index must equal or exceed the prescribed ranking,
as follows:
Hurdle Rate
Less than 50th percentile (median)
At the 50th percentile
50th to 75th percentile
At 75th percentile
% of Tranche that vests
Nil
50%
Pro-rata
100%
53
CFO and Business Unit Managing Directors EESOP Grants
The Board did not approve any issues of options in 2010 and presently does not intend to approve any issues in 2011.
Key Functional Managers and Other Key Managers EESOP Grants
Once again, the Board did not approve any issue of options in 2010 and presently does not intend to approve any issues in 2011.
Key Management Personnel LTIP (Performance Rights) Grant
The executive performance rights LTIP operates in the same way as the CEO performance rights LTIP, except that the comparator group
for the purposes of the executive LTIP is presently a subset of the ASX200 Accumulation Index comprised of the Company and its
competitors (AWB Limited, Graincorp Limited, Gunns Limited, Incitec Pivot Limited and Nufarm Limited). The Board reserves the right
to alter the comparator group if the group ceases to be appropriate.
The maximum percentage of total fixed remuneration (TFR) of the grants varies by employee, the more senior the executive the greater
the percentage.
Once again, the Board did not approve the issue of any performance rights to executives (other than to Mr Jackman) in the financial year.
The Company’s Securities Trading Policy prohibits members of management and senior executives from entering into
arrangements to protect the value of unvested EESOP awards or performance rights. This includes entering into contracts
to hedge their exposure to options granted under the EESOP or performance rights LTIP.
Further, Key Management Personnel are not permitted to deal in the Company’s securities without prior permission from
the Company and are required to disclose all dealings on an annual basis. Adherence to this policy is monitored on an
annual basis by the Company Secretary.
Relationship between Elders’ Financial Performance and Executive Rewards
Short Term Incentives
Short Term Incentives (STIs) are paid to executives on achievement of a range of financial and non-financial performance
targets. The following table shows the Company’s performance in relation to a number of financial and operational
performance measures over a 5 year period.
Performance Measure
($ millions)
2010
2009
(to 30/9/09)
2009
(to 30/6/09)
2008
2007
2006
Sales Revenue
2,154.4(1)
3,540.1
2,902.0
3,312.1
3,228.5
3,355.8
Underlying EBIT
Statutory Profit
Cashflow from
Operating Activities
(1) Not an STI measure
34.0
(217.6)
(110.5)
40.3
(466.4)
(523.3)
16.8
(415.4)
(370.8)
171.7
36.4
(14.1)
169.4
105.4
85.0
157.1
87.4
127.4
Futuris Automotive was the only business unit that met its performance targets for the financial period. As a consequence
only senior executives from that business were allocated STIs in respect of the period.
Long Term Incentives
Long Term Incentives (LTIs), other than general issues of options under the EESOP and service rights issued under the
Retention Plan only vest when the Company achieves superior returns for shareholders as measured by Relative Total
Shareholder Return (TSR). TSR is the total return to shareholders over a period based on the capital gain and dividends
paid for that period, equal to the following formula:
TSR = (PE-PB+D)/PB
with:
PB = share price at beginning of period
PE = share price at end of period
D = dividends paid
54
(a) Relative Total Shareholder Return (TSR)
Elders TSR has underperformed the ASX/S&P 200 Accumulation Index (All and Industrials) and the selected Peer Group (1)
over the most recent financial period and on a cumulative basis over the period from 2005 to 2010.
Elders’ relative TSR performance against two comparator groups (ASX 200/S&P) and the selected Peer Group (1) is set
out as follows:
120%
80%
40%
0%
(40%)
%
R
S
T
e
t
u
l
o
s
b
A
(80%)
2005
2006
2007
2008
2009
2010
Elders
ASX200 Industrials
ASX200
Peer Companies (mean)
Notes:
160%
120%
80%
40%
0%
(40%)
(80%)
(120%)
)
%
(
R
S
T
e
v
i
t
a
l
u
m
u
C
(160%) 2005
2006
2007
2008
2009
2010
Source: Capital IQ
1. Peer Group companies are AWB, Graincorp, Gunns, Incitec Pivot and Nufarm.
2. Each period consists of 12 months total shareholder return from 1 July to 30 June except 2009 year which represents
15 months from 1 July 2008 to 30 September 2009 (to account for change in Elders financial year end).
Dividends and share price are the factors that contribute to the calculation of TSR. The history of both for the last 5 years
is set out below:
Dividend History 2005 - 2010
Dividend
2010
2010
2009
2009
2008
2008
2007
2007
2006
2006
2005
2005
Type
Ordinary
- final
Ordinary
- interim
Ordinary
- final
Ordinary
- interim
Ordinary
- final
Ordinary
- interim
Ordinary
- final
Ordinary
- interim
Ordinary
- final
Ordinary
-interim
Ordinary
- final
Ordinary
- interim
Payment Date
Amount
Per Share
-
Nil
Franking Rate
-
-
Nil
-
-
Nil
-
Share Price History 2005-2010
- 28/10/08
1/4/08 24/10/07 5/04/07 25/10/06
3/4/06 26/10/05
4/4/05
Nil
0.0550 0.0400
0.0550 0.0400
0.0500 0.0400
0.0500 0.0400
-
100.00
100.00
100.00
100.00
100.00 100.00
100.00
100.00
$
30
25
20
15
10
5
0
5
0
-
l
i
r
p
A
5
0
-
y
l
u
J
5
0
-
y
r
a
u
n
a
J
5
0
-
r
e
b
o
t
c
O
6
0
-
y
r
a
u
n
a
J
6
0
-
l
i
r
p
A
6
0
-
y
l
u
J
6
0
-
r
e
b
o
t
c
O
7
0
-
y
r
a
u
n
a
J
7
0
-
l
i
r
p
A
7
0
-
y
l
u
J
7
0
-
r
e
b
o
t
c
O
8
0
-
y
r
a
u
n
a
J
8
0
-
l
i
r
p
A
8
0
-
y
l
u
J
8
0
-
r
e
b
o
t
c
O
9
0
-
y
r
a
u
n
a
J
9
0
-
l
i
r
p
A
9
0
-
y
l
u
J
9
0
-
r
e
b
o
t
c
O
0
1
-
y
r
a
u
n
a
J
0
1
-
l
i
r
p
A
0
1
-
y
l
u
J
0
1
-
r
e
b
o
t
c
O
55
(b) Other LTIP Performance Hurdles for Senior Executives
Because financial performance hurdles were not met for the Group and all businesses no LTIP performance options vested
in respect of the current financial period.
(c) Futuris Automotive Exit Incentive Plan
The company has in place a long term incentive plan for Futuris Automotive Interiors (FAI) which seeks to reward the FAI
executive team for increases in the market value of the business over the period to 30 September 2013. LTI awards vest
either at the end of the plan period or on the sale of the business.
(d) Review of Long Term Incentives
The Board and Remuneration Committee are aware that for an incentive plan to be effective in retaining and providing
incentive to executives it must reward senior executives for delivering superior results. At present the exercise prices of
options issued under the Company’s LTIP range from $12.90 to $25.40 leaving little or no opportunity for executives to
benefit from the plans even if they achieve their respective performance hurdles. Accordingly, as discussed earlier in this
report, the Remuneration Committee and the Board resolved during the year to replace the existing option plan with a
new performance rights LTIP for senior executives described above.
The Company anticipates that the majority, if not all, the executive options on issue will pass their relevant expiry dates
unexercised given the effect of the consolidation of the Company’s shares undertaken in the financial period on the
exercise price of those options.
Section 4. Nominated Executives’ Contract Terms
Formal employment contracts have been entered into with the Chief Executive and each of the 7 executive key management
personnel. A summary of the key terms of those employment contracts for nominated executives is outlined below.
Contracts for nominated executives have no fixed term. Grants pursuant to the various Short Term Incentive Plans are at
the Board’s discretion and are capped at a contractual maximum for relevant employees. Grants pursuant to the Long Term
Incentive Plans are also at the Board’s discretion subject to shareholder approval in the case of the Chief Executive, and
capped at the contractual maximum for other participants. Participants who cease employment before either the
performance or service conditions have been met will forfeit all unvested entitlements, unless otherwise determined by the
Board in circumstances such as death, redundancy, total and permanent disability and retirement.
Elders may terminate employment contracts immediately for cause, in which case the executive is not entitled to any
payment other than the value of fixed remuneration up to the termination date. The Board, following the recommendation
of the Remuneration Committee, may amend the terms of the Chief Executive’s employment contract. The Chief Executive,
in consultation with the Chairman, has the authority to amend the terms of employment contracts of his direct reports,
where circumstances warrant.
Table 4a. Summary of the key terms of employment contracts for nominated executives
Name
Employing
Company
Date of
Contract
Termination
by Elders
(without
cause)
Termination
by
Employee
Termination Payments
(only where Termination
by Company)
Short and Long Term Incentives
(refer to sections 3D and 3E above)
M Jackman
Elders Limited February
2010
12 months
notice
12 months
notice
M Hosking
Elders Limited 14 April
2009
12 months
notice
6 months
notice
Payment in lieu
of notice based on
Base Salary
Discretion of Board
to pay portion of
STI and LTI
Payment in lieu
of notice based on
Base Salary
Discretion of
CEO to pay portion
of STI and LTI
STI: May earn up to 120% of
Total Fixed Remuneration if Elders
Limited achieves financial and
non-financial KPIs
LTI: May earn up to 150% of Total
Fixed Remuneration in Performance
Rights if Elders Limited achieves
financial and non-financial KPIs
STI: May earn up to 100% of fixed
remuneration if business unit achieves
agreed KPIs and outperforms
budget EBIT
LTI: May earn up to 60% of Total
Fixed Remuneration in Performance
Rights if Elders Limited achieves
financial and non-financial KPIs
56
Table 4a. Summary of the key terms of employment contracts for nominated executives (continued)
Name
Employing
Company
Date of
Contract
Termination
by Elders
(without
cause)
Termination
by
Employee
Termination Payments
(only where Termination
by Company)
Short and Long Term Incentives
(refer to sections 3D and 3E above)
M de Wit
Futuris
Automotive
Group Ltd
1 January
2009
3 months
notice
3 months
notice
Payment in lieu
of notice based on
Base Salary
STI: May earn up to 80% of fixed
remuneration plus superannuation if
business unit achieves budget EBIT
V Erasmus
Elders
Forestry
Pty Ltd
23 March
2006 (as
amended)
12 months
notice
6 months
notice
S McClure
Elders Limited 7 November
2005
12 months
notice
6 months
notice
S Hughes
Elders Limited 21 July
2008
12 months
notice
6 months
notice
Discretion of Board
to pay portion of
STI and LTI
Payment in lieu
of notice based on
Base Salary
Discretion of CEO
to pay portion of
STI and LTI
Payment in lieu
of notice based on
Base Salary
Discretion of CEO
to pay portion of
STI and LTI
Payment in lieu
of notice based on
Base Salary
Discretion of CEO
to pay portion of
STI and LTI
R Tanti
Elders Limited 4 May 2009 12 months
notice
6 months
notice
Payment in lieu
of notice based on
Base Salary
Discretion of CEO
to pay portion of
STI and LTI
Payment in lieu
of notice based on
Base Salary
Discretion of CEO
to pay portion of
STI and LTI
M Guerin1
Elders Rural
Services Ltd
1 March
2008
12 months
notice
6 months
notice
Notes:
1 M Guerin ceased employment on 1 July 2010
LTI: May earn from 0.5 to 5 times
fixed salary under Futuris Auto Exit
Incentive Scheme based on maximum
increase in value of business over
the period to 30 September 2013
STI: May earn up to 80% of fixed
remuneration if business unit achieves
agreed KPIs and outperforms budget
NPAT
LTI: May earn up to 60% of Total
Fixed Remuneration in Performance
Rights if Elders Limited achieves
financial and non-financial KPIs
STI: May earn up to 60% of fixed
remuneration if the group achieves
agreed KPIs and outperforms budget
EBIT
LTI: May earn up to 60% of Total
Fixed Remuneration in Performance
Rights if Elders Limited achieves
financial and non-financial KPIs
STI: May earn up to 60% of fixed
remuneration if the group achieves
agreed KPIs and outperforms
budget EBIT
LTI: May earn up to 60% of Total
Fixed Remuneration in Performance
Rights if Elders Limited achieves
financial and non-financial KPIs
STI: May earn up to 60% of fixed
remuneration if the group achieves
agreed KPIs and outperforms
budget EBIT
LTI: May earn up to 60% of Total
Fixed Remuneration in Performance
Rights if Elders Limited achieves
financial and non-financial KPIs
STI: May earn up to 60% of fixed
remuneration if business unit
achieves agreed KPIs and outperforms
budget EBIT
LTI: Awarded 750,000 options
(250,000 pa) under EESOP with
vesting subject to meeting budget
EBIT performance hurdle.
57
Section 5. Remuneration Disclosure Tables
Table 5a. Details of executive directors’, key management personnel and the five highest paid executives’ remuneration for the
2009 and 2010 financial year.
(A$)
Short Term Payments
Value of Share Based
Incentives
Long Term
Payments
Post
Employment
Total
Remuneration
Total
Performance
Related
Base
Salary
Bonus
Other
Non
Monetary
Options(1) Performance
Rights
Shares
M Jackman
2010
2009(15mths)*
2009(12mths)**
1,012,680
952,899
702,899
0
300,000
0
2,904
0
0
1,017,083 (7)
472,917
408,227
34,841
-
-
M Hosking (2) 2010
2009(15mths)*
2009(12mths) **
630,533
277,836
128,753
0
65,000
0
M de Wit
V Erasmus
2010
2009(15mths)*
2009(12mths)**
641,250
731,885
605,556
266,500 (6)
0
0
2010
2009(15mths)*
2009(12mths)**
523,094
689,332
548,588
0
193,000
0
2,904
0
0
0
43,791
40,742
6,025
15,167
15,167
0
0
0
26,243
44,229
37,668
5,931
62,131
60,649
M Guerin (3)
2010
2009(15mths)*
2009(12mths)**
1,178,040
738,975
588,975
0
50,000
0
20,928
57,007
50,757
(73,290)
14,827
11,862
S McClure (4) 2010
S Hughes (4)
2010
R Tanti (4)(5)
2010
322,571
371,560
370,104
0
0
0
2,904
11,423
2,904
2,372
2,904
0
0
-
-
0
-
-
0
-
-
0
-
-
0
0
0
2010
2009(15mths)*
2009(12mths)**
5,049,832
3,390,927
2,574,771
266,500
608,000
0
41,473
115,965
106,666
989,762
594,104
518,406
34,841
0
0
Total
Notes:
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
Long
Service
Leave
15,599
0
0
3,206
0
0
54,057
26,394
17,563
12,433
11,094
8,580
0
0
0
11,128
3,453
1,922
101,798
37,488
26,143
Superannuation
50%
44%
36%
0%
18%
-
29%
5%
5%
1%
26%
9%
-6%
7%
2%
3%
1%
0%
14,645
13,277
9,661
30,390
25,005
11,588
25,000
53,294
46,564
13,440
17,360
13,745
40,850
63,500
50,000
2,097,752
1,739,093
1,120,787
667,033
367,841
140,341
1,013,050
899,593
748,093
560,923
988,084
646,729
1,166,528
924,309
701,594
14,446
362,472
33,440
413,729
14,645
389,575
186,856
172,436
131,558
6,671,062
4,918,920
3,357,544
(1) In accordance with AASB 2, the accounting value represents a proportion of the fair value of options that had not yet fully vested as at
the commencement of the financial year. Where applicable this value includes an assumption that options will vest at the end of their
vesting period even though the executive only receives this value if performance hurdles are met. The amount included as remuneration,
does not represent a cash payment, is not related to, nor indicative of the benefit (if any) that may ultimately be realised by each
Senior Executive should the options become exercisable. As required under the accounting standards, accounting expense that was
previously recognised as remuneration has been reversed where a KMP has left Elders, resulting in equity instruments being forfeited.
(2) M Hosking commenced employment with the Group on 14 April 2009.
(3) M Guerin ceased employment on 1 July 2010 and received a payment in lieu of notice of 12 months in accordance with his contract
of employment.
(4) None of S McClure, S Hughes or R Tanti were key management personnel in 2009.
(5) R Tanti commenced employment with the Group on 4 May 2009.
(6) Payment pursuant to the terms described in the STI terms on page 56 of this report.
(7) These options were forfeited upon approval of Mr Jackman’s Performance Rights LTIP at the 2009 AGM.
* Represents audited numbers for the 15 months to 30 September 2009.
** Represents audited numbers for the 12 months to 30 June 2009.
58
Section 6. Equity instruments in relation to directors and executives
Table 6a. Share movements non-executive Directors and executives
Shares
held
at start
of year
Shares
acquired
during
the year
as part of
remuneration
Shares
acquired
during the
year
through the
vesting of
LTIP
Other changes
during
the year
Other
shares
acquired/
(disposed
of) during
the year
Balance of
shares held
at end of
financial
period
Balance of
shares held
at date of
signing
Remuneration
Report
Non-executive Directors
J C Ballard (1)
2010
S Gerlach
2010
2009(15mths)*
2009(12mths)**
J C Fox
2010
2009(15mths)*
2009(12mths)**
C E Bright
2010
2009(15mths)*
2009(12mths)**
R G Grigg
2010
2009(15mths)*
2009(12 mths)**
I G MacDonald (4) 2010
2009(15mths)*
2009(12mths)**
J H Ranck (4)
2010
2009(15mths)*
2009(12mths)**
-
60,683
49,253
49,253
2,677
2,677
2,677
8,146
8,146
8,146
3,156
3,156
3,156
26,000
6,000
6,000
24,000
17,000
-
A Salim
G D Walters
2010
2009(15mths)*
2009(12mths)**
3,354,558
3,354,558
3,354,558
2010
2009(15mths)*
2009(12mths)**
16,100
2,100
2,100
M C Allison (10)
2010
2009 (15mths)
R H Wylie (10)
2010
2009 (15mths)
-
-
-
-
Total
2010
2009(15mths)*
2009(12mths)**
3,495,320
3,425,890
3,425,890
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
250,000
13,334
11,430
11,430
13,334
-
-
13,333
-
-
13,334
-
-
26,668
20,000
20,000
104,334
7,000
17,000
-
-
-
13,334
14,000
14,000
-
-
6,000
-
453,671
52,430
62,430
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
250,000(4)
250,000(4)
(2)
74,017
60,683
60,683
16,011
(3)
2,677
2,677
21,479
8,146
8,146
(4)
16,490
3,156
3,156
52,668
26,000
26,000
(2)
74,017
60,683
60,683
(3)
16,011
16,011
2,677
21,479
21,479
8,146
(4)
16,490
16,490
3,156
52,668
52,668
26,000
128,334
24,000
17,000
128,334
37,334
24,000
(5)
3,354,558
(5)
3,354,558
3,354,558
3,354,558
3,354,558
3,354,558
29,434
16,100
16,100
(6)
(4)
(4)
-
-
6,000
-
(6) (4)
(4)
29,434
29,434
16,100
-
-
6,000
6,000
3,948,991
3,948,991
3,495,320
3,594,657
3,485,164
3,495,320
59
Table 6a. Share movements non-executive Directors and executives (continued)
Executives
Shares held
at start of
year
Shares
acquired
during
the year as
part of
remuneration
Shares
acquired
during the
year
through the
vesting
of LTIP
Other
shares
acquired/
disposed
of during
the year
Other
changes
during
the year
Balance of
shares
held at end
of financial
period
Balance of
shares
held at date
of signing
Remuneration
Report
M Jackman (4)(7)
2010
2009(15mths)*
2009(12mths)**
M Hosking
2010
2009(15mths)*
2009(12mths)**
M de Wit
2010
2009(15mths)*
2009(12mths)**
V Erasmus
2010
2009(15mths)*
2009(12mths)**
M Guerin
2010
2009(15mths)*
2009(12mths)**
S McClure (8)
2010
S Hughes(8)
R Tanti(8)
Total
2010
2010
2010
2009(15mths)*
2009(12mths)**
13,000
3,000
3,000
0
0
0
5,203
5,203
5,203
1,998
1,998
1,998
27,070
27,070
27,070
1,030
10,420
0
58,721
37,271
37,271
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
94,168
10,000
10,000
0
0
0
13,334
0
0
0
0
0
26,667
0
0
6,667
6,667
0
147,503
10,000
10,000
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
107,168
13,000
13,000
0
0
0
18,537
5,203
5,203
1,998
1,998
1,998
107,168
39,668
13,000
0
0
0
18,537
18,537
5,203
1,998
1,998
1,998
53,737
(9)
53,737
(9)
27,070
27,070
7,697
17,087
0
206,224
47,271
47,271
53,737
27,070
7,697
17,087
0
206,224
113,940
47,271
Prior year shareholding comparatives have been adjusted for the effects of the share consolidation that took place on 30 December 2009.
Notes:
(1) J Ballard was appointed non-executive Director on 20 September 2010.
(2) S Gerlach retired as a director on 21 September 2010. Balance is at date of retirement.
(3) J Fox retired as a director on 18 December 2009. Balance is at the date of retirement.
(4) Shares are held in name of spouse, jointly held or family superannuation company in which the director is a beneficiary.
(5) A Salim resigned on 30 October 2009. Balance is at the date of resignation.
(6) G Walters retired 31 March 2010. Balance is at date of retirement.
(7) M Jackman also holds 1,000 Elders Hybrid convertible unsecured notes acquired on 11 September 2009.
(8) None of S McClure, S Hughes or R Tanti were key management personel in 2009.
(9) M Guerin ceased employment on 1 July 2010. Balance is at date of cessation.
(10) M Allison and R Wylie were both appointed non-executive Directors on 10 November 2009.
* Represents audited numbers for the 15 months to 30 September 2009.
** Represents audited numbers for the 12 months to 30 June 2009.
60
Table 6b. Aggregate Long Term Incentive Plan opportunities received and changes
Option holdings of Directors and Key Management Personnel
2010 (Number)
Balance at
beginning of period
Options Granted
Options Lapsed,
Surrendered or
foregone to
30 September
2010 (1)
Vested at 30 September 2010
Directors
M Jackman
Key Management Personnel
M de Wit
V Erasmus
M Guerin
M Hosking
S McClure (3)
S Hughes (3)
R Tanti(3)
Total
Notes:
400,000
50,000
150,000
150,000
0
22,500
15,000
0
787,500
Balance at
30 September 2010
Exercisable Not exercisable
0
0
0
0
0
0
0
0
0
400,000 (2)
0
0
10,000
40,000
20,000
0
150,000
75,000
150,000
0
0
0
0
0
0
22,500
15,000
0
0
0
5,000
0
0
560,000
227,500
100,000
0
0
0
0
0
0
0
0
0
(1) The value of options lapsed, surrendered or foregone was $1,584,858
(2) M Jackman agreed to forego these options upon approval of his Performance Rights LTIP at the 2009 AGM
(3) None of S McClure, S Hughes or R Tanti were key management personnel in 2009
(4) No options were exercised in the financial period.
2009 (Number)
Options Granted
Balance at
beginning of
period
Options Lapsed or
Surrendered
15 months to 30
September 2009
Vested at 30 September 2009
Balance at
30 September 2009
Exercisable Not exercisable
Directors
M Jackman
Key Management Personnel
M de Wit
V Erasmus
M Guerin
M Hosking
Total
0
400,000
50,000
75,000
75,000
0
0
75,000
75,000
0
200,000
550,000
0
0
0
0
0
0
400,000
0
50,000
20,000
150,000
150,000
0
0
0
0
750,000
20,000
0
0
0
0
0
0
61
Table 6c. – Current Long Term Incentive Plan opportunities (by offer)
Granted
Options
(Number) (1)
Vested
Options
(Number)
Grant Date
Value at
Grant
Date ($) per
share (2)
Value at
Grant
Date ($)
Exercise
Price ($)
First
Exercise
Date
Expiry and
Last Exercise
Date
Options as
% of
Remuneration
EESOP
2010
Directors
M Jackman
0
0
0
0
0
0
0
0
Key Management Personnel
M Hosking
M de Wit
V Erasmus
M Guerin(3)
S McClure (4)
S Hughes (4)
R Tanti(4)
2009
Directors
M Jackman
75,000
(Tranche 1 TSR)
M Jackman
125,000
(Tranche 2 TSR)
M Jackman
200,000
(Tranche 3 TSR)
Key Management Personnel
M Hosking
M de Wit
V Erasmus
M Guerin(3)
Notes:
0
0
75,000
75,000
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
-
-
-
-
-
-
-
-
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
26 Sep 08
3.30 247,500
13.20
26 Sep 10
26 Sep 12
14.2
26 Sep 08
3.70 462,500
13.20
26 Sep 11
26 Sep 13
26.6
26 Sep 08
3.90 780,000
13.20
26 Sep 12
26 Sep 14
44.9
-
-
0
0
0
0
0
0
-
-
-
-
28 Nov 08
0.24
17,793
12.90
28 Nov 11
28 Nov 13
28 Nov 08
0.47
35,585
12.90
28 Nov 11
28 Nov 13
-
-
3.4
1.2
(1) Exercisable subject to meeting performance hurdles.
(2) The valuation of the options issued to M Jackman was prepared independently based on the Trinomial methodology.
Valuation of options issued to other KMPs were based on the Black Scholes methodology.
(3) M Guerin ceased employment on 1 July 2010.
(4) None of S McClure, S Hughes or R Tanti were key management personnel in 2009.
62
Performance Rights LTIP
Granted
Performance
Rights (Number)
Vested
Performance
Rights (Number)
Grant Date Value at Grant
Date ($) per
right
Expensed at 30
September 2010
($)
Expiry and
Last Exercise
Date
Performance
Rights as % of
Remuneration
2010
Directors
M Jackman
(Tranche 1 TSR)
M Jackman
(Tranche 2 TSR)
M Jackman
(Tranche 1 TSR)
285,603
-
10 Nov 2009
0.11
15,423
10 Nov 2011
285,603
-
10 Nov 2009
0.12
10,886
10 Nov 2012
150
285,603
-
10 Nov 2009
0.12
8,532
10 Nov 2013
Key Management Personnel
M Hosking
M de Wit
V Erasmus
M Guerin(1)
S McClure (2)
S Hughes (2)
R Tanti(2)
2009
Directors
M Jackman
Key Management Personnel
M Hosking
M de Wit
V Erasmus
M Guerin
Notes:
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
-
-
-
-
-
-
-
-
-
-
-
-
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(1) M Guerin ceased employment on 1 July 2010.
(2) None of S McClure, S Hughes or R Tanti were key management personnel in 2009.
All equity transactions with directors and key executives other than those arising from the exercise of remuneration options have been
entered into under terms and conditions no more favourable than those the Group would have adopted if dealing at arms length.
Retention Plan
Granted Service
Vested
Grant Date
Value at Grant
Expensed at
Expiry and Last
Service Rights
Rights (Number)
Service Rights
Date ($) per
30 September
Exercise Date
as % of
(Number)
Rights(2)
2010 ($)(2)
Remuneration
2010
Key Management Personnel
M Hosking
S McClure
S Hughes
R Tanti
503,882
162,793
186,049
176,746
0
0
0
0
1 Aug 2010
1 Aug 2010
1 Aug 2010
1 Aug 2010
N/A
N/A
N/A
N/A
N/A
1 Aug 2013
N/A
N/A
N/A
1 Aug 2013
1 Aug 2013
1 Aug 2013
100
60
60
60
(2) A valuation of the service rights issued on 1 August 2010 has not been performed and as such no expense has been recognised at 30
September 2010. We note that any expense, had it been recognised, would be immaterial.
63
Discussion and Analysis
of 2010 Financial Results
Income statement
Elders recorded a statutory net loss after tax and
minority interests of $(217.6) million for the twelve
months to 30 September 2010.
The loss, after profit attributable to non-controlling
interest of $5.1 million included non-recurring
items totalling a loss of $(220.6) million. Exclusive
of these non-recurring items the Company
recorded an underlying net profit after tax of
$3.0 million.
Underlying Loss Reconciliation
Statutory loss after tax attributable
to members
Profit before tax of non-recurring items:
Forestry
Rural Services
Automotive
Corporate
Other non-core assets and
discontinued items
Net tax including write-off of
deferred tax asset
Loss after tax of non-recurring items
Underlying continuing profit after tax for
the year attributable to members
12 months
September
2010
$m
(217.6)
(166.5)
(10.0)
0.8
(18.0)
(22.0)
(4.9)
(220.6)
3.0
The non-recurring items of $(215.7) million before
tax comprise:
> Revision to property valuations in Central
Queensland and other provisions and charges
arising from the decision to terminate
plantations rendered uneconomic by
fungal infection and sell land holdings. The
revaluation of Central Queensland property to
net realisable value resulted in an impairment
of $(33.7) million. Other associated provisions
and charges totalled $(35.3) million. This
figure includes provisions to recognise onerous
leases, replant costs and write-offs in respect
of Elders Forestry’s own trees.
> $(43.8) million to write off goodwill attached
to the forestry business.
> $(32.4) million to write-off of the value of
the Company’s investment in Forest
Enterprises Australia, which entered
liquidation during the year.
> Other, including discount on acquisition of
remaining 50% share of Albany Chip Terminal,
totalling a net benefit of $7.9 million.
• Rural Services related items of $(10.0) million
before tax:
> impairment of assets of a net $(8.8) million;
offset by upgrade in value of abattoir interests.
> project and transformation costs of
$(9.3) million.
> other items totalling a net charge of
$(1.8) million, principally being legal
settlement.
> offset by favourable results from discontinued
operations of $9.9 million.
• Automotive results included a $0.8 million gain
before tax attributable to the write back of
previous impairments.
• Corporate items of $(18.0) million before tax
includes legal, project, refinance and other
costs and other goodwill and asset impairments.
• Forestry related items totalling $(166.5) million
• Other non-core assets and discontinued
before tax :
> impairments to accrued income estimates
of $(29.2) million to reflect revised production
estimates from fungus affected plantation
in Central Queensland and drought affected
plantations in Esperance.
operations totalling net $(22.0) million before
tax, principally relating to Air International
Thermal Systems and aquaculture assets.
64
Net tangible asset per share fell from $3.68 to
$1.31, with the movement reflecting the additional
equity issued during the period as part of the
recapitalisation process and the impact of the
current year’s trading and non-recurring items on
shareholders equity.
Statement of cash flows
Substantial improvement in Elders’ cash flow in
2010 has been masked by the impact of the on
balance sheet recognition during the period of the
Group’s debtor financing program of $111.2 million.
The one-off impact has:
• reduced cash flow from operating activities by
that amount, through an increase in working
capital in the Investment and Other segment; and
• resulted in a corresponding financing inflow.
Operating cash flows excluding this impact were
essentially break-even.
All operating divisions improved their operating
cash flow compared with the prior reporting period.
The principal item in the $81.1 million inflow
from Investing activities were proceeds of
$86.6m from the divestment of timber processing
assets to Gunns Ltd during the period.
The principal factors in the outflow of
$(258.5) million from Financing activities were
net cash receipts of $530.5 million from equity
issues (net of share issue costs of $19.5 million);
an inflow of $111.2 million associated with the
on-balance sheet treatment this year of the Group’s
debtor financing program and debt repayments
of $(896.3) million.
Balance sheet
Significant balance sheet items and
movements include:
• Cash was reduced from $367.9 million to
$80.0 million chiefly to achieve the debt
repayment undertaken within the refinancing
of corporate debt facilities.
• Current receivables of $471.2 million fell by
$64.6 million, chiefly due to the receipt of
proceeds from the sale of Timber processing
assets during the period.
• Other non-current receivables of $199.7 million
include accrued income from forestry operations
of $156.9 million.
• Investments recognised under equity method
reduced by $42.3 million principally due to
the write-off of the FEA shareholding and
consolidation of the Plexicor joint venture offset
by the addition of the Elders Insurance and
Elders Financial Planning JV’s.
• Property, plant and equipment rose $15.3 million
with increases from the acquisition of the
Albany Chip Terminal and the consolidation of
Plexicor assets offset by depreciation charges
during the year.
• Investment properties declined from
$283.8 million to $265.0 million due to
impairment of Central Queensland forestry land.
• Intangibles of $257.7 million increased by
$29.2 million principally due to the goodwill
taken on with the consolidation of Plexicor, offset
by the writing off of Forestry goodwill and sale
of Elders Financial Planning.
• Gross borrowings of $497.6 million are
$701.7 million lower than at the beginning of
the year. The reduction in debt resulted from
the recapitalisation and refinancing of the
Company at the beginning of the year, offset
in part by the additional $111.2 million of debt
associated with the previously off balance sheet
debtor financing program and the additional
debt of $64.3 million brought on balance sheet
at 30 September due to the consolidation of
the Plexicor business
65
10 Year Summary Financial Results
$ million year ended
unless otherwise indicated
Profitability
Sales revenue
Total revenue
Reported EBIT* by Segment
Rural Services 1
Financial Services 1
Forestry
Automotive Systems
Property
Other
Total EBIT
Underlying** EBIT
Underlying** profit before tax
Abnormal & non-recurring items
after tax
Tax expense
Minority interests
Statutory profit
Underlying profit after tax
Cash flow from operating
activities
Shareholders’ equity
Share information
Dividend per share (cents)
Interim
Final
Total
Dividend provided for or paid#
Hybrid distribution
Share price^ ($ per share)
Market capitalisation^
Sept 2010
2009
2008
2007
2006
June
2005
2004
2003
2002
2001
2,154.4
2,902.0
3,312.1
2,246.5
3,049.3
3,496.1
3,228.5
3,366.9
3,355.8
3,422.6
3,174.7
3,232.0
2,707.3
2,791.0
2,464.3
2,844.8
2,145.8
2,537.6
1,968.4
2,177.7
13.7
-
-158.6
15.9
-
-50.8
-179.8
34.0
4.0
-221.4
22.3
-63.4
-59.8
-
-61.7
-384.0
16.8
-35.0
20.9
22.4
61.4
26.2
-
-36.9
94.0
171.7
114.8
220.6
-388.5
-47.8
-6.2
-1.9
-415.4
-26.9
21.0
9.6
36.4
84.2
56.3
27.2
61.6
9.5
30.4
-16.2
168.8
169.4
129.4
-1.0
20.2
-2.8
105.4
106.4
65.8
26.9
39.9
16.3
16.3
-8.4
156.8
157.1
118.2
-0.9
-21.4
-9.0
87.4
88.3
-370.8
-14.1
85.0
127.4
747.8
1,296.2
1,196.6
1,227.9
-
-
-
-
8.2
0.28^
233.5
4.0
5.5
9.5
73.4
8.9
1.10^
858.4
4.0
5.5
9.5
65.4
8.9
2.78^
2,045
4.0
5.0
9.0
59.9
1.8
2.10^
1,514
4.0
-5.0
-217.6
3.0
-110.5
1,006.1
-
-
-
-
-
0.39^
175.0
26.8
-
32.2
99.3
-3.3
-11.8
143.2
131.3
106.4
-13.2
-47.9
-11.8
58.6
71.8
-9.3
970.3
4.0
5.0
9.0
53.7
-
1.82^
1,207
19.0
-
10.9
19.5
7.5
-5.0
51.9
96.1
86.1
-44.2
-12.2
-5.9
23.8
62.8
121.1
961.2
4.0
4.0
8.0
52.3
-
1.58^
1,041
152.3
47.3
101.0
-
-
19.3
0.3
-5.5
166.4
84.0
65.0
82.4
-38.5
-6.9
102.0
48.0
-55.6
843.6
4.0
4.0
8.0
50.6
-
1.68^
1,096
-
-
30.7
4.8
17.1
99.9
91.9
71.2
8.0
-13.9
-2.9
62.4
56.5
113.8
749.1
4.0
4.0
8.0
48.7
-
1.36^
836
-
-
22.4
1.4
3.2
128
88.6
65.2
39.4
-18.1
-6.5
80.0
55.8
188.8
723.0
4.0
4.0
8.0
48.4
-
2.64^
1,595
Number of shareholders^
40,075
33,361
32,187
31,956
33,337
35,394
40,028
42,625
45,508
30,844
Ordinary shares on issue^
448,598,480 819,165,045 780,545,644 735,640,128 720,911,089 663,243,696 659,138,427 652,293,766 614,870,776 605,136,707
Share issues
Share
placement
Share
purchase plan,
10:1 share
consolidation
Dividend
reinvestment
plan, (fully
underwritten)
Dividend
reinvestment
plan, (fully
underwritten),
conversion
of options and
convertible notes
Dividend
reinvestment
plan, conversion
of options
convertible
Convertible notes
conversion
Dividend
reinvestment
plan,
conversion
of options
institutional
placement
Dividend
reinvestment
plan,
conversion of
options
Dividend
reinvestment
plan,
conversion of
options
Dividend
reinvestment
plan, private
placement
conversion of
options
Dividend
reinvestment
plan,
conversion of
options
Dividend
reinvestment
plan,
conversion of
options
Ratios and statistics
Reported earnings per share
(cents)
Return on shareholders’ equity %
- Underlying profit
- Reported profit
Net tangible assets per share ($)
Gearing %†
Dividend payout ratio %
-51.1
-51.51
4.82
14.5
13.1
8.9
3.6
16.2
10.2
13.2
-
2.2
-55.6
0.37
104
-
0.4
-21.6
1.31
43%
-
6.5
2.8
1.14
40
197
8.9
8.8
1.22
31
68
7.2
7.1
1.17
16
69
7.4
6.0
0.82
32
65
6.5
2.5
0.94
0
222
5.7
12.1
0.88
0
49
7.5
8.3
0.8
16
78
7.7
11.1
0.85
47
61
Reported earnings before interest and tax (inclusive of non-recurring and abnormal items).
1 Prior to 2006 Financial services result reported within Rural Services.
*
** Underlying profit and earnings results excluding abnormal and non-recurring items (includes material profit/loss on asset disposal).
#
^ As at period end. Comparison between 2010 and preceding years should be taken into account 10:1 share consolidation completed January 2010.
† As measured by ratio of net interest-bearing debt/shareholders equity.
In respect of dividends declared for the financial year.
66
Elders Limited
Annual Financial Report
30 September 2010
Statement of Comprehensive Income
Statement of Financial Position
Statement of Cash Flows
Statement of Changes in Equity
Investments in Associates and Joint Ventures
Interest Bearing Loans and Borrowings
Investment Properties
Intangibles
Corporate Information
Statement of Significant Accounting Policies
Revenue and Expenses
Income Tax
Receivables
Livestock
Forestry
Inventory
Notes to the Financial Statements
1
2
3
4
5
6
7
8
9 Derivative Financial Instruments
10 Other Financial Assets
11
12 Property, Plant and Equipment
13
14
15 Other Assets
16 Trade and Other Payables
17
18 Provisions
19 Contributed Equity
20 Hybrid Equity
21 Reserves
22 Retained Earnings
23 Dividends
24 Non-controlling Interests
25 Cash Flow Statement Reconciliation
26 Results of Insurance Activities
27 Expenditure Commitments
28 Contingent Liabilities
29 Segment Information
30 Supplementary Statement of Net Debt
31 Auditors Remuneration
32
33 Key Management Personnel
34 Related Party Disclosures
35 Earnings Per Share
36 Financial Instruments
37 Share Based Payment Plans
38 Superannuation Commitments
Business Combinations –
39
Changes in the Composition of the Entity
Investments in Controlled Entities
40 Discontinued Operations
41 Parent Entity
42 Subsequent Events
Directors’ Declaration
Independent Auditor’s Report
68
69
70
71
72
72
94
96
98
100
100
101
102
102
103
106
108
109
113
113
114
117
120
121
121
123
123
124
124
125
126
127
128
130
132
133
141
145
147
148
154
155
156
159
161
161
162
163
67
Statement of Comprehensive Income
For the Year ended 30 September 2010
Continuing operations
Sales revenue
Cost of sales
Other revenues
Expenses
Share of net profits/(losses) of associates and joint ventures accounted for using the equity method
Profit/(loss) on sale of non current assets
Profit/(loss) from continuing operations before net finance costs and income tax expense
Interest revenue
Finance costs
Profit/(loss) from continuing operations before income tax expense
Income tax (expense)/benefit
Profit/(loss) from continuing operations after income tax expense
Net profit/(loss) of discontinued operations, net of tax
Net profit/(loss) for the period
Other comprehensive income/(loss)
Foreign currency translation
Cash flow hedge and fair value of derivatives
Recognition of share of reserve for losses in associate
Income tax on items of other comprehensive income
Other comprehensive income/(loss) for the period, net of tax
Consolidated
12 months
September
2010
$000
15 months
September
2009
$000
Note
3
3
3
11
3
3
3
4
2,069,053
2,948,767
(1,619,220)
(2,385,639)
39,067
47,009
(652,417)
(795,001)
33,854
28,438
(616)
11,427
(130,279)
(144,999)
25,328
9,315
(58,277)
(110,979)
(163,228)
(246,663)
(9,078)
49,169
(172,306)
(197,494)
40
(40,205)
(270,006)
(212,511)
(467,500)
(8,639)
(41)
4,753
(14,327)
730
448
(7,701)
4,024
(2,708)
(18,045)
Total comprehensive income/(loss) for the period
(215,219)
(485,545)
Profit/(loss) for the period is attributable to:
Non-controlling interest
Owners of the parent
Total comprehensive income/(loss) for the period is attributable to:
Non-controlling interest
Owners of the parent
Reported Operations
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
Continuing Operations
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
Discontinued Operations
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
The accompanying notes form an integral part of this statement of comprehensive income.
68
5,117
(1,074)
22
(217,628)
(466,426)
(212,511)
(467,500)
5,047
(919)
(220,266)
(484,626)
(215,219)
(485,545)
35
35
35
35
35
35
(51.1)¢
(576.5)¢
(51.1)¢
(576.5)¢
(41.7)¢
(242.3)¢
(41.7)¢
(242.3)¢
(9.4)¢
(334.2)¢
(9.4)¢
(334.2)¢
Statement of Financial Position
As at 30 September 2010
Current Assets
Cash and cash equivalents
Trade and other receivables
Livestock
Forestry
Inventories
Derivative financial instruments
Non current assets classified as held for sale
Other
Total Current Assets
Non Current Assets
Receivables
Forestry
Other financial assets
Investments in associates and joint ventures
Property, plant and equipment
Investment properties
Intangibles
Deferred tax assets
Other
Total Non Current Assets
Total Assets
Current Liabilities
Trade and other payables
Derivative financial instruments
Interest bearing loans and borrowings
Current tax payable
Provisions
Total Current Liabilities
Non Current Liabilities
Payables
Derivative financial instruments
Interest bearing loans and borrowings
Deferred tax liabilities
Provisions
Total Non Current Liabilities
Total Liabilities
Net Assets
Equity
Contributed Equity
Hybrid Equity
Reserves
Retained earnings
Total Parent Entity Equity Interest
Non-controlling Interests
Total Equity
The accompanying notes form an integral part of this statement of financial position.
Consolidated
September
2010
$000
September
2009
$000
Note
25(b)
79,985
367,868
5
6
7
8
9
11
15
5
7
10
11
12
13
14
4
15
16
9
17
4
18
16
9
17
4
18
19
20
21
22
24
471,160
535,785
48,654
43,752
2,144
-
175,217
225,524
-
7,820
18,111
16,599
23,132
23,202
818,403
1,220,550
199,722
232,689
25,051
21,980
27,014
17,549
240,878
283,224
129,651
114,381
265,022
283,797
257,733
228,520
118,917
115,040
18,919
18,459
1,277,873
1,320,673
2,096,276
2,541,223
356,979
362,731
3,601
-
279,486
854,069
51,558
38,047
72,007
107,197
763,631
1,362,044
1,186
-
17,703
49,924
218,149
345,204
64,881
69,186
24,633
13,206
326,552
477,520
1,090,183
1,839,564
1,006,093
701,659
1,273,863
737,513
145,151
145,151
(35,668)
(30,765)
(380,577)
(158,012)
1,002,769
693,887
3,324
7,772
1,006,093
701,659
69
Statement of Cash Flows
For the Year ended 30 September 2010
Cash Flows from Operating Activities
Receipts from customers
Payments to suppliers and employees
Dividends received
Interest received
Interest and other costs of finance paid
GST (paid)/refunded
Income taxes (paid)/refunded
Other operating inflows/(outflows)
Net operating cash flows
Cash Flow from Investing Activities
Payment for property, plant and equipment
Payment for investments
Payment for investment properties
Payment for controlled entities, net of cash acquired
Payment for design and development capitalised
Proceeds from sale of property, plant and equipment
Proceeds from sale of investments
Proceeds from sale of investment properties
Proceeds from disposal of controlled entity
Acquisition of non controlling interest
Loans to associated entities
Repayment of loans by associated entities
Loans to growers
Loans repaid by growers
Net investing cash flows
Cash Flow from Financing Activities
Proceeds from issue of shares
Share issue costs
Dividends and distributions paid
Dividends underwritten
Proceeds from borrowings
Repayment of borrowings
Principal repayments of lease liabilities
Partnership profit distributions
Net financing cash flows
Net increase/(decrease) in cash held
Cash/(overdraft) at the beginning of the financial year
Cash/(overdraft) at the end of the financial year
The accompanying notes form an integral part of this statement of cash flows.
70
Consolidated
12 months
September
2010
$000
Inflows
(Outflows)
15 months
September
2009
$000
Inflows
(Outflows)
Note
6,376,313
9,089,951
(6,473,637)
(9,525,238)
31,409
22,569
20,719
21,318
(53,425)
(110,826)
(21,606)
(22,914)
7,904
(9,058)
-
12,722
25(a)
(110,473)
(523,326)
39(a)
(18,260)
(24,783)
(1,600)
(20,134)
(6,354)
(39,975)
5,311
(4,249)
5,833
1,020
4,841
-
(4,422)
9,789
231,633
985
91,160
94,583
(7,796)
-
(4,450)
(36,999)
4,999
8,383
(959)
(16,352)
11,630
7,284
81,126
209,992
550,000
(19,500)
-
-
-
-
(38,281)
26,879
111,215
522,709
(896,324)
(69,442)
(481)
(3,446)
(1,464)
(3,242)
(258,536)
437,159
(287,883)
123,825
367,868
244,043
25(b)
79,985
367,868
Statement of Changes in Equity
For the Year ended 30 September 2010
Consolidated ($000)
Issued
Capital
Reserves
Hybrid
Equity
Retained
Earnings
Total Equity
Non-
controlling
interest
As at 1 October 2009
737,513
(30,765)
145,151
(158,012)
7,772
701,659
Profit/(loss) for the period
Other comprehensive income/(loss)
Foreign currency translation
Net gains/(losses) on cash flow hedges
Recognition of share of reserve for losses in associate
Income tax on items of other comprehensive income
Total comprehensive income/(loss) for the period
Transactions with owners in their capacity as owners:
Shares issued
Transaction costs on share issue (net of tax)
Partnership profit distributions
Acquisition of non-controlling interest
Excess paid for purchase of non-controlling interest
Recognition of share of reserved losses in associate
Cost of share based payments
Reallocation of equity
As at 30 September 2010
-
-
-
-
-
-
550,000
(13,650)
-
-
-
-
-
-
-
-
(217,628)
5,117
(212,511)
(8,569)
4,753
730
448
(2,638)
-
-
-
-
(5,480)
-
2,136
1,079
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(70)
(8,639)
-
-
-
4,753
730
448
(217,628)
5,047
(215,219)
-
-
-
-
-
162
-
(5,099)
-
-
550,000
(13,650)
(3,446)
(3,446)
(6,049)
(6,049)
-
-
-
-
(5,480)
162
2,136
(4,020)
1,273,863
(35,668)
145,151
(380,577)
3,324
1,006,093
As at 1 July 2008
694,118
16,190
145,151
353,991
86,726
1,296,176
-
-
(466,426)
(1,074)
(467,500)
Profit/(loss) for the period
Other comprehensive income/(loss)
Foreign currency translation
Net gains/(losses) on cash flow hedges
Recognition of share of reserve for losses in associate
Income tax on items of other comprehensive income
Total comprehensive income/(loss) for the period
Transactions with owners in their capacity as owners:
-
-
-
-
-
-
(196)
(14,327)
(7,701)
4,024
(18,200)
Business combinations
Cost of share based payments
Dividend reinvestment plan
Dividends to shareholders
Dividends underwritten
Hybrid equity distribution
Recognition of non-controlling interest on
controlled entity
Recognition of share of reserved losses in associate
Partnership profit distributions
As at 30 September 2009
-
(38,159)
446
9,404
16,070
-
26,879
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
155
(41)
-
-
-
(14,327)
(7,701)
4,024
(466,426)
(919)
(485,545)
-
-
-
(75,912)
(114,071)
-
-
9,850
16,070
(42,949)
(3,198)
(46,147)
-
(8,204)
-
-
26,879
(8,204)
-
4,317
5,576
-
4,317
5,576
-
(3,242)
(3,242)
737,513
(30,765)
145,151
(158,012)
7,772
701,659
The accompanying notes form an integral part of this statement of changes in equity.
71
Notes to the Financial Statements
For the Year ended 30 September 2010
Note 1. Corporate Information
This Annual Report provides the financial results of Elders Limited for the year ended 30 September 2010. During the previous financial
period the Group changed its reporting date from 30 June to 30 September. Accordingly comparative amounts include the financial results
for the 15 month period to 30 September 2009 and as such are not directly comparable to the current financial period.
The financial report of Elders Limited for the year ended 30 September 2010 was authorised for issue in accordance with a resolution of the
Directors on 15 November 2010.
Elders Limited is a company limited by shares incorporated in Australia whose shares are publicly traded on the Australian Stock Exchange.
The nature of the operations and principal activities of the Group are described in the Directors’ report and note 29.
Note 2. Statement of Significant Accounting Policies
(a) Basis of preparation
The financial report is a general-purpose financial report, which has been prepared in accordance with the requirements of the Corporations
Act 2001, Australian Accounting Standards and other authoritative pronouncements of the Australian Accounting Standards Board (AASB).
This report has been prepared on a historical cost basis, except for investment properties, derivative financial instruments and available for
sale financial assets that have been measured at fair value, and biological assets that are measured at fair value less estimated point of
sale costs.
The financial report is presented in Australian dollars and all values are rounded to the nearest thousand dollars ($’000) unless otherwise
stated under the option available to the Company under ASIC Class Order 98/0100. The Company is an entity to which the class order applies.
(b) Statement of compliance
The financial report complies with Australian Accounting Standards and International Financial Reporting Standards (IFRS) as issued by the
International Accounting Standards Board.
(c) New Accounting Standards and Interpretations
Changes in accounting policy and disclosure
The accounting policies are consistent with those of the previous financial period except as follows:
The Group has adopted the following new and amended Australian Accounting Standards and AASB Interpretations as of 1 October 2009:
• AASB 2008-1 Amendments to Australian Accounting Standard – Share-based Payments: Vesting Conditions and Cancellations effective 1
January 2009
• AASB 7 Financial Instruments: Disclosures effective 1 January 2009
• AASB 8 Operating Segments effective 1 January 2009
• AASB 101 Presentation of Financial Statements (revised 2007) effective 1 January 2009
• AASB 123 Borrowing Costs (revised 2007) effective 1 January 2009
• AASB Interpretation 16 Hedges of a Net Investment in a Foreign Operation effective 1 October 2008
• AASB 2008-1 Amendments to Australian Accounting Standard – Share-based Payment: Vesting Conditions and Cancellations [AASB 2]
effective 1 January 2009
• AASB 2008-5 Amendments to Australian Accounting Standards arising from the Annual Improvements Project effective 1 January 2009
• AASB 2008-7 Amendments to Australian Accounting Standards – Cost of an Investment in a Subsidiary, Jointly Controlled Entity or
Associate effective 1 January 2009
• AASB 2009-3 Amendments to Australian Accounting Standards – Embedded Derivatives [AASB 139 and Interpretation 9] effective 30
June 2009
• AASB 2009-6 Amendments to Australian Accounting Standards operative for periods beginning on or after 1 January 2009 that end on or
after 30 June 2009
• AASB 3 Business Combinations (revised 2008)
• AASB 127 Consolidated and Separate Financial Statements (revised 2008)
• AASB 2008-3 Amendments to Australian Accounting Standards arising from AASB 3 and AASB 127
• AASB 2008-6 Further Amendments to Australian Accounting Standards arising from the Annual Improvements Project [AASB 1 & AASB 5]
• AASB 2009-4 Amendments to Australian Accounting Standards arising from the Annual Improvements Project
72
Notes to the Financial Statements
For the Year ended 30 September 2010
Note 2. Statement Of Significant Accounting Policies (continued)
(c) New Accounting Standards and Interpretations (continued)
The group has made a formal written election to early adopt the new and amended Australian Accounting Standards as of 1 October 2009:
• AASB 2010-4 Further Amendments to Australian Accounting Standards arising from the Annual Improvements Project
When the adoption of the Standard or Interpretation is deemed to have an impact on the financial statements or performance of the Group,
its impact is described below:
AASB 3 Business Combinations (revised 2008) and AASB 127 Consolidated and Separate Financial Statements (revised 2008)
AASB 3 (revised 2008) introduces significant changes in the accounting for business combinations. Changes affect the valuation of
non-controlling interests (previously “minority interests”), the accounting for transaction costs, the initial recognition and subsequent
measurement of contingent consideration and business combinations achieved in stages. These changes will impact the amount of goodwill
recognised, the reported results in the period when an acquisition occurs and future reported results.
AASB 127 (revised 2008) requires that a change in the ownership interest of a subsidiary (without a change in control) is to be accounted
for as a transaction with owners in their capacity as owners. Therefore such transactions will no longer give rise to goodwill, nor will they
give rise to a gain or loss in the statement of comprehensive income. Furthermore the revised Standard changes the accounting for losses
incurred by a partially owned subsidiary as well as the loss of control of a subsidiary. The changes in AASB 3 (revised 2008) and AASB 127
(revised 2008) will affect future acquisitions, changes in, and loss of control of, subsidiaries and transactions with non-controlling interests.
The change in accounting policy was applied prospectively and had no material impact on earnings per share.
AASB 7 Financial Instruments: Disclosures
The amended Standard requires additional disclosures about fair value measurement and liquidity risk. Fair value measurements related to
all financial instruments recognised and measured at fair value are to be disclosed by source of inputs using a three level fair value
hierarchy, by class. In addition, a reconciliation between the beginning and ending balance for level 3 fair value measurements is now
required, as well as significant transfers between levels in the fair value hierarchy. The amendments also clarify the requirements for
liquidity risk disclosures with respect to derivative transactions and assets used for liquidity management. The fair value measurement
disclosures are presented in note 36. The liquidity risk disclosures are not significantly impacted by the amendments and are presented in
note 36.
AASB 8 Operating Segments
AASB 8 replaced AASB 114 Segment Reporting upon its effective date. The Group concluded that the operating segments determined in
accordance with AASB 8 are the same as the business segments previously identified under AASB 114. AASB 8 disclosures are shown in
note 29.
AASB 101 Presentation of Financial Statements
The revised Standard separates owner and non-owner changes in equity. The statement of changes in equity includes only details of
transactions with owners, with non-owner changes in equity presented in a reconciliation of each component of equity and included in the
new statement of comprehensive income. The statement of comprehensive income presents all items of recognised income and expense,
either in one single statement, or in two linked statements. The Group has elected to present one statement.
AASB 123 Borrowing Costs
The revised AASB 123 requires capitalisation of borrowing costs that are directly attributable to the acquisition, construction or production
of a qualifying asset. The Group has previously elected to capitalise borrowing costs associated with qualifying assets and as such the
amendments are not expected to have any financial impact.
AASB 2008-7 Amendments to Australian Accounting Standards – Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate
The amendments delete the reference to the “cost method” making the distinction between pre and post acquisition profits no longer
relevant. All dividends received are now recognised in profit or loss rather than having to be split between a reduction in the investment and
profit and loss. However the receipt of such dividends requires an entity to consider whether there is an indicator of impairment of the
investment in that entity. The receipt of dividends by Elders Limited during the year did not impact the recoverability of the Group’s
investments.
The amendments further clarify cases or reorganisations where a new parent is inserted above an existing parent of the group. It states that
the cost of the subsidiary is the previous carrying amount of its share of equity items in the subsidiary rather than its fair value. The
adoption of these amendments did not have any impact on the financial position or the performance of the Group.
Annual Improvements Project
In May 2008 and April 2009 the AASB issued omnibus of amendments to its Standards as part of the Annual Improvements Project,
primarily with a view to removing inconsistencies and clarifying wording. There are separate transitional provisions and application dates for
each amendment. The adoption of the following amendments resulted in changes to accounting policies but did not have any impact on the
financial position or performance of the Group.
73
Notes to the Financial Statements
For the Year ended 30 September 2010
Note 2. Statement Of Significant Accounting Policies (continued)
(c) New Accounting Standards and Interpretations (continued)
• AASB 5 Non-current Assets Held for Sale and Discontinued Operations: clarifies that the disclosures required in respect of non-current
assets and disposal groups classified as held for sale or discontinued operations are only those set out in AASB 5. The disclosure
requirements of other Accounting Standards only apply if specifically required for such non-current assets or discontinued operations.
• AASB 8 Operating Segments: clarifies that segment assets and liabilities need only be reported when those assets and liabilities are
included in measures that are used by the chief operating decision maker. As the Group’s chief operating decision maker does review
segment assets and liabilities, the Group has continued to disclose this information in note 29.
• AASB 116 Property, Plant and Equipment: replaces the term “net selling price” with “fair value less costs to sell”. The Group amended its
accounting policy accordingly, which did not result in any change in the financial position.
• AASB 123 Borrowing Costs: the definition of borrowing costs is revised to consolidate the two types of items that are considered
components of “borrowing costs” into one – the interest expense calculated using the effective interest rate method calculated in
accordance with AASB 139. The Group has amended its accounting policy accordingly which did not result in any change in its statement
of financial position.
• AASB 128 Investment in Associates: an investment in an associate is a single asset for the purpose of conducting the impairment test,
including any reversal of impairment. Any impairment is not separately allocated to the goodwill included in the investment balance. Any
impairment is reversed if the recoverable amount of the associate increases. The Group has amended its impairment accounting policy
accordingly. The amendment had no impact on the Group’s financial position or performance.
• AASB 136 Impairment of Assets: when discounted cash flows are used to estimate “fair value less cost to sell” additional disclosure is
required about the discount rate, consistent with disclosures required when the discounted cash flows are used to estimate “value in use”.
The Group has amended its disclosures accordingly in note 14. The amendment also clarified that the largest unit permitted for allocating
goodwill, acquired in a business combination, is the operating segment as defined in AASB 8 before aggregation for reporting purposes. The
amendment has no impact on the Group as the annual impairment test is performed before aggregation.
Other amendments resulting from the Annual Improvements Project did not have any impact on the accounting policies, financial position
or performance of the Group.
Australian Accounting Standards and Interpretations that have recently been issued or amended, but are not yet effective, have not been
adopted by the Group for the annual reporting period ending 30 September 2010. These are outlined in the table below.
Reference Title
Summary
Application
date of
standard
Impact on
Group
financial
report
AASB
2009-5
AASB
2009-8
Further Amendments
to Australian
Accounting Standards
arising from the
Annual Improvements
Project.
[AASB 5, 8, 101,
107, 117, 118, 136 &
139]
Amendments to
Australian
Accounting
Standards – Group
Cash-settled
Share-based
Payment
Transactions
[AASB 2]
The amendments to some Standards result in accounting
changes for presentation, recognition or measurement
purposes, while some amendments that relate to terminology
and editorial changes are expected to have no or minimal effect
on accounting.
1 January
2010
This Standard makes amendments to Australian Accounting
Standard AASB 2 Share-based Payment and supersedes
Interpretation 8 Scope of AASB 2 and Interpretation 11 AASB
2 – Group and Treasury Share Transactions.
1 January
2010
The amendments clarify the accounting for group cash-settled
share-based payment transactions in the separate or individual
financial statements of the entity receiving the goods or services
when the entity has no obligation to settle the share-based
payment transaction.
The amendments clarify the scope of AASB 2 by requiring an
entity that receives goods or services in a share-based payment
arrangement to account for those goods or services no matter
which entity in the group settles the transaction, and no matter
whether the transaction is settled in shares or cash.
The
amendments
are not
expected to
have a
material
impact on the
financial
statements
The
amendments
are not
expected to
have a
material
impact on the
financial
statements
Application
date for
Group
1 October
2010
1 October
2010
74
Application
date for
Group
1 October
2010
1 October
2013
Notes to the Financial Statements
For the Year ended 30 September 2010
Note 2. Statement Of Significant Accounting Policies (continued)
(c) New Accounting Standards and Interpretations (continued)
Reference Title
Summary
Application
date of
standard
Impact on
Group
financial
report
The
amendments
are not
expected to
have any
impact on the
financial
statements
The group has
not yet
determined
the extent of
the impact of
the
amendments,
if any.
AASB
2009-10
Amendments to
Australian
Accounting
Standards –
Classification of
Rights Issues [AASB
132]
The amendment provides relief to entities that issue rights in a
currency other than their functional currency, from treating the
rights as derivatives with fair value changes recorded in profit or
loss. Such rights will now be classified as equity instruments
when certain conditions are met.
1 February
2010
1 January
2013
AASB9
Financial Instruments AASB 9 includes requirements for the classification and
measurement of financial assets resulting from the first part of
Phase 1 of the IASB’s project to replace IAS 39 Financial
Instruments: Recognition and Measurement (AASB 139 Financial
Instruments: Recognition and Measurement).
These requirements improve and simplify the approach for
classification and measurement of financial assets compared with
the requirements of AASB 139. The main changes from AASB 139
are described below.
(a) Financial assets are classified based on (1) the objective of the
entity’s business model for managing the financial assets; (2)
the characteristics of the contractual cash flows. This replaces
the numerous categories of financial assets in AASB 139, each
of which had its own classification criteria.
(b) AASB 9 allows an irrevocable election on initial recognition to
present gains and losses on investments in equity instruments
that are not held for trading in other comprehensive income.
Dividends in respect of these investments that are a return on
investment can be recognised in profit or loss and there is no
impairment or recycling on disposal of the instrument.
(c) Financial assets can be designated and measured at fair value
through profit or loss at initial recognition if doing so eliminates
or significantly reduces a measurement or recognition
inconsistency that would arise from measuring assets or
liabilities, or recognising the gains and losses on them, on
different bases.
1 October
2013
The group has
not yet
determined
the extent of
the impact of
the
amendments,
if any.
AASB
2009-11
Amendments to
Australian
Accounting
Standards arising
from AASB 9
[AASB 1, 3, 4, 5, 7,
101, 102, 108, 112,
118, 121, 127, 128,
131, 132, 136, 139,
1023 & 1038 and
Interpretations 10
& 12]
The revised Standard introduces a number of changes to the
accounting for financial assets, the most significant of which
includes:
• two categories for financial assets being amortised cost or fair
1 January
2013
value
• removal of the requirement to separate embedded derivatives
in financial assets
• strict requirements to determine which financial assets can be
classified as amortised cost or fair value, Financial assets can
only be classified as amortised cost if (a) the contractual cash
flows from the instrument represent principal and interest and
(b) the entity’s purpose for holding the instrument is to collect
the contractual cash flows
• an option for investments in equity instruments which are not
held for trading to recognise fair value changes through other
comprehensive income with no impairment testing and no
recycling through profit or loss on derecognition
• reclassifications between amortised cost and fair value no
longer permitted unless the entity’s business model for holding
the asset changes
• changes to the accounting and additional disclosures for
equity instruments classified as fair value through other
comprehensive income
75
Notes to the Financial Statements
For the Year ended 30 September 2010
Note 2. Statement Of Significant Accounting Policies (continued)
(c) New Accounting Standards and Interpretations (continued)
Reference Title
Summary
Application
date of
standard
Impact on
Group
financial
report
AASB
124
(Revised)
Related Party
Disclosures
(December 2009)
The revised AASB 124 simplifies the definition of a related
party, clarifying its intended meaning and eliminating
inconsistencies from the definition, including:
1 January
2011
(a) the definition now identifies a subsidiary and an associate
with the same investor as related parties of each other;
(b) entities significantly influenced by one person and entities
significantly influenced by a close member of the family of
that person are no longer related parties of each other; and
(c) the definition now identifies that, whenever a person or
entity has both joint control over a second entity and joint
control or significant influence over a third party, the second
and third entities are related to each other.
A partial exemption is also provided from the disclosure
requirements for government-related entities. Entities that are
related by virtue of being controlled by the same government
can provide reduced related party disclosures.
AASB
2009-12
Amendments to
Australian
Accounting
Standards
This amendment makes numerous editorial changes to a range
of Australian Accounting Standards and Interpretations.
1 January
2011
The amendment to AASB 124 clarifies and simplifies the
definition of a related party.
[AASBs 5, 8, 108,
110, 112, 119, 133,
137, 139, 1023 &
1031 and
Interpretations 2, 4,
16, 1039 & 1052]
AASB
2009-14
Amendments to
Australian
Interpretation
– Prepayments of a
Minimum Funding
Requirement
These amendments arise from the issuance of Prepayments of
a Minimum Funding Requirement (Amendments to IFRIC 14).
The requirements of IFRIC 14 meant that some entities that
were subject to minimum funding requirements could not
treat any surplus in a defined benefit pension plan as an
economic benefit.
1 January
2011
The amendment requires entities to treat the benefit of such an
early payment as a pension asset. Subsequently, the remaining
surplus in the plan, if any, is subject to the same analysis as if
no prepayment had been made.
Limits the scope of the measurement choices of non-controlling
interest at proportionate share of net assets in the event of
liquidation. Other components of NCI are measured at
fair value.
1 July
2010
Requires an entity (in a business combination) to account for
the replacement of the acquiree’s share-based payment
transactions (whether obliged or voluntarily), i.e., split between
consideration and post combination expenses.
Clarifies that contingent consideration from a business
combination that occurred before the effective date of AASB 3
Revised is not restated.
Eliminates the requirement to restate financial statements for a
reporting period when significant influence or joint control is
lost and the reporting entity accounts for the remaining
investment under AASB 139. This includes the effect on
accumulated foreign exchange differences on such investments.
AASB
2010-3
Amendments to
Australian
Accounting
Standards arising
from the Annual
Improvements
Project
[AASB 3, AASB 7,
AASB 121, AASB
128, AASB 131,
AASB 132 & AASB
139]
76
Application
date for
Group
1 October
2011
The
amendments
are not
expected to
have any
impact on the
financial
statements
1 October
2011
1 October
2011
1 October
2010
The
amendments
are not
expected to
have any
impact on the
financial
statements
The
amendments
are not
expected to
have any
impact on the
financial
statements
The
amendments
are not
expected to
have any
impact on the
financial
statements.
Notes to the Financial Statements
For the Year ended 30 September 2010
Note 2. Statement Of Significant Accounting Policies (continued)
(c) New Accounting Standards and Interpretations (continued)
Reference Title
Summary
Interpret-
ation 19
Interpretation 19
Extinguishing
Financial Liabilities
with Equity
Instruments
This interpretation clarifies that equity instruments issued to a
creditor to extinguish a financial liability are “consideration
paid” in accordance with paragraph 41 of IAS 39. As a result,
the financial liability is derecognised and the equity instruments
issued are treated as consideration paid to extinguish that
financial liability.
The interpretation states that equity instruments issued in a
debt for equity swap should be measured at the fair value of the
equity instruments issued, if this can be determined reliably. If
the fair value of the equity instruments issued is not reliably
determinable, the equity instruments should be measured by
reference to the fair value of the financial liability extinguished
as of the date of extinguishment.
Application
date for
Group
1 October
2010
Application
date of
standard
Impact on
Group
financial
report
1 July
2010
The
amendments
are not
expected to
have any
impact on the
financial
statements.
(d) Basis of consolidation
The consolidated financial statements comprise the financial statements of the parent entity, Elders Limited, and its subsidiaries and
special purpose entities (as outlined in note 32), as at and for the period ended 30 September each year (referred to collectively throughout
these financial statements as the “Group”). Interests in associates are equity accounted and are not part of the consolidated group (see
note 2(q)).
Subsidiaries are all those entities over which the Group has the power to govern the financial and operating policies so as to obtain benefits
from their activities. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when
assessing whether the group controls another entity.
Special purpose entities are those entities over which the group has no ownership interest but in effect the substance of the relationship is
such that the group controls the entity so as to obtain the majority of benefits from its operation.
The financial statements of the subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting
policies. In preparing the consolidated financial statements, all intercompany balances and transactions, income and expenses and profit
and losses resulting from intra-group transactions have been eliminated in full.
Subsidiaries and special purpose entities are fully consolidated from the date on which control is obtained by the Group and cease to be
consolidated from the date on which control is transferred out of the Group.
Investments in subsidiaries held by the Group are accounted for at cost in the separate accounting records of the parent entity less any
impairment charges. Dividends received from subsidiaries are recorded as a component of other revenues in the separate statement of
comprehensive income of the parent entity, and do not impact the recorded cost of the investment. Upon receipt of dividend payments from
subsidiaries, the parent will assess whether any indicators of impairment of the carrying value of the investment in the subsidiary exist.
Where such indicators exist, to the extent that the carrying value of the investment exceeds its recoverable amount, an impairment loss is
recognised.
The acquisition of subsidiaries is accounted for using the acquisition method of accounting. The acquisition method of accounting involves
recognising at acquisition date, separately from goodwill, the identifiable assets acquired, the liabilities assumed and any non-controlling
interest in the acquiree. The identifiable assets acquired and the liabilities assumed are measured at their acquisition date fair values (see
note 2(e)).
The difference between the above items and the fair value of the consideration (including the fair value of any pre-existing investment in the
acquiree) is goodwill or a discount on acquisition.
A change in the ownership interest of a subsidiary that does not result in a loss of control, is accounted for as an equity transaction.
Non-controlling interests are allocated their share of net profit after tax in the statement of comprehensive income and are presented within
equity in the consolidated statement of financial position, separately from the equity of the owners of the parent.
Losses are attributed to the non-controlling interest even if that results in a deficit balance.
77
Notes to the Financial Statements
For the Year ended 30 September 2010
Note 2. Statement of Significant Accounting Policies (continued)
(d) Basis of consolidation (continued)
If the Group loses control over a subsidiary, it:
• Derecognises the assets (including goodwill) and liabilities of the subsidiary.
• Derecognises the carrying amount of any non-controlling interest.
• Derecognises the cumulative translation differences, recorded in equity.
• Recognises the fair value of the consideration received.
• Recognises the fair value of any investment retained.
• Recognises any surplus or deficit in profit or loss.
• Reclassifies the parent’s share of components previously recognised in other comprehensive income to profit or loss.
(e) Business combinations
Business combinations are accounted for using the acquisition method. The consideration transferred in a business combination shall be
measured at fair value, which shall be calculated as the sum of the acquisition date fair values of the assets transferred by the acquirer, the
liabilities incurred by the acquirer to former owners of the acquiree and the equity issued by the acquirer, and the amount of any non-
controlling interest in the acquiree. For each business combination, the acquirer measures the non-controlling interest in the acquiree either
at fair value or at the proportionate share of the acquiree’s identifiable net assets. Acquisition-related costs are expensed as incurred.
When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in
accordance with the contractual terms, economic conditions, the Group’s operating or accounting policies and other pertinent conditions as at
the acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree.
If the business combination is achieved in stages, the acquisition date fair value of the acquirer’s previously held equity interest in the
acquiree is remeasured at fair value as at the acquisition date through profit or loss.
Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. Subsequent changes to
the fair value of the contingent consideration which is deemed to be an asset or liability will be recognised in accordance with AASB 139
either in profit or loss or in other comprehensive income. If the contingent consideration is classified as equity, it shall not be remeasured.
(f) Significant accounting estimates and assumptions
The carrying amounts of certain assets and liabilities are often determined based on estimates and assumptions of future events. The key
estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of certain assets and
liabilities within the next annual reporting period are:
Impairment of goodwill and intangibles with indefinite useful lives
The Group determines whether goodwill and intangibles with indefinite useful lives are impaired at least on an annual basis. This requires an
estimation of the recoverable amount of the cash generating units to which the goodwill and intangibles with indefinite useful lives are
allocated. The assumptions used in this estimation of recoverable amount are discussed in note 2(w).
Share based payment transactions
The Group measures the cost of equity settled transactions with employees by reference to the fair value of the equity instruments at the date
at which they are granted. Refer further to information on share based payments transactions at note 2(ac) and 37.
Other significant accounting estimates and assumptions are disclosed elsewhere in the financial statements where relevant.
(g) Operating segments
An operating segment is a component of equity that engages in business activities from which it may earn revenues or incur expenses
(including revenues and expenses relating to transactions with other components of the same entity), whose operating results are reviewed
regularly by the entity’s chief operating decision maker to make decisions about resources to be allocated to the segment and assess it’s
performance and for which discrete financial information is available. This includes start up operations which are yet to earn revenues.
Management will also consider other factors in determining operating segments such as the existence of a line manager and the level of
segment information presented to the board of directors.
Operating segments have been identified based on the information provided to the chief operating decision makers – being the executive
management team.
78
Notes to the Financial Statements
For the Year ended 30 September 2010
Note 2. Statement of Significant Accounting Policies (continued)
(g) Operating segments (continued)
The group aggregates two or more operating segments when they have similar economic characteristics, and the segments are similar in each
of the following respects:
• Nature of product and services,
• Nature of production processes,
• Type or class of customer for the products and services,
• Method used to distribute the products or provide the services, and if applicable,
• Nature of regulatory environment
Operating segments that meet the quantitative criteria as prescribed by AASB 8 are reported separately. However, an operating segment that
does not meet the quantitative criteria is still reported separately where information about the segment would be useful to users of the
financial statements.
Information about other business activities and operating segments that are below the quantitative criteria are combined and disclosed in a
separate category for “all other segments”.
(h) Foreign Currency translation
(i) Functional and presentation currency
Both the functional and presentation currency of Elders Limited and its Australian subsidiaries is Australian dollars (AUD). Subsidiaries
incorporated in countries other than Australia (see note 32), for which have a functional currency other than Australian Dollars, are translated
to the presentation currency (see below for consolidation reporting).
(ii) Transactions and balances
Transactions in foreign currencies are initially recorded in the functional currency by applying the exchange rates ruling at the date of
transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the reporting
date.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate as at the date
of the initial transaction. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date
when the fair value was determined.
(iii) Translation of Group Companies’ functional currency to presentation currency
As at the reporting date the assets and liabilities of overseas subsidiaries are translated into the presentation currency of Elders Limited at
the rate of exchange ruling at the reporting date, and the statements of comprehensive income are translated at the weighted average
exchange rates for the period.
Exchange variations resulting from the translation are recognised in the foreign currency translation reserve in equity.
All exchange differences in the consolidated financial report are taken to the statement of comprehensive income with the exception of
differences arising on monetary items that forms part of the groups’ net investment in a foreign operation. These are taken directly to equity
until the disposal of the net investment, at which time they are recognised in the statement of comprehensive income.
(i) Cash and cash equivalents
Cash and cash equivalents in the statement of financial position comprise cash at bank and in hand and short-term deposits with an original
maturity of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of
changes in value.
For the purposes of the statement of cash flows, cash and cash equivalents consist of cash and cash equivalents defined above, net of
outstanding bank overdrafts. Bank overdrafts are included within interest bearing loans and borrowings in current liabilities on the statement
of financial position.
(j) Trade and other receivables
Trade receivables, which generally have 30-90 day terms, are recognised initially at fair value and subsequently measured at amortised cost
using the effective interest rate method, less an allowance for impairment.
Collectability of trade receivables are reviewed on an ongoing basis at an operating unit level. Individual debts that are known to be
uncollectible are written off when identified. An impairment provision is recognised when there is objective evidence that the Group will not
be able to collect the receivable. Financial difficulties of the debtor, default payment or debts greater than 60 days overdue are considered
objective evidence of impairment. The amount of the impairment loss is the receivable carrying amount compared to the present value of
estimated future cash flows, discounted at the original effective interest rate.
79
Notes to the Financial Statements
For the Year ended 30 September 2010
Note 2. Statement of Significant Accounting Policies (continued)
(k) Inventories
Inventories including raw materials, work in progress and finished goods are valued at the lower of cost and net realisable value.
Costs incurred in bringing each product to its present location are accounted for as follows:
Raw materials – purchase cost is on the first in, first out basis. The cost of purchase comprises the purchase price, import duties and other
taxes (other than those subsequently recoverable by the entity from the taxing authorities), transport, handling and other costs directly
attributable to the acquisition of raw materials. Volume discounts and rebates are included in determining the cost of purchase.
Finished goods and work in progress – costs of direct materials and labour and a proportion of variable and fixed manufacturing overheads
based on normal operating capacity. Costs are assigned on the basis of weighted average costs.
Where commodity inventories are acquired principally for the purpose of selling in the near term and generating a profit, such commodities
are measured at fair value less costs to sell with changes in fair value less costs to sell recognised in the statement of comprehensive income.
Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated
costs necessary to make the sale.
(l) Livestock
The Group holds biological assets in the form of livestock and primarily beef cattle. These assets are measured at fair value, which has been
determined based upon various assumptions, including livestock prices, less point of sale costs and other incidental costs. These
assumptions are updated monthly and reflect the different categories of livestock held. The market value increments or decrements are
recorded in the statement of comprehensive income.
(m) Forestry
The Group has interests in forestry plantations through plantation areas established and maintained on its own account and interests in the
forestry managed investment schemes, which have reverted to the consolidated entity as a result of default by an original grower and forfeiture
of their plantation interest. Forestry plantation timber owned by the Group is valued at each reporting date at fair value and increments and
decrements in fair value are recognised in the statement of comprehensive income in the financial period in which they occur.
Fair value is determined as follows:
• Up until the time at which the initial inventory of the plantation is conducted (expected to be between four to six years) by applying
historical costs; and
• After initial inventory and up until harvest of the timber – anticipated fair value less estimated point of sale costs.
As there is no active and liquid market for immature forestry plantation timber, fair value less estimated point of sales costs is based on
forecast plantation growth and yields at the current average annual growth rates, prices based on the current price plus indexation and
forecast of the net present values of future net cash flows from harvest and costs of maintaining plantations to maturity.
(n) Derivative financial instruments and hedging
The Group uses derivative financial instruments (including forward currency contracts, forward commodity contracts and interest rate swaps)
to hedge its risks associated with foreign currency, commodity prices and interest rate fluctuations. Such derivative financial instruments are
initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently remeasured to fair value.
Derivatives are carried as assets when their fair value is positive and as liabilities when their fair value is negative.
Derivative assets and liabilities are classified as non-current in the statement of financial position when the remaining maturity is more than
12 months, or current when the remaining maturity is less than 12 months.
The fair values of forward currency contracts are calculated by reference to current forward exchange rates for contracts with similar maturity
profiles. The fair value of interest rate swaps are determined using a valuation technique based on cash flows discounted to present value
using current market interest rates. The fair value of commodity contracts are also determined using a discounted cash flow valuation
technique using cash flow estimates based on observable forward prices for the commodity.
Any gains or losses arising from changes in fair value of derivatives, except for those that qualify as cash flow hedges, are taken directly to
profit or loss for the year.
For the purposes of hedge accounting, hedges are classified as:
• Fair value hedges when they hedge the exposure to changes in the fair value of a recognised asset or liability or an unrecognised firm
commitment (Elders Limited does not currently have any fair value hedges).
80
Notes to the Financial Statements
For the Year ended 30 September 2010
Note 2. Statement of Significant Accounting Policies (continued)
(n) Derivative financial instruments and hedging (continued)
• Cash flow hedges where they hedge the exposure to variability in cash flows that is either attributable to a particular risk associated with a
recognised asset or liability or a forecasted transaction (Elders Limited currently has cash flow hedges attributable to future foreign currency
inventory purchases and payment of interest on borrowings).
• Hedges of a net investment in a foreign operation.
Hedges that meet the strict criteria for hedge accounting are accounted for as follows:
Cash flow hedges
Cash flow hedges are hedges of the Group’s exposure to variability in cash flows that is attributable to a particular risk associated with a
recognised asset or liability or to a forecast transaction and that could affect profit or loss. The effective portion of the gain or loss on the
hedging instrument is recognised directly in equity, whilst the ineffective portion is recognised in profit and loss.
Amounts taken to equity are transferred out of equity and included in the measurement of the hedged transaction (finance costs or inventory
purchases) when the forecast transaction occurs.
The Group tests each of the designated cash flow hedges for effectiveness on a quarterly basis both retrospectively and prospectively using
the Cumulative Dollar Offset Methodology. If the testing falls within the 80:125 range, the hedge is considered highly effective and continues
to be designated as a cash flow hedge. For foreign currency cash flow hedges if the risk is over-hedged, the ineffective portion is taken
immediately to other income/expense in the statement of comprehensive income. For interest rate cash flow hedges, any ineffective portion is
taken to other expenses in the statement of comprehensive income.
If the forecast transaction is no longer expected to occur, amounts recognised in equity are transferred to the statement of comprehensive
income.
If the hedging instrument expires or is sold, terminated or exercised without replacement or rollover, or if its designation as a hedge is revoked
(due to being ineffective), amounts previously recognised in equity remain in equity until the forecast transaction occurs.
(o) Non current assets and disposal groups held for sale and discontinued operations
Non current assets and disposal groups are classified as held for sale and measured at the lower of their carrying amount and fair value less
costs to sell if their carrying amount will be recovered principally through a sale transaction instead of use. They are not depreciated or
amortised. For an asset or disposal group to be classified as held for sale, it must be available for immediate sale in its present condition and
its sale must be highly probable.
An impairment loss is recognised for any initial or subsequent write-down of the asset (or disposal group) to fair value less costs to sell. A
gain is recognised for any subsequent increases in fair value less costs to sell of an asset (or disposal group), but not in excess of any
cumulative impairment loss previously recognised. A gain or loss not previously recognised by the date of the sale of the non current asset (or
disposal group) is recognised at the date of de-recognition.
A discontinued operation is a component of the entity that has been disposed of or is classified as held for sale and that represents a separate
major line of business or geographical area of operations, is part of a single coordinated plan to dispose of such a line of business or area of
operations, or is a subsidiary acquired exclusively with a view to resale. The results of discontinued operations are presented separately on the
face of the statement of comprehensive income and the assets and liabilities are presented separately on the face of the statement of
financial position.
(p) Investments and other financial assets
Investments and financial assets in the scope of AASB 139 Financial Instruments: Recognition and Measurement are categorised as either
financial assets at fair value through the profit or loss, loans and receivables, held to maturity investments, or available for sale assets, as
appropriate. The classification depends on the purpose for which the assets were acquired or originated. Designation is re-evaluated at each
reporting date, but there are restrictions on reclassifying to other categories.
When financial assets are recognised initially, they are measured at fair value, plus, in the case of assets not at fair value through profit and
loss, directly attributable transaction costs.
Recognition and derecognition
All regular way purchases and sales of financial assets are recognised on the trade date i.e., the date that the Group commits to purchase
the asset. Regular way purchases or sales are purchases or sales of financial assets under contracts that require delivery of the assets
within the period established generally by regulation or convention in the market place. Financial assets are derecognised when the right
to receive cash flows from the financial assets has expired or when the entity transfers substantially all the risks and rewards of the
financial assets. If the entity neither retains nor transfers substantially all of the risks and rewards, it derecognises the asset if it has
transferred control of the assets.
81
Notes to the Financial Statements
For the Year ended 30 September 2010
Note 2. Statement of Significant Accounting Policies (continued)
(p) Investments and other financial assets (continued)
Subsequent measurement
(i) Financial assets at fair value through profit or loss
Financial assets classified as held for trading are included in the category “financial assets at fair value through profit or loss”. Financial
assets are classified as held for trading if they are acquired for the purpose of selling in the near term with the intention of making a profit.
Derivatives are also classified as held for trading unless they are designated as effective hedging instruments. Gains or losses on investments
held for trading are recognised in profit or loss and the related assets are classified as current assets in the statement of financial position.
(ii) Loans and receivables
Loans and receivables including loan notes and loans to key management personnel are non derivative financial assets with fixed or
determinable payments that are not quoted in an active market. Such assets are carried at amortised cost using the effective interest method.
Gains and losses are recognised in profit and loss when the loans and receivables are derecognised or impaired. These are included in current
assets, except for those with maturities greater than 12 months after balance date, which are classified as non-current.
The fair value of investments that are actively traded in organised financial markets are determined by reference to quoted market bid prices
at the close of business on the reporting date. For investments with no active market, fair values are determined using valuation techniques.
Such techniques include using recent arms length market transactions, reference to the current market value of another instrument that is
substantially the same, discounted cash flow analysis and option pricing models, making as much use of available and supportable market
data as possible.
(q) Investments in associates
The Group’s investments in its associates are accounted for using the equity method of accounting in the consolidated financial statements
and at cost in the parent. The associates are entities over which the Group has significant influence and that are neither subsidiaries nor
joint ventures.
The Group generally deems they have significant influence if they have over 20% of the voting rights.
Under the equity method, investments in associates are carried in the consolidated financial statements at cost plus post acquisition changes
in the group’s share of net assets of the associates. Goodwill relating to an associate is included in the carrying amount of the investment and
is not amortised. After application of the equity method, the Group determines whether it is necessary to recognise any impairment loss with
respect to the Group’s net investment in associates. Goodwill included in the carrying amount of the investment in associate is not tested
separately, rather the entire carrying amount of the investment is tested for impairment as a single asset. If an impairment is recognised, the
amount is not allocated to the goodwill of the associate.
The Group’s share of its associates’ post-acquisition profits or losses is recognised in the statement of comprehensive income, and its share of
post-acquisition movements in reserves is recognised in reserves. The cumulative post-acquisition movements are adjusted against the
carrying amount of the investment. Dividends receivable from associates are recognised in the parent entity’s statement of comprehensive
income as a component of other income.
When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any unsecured long-term
receivables and loans, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of
an associate.
The reporting dates of the associates are disclosed in note 11 and the associates accounting policies conform to those used by the Group for
like transactions and events on similar circumstances.
(r) Investments in joint ventures
A joint venture is a contractual arrangement whereby two or more parties undertake an economic activity that is subject to joint control.
Interests in joint venture entities are accounted for by applying the equity method of accounting. The Group identifies joint venture entities
where the Group is in a position of joint control over the entity. Investments in joint venture entities are carried at the equity accounted
amount less any impairment in value.
(s) Property, plant and equipment
Property, plant and equipment is stated at historical cost less accumulated depreciation and any accumulated impairment losses. Such costs
include the cost of replacing parts that are eligible for capitalisation when the cost of replacing parts is incurred. Similarly, when each major
inspection is performed, its cost is recognised in the carrying amount of the plant and equipment as a replacement only if it is eligible for
capitalisation. All other repairs and maintenance are recognised in profit or loss as incurred.
82
Notes to the Financial Statements
For the Year ended 30 September 2010
Note 2. Statement of Significant Accounting Policies (continued)
(s) Property, plant and equipment (continued)
Property, plant and equipment, excluding freehold land and assets under construction, are depreciated over the estimated useful economic
life of specific assets as follows:
Buildings
Leasehold improvements
Plant and equipment – owned
Plant and equipment – leased
Livestock carrier
Network Infrastructure
Life
50 years
Lease term
3 to 10 years
Lease term
2.5 years
5 to 25 years
Method
Straight line
Straight line
Straight line and units of production
Straight line
Straight line
Straight line
The useful lives are consistent with those of the prior period. The assets’ residual values, useful lives and amortisation methods are reviewed,
and adjusted if appropriate at each financial year end.
Gains and losses on disposal are determined by comparing the proceeds with the carrying amount. These are included in the statement of
comprehensive income.
Derecognition
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or
disposal.
(t) Investment properties
Investment properties are initially measured at cost, including transaction costs. The carrying amount included the cost of replacing part of
an existing investment property at the time that cost is incurred if the recognition criteria are met, and excluded the day-to-day servicing of
an investment property. Subsequent to initial recognition, investment properties are measured at fair value, which is based on active market
prices, adjusted if necessary, for the difference in the nature, location or condition of the specific asset at reporting date. Gains or losses
arising from changes in the fair values of investment properties are recognised in profit or loss in the period in which they arise.
For plantation land, the basis of valuation is changed to fair value when a sub-lease is granted on the property. Fair value for plantation land
is determined using a discounted cash flow (DCF) valuation model. The DCF valuation model incorporates the following factors:
• Recent external indicators including current purchase price of equivalent land or independent land valuations;
• The Future Land Price Index to the year after harvest;
• Estimation of the present value of future rental income, either as annuity income or as a portion of deferred harvest proceeds;
• The number of years to harvest the current plantation;
• The land discount rate; and
• The terminal land value derived from unencumbered land value after harvest.
The DCF valuation model and assumptions are reviewed on a half yearly basis.
All plantation land held for more than 12 months is subject to a three year rotational assessment by an independent valuer.
Investment properties are derecognised either when they have been disposed of or, when the investment property is permanently withdrawn
from use and no future benefit is expected from its disposal. Any gains or losses on the retirement or disposal of an investment property are
recognised in profit and loss in the period of retirement or disposal.
Transfers are made to investment property when, and only when, there is a change in use, evidenced by ending of owner occupation,
commencement of an operating lease to another party or ending of construction or development. Transfers are made from investment property
when, and only when, there is a change in use, evidenced by commencement of owner occupation or commencement of development with a
view to sale.
For a transfer from investment property to owner-occupied property or inventories, the deemed cost of property for subsequent accounting is
its fair value at the date of change in use. If the property occupied by the Group as an owner-occupied property becomes an investment
property, the Group accounts for such property in accordance with the policy stated under Property, plant and equipment up to the date of
change in use.
For a transfer from inventories to investment properties, any difference between the fair value of the property at that date and its previous
carrying amount is recognised in profit and loss. When the Group completes the construction or development of a self constructed investment
property, any difference between the fair value of the property at that date and its previous carrying amount is recognised in profit and loss.
83
Notes to the Financial Statements
For the Year ended 30 September 2010
Note 2. Statement of Significant Accounting Policies (continued)
(u) Leases
The determination of whether an arrangement is or contains a lease is based on the substance of the arrangement and requires an assessment
of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use
the asset.
(i) Group as a lessee
Finance leases, which transfer to the Group substantially all the risks and benefits incidental to ownership of the leased item, are capitalised
at the inception of the lease at the fair value of the leased asset or, if lower, at the present value of the minimum lease payments. Lease
payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the
remaining balance of the liability. Finance charges are recognised as an expense in profit or loss.
Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset and the lease term if there is no reasonable
certainty that the Group will obtain ownership by the end of the lease term.
Operating lease payments are recognised as an expense in the statement of comprehensive income on a straight-line basis over the lease
term. Operating lease incentives are recognised as a liability when received and subsequently reduced by allocating lease payments between
rental expense and reduction of the liability.
(ii) Group as a lessor
Leases in which the Group retains substantially all the risks and benefits of ownership of the leased asset are classified as operating leases.
Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset and recognised as an
expense over the lease term on the same basis as rental income.
(v) Impairment of non financial assets other than goodwill and indefinite life intangibles
Non financial assets other than goodwill and indefinite life intangibles are tested for impairment whenever events or changes in
circumstances indicate the carrying amount may not be recoverable.
Elders Limited conducts a bi-annual internal review of asset values, which is used as a source of information to assess for any indicators of
impairment. External factors, such as changes in expected future processes, technology and economic conditions, are also monitored to
assess for indicators of impairment. If any indication of impairment exists, an estimate of the asset’s recoverable amount is calculated.
An impairment loss is recognised for the amount by which the asset’s carrying value exceeds its recoverable amount. Recoverable amount is
the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the
lowest levels for which there are separately identifiable cash inflows that are largely independent of the cash inflows from other assets or
groups of assets (cash generating units). Non financial assets other than goodwill that suffered impairment are tested for possible reversal of
the impairment whenever events or changes in circumstances indicate that impairment may be reversed.
(w) Goodwill and intangibles
Goodwill
Goodwill acquired in a business combination is initially measured at cost of the business combination being the excess of the consideration
transferred over the fair value of the Group’s net identifiable assets acquired and liabilities assumed. If this consideration transferred is lower
than the fair value of the net identifiable assets of the subsidiary acquired, the difference is recognised in profit or loss.
After initial recognition, goodwill is measured at cost less any accumulated impairment losses.
For the purposes of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the
Group’s cash generating units, or groups of cash generating units, that are expected to benefit from the synergies of the combination,
irrespective of whether the other assets and liabilities of the Group are assigned to those units or group of units. Each unit or group of units to
which the goodwill is allocated represents the lowest level within the entity at which the goodwill is monitored for internal management
purposes, and is not larger than an operating segment determined in accordance with AASB 8.
Impairment is determined by assessing the recoverable amount of the cash-generating unit (group of cash-generating units), to which goodwill
relates.
Goodwill is not amortised but is reviewed every six months for impairment, or more frequently if there is any indication that the carrying value
may be impaired. Elders Limited performs its impairment testing using discounted cash flows under the fair value less costs to sell
methodology and the value in use methodology, and independent valuations. Further details on methodology and assumptions used are
outlined in note 14.
When the recoverable amount of the cash-generating unit (group of cash-generating units) is less than the carrying amount, an impairment
loss is recognised. When goodwill forms part of a cash-generating unit (group of cash-generating units) and an operation within that unit is
84
Notes to the Financial Statements
For the Year ended 30 September 2010
Note 2. Statement of Significant Accounting Policies (continued)
(w) Goodwill and intangibles (continued)
disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the
gain or loss on disposal of the operation. Goodwill disposed of in this manner is measured based on the relative values of the operation
disposed of and the portion of the cash-generating unit retained.
Impairment losses recognised for goodwill are not subsequently reversed.
Intangibles
Intangible assets acquired separately or in a business combination are initially measured at cost. The cost of an intangible asset acquired in a
business combination is its fair value as at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any
accumulated amortisation and any accumulated impairment losses. Internally generated intangible assets, excluding capitalised development
costs, are not capitalised and expenditure is recognised in profit or loss in the year in which the expenditure is incurred.
The useful lives of these intangible assets are assessed to be either finite or indefinite. Intangible assets with finite lives are amortised over
their useful lives and tested for impairment whenever there is an indication that the intangible asset may be impaired (see note 2(v) for
methodology). The amortisation period and the amortisation method for an intangible asset with a finite useful life is reviewed at least at each
financial year end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the
asset are accounted for prospectively by changing the amortisation period or method, as appropriate, which is a change in accounting
estimate. The amortisation expense on intangible assets with finite lives is recognised in profit and loss in the expense category consistent
with the function of the intangible asset.
Intangible assets with indefinite useful lives are tested for impairment annually either individually or at the cash-generating unit level
consistent with the methodology outlined for goodwill above. Such intangibles (brand names) are not amortised. The useful life of an
intangible asset with an indefinite life is reviewed each reporting period to determine whether the indefinite life assessment continues to be
supportable. If not, the change in the useful life assessment from indefinite to finite is accounted for as a change in accounting estimate and
is thus accounted for on a prospective basis.
Expenditure incurred in developing, maintaining or enhancing brand names is expensed in the year in which it is incurred.
(x) Design and development
Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, is
recognised in profit and loss as incurred.
Development activities involve a plan or design for the production of new or substantially improved products and processes. Development
expenditure is capitalised only if development costs can be measured reliably, the product or process is technically and commercially
feasible, future economic benefits are probable, and the group intends to and has sufficient resources to complete development and to use or
sell the asset. The expenditure capitalised includes the cost of materials, direct labour and overhead costs that are directly attributable to
preparing the asset for its intended use, and capitalised borrowing costs (see note 2(z)). Other development expenditure is recognised in
profit and loss as incurred.
Capitalised development expenditure is measured at cost less accumulated amortisation and accumulated impairment losses.
Any expenditure carried forward is amortised from the commencement of commercial production on a straight-line basis over the period of
the expected benefit, which is over a 3 year period. These development costs are Automotive related and primarily represent engineering costs
incurred in developing products under awarded contracts.
(y) Trade and other payables
Trade and other payables are carried at amortised cost and due to their short term nature are not discounted. They represent liabilities for
goods and services provided to the Group prior to the end of the financial year that remain unpaid and arise when the Group becomes obliged
to make future payments in respect of the purchase of these goods and services. The amounts are unsecured and are usually paid within 30
days of recognition.
Financial guarantees
The fair value of financial guarantee contracts discussed in notes 28 and 36 have been assessed using a probability weighted discounted
cash flow approach. In order to estimate the fair value under this approach the following assumptions are made:
• Probability of Default (PD): This represents the likelihood of the guaranteed party defaulting in a one year period and is assessed based on
historical default rates of companies rated by Standard & Poors.
• Loss Given Default (LGD): This represents the proportion of the exposure that is not expected to be recovered in the event of a default by
the guaranteed party and is based on the result of studies into the recovery rate for unsecured debt obligations.
• Exposure at Default (EAD): This represents the maximum loss that Elders Limited is exposed to if the guaranteed party were to default.
The model assumes the guaranteed loan/facility/contract is at maximum possible exposure at the time of the default and hence, equates
to the values disclosed in notes 28 and 36.
85
Notes to the Financial Statements
For the Year ended 30 September 2010
Note 2. Statement of Significant Accounting Policies (continued)
(y) Trade and other payables (continued)
When the uncertainty associated with an assumption was sufficient to warrant consideration for a range of possible assumptions, the midpoint
of the range was used for valuation purposes.
The value of the financial guarantee over each future year of the guarantee’s life is then equal to PDxLGDxEAD, which is discounted over the
contractual term of the guarantee, to reporting date to determine the fair value. The discount rate adopted is the five year Commonwealth
government bond yield as at 30 September. The contractual term of the guarantee matches the underlying obligation to which it relates.
(z) Interest bearing loans and borrowings
All loans and borrowings are initially recognised at the fair value of the consideration received less directly attributable transaction costs.
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest rate
method. Fees paid on the establishment of loan facilities that are yield related are included as part of the carrying amount of the loans and
borrowings.
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12
months after the reporting date.
Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset (i.e. an asset that necessarily takes a
substantial period of time to get ready for its intended use or sale) are capitalised as part of the cost of that asset. All other borrowing costs
are expensed in the period they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the
borrowing of funds.
(aa) Provisions and employee benefits
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an
outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount
of the obligation.
When the group expects some or all of the provision to be reimbursed, for example under an insurance contract, the reimbursement is
recognised as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the
statement of comprehensive income net of any reimbursement.
Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the present obligation at the
reporting date. The discount rate used to determine the present value reflects current market assessments of the time value of money and the
risks specific to the liability. The increase in the provision resulting from the passage of time is recognised in finance costs.
Employee leave benefits
(i) Wages, salaries, annual leave and sick leave
Liabilities for wages and salaries, including non-monetary benefits and annual leave expected to be settled within 12 months of the reporting
date are recognised in provisions in respect of employee’s services up to the reporting date. They are measured at the amounts expected to be
paid when the liabilities are settled. Expenses for non accumulating sick leave are recognised when the leave is taken and are measured at
the rates paid or payable.
(ii) Long service leave
The liability for long service leave is recognised in the provision for employee benefits and measured as the present value of expected future
payments to be made in respect of services provided by employees up to the reporting date using the projected unit credit method.
Consideration is given to expected future wage and salary levels, experience of employee departures, and periods of service. Expected future
payments are discounted using market yields at the reporting date on national government bonds with terms to maturity and currencies that
match, as closely as possible, the estimated future cash outflows.
Other provisions
(i) Warranty
A provision for warranties is recognised when the underlying products and services are sold. The provision is based on historical warranty date
and a weighting of all possible outcomes against their associated probabilities.
(ii) Restoration
Where the group has entered leasing arrangements that require the leased asset to be returned at the end of the lease term in its original
condition an estimate is made of the costs of restoration or dismantling of any improvements and a provision is raised.
86
Notes to the Financial Statements
For the Year ended 30 September 2010
Note 2. Statement of Significant Accounting Policies (continued)
(aa) Provisions and employee benefits (continued)
(iii) Dividend
A provision for dividend is not recognised as a liability unless the dividends are declared, on or before, reporting date.
(iv) Restructuring
A provision for restructuring or termination benefits is recognised when the Group has approved a detailed plan and formal restructuring plan,
and the restructuring or terminations have either commenced or been publicly announced. Future operating losses are not provided for.
(v) Onerous contracts
A provision for onerous contracts is recognised when the expected benefits to be derived from a contract are lower than the unavoidable cost
of meeting its obligations under the contract. The provision is measured at the present value of the lower of the expected cost of terminating
the contract and the expected net cost of complying with the contract. Before a provision is established, the Group recognises any impairment
loss on the assets associated with that contract.
(ab) Pensions and other post employment benefits
The Group maintains an Australian-based defined benefits superannuation fund. The defined benefits section of the fund has been closed
since December 1996.
With respect to the defined benefit fund, relevant Group entities are obliged to contribute to the fund as set out in the Trust Deed and in
accordance with legal requirements. During the year, superannuation entitlements are paid in accordance with legislative requirements at
levels necessary to ensure that there are sufficient assets to meet the liabilities determined by actuarial valuations undertaken at regular
intervals not exceeding three years. Member contributions are at a set rate.
Actuarial gains and losses for the defined benefits section of the fund are recognised as profit or loss in the statement of comprehensive
income.
(ac) Share based payments
Equity settled transactions
The Group provides benefits to employees (including key management personnel) in the form of share-based payment transactions, whereby
employees render services in exchange for shares or rights over shares (equity-settled transactions).
There are currently two share based plans in place to provide these benefits:
(i) Employee Share Option Plan (ESOP), which provides benefits to senior executives; and
(ii) Employee Share Loan Plan (ESLP), which provides benefits to all employees.
The cost of these equity-settled transactions with employees is measured by reference to the fair value at the date at which they are granted.
The fair value is determined using a trinomial model, further details of which are given in note 37.
In valuing equity settled transactions, no account is taken of any of the vesting conditions, other than:
• Non vesting conditions that do not determine whether the Group receives the services that entitle the employees to receive payment in
equity, and
• Conditions that are linked to the price of the shares of Elders Limited (market conditions).
The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the
performance conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award (vesting date).
At each subsequent reporting date until vesting, the cumulative charge to the statement of comprehensive income is the product of:
• The grant date fair value of the award.
• The current best estimate of the number of awards that will vest, taking into account such factors as the likelihood of employee turnover
during the vesting period and the likelihood of non-market performance conditions being met.
• The expired portion of the vesting period.
The charge to the statement of comprehensive income for the period is the cumulative amount as calculated above less the amounts already
charged in previous periods. There is a corresponding entry to equity.
Until an award has vested, any amounts recorded are contingent and will be adjusted if more or fewer awards vest than were originally
anticipated to do so. Any award subject to a market condition or non-vesting condition is considered to vest irrespective of whether or not that
market condition or non-vesting is fulfilled, provided that all other conditions are satisfied.
If a non-vesting condition is within the control of the Group, Company or the employee, the failure to satisfy the condition is treated as a
cancellation. If a non-vesting condition within the control of neither the Group, Company nor employee is not satisfied during the vesting
period, any expense for the award not previously recognised is recognised over the remaining vesting period, unless the award is forfeited.
87
Notes to the Financial Statements
For the Year ended 30 September 2010
Note 2. Statement of Significant Accounting Policies (continued)
(ac) Share based payments (continued)
If the terms of an equity-settled award are modified, as a minimum an expense is recognised as if the terms had not been modified. An
additional expense is recognised for any modification that increases the total fair value of the share-based payment arrangement, or is
otherwise beneficial to the employee, as measured at the date of modification.
If an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for the
award is recognised immediately. However, if a new award is substituted for the cancelled award and designated as a replacement award on
the date that it is granted, the cancelled and new award are treated as if they were a modification of the original award, as described in the
previous paragraph.
The dilutive effect, if any, of outstanding options is reflected as additional share dilution in the computation of earnings per share.
Shares in the Group held by the Employee Share Loan Plan at the reporting date are classified in reserves. Shares forfeited under the
Employee Share Loan Plan are held within a separate component of equity – reserved shares reserve (refer note 21).
(ad) Hybrid notes
Hybrid notes are classified as equity. Incremental costs directly attributable to the issue of the hybrid notes are included in equity as a
deduction, net of tax, from the proceeds. Distributions to note holders have been made quarterly at the discretion of Directors however Elders’
current restructured financing arrangements restricts Elders from paying distributions on the Hybrid notes up until and including
30 September 2011.
(ae) Contributed equity
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are included in equity as
a deduction, net of tax, from the proceeds.
Reserved shares
The Group’s own equity instruments, which are reacquired for later use in employee share-based payment arrangements (reserved shares), are
held as a separate component of equity (reserved shares reserve – refer note 21). No gain or loss is recognised in profit or loss on the
purchase, sale, issue or cancellation of the Group’s own equity instruments.
(af) Earnings per share
Basic earnings per share is calculated as net profit for the year attributable to members of the parent, adjusted to exclude any costs of
servicing equity (other than dividends) and hybrid equity dividends, divided by the weighted average number of ordinary shares, adjusted for
any bonus element.
Diluted earnings per share is calculated as net profit attributable to members of the parent, adjusted for:
• Costs of servicing equity (other than dividends) and hybrid equity dividends.
• The after tax effect of dividends and interest associated with dilutive potential ordinary shares that have been recognised as expenses.
• Other non-discretionary changes in revenues and expenses during the period that would result from the dilution of potential ordinary shares,
divided by the weighted average number of ordinary shares and dilutive potential ordinary shares, adjusted for any bonus element.
(ag) Revenue recognition
Revenue is recognised and measured at the fair value of the consideration received or receivable to the extent that it is probable that
economic benefits will flow to the Group and the revenue can be reliably measured. The following specific recognition criteria must also be
met before revenue is recognised:
(i) Sale of goods
Revenue from the sale of goods is recognised when there has been a transfer of risks and rewards to the customer (through the execution of a
sales agreement at the time of delivery of the goods to the customer), no further work or processing is required, the quantity and quality of
the goods has been determined, the price is fixed and generally title has passed (for shipped goods this is the bill of lading).
(ii) Rendering of services – non insurance related
Revenue from the rendering of services is recognised by reference to the stage of completion of a contract or contracts in progress at reporting
date or at time of completion of the contract and billing by the customer.
Stage of completion is measured by reference to the labour hours incurred to date as a percentage of total estimated labour hours for each
contract. Where the contract outcome cannot be reliably measured, revenue is recognised only to the extent of the expenses recognised that
are recoverable.
88
Notes to the Financial Statements
For the Year ended 30 September 2010
Note 2. Statement of Significant Accounting Policies (continued)
(ag) Revenue recognition (continued)
(iii) Interest income
Revenue is recognised as it accrues using the effective interest rate method. This is a method of calculating the amortised cost of a financial
asset and allocating the interest income over the relevant period using the effective interest rate, which is the rate that exactly discounts
estimated future cash receipts through the expected life of the financial asset to the net carrying amount of the financial asset.
(iv) Dividend income
Revenue is recognised when the Group’s right to receive the payment is established.
(v) Forestry revenue
Revenue from the provision of forestry services is recognised by reference to the financial period during which the relevant services are
provided. Any unearned portion of these fees at financial year end is brought to account in the statement of financial position as a liability
and recognised in subsequent periods.
(ah) Income tax and other taxes
Income tax disclosed in the statement of comprehensive income comprises current and deferred tax. Income tax is recognised in the
statement of comprehensive income except to the extent that it relates to items recognised directly in equity, in which case it is recognised
in equity.
Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the
taxation authorities based on the current period’s taxable income. The tax rates and tax laws used to compute the amount are those that are
enacted or substantively enacted by the reporting date.
Deferred income tax is provided on all temporary differences at the reporting date between the tax bases of assets and liabilities and their
carrying amounts for financial reporting purposes.
Deferred income tax liabilities are recognised for all taxable temporary differences except:
• where the deferred income tax liability arises from the initial recognition of an asset or liability in a transaction that is not a business
combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and
• when the taxable temporary difference is associated with investments in subsidiaries, associates and interests in joint ventures and the
timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the
foreseeable future.
Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax credits and unused tax losses,
to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and the carry forward
of unused tax assets and unused tax losses can be utilised except:
• when the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability
in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable
profit or loss; and
• when the deductible temporary difference is associated with investments in subsidiaries, associates and interests in joint ventures, deferred
tax assets are only recognised to the extent that it is probable that the temporary differences will reverse in the foreseeable future and
taxable profit will be available against which the temporary differences can be utilised.
The carrying amount of deferred income tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable
that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised.
Unrecognised deferred income tax assets are reassessed at each reporting date and are recognised to the extent that it has become probable
that future taxable profit will allow the deferred tax asset to be recovered.
Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the
liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.
Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right exists to set off current tax assets against current
tax liabilities and the deferred tax assets and liabilities relate to the same taxable entity and the same taxation authority.
Other taxes
Revenues, expenses and assets are recognised net of the amount of GST except:
• where the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is
recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and
• receivables and payables are stated with the amount of GST included.
The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the statement
of financial position.
89
Notes to the Financial Statements
For the Year ended 30 September 2010
Note 2. Statement of Significant Accounting Policies (continued)
(ah) Income tax and other taxes (continued)
Cash flows are included in the statement of cash flows on a gross basis and the GST component of cash flows arising from investing and
financing activities, which is recoverable from, or payable to, the taxation authority are classified as operating cash flows.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority.
(ai) General Insurance activities
The summary of accounting policies in relation to general insurance activities below is only relevant to the comparative period as it relates to
the general insurance activities of Elders Insurance Limited (EIL). EIL was a wholly owned entity of the parent entity and was subject to
prudential supervision by the Australian Prudential Regulatory Authority until its disposal on 30 September 2009.
Significant accounting estimates and assumptions
The ultimate liability arising from claims made under insurance contracts
Provision is made for the estimated cost of claims incurred but not settled at the reporting date. This provision consists of estimates of both
the expected ultimate cost of claims notified to the Group as well as the expected ultimate cost of claims incurred but not reported to the
Group (“IBNR”). The estimated cost of claims includes direct expenses that are expected to be incurred in settling those claims.
The estimation of IBNR is generally subject to a greater degree of uncertainty than the estimate of the cost of settling claims already notified
to the Group, where more information about the claims is generally available. Liability and other long tail classes of business, where claims
settlement may not happen for many years after the event giving rise to the claim, typically display greater variability between initial estimates
and final settlement due to delays in reporting claims, uncertainty in respect of court awards and future claims inflation. Claims in respect of
property and other short tail classes are typically reported and settled sooner after the claim event, giving rise to more certainty. The
estimation techniques and assumptions used in determining the outstanding claims provision and the associated reinsurance and other
recoveries are described below.
In calculating the estimated cost of unpaid claims the Group uses a variety of estimation techniques, generally based upon statistical
analyses of historical experience, which assumes that the development pattern of the current claims will be consistent with past experience.
Allowance is made, however, for changes or uncertainties which may create distortions in the underlying statistics or which might cause the
cost of unsettled claims to increase or reduce when compared with the cost of previously settled claims including:
• Changes in Group processes which might accelerate or slow down the development and/or recording of paid or incurred claims, compared
with the statistics from previous periods;
• Changes in the legal environment;
• The effects of inflation;
• Changes in the mix of business;
• The impact of large losses; and
• Movements in industry benchmarks.
A component of these estimation techniques is usually the estimation of the current cost of notified but not paid claims. In estimating the
cost of these the Group has regard to the claim circumstances as reported, any information available from loss adjusters and information on
the cost of settling claims with similar characteristics in the previous period.
Large claims impacting each relevant business class are generally assessed separately, being measured on a case by case basis or projected
separately in order to allow for the possible distortive effect of the development and incidence of these large claims.
Where possible the Group adopts multiple techniques to estimate the required level of provisions. This assists in giving greater understanding
of the trends inherent in the data being projected. The projections given by the various methodologies also assist in setting the range of
possible outcomes.
The most appropriate estimation technique is selected taking into account the characteristics of the business class and the extent of the
development of each accident year.
Provisions are calculated gross of any reinsurance recoveries. A separate estimate is made of the amounts that will be recoverable from
reinsurers based upon the gross provisions.
Details of specific assumptions used in deriving the outstanding claims liability at year end are detailed below.
Assets Arising from Reinsurance Contracts
Assets arising from contracts with the Group’s reinsurers are determined using the same methods described above. In addition, the
recoverability of these assets is assessed at each reporting date to ensure that the balances properly reflect the amounts that will ultimately
be received, taking into account counterparty and credit risk. Impairment is recognised where there is objective evidence that the Group may
not receive amounts due to it and these amounts can be reliably measured.
90
Notes to the Financial Statements
For the Year ended 30 September 2010
Note 2. Statement of Significant Accounting Policies (continued)
(ai) General Insurance activities (continued)
Accounting policies in relation to general insurance activities are as follows:
Premium Revenue
Premium comprises amounts charged to policyholders, excluding taxes collected on behalf of third parties. The earned portion of premium
received and receivable, including unclosed business, is recognised as revenue. Premium on unclosed business is brought to account based
upon the pattern of booking of renewals and new business.
Unearned Premium
Unearned premium is calculated based on the term of the risk which closely approximates the pattern of risks underwritten based on the
365th method.
At each reporting date, the adequacy of the unearned premium liability is assessed on a net of reinsurance basis against the present value of
the expected future cash flows relating to potential future claims in respect of the relevant insurance contracts, plus an additional risk margin
to reflect the inherent uncertainty of the central estimate. The assessment is carried out at the divisional level, being a portfolio of contracts
that are broadly similar and managed together as a single portfolio. If the unearned premium liability, less related intangible assets and
deferred acquisition costs, is deficient, then the resulting deficiency is recognised in the statement of comprehensive income of the Group.
The deficiency is recognised first by writing down any related intangible assets and then related deferred acquisition costs, with any excess
being recorded in the statement of financial position as an unexpired risk liability.
Outwards Reinsurance Premiums
Premium ceded to reinsurers is recognised as an expense in accordance with the pattern of reinsurance service received. Accordingly, a
portion of outwards reinsurance premium is treated as a prepayment at the reporting date.
Outstanding Claims Liability
The provision for outstanding claims is measured as the central estimate of the present value of expected future claims payments plus a risk
margin. The expected future payments include those in relation to claims reported but not yet paid; claims incurred but not reported
(“IBNR”); claims incurred but not enough reported (“IBNER”); and estimated claims handling costs.
The expected future payments are discounted to present value using a risk free rate.
A risk margin is applied to the central estimate, net of reinsurance and other recoveries, to reflect the inherent uncertainty in the central
estimate.
Reinsurance and Other Recoveries Receivable
Reinsurance and other recoveries receivable on paid claims, reported claims not yet paid, IBNR and unexpired risk liabilities are recognised
as revenue.
Amounts recoverable are assessed in a manner similar to the assessment of outstanding claims. Recoveries are measured as the present value
of the expected future receipts, calculated on the same basis as the provision for outstanding claims.
Acquisition Costs
A portion of acquisition costs relating to unearned premium revenue is deferred in recognition that it represents future benefits to the
organisation. Deferred acquisition costs are measured at the lower of cost and recoverable amount. A write-down to recoverable amount is
recognised where the present value of expected future claims (including settlement costs) in relation to business written to the reporting date
exceeds related unearned premiums. Deferred acquisition costs are amortised over the period expected to benefit from the expenditure.
Fire Brigade and Other Charges
Fire service levies and other charges received or receivable from policyholders are included in premiums. A liability for fire brigade and other
charges is recognised on business written to the reporting date, regardless of whether assessments have been issued by the appropriate
authority. Levies and charges payable by the organisation are expensed on the same basis as the recognition of premium revenue, with the
portion relating to unearned premium being recorded as a prepayment.
Assets Backing General Insurance Liabilities
The Group has determined that all assets are held to back general insurance liabilities and are valued at fair value in the statement of
financial position.
The following policies apply to assets held to back general insurance liabilities:
Financial Assets
Financial assets are designated at fair value through profit or loss. Initial recognition is at cost in the statement of financial position and
subsequent measurement is at fair value with any resultant unrealised profits and losses recognised in the statement of comprehensive income.
91
Notes to the Financial Statements
For the Year ended 30 September 2010
Note 2. Statement of Significant Accounting Policies (continued)
(ai) General Insurance activities (continued)
Details of fair values of different types of assets are listed below:
• Cash assets and bank overdrafts are carried at face value of the amounts deposited or drawn. The carrying amount of cash assets and bank
overdrafts approximate to their fair value. For the purposes of the statement of cash flows, cash includes cash on hand, deposits held at call
with banks and investments in money market instruments, net of bank overdrafts.
• Fixed interest securities are initially recognised at cost and the subsequent fair value is taken as the quoted bid price of the instrument at
the reporting date.
• Unlisted fixed interest securities are recorded at amounts based on valuations using rates of interest equivalent to the yields obtainable on
comparable investments at reporting date.
Financial assets are derecognised when the rights to receive future cash flows from the assets have expired, or have been transferred, and
Elders Insurance Limited has transferred substantially all the risks and rewards of ownership.
Receivables
Amounts due from policyholders are initially recognised at face value, being the amounts due. They are subsequently measured at fair value
which is approximated by taking the initially recognised amount and reducing it for impairment as appropriate.
A provision for impairment of receivables is established when there is objective evidence that Elders Insurance Limited will not be able to
collect all amounts due according to the original terms of the receivables. The amount of the provision is the difference between the asset’s
carrying amount and the present value of estimated future cash flows. The discount is calculated using a risk free rate. The impairment
charge is recognised in the statement of comprehensive income.
Actuarial Assumptions and Methods
Short Tail Classes
With short tail classes, there is not a significant delay between the occurrence of the claim and the claim being reported to the Group. The
costs of claims notified to the Group at the reporting date are estimated on a case by case basis to reflect the individual circumstances of
each claim. The ultimate expected cost of claims is projected from this data by reference to statistics which show how estimates of claims
incurred in previous periods have developed over time to reflect changes in the underlying estimates of the cost of notified claims and late
notifications.
Liability
Claims estimates for the Group’s liability business are derived from analysis of the results of several different actuarial methods. Ultimate
numbers of claims are projected based on the past reporting patterns. Payments experience is analysed based on averages paid per claim
incurred and averages paid per claim finalised. Historic case estimate development is also used to develop a model of future payments. The
resulting average claim sizes from these models are analysed, along with the loss ratios and other statistics, in order to determine a final
estimate of outstanding claims.
Claims inflation is incorporated into the resulting projected payments, to allow for both general economic inflation as well as any
superimposed inflation detected in the modelling of payments experience. Superimposed inflation arises from non-economic factors such as
developments of legal precedent.
Projected payments are discounted to allow for the time value of money. The liability class of business is also subject to the possible
emergence of new types of latent claims, but no specific allowance is included for this as at the reporting date. Such uncertainties are
considered when setting the risk margin appropriate for this class.
The following assumptions have been made in determining the outstanding claims liabilities:
Discount Rate
Discount Mean Term (Years)
Claims Handling Expense Ratio
Ultimate Gross Loss Ratio Latest Accident Year
Sept 2010
Sept 2009
Sept 2010
Sept 2009
Short-Tail
Short-Tail
Liability
-
-
-
-
4.80%
0.36
5.0%
80%
-
-
-
-
Liability
4.80%
2.46
6.0%
50%
Process Used to Determine Assumptions
A description of the processes used to determine these assumptions is provided below:
Average Weighted Term to Settlement
The average weighted term to settlement is calculated separately by class of business based on historic settlement patterns.
Expense Rate
Claims handling expenses were calculated by reference to past experience of claims handling costs as a percentage of past payments.
92
Notes to the Financial Statements
For the Year ended 30 September 2010
Note 2. Statement of Significant Accounting Policies (continued)
(ai) General Insurance activities (continued)
Discount Rate
Discount rates derived from market yields on Commonwealth Government securities as at the reporting date have been adopted.
Insurance Contracts – Risk Management Policies and Procedures
The financial condition and operation of the Group are affected by a number of key risks including insurance risk, interest rate risk, currency
risk, credit risk, market risk, liquidity risk, financial risk, compliance risk and operational risk.
Objectives in Managing Risks Arising from Insurance Contracts and Policies for Mitigating those Risks
The Group has the objective to control insurance risk thus reducing the volatility of operating profits. In addition to the inherent uncertainty of
insurance risk, which can lead to significant variability in the loss experience, profits from insurance business are affected by market factors,
particularly competition and movements in asset values. Short-term variability is, to some extent, a feature of insurance business.
In accordance with Prudential Standards GPS220 Risk Management and GPS230 Reinsurance Management issued by the Australian
Prudential Regulation Authority (APRA), the Board and senior management of the Group have developed, implemented and maintained a
sound and prudent Risk Management Strategy (RMS) and Reinsurance Management Strategy (REMS).
The RMS and REMS identify the Group’s policies and procedures, processes and controls that comprise its risk management and control
systems. These systems address all material risks, financial and non-financial, likely to be faced by the Group. Annually, the Board certifies to
APRA that adequate strategies have been put in place to monitor those risks, that the Group has systems in place to ensure compliance with
legislative and prudential requirements and that the Board has satisfied itself as to the compliance with RMS and REMS.
The RMS and REMS have been approved by the Board and submitted to APRA. Key aspects of the processes established in the RMS to
mitigate risks include:
• The maintenance and use of sophisticated management information systems, which provide up to date, reliable data on the risks to which
the business is exposed at any point in time;
• Actuarial models, using information from the management information systems, are used to calculate premiums and monitor claims
patterns. Past experience and statistical methods are used as part of the process;
• Documented procedures are followed for underwriting and accepting insurance risks;
• Natural disasters such as bushfires are more challenging to manage. The Group monitors exposure to such risks through special modelling
techniques involving the collation of data on weather patterns which support decisions on limiting exposure;
• Reinsurance is used to limit the Group’s exposure. When selecting a reinsurer the Group only consider those companies that provide high
security. In order to assess this, the Group uses rating information from the public domain or gathered through internal investigations;
• In order to limit concentrations of credit risk, in purchasing reinsurance the Group has regard to existing reinsurance assets and seeks to
limit excess exposure to any single reinsurer or group of related reinsurers; and
• The mix of assets in which the Group invests is driven by the nature and term of the insurance liabilities. The management of assets and
liabilities is closely monitored to attempt to match the maturity dates of assets with the expected pattern of claim payments.
Terms and Conditions of Insurance Business
The terms and conditions attaching to insurance contracts affect the level of insurance risk accepted by the Group. The majority of direct
insurance contracts written are entered into on a standard form basis. There are no special terms and conditions in any non standard
contracts that have a material impact on the financial statements.
Concentration of Insurance Risk
The Group’s exposure to concentrations of insurance risk is mitigated by a diversified portfolio. Specific processes for monitoring identified
key concentrations are set out below:
Risk
Natural Catastrophes
Source of Concentration
Risk Management Measures
Properties concentrated in regions that are
subject to:
Earthquakes
Bushfires
Cyclones
Hail Storms
The Group’s underwriting strategy requires
individual risk premiums to be differentiated
in order to reflect the higher loss frequency
in particular geographical areas.
The Group has modelled aggregated risk by
postcode using commercially available
catastrophe models. The Group’s exposure
data across the Australian portfolio
encompasses all fire risks.
Based on the probable maximum loss per
the models, the Group purchases
catastrophe reinsurance cover to limit
exposure to any single event.
93
Notes to the Financial Statements
For the Year ended 30 September 2010
Note 3. Revenue and Expenses
Sales revenue:
Sale of goods
Sale of biological assets
Commission and other selling charges
Other sales related income
Discontinued operations:
Other revenues:
Change in fair value of financial assets designated as fair value through profit and loss
Dividends
Other
Discontinued operations:
Interest revenue:
Associated entities
Other persons
Discontinued operations:
Expenses:
Distribution expenses
Marketing expenses
Occupancy expenses
Administrative expenses
Losses on forestry review
Impairment of assets retained
Refinancing, redundancy and other write offs
Other expenses
Discontinued operations:
Profit/(loss) on sale of non current assets:
Property, plant and equipment
Profit on sale of investments
Profit on sale of controlled entities
Discontinued operations
94
Consolidated
12 months
September
2010
$000
15 months
September
2009
$000
Note
1,657,964
2,417,823
151,507
180,138
202,536
265,864
57,046
84,942
2,069,053
2,948,767
40
85,328
591,316
2,154,381
3,540,083
10,849
54
28,164
39,067
1,880
8,459
406
38,144
47,009
60,898
40,947
107,907
1,776
23,552
25,328
1,632
26,960
1,816
7,499
9,315
17,461
26,776
279,324
341,761
6,548
40,660
160,195
142,039
9,725
12,517
1,409
652,417
57,836
15,926
55,926
210,908
-
42,125
123,077
5,278
795,001
717,470
710,253
1,512,471
(729)
113
-
(616)
(8,954)
(9,570)
(95)
57,225
(45,703)
11,427
112,682
124,109
40
40
40
40
Notes to the Financial Statements
For the Year ended 30 September 2010
Note 3. Revenue and Expenses (continued)
Finance costs:
Interest expense - other entities
Finance lease charges
Other finance costs
Discontinued operations:
Specific expenses
Depreciation and amortisation:
Property, plant and equipment
Leased assets
Design and development
Patents, trademarks and other
Discontinued operations:
Employee benefit expense:
Wages and salaries
Post employment benefits including superannuation
Workers compensation
Share based payments
Discontinued operations
Operating lease expenditure
Foreign exchange net gains/(losses)
Provision for doubtful debts and bad debts written off
Note
40
Consolidated
12 months
September
2010
$000
15 months
September
2009
$000
47,030
100,091
54
11,193
58,277
571
6
10,882
110,979
5,772
58,848
116,751
18,460
25,212
193
4,578
2,648
25,879
109
25,988
44
6,314
3,587
35,157
10,385
45,542
225,033
289,638
17,570
2,238
2,136
25,111
2,481
6,781
246,977
324,011
251
35,759
247,228
359,770
86,791
123,467
(2,372)
27,185
(484)
5,955
95
Notes to the Financial Statements
For the Year ended 30 September 2010
Note 4. Income Tax
(a) Major components of income tax expense are:
Income Statement
Current income tax
Current income tax charge/(benefit)
Adjustments in respect of current income tax of previous years
Deferred income tax
Origination and reversal of temporary differences
Income tax expense/(benefit) reported in income statement
Statement of Changes in Equity
Deferred income tax
Consolidated
12 months
September
2010
$000
15 months
September
2009
$000
3,346
(21,551)
89
(583)
(2,583)
852
23,304
1,170
Income tax expense/(benefit) reported in equity
(6,298)
(4,024)
(b) A reconciliation of income tax expense applicable to accounting profit/(loss) before income tax at the statutory income tax rate
to income tax expense at the Group’s effective income tax rate is as follows:
Accounting profit/(loss) before tax from:
- Continuing operations
- Discontinued operations
Total Accounting profit/(loss) before tax
(163,228)
(246,663)
(48,431)
(219,667)
(211,659)
(466,330)
Income tax expense/(benefit) at 30% (2009: 30%)
(63,498)
(139,899)
Adjustments in respect of current income tax of previous years
Share of associate (profits)/losses
Non assessable (profits)/losses
Non deductible depreciation and amortisation
Non deductible other expenses
Impairment expense
Employee share plan costs
Losses available to offset against future taxable income
Other
Income tax expense/(benefit) as reported in the statement of comprehensive income
Aggregate Income tax expense/(benefit) is attributable to:
- Continuing Operations
- Discontinued Operations
Current tax payable/(receivable)
89
(10,213)
(583)
2,522
1,491
10,405
-
3,418
71
1,115
17,653
107,488
670
48,407
2,835
852
2,248
23,678
(5,875)
1,170
9,078
(8,226)
852
(49,169)
50,339
1,170
51,558
38,047
96
Notes to the Financial Statements
For the Year ended 30 September 2010
Note 4. Income Tax (continued)
Statement of
Financial Position
Statement of
Comprehensive Income
September
2010
$000
September
2009
$000
12 months
September
2010
$000
15 months
September
2009
$000
Consolidated
Deferred income tax liabilities
Revaluations of investment properties to fair value
(8,826)
(10,799)
(1,973)
2,528
Revaluations of foreign exchange contracts (cash flow hedges)
to fair value
Shares in associated entities
Exchange rates to fair value
Non assessable accrued income
Forestry assets (standing timber)
Research and development
Other debtors
Other
Gross deferred income tax liabilities
Deferred income tax assets
Losses available to offset against future taxable income
Provision for employee entitlements
Other provisions
Forestry product investment income
Accrued expenditure
Deferred borrowing costs
Other capitalised expenses
Plant and equipment temporary differences
Other
Gross deferred income tax assets
Deferred income tax charge
(3,113)
(394)
(1,084)
(1,202)
(4,124)
(2,408)
(36,781)
(33,929)
(4,621)
(5,605)
(2,566)
(1,891)
(5,398)
(5,524)
(3,325)
(2,477)
1,911
(3,730)
(1,324)
2,852
(777)
81
(759)
(586)
(64,881)
(69,186)
(4,305)
60,030
11,817
18,025
961
5,715
6,765
11,680
871
3,053
63,030
11,733
12,360
4,290
2,613
9,249
8,294
3,189
282
118,917
115,040
3,000
(84)
(5,665)
3,329
(3,102)
2,484
(3,386)
2,318
(2,771)
(3,877)
(8,182)
1,224
3,161
1,363
14,907
301
(2,580)
(1,751)
(1,514)
17,639
4,121
2,053
(129)
5,533
(257)
(8,693)
(4,679)
7,945
(229)
5,665
23,304
Tax losses
The group has deferred tax assets attributable to tax losses not recognised in the financial statements of $62.9 million (2009: $14.5
million) that are available indefinitely for offset against future taxable profits of the companies in which the losses arose.
Unrecognised temporary differences
At 30 September 2010, there are no unrecognised temporary differences associated with the Group’s investment in subsidiaries, associate
or joint venture, as the group has no liability for additional taxation should unremitted earnings be remitted (2009: $nil)
Tax Consolidation
Elders and its 100% owned subsidiaries are in a tax consolidated group. Members of the group have entered into a tax sharing arrangement
in order to allocate income tax expense to wholly owned subsidiaries.
Wholly owned Australian subsidiaries are required to make contributions to the head entity for tax liabilities and deferred tax balances
arising from external transactions occurring after the implementation of tax consolidations. The contributions are calculated as a percentage
of taxable income as if each subsidiary is a stand alone entity. Contributions are payable following payment of the liabilities by Elders. The
assets and liabilities arising under the tax funding agreement are recognised as intercompany assets and liabilities with a consequential
adjustment to income tax expense or benefit.
In addition the agreement provides for the allocation of income tax liabilities between the entities should the head entity default on its tax
payment obligations or upon leaving the Group.
The head entity of the tax consolidated group is Elders Limited.
Taxation of financial arrangements (TOFA)
Legislation is in place which changes the tax treatment of financial arrangements including the tax treatment of hedging transactions. The
group has assessed the potential impact of these changes on the Group’s tax position. No impact has been recognised and no adjustments
have been made to the deferred tax and income tax balances as at 30 September 2010.
97
Notes to the Financial Statements
For the Year ended 30 September 2010
Note 5. Receivables
Current
Trade debtors (i)
Allowance for doubtful debts
Amounts receivable from associated entities
Allowance for non-recovery
Finance debtors
Allowance for non-recovery
Other receivables
Allowance for non-recovery
Non Current
Other receivables
Allowance for non-recovery
Amounts receivable from associated entities
Movements in the allowance for doubtful debts – trade debtors
Opening balance of allowance for doubtful debts
Trade debts written off
Trade debts provided for during the year
Closing balance of allowance for doubtful debts
Movements in allowance for non-recovery – amounts receivable from associated entities, other
receivables, and finance debtors
Opening balance of allowance for non-recovery
Amounts written off
Amounts provided for during the year
Closing balance of allowance for non-recovery
Consolidated
September
2010
$000
September
2009
$000
417,072
333,912
(13,008)
(10,759)
404,064
323,153
24,017
21,865
(10,462)
13,555
9,412
(1,476)
7,936
-
21,865
11,965
-
11,965
50,509
180,538
(4,904)
(1,736)
45,605
178,802
471,160
535,785
186,994
186,064
(3,301)
-
183,693
186,064
16,029
46,625
199,722
232,689
10,759
(5,066)
7,315
7,636
(2,185)
5,308
13,008
10,759
1,736
(1,463)
19,870
20,143
3,531
(1,795)
-
1,736
(i) Included in trade debtors is $72.7 million (2009: $76.2 million) which is subject to credit insurance with various terms and conditions.
Trade receivables are non interest bearing and are generally on 30 to 90 day terms with the exception of livestock receivables which are on
14 day terms. A provision for impairment loss is recognised when there is objective evidence that an individual trade receivable is impaired. An
impairment loss of $ 7.3 million (2009: $5.3 million) has been recognised by the Group. No individual amount within the impairment
allowance is material.
98
Notes to the Financial Statements
For the Year ended 30 September 2010
Note 5. Receivables (continued)
The ageing analysis of trade debtors is as follows:
0-30 days
Trade debtors past due but not considered impaired
31-60 days
61-90 days
+91 days
Trade debtors past due and considered impaired
31-60 days
61-90 days
+91 days
Total trade debtors
The ageing analysis of other current receivables is as follows:
0-30 days
Other current receivables past due but not considered impaired
31-60 days
61-90 days
+91 days
Other current receivables past due and considered impaired
31-60 days
+91 days
Consolidated
September
2010
$000
September
2009
$000
316,451
273,998
54,117
9,758
23,738
87,613
47
47
12,914
13,008
22,087
5,519
21,549
49,155
13
29
10,717
10,759
417,072
333,912
36,367
166,212
217
429
8,592
9,238
1,800
3,104
4,904
733
722
11,135
12,590
-
1,736
1,736
Total other current receivables
50,509
180,538
Related party receivables
For terms and conditions of related party receivables refer to notes 33 and 34.
Fair value and credit risk
Due to the short term nature of current receivables, their carrying value is assumed to approximate their fair value. For other receivables
the carrying amount is not materially different to their fair values.
The maximum exposure to credit risk is the fair value of each class of receivables. Details regarding credit risk exposure are disclosed in
note 36.
Foreign exchange and interest rate risk
Details regarding the foreign exchange and interest rate risk exposure are disclosed in note 36.
99
Notes to the Financial Statements
For the Year ended 30 September 2010
Note 6. Livestock
Current
Fair value at start of the period
Purchases during the period
Cost of sales during the period
Fair value increment/(decrement) in period
Fair value at the end of the period
Consolidated
September
2010
$000
September
2009
$000
43,752
37,023
338,899
336,486
(332,588)
(329,822)
(1,409)
48,654
65
43,752
At balance date 43,745 head of beef cattle (2009: 49,240) are included in livestock.
The fair value methodology for Livestock assets is detailed in note 2(l).
The group is exposed to a number of risks related to its livestock:
Regulatory and environmental risks
The Group is subject to laws and regulations and has established environmental policies and procedures aimed at compliance with local
environmental and other laws. Management performs regular reviews to identify environmental risks and ensure systems in place are
adequate to manage those risks.
Financial/supply and demand risk
The Group is exposed to financial risk in respect of livestock activity. The primary financial risk associated with this activity occurs due to
the length of time between expending cash on the purchase and ultimately receiving cash from the sale to third parties. The Group’s
strategy to manage this financial risk is to actively review and manage its working capital requirements.
The Group is exposed to risks arising from fluctuations in price and sales volumes. Where possible, the Group manages these risks by
aligning volumes with market supply and demand.
Other risks
The Group’s livestock are exposed to the risk of damage from diseases and other natural forces. The Group has extensive processes in
place aimed at monitoring and mitigating those risks, including regular health inspections and industry pest and disease surveys.
2,144
25,051
27,195
27,014
2,764
(3,699)
-
1,116
27,195
-
27,014
27,014
25,716
1,474
1
(1,785)
1,608
27,014
Note 7. Forestry
Current
Non Current
Fair value at start of the period (note 2(m))
Purchases during the year
Impairment
Harvest
Fair value increment in period
Fair value at the end of the period
100
Notes to the Financial Statements
For the Year ended 30 September 2010
Note 7. Forestry (continued)
Physical quantity of forestry plantation timber at the end of the year is 490,013 m3 (2009: 519,639 m3).
The fair value methodology for Forestry assets is detailed in note 2(m). The assumptions used in the valuation model to determine fair value
less point of sale costs are as follows:
CPI:
Discount rate :
Period to Harvest:
Current woodchip FOB price:
2.5-4% (2009: 2.5% to 5%)
9-15% (2009: 9%)
Between 1-19 years, depending upon year of establishment and
current harvest schedule for the individual property
$207.40 per BDMT (Bone Dry Metric Tonne) (2009: $207.40)
The group is exposed to a number of risks related to its plantations:
Regulatory and environmental risks
The Group is subject to laws and regulations and has established environmental policies and procedures aimed at compliance with local
environmental and other laws. Management performs regular reviews to identify environmental risks and ensure systems in place are
adequate to manage those risks.
Financial/supply and demand risk
The Group is exposed to financial risk in respect of forestry activity. The primary financial risk associated with this activity occurs due to the
length of time between expending cash on the purchase or planting and maintenance of the plantations and ultimately receiving cash from
the sale of timber to third parties. The Group’s strategy to manage this financial risk is to actively review and manage its working capital
requirements.
The Group is exposed to risks arising from fluctuations in price and sales volumes. Where possible, the Group manages these risks by
aligning harvest volumes with market supply and demand.
Climate and other risks
The Group’s plantations are exposed to the risk of damage from climatic changes, diseases, forest fires and other natural forces. The Group
conducts regular plantation health inspections and is involved in industry pest and disease surveys.
Note 8. Inventory
Current
Raw materials and bulk stores – at net realisable value
Work in progress – at cost
Finished goods – at net realisable value
Consolidated
September
2010
$000
September
2009
$000
35,666
226
47,172
1,229
139,325
177,123
175,217
225,524
Inventories recognised as an expense for the year ended 30 September 2010 totalled $1,523.8 million (2009: $2,228.5 million). This
expense has been included in the cost of sales line item as a cost of inventories. In addition inventory write-downs recognised as an expense
totalled $3.9 million (2009: $9.1 million) for the Group.
101
Notes to the Financial Statements
For the Year ended 30 September 2010
Note 9. Derivative Financial Instruments
Current
Asset/(liability) - derivatives
Non Current
Asset/(liability) - derivatives
(a) Instruments used by the group
Consolidated
September
2010
$000
September
2009
$000
(3,601)
7,820
(17,703)
(49,924)
At 30 September 2010, the Group had a number of interest rate swap agreements and cross currency swap agreements in place. These
swaps are used to hedge the movements in interest rates and the changes in fair value of borrowings denominated in a foreign currency
(USD).
The Group also held a number of forward exchange contracts designated as hedges of contracted future sales to customers and contracted
future purchases from suppliers for which the Group has firm commitments. The foreign currency contracts are being used to hedge the
foreign currency risk of the firm commitments.
The terms of these swap agreements and forward contracts are as follows:
Amount in Total
$AUD’000
Maturity
Pay Rate/
Exchange Rate
Number of
Contracts
At 30 September 2010
Interest Rate Swaps
Cross Currency Swaps
At 30 September 2009
Interest Rate Swaps
Cross Currency Swaps
204,054
Nov 2014 to Jun 2015
5.67% to 6.67%
136,113
Sep 2012 to Jun 2015
BBSW + Margin
429,054
Oct 2009 to June 2015
5.49% to 7.42%
291,709 Nov 2009 to June 2015
BBSW + Margin
3
4
10
5
(b) Interest rate and credit risk
For financial risk management policies of the Group, refer to note 36.
Note 10. Other Financial Assets
Non Current
Unlisted investments, at cost (i)
Consolidated
September
2010
$000
September
2009
$000
21,980
17,549
(i) These investments are measured at historical cost less impairment as fair value cannot be reliably measured, due to the equity
instruments not being traded in a liquid market environment. Management believes that the measurement at historical cost is
reasonable and the most appropriate at reporting date
102
Notes to the Financial Statements
For the Year ended 30 September 2010
Note 11. Investments in Associates and Joint Ventures
Associates *
- listed
- unlisted
Investment in Joint Ventures:
- unlisted
Contribution to net profit/(loss) for Associates:
- listed
- unlisted
Contribution to net profit/(loss) for Joint Ventures:
- unlisted
Aggregate Associate or Joint Venture contribution to net profit/(loss) is attributable to:
- Continuing Operations
- Discontinued Operations
Consolidated
September
2010
$000
September
2009
$000
16,420
49,031
215,537
226,341
231,957
275,372
8,921
7,852
240,878
283,224
927
31,770
32,697
1,046
33,743
(2,434)
(15,765)
(18,199)
17,502
(697)
33,854
28,438
(111)
(29,135)
33,743
(697)
* The Group’s investments in Hi-Fert, Seafood Delicacies Ltd, Smartfibre and certain forestry properties are held for sale and have been
classified in the statement of financial position as “Non current assets held for sale” totalling $18.1 million (2009: $16.6 million). The Group’s
investment in Kilcoy has been reclassified to Investments in Associates on the basis that a sale within 12 months is no longer probable.
(a) Interests in associates
Details of material interests in associated entities are as follows:
Name of Associate
Principal activity
of Associate
Balance date
of Associate
Ownership
Interest
Consolidated Entity
Investment
Sept 2010
%
Sept 2009
%
Sept 2010
$000
Sept 2009
$000
Futuris Automotive Interiors (Anhui)
Company Ltd (a)
Automotive
MCK Holdings Pty Ltd (Plexicor) (b)
Automotive
Rural Bank Limited
Banking
31 Dec
30 Jun
30 Jun
AWH Pty Ltd (formerly Australian Wool
Handlers Pty Ltd)
Wool processing
30 Jun
Elders Financial Planning Pty Ltd
Financial services
30 Sep
70
50
40
50
49
Forestry
30 Jun
13.5
Forest Enterprises Australia Ltd (in
voluntary administration)
Agricultural Land Trust (formerly
Westralia Property Trust)
70
50
40
50
-
27
10,364
11,786
-
21,819
145,004
148,017
41,399
38,224
5,083
-
-
32,405
Land management
30 Jun
49.9
49.9
16,420
16,626
Kilcoy Pastoral Company Limited
Meat processing
30 Jun
20
20
4,147
-
Other investments
9,540
6,495
231,957
275,372
103
Notes to the Financial Statements
For the Year ended 30 September 2010
Note 11. Investments in Associates and Joint Ventures (continued)
(a) Interests in associates (continued)
All associates are Australian resident companies, except Futuris Automotive Interiors (Anhui) Company Ltd which is incorporated in
Mauritius.
(a) Futuris Automotive Interiors (Anhui) Company Ltd is considered a jointly controlled entity due to the control provided in the shareholders’
agreement to the minority parties.
(b) As at 30 September 2010 the group determined control over MCK Holdings Pty Ltd existed. Consequently the entity has been
consolidated in the financial statements of the Group. Refer to note 24 and 39 for further information.
(c) Impairment losses relating to the following investments in associates that have been taken to account:
• Forestry Enterprises Australia Ltd $32.4 million (2009: $66.2 million)
• AWH Pty Ltd $nil (2009: $1.2 million)
• Agricultural Land Trust $0.5 million (2009: $4.2 million)
• Air International Thermal $nil (2009: $9.1 million)
• Kilcoy Pastoral Company reversal of previously recorded impairment $2.7 million (2009: $nil million)
Share of associates’ statement of financial position
Current assets
Non current assets
Current liabilities
Non current liabilities
Share of net assets of associates
Share of associates’ profit or loss
Revenue
Profit before income tax
Income tax (expense)/benefit
Profit after income tax
Non controlling interests
Share of net results of associates
Commitments and contingent liabilities
Share of associates’ capital expenditure commitments (contracted)
Share of associates’ operating lease commitments
Share of associates’ contingent liabilities
Consolidated
12 months
September
2010
$000
15 months
September
2009
$000
4,204,351
1,538,921
122,779
555,649
4,327,130
2,094,570
4,059,941
1,659,588
85,151
210,287
4,145,092
1,869,875
182,038
224,695
385,990
363,630
45,605
(18,357)
(12,894)
158
32,711
(18,199)
(14)
-
32,697
(18,199)
342
6,451
64,945
19,823
1,234
1,802
On 8 May 2009 the Group’s investment in Rural Bank Limited was reduced from 50% to 40%, therefore the nature of the investment was
reclassified from a joint venture to an associate. The comparative period share of associate’s profit and loss only includes Rural Bank
Limited results from May to September 2009.
104
Notes to the Financial Statements
For the Year ended 30 September 2010
Note 11. Investments in Associates and Joint Ventures (continued)
(b) Interests in Rural Bank Limited
Summary of statement of financial position of Rural Bank Limited
Finance receivables
Other assets
Total assets
Finance deposits
Other liabilities
Total liabilities
Net assets
Share of net assets
Reconciling items:
Dividend
Origination fees
Summary of share of profit of Rural Bank Limited
Profit before income tax
Tax expense
Timing variance in origination fees recognised
Share of net results
Consolidated
12 months
September
2010
$000
15 months
September
2009
$000
4,138,246
3,631,433
9,392
717,578
4,147,638
4,349,011
3,625,009
3,723,836
167,156
277,388
3,792,165
4,001,224
355,473
142,189
347,787
139,114
3,888
(1,073)
10,244
(1,341)
145,004
148,017
31,884
(9,565)
22,319
-
22,319
38,884
(11,738)
27,146
576
27,722
Share of commitments and contingent liabilities of Rural Bank Limited
1,686
1,397
(c) Interests in joint ventures
Share of joint ventures’ statement of financial position
Current assets
Non current assets
Current liabilities
Non current liabilities
Share of net assets
Share of joint ventures’ profit or loss
Revenue
Profit before income tax
Income tax expense
Share of net results of joint venture
Share of commitments and contingent liabilities of joint ventures
(d) Fair value of investment in listed entities
52,159
38
52,197
43,095
218
43,313
8,884
44,833
15,840
60,673
41,000
-
41,000
19,673
345,612
378,673
1,494
(448)
1,046
-
1,911
(602)
1,309
92
Listed entities (equity accounted)
Carrying amount
Fair value*
2010
$000
2009
$000
2010
$000
2009
$000
16,420
49,031
6,003
18,406
* Fair value has been determined based on published price quotations. The group’s listed equity accounted investments include Forest
Enterprises Australia Ltd (“FEA”) and the Agricultural Land Trust. FEA is in voluntary administration and has both a nil carrying amount and
nil fair value at 30 September 2010.
105
Notes to the Financial Statements
For the Year ended 30 September 2010
Note 12. Property, Plant and Equipment
Non Current
Freehold land – cost
Buildings
Cost
Accumulated depreciation and impairment
Leasehold improvements
Cost
Accumulated amortisation and impairment
Plant and equipment (owned)
Cost
Accumulated depreciation and impairment
Plant and equipment (leased)
Cost
Accumulated amortisation and impairment
Livestock Carrier
Cost
Accumulated depreciation and impairment
Assets under construction – cost
Total property, plant and equipment
Property, plant and equipment pledged as security for liabilities
Refer to note 17 for interest bearing loans and borrowings secured by property, plant and equipment.
Reconciliations of the carrying amounts for each class of property, plant and equipment are set out below:
Freehold land
Carrying amount at beginning of period
Additions
Disposals
Transfer (to)/from investment properties
Impairment
Exchange fluctuations
Transfers/other
Carrying amount at period end
106
Consolidated
September
2010
$000
September
2009
$000
10,616
11,261
24,054
(9,817)
14,237
18,249
(7,576)
10,673
31,019
28,020
(15,271)
(13,994)
15,748
14,026
243,893
283,639
(165,005)
(214,384)
78,888
69,255
1,395
(563)
832
1,547
(520)
1,027
33,419
28,789
(30,132)
(24,270)
3,287
6,043
4,519
3,620
129,651
114,381
11,261
-
(360)
145
(519)
89
-
10,616
13,727
1,652
(2,453)
-
-
(13)
(1,652)
11,261
Notes to the Financial Statements
For the Year ended 30 September 2010
Note 12. Property, Plant and Equipment (continued)
Buildings
Carrying amount at beginning of period
Additions
Disposals
Transfer (to)/from investment properties
Depreciation expense
Impairment
Exchange fluctuations
Transfers/other
Carrying amount at period end
Leasehold improvements
Carrying amount at beginning of period
Additions
Additions through entity acquired
Disposals
Depreciation expense
Impairment
Exchange fluctuations
Transfers/other
Carrying amount at period end
Plant and equipment (owned)
Carrying amount at beginning of period
Additions
Additions through entity acquired
Disposals
Disposal through entity sold
Allocation of amounts held in provisions
Depreciation expense
Impairment
Exchange fluctuations
Transfers from assets under construction
Transfers/other
Carrying amount at period end
Plant and equipment (leased)
Carrying amount at beginning of period
Additions
Disposals
Depreciation expense
Transfers from assets under construction
Transfers/other
Carrying amount at period end
Consolidated
September
2010
$000
September
2009
$000
10,673
762
(2,776)
2,700
(926)
-
(71)
3,875
14,237
14,026
2,224
69
(1,651)
(2,075)
(927)
(20)
4,102
15,748
25,693
1,378
(9,868)
-
(2,166)
(3,140)
(127)
(1,097)
10,673
13,583
2,755
-
(2,652)
(2,861)
-
-
3,201
14,026
69,255
207,770
5,609
29,806
(1,235)
12,890
-
(28,775)
(70)
(101,597)
(4,550)
-
(14,336)
(25,500)
214
(181)
2,296
(7,920)
78,888
1,027
-
-
(193)
55
(57)
832
(10,171)
402
-
14,236
69,255
5,885
330
(4,220)
(718)
-
(250)
1,027
107
Notes to the Financial Statements
For the Year ended 30 September 2010
Note 12. Property, Plant and Equipment (continued)
Livestock Carrier
Carrying amount at beginning of period
Additions
Depreciation expense
Impairment
Carrying amount at period end
Assets under construction
Carrying amount at beginning or period
Additions
Additions through entity acquired
Disposals
Impairment
Exchange fluctuations
Transfers to other classes of PPE
Carrying amount at period end
Note 13. Investment Properties
Non Current
Investment properties at fair value as per valuation
Carrying amount at beginning of period
Transfer (to)/from other property, plant, equipment
Fair value adjustments, net
Acquisition of investment properties
Transfer to non current assets held for sale
Disposal of investment properties
Impairment adjustment
Reverse discount on acquisition
Foreign exchange variation
Other
Carrying amount at end of period
Investment property pledged as security for liabilities
Refer to note 17 for interest bearing loans and borrowings secured by investment property.
(a) Amounts recognised in profit and loss for investment properties
Land and Buildings
Rental income
Consolidated
September
2010
$000
September
2009
$000
4,519
4,630
(1,232)
(4,630)
3,287
3,620
5,035
304
(540)
-
(25)
(2,351)
6,043
18,825
97
(1,923)
(12,480)
4,519
27,498
4,433
-
(671)
(15,604)
4
(12,040)
3,620
265,022
283,797
283,797
256,417
(2,845)
7,564
6,354
(1,050)
(4,853)
(34,321)
10,649
-
(273)
2,663
10,672
39,975
-
(985)
(25,626)
-
681
-
265,022
283,797
-
-
286
286
Plantation Land
The Group does not separately recognise rental income from plantation land in profit and loss. This income is embedded within the harvest
proceeds from plantations. Therefore it is not possible to provide a definitive rental income value and associated direct expenses generated
from rental income to disclose. Rental income is not considered to be a significant revenue item.
108
Notes to the Financial Statements
For the Year ended 30 September 2010
Note 13. Investment Properties (continued)
(b) Valuation basis
The Plantation Land not yet used to generate income has some immaterial expenses associated with the land. These costs are not
separately recorded and therefore cannot be separately identified.
Investment properties are carried at fair value. The fair value represents the amount at which the assets could be exchanged between a
knowledgeable willing buyer and a knowledgeable willing seller in an arms length transaction at the date of valuation. In determining fair
value, the expected net cash flows applicable to each property have been discounted to their present value using a market determined,
risk-adjusted, discount rate applicable to the respective asset.
At March 2010, the Board initiated an independent review, of forestry asset values in light of industry uncertainty and developments in
the Forestry division. Ernst and Young were commissioned to oversee the review and it involved the assessment of carrying values to
include 100% of Elders Forestry freehold estate and future income and harvest yield forecasts. As a result an impairment loss of $34.3m
was recognised against investment properties. The loss relates specifically to properties in Central Queensland which were affected by
fungal disease.
The fair value methodology for plantation land investments is detailed in note 2(t). Fair value has been determined by the independent land
valuation expert, Colliers Jardine using a desktop approach.
Plantation Land
The assumptions used for the Plantation Land DCF valuation model are as follows:
Future Land Price Index
CPI
Land discount rate (post-tax)
Future land rental income
Lease period
4.5% (2009: 4.5%)
2.5% (2009: 2.5%)
9.0% (2009: 9.0%)
Between 0-30% of final net harvest proceeds
Between 1-20 years depending upon the individual property
Land and Buildings
Land and Buildings have been impaired by $nil (2009: $25.6 million).
Note 14. Intangibles
Non Current
Patents, trade marks and licences
Accumulated amortisation and impairment
Goodwill
Accumulated impairment
Brand names
Development costs, rent roll & other
Accumulated amortisation and impairment
Total intangibles
Consolidated
September
2010
$000
September
2009
$000
3,115
(2,610)
505
3,224
(3,078)
146
244,358
168,341
(60,759)
(22,854)
183,599
145,487
60,400
60,400
21,764
(8,535)
13,229
29,662
(7,175)
22,487
257,733
228,520
109
Consolidated
September
2010
$000
September
2009
$000
146
412
-
-
(19)
(34)
505
5,328
-
(4,310)
(872)
-
-
146
145,487
207,886
98,085
2,275
(10,248)
(50,838)
(1,162)
-
18,371
(67,390)
(13,380)
-
183,599
145,487
60,400
60,519
-
(119)
60,400
60,400
22,487
95
(6,274)
(2,648)
(387)
(44)
33,103
1,117
(6,546)
(5,187)
-
-
13,229
22,487
Notes to the Financial Statements
For the Year ended 30 September 2010
Note 14. Intangibles (continued)
(a) Reconciliation of carrying amounts at the beginning and end of the period
Patents, trade marks and licences
As at beginning of period
Additions
Disposals
Amortisation
Impairment
Transfers/other
As at period end
Goodwill
As at beginning of period
Acquisition of controlled entity
Additions
Disposals
Impairment
Exchange fluctuations
As at period end
Brand names
As at beginning of period
Disposals
As at period end
Development costs, rent rolls and other
As at beginning of period
Additions
Disposals
Amortisation
Impairment
Exchange fluctuations
As at period end
A description of each intangible asset is included in section (b) of this note.
Refer note 2(w) for the accounting policy in relation to goodwill and other intangible assets.
110
Notes to the Financial Statements
For the Year ended 30 September 2010
Note 14. Intangibles (continued)
(b) Description of the Group’s intangible assets and goodwill
(i) Patents, trade marks and licences
Patents and licences have been acquired through business combinations and are carried at cost less accumulated impairment losses. These
intangible assets have been determined to have finite useful lives and are amortised over their useful lives and tested for impairment
whenever there is an indicator of impairment (refer section (c) of this note).
(ii) Goodwill
After initial recognition, goodwill acquired in a business combination is measured at cost less any accumulated impairment losses. Goodwill
is not amortised but is subject to impairment testing on an annual basis or whenever there is an indication of impairment (refer section (c)
of this note).
(iii) Brand names
The brand name value represents the value attributed to the Elders brand when acquired through business combinations and are carried at
cost less accumulated impairment losses. Brand names have been determined to have indefinite useful life due to there being no
foreseeable limit to the period over which they are expected to generate net cash inflows, given the strength and durability of our brand and
the level of marketing support. The Brand has been in the rural and regional Australian Market for many years, and the nature of the
industry we operate in is such that brand obsolescence is not common, if appropriately supported by advertising and marketing spend.
Brand names are not amortised but are subject to impairment testing on an annual basis or whenever there is an indication of impairment
(refer section (c) of this note).
Expenditure incurred in developing, maintaining or enhancing brand names is expensed in the year that it occurred.
(iv) Development costs, rent rolls and other
Development costs and rent rolls have been acquired through business combinations and are carried at cost less accumulated impairment
losses. These intangible assets have been determined to have finite useful lives and are amortised over their useful lives and tested for
impairment whenever there is an indicator of impairment (refer section (c) of this note).
(c) Impairment tests for goodwill and intangibles with indefinite useful lives
For the purposes of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the
Group’s cash generating units, or groups of cash generating units, that are expected to benefit from the synergies of the combination,
irrespective of whether the other assets and liabilities of the Group are assigned to those units or group of units. Each unit or group of units
to which the goodwill is allocated represents the lowest level within the entity at which the goodwill is monitored for internal management
purposes, and is not larger than an operating segment determined in accordance with AASB 8.
The carrying amount of goodwill and brand names attributed to each of these cash generating units is as follows:
Consolidated
Rural Services Network
Rural Services New Zealand
Forestry
MCK Holdings (Plexicor)
Other CGU’s
Goodwill
Brand Names
September
2010
$000
September
2009
$000
September
2010
$000
September
2009
$000
70,020
9,926
-
98,085
5,568
70,020
16,542
43,764
-
15,161
60,400
60,400
-
-
-
-
-
-
-
-
183,599
145,487
60,400
60,400
(i) Rural Services Network CGU
The recoverable amount of Goodwill and Brand Names for Rural Services Network CGU has been determined based on a value in use
calculation using cash flow projections approved by management that covers a period of 5 years. Future cash flows are based on budgets
and forecasts taking into account current market conditions and known future business events that will impact cash flows. The discount rate
applied to the cash flow projections is 15.2% pre-tax (2009: 13.0% pre-tax) which has been determined based on a weighted average cost
of capital calculation.
The calculation of value in use for the Rural Services Network CGU was based on the following key assumptions:
Gross margins
• Farm supplies volumes are expected to marginally increase in line with improved seasonal conditions on the east coast of Australia despite
price levels remaining stable.
• Livestock prices are expected to weaken however volumes are forecast to be consistent with 2010.
• Real estate activity in broadacre is forecast to increase with improving rural conditions however activity in residential markets is expected to
decrease over the forecast period.
111
Notes to the Financial Statements
For the Year ended 30 September 2010
Note 14. Intangibles (continued)
(c) Impairment tests for goodwill and intangibles with indefinite useful lives (continued)
Selling, general and administrative expenses
• Significant reduction in expenses is expected through restructure initiatives undertaken by management during the 2010 financial year.
Growth rate estimates
• Year 1 cash flows are based on the Board approved budget for the 2011 financial year.
• Growth for years 2 – 4 is based on a three year forecast model assuming a straight line increase for inflation and price in addition to the
cost reductions detailed above.
• The growth rate for year 5 is based on a 5% nominal growth factor.
Discount rates
• Discount rates reflect management’s estimate of the time value of money and the risk specific to each unit that are not already reflected in
the cash flows.
Management has determined there is no impairment in the current year for the Rural Services CGU (2009: $nil).
(ii) Rural Services New Zealand CGU
The recoverable amount of goodwill for Rural Services New Zealand CGU has been determined based on a value in use calculation using
cash flow projections approved by management that covers a period of 5 years. Future cash flows are based on budgets and forecasts taking
into account current market conditions and known future business events that will impact cash flows. The discount rate applied to the cash
flow projections is 15.2% pre-tax (2009: 13.0% pre-tax) which has been determined based on a weighted average cost of capital
calculation.
The calculation of value in use for the Rural Services New Zealand CGU was based on the following key assumptions:
Gross margins
• Trading conditions for farm supplies are expected to improve principally in the areas of chemicals and seed.
• Rural confidence is expected to recover in line with strong and improving terms of trade and the general economic conditions in New Zealand.
Selling, general and administrative expenses
• Significant reduction in expenses is expected through restructure initiatives undertaken by management during the 2010 financial year.
Growth rate estimates
• Year 1 cash flows are based on the Board approved budget for the 2011 financial year. This includes the impact of cost initiatives identified
and implemented during 2010.
• Growth for years 2 – 5 is 3% based on a nominal growth
Discount rates
• Discount rates reflect management’s estimate of the time value of money and the risk specific to each unit that are not already reflected in
the cash flows.
Management has recorded an impairment of $5.0 million (2009: $1.0 million) for the Rural Services New Zealand CGU.
(iii) MCK Holdings
MCK Holdings (“Plexicor”) was consolidated into the Group on 30 September 2010. Refer note 39 for details of provisional acquisition
accounting. Goodwill of $86.1 million acquired is represented by the difference between consideration paid and the fair value of the
identifiable assets and liabilities acquired. In addition Plexicor had $12.0 million of goodwill in its statement of financial position. All
goodwill and assets of Plexicor will be tested for impairment going forward in line with the Group’s policy.
(d) Sensitivity to change in assumptions
(i) Rural Services Network CGU
With regard to the assessment of the value in use of the Rural Services Network CGU, management believe that no reasonably possible
change in any of the above key assumptions would cause the carrying value of the unit to materially exceed its recoverable amount, with the
exception of:
• an decrease in expected future cash flows in excess of 59% in the forecast year 1 and then expected growth rates applied to that base
thereafter could result in an impairment; and
• a decrease in the expected future cash in the forecast year 1 in excess of 34% with no growth applied thereafter, could result in an
impairment.
(ii) Rural Services New Zealand CGU
With regard to the assessment of the value in use of the Rural Services New Zealand CGU, any negative change to the above key
assumptions will cause the carrying value of the unit to exceed its recoverable amount.
112
Notes to the Financial Statements
For the Year ended 30 September 2010
Note 15. Other Assets
Current
Deferred expenses
Prepayments
Non Current
Deferred design and development expenditure
As at beginning of period
Design and development expenditure capitalised
Additions through entity acquired
Amortisation
Impairment
As at period end
Note 16. Trade and Other Payables
Current
Trade creditors
Other creditors and accruals
Payables to associated companies
Unearned forestry income
Non Current
Payables
Other creditors and accruals
(a) Fair Value
Due to the short term nature of these payables, their carrying value is assumed to approximate their fair value.
(b) Financial guarantees
Information regarding financial guarantees is set out in note 36.
(c) Related party payables
For terms and conditions of related party payables refer to note 34.
(d) Interest rate, foreign risk and liquidity risk
Information regarding interest rate, foreign exchange and liquidity risk exposure is set out in note 36.
Consolidated
September
2010
$000
September
2009
$000
1,432
21,700
23,132
2,063
21,139
23,202
18,919
18,459
18,459
4,394
96
(4,578)
548
18,919
27,058
3,963
-
(6,314)
(6,248)
18,459
282,267
244,526
69,510
100,889
2,000
3,202
-
17,316
356,979
362,731
410
776
1,186
-
-
-
113
Notes to the Financial Statements
For the Year ended 30 September 2010
Note 17. Interest Bearing Loans and Borrowings
Current
Secured loans
Unsecured loans
Lease liabilities
Secured notes
Trade receivables funding
Non Current
Secured loans
Unsecured loans
Lease liabilities
Secured notes
Total Current and Non Current
Consolidated
September
2010
$000
September
2009
$000
167,422
702,419
620
229
1,603
453
-
149,594
111,215
-
279,486
854,069
122,357
245,064
1,016
127
-
112
94,649
100,028
218,149
345,204
497,635
1,199,273
During the financial period, Elders completed negotiations in respect of its trade receivables financing program. As a result of the new
program, a secured interest bearing liability for the trade receivables portfolio has been recognised on the balance sheet as a current liability.
(a) Financing arrangements
The Group has access to the following financing facilities with a number of financial institutions.
Consolidated
Maturity
Accessible
$000
Drawn
$000
Unused
$000
2010
Secured Loans
- Tranche A1 Term Loan
- Tranche D1 Revolver
- Other
Secured Notes
- Tranche A2 – Series A
- Tranche A2 – Series B
- Tranche A3 – Series C
- Tranche A3 – Series D
- Tranche A4 – Series D
Sep ‘12
Mar ‘11
Various
Nov ‘14
May ‘15
Nov ‘14
May’15
Nov ‘14
122,357
122,357
116,800
75,000
299,484
203,637
-
41,800
95,847
538,641
400,994
137,647
16,994
33,568
12,612
24,953
28,197
16,994
33,568
12,612
24,953
28,197
116,324
116,324
-
-
-
-
-
-
-
-
-
- Costs to be amortised over the period of the loan
Nov ‘14
(21,675)
(21,675)
Unsecured loans and lease liabilities
94,649
94,649
1,992
1,992
Total
114
635,282
497,635
137,647
Notes to the Financial Statements
For the Year ended 30 September 2010
Note 17. Interest Bearing Loans and Borrowings (continued)
(a) Financing arrangements (continued)
Consolidated
Maturity
Accessible
$000
Drawn
$000
Unused
$000
2009
Secured Loans
- Tranche A1 Term Loan
- Tranche B1 Asset Sales Bridge
- Tranche C1 Equity Bridge
- Tranche D1 Revolver
- Tranche D2 Ancillary
- Other
Secured Notes
- Tranche A2 – Series A
- Tranche A2 – Series B
- Tranche A3 – Series C
- Tranche A3 – Series D
- Tranche B2 – Series F
- Tranche C2 – Series G
- Tranche A4 – Series D
Sep ‘12
Sep ‘10
Oct ‘09
Mar ‘11
Mar ‘11
Various
Nov ‘14
May ‘15
Nov ‘14
May’15
Sep ‘10
Nov ‘09
Nov ‘14
127,214
127,214
344,737
344,737
316,272
316,272
116,777
116,777
-
-
-
-
35,000
28,105
19,414
23,069
15,586
5,036
968,105
947,483
20,622
19,366
37,919
14,450
28,293
78,018
71,576
30,691
19,366
37,919
14,450
28,293
78,018
71,576
30,691
280,313
280,313
249,622
249,622
2,168
2,168
-
-
-
-
-
-
-
-
-
-
-
- Costs to be amortised over the period of the loan
Nov ‘14
(30,691)
(30,691)
Unsecured loans and lease liabilities
Total
1,219,895
1,199,273
20,622
Tranches A2, A3 & A4 maturities are subject to “Note Holder Put Rights” to September 2012.
(b) Fair values
Unless disclosed below, the carrying amount of the Group’s current and non current borrowings approximate their fair value.
The fair values have been calculated by discounting the expected future cash flows at prevailing market interest rates varying
from 7.5% to 8.5% (2009: 7.5% to 8.5%).
Secured loans
Secured notes
2010
2009
Carrying
amount
$000
Fair
value
$000
Carrying
amount
$000
Fair
value
$000
400,994
400,994
947,483
947,483
94,649
98,806
249,622
249,622
495,643
499,800
1,197,105
1,197,105
The parent entity and certain controlled entities have potential financial liabilities which may arise from certain contingencies disclosed in
note 28. However the Directors do not expect those potential financial liabilities to crystallise into obligations and therefore financial
liabilities disclosed in the above table are the director’s estimate of amounts that will be payable by the Group. No material losses are
expected and as such, the fair values disclosed are the directors’ estimate of amounts that will be payable by the group.
115
Notes to the Financial Statements
For the Year ended 30 September 2010
Note 17. Interest Bearing Loans and Borrowings (continued)
(c) Interest rate, foreign exchange and liquidity risk
Secured notes are issued in the United States of America financial markets and are denominated in United States dollars. Details regarding
interest rate, foreign exchange and liquidity risk is disclosed in note 36.
(d) Assets pledged as security
Secured loans and secured notes are secured by various fixed and floating charges over the assets of the controlled entities concerned.
Lease liabilities are secured by a charge over the leased assets.
The carrying amount of assets pledged as security for current and non-current interest bearing liabilities are:
Consolidated
September
2010
$000
September
2009
$000
48,870
297,823
155,550
198,948
150,894
418,500
68,176
10,186
773,814
575,133
48,052
238,480
-
27,014
492,471
563,987
196,382
242,824
106,358
58,758
268,619
273,921
304,974
165,977
1,416,856
1,570,961
2,190,670
2,146,094
Current assets
Floating charge
Cash and cash equivalents
Trade and other receivables
Inventory
Other
Non Current assets
Floating charge
Receivables
Inventories
Other financial assets
Investments in associates and joint ventures
Property, plant and equipment
Investment properties
Other
Total Current and Non Current
116
Notes to the Financial Statements
For the Year ended 30 September 2010
Note 18. Provisions
Current
Employee entitlements
Warranty
Restructuring
Redundancy
Make good
Onerous Contracts
Other
Non Current
Employee entitlements
Make good
Onerous Contracts
Total provisions
Consolidated
September
2010
$000
September
2009
$000
43,955
1,717
6,883
1,758
7,323
6,623
3,748
50,333
2,242
36,179
2,000
7,028
3,448
5,967
72,007
107,197
4,704
7,553
12,376
24,633
96,640
13,206
-
-
13,206
120,403
For a description of the nature and timing of the cash flows associated with the above provisions, refer to section (b) below.
(a) Movement in provisions
Employee entitlements
As at beginning of period
Arising during year
Utilised
Unused amounts reversed
Provisions arising from business combinations
Discount rate adjustment
As at period end
Warranty
As at beginning of period
Arising during year
Utilised
Unused amounts reversed
Provisions arising from business combinations
As at period end
63,539
15,887
67,559
35,111
(32,849)
(38,619)
(69)
2,240
(89)
(753)
-
241
48,659
63,539
2,242
1,064
(1,182)
(401)
(6)
1,717
2,722
1,866
(1,187)
(1,159)
-
2,242
117
Notes to the Financial Statements
For the Year ended 30 September 2010
Note 18. Provisions (continued)
(a) Movement in provisions (continued)
Restructuring
As at beginning of period
Arising during year
Utilised
Unused amounts reversed
Provisions allocated to property, plant and equipment
Provisions allocated to investment property
Provisions allocated to inventory
As at period end
Redundancy
As at beginning of period
Arising during year
Utilised
Unused amounts reversed
As at period end
Make good
As at beginning of period
Arising during year
Utilised
Unused amounts reversed
Discount rate adjustment
As at period end
Onerous contracts
As at beginning of period
Arising during year
Utilised
Unused amounts reversed
As at period end
Other
As at beginning of period
Arising during year
Utilised
Unused amounts reversed
Provisions allocated to other assets
As at period end
118
Consolidated
September
2010
$000
September
2009
$000
36,179
-
6,889
57,086
(3,786)
(27,796)
(15,670)
(4,550)
(2,437)
(2,853)
6,883
2,000
2,117
(2,329)
(30)
1,758
7,028
7,311
(40)
(165)
742
-
-
-
-
36,179
917
3,353
(1,806)
(464)
2,000
6,306
137
(14)
-
599
14,876
7,028
3,448
17,716
(1,675)
(490)
-
3,448
-
-
18,999
3,448
5,967
4,228
25,459
8,114
(6,160)
(26,175)
(258)
(29)
3,748
(1,431)
-
5,967
Notes to the Financial Statements
For the Year ended 30 September 2010
Note 18. Provisions (continued)
(b) Nature and timing of provisions
(i) Employee entitlements
Refer to note 2(aa) and 2(ab) for the relevant accounting policy and a discussion of the significant estimations and assumptions applied in
the measurement of this provision.
(ii) Warranty
A provision for warranties is recognised when the underlying products and services are sold. The provision is based on historical warranty
date and a weighting of all possible outcomes against their associated probabilities.
A provision is recognised for expected warranty claims on products sold during the last five years, based on past experience of the level of
repairs and returns. It is expected that the majority of these costs will be incurred in the next financial year and all will have been incurred
within two years of the reporting date. Assumptions used to calculate the provision for warranties were based on current sales levels and
current information available about returns based on the two-year warranty period for all products sold.
(iii) Restructure
The restructuring provision relates to the Group’s exit from its wool processing and trading operations (BWK). This provision was recognised
on announcement of the exit strategy in December 2008. The most significant part of the restructure, being the exit of the operation in
Germany and Turkey, was substantially completed at June 2010.
(iv) Redundancy
The redundancy provision relates to redundancies communicated to staff during the year.
(v) Make Good
A make good provision is recorded at the commencement of a lease or operation being the present value of restoration obligations, while
the cost of future restoration is capitalised as part of the asset. The capitalised cost is depreciated over the life of the lease or project and
the provision is increased as the discounting of the liability unwinds.
(vi) Onerous leases
As part of the Forestry asset review, testing of the anticipated benefit of leased properties resulted in a total onerous lease provision of
$15.0 million to be recognised.
(vii) Other
The remaining provision balance in ‘other’ includes legal claims of $1.6 million (2009: $1.3 million).
119
Notes to the Financial Statements
For the Year ended 30 September 2010
Note 19. Contributed Equity
Consolidated
September
2010
$000
September
2009
$000
Issued and paid up capital
448,598,480 ordinary shares (September 2009: 819,165,045)
1,273,863
737,513
On 4 September 2009, Elders announced an equity raising comprising the offering of $550 million of new ordinary shares in Elders (New
Shares) at an offer price of $0.15 per New Share. The offering was approved by ordinary resolution at the Extra-ordinary General Meeting
held on 15 October 2009. The offering comprised of:
$400 million fully underwritten conditional placement to institutional investors; and
$150 million Share Purchase Plan (“SPP”).
As a consequence of approval of this offering, an additional 2.67 billion ordinary shares were issued on 19 October 2009 under the
conditional placement and 1.00 billion ordinary shares were issued on 2 November 2009 under the SPP.
A 10:1 share consolidation of Elders Limited shares was completed in January 2010.
Movements in ordinary shares:
Opening balance
Issued capital
Share issue costs (net of tax)
Employee bonus shares
Dividends underwritten
Dividend reinvestment plan
September 2010
September 2009
Number
$000
Number
$000
819,165,045
737,513
780,545,644
694,118
3,666,671,060
-
-
-
-
550,000
(13,650)
-
-
-
-
-
345,752
23,812,167
14,461,482
-
-
446
26,879
16,070
Balance before share consolidation
4,485,836,105
1,273,863
819,165,045
737,513
Share consolidation 10:1
Closing balance
448,598,480
-
-
-
448,598,480
1,273,863
819,165,045
737,513
As a result of the share consolidation, the calculation of basic and diluted earnings per share have been adjusted retrospectively.
Effective 1 July 1998, the Corporations legislation abolished the concepts of authorised capital and par value shares. Accordingly the
Company does not have authorised capital nor par value in respect of its issued capital.
(a) Capital management
When managing capital, management’s objective is to ensure the entity continues as a going concern as well as to maintain optimal returns
to shareholders and benefits for other stakeholders. Management also aims to maintain a capital structure that ensures the lowest cost of
capital available to the entity.
Management are constantly adjusting the capital structure to take advantage of favourable costs of capital or high returns on assets. As the
market is constantly changing, management may change the amount of dividends to be paid to shareholders, return capital to shareholders,
issue new shares or sell assets to reduce debt.
Elders’ current financing arrangements restrict Elders from paying dividends on shares until 31 March 2012. Refer to note 23 for dividend
disclosure.
120
Notes to the Financial Statements
For the Year ended 30 September 2010
Note 20. Hybrid Equity
Issued and fully paid up
Consolidated
September
2010
$000
September
2009
$000
145,151
145,151
1,500,000 perpetual, subordinated, convertible unsecured notes (“Hybrids”) were issued in April 2006 at $100 each. If the Board resolves
to pay them, distributions will be paid quarterly in arrears on 31 March, 30 June, 30 September and 31 December each year. Distributions
are frankable. Until 30 June 2011 (the first remarketing date) the distribution rate will be the 3 month bank bill swap rate plus a margin
of 2.20% pa. On a remarketing date, Elders has discretion to either redeem the Hybrid for cash or convert the Hybrid into ordinary shares.
Alternatively, Elders can accept a one-off step up of 250 bps in margin or pursue a remarking process to set a new margin.
Elders’ current restructured financing arrangements, restricts Elders from paying distributions on Elders Hybrids until and including
30 September 2011.
Note 21. Reserves
Business combination reserve
Employee equity benefits reserve
Foreign currency translation reserve
Net unrealised gains reserve
Share of reserve for losses in associate
Reserved shares reserve
(a) Movement in reserves
Business combination reserve:
Opening balance
Arising during the period
Excess paid for purchase of non-controlling interest
Transfer to retained earnings
Closing balance
Employee equity benefits reserve:
Opening balance
Current period share option expense
Current period share plan expense
Transfer to retained earnings
Transfer to reserved shares reserve
Other share plan transfers
Closing balance
Foreign currency translation reserve:
Opening balance
Currency translation differences
Currency translation differences realised
Non-controlling interest share of movement
Income tax on items taken directly or transferred to equity
Closing balance
(5,134)
(7,434)
(14,006)
(1,553)
6,163
(13,704)
(35,668)
(10,312)
(13,695)
(5,795)
(6,396)
5,433
-
(30,765)
(10,312)
27,847
-
(38,159)
(5,480)
10,658
(5,134)
-
-
(10,312)
(13,695)
(23,099)
2,136
-
(9,579)
13,704
(1,378)
8,734
-
-
-
2,048
(7,434)
(13,695)
(5,795)
(10,217)
1,578
70
358
(5,599)
(348)
307
(155)
-
(14,006)
(5,795)
121
Notes to the Financial Statements
For the Year ended 30 September 2010
Note 21. Reserves (continued)
Net unrealised gains reserve:
Opening balance
Net gains/(losses) on cash flow hedges
Transfer to retained earnings
Income tax on items taken directly or transferred to equity
Closing balance
Share of reserve for losses in associate:
Opening balance
Current period movement
Closing balance
Reserved shares reserve:
Opening balance
Transfer from employee equity benefits reserve
Closing balance
Total Reserves
(b) Nature and purpose of reserves
Consolidated
September
2010
$000
September
2009
$000
(6,396)
733
4,020
90
(1,553)
5,433
730
6,163
-
(13,704)
(13,704)
3,907
(14,327)
-
4,024
(6,396)
13,134
(7,701)
5,433
-
-
-
(35,668)
(30,765)
Business combination reserve
This reserve is used to record fair value adjustments to those assets acquired by the Group in a business combination.
Employee equity benefits reserve
This reserve is used to record the value of equity benefits (both options and share loans) provided to employees, including key management
personnel as part of their remuneration.
Foreign currency translation reserve
The foreign currency translation reserve is used to record exchange differences arising from the translation of the financial statements of
foreign subsidiaries.
Net unrealised gains reserve
This reserve records the portion of the gain or loss on a hedging instrument in a cash flow hedge that is determined to be an effective
hedge.
Share of reserve for losses in associate
Rural Bank has APRA reporting requirements for a general provision for credit losses to be recognised directly in equity. The Group therefore
is required to recognise the proportionate interest in Rural Bank’s reserve for credit losses directly in equity.
Reserved Shares Reserve
This reserve represents shares that have been forfeited by employees that were issued under the employee share loan plan. In previous
financial periods this balance was included in the Employee Equity Benefits Reserve.
122
Notes to the Financial Statements
For the Year ended 30 September 2010
Note 22. Retained Earnings
Retained earnings at the beginning of the financial year
Net profit/(loss) attributable to members
Dividends to shareholders
Recognition for share of reserve for losses in associate
Transfer from business combinations reserve
Transfer from employee equity benefits reserve
Transfer from net unrealised gains reserve
Retained earnings at the end of the financial year
Note 23. Dividends
a) Dividends proposed
No final dividend will be paid (2009: Nil)
b) Dividends paid during the year
Current year interim
- No interim dividend will be paid (2009: Nil)
Previous year final
- No final dividend paid (2009: 5.5¢ per share, fully franked)
- No hybrid distribution paid (2009: fully franked)
Subsidiary equity dividends on ordinary shares:
Dividends paid to external parties during the year
- B&W Rural Pty Ltd dividend $1,030 per share fully franked (2009: $4,460 per share fully franked)
- B&W Rural Pty Ltd dividend $1,468 per share fully franked (2009: $nil per share fully franked)
- Killara Feedlot Pty Ltd dividend $nil per share (2009: 0.2¢ per share unfranked)
- Killara Feedlot Pty Ltd dividend $nil per share (2009: $0.17 per share unfranked)
Consolidated
September
2010
$000
September
2009
$000
(158,012)
353,991
(217,628)
(466,426)
-
162
(10,658)
9,579
(4,020)
(51,153)
5,576
-
-
-
(380,577)
(158,012)
-
-
-
-
-
1,010
720
-
-
-
-
42,949
8,204
51,153
2,186
-
107
905
1,730
54,351
Elders’ current restructured financing arrangements restrict Elders from paying dividends on shares until after 31 March 2012.
c) Franking credit balance
Franking credits available to the parent for subsequent financial years based on tax rate of 30% (2009: 30%)
19,700
15,790
The above amounts represent the balance of the franking account as at the end of the financial period, adjusted for:
• franking credits that will arise from the payment of the amount of the provision for income tax;
• franking debits that will arise from the payment of dividends recognised as a liability at the reporting date;
• franking credits that will arise from the receipt of dividends recognised as receivables at the reporting date; and
• franking credits that may be prevented from being distributed in subsequent financial years.
123
Notes to the Financial Statements
For the Year ended 30 September 2010
Note 24. Non-controlling Interests
Non-controlling interests comprise interests in the following items:
Contributed equity
Retained earnings
Consolidated
September
2010
$000
September
2009
$000
1,275
2,049
3,324
13,332
(5,560)
7,772
On 1 April 2010, the Group acquired an additional 46.75% interest in the controlled entity, Killara Feedlot Pty Ltd, increasing the Group’s
interest to 100% for $11.2 million. The transaction resulted in the de-recognition of a non-controlling interest of $6.0 million and the
recognition in equity of $5.2 million, being the excess paid for the purchase of the non-controlling interest.
Note 25. Cash Flow Statement Reconciliation
(a) Reconciliation of net profit after tax to net cash flows from operations
Profit/(loss) after income tax expense
Adjustments for:
Depreciation and amortisation
Share of associates and joint venture (profit)
Dividends from associates
Dividend received as DRP
Fair value adjustments to financial assets
Other fair value adjustments
Impairment of assets
Movement in provision for:
- doubtful debts
- employee entitlements
- other provisions
Other write downs
Net (profit)/loss on sale of non-current assets
Net (profit)/loss on sale of controlled entity
Cost of share based payments
Deferred tax asset
Deferred income tax
Provision for tax
Other non cash items
- (Increase)/decrease in receivables and other assets
- (Increase)/decrease in inventories
- Increase/(decrease) in payables and accruals
Net cash flows from operating activities
(b) Cash and Cash equivalents
Cash at bank and in hand
(212,511)
(467,500)
25,988
(33,743)
31,355
-
(956)
45,542
697
19,900
(7,703)
(8,181)
(11,662)
(10,672)
142,633
320,334
27,185
15,729
16,164
3,938
5,065
10,937
12,211
9,509
616
(41,563)
8,954
2,136
(2,918)
(5,457)
13,547
2,404
(82,546)
7,548
(35,862)
15,384
15,105
19,868
23,402
(171,927)
(80,228)
(150,184)
52,006
93,277
(105,653)
(294,492)
(110,473)
(523,326)
79,985
367,868
Cash includes $3.0 million (2009: $0.5 million) of cash held in trust on behalf of certain controlled entities.
124
Notes to the Financial Statements
For the Year ended 30 September 2010
Note 25. Cash Flow Statement Reconciliation (continued)
(c) Non cash financing and investing activities
During the financial year there were no non-cash financing and investing transactions (2009: 14,461,482 ordinary shares for
$16.1 million). These transactions are not reflected in the prior period statement of cash flows.
Note 26. Results of Insurance Activities
The summary of financial position below reflects the contribution to the Group of the general insurance activities of Elders Insurance
Limited (EIL). EIL was a wholly owned entity of the parent entity and was subject to prudential supervision by the Australian Prudential
Regulatory Authority until its disposal on 30 September 2009. Consequently only comparative information is provided.
Profit from ordinary activities includes the following results from general insurance activities:
Direct premium revenue
Outward reinsurance premiums
Claims expense
Reinsurance and other recoveries
Claims handling costs
Net claims incurred
Underwriting expenses
- Amortisation of deferred acquisition costs
- Recurring acquisition costs
- Other underwriting costs
Other underwriting revenue
Net underwriting result
Investment revenue
General and administration expenses
Profit from ordinary activities before income tax
Income tax (expense)
Net profit
Consolidated
September
2010
$000
September
2009
$000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
535,451
(241,326)
294,125
(399,220)
213,839
(9,323)
(194,704)
(104,843)
(25,737)
(6,326)
(136,906)
54,918
17,433
12,510
(17,521)
12,422
(4,527)
7,895
125
Notes to the Financial Statements
For the Year ended 30 September 2010
Note 26. Results of Insurance Activities (continued)
(a) Net claims incurred comprises:
September 2010
September 2009
Current Year
$000
Prior Year
$000
Total
$000
Current Period
$000
Prior Period
$000
Total
$000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(440,693)
35,305
(405,388)
227,696
(15,308)
212,388
(212,997)
19,997
(193,000)
9,070
(12,225)
(3,155)
(5,078)
6,529
1,451
3,992
(5,696)
(1,704)
(209,005)
14,301
(194,704)
Gross claims incurred and related expenses
-undiscounted
Reinsurance and other recoveries -
undiscounted
Net claims incurred - undiscounted
Discount and discount movement
- gross claims
Discount and discount movement
- reinsurance and other recoveries
Net discount movement
Total direct claims incurred
(b) Process for Determining Risk Margin
The overall risk margin was determined allowing for diversification between different APRA business classes and the relative uncertainty of
the outstanding claims estimate for each class. Uncertainty was analysed for each class taking into account potential uncertainties relating
to the actuarial models and assumptions, the quality of underlying data used in the models, the general insurance environment and the
impact of legislative reform.
The assumptions regarding uncertainty for each class were applied to the net central estimates and the results were aggregated, allowing for
diversification in order to arrive at an overall provision which is intended to have a 90% probability of sufficiency.
Risk Margins Applied (Net of Diversification)
Long Tail Classes
Short Tail Classes
Overall Margin Allowing for Diversification
Note 27. Expenditure Commitments
2010 %
2009 %
-
-
-
16.5
8.9
12.0
Finance lease commitments – Group as a lessee
The Group has finance leases and hire purchase contracts for various items of plant and machinery with a carrying amount of $0.8 million
(2009: $1.0 million). These lease contracts expire within one to four years. The leases have terms of renewal but no purchase options and
escalation clauses. Renewals are at the option of the specific entity that holds the lease.
Lease commitments:
Finance leases:
- Within one year
- After one year but not after five years
Total minimum lease payments
Less amounts representing finance charges
Present value of minimum lease payments
126
Consolidated
September
2010
$000
September
2009
$000
254
134
388
(32)
356
495
116
611
(46)
565
Notes to the Financial Statements
For the Year ended 30 September 2010
Note 27. Expenditure Commitments (continued)
Disclosed in the financial statements as:
- current (note 17)
- non current (note 17)
Operating leases:
- Within one year
- After one year but not later than five years
- After more than five years
Total minimum lease payments
Consolidated
September
2010
$000
September
2009
$000
229
127
356
453
112
565
88,946
192,575
120,411
401,932
87,273
211,401
141,256
439,930
Operating leases commitments – Group as a lessee
The Group leases the majority of its branch networks and capital city properties under operating leases. The lease commitments comprise
base amounts adjusted where necessary for escalation clauses primarily based on inflation rates. Leases generally provide the Group with a
right of renewal at the end of the lease term. The extent of lease commitments is a factor that is considered in the calculation of certain
borrowing covenants.
Property plant and equipment commitments
Capital expenditure contracted for but not otherwise provided for in these accounts:
- Within one year
- After one year but not later than five years
Note 28. Contingent Liabilities
Contingent liabilities at balance date, not otherwise provided for in these financial statements, are as follows:
Claims lodged for damages resulting from the use of products or services
Guarantees issued to third parties arising in the normal course of business.
700
120
820
14,649
-
14,649
1,300
23,427
24,727
797
28,962
29,759
Unquantifiable contingent liabilities
• The Group has contingent obligations in respect of leased premises, which have been sub-let to associated entities.
• The Group has provided a guarantee for the performance of an associated entity under a lease agreement.
• Benefits are payable under service agreements with executive directors and officers of the Group under certain circumstances such as
termination or achievement of prescribed performance hurdles.
• The Group has provided a guarantee to a third party in relation to the obligations of Caversham Property Developments Pty Limited, a former
subsidiary of Elders Limited. The directors are of the view that the Group’s liability under the guarantee is unquantifiable and remote.
• The Group has provided an indemnity to Toepfer International (“TI”) in connection with half of any losses suffered as a result of default by
the joint venture, Elders Toepfer Grain (“ETG”), in connection with a loan facility provided by TI to ETG. The directors are of the view that
the probability of this indemnity being called upon is remote.
• There have been various legal claims lodged for damages resulting from the use of products or services of the Group for which no provision
has been raised as it is not currently probable that these claims will succeed and it is not practical to estimate the potential effect of these
claims. The directors’ are of the view that none of these claims based on the net exposure are likely to be material.
• Elders Forestry Management Ltd (“EFM”) is the responsible entity of the Elders Forestry group’s forestry management investment schemes.
EFM has established a large plantation estate in central Queensland which has been impacted by a fungal disease which causes tree
mortality and growth impairment. The impacted plantations have been established as part of various schemes promoted between 2000 and
2007. As at 1 November 2010 no claims for damages have been lodged as a result of the outbreak of this disease.
Other contingent liabilities
As previously disclosed the Group has received amended income tax assessments from the Australian Taxation Office relating to three
separate matters which are disputed.
The first matter relates to the capital gain arising on the disposal of the Group’s interest in its Building Products division in October 1997.
The Group appealed the amended assessments increasing the capital gain. On 31 August 2010 the Federal Court upheld the Group’s
appeal against the amended assessments. The Australian Taxation Office has appealed the Federal Court decision. Management consider
127
Notes to the Financial Statements
For the Year ended 30 September 2010
Note 28. Contingent Liabilities (continued)
the current provisioning in relation to this matter to be adequate and will continue to vigorously defend its position through the
appeal process.
The second matter relates to the utilisation of a capital loss arising on the disposal of the Elders wool handling business in 1998 and
utilised during the years 1998 to 2003. During the year the matter was settled. There is no impact to the net profit/(loss) for the period.
The third matter relates to the utilisation of losses arising from the funding activities of the Group’s in-house financier. The amended
assessments are attributable to the 2003 year denying the losses claimed. A provision has been raised against this potential exposure. The
Group is confident of the position it has adopted and intends to defend vigorously the deductions claimed.
Other guarantees
As disclosed in note 32, the parent entity has entered into a Deed of Cross Guarantee with certain controlled entities. The effect of this
Deed is that Elders Limited and each of these controlled entities has guaranteed to pay any deficiency of any of the companies party to
the Deed in the event of any of those companies being wound up.
The parent entity and certain entities in the Group are parties to various guarantees and indemnities pursuant to bank facilities and
operating lease facilities extended to the Group and commitments under the convertible and unsecured notes.
Note 29. Segment Information
Identification of reportable segments
The Group has identified its operating segments to be the four segments of Rural Services, Forestry, Automotive Components and
Investment & Other. In the prior period Financial Services was also considered a segment until the operations were disposed. This is the
basis on which internal reports are reviewed and used by the executive management team (the chief operating decision makers) in assessing
performance and in determining allocation of resources. Discrete financial information about each of these operating businesses is reported
to the executive management team on at least a monthly basis. The Group operates predominantly within Australia. All other geographical
operations are not material to the financial statements.
Type of product and service
• Rural Services include the provision of a range of agricultural products and services through a common distribution channel and the
investment in Rural Bank. Rural Bank was previously included in the Financial Services segment.
• Financial Services included the provision of a range of financial services through a common distribution channel. The net assets within this
segment were significantly divested in financial year 2009. The investment in Rural Bank is now reported in the Rural Services segment.
• Forestry includes the Group’s interests in forestry plantations.
• Automotive Components include the manufacturing and sales of automotive components of which the key components are seating, interior
trim, heating ventilating and air-conditioning systems.
• The Investment & Other segment includes the general investment activities not associated with the other business segments and the
administrative corporate office activities.
Accounting policies and intersegment transactions
The accounting policies used by the group in reporting segments internally are the same as those contained in note 2 to the accounts.
Segment results have been determined on a consolidated basis and represent the earnings before corporate net financing costs and income
tax expense.
Rural Services
Forestry
Automotive
Components
Investment &
Other
Total
12 months September 2010
$000
$000
$000
$000
$000
External sales
Other revenue
Share of net profit (loss) of associates
1,797,230
100,311
256,840
-
2,154,381
7,529
32,968
9,514
21,726
-
(440)
19,568
1,215
58,337
33,743
Total revenue
1,837,727
109,825
278,126
20,783
2,246,461
Earnings before interest, tax, depreciation
& amortisation
23,994
(157,613)
30,603
(50,767)
(153,783)
Depreciation & amortisation
(10,276)
(939)
(14,753)
(20)
(25,988)
Segment Result
Corporate net interest expense
Profit from ordinary activities before tax
128
13,718
(158,552)
15,850
(50,787)
(179,771)
(31,888)
(211,659)
Notes to the Financial Statements
For the Year ended 30 September 2010
Note 29. Segment Information (continued)
12 months September 2010
Rural
Services
$000
Forestry
Automotive
Components
Investment &
Other
Total
$000
$000
$000
$000
Segment assets
882,716
522,785
281,425
210,448
1,897,374
Unallocated assets (including tax assets)
-
-
-
-
198,902
Total assets
Segment liabilities
882,716
522,785
281,425
210,448
2,096,276
301,636
39,778
108,142
26,553
476,109
Unallocated liabilities (including tax liabilities)
-
-
-
-
614,074
Total liabilities
Net assets
301,636
39,778
108,142
26,553
1,090,183
581,080
483,007
173,283
183,895
1,006,093
Carrying value of equity investments
210,130
50
Acquisition of non current assets
13,795
14,674
10,327
(3,317)
20,371
240,878
-
25,152
Non cash income/(expense) other than
depreciation and amortisation
Profit/(loss) on sale of non current assets and
controlled entities
(20,233)
(199,103)
(33,593)
48,176
(204,753)
(2,537)
(7,281)
248
-
(9,570)
15 months September 2009
$000
$000
$000
$000
$000
$000
Rural
Services
Financial
Services
Forestry
Automotive
Components
Investment
& Other
Total
External sales
Other revenue
2,664,984
322,612
211,416
333,020
8,051
3,540,083
41,807
229,194
(27,513)
19,954
(4,650)
258,792
Share of net profit (loss) of associates
26,998
-
(2,668)
(25,986)
959
(697)
Total revenue
2,733,789
551,806
181,235
326,988
4,360
3,798,178
Earnings before interest, tax, depreciation
& amortisation
(240,874)
136,301
(94,040)
(39,974)
(92,226)
(330,813)
Depreciation & amortisation
(18,400)
(1,109)
(6,583)
(19,431)
(19)
(45,542)
Segment Result
(259,274)
135,192
(100,623)
(59,405)
(92,245)
(376,355)
Corporate net interest expense
Profit from ordinary activities before tax
(89,975)
(466,330)
Segment assets
990,072
18,675
726,160
194,279
129,129
2,058,315
Unallocated assets (including tax assets)
-
-
-
-
-
482,908
Total assets
Segment liabilities
Unallocated liabilities (including
tax liabilities)
Total liabilities
Net assets
990,072
18,675
726,160
194,279
129,129
2,541,223
358,995
11,428
30,718
61,174
70,744
533,059
-
-
-
-
-
1,306,505
358,995
11,428
30,718
61,174
70,744
1,839,564
631,077
7,247
695,442
133,105
58,385
701,659
Carrying value of equity investments
Acquisition of non current assets
197,065
32,368
-
32,405
33,605
20,149
283,224
817
45,816
10,259
54
89,314
Non cash income/(expense) other than
depreciation and amortisation
Profit/(loss) on sale of non current assets
and controlled entities
(185,006)
123,032
(103,652)
(39,460)
(52,366)
(257,452)
43,611
137,981
(43,163)
28
(14,348)
124,109
The profit made by Rural Services as a result of providing distribution services to the Insurance Division during the 15 month period to
30 September 2009 has been treated as continuing in the Rural Services segment. This is because Rural Services continued to receive part
of this income as reimbursements for distribution costs under the new joint venture arrangement.
129
Notes to the Financial Statements
For the Year ended 30 September 2010
Note 30. Supplementary Statement of Net Debt
(a) Statement of Net Debt
12 months September 2010
Earnings before interest & tax
Depreciation and amortisation
Share of associates and joint venture (profit)
Dividends received from associates
Fair value adjustments on financial assets
Other fair value adjustments
Impairment of assets
Movement in provision for:
- doubtful debts
- employee entitlements
- other provisions
Other writedowns
Profit/(loss) on sale of non-current assets
Profit/(loss) on sale of controlled entity
Cost of share based payments
Interest received
Interest and other costs of finance paid
Tax (paid)/refund
Other non cash items
Movement in working capital
Operating cash flow
Payments for property, plant and equipment
Purchase of investments
Payments for investment properties
Purchase of controlled entity, net of cash acquired
Payment for design and development capitalised
Rural
Services
$000
13,718
10,276
(32,968)
30,781
852
2,622
7,421
8,116
3,112
(6,661)
2,222
957
1,580
23
7,302
(1,963)
(1,878)
3,914
49,426
19,728
69,154
(12,195)
(1,600)
-
-
-
Proceeds on sale of property, plant & equipment
5,037
-
-
4,547
(7,796)
(3,333)
4,070
-
-
(11,270)
-
-
(3,446)
(43,507)
(46,953)
10,931
Proceeds from sale of investments
Proceeds from sale of investment property
Proceeds from disposal of controlled entity
Acquisition of non-controlling interests
Loans to associated entities
Repayment of loans by associated entities
Loans to growers
Loans repaid by growers
Investing cash flow
Proceeds from issue of shares
Share issue costs
Partnership profit distributions
Other financing inflows(outflows)
Other flows
Total Flows
Opening net debt
Total Flows
Fair value adjustment to debt
Consolidation of MCK Holdings Pty Ltd (Plexicor)
Closing net debt
130
Forestry
Automotive
Components
Investment &
Other
Total
$000
$000
(50,787)
(179,771)
$000
(158,552)
939
-
-
(225)
(9,893)
$000
15,850
14,753
440
-
-
-
134,245
(790)
-
10,856
20
(1,215)
574
(1,583)
(4,391)
1,757
2,100
744
-
-
-
2,090
14,469
(51,008)
9,782
(9,655)
(76,247)
(185,934)
-
-
-
-
-
-
-
-
-
-
(1,117)
127
-
-
25,988
(33,743)
31,355
(956)
(11,662)
142,633
27,185
15,729
16,164
3,938
616
8,954
2,136
22,569
(53,425)
7,904
(2,212)
23,402
(110,473)
(18,260)
(1,600)
(6,354)
5,311
(4,249)
5,833
1,020
4,841
91,160
(7,796)
(4,450)
4,999
(959)
11,630
81,126
(109,687)
(133,875)
8,213
1,036
21,335
-
(93)
7,374
-
713
(454)
-
1,662
6,300
(35,565)
(29,265)
(1,091)
-
(6,354)
(7,229)
-
796
1,020
4,841
86,613
-
-
802
(959)
11,630
90,069
-
-
-
9,481
746
1,716
(248)
-
23
85
-
-
1,867
43,923
(8,351)
35,572
(4,974)
-
-
12,540
(4,249)
-
-
-
-
-
-
-
-
-
-
-
-
(59,577)
(59,577)
1,227
(25,699)
(25,699)
13,190
3,317
(990)
550,000
550,000
(19,500)
-
128,783
659,283
472,359
(19,500)
(3,446)
-
527,054
497,707
(869,548)
497,707
968
(64,300)
(435,173)
Rural
Services
$000
Financial
Services
$000
Forestry
Automotive
Components
Investment
& Other
Total
$000
$000
$000
$000
(259,274)
135,192
(100,623)
(59,405)
(92,245)
(376,355)
18,400
1,109
6,583
19,431
19
45,542
25,986
-
-
-
-
(959)
1,058
-
(1,228)
697
19,900
(7,703)
(8,181)
-
(10,672)
19,084
10,902
320,334
-
(1,762)
(4,279)
-
(28)
-
399
25
(266)
7,957
60
7,202
7,736
-
-
2,169
-
1,505
12,843
7,424
6,274
5,065
10,937
12,211
9,509
(41,563)
(82,546)
7,548
21,318
(101,606)
(110,826)
5,657
18,652
(9,058)
21,916
(129,535)
(171,927)
14,378
(351,399)
14,938
(115,157)
(523,326)
Notes to the Financial Statements
For the Year ended 30 September 2010
Note 30. Supplementary Statement of Net Debt (continued)
(a) Statement of Net Debt (continued)
15 months September 2009
Earnings before interest & tax
Depreciation and amortisation
Share of associates and joint venture
(profit)
Dividends received from associates
Dividends received under DRP
Fair value adjustments on financial assets
Other fair value adjustments
Impairment of assets
Movement in provision for:
- doubtful debts
- employee entitlements
- other provisions
Other writedowns
(26,998)
15,689
(7,703)
(6,953)
-
224,148
5,104
12,609
-
-
-
-
-
-
(39)
119
-
14,640
2,668
3,153
-
-
(10,672)
66,200
-
(29)
(319)
11,157
-
(1,648)
Profit/(loss) on sale of non-current assets
(43,611)
340
231
Profit/(loss) on sale of controlled entity
-
(138,321)
42,932
Cost of share based payments
Interest received
Interest and other costs of finance paid
Tax (paid)/refund
Other non cash items
Movement in working capital
Operating cash flow
Payments for property, plant & equipment
Payments for investments
Payments for investment properties
Payment for design and development
capitalised
Proceeds from sale of property, plant
and equipment
(589)
966
(7,462)
(16,194)
2,153
(78,558)
(267,223)
(345,781)
(12,574)
(19,794)
-
-
7,130
229
13,739
-
(7,810)
-
19,198
(11,584)
7,614
(817)
-
-
-
-
Proceeds from sale of investments
195,073
34,442
85
314
(1,492)
1,332
1,051
9,766
(94,706)
(84,940)
(5,841)
-
(39,975)
Proceeds from sale of investment property
Proceeds from disposal of controlled entity
Loans to associated entities
Repayment of loans by associated entities
Loans to growers
Loans repaid by growers
Investing cash flow
Dividends paid
Dividends underwritten
Partnership profit distributions
Other flows
Total Flows
Opening net debt
Total flows
De-consolidation of Amcom debt
De-consolidation of Broadwater debt
De-consolidation of Timber debt
Consolidation of Elders Rural Holdings debt
Fair value adjustments to debt
Closing net debt
(5,551)
(286)
-
-
(4,422)
2,352
307
-
985
(193)
-
3,049
(16,352)
7,284
-
-
-
-
-
-
-
-
(54)
-
-
-
(24,783)
(20,134)
(39,975)
(4,422)
9,789
2,118
231,633
-
985
29,061
94,583
(33,624)
(36,999)
3,148
-
-
8,383
(16,352)
7,284
-
-
-
65,715
(3,375)
1,928
-
-
-
258
-
-
168,388
99,598
(48,691)
(9,952)
649
209,992
(3,198)
-
(3,242)
(6,440)
-
-
-
-
-
-
-
-
-
-
-
-
(35,083)
(38,281)
26,879
-
26,879
(3,242)
(8,204)
(14,644)
(183,833)
107,212
(133,631)
4,986
(122,712)
(327,978)
(522,975)
(327,978)
23,027
15
3,980
(29,231)
(16,386)
(869,548)
131
Notes to the Financial Statements
For the Year ended 30 September 2010
Note 30. Supplementary Statement of Net Debt (continued)
(b) Reconciliation of net debt balance to balance sheet
Cash and cash equivalents
Interest Bearing Loans and Borrowings
Derivatives on Interest Bearing Loans and Borrowings
Note 31. Auditors Remuneration
The auditor of Elders Limited is Ernst & Young.
Amounts received or due and receivable by Ernst & Young (Australia) for:
- auditing or review of financial statements (i)
- tax services (primarily compliance)
- fees in relation to investigative accountants report and preparation of prospectus
- other compliance and assurance services
Amounts received or due and receivable by related practices of Ernst & Young (Australia) for:
- auditing or review of financial statements
Amounts received or due and receivable by non Ernst & Young audit firms for:
- auditing or review of financial statements
- tax services
- internal audit
- other services (ii)
Consolidated
September
2010
$000
September
2009
$000
79,985
367,868
(497,635)
(1,199,273)
(17,523)
(38,143)
(435,173)
(869,548)
$
$
1,830,037
2,647,524
420,382
141,268
-
1,764,345
231,876
242,062
2,482,295
4,795,199
141,180
432,650
141,180
432,650
-
-
-
-
-
21,000
474,091
669,442
5,817,176
6,981,709
(i) A full statutory audit as at 30 June 2009 and 30 September 2009 was conducted in the 15 month period ended 30 September 2009.
(ii) Other services including specific projects.
132
Notes to the Financial Statements
For the Year ended 30 September 2010
Note 32. Investments in Controlled Entities (continued)
(a) Schedule of controlled entities (continued)
A Top Pty Ltd
Abbino Pty Ltd
Acehill Investments Pty Ltd
ACN 073 323 038 Pty Ltd
Active Leisure (Sports) Pty Ltd (in liquidation)
Agricultural Land Management Limited
AI Asia Pacific Operations Holding Limited
AI China Operations Holding Limited
AIM Metals Pty Ltd
Air International (China) Pty Ltd
Air International (India) Pty Ltd
Air International (Malaysia) Pty Ltd
Air International (Ventures) No 2 Pty Ltd
Air International Asia Pacific Operations Pty Ltd
Air International Vehicle Air Conditioning (Shanghai) Co Ltd
Albany Woolstores Pty Ltd
Aldetec Pty Ltd
Aldetec Unit Trust
AMG Marketing & Research Pty Ltd (in liquidation)
APO Administration Limited
APT Finance Pty Ltd
APT Forestry Pty Ltd
APT Land Pty Ltd
APT Nurseries Pty Ltd
APT Projects Ltd
AR Finance Pty Ltd
Argo Trust No. 2
Artreal Pty Ltd
Ashwick (Vic) No 102 Pty Ltd
Austech Ventures Pty Ltd (formerly Austech Ventures Ltd)
(g)
(g)
(a)
(g)
(a)
(c)(e)
(c)(e)
(a)
(a)
(g)
(a)
(a)
(a)
(c)
(g)
(k)
(f)
(g)
(c)(e)
(a)
(a)
(a)
(a)
(g)
(l)
(i)
(g)
(a)
(a)
Australian Combined Meat Processors Pty Ltd
(g)(h)
Australian Plantation Timber Pty Ltd (formerly Australian Plantation
Timber Ltd)
Australian Retirement Managers Pty Ltd
Australian Topmaking Services Pty Ltd (formerly Australian Topmaking
Services Limited)
B & W Rural Pty Ltd
Balcooma Pty Ltd
Banks Marsden Pty Ltd
BHC Sales & Marketing Pty Ltd
Bremer Woll Kämmerei AG
BREWA Umwelt Service GmbH
BWK Australia Pty Ltd
BWK Chemifraser GmbH
BWK Eastern Wool Industrial & Trading Joint Stock Corporation
BWK Elders Europe GmbH
BWK Elders Europtop GmbH
(a)
(a)
(a)
(h)
(l)
(g)
(g)
(c)
(c)
(g)
(c)
(c)
(c)
(c)
% Held by Group
September 2010
September 2009
100
100
100
100
-
100
100
100
100
100
100
100
100
100
100
66
100
100
-
100
100
100
100
100
100
-
100
100
100
100
50
100
100
100
51
-
100
100
100
100
100
100
91
100
51
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
66
100
100
100
100
100
100
100
100
100
100
-
100
100
100
50
100
100
100
51
100
100
100
100
100
100
100
91
100
51
133
Notes to the Financial Statements
For the Year ended 30 September 2010
Note 32. Investments in Controlled Entities (continued)
(a) Schedule of controlled entities (continued)
BWK Elders Industry and Trade
BWK Holdings Pty Ltd
Canosac Limited
Carbon Bid Co Pty Ltd
Caversham Investments Pty Ltd
Caversham Landscape D. & C. Pty Ltd
Caversham Projects Pty Ltd
Caversham Property (Sales) Pty Ltd
Caversham Property Holdings Pty Ltd
Charlton Feedlot Pty Ltd
CP Ventures Pty Ltd (formerly CP Ventures Ltd)
Danny F11 Investments Pte Ltd
Dawley Pty Ltd
Domeni Pty Ltd
E Globulus Pty Ltd
E. & R. Steeden Pty Ltd
Elders Australia Aktien Holding GmbH & Co KG
Elders Australia Beteiligungs GmbH
Elders Burnett Moore WA Pty Ltd
Elders China Trading Company
Elders Communications Pty Ltd
Elders Esperance Woodchip Terminal Pty Ltd (formerly ITC Esperance
Woodchip Terminal Pty Ltd)
Elders Finance Pty Ltd
Elders Financial Services Group Pty Ltd
Elders Financial Solutions Pty Ltd
Elders Fine Foods (Shanghai) Company
Elders Forestry Finance Pty Ltd (formerly ITC Finance Pty Ltd)
Elders Forestry Land Holdings (formerly ITC Land Holdings Pty Ltd)
Elders Forestry Management Ltd (formerly ITC Project Management Ltd)
Elders Forestry Pty Ltd (formerly ITC Ltd)
Elders Global Wool Holdings Pty Ltd
Elders Hycube Pty Ltd
Elders International Australia Pty Ltd (formerly Elders International
Australia Limited)
Elders Meat Processing Pty Ltd
Elders Mortgage Brokers Pty Ltd
Elders Project Management Pty Ltd
Elders Property Management Pty Ltd
Elders Real Estate (NSW) Pty Ltd
Elders Real Estate (Qld) Pty Ltd
Elders Real Estate (Tasmania) Pty Ltd
Elders Real Estate (WA) Pty Ltd
Elders Real Estate Franchise (Vic) Pty Ltd
Elders Risk Management Pty Ltd
Elders Rural Holdings Limited
Elders Rural Services Australia Limited
134
(c)
(a)
(c)(f)
(g)
(k)
(g)
(g)
(g)
(k)
(a)
(a)
(c)
(g)
(g)
(g)
(k)
(c)
(c)
(g)
(c)
(a)
(g)
(a)
(a)
(g)
(c)
(a)
(g)
(a)
(a)
(g)
(a)
(g)
(g)
(g)
(g)
(g)
(g)
(g)
(g)
(g)
(l)
(c)(h)
% Held by Group
September 2010
September 2009
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
50
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
50
100
Notes to the Financial Statements
For the Year ended 30 September 2010
Note 32. Investments in Controlled Entities (continued)
(a) Schedule of controlled entities (continued)
Elders Rural Services Limited
Elders Services Company Pty Ltd
Elders Tasmanian Fibre Pty Ltd (formerly ITC Fibre Pty Ltd)
Elders Telecommunications Infrastructure Pty Ltd
Elders Trustees Pty Ltd (formerly Elders Trustees Ltd)
Elders Underwriting Agency Pty Ltd
Elders Webster Pty Ltd
Elders-GM Properties (SA) Pty Ltd (in liquidation)
Elders-GM Properties (Vic) Pty Ltd (in liquidation)
EREF Pty Ltd
Elders Wool International Pty Ltd (formerly BWK Elders Australia Pty Ltd)
EWI Pty Ltd (formerly Elders Wool International Pty Ltd)
Family Hospitals Pty Ltd
Fares Exports Management Mexico, S.A. de C.V.
Fares Exports Pty Ltd
Fares Exports Trading Mexico, S.A. de C.V.
Farmers Investment Trust
FGSF Pty Ltd
Futuris Agencies Pty Ltd
Futuris Automotive Group Ltd
Futuris Automotive Interiors (Australia) Pty Ltd
Futuris Automotive Interiors (Barbados) Inc
Futuris Automotive Interiors (US) Inc
Futuris Automotive Interiors Holdings Pty Ltd
Futuris Automotive Interiors Trading (Shanghai) Co Ltd
Futuris Automotive Pty Ltd
Futuris Rural Pty Ltd
Futuris Ventures Pty Ltd
Futuris/Tamper Joint Venture Unit Trust
Geelong Wool Combing Pty Ltd (formerly Geelong Wool Combing Ltd)
George Moss (Qld) Pty Ltd
George Moss Pty Limited
Grouville Pty Ltd
H W Hayes & Sons (Ipswich) Pty Ltd
Hallette Pty Ltd
Hollymont Ltd
Hose & Pipe Pty Ltd
IMA Investment Management Australia (ADF) Pty Ltd
IMA Investment Management Australia Pty Ltd
Innerhadden Pty Ltd (formerly Innerhadden Ltd)
Elders Forestry Holdings Ltd (formerly Integrated Tree Cropping Ltd)
ITC Portland Woodchip Terminal Pty Ltd
J.A. Gilmour & Sons (NSW) Pty Ltd
J.S. Brooksbank Pty Ltd
Jetoleaf Pty Ltd
JS Brooksbank & Co Australasia Ltd
(a)
(g)
(a)
(g)
(a)(b)
(g)
(g)
(k)
(k)
(g)
(a)
(a)
(k)
(c)
(a)
(c)
(f)
(g)
(k)
(a)
(a)
(c)
(c)
(a)
(c)
(a)
(a)
(k)
(f)
(a)
(k)
(k)
(g)
(l)
(g)
(a)
(a)
(a)
(a)
(a)
(g)
(g)
(g)
(g)
(g)
(c)
% Held by Group
September 2010
September 2009
100
100
100
100
100
100
100
-
-
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
-
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
135
Notes to the Financial Statements
For the Year ended 30 September 2010
Note 32. Investments in Controlled Entities (continued)
(a) Schedule of controlled entities (continued)
JSB New Zealand Limited
Kentlake Holdings Pty Ltd
Keratin Holdings Pty Ltd
Killara Feedlot Pty Ltd
Kojonup Farm Pty Ltd
Leisure Industries International Pty Ltd
Manet Holdings Pty Ltd
Manor Hill Pty Ltd (in liquidation)
Marybrook Development Company Pty Ltd
Marybrook Investment Pty Ltd (formerly Marybrook Investments Ltd)
MCK Group Pty Ltd
MCK Holdings Pty Ltd
MCK Holdings (Australia) Pty Ltd
MCK Pacific Pty Ltd
Milltoc Pty Ltd
Miranda Bay Pty Ltd
Mutual Benefit Consulting Pty Ltd
Mylang Pty Ltd (in liquidation)
Neues Wolkontor GmbH
New Ashwick Pty Ltd
North Australian Cattle Company Pty Ltd
Pacrim Meat & Livestock Trading Pty Ltd
Pakenham Properties Pty Ltd
Pernatty Pty Ltd (in liquidation)
Pitt Son & Keene Pty Ltd
PlantTech Pty Ltd
Plantation Pulpwood Terminals Pty Ltd
Prestige Property Holdings Pty Ltd
Primac Elders Real Estate Pty Ltd
Primac Exports Pty Ltd
Primac Holdings Pty Ltd
Primac Pastoral Co Pty Ltd
Primac Pty Ltd
Primac Superannuation No. 1 Pty Ltd
Primac Superannuation No. 2 Pty Ltd
Primac Superannuation Nominees Pty Ltd
Primac Travel Pty Ltd
PT Elders Indonesia
Rachid Fares Enterprises of Australia Pty Ltd
Redray Enterprises Pty Ltd
Relatran Pty Ltd
SA Bid Co Pty Ltd
Southern Wool Services (Goulburn) Pty Ltd (in liquidation)
Steeden Holdings Pty Ltd
Steering Systems Australia Pty Ltd
Sycamore Enterprises Pty Ltd
136
(c)
(g)
(a)
(a)(b)
(g)
(k)
(a)
(a)
(g)
(k)
(d)
(d)
(d)
(d)
(a)
(g)
(g)
(k)
(c)
(g)
(a)
(l)
(l)
(l)
(g)
(k)(l)
(d)(g)
(a)
(g)
(a)
(a)
(g)
(a)
(l)
(l)
(l)
(g)
(c)
(g)
(a)
(g)
(g)
(g)
(k)
(a)
(a)
% Held by Group
September 2010
September 2009
100
100
100
100
100
100
100
-
100
100
50
50
50
50
100
100
100
-
100
100
100
-
-
-
100
-
100
100
100
100
100
100
100
-
-
-
100
100
100
100
100
100
-
100
100
100
100
100
100
53
100
100
100
100
100
100
50
50
50
50
100
100
100
100
100
100
100
100
100
100
100
100
50
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Notes to the Financial Statements
For the Year ended 30 September 2010
Note 32. Investments in Controlled Entities (continued)
(a) Schedule of controlled entities (continued)
Sydney Woolbrokers Limited
Tashmore Pty Ltd
Therm Air Australia Pty Ltd
Tomkins Financial Services Pty Ltd
Topsoils of Australia Pty Ltd
Torrens Investments Pte Ltd
Treecrop Pty Ltd
Trend-to-Zero Pty Ltd
Ultra Enterprises Pty Ltd
Ultrasound Australia Pty Ltd
Ultrasound International Pty Ltd
Ultrasound Technical Services Pty Ltd
United Alliance Group Pty Ltd (formerly United Alliance Group Ltd)
Vickner Pty Ltd
Victorian Investment Corporation Pty Ltd
Victorian Producers Co-operative Company Pty Ltd
Vision Group of Companies Pty Ltd
Vockbay Pty Limited
WA Bid Co Pty Ltd
Windoware 2000 Pty Ltd
Wool Exchange (WA) Pty Ltd
Wooltech Marketing Pty Ltd
Yenley Pty Ltd
% Held by Group
September 2010
September 2009
66
100
100
-
100
100
100
100
-
100
100
100
100
100
100
100
100
100
100
50
67
-
100
66
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
50
67
100
100
(g)
(g)
(a)
(l)
(g)
(c)
(g)
(a)
(l)
(a)
(k)
(k)
(g)
(g)
(a)
(a)
(g)
(a)
(g)
(d)
(g)
(l)
(g)
• The parties that comprise the Closed Group are denoted by (a). Parties added to the Closed Group during the year are denoted by (b).
Parties removed from the Closed Group during the year are denoted by (k).
• Entities incorporated in a country other than Australia are denoted by (c).
• Entities acquired during the period are denoted by (d).
• Entities audited by firms other than the parent entity auditors or by affiliates of the parent entity auditor are denoted by (e).
• Entities exempted from audit requirements due to overseas legislation or non-corporate status are denoted by (f).
• Entities classified by the Corporations Act 2001 as small proprietary companies relieved from audit requirements are denoted by (g).
• Entities denoted by (h) are controlled entities, as the Group has the capacity to control via a dominance of financial, management and
technological control.
• Entity denoted by (i) is a controlled special purpose entity related to trade receivable financing program.
• Entities denoted by (j) are entities where an entity controlled by the parent entity holds a controlling interest in the entity.
• Entities denoted by (l) are entities that were disposed of, deregistered or liquidated during the year. An equity interest has been retained in
some of these entities.
(b) Deed of cross guarantee
Pursuant to Australian Securities and Investments Commission Class Order 98/1418 (as amended) dated 13 August 1998, relief has been
granted to these controlled entities of Elders Limited from the Corporations Act 2001 requirements for preparation, audit and lodgement of
financial reports, and directors’ reports.
As a condition of the Class Order, Elders Limited, and the controlled entities subject to the Class Order, entered into a Deed of Cross
Guarantee. The effect of the deed is that Elders Limited has guaranteed to pay any deficiency in the event of the winding up of any member
of the Closed Group, and each member of the Closed Group has given a guarantee to pay any deficiency, in the event that Elders Limited or
any other member of the closed group is wound up.
A consolidated statement of comprehensive income and consolidated statement of financial position, comprising the Company and the
controlled entities which are a party to the deed, after elimination of all transactions between parties to the Deed of Cross Guarantee, for
the year ended 30 September is set out as follows:
137
Notes to the Financial Statements
For the Year ended 30 September 2010
Note 32. Investments in Controlled Entities (continued)
(b) Deed of cross guarantee (continued)
Statement of comprehensive income and retained earnings of the Closed Group
Profit/(loss) from continuing operations before income tax
Income tax benefit/(expense)
Profit/(loss) after income tax from continuing operations
Profit/(loss) after tax from discontinued operation (refer note 40)
Net profit for the period
Other comprehensive income
Total comprehensive income for the period
Retained earnings at the beginning of the period
Impact of acquisitions/disposals
Impact of entities exiting or joining closed group
Transfers to and from reserves
Dividends provided for or paid
Retained earnings at the end of the period
Consolidated statement of financial position of the Closed Group
Current assets
Cash and cash equivalents
Trade and other receivables
Livestock
Forestry
Inventories
Non Current asset classified as held for sale
Other assets
Total Current assets
Non Current assets
Receivables
Forestry
Inventories
Other financial assets
Investments in associates and joint ventures
Property, plant and equipment
Investment property
Intangibles
Deferred tax assets
Other assets
Total Non Current assets
Total assets
Current liabilities
Trade and other payables
Derivative financial instruments
Interest bearing loans and borrowings
Current tax liabilities
Provisions
Total Current liabilities
138
Consolidated
September
2010
$000
September
2009
$000
(106,488)
(28,140)
(134,628)
45,157
40,634
85,791
(1,378)
(203,778)
(136,006)
(117,987)
447
-
(135,559)
(117,987)
(213,142)
(32,660)
-
(11,342)
48,607
14,545
-
-
(51,153)
(285,996)
(213,142)
1,805
297,823
102,412
198,948
12,416
2,122
47,346
1,347
357,273
524,721
-
-
68,176
-
10,186
575,133
48,052
22,918
238,480
-
-
27,014
373,097
563,987
218,788
242,824
76,854
261,496
133,703
85,018
19,077
58,758
273,921
70,661
76,857
18,459
1,239,003
1,570,961
1,763,724
2,146,094
81,961
19,882
23,129
123,441
23,375
104,804
38,733
830,017
65,877
24,118
271,788
1,063,549
Notes to the Financial Statements
For the Year ended 30 September 2010
Note 32. Investments in Controlled Entities (continued)
(b) Deed of cross guarantee (continued)
Non Current liabilities
Interest bearing loans and borrowings
Deferred tax liabilities
Provisions
Total Non Current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Hybrid equity
Reserves
Retained earnings
Non-controlling interests
Shareholder equity attributable to members of Elders Limited
Consolidated
September
2010
$000
September
2009
$000
292,007
344,019
17,897
14,216
12,713
5,194
324,120
361,926
595,908
1,425,475
1,167,816
720,619
1,273,863
737,513
145,151
145,151
34,798
47,408
(285,996)
(213,142)
-
3,689
1,167,816
720,619
Certain members of the Closed Group, in addition to certain controlled entities, are guarantors in connection with the consolidated entity’s
borrowings facilities disclosed at note 17 and in connection with the unsecured and convertible notes disclosed at note 19.
Certain branch locations are subject to agreements whereby profits are shared on a proportionate 50% basis albeit under the control of the
controlled entities within the Group.
(c) Country of Incorporation of entities not incorporated in Australia
All companies are incorporated and carry on business in Australia except for the companies designated by (c) above which are incorporated
in the following countries:
Company
AI Asia Pacific Operations Holdings Limited
Al China Operations Holding Limited
Country of Incorporation
Hong Kong SAR
Hong Kong SAR
Air International Vehicle Air Conditioning (Shanghai) Co Ltd
China
APO Administration Limited
Bremer Woll Kämmerei AG
BREWA Umwelt Service GmbH
BWK Chemifraser GmbH
BWK Eastern Wool Industrial & Trading Joint Stock Corporation
BWK Elders Europe GmbH
BWK Elders Europtop GmbH
BWK Elders Industry and Trade
Canosac Limited
Danny F11 Investments Pte Ltd
Elders Australia Aktien Holding GmbH & Co KG
Elders Australia Beteiligungs GmbH
Elders China Trading Company Ltd
Elders Fine Foods (Shanghai) Company
Elders Rural Holdings Limited
Hong Kong SAR
Germany
Germany
Germany
Turkey
Germany
Germany
Germany
Hong Kong SAR
Singapore
Germany
Germany
China
China
New Zealand
139
Notes to the Financial Statements
For the Year ended 30 September 2010
Note 32. Investments in Controlled Entities (continued)
(c) Country of Incorporation of entities not incorporated in Australia (continued)
Company
Country of Incorporation
Fares Exports Management Mexico, S.A. de C.V.
Fares Exports Trading Mexico, S.A. de C.V.
Futuris Automotive Interiors (Barbados) Inc
Futuris Automotive Interiors (US) Inc
Futuris Automotive Interiors Trading (Shanghai) Co Ltd
JSB New Zealand Limited
JS Brooksbank & Co Australasia Ltd
Neues Wolkontor GmbH
PT Elders Indonesia
Torrens Investments Pte Ltd
Mexico
Mexico
Barbados
USA
China
New Zealand
New Zealand
Germany
Indonesia
Singapore
The following entities are subsidiaries of Elders Rural Holdings Limited (incorporated in New Zealand).
All of these subsidiaries are also incorporated in New Zealand, and the ultimate shareholding held by the Group is as follows:
% Held by Group
September
2010
September
2009
-
50
50
50
50
25
50
35
50
35
-
50
50
-
50
25
25
50
50
50
50
25
50
35
50
35
25
50
34
25
50
25
Company
AWE McNicol Transport (2005) Ltd
Elders Card Ltd
Elders Direct Ltd
Elders Insurance Ltd
Elders Merchandise Limited
Elders Primary Wool Limited
Elders Real Estate Ltd
Elders Stock (SI) Ltd
Elders Wairarapa Vet Services Ltd
Elderstock Ltd
EPW Southland Woolbrokers Ltd
Evia Rural Finance Ltd
Gisbourne Farmers Ltd
Hawkes Bay Wool Processors (2005) Ltd
Seed Production (NZ) Limited
Wool Marketing Enterprises Ltd
140
Notes to the Financial Statements
For the Year ended 30 September 2010
Note 33. Key Management Personnel
(a) Details of Key Management Personnel
Directors
S Gerlach
J C Ballard
C E Bright
J C Fox
R G Grigg
A Salim
G D Walters
I G MacDonald
J H Ranck
R H Wylie
M C Allison
M G Jackman
Chairman (retired 21 September 2010)
Chairman (appointed Director and Chairman 20 September 2010)
Non Executive Director
Non Executive Director (retired 18 December 2009)
Non Executive Director
Non Executive Director (resigned 30 October 2009)
Non Executive Director (retired 31 March 2010)
Non Executive Director
Non Executive Director
Non Executive Director (appointed 10 November 2009)
Non Executive Director (appointed 10 November 2009)
Managing Director and Chief Executive Officer
Other Key Management Personnel
M G de Wit
M S Guerin
V M Erasmus
M G Hosking
S McClure
R Tanti
S Hughes
Managing Director – Futuris Automotive Group Ltd
Chief Operating Officer – Elders Ltd (ceased employment 1 July 2010)
Chief Operating Officer and Managing Director – Elders Forestry
Chief Financial Officer
Group General Manager Strategy and Development
Group General Manager Human Resources
Chief Information Officer
S McClure, R Tanti and S Hughes are considered Key Management Personnel from 1 October 2009.
(b) Remuneration of Specified Directors and other Key Management Personnel
For information on Group Remuneration Policy, Structure and the relationship between remuneration payment and performance please refer
to the Remuneration Report.
Short term
Long term
Post employment
Termination benefits
Share based payments
Consolidated
September
2010
$
September
2009
$
5,905,128
8,519,717
101,798
585,116
695,975
1,024,603
8,312,620
157,845
693,178
4,495,050
(190,097)
13,675,693
141
Notes to the Financial Statements
For the Year ended 30 September 2010
Note 33. Key Management Personnel (continued)
(c) Option holdings of Directors and other Key Management Personnel
September 2010
(Number)
Directors
M G Jackman
Key Management Personnel
M G de Wit
M S Guerin
V Erasmus
M G Hosking
S McClure
R Tanti
S Hughes
Total
September 2009
(Number)
Directors
M G Jackman
L P Wozniczka
Key Management Personnel
M G de Wit
M S Guerin
V Erasmus
M G Hosking
B A Griffiths
T P Plant
P Zachert
Total
Balance at
beginning of
period
Options
Exercised
Options
Granted
Options
Lapsed /
Forfeited
Balance
at end of
period
Vested and
exercisable at
30 Sept
2010
400,000
50,000
150,000
150,000
-
22,500
-
15,000
787,500
-
800,000
50,000
75,000
75,000
-
40,000
110,000
75,000
1,225,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(400,000)
-
-
-
-
-
-
-
-
-
-
(10,000)
40,000
20,000
(150,000)
-
-
-
-
-
-
-
150,000
75,000
-
22,500
-
15,000
-
5,000
-
-
(560,000)
227,500
100,000
400,000
-
400,000
-
-
(625,000)
175,000
175,000
-
75,000
75,000
-
-
-
-
-
-
50,000
150,000
150,000
-
20,000
-
-
-
-
40,000
20,000
75,000
(185,000)
-
75,000
(87,500)
62,500
700,000
(897,500)
1,027,500
-
62,500
277,500
As at balance date there are $nil options (2009: $nil) which have vested but are unexercisable.
The prior year comparatives have been adjusted for the effect of the share consolidation as disclosed in note 19.
(d) Shareholdings of Directors and other Key Management Personnel
September 2010
Ordinary shares
Balance at
beginning of period
On Exercise
of Options
Granted as
Remuneration
Net Change
Other
Balance
at end of period
Directors
S Gerlach
J C Ballard
C E Bright
J C Fox*
R G Grigg
A Salim*
G D Walters*
I G MacDonald
J H Ranck
R H Wylie
M G Jackman
142
60,683
-
8,146
2,677
3,156
3,354,558
16,100
26,000
24,000
-
13,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
13,334
250,000
13,333
13,334
13,334
74,017
250,000
21,479
16,011
16,490
-
3,354,558
13,334
26,668
104,334
6,000
94,168
29,434
52,668
128,334
6,000
107,168
Notes to the Financial Statements
For the Year ended 30 September 2010
Note 33. Key Management Personnel (continued)
(d) Shareholdings of Directors and other Key Management Personnel (continued)
September 2010
Ordinary shares
Balance at
beginning of period
On Exercise
of Options
Granted as
Remuneration
Net Change
Other
Balance
at end of period
Key Management Personnel
M G de Wit
M S Guerin*
V Erasmus
M G Hosking
S McClure
R Tanti
S Hughes
Total
September 2010 (Hybrid equity)
Directors
M Jackman
September 2009
Ordinary shares
Directors
S Gerlach
C E Bright
J C Fox
R G Grigg
A Salim
G D Walters
I G MacDonald
J H Ranck
M G Jackman
L P Wozniczka
Key Management Personnel
M G de Wit
M S Guerin
V Erasmus
5,203
27,070
1,998
-
1,030
-
10,420
3,554,041
1,000
49,253
8,146
2,677
3,156
3,354,558
2,100
6,000
17,000
3,000
452,134
5,203
27,070
1,998
M G Hosking
-
-
B A Griffiths
T P Plant
P Zachert
Total
September 2009 (Hybrid equity)
Directors
M Jackman
117,302
24,755
143,004
4,217,356
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
13,334
26,667
-
-
6,667
-
6,667
601,174
18,537
53,737
1,998
-
7,697
-
17,087
4,155,215
-
1,000
11,430
60,683
-
-
-
-
14,000
20,000
7,000
10,000
-
-
-
-
-
-
(46,392)
-
-
8,146
2,677
3,156
3,354,558
16,100
26,000
24,000
13,000
452,134
5,203
27,070
1,998
70,910
24,755
143,004
16,038
4,233,394
1,000
1,000
* Balance at period end represents balance at date of cessation of services.
The prior year comparatives have been adjusted for the effect of the share consolidation as disclosed in note 19. Movements in net change
other for the year ended 30 September 2010 includes rounding due to the share consolidation.
All equity transactions with directors and key executives other than those arising from the exercise of remuneration options have been
entered into under terms and conditions no more favourable than those the Group would have adopted if dealing at arms length.
143
Notes to the Financial Statements
For the Year ended 30 September 2010
Note 33. Key Management Personnel (continued)
(e) Loans to Directors and other Key Management Personnel
Balance at
beginning period
$000
6
806
Interest
Charged
$000
1
27
Executives (i)
September 2010
September 2009
Loan
Written Off
Loan Repaid/
Advanced
Balance at
end of period
Highest owing
in period
$000
$000
$000
$000
-
-
-
827
7
6
-
821
(i) There is one key executive within the loan group (2009: two)
(f) Transactions and Balances with Directors and other Key Management Personnel
The aggregate amounts recognised in respect of the following types of transactions with directors of entities in the Group and their
director-related entities were:
Transaction type
Director concerned
Sales through rural agency services
Purchase of merchandise
Purchases through rural agency services
C E Bright
C E Bright
C E Bright
The above transactions were made on commercial terms and conditions and at market rates.
Consolidated
September
2010
$000
September
2009
$000
5
-
-
717
28
240
In addition, directors of the parent entity or its controlled entities, or their director-related entities, may purchase goods and services from
the Group in their domestic dealings and within normal customer or employee relationships on terms and conditions no more favourable
than those available in similar arms length dealings.
The amounts involved are immaterial to the Group and include the following:
• Sales of goods
• Provision of insurance services
• Provision of rural agency services
• Provision of deposit facilities
144
Notes to the Financial Statements
For the Year ended 30 September 2010
Note 34. Related Party Disclosures
(a) Ultimate Controlling Entity
The ultimate controlling entity of the Group is Elders Limited.
(b) Transactions with related parties in the wholly owned group
Transactions with related parties in the wholly owned group:
Loans repaid / (advanced)
Interest recharged
Recharges – other
Balances with related parties in the wholly owned group:
Owing to the parent entity
Owing from the parent entity
Parent
12 months
September
2010
$000
15 months
September
2009
$000
(596,326)
614,992
(22,940)
(47,089)
(3,500)
(7,750)
1,556,261
1,132,565
(590,742)
(789,812)
965,519
342,753
Transactions with related parties in the wholly owned group are made in arms length transactions both at normal market prices and on
normal commercial terms.
(c) Transactions with controlled entities not wholly owned
Details of entities not wholly owned are set out in note 32.
Transactions with controlled entities not wholly owned:
Loan repayments received
Interest received or receivable
Dividends received
Sale of inventory
Purchases
Recharges – other
Balances with controlled entities not wholly owned:
Owing to the Group
Owing from the Group
1,633
-
1,799
80
1,749
(1,815)
-
2
3,198
5,838
-
612
13,006
(905)
12,101
20,948
(5,990)
14,958
Transactions with controlled entities not wholly owned are made in arms length transactions both at normal market prices and on normal
commercial terms.
145
Notes to the Financial Statements
For the Year ended 30 September 2010
Note 34. Related Party Disclosures (continued)
(d) Transactions with other partly owned entities
Details of associates and joint ventures are set out in note 11.
Transaction type
Class of entity
Loans with partly owned entity
Loans advanced
Loan repayments received
Interest received or receivable
Loan repayments made
Interest paid or payable
Other transactions
Dividends received
Distribution fees received
Reimbursement of expense
Sale of inventory
Sale of plant and equipment
Other services and recharges
Capital contributions
Purchases
Acquisition of investments
Other
Dividends received
Distribution fees received
Reimbursement of expense
Sale of inventory
Other services and recharges
Capital contributions
Purchases
Balances with partly owned entities:
Owing to the Group
Owing from the Group
Owing to the Group
Owing from the Group
Associate
Associate
Associate
Associate
Associate
Associate
Associate
Associate
Associate
Associate
Associate
Associate
Associate
Associate
Associate
Joint Venture
Joint Venture
Joint Venture
Joint Venture
Joint Venture
Joint Venture
Joint Venture
Associate
Associate
Joint Venture
Joint Venture
Consolidated
September
2010
$000
September
2009
$000
(4,450)
(28,908)
4,999
2,646
-
-
30,781
20,122
26,732
5,383
-
10,405
(1,600)
5,609
2,267
(6,081)
(220)
12,404
8,265
-
35,712
7
43,815
-
(64,726)
(102,433)
-
689
-
2,471
-
-
-
-
-
29,183
2,000
401
-
(10,801)
-
31,749
20,480
13,858
42
190
(31,500)
(561)
68,490
(2)
-
(1)
Loans made to partly owned entities are priced on an arms length basis are to be settled in cash within six months of the reporting date.
None of the balances are secured.
Transactions with partly owned entities are made in arms length transactions both at normal market prices and normal commercial terms.
146
Notes to the Financial Statements
For the Year ended 30 September 2010
Note 35. Earnings Per Share
Weighted average number of ordinary shares (‘000) used in calculating basic EPS
Dilutive share options (‘000)
Consolidated
September
2010
$000
425,675
126,568
September
2009
$000
80,908
21,479
Adjusted weighted average number of ordinary shares used in calculating dilutive EPS (‘000)
552,243
102,387
Hybrid notes have been included in the calculation of dilutive EPS, as they are believed to be dilutive for the current financial period.
The following reflects the net profit/(loss) and share data used in the calculations of earnings per share (EPS):
Reported Operations
Basic
Net profit/(loss) attributable to members (after tax)
(217,628)
(466,426)
Dilutive
Operating profit/(loss) after tax
Interest on convertible notes
(217,628)
(466,426)
-
-
Net profit/(loss) attributable to members (after tax) adjusted for the effect of convertible notes
(217,628)
(466,426)
Reported Operations earnings per share:
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
Continuing Operations
Basic
Net profit/(loss) attributable to members (after tax)
Less: Net loss/(profit) of discontinued operations (net of tax)
Net profit/(loss) of continuing operations (net of tax)
Dilutive
Net profit/(loss) of continuing operations (net of tax)
Interest on convertible notes
(51.1)¢
(51.1)¢
(576.5)¢
(576.5)¢
(217,628)
(466,426)
40,205
270,424
(177,423)
(196,002)
(177,423)
(196,002)
-
-
Net profit/(loss) of continuing operations (net of tax) adjusted for the effect of convertible notes
(177,423)
(196,002)
Continuing Operations earnings per share:
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
Discontinued Operations
(41.7)¢
(41.7)¢
(242.3)¢
(242.3)¢
Net profit/(loss) of discontinued operations (net of tax)
(40,205)
(270,424)
Discontinued Operations earnings per share:
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
(9.4)¢
(9.4)¢
(334.2)¢
(334.2)¢
As a result of the share consolidation detailed in note 19, the calculation of basic and diluted earnings per share have been
adjusted retrospectively.
147
Notes to the Financial Statements
For the Year ended 30 September 2010
Note 36. Financial Instruments
Exposure to commodity, interest rate, liquidity, credit and foreign currency risks arise in the normal course of business. The Group has
policies in place to manage these exposures within Board approved limits.
(a) Commodity risk
The Group enters into contracts for the purchase and sale of various commodities, in the ordinary course of business operations. Differences
in the timing of purchase and sale contracts create an exposure to commodity price risk.
All business units that have exposure to commodity price risk operate within the confines of a Board approved risk management policy. The
Group enters into futures, swaps and option contracts to manage commodity price risk within the established Board approved limits.
The Group classifies financial instrument commodity purchase and sale contracts, commodity futures, swaps and option contracts as fair
value derivatives. All open contracts are fair valued at balance date with any gains and losses on these contracts, together with the
associated costs to completion of these contracts, being recognised immediately through the statement of comprehensive income.
The Group currently has cash flow hedges attributable to future foreign currency inventory purchases related to automotive components.
Otherwise the Group has elected not to apply hedge accounting for the financial reporting of commodity contracts classed as financial
instruments.
The sensitivity analysis below estimates the impact of a +/- 10% movement in the price of wool, with all other variables held constant. This
analysis excludes the impact of these price movements on agency commission related to these commodities.
Consolidated
+/- 10%
The impact on equity incorporates the impact on profit and is therefore of the same magnitude.
(b) Interest rate risk
Post Tax Profit/Equity
Higher/(Lower)
September
2010
$000
September
2009
$000
-
+/- 1,111
The Group is exposed to interest rate risk through primary financial assets and liabilities, modified through derivative financial instruments.
Cross currency interest swaps are used to hedge the Australian dollar value of cash flows associated with the payment of principal and
interest on long term fixed rate borrowings and to swap a fixed rate exposure into an Australian floating interest rate exposure.
Interest rate swap agreements are used to convert floating interest rate exposures on certain debt to fixed rates. These swaps entitle the
Group to receive, or oblige it to pay, the amounts, if any, by which actual interest payments on nominated loan amounts exceed or fall below
specified interest amounts.
At balance date, the Group had the following mix of financial assets and liabilities exposed to Australian variable interest rate risk that are
not designated in cash flow hedges:
148
Notes to the Financial Statements
For the Year ended 30 September 2010
Note 36. Financial Instruments (continued)
(b) Interest rate risk (continued)
Financial assets
Cash and cash equivalents
Amounts receivable from associated entities
Other receivables
Financial liabilities
Secured loans
Unsecured loans
Net Exposure
Consolidated
September
2010
$000
September
2009
$000
79,985
14,213
-
367,868
34,569
10,216
94,198
412,653
(400,994)
(947,483)
(1,636)
-
(402,630)
(947,483)
(308,432)
(534,830)
The Group’s policy is to manage its finance costs using a mix of fixed and variable rate debt. The Group constantly analyses its interest rate
exposure so as to manage its cash flow volatility arising from interest rate changes. Within this analysis, consideration is given to potential
renewals of existing positions, alternative financing, alternative hedging positions and the mix of fixed and variable interest rates.
The following sensitivity analysis is based on the interest rate risk exposures in existence at the balance sheet date. At 30 September 2010,
if interest rates had moved as illustrated in the table below, with all other variables held constant, post tax profit and equity would have
been affected as follows:
Consolidated
+ 100 basis points
- 100 basis points
Post Tax Profit/Equity
Higher/(Lower)
September
2010
$000
September
2009
$000
(3,084)
3,084
(5,348)
5,348
The impact on equity incorporates the impact on profit and is therefore of the same magnitude. Movements in profit are due to higher/lower
interest costs from variable rate debt and cash balances. The sensitivity is lower in 2010 than 2009 because of lower debt levels.
(c) Liquidity risk
Liquidity risk arises from the financial liabilities of the group and the group’s subsequent ability to meet their obligations to repay their
financial liabilities as and when they fall due.
The Group’s objective is to maintain a balance between continuity of funding and flexibility through the use of bank overdrafts, bank loans
and committed available lines of credit. The Group manages its liquidity risk by monitoring the total cash inflows and outflows expected in a
weekly basis. Elders Limited has established comprehensive risk reporting covering its business units that reflect expectations of
management of the expected settlement of financial assets and liabilities.
149
Notes to the Financial Statements
For the Year ended 30 September 2010
Note 36. Financial Instruments (continued)
(c) Liquidity risk (continued)
A. Non derivative financial liabilities
The following liquidity risk disclosures reflect all contractually fixed pay-offs, repayments and interest resulting from the recognised financial
liabilities and financial guarantees as of 30 September 2010. For the other obligations the respective undiscounted cash flows for the
respective upcoming fiscal years are presented. The timing of cash flows for liabilities in based on the contractual terms of the underlying
contract.
However, where the counterparty has a choice of when the amount is paid, the liability is allocated to the earliest period in which the Group
can be required to pay. When the Group is committed to make amounts available in instalments, each instalment is allocated to the earliest
period in which the Group is required to pay. For financial guarantee contracts, the maximum amount of the guarantee is allocated to the
earliest period in which the guarantee can be called.
The risk implied from the values shown in the table below, reflects a balanced view of cash inflows and outflows of non-derivative financial
instruments.
Consolidated
September 2010
Non derivative
financial assets:
Carrying
amount
$000
Contractual
cash flows
6 months
or less
6-12 months
1-5 years
> 5 years
$000
$000
$000
$000
$000
Cash and cash equivalents
79,985
79,985
79,985
Trade and other receivables
704,033
891,385
506,005
784,018
971,370
585,990
Non derivative
financial liabilities:
Secured loans
Secured notes
Unsecured loans
Finance leases
(400,994)
(430,521)
(293,959)
(116,324)
(158,485)
(4,735)
(1,636)
(356)
(1,688)
(388)
(335)
(127)
Trade and other payables
(358,165)
(358,165)
(356,979)
Financial guarantees
(19,030)
(19,030)
(19,030)
-
1,679
1,679
(4,735)
(4,735)
(335)
(127)
-
-
-
99,189
99,189
-
284,512
284,512
(131,827)
(149,015)
(1,018)
(134)
(1,186)
-
-
-
-
-
-
-
-
(896,505)
(968,277)
(675,165)
(9,932)
(283,180)
Net inflow/(outflow)
(112,487)
3,093
(89,175)
(8,253)
(183,991)
284,512
September 2009
Non derivative
financial assets:
Cash and cash equivalents
367,868
367,868
367,868
Trade and other receivables
780,969
962,666
551,581
1,148,837
1,330,534
919,449
-
3,301
3,301
-
-
143,014
264,770
143,014
264,770
Non derivative
financial liabilities:
Secured loans
Secured notes
Unsecured loans
Finance leases
(947,483)
(1,040,149)
(371,747)
(374,138)
(294,264)
-
(280,313)
(342,480)
(81,124)
(87,060)
(42,752)
(131,544)
(1,603)
(565)
(1,603)
(611)
(1,603)
(322)
Trade and other payables
(362,731)
(362,731)
(362,731)
Financial guarantees
(28,962)
(28,962)
(28,962)
-
(173)
-
-
-
(116)
-
-
-
-
-
-
Net inflow/(outflow)
(472,820)
(446,002)
72,960
(458,070)
(194,118)
133,226
(1,621,657)
(1,776,536)
(846,489)
(461,371)
(337,132)
(131,544)
150
Notes to the Financial Statements
For the Year ended 30 September 2010
Note 36. Financial Instruments (continued)
(c) Liquidity risk (continued)
B. Derivative financial instruments
Due to the unique characteristics and inherent risks to derivative instruments, the Group (through the Group Treasury Function) separately
monitors liquidity risk arising from transacting in derivative instruments.
The table below details the liquidity risk arising from derivative financial liabilities held by the group at balance date. Net settled derivative
liabilities comprise forward commodity contracts that are used as economic hedges of commodity purchases and forward exchange and
interest rate hedges that are used to hedge future principle and interest repayments of interest bearing loans and borrowings.
Carrying
amount
$000
Contractual
cash flows
6 months
or less
6-12 months
1-5 years
> 5 years
$000
$000
$000
$000
$000
-
-
-
Total inflow/(outflow)
(21,304)
(21,304)
(21,304)
(21,304)
(3,601)
(3,601)
-
-
-
-
-
(17,703)
(17,703)
-
-
-
-
-
-
-
(17,787)
(17,787)
7,820
7,820
7,820
(49,924)
(42,104)
(49,924)
(42,104)
(21,521)
(13,701)
(10,616)
(10,616)
Consolidated
September 2010
Derivative assets
– net settled
Derivative liabilities
– net settled
September 2009
Derivative assets
– net settled
Derivative liabilities
– net settled
Total inflow/(outflow)
(d) Credit risk
The Group’s exposures to credit risk on the balance sheet are indicated by the carrying amounts of its financial assets. The Group’s
maximum exposure to credit risk at the reporting date was:
Cash and cash equivalents
Trade and other receivables
Derivative financial assets
Location of credit risk
Australia
New Zealand
Asia (excluding China)
China
Europe
Other
Consolidated
September
2010
$000
79,985
704,033
-
September
2009
$000
367,868
779,811
7,820
784,018
1,155,499
637,799
47,765
5,467
6,528
2,727
3,747
676,093
-
3,259
16,034
19,432
64,993
Total gross receivables
704,033
779,811
151
Notes to the Financial Statements
For the Year ended 30 September 2010
Note 36. Financial Instruments (continued)
(d) Credit risk (continued)
Industry classification
Rural
Financial Services
Forestry
Automotive
Investment and Other
Total gross receivables
Consolidated
September
2010
$000
September
2009
$000
273,860
-
194,351
63,148
172,674
704,033
304,221
2,604
322,127
61,453
89,406
779,811
The aging of the Groups’ trade and other receivables at balance date is reported at note 5.
The credit risk associated with cash and derivatives is located primarily in Australia.
The Group minimises concentrations of credit risk by undertaking transactions with a large number of debtors in various locations and
industries. The credit risk amounts do not take into account the value of any collateral or security. The creditworthiness of counterparties is
regularly monitored and subject to defined credit policies, procedures and limits. The amounts disclosed do not reflect expected losses and
are shown gross of provisions.
(e) Foreign Currency Risk
The Group is exposed to movements in the exchange rates of a number of currencies, in the ordinary course of business operations. The
predominant exposure is to movements in the AUD/USD, AUD/NZD and AUD/EUR exchange rates. These are primarily generated from the
following activities:
• Purchase and sale contracts written in foreign currency, or priced in AUD but determined from a foreign currency value at a future date;
• Receivables and payables denominated in foreign currencies;
• Commodity derivatives traded in a currency other than AUD;
• Commodity cash prices that are partially determined by movements in exchange rates;
• Costs of sale such as transportation and commission denominated in foreign currency; and
• Funding raised in foreign currency.
Foreign exchange risk is managed within Board approved limits using forward foreign exchange and foreign currency option contracts. Where
possible, exposures are netted off against each other to minimise the cost of hedging.
In managing foreign exchange risk, hedge accounting will be applied for financial reporting purposes for selected exposures based upon the
size and duration of the exposure.
Where hedge accounting is not applied, foreign currency contracts are fair valued at balance date with gains and losses recognised
immediately through the statement of comprehensive income.
152
Notes to the Financial Statements
For the Year ended 30 September 2010
Note 36. Financial Instruments (continued)
(e) Foreign Currency Risk (continued)
At 30 September 2010, the Group had the following AUD exposures to foreign currencies that were not designated in cash flow hedges:
Financial Assets
Cash and cash equivalents – EUR
Cash and cash equivalents – USD
Cash and cash equivalents – NZD
Cash and cash equivalents – CNY
Cash and cash equivalents – Other
Receivables – EUR
Receivables – USD
Receivables – NZD
Receivables – CNY
Receivables – ZAR
Receivables – Other
Financial Liabilities
Payables – EUR
Payables – USD
Payables – NZD
Payables – CNY
Payables – Other
Interest bearing loans and borrowings - EUR
Interest bearing loans and borrowings – USD
Interest bearing loans and borrowings – NZD
Interest bearing loans and borrowings – CNY
Net exposure
Consolidated
September
2010
$000
September
2009
$000
7,285
15,218
2,623
1,364
517
2,891
3,205
49,340
3,973
1,622
2,093
19,273
20,436
2,241
2,034
584
17,109
17,809
52,384
3,567
1,861
1,456
90,131
138,754
(6,082)
(7,283)
(4,105)
(1,183)
(22,672)
(19,910)
(2,146)
(1,173)
-
(323)
-
(10,215)
(108,637)
(249,622)
(13,159)
(2,551)
(10,661)
(3,796)
(163,703)
(299,815)
(73,572)
(161,061)
Given the foreign currency balances included in the balance sheet at balance date, if the Australian dollar at that date strengthened by
10% with all other variables held constant, then the impact on post tax profit/(loss) and equity arising on the balance sheet exposure
would be as follows:
Consolidated
EUR
USD
NZD
CNY
ZAR
Other
Post Tax Profit/Equity
Higher/(Lower)
September
2010
$000
September
2009
$000
(409)
9,750
(1,613)
(64)
(162)
(144)
(2,206)
21,256
(2,405)
(181)
(186)
(172)
The impact on equity incorporates the impact on profit and is therefore of the same magnitude. A 10% weakening of the Australian dollar
against the above currencies would have had the equal but opposite effect on the above currencies to the amounts shown above, on the
basis that all other variables are held constant.
153
Notes to the Financial Statements
For the Year ended 30 September 2010
Note 36. Financial Instruments (continued)
(f) Fair value of financial assets and liabilities
The Group uses various methods in estimating the fair value of a financial instrument. The methods comprise:
• Level 1 – the fair value is calculated using quoted prices in active markets.
• Level 2 – the fair value is estimated using inputs other than quoted prices included in level 1 that are observable for the asset or liability,
either directly (as prices) or indirectly (derived from prices).
• Level 3 – the fair value is estimated using inputs for the asset or liability that are not based on observable market data.
The fair value of financial instruments as well as the method used to estimate the fair values are summarised in the table below:
Consolidated
September 2010
September 2009
Quoted
market
price
(Level 1)
Valuation
technique - market
observable inputs
(Level 2)
Valuation
technique – non
market observable
inputs (Level 3)
Quoted
market
price
(Level 1)
Valuation
technique - market
observable inputs
(Level 2)
Valuation
technique – non
market observable
inputs (Level 3)
$000
$000
$000
$000
$000
$000
Financial assets
Derivatives
Financial liabilities
Derivatives
-
-
-
-
(21,304)
(21,304)
-
-
-
-
-
-
7,820
(49,924)
(42,104)
-
-
-
Quoted market prices represent the fair value determined based on quoted prices on active markets as at the reporting date without any
deduction for transaction costs. The fair value of the listed entity investments are based on active quoted market prices.
For financial instruments not quoted in active markets, the group uses valuation techniques such as present value technologies, comparison
to similar instruments for which active market observable prices exist and other relevant models used by market participants.
Note 37. Share Based Payment Plans
(a) Employee option ownership scheme
The parent entity issues from time to time options over ordinary shares to senior employees of the Group. These options are issued at the
sole discretion of the Directors as part of employees’ remuneration packages.
The following table illustrates the number (No.) and weighted average exercise prices (WAEP) of, and movements in, share options issued
during the year:
Outstanding at the beginning of the year
Issued during the year
Lapsed during the year
Exercised during the year
September
September
2010
No. (‘000)
2010
WAEP
$
2009
No. (‘000)
2,440
17.80
-
-
(1,060)
15.85
-
-
2,534
1,108
(1,202)
-
2009
WAEP
$
20.90
13.00
20.10
-
Outstanding at the end of the year
1,380
19.27
2,440
17.80
The prior year comparatives have been adjusted for the effect of the share consolidation as disclosed in note 19.
The range of exercise prices for options outstanding at the end of the year was $12.90 - $25.40.
The weighted average remaining contractual life for the share options outstanding as at 30 September 2010 is 1.53 years
(2009: 3.06 years).
154
Notes to the Financial Statements
For the Year ended 30 September 2010
Note 37. Share Based Payment Plans (continued)
(b) Employee share plan (ESP)
Shareholders approved the implementation of an ESP at a general meeting in November 1989 and October 1998. Within the ESP, two
schemes exist. The general terms and conditions of these schemes comprise:
(i)
(ii)
General Employee Scheme under which permanent employees may acquire shares in the parent company with a market value ranging
from $3,000 to $17,500 per year per employee; and
Incentive Scheme under which selected employees will be eligible to acquire shares in the parent company on such terms as the
Directors decide are appropriate in the circumstances of the employee.
During the financial year no ordinary shares (2009: nil) in the parent company were transferred to eligible employees for nil consideration
under the Incentive Scheme.
Shares are issued to eligible employees by way of an interest free loan and are subject to holding restrictions, which prevent the employee
dealing in the shares until the restriction period has expired. All shares issued under the plan rank equally with other shares of their class
and participants enjoy all rights attaching to that class of shares. Any loan is repayable from dividends and the proceeds of sale of shares
issued under the plan but is otherwise non-recourse to the employee, the shares being held by the Trustee as security for repayment of loan.
This plan is accounted for and valued as an option plan, with the contractual life of each option equivalent to the estimated loan life.
The ESP was suspended in 2009 and no new shares have since been issued.
(c) Option pricing model
The fair value of the share options is estimated as at the date of grant using either Trinomial or Black-Scholes valuation models taking into
account the terms and conditions upon which the options were granted (options with external market conditions are valued using the
Trinomial method).
The following table lists the inputs to the model used for the period. Given no share options were issued under the EESOP in 2010, no
valuation inputs are disclosed for 2010:
Dividend Yield (%)
Expected Volatility (%)
Risk-free interest rate (%)
Expected life of options (years)
Option exercise price ($)
Weighted average share price at measurement date ($)
Note 38. Superannuation Commitments
September
2010
September
2009
-
-
-
-
-
-
4.50
35.00
5.38
3.00
1.32
1.49
The Group maintains an Australian-based defined benefits superannuation fund. The defined benefits section of the fund has been closed
since December 1996.
Comprehensive actuarial valuations are made at three yearly intervals, and the last such assessment was made as at 30 June 2010, by S
Mules, F.I.A.A from Mercer Investment Nominees Ltd. The next actuarial valuation is to be conducted as at 30 June 2013.
The objective of the valuation is to ensure that the benefit entitlements of employees are fully funded by the time they become payable. To
achieve this objective, the actuary has used the aggregate funding method, which entails contributions to be paid out as a constant
percentage of members’ salaries over their working lifetimes. Funding recommendations made by the actuary are based on assumptions of
various matters such as future salary levels, mortality rates, membership turnover and interest rates.
As at 30 June 2010 the defined benefit fund position is of an immaterial surplus of assets over liabilities and thus disclosure of the
components of the net benefit income recognised in the Group statement of comprehensive income in accordance with AASB 119 Employee
Benefits has not been made.
155
Notes to the Financial Statements
For the Year ended 30 September 2010
Note 39. Business Combinations – Changes in the Composition of the Entity
(a) Controlled Entities Acquired
During the year the Group obtained control of the following material entities:
• Plantation Pulpwood Terminals Pty Ltd
• MCK Holdings Pty Ltd
Plantation Pulpwood Terminals Pty Ltd (PPT)
During the 2010 financial year, the Group acquired the remaining 50% of the voting shares of PPT on 30 August 2010 resulting in PPT
becoming a wholly owned subsidiary.
Equity and consideration paid in current period:
Purchase consideration
Contingent consideration
Total consideration
Fair value of identifiable net assets acquired (see below)
Goodwill/(discount) on acquisition
The aggregate amounts of assets and liabilities acquired by major class:
Cash and cash equivalents
Property, plant and equipment
Other assets
Trade and other payables
Provisions
Net identifiable assets acquired
Outflow of cash to acquire the entities, net of cash acquired:
Cash consideration
Cash balance acquired
Net Inflow/(outflow) of cash
Date Control
Acquired
Proportion of
Shares Acquired
Sept 2010
$000
30 Aug
50%
7,641
-
7,641
12,641
(5,000)
Acquiree’s
carrying amount
$000
Fair
value
$000
412
412
15,320
20,320
583
583
(8,542)
(8,542)
(132)
7,641
(132)
12,641
(7,641)
412
(7,229)
The accounting for the PPT business combination is provisional on the basis that formal valuations of all assets and liabilities acquired have
not been finalised. It is intended that these will be finalised within 12 months with any adjustments to the provisional acquisition accounting
being recorded retrospectively.
MCK Holdings Pty Ltd (Plexicor)
The Group has previously held a 50% interest in Plexicor which has been classified as an equity accounted investment. As at 30 September
2010 the Group has determined that due to the influence Elders has over the operating and financial policies of Plexicor that control of that
business now exists.
The external 50% shareholders have a put option for the remaining 50% of Plexicor. The value of this option is currently $27.1 million.
Due to the certainty of this option being exercised this amount has been recorded as a liability in the statement of financial position at
30 September 2010 and treated as consideration for the purchase of the remaining 50% of Plexicor as part of the business combination.
156
Notes to the Financial Statements
For the Year ended 30 September 2010
Note 39. Business Combinations – Changes in the Composition of the Entity (continued)
(a) Controlled Entities Acquired (continued)
Purchase consideration
Value of initial investment
Total consideration
Fair value of identifiable net assets acquired (see below)
Goodwill/(discount) on acquisition
The aggregate amounts of assets and liabilities acquired by major class:
Cash and cash equivalents
Trade and other receivables
Inventories
Property, plant and equipment
Goodwill
Other assets
Tax assets and liabilities
Derivatives
Trade and other payables
Provisions
Interest bearing loans and liabilities
Net identifiable assets acquired
Outflow of cash to acquire the entities, net of cash acquired:
Cash consideration payable (refer above)
Cash balance acquired
Net Inflow/(outflow) of cash
Date Control
Acquired
Proportion of
Shares Acquired
Sept 2010
$000
30 Sep
50%
27,100
20,941
48,041
(50,044)
98,085
Acquiree’s
carrying amount
$000
Fair
value
$000
12,540
12,540
9,927
6,829
9,859
12,022
142
2,914
(75)
9,927
6,829
9,859
-
142
(189)
(75)
(22,543)
(22,543)
(2,234)
(2,234)
(64,300)
(64,300)
(34,919)
(50,044)
(27,100)
12,540
(14,560)
The accounting for the Plexicor business combination is provisional due to control being obtained on the last day of the financial year.
Formal valuations of all assets and liabilities acquired have not been finalised. Specifically identifiable intangible assets have not been
separated from the goodwill acquired. In accordance with AASB 3 Business Combinations it is intended that valuations will be completed
within 12 months with any adjustments to the provisional acquisition accounting, including recognition of separately identifiable intangible
assets, being recorded retrospectively.
During the period there were other immaterial business combinations that resulted in $2.3 million of goodwill being recognised.
Prior period acquisitions
There were no controlled entities acquired during the September 2009 financial period.
(b) Controlled Entities Disposed
The Group disposed of its net assets in Elders Trustees Ltd and Tomkins Financial Services Pty Limited on 4 December 2009 to Millennium
3 Financial Services Group Pty Ltd. As part of this transaction, the Group acquired 49% interest in Elders Financial Planning Pty Ltd and
records this as an investment in associate.
On 7 December 2009, the Group sold its 100% interest in PlantTech Pty Ltd to Seed Technology and Marketing Pty Ltd (“Seedmark”),
which was previously a 50% investment held by the Group through PlantTech Pty Ltd. The Group now still owns 50% of Seedmark
subsequent to the transaction.
157
Notes to the Financial Statements
For the Year ended 30 September 2010
Note 39. Business Combinations – Changes in the Composition of the Entity (continued)
(b) Controlled Entities Disposed (continued)
Proceeds received on disposal of assets/shares
Cash
Share capital (i)
Receivables
Cash balance disposed
Less costs of disposal
The carrying amounts of assets and liabilities disposed of by major class are:
Trade and other receivables
Inventories
Other Assets
Property, plant and equipment
Intangibles
Other financial assets
Tax assets and liabilities
Trade and other payables
Provisions
Interest bearing loans and liabilities
Net assets/(liabilities) of entity sold
Non-controlling interests
Profit/(loss) on disposal (before tax)
Additional loss on Timber sale
Additional loss on disposal of other controlled entities
Total profit/(loss) on disposal of controlled entities
Consolidated
September
2010
$000
September
2009
$000
4,934
4,804
-
(336)
(51)
308,454
-
96,213
(209,356)
(7,277)
9,351
188,034
870
345,421
-
148
70
15,755
-
(32)
73,683
145,313
101,597
51,644
47,090
(4,367)
(5,648)
(369,455)
(232)
(213,499)
-
(25,289)
10,931
152,138
-
(1,580)
(7,374)
-
(8,954)
(48,511)
84,407
-
(1,951)
82,456
(i) The share capital received as part of the proceeds relates to 49% share in Elders Financial Planning Pty Ltd (previously Pinnacle
Partners Pty Ltd). This is a joint venture with Millennium 3 Financial Services Group Pty Ltd which owns the remaining 51%.
Prior period disposals
• The Group disposed of its controlling interest in Amcom Limited in two tranches. The initial tranche of 170 million shares were sold on 1
September 2008, resulting in Amcom Limited no longer being a controlled entity of the Group. The remaining 100 million shares were sold
on 10 December 2008.
• On 31 August 2009, the Group entered into binding contracts to effect the sale of the Elders Insurance Ltd and Elders Insurance Agencies
Pty Ltd companies to QBE, inclusive of the insurance distribution operations, which will be conducted by a joint venture between QBE and
Elders (25% interest) under a 20 year exclusive distribution agreement. Settlement of the sale occurred on 30 September 2009.
• On 31 August 2009, the Group entered into a binding purchase and sale agreement with Gunns Limited, for the sale of ITC Timber Pty Ltd,
an entity which held Elders hardwood timber processing operations as well as its 50% stake in Smartfibre Pty Ltd (“Smartfibre”).
On 28 October 2009 the Australian Competition and Consumer Commission (ACCC) issued a Statement of Issues in relation to the sale.
To address the ACCC’s concerns, the sale was restructured to exclude ITC Timber’s 50% stake in Smartfibre.
As at 30 September 2009, the group recognised an overall loss of $44.2 million in relation to the Timber sale. This included a profit
before tax of $7.4 million for the sale of Smartfibre. As a result of the restructured sale, the Group has derecognised the $7.4 million
profit before tax in the current period.
As at 30 September 2010, the investment in Smartfibre Pty Ltd is classified as ‘Non current assets classified as held for sale‘.
158
Notes to the Financial Statements
For the Year ended 30 September 2010
Note 40. Discontinued Operations
Financial period 30 September 2010
Operations within Wool Processing, Seed Distribution, Financial Planning, New Zealand Real Estate, Automotive Air Conditioning and results
within Forest Enterprises Australia Ltd and Smartfibre Pty Ltd were classified as discontinued operations during the year ended 30
September 2010. The comparative statement has been re-presented to show the effects of these classifications.
Financial period 30 September 2009
Operations within Horticulture, Wool Processing, Insurance broking, Timber and Telecommunications division were classified as
discontinued operations, or were disposed of during the period ended 30 September 2009 and reported as discontinued operations.
Continuing
12 months
September
2010
$000
Discontinued
12 months
September
2010
$000
Consolidated
12 months
September
2010
$000
Continuing
15 months
September
2009
$000
Discontinued
15 months
September
2009
$000
Consolidated
15 months
September
2009
$000
2,069,053
85,328
2,154,381
2,948,767
591,316
3,540,083
(1,619,220)
(69,799)
(1,689,019)
(2,385,639)
(249,647)
(2,635,286)
39,067
1,880
40,947
47,009
60,898
107,907
(652,417)
(57,836)
(710,253)
(795,001)
(717,470)
(1,512,471)
33,854
(111)
33,743
28,438
(29,135)
(697)
(616)
(8,954)
(9,570)
11,427
112,682
124,109
(130,279)
(49,492)
(179,771)
(144,999)
(231,356)
(376,355)
25,328
(58,277)
1,632
26,960
9,315
17,461
26,776
(571)
(58,848)
(110,979)
(5,772)
(116,751)
Sales revenue
Cost of sales
Other revenues
Other expenses
Share of net profits/(loss) of
associates and joint ventures
accounted for using the
equity method
Profit/(loss) on sale of
non current assets
Profit/(loss) before net borrowing
costs and tax expense
Interest revenue
Finance costs
Profit/(loss) before tax expense
(163,228)
(48,431)
(211,659)
(246,663)
(219,667)
(466,330)
Income tax benefit/(expense)
(9,078)
8,226
(852)
49,169
(50,339)
(1,170)
Net profit/(loss) for year
(172,306)
(40,205)
(212,511)
(197,494)
(270,006)
(467,500)
Net profit/(loss) attributable to
minority interest
Net profit/(loss) attributable to
members of the parent entity
5,117
-
5,117
(1,492)
418
(1,074)
(177,423)
(40,205)
(217,628)
(196,002)
(270,424)
(466,426)
159
Notes to the Financial Statements
For the Year ended 30 September 2010
Note 40. Discontinued Operations (continued)
Continuing
12 months
September
2010
$000
Discontinued
12 months
September
2010
$000
Consolidated
12 months
September
2010
$000
Continuing
15 months
September
2009
$000
Discontinued
15 months
September
2009
$000
Consolidated
15 months
September
2009
$000
Revenue and Expenses
Sales revenue:
Sale of goods
1,657,964
82,618
1,740,582
2,417,823
257,541
2,675,364
Sale of biological assets
151,507
-
151,507
180,138
1,565
181,703
Commission and other
selling charges
Insurance premium revenue
Other sales related income
Other expenses:
Distribution expenses
Marketing expenses
Occupancy expenses
202,536
2,710
205,246
265,864
9,526
275,390
-
57,046
-
-
-
-
294,124
294,124
57,046
84,942
28,560
113,502
2,069,053
85,328
2,154,381
2,948,767
591,316
3,540,083
279,324
3,524
282,848
341,761
148,278
490,039
6,548
40,660
66
443
6,614
41,103
15,926
55,926
8,725
2,601
24,651
58,527
Administrative expenses
160,195
3,676
163,871
210,908
78,211
289,119
Insurance claims & related
expenses
-
Loss on forestry review
142,039
-
-
-
142,039
Write down of assets to be divested
or discontinued
Impairment of assets retained
Restructuring, redundancy and
refinancing costs
-
40,799
40,799
9,725
12,517
-
-
9,725
42,125
12,517
123,077
-
-
42,125
123,077
Other expenses
1,409
9,328
10,737
5,278
197
5,475
652,417
57,836
710,253
795,001
717,470
1,512,471
Profit / (Loss) on sale of non
current assets:
- property, plant and equipment
- investments
- Investment property
- controlled entities
(729)
125
(12)
-
(616)
-
-
-
(8,954)
(8,954)
(729)
125
(12)
(8,954)
(9,570)
(95)
2,462
57,225
(18,029)
-
-
2,367
39,196
-
(45,703)
128,249
82,546
11,427
112,682
124,109
The net cash flow of the discontinued operations are as follows:
Operating activities
Investing activities
Financing activities
Net cash inflow / (outflow)
160
12 months
September
2010
$000
(9,217)
-
(5,043)
(14,260)
15 months
September
2009
$000
57,729
(14,947)
(12,058)
30,724
-
-
-
194,565
194,565
-
-
284,893
284,893
Notes to the Financial Statements
For the Year ended 30 September 2010
Note 41. Parent Entity
Information relating to the parent entity of the Group, Elders Limited:
Current assets
Non current assets
Total Assets
Current liabilities
Non current liabilities
Total liabilities
Net assets
Issued capital
Hybrid equity
Retained earnings
Employee equity reserve
Net unrealised gain reserve
Reserved shares reserve
Total equity
Parent
September
2010
$000
September
2009
$000
1,565,025
1,441,604
546,680
537,769
2,111,705
1,979,373
610,620
954,311
99,863
142,316
710,483
1,096,627
1,401,222
882,746
1,273,863
145,151
(15,571)
11,132
351
(13,704)
737,513
145,151
(9,902)
9,733
251
-
1,401,222
882,746
Guarantees
As disclosed in note 32, the parent entity has entered into a Deed of Cross Guarantee with certain controlled entities. The effect of this
Deed is that Elders Limited and each of these controlled entities has guaranteed to pay any deficiency of any of the companies party to the
Deed in the event of any of those companies being wound up.
The parent entity is a party to various guarantees and indemnities pursuant to bank facilities and operating lease facilities extended to the
Group and commitments under the convertible and unsecured notes.
Note 42. Subsequent Events
Rural Bank
On 26 October 2010 Elders announced that it had entered into an agreement to sell its interest in Rural Bank. Under the agreement, which
is subject to regulatory and financier approval, the group will realise gross proceeds of $165.0 million. As disclosed in note 11, the carrying
amount of the investment as at 30 September 2010 is $145.0 million.
Other
There is no other matter or circumstance that has arisen since 30 September 2010 which is not otherwise dealt with in this report or in the
consolidated financial statements, that has significantly affected or may significantly affect the operations of the Group, the results of those
operations or the state of affairs of the Group in subsequent financial periods.
161
Directors’ Declaration
In accordance with a resolution of the directors of Elders Limited, I state that:
In the opinion of the directors:
(a) the financial statements and notes of the consolidated entity are in accordance with the Corporations Act 2001, including:
(i) Giving a true and fair view of the consolidated entity’s financial position as at 30 September 2010 and of its performance
for the year ended on that date; and
(ii) Complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and Corporations
Regulations 2001.
(b) the financial statements and notes also comply with the International Financial Reporting Standards as disclosed in note 2(b); and
(c)
there are reasonable grounds to believe that the consolidated entity will be able to pay its debts as and when they become
due and payable.
(d) this declaration has been made after receiving the declarations required to be made to the directors in accordance with section 295A
of the Corporations Act 2001 for the year ended 30 September 2010.
(e)
as at the date of this declaration, there are reasonable grounds to believe that the members of the Closed Group identified in note 32
will be able to meet any obligations or liabilities to which they are or may become subject, by virtue of the deed of cross guarantee.
On behalf of the Board
J C Ballard
Chairman
M G Jackman
Director
Adelaide
15 November 2010
162
ERNST & YOUNG
Ernst & Young Building
121 King William Street
Adelaide SA 5000 Australia
GPO Box 1271 Adelaide SA 5001
Tel: +61 8 8 417 1600
Fax: +61 8 8 417 1775
www.ey.com/au
Independent Auditor’s Report
163
ERNST & YOUNG
ERNST & YOUNG
Ernst & Young Building
Ernst & Young Building
121 King William Street
121 King William Street
Adelaide SA 5000 Australia
Adelaide SA 5000 Australia
GPO Box 1271 Adelaide SA 5001
GPO Box 1271 Adelaide SA 5001
Tel: +61 8 8 417 1600
Tel: +61 8 8 417 1600
Fax: +61 8 8 417 1775
Fax: +61 8 8 417 1775
www.ey.com/au
www.ey.com/au
164
ASX Additional Information
(a) Distribution of Equity Securities as at 10 November 2010
No of Shares
No of Holders
No of Hybrids
No of Holders
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 - maximum
6,646,473
23,414,877
27,546,827
118,412,329
272,577,974
448,598,480
The number of holders holding less than a marketable parcel
21,261
8,782
3,562
4,983
247
611,220
311,037
88,371
362,798
126,574
38,835
1,500,000
Ordinary Shares
814
2,455
149
11
17
1
2,633
Hybrids
0
(b) Voting rights
(i) Ordinary Shares: all ordinary shares carry one vote per share without restriction.
(ii) Elders Hybrids: Hybrids do not carry any voting rights under the Company’s constitution.
(c) Stock Exchange quotation
The company’s ordinary shares and Elders Hybrids are listed on the Australian Securities Exchange. The Home Exchange is Melbourne.
(d) Twenty Largest Shareholders as at 10 November 2010
The twenty largest holders of Elders Ordinary Shares were as follows:
No of Shares % of Shares
Citicorp Nominees Pty Limited
Merrill Lynch (Australia) Nominees Pty Limited
HSBC Custody Nominees (Australia) Limited
National Nominees Limited
J P Morgan Nominees Australia Limited
HSBC Custody Nominees (Australia) Limited-GSCO ECA
J P Morgan Nominees Australia Limited
Share Direct Nominees Pty Ltd <10026 Account>
Pacific Agrifoods Investments Pty Ltd
Woodross Nominees Pty Ltd
Suncorp Custodian Services Pty Limited
Netherhill Pty Ltd
M F Custodians Ltd
Queensland Investment Corporation
Comsec Nominees Pty Limited
Mr Kevin David Pfeiffer
Ocean View Nominees Pty Ltd
NEFCO Nominees Pty Ltd
LPC Investments Pty Ltd
Mr Neville Roach + Mrs Gladys Roach
Total
Total held by twenty largest ordinary shareholders as a percentage of this class is 48.78%
The twenty largest holders of Elders Hybrids were as follows:
J P Morgan Nominees Australia Limited
The Australian National University
M F Custodians Ltd
Easn Pty Ltd
HSBC Custody Nominees (Australia) Limited
Gwynvill Trading Pty Limited
Ubs Wealth Management Australia Nominees Pty Ltd
Cogent Nominees Pty Limited
RBC Dexia Investor Services Australia Nominees Pty Limited
LUTON Pty Ltd
Brazil Farming Pty Ltd
Masfen Securities Limited
National Nominees Limited
Bond Street Custodians Limited
Mr Gabriel Berger
Rbc Dexia Investor Services Australia Nominees Pty Limited
Hsbc Custody Nominees (Australia) Limited - A/C 3
Dahlonega Pty Ltd
Di Iulio Homes Pty Limited
Mr Guthrie John Williamson
Total
Total held by twenty largest hybrid holders as a percentage of this class is 33.96%
(e) The number of shares held by the substantial shareholders listed in the Company’s register of
substantial shareholder as at 10 November 2010 were:
Shareholder
Bank of America Corporation
Mathews Capital Partners Pty Ltd - The Sabre Fund
Mathews Capital Partners Pty Ltd - Focus Asset Management Pty Ltd (“Mathews”)
QBE Insurance Group Limited
Number of shares
63,769,195
48,938,821
44,882,132
67,212,277
39,409,924
35,335,436
27,702,546
13,362,420
7,618,784
4,288,400
3,614,449
3,354,557
2,892,802
2,001,217
1,680,000
1,594,259
1,535,098
1,503,907
1,500,330
1,150,000
1,080,856
1,006,700
1,000,000
218,843,962
14.98
8.79
7.88
6.18
2.98
1.70
0.96
0.81
0.75
0.64
0.45
0.37
0.36
0.34
0.34
0.33
0.26
0.24
0.22
0.22
48.78
Hybrids % of Hybrids
126,574
50,000
27,775
27,000
25,726
25,711
25,009
24,916
22,014
22,000
19,900
19,827
15,504
13,186
11,924
11,598
10,613
10,095
10,000
10,000
509,372
8.44
3.33
1.85
1.80
1.72
1.71
1.67
1.66
1.47
1.47
1.33
1.32
1.03
0.88
0.79
0.77
0.71
0.67
0.67
0.67
33.96
165
Shareholder Information
Share Registry
Annual Report mailing list
Shareholders who wish to vary their annual
report mailing arrangements should advise
Computershare in writing. Electronic versions of
the report are available to all via the Company’s
website. Annual Reports will be mailed to
all shareholders who have elected to be placed
on the mailing list for this document. Report
election forms can be downloaded from either the
Company’s or Computershare’s website.
Forms for download
All forms relating to amendment of holding details
and holder instructions to the Company are
available for download from either the Company’s
or Computershare’s website.
Investor information
Information about the Company is available from
a number of sources:
• Website: www.elders.com.au
• E-news: Shareholders can nominate to receive
company information electronically. This service
is hosted by Computershare and holders can
register via the Investor Centre on the Company’s
website or direct via Computershare’s website.
• Publications: the annual report is the major
printed source of company information. Other
publications include the Half-yearly report,
company press releases, presentations and
Open Briefings. All publications can be obtained
either through the Company’s website or by
contacting the Company.
• Direct enquiry with the General Manager,
Investor and Corporate Relations,
Mr Don Murchland by telephone 08 8425 4617
or via email don.murchland@elders.com.au.
Securities analysts, institutional and other
potential investors seeking information about the
Company should contact Don Murchland.
Computershare Investor Services Pty Ltd
Level 5, 115 Grenfell Street,
Adelaide, South Australia, 5000
Telephone: 1300 55 61 61
Facsimile: +61 (0)8 8236 2305
Website: www.computershare.com.au
Enquiries and share registry address
Shareholders with enquiries about their
shareholdings should contact the Company’s share
registry, Computershare Investor Services Pty Ltd,
on telephone: 1300 55 61 61.
Online shareholder information
Shareholders can obtain information about their
holdings or view their account instructions on-line,
as well as download forms to update their holder
details.For identification and security purposes,
you will need to know your Holder Identification
Number (HIN/SRN), Surname/Company Name and
Post/Country Code to access. This service is
accessible via the Investor Centre on the Company’s
website or direct via the Computershare website.
Tax and dividend/interest payments
Elders is obliged to deduct tax from dividend/
interest payments (which are not fully franked) to
holders registered in Australia who have not quoted
their tax file number (TFN) to the Company.
Shareholders who have not already quoted their
TFN can do so by contacting Computershare.
A notification form is available from either the
Company’s or Computershare’s website.
Change of address
Shareholders who have changed their address
should advise Computershare in writing.
Written notification can be mailed or faxed to
Computershare at the address given above and
must include both old and new addresses
and the security holder reference number (SRN)
of the holding. Change of address forms are
available for download from either the Company’s
or Computershare’s website. Alternatively,
holders can amend their details on-line
via Computershare’s website. Shareholders who
have broker sponsored holdings should contact
their broker to update these details.
166
Notes
167
Notes
168
Company Directory
Directors
Mr John C Ballard MBA, FAICD Chairman
Mr James H Ranck BS Econ
Mr Raymond G Grigg, FSAE-I, FAICD
Mr Ian G MacDonald SF, Fin
Mr Malcolm G Jackman BSc Bcom
Mr Rob H Wylie, FCA
Mr Mark C Allison, BAgrSc, BEcon, GDM, FAICD
Mr Charles E Bright, BA, MA(Oxon)
Secretary
Mr Peter G Hastings BA LLB GDLP
Registered Office
Level 3, 27 Currie Street
Adelaide, South Australia, 5000
Telephone: (08) 8425 4999
Facsimile: (08) 8410 1597
Email: information@elders.com.au
Website: www.elders.com.au
Share Registry
Computershare Investor Services Pty Ltd
Level 5, 115 Grenfell Street
Adelaide, South Australia, 5000
Telephone: 1300 55 61 61
Facsimile: +61 (0)8 8236 2305
Website: www.computershare.com.au
Auditors
Ernst & Young
Bankers
Australia & New Zealand Banking Group
BNP Paribas
Citigroup
Commonwealth Bank of Australia
HSBC Bank
National Australia Bank
Westpac Banking Corporation
Stock Exchange Listings
Elders Limited ordinary shares and
subordinated convertible unsecured notes
(Elders Hybrids) are listed on the Australian
Securities Exchange under the ticker codes
“ELD” and “ELDPA”
Trustee for Elders Hybrids
Permanent Trustee Company Limited
151 Rathdowne Street
Carlton South, Victoria, 3053