2011
A n n u A l
R e p o R t
Company Directory
Directors
Mr John C Ballard MBA, FAICD, Chairman
Mr Malcolm G Jackman BSc Bcom, Managing Director
Mr Ian G MacDonald SF, Fin
Mr James H Ranck BS Econ
Mr Mark C Allison, BAgrSC, BEcon, GDM, FAICD
Mr Raymond G Grigg FSAE-I, FAICD
Mr Rob H Wylie, FCA
Secretaries
Mr Peter G Hastings BA LLB GDLP
Ms Sarah J Graves BA LLB GDLP ACIS
Registered Offi ce
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
Commonwealth Bank of Australia
National Australia Bank
Rural Bank Limited
Coöperative Centrale Raiffeisen – Boerenleenbank
(Rabobank Australia)
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
The Trust Company (Australia) Limited (formerly
known as Permanent Trustee Company Limited)
Level 3, 530 Collins Street
Melbourne, Victoria, 3000
Our clients and
their needs are our
central focus ~
all day, every day.
Elders is an Australian company with leading
businesses in rural services and automotive
components supply.
Elders provides Australian and New Zealand
primary producers with the physical, financial and
service inputs for the achievement of the most
successful production and sales from their efforts.
Our trading operations in livestock and wool
work to add value and achieve premium prices in
world markets.
Automotive operations are conducted through
Futuris, Australia’s leading automotive
components supplier and an emerging tier one
supplier to the Asia Pacific automotive industry.
ELDERS LIMITED ABN 34 004 336 636
1
Elders’ 4 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
Sales Revenue: $1,948 million
Employees: 2,409*
Sales Revenue: $315 million
Employees: 967*
Network Operations
Supply of products and
services to rural and
regional clients including:
• Farm inputs: supply of
agricultural chemicals,
fertilisers, animal
health and general rural
merchandise
• Marketing and sale of
farm outputs
• Real estate and property
services
• Financial services
distribution
Australia
216 rural branches
94 Real Estate and
Insurance stores
157 Real Estate franchises
New Zealand
14 rural branches
2 Insurance stores
Trading
Trading and supply chain
initiatives that leverage
Elders Network access to
primary producers and
Elders’ relationships with
international buyers of
livestock, food and fibre
Futuris
Design and manufacture solutions, principally for
the automotive sector:
• seating – full seating systems and seat hardware
• interiors – door trim, headliner, floor carpet
and NVH systems
• controls – steering, pedals and ILVS assemblies
• aftermarket and vehicle personalisation
• manufacturing solutions – focusing on cleantech
• infrastructure – transport and communications
Feedlots
Australia (2)
Indonesia (1)
Live Export
Long-haul breeding stock
Short-haul feeder cattle
Wool
China
Elders Fine Foods
importation to
Chinese markets
Australia
Supplier to Australian OEM
passenger vehicle producers
International
Local manufacture and
supply under contracts
with vehicle producers in:
• China
• Thailand
• North America
• South Africa
* Full time equivalent employees at 30 September 2011.
Forestry and Corporate activities employed a further
90 and 11 FTE respectively at year-end.
3
2011 The Year in Brief
Key Financial Results
Year ended 30 September
2011
2010
$ million unless indicated otherwise
Sales revenue from continuing operations
2,263.1
1,958.1
Underlying EBIT
Net underlying interest
Underlying profit before tax
Tax on underlying profit
Non-controlling interests
Underlying profit to shareholders
Non-recurring items after tax
Statutory (Reported) profit to shareholders
Cash flow from operating activities
Borrowings
Net debt
Net assets
Earnings per share (cents) - underlying basic
Earnings per share (cents) - underlying diluted
Earnings per share (cents) - statutory basic
Earnings per share (cents) - statutory diluted
Gearing
33.7
(26.6)
7.1
0.8
(3.2)
4.7
(400.0)
(395.3)
(23.8)
427.1
345.5
604.7
1.0
0.5
(88.1)
(88.1)
57%
2.6
(16.3)
(13.7)
3.7
(5.1)
(15.1)
(202.5)
(217.6)
(110.5)
497.6
435.2
1,006.1
(3.5)
(3.5)
(51.1)
(51.1)
43%
Statutory profit/(loss) to shareholders
$million
2009
2010
2011
(217.6)
(432.7)
(395.3)
0
-100
-200
-300
-400
-500
Underlying profit/(loss) to shareholders
$million
2009
2010
2011
4.7
(15.1)
Net Debt
$million
(47.8)
869.5
435.2
345.5
2009
2010
2011
10
0
-10
-20
-30
-40
-50
1000
800
600
400
200
0
Reporting Period, Terms and Abbreviations
Abbreviations and terms
Annual Report
Notice of Meeting
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 “2011” or “2011 financial year”
refer to the 12 months ended 30 September
2011 unless otherwise stated. References to
“2010” or other years refer to the 12 months
ended 30 September of that year.
This document has been prepared to provide
shareholders with an overview of Elders
Limited’s performance for the 2011 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.
The 2011 Annual General Meeting of
Elders Limited will be held on Tuesday,
20 December 2011, commencing at
10.00am in Hall A, 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.
ELDERS LIMITED ABN 34 004 336 636
4
Safety
Lost Time Injury Frequency Rate rose from 5.0 to 7.1
Medical Treatment Injury Frequency rate reduced from 29.4 to 19.4
Profit and loss
Statutory loss after tax of $(395.3) million compared with loss of ($217.6) million
Non-recurring items totalling $(400.0) million after tax:
• Forestry related items totalling $(335.4) million
• Rural Services items totalling $(22.9) million
• Automotive item of $(0.5) million
• Corporate legal, project and other items ($41.2) million
• Underlying profit after tax of $4.7 million vs underlying loss of $(15.1) million
in previous corresponding period
Balance sheet and finance
Net debt of $345.5 million as at 30 September
Borrowings reduced from $497.6 million to $427.1 million
Gearing rose from 43% to 57%
Completion of successive refinancings has increased tenure and simplified structure
Corporate
Decision to withdraw from Forestry sector, with assets classified as discontinuing
in 2011 accounts and excluded from underlying earnings calculations
Achievement of $23.6 million of cost savings across the company
Rural Services
Sales up 15% to $1,947.9 million due to Australian Network
Underlying EBIT of $25.0 million, up from $0.5 million
Statutory EBIT of $4.2 million down from $13.7 million
Successful integration of Go-to-Client and SalesPlus+ programs
Automotive
Sales up 23% to $315.2 million due to consolidation of joint ventures
Underlying EBIT of $15.3 million up from $15.0 million
Statutory EBIT of $15.3 million compared with 2010 Statutory EBIT of $15.8 million
New manufacturing operations established in Thailand and North America
New supply contracts won in Australia, China, Thailand and North America
5
From the Chairman
There is no sugar-coating the statutory result
for 2011... but the year’s results and actions
also show grounds on which shareholders can
expect a much improved performance.
Elders is dealing with its unprofitable and cash
consuming Forestry assets, generating improved
performance from its rural and automotive
operations and reducing debt.
John Ballard
Your Company’s profit and loss results for 2011
essentially comprise a large statutory loss and an
encouraging, and improving, underlying result from its
ongoing businesses in Rural Services and Automotive.
There is no ‘sugar-coating’ the statutory result of
$(395.3)million for the year, the third successive loss
reported by the Company.
However, the deterioration in woodchip demand
and pricing in 2011 has extended the payback
horizons and returns beyond what is appropriate
for shareholder value. The decision to liquidate the
forestry assets and reinvest the released capital
will enable Elders to accelerate debt reduction and
leave the Company focussed on its profitable
Rural Services and Automotive businesses.
I appreciate that this outcome, and the price
performance of the Company’s shares, is disconcerting
and extremely disappointing for shareholders who
have placed their trust in the Company, and the
expectations of an improved result in 2011.
However, the board believes that the year’s results and
actions show the grounds on which shareholders can
expect a much improved, and surer, performance
from Elders in the near future. As my comments
below, and this report, outline, Elders is dealing with
unprofitable and cash-consuming forestry assets,
generating improved operating performance from its
traditional rural services and automotive operations
and reducing debt levels.
The Statutory Loss for 2011 is essentially the product
of unprofitable operations and activities which the
Company has decided to exit.
The decisions to withdraw from the forestry sector,
livestock vessel operation and the Elders Toepfer
Grain (ETG) trading joint venture will see the
discontinuation of operations and assets which were
loss-making and, in the case of forestry, cash-
consuming, albeit at the cost of a substantial negative
impact on the 2011 statutory result.
The decision to exit forestry is significant, given the
quantum of the forestry assets on the Company’s
balance sheet, and the investment made by previous
boards and management of Futuris, as the Company
was then known, to build a leadership position in this
sector. The commitment to forestry was maintained
despite difficult conditions for the industry on the
strength of the medium term outlook for Australian
certified plantation woodchips.
6
Underlying performance, exclusive of non-recurring
or ‘one-off’ items, improved considerably. Underlying
net profit after tax recovered from last year’s loss of
$(15.1) million to a profit of $4.7 million.
I am pleased to report that this result was driven by
Elders’ traditional rural services network operations.
As shareholders will be aware, the Network operations
have been the focus of a business transformation
program. The turnaround in network performance
in 2011 shows that improvement has occurred and
is being reflected in increased sales and earnings
generation at the network level. Further gains are still
required for the achievement of a satisfactory return
and the board is intent on ensuring that ongoing
improvement is delivered and that the business gives
an appropriate financial return for shareholders.
Unfortunately, the gains made in Network operations
were offset somewhat by the reduced contribution
from Rural Services’ Trading operations which
experienced a significant reduction in its Indonesian
live export income. Automotive operations performed
well in maintaining their contribution, despite
contracting motor vehicle production volumes
in Australia.
The results from Trading and Automotive meant that
the improvement in Elders’ underlying results was
below that originally expected. Notwithstanding this,
there has been a clear uplift in operating performance
and results upon which the Company intends to
build in 2012.
Elders reduced its borrowings by $70.5 million or
14% over the course of the year. However, the
simple fact that interest consumed $26.6 million
of the $33.7 million of underlying EBIT generated
by the Company, highlights the need for further
debt retirement.
Elders expects to achieve this over the course
of 2012 and 2013 through the application of funds
realised through the divestment of forestry assets.
Board
I am pleased to note the impending appointment
of two new non-executive directors, Ms Anna Buduls
and Ms Josephine Rozman, to the Company’s
Board. Ms Buduls and Ms Rozman will both stand
for election at the Company’s forthcoming Annual
General Meeting.
Both candidates will bring experience and skills
proven in areas of high relevance to Elders, having
performed director or senior executive roles within
agriculture and related sectors.
In this respect, I note that Ms Buduls and Ms Rozman
are but two well-credentialed persons who have
chosen to join Elders in the past year. The success
of the Company in attracting the commitment of
a number of regarded and proven executives since
the start of the year has upgraded its management
depth and evidences market confidence in its
direction and strategy.
Corporate governance and
continuous disclosure
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
in the Corporate Governance Statement commencing
on page 21 of this report.
The presence of appropriate diversity within
the Company’s board and workforce is an important
requirement if Elders is to optimise its access to,
and utilisation of, the talent at its disposal.
The Corporate Governance Statement includes
a statement on Elders’ policy and objectives for the
encouragement of appropriate diversity within
the organisation.
Elders has adopted a Diversity Policy and is
developing a strategy which will provide the framework
necessary for Elders’ compliance with the new ASX
disclosure rules that will apply from the first financial
year after 1 January 2011. The framework provides for
three key areas of focus: the achievement of greater
gender balance at all levels; age diversity; and
employee flexibility as critical business strategies to
help attract and retain the right people.
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
In 2011 Elders continued to focus on
capital management initiatives to
transform its operations to a capital-
light structure that is appropriate for
the seasonal nature of the business.
The key initiative completed during
the year was the closing of a new
syndicated finance facility with
its core relationship banks as well as
the introduction of a new core
agribusiness financier in Rabobank
(Australia Branch).
The new syndicated finance facilities
were completed in September 2011
and provide Elders with increased
committed cash lines and greater
flexibility within a package that has
a lower nominal total value.
The Company’s commitment to
capital light cash-focussed operations
is evident in a number of decisions
taken to divest or cease operations
and redirect capital. These include
international wool trading and forestry
operations. It is expected that the
liquidation of capital invested in these
operations will be realised primarily
in 2012. The sale of the shareholding
in Rural Bank, announced prior to
2011, was completed during the year.
In addition, Elders undertook a
number of other initiatives to improve
its capital efficiency including
bringing livestock payment terms into
alignment with its receipt period,
amendment to other agent sales terms
to reduce working capital demands,
amendments to the trade debtor
financing facility, a company-wide
focus on debtor collection and
inventory management strategies.
Capital management will continue
to assume a high significance in
2012 as the Company conducts the
divestment of its forestry assets
and applies the proceeds to debt
reduction as they become available.
Elders will also continue to investigate
opportunities to further improve
working capital through new and
extended securitisation facilities.
7
Chief Executive Officer’s
Report to Shareholders
The Company clearly fell short of its most
important profit objective. However, underlying
results show that Elders is lifting its performance.
Sales, network operations, costs and indebtedness
all recorded outcomes clearly superior to that
of 12 months ago.
Malcolm Jackman
Elders’ financial statements for 2011 record a
statutory loss of $(395.3) million, an outcome which
is to a large part attributable to forestry and other
unprofitable operations the Company has decided to
exit and debt restructuring costs.
These accounted for $(362.3) million of the total
non-recurring items of $(400.0) million after tax.
Full details of the non-recurring items are provided in
the Discussion and Analysis of the Financial Results
on page 59 of this report.
While it is disappointing to report another statutory
loss, it is relevant to note the improvement in
underlying performance exclusive of these non-
recurring items and, more particularly, the significance
of four key outcomes from 2011:
1) improved sales and operating performance from
Rural Services network operations;
2) the decision to exit Forestry operations altogether;
3) cost reduction; and
4) successive refinancing of finance facilities and
debt reduction.
Operating results
Underlying EBIT from continuing operations was
$33.7 million, well above the 2010 comparative of
$2.6 million. Underlying net profit before tax was
$7.1 million, which compares with the corresponding
underlying loss of $(13.7) million in the previous year.
The improvement in underlying performance was
driven by Network operations, the first of the four key
outcomes discussed below.
While these financial results are not yet appropriate,
they nevertheless represent a positive turnaround after
two consecutive years of decline and significant
challenge for the business.
8
Improved sales and operating performance by
Australian Network operations
Sales and EBIT generated by Australian Network
operations rose significantly.
Sales rose by 13% to be $1,276.5 million compared
with $1,127.0 million and Australian Network EBIT
contribution of $59.0 million was 92% above the
previous year’s result of $30.8 million.
The decision to exit Forestry
The Company has decided to exit the forestry sector
as shareholder value will be better served through the
redirection of the invested capital.
The long-term outlook for Australian plantation forestry
remains favourable, with additional demand from
Chinese mills under construction, and some recovery
in Japan expected to result in improved returns.
However, the near and medium term outlook has
weakened, with softening demand and prices
falling significantly.
As a result, the capital requirement and investment
horizons for participating have been extended
beyond that compatible with Elders’ financial and
strategic objectives. Accordingly, it is considered
that withdrawal from the sector, with release and
redirection of capital is the most shareholder-value-
accretive course of action. This strategy will see
capital redirected from cash-consuming and loss-
making assets to cash, earnings and share value
positive applications, particularly debt reduction.
It is intended that the sale process be executed as
rapidly as shareholder value considerations permit
over the course of 2012.
Further discussion of the Forestry divestment and
operations follows under the heading ‘Asset held for
Sale: Forestry’.
Improved cost performance
Elders’ overhead, or SG&A (sales, general and
administration) costs were reduced by $23.6 million,
or 6% below that of the previous year.
The savings, which were realised across both
operating and corporate expenditure, flowed from
initiatives taken in the previous year to reduce costs to
levels more sustainable in current markets.
The effectiveness of cost initiatives was blunted by
rising prices for key inputs such as fuel and the
pressure that is being placed on rural and regional
wage costs by resource sector growth. As a result,
the cost savings achieved in 2011 were lower
than targeted.
Notwithstanding this, a 6% inprovement in costs in
the prevailing context is a significant reduction, and an
important contributor to the lift in underlying earnings.
Successive refinancing of finance facilities
and debt pay down
Elders completed two refinancings and reduced
borrowings by $70.5 million, or 14%.
Through the refinancing, Elders introduced two new
banks into its lending syndicate, simplified the lending
structure considerably and secured increased tenure
and committed cash lines.
Further debt reduction is necessary and planned
for 2012.
Sales revenue by continuing operations
$million
2,500
2,000
1,500
1,000
500
0
2009
2010
2011
$million 12 months to 30 September: 2009*
2010*
2011
Rural Services
1,990.5
1,701.2 1,947.9
Automotive
224.6
256.9
315.2
Total
2,215.1
1,958.1 2,263.1
* 2009 & 2010 sales revenue restated to exclude discontinued
operations. Statutory results reported for 2009 were for a 15 month
transition year, implemented to shift to a September year-end.
A non-statutory result for the 12 months to September 2009 has
been presented here to enable comparison of performance over
the 12 months to September in years 2009 to 2011.
High
performance
sales
capability
Elders has identified a High
Performance Sales Capability as the
critical ingredient for the satisfaction
of its clients and shareholders.
The Company has researched,
designed and commenced a change
program to bring our sales culture,
practices and capability to that
required of a high performance sales
organisation.
The program is changing our
organisational philosophy and
orientation from a historical focus
on service around individual
transactions to a client-centric
culture with an emphasis on
creating mutually valuable client
relationships.
Beginning in October 2010, the
Company’s entire network sales force
of 1,307 staff were provided with
sales training and coaching under
the banner of SalesPlus+, an Elders-
specific structured sales activity
management and reporting system.
A second round of follow up training
was completed prior to year end.
This program includes a bottom-
to-top weekly sales discussion
from customer-facing roles right
through the management chain to
CEO, ensuring the right activities
are being implemented, and any
problems preventing successful
sales activity are quickly identified
and resolved.
Early progress under the program
is evident in sales activity, referrals,
client contact and increased share
of wallet. The focus in 2012 will
be on continuing to embed this
program to ensure it becomes part
of our organisational DNA, driving
competitive advantage.
9
Corporate Focus
As stated previously, Elders is seeking to rebuild itself
as a capital-light, cash-focussed, high performance
sales organisation.
Safety
There has been a continuous focus on improving
systems to enable reporting and improved safe
practices in the workplace in Elders in 2011.
The initiatives taken, and progress made, towards
this objective have been outlined in this document
under the headings of the strategic cornerstones
of High Performance Sales Capability, Supply Chain
Excellence, Superior Capital Management and
Cost and Service-Effective Technology.
Emerging results from these programs are becoming
apparent, such as the improved sales performance
already highlighted and efficiencies in working capital.
In particular, the pursuit of capital efficiency has
resulted in some significant changes in corporate
structure and focus during 2011.
Elders divested or discontinued a number of Rural
Services assets and operations which were capital
intensive or which are ancillary to the Company’s
principal focus on rural and regional distribution.
These included:
– divestment of Elders’ 40% shareholding in Rural
Bank, with its attendant capital obligations, in order
to concentrate on distribution of banking products;
– divestment of Elders’ 50% shareholding in Elders
Toepfer Grain in order to reduce exposure to trading
volatility and concentrate our grain sector focus on
the ‘farm-gate services’ of supply and sale of inputs
and accumulation under contract;
– cessation of international wool trading operations to
concentrate on farm-gate services to wool growers
and to release and redirect invested capital into
higher returning activities such as long-haul live
export;
– sale and re-chartering of the MV Torrens, the sole
livestock carrying vessel owned by Elders; and
– consolidation of Chinese operations into a single,
more commercially focused enterprise.
This strategy has significantly sharpened the focus
of Elders’ Rural Services business to its core activities
of rural and regional distribution and accumulation
and supply chain activities.
Financial position
Elders made significant progress in reducing debt
levels, with gross borrowings at year end of
$427.1 million compared with $497.6 million as at
30 September 2010. Net debt was reduced from
$435.2 million to $345.5 million. Elders has now
reduced its gross borrowings by $810.3 million over
the past two years. Further progress is expected in
2012 as forestry asset divestments are completed.
The reductions to borrowings in 2011 has not been
reflected in lower gearing due to the impact on
shareholders’ equity of the year’s statutory result and
particularly the revaluations made in respect of
forestry assets.
A new company-wide standard for occupational
health and safety measurement and reporting was
introduced, supported by a shift to on-line reporting
systems. The new standard has removed anomalies
between the Company’s different businesses.
The new system, which includes new lower threshold
criteria and definitions, has increased the ease
of safety reporting and increased the likelihood that
events will be recorded. The increase in the Company’s
12 month rolling Lost Time Injury Frequency
Rate (LTIFR) in 2011, from 5.0 to 7.1, is considered
to have resulted from the more effective capture
of occupational health and safety events by the new
system and greater awareness by employees of
reportable events.
The incidence of injuries requiring medical treatment
was reduced from 29.4 to 19.4 per million hours
worked reflecting improvement in safety awareness.
Human Resources
Elders employed 3,476 full time equivalent (FTE)
employees as at 30 September 2011 compared with
3,349 FTE at the beginning of the year. The increase
is due to the expansion of Automotive employment
levels to meet the requirements of new contracts.
Employment levels in Rural Services, Forestry
and Corporate operations were reduced by a total
of 101 FTE.
The movement in Rural Services employment
numbers is attributable to efficiencies realised through
the Cost-to Serve program, the cessation of non-core
activities and the outsourcing of IT services. All IT
services are now provided through a strategic
business partner with minimal staff remaining in the
retained organisation to provide contract management
and strategic direction
2011 has been a year of ongoing culture change for
Elders as it pursues its development as a high
performance sales organisation. The Company’s
efforts and focus on this objective in 2011, outlined in
the preceding text box, essentially have involved the
Net debt
$million
1,000
869.5
800
600
400
200
0
435.2
345.5
2009
2010
2011
10
training and implementation of new reporting and
sales management procedures for Elders’ front-line
sales force.
Identification, retention and nurturing of the
Company’s talent is a key discipline for vibrant and
competitive organisations. In 2011 Elders initiated
a formal structured talent and succession process.
The process is an investment in the Company’s
capacity to source the best candidates for its
executive requirements internally and will support
the advancement of gender diversity.
As noted by the Chairman earlier in this report,
the Company has adopted a Diversity Policy. As at
30 September, women accounted for 11% of senior
executives, 7% of senior managers, 12% of managers
and 35% of employees.
Review of Continuing
Operations
Detailed descriptions of operations, strategy and
reporting of results for Elders’ continuing businesses
is provided from page 14 of this report.
Rural Services
Seasonal and market conditions over the course
of 2011 were mixed, being generally positive for
agricultural producers but challenging for trading
operations.
A year which began with ongoing severe drought
conditions in Western Australia, unfavourable cool
and wet conditions in southern Australia and flooding
and cyclones in northern Australia concluded with
favourable conditions for most agricultural activities
in most agricultural regions.
For rural service providers, this meant good and
growing demand for agricultural chemicals, reduced
need for fertiliser due to rainfall adequacy or flood
and cyclone disruption and tight livestock markets
as growers who were previously drought-affected
began the process of restocking. Tight supply in wool
markets saw prices reach the levels not experienced
in over 40 years.
Real estate also recorded mixed trading conditions
with activity levels and prices falling in residential
markets whilst broadacre markets remained solid.
Elders’ Trading operations were adversely affected
by the tight livestock markets, the impact of cool wet
weather on feedlot operations, historically high
Australian dollar exchange rates and the disruption
to live export operations brought by the Australian
Government’s summary suspension of live export
to Indonesia.
Rural Service operations contributed underlying
EBIT of $25.0 million in 2011, compared with
$0.5 million in the previous year. The increase is
attributable to the turnaround in Network operations
highlighted earlier in this report.
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 2011 Elders initiated an enterprise-
wide technology and process
renewal program, Project Connect,
that has been designed to upgrade
the Company’s capabilities and
day-to-day performance in each
of its sales, supply chain and capital
management disciplines. Elders is
being partnered by Accenture in
the project.
The development stages of the
program are fully underway.
The Design and Build phases of the
first release (Core Finance/HR/
Indirect Procurement) have been
completed per plan and budget
and are on track for a March 2012
deployment.
Elders outsourced its information
technology services to HP during
the year. The initiative has
reduced legacy risk and improved
service provision. A seamless
transition was completed in July.
Our communications partnership
with Telstra was renewed,
reducing operating costs whilst
renewing devices.
2012 will see the first release of
Project Connect, the core Finance/
Human Resources/Indirect
Procurement modules, being
deployed and the initiation of Release
2, which will address broader
Sales requirements.
11
Automotive
Futuris Automotive effectively maintained its
contribution despite a significant downturn in industry
conditions. Automobile build rates declined due to
lower vehicle sales and events such as the disruption
brought to supply lines by the Japanese tsunami.
Motor vehicle construction by Futuris Automotives’
Australian customers declined by 10% in comparison
to the previous year.
Futuris generated underlying EBIT of $15.3 million
from sales of $315.2 million which compares
to the underlying EBIT of $15.0 million from sales
of $256.9 million in 2010. 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 contracts and Elders will
continue to support development of the business.
Asset held for sale: Forestry
As noted above, the Company has elected to withdraw
from the Forestry sector and announced its intention
to divest its forestry assets.
These assets comprise plantation properties, Elders’
interest in plantation trees, ownership or interests in
woodchip loading facilities, grower loans and other
sundry assets such as woodchip stockpiles and
property plant and equipment. The book value of the
Forestry assets held for sale in the 2011 financial
statements is $181.3 million.
The Forestry asset base is diverse, containing a variety
of different asset types, some of which are subject
to encumbrances, such as long term agreements with
tree-owners.
For this reason, Elders anticipates that shareholder
value will be best served by a staged approach to the
divestment in which individual assets are marketed
individually as circumstances recommend.
The initial focus has been on the sale of Central
Queensland land, and at year-end the Company had
sold, or contracted for sale, acreage in the region with
a gross value of $19 million. Since year-end this
position has been extended with 69% of Central
Queensland holdings now having been sold, or
contracted for sale, for a total gross sales value of
$26.0 million
Progressive divestment of the balance of the forestry
asset base will be pursued vigorously with a view to
optimising the balance between book value realisation
with the gains that accrue from timely capital release
and reinvestment.
Seasonal conditions clearly underpinned the result,
but the benefits of the business improvement
initiatives and investments taken are also considered
to be evident. These include investment in formal
sales training for Elders’ entire sales force, the
introduction of new sales management and reporting
systems, refinement to product range strategies and
improved cost to serve.
The increased Rural Services’ contribution was
achieved despite a substantial reduction in income
generated by Trading activities. Contribution from
trading, which comprises feedlot operation and live
export, fell by 50% or $7.2 million.
The Commonwealth Government’s suspension of live
export to Indonesia, which was imposed without
warning in June as the industry was entering its peak
Trading period, had a far-reaching effect throughout
the northern Australian economy.
From Elders’ perspective, the Company’s revenue
from live export to Indonesia was $49.9 million lower
than in the previous year, a substantial proportion of
which is attributable to the intervention. In addition,
Elders suffered additional cost imposts of $1.1 million
brought by the suspension and revised control orders,
which have been recognised as a non-recurring item
in 2011 statutory profit. The impact on our clients, and
other businesses in northern Australia that depend on
the trade, has been more severe.
Underlying EBIT by continuing operations
$million
50
40
30
20
10
0
-10
-20
2009
2010
2011
$million 12 months to 30 September: 2009*
2010*
2011
Rural Services
Automotive
Investment & other
Total
13.2
(3.5)
(9.8)
(0.1)
0.5
15.0
25.0
15.3
(12.9)
(6.6)
2.6
33.7
* 2009 & 2010 underlying EBIT restated to exclude discontinued
operations. Statutory results reported for 2009 were for a 15 month
transition year, implemented to shift to a September year-end.
A non-statutory result for the 12 months to September 2009 has
been presented here to enable comparison of performance over
the 12 months to September in years 2009 to 2011.
12
Conclusion, strategy and
outlook
Elders’ objectives for 2011 were for the delivery of
improved financial results, a lift in sales performance
and focus from its network operations and further
debt reduction.
In reporting a large, and increased, statutory loss for
the year, the Company clearly fell short of its ultimate,
and most important, profit objective.
However, the substantial improvement in underlying
results, and in virtually every other measure,
shows that the Company is progressing and is lifting
its performance. Elders’ results in sales, network
operations, costs and indebtedness at 30 September
are all clearly superior to that of 12 months ago.
Importantly, further gains are expected to accrue
from the strategies and initiatives that are currently in
place and planned under the 4 Strategic Cornerstones
that Elders has adopted: High Performance Sales
Capability; Supply Chain Excellence; Cost and
Service-Effective Technology and Superior Capital
Management.
These initiatives are intended to enable the growth
in operational earnings and reduction in debt and
interest from which improved profit and share price
outcomes for shareholders can be expected. Further
discussion of the progress and plans for each of
these cornerstones are contained in the text boxes
that appear through this report.
In closing, I would like to acknowledge appreciation
for the commitment of shareholders and ongoing
efforts of our staff team. 2011 and the preceding years
have been challenging for all concerned with the
Company but the year’s underlying results show that
Elders has turned the corner and that, with your
ongoing support, further and substantial improvement
can be expected.
Malcolm Jackman
Chief Executive
Supply
chain
excellence
Supply chain excellence is a critical
element in Elders’ sales and
shareholder value performance.
Elders’ journey towards supply chain
excellence is now two years into what
is anticipated to be a three- to five-
year transformation.
The key highlights for 2011 were the
embedding of the critical supply
chain processes such as sales and
operations planning (S&OP)
and ranging that were commenced
in 2010.
Our three third-party distribution
centres performed at an average
line fill order level of around
85%, a figure well above the average
reliability of the total supplier base.
Continued improvements in reporting
and key performance indicator
measurement were made, allowing
better stock management and
movement decisions and hence
better working capital management.
Our S&OP planning process became
part of the “business as usual”
rhythm of running our farm supplies
business, with forecast accuracy
at a total business level regularly
exceeding 90% and, as a result,
realising a reduction in both out-of-
stocks and inventory-to-sales ratios.
Progress on a centralised product
ranging and procurement strategy
for core range products has also been
made, with the key categories of
AgChem, animal health and fertiliser
now rationalised and with favourable
supplier agreements in place.
13
Discussion and Analysis of Operations
Rural Services
Elders is one of the leading suppliers of rural services
to the Australian and New Zealand farm sectors.
Elders’ mission is to be the ‘Productivity Partner of
Choice’ for Australian and New Zealand farmers
through the provision of the physical, financial and
technical and advisory inputs for successful farming
via its network of 230 branches and approximately
339 points of presence.
Description of Operations
Network operations in Australia 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 offers grain growers a range of
cash-based grain marketing options through an
accumulation agreement with Toepfer Australia.
• 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’ below) utilises
the Elders Network as a part of its distribution
of a wide range of insurance cover to rural and
regional Australia.
14
• Banking: Elders distributes banking products
through the Network under a distribution agreement
with Rural Bank.
Network operations in New Zealand provide wool and
livestock agency services, farm supplies and financial
services distribution.
Elders Network operations are supported by Trading
and Network Related supply chain and distribution
interests that leverage or support its relationships
with the farm sectors.
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 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 at Lampung (PT Elders Indonesia).
China operations: Elders Fine Foods is involved in
the importation and distribution of Australian products
in China.
Network Related
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.
Elders Financial Planning: a 51:49 joint venture
between OnePath (a subsidiary of ANZ) and Elders that
provides financial planning solutions through advisors.
Rural Services Results
$million 12 months to 30 September:
2011
2010
Sales – continuing operations 1,947.9 1,701.2
Sales – total
1,986.1 1,797.2
Depreciation & amortisation
8.4
10.3
Gross Margin:
Network: Australia
New Zealand
Trading
Costs:
Australia network
New Zealand
Trading
322.8
276.8
18.2
27.8
306.8
250.8
19.1
36.9
(301.9)
(314.0)
(217.8)
(220.0)
(21.0)
(20.7)
(25.2)
(22.6)
Support centres & other
(42.4)
(46.2)
Mark-to-market
Network-related Equity
earnings
Underlying EBIT
Non-recurring items
Statutory EBIT
Operating Cash flow
(7.2)
11.3
25.0
(20.8)
4.2
59.5
(2.0)
9.7
0.5
13.2
13.7
69.1
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.
In December 2010 Elders divested its entire 40%
share-holding in Rural Bank to the bank’s other
shareholder Bendigo and Adelaide Bank Limited. The
results attributable to the Rural Bank shareholding
have accordingly been classified as discontinued.
Elders divested its 50% shareholding in Elders Toepfer
Grain (ETG) Joint Venture to fellow joint venturer
Toepfer International during the year. Accordingly,
ETG has been classified as discontinued in the
2011 accounts.
Elders’ operational strategy is to maximise the revenue
and margin generated by the Rural Services Network
operations and to leverage its accumulation capability
and relationships with the Australian and New Zealand
farm sector to the growing domestic and international
trade in food and fibre.
Results
Rural Services operations recorded a statutory EBIT
of $4.2 million in 2011 which compares with the
2010 comparative of $13.7 million in the preceding
year. Both results incorporate a number of non-
recurring items which are detailed in the Discussion
and Analysis of the Statement of Profit and Loss
on page 59.
Underlying performance improved significantly, with
the 2011 underlying EBIT of $25.0 million compared
with $0.5 million in the previous year.
The principal factors in the underlying EBIT
result were:
– increased sales and contribution from Australian
Network operations;
− increased sales, and improved cost performance
by New Zealand network operations;
− reduced contribution from Trading operations;
− an unfavourable mark-to-market adjustment of
$(7.2) million to reflect exchange rates prevailing
at balance date;
− improved cost performance, with total costs being
reduced by $12.1 million; and
− slightly higher earnings from Network Related
operations.
Australian Network
The improvement in financial results from Australian
Network operations can essentially be attributed to
increased sales and reduced costs.
Network contribution rose from $30.8 million to
$59.0 million.
The Australian Network generated sales revenue of
$1,276.5 million in 2011, 13% higher than the
previous year’s sales of $1,127.0 million. Sales of farm
supplies accounted for the bulk of the growth, with
livestock and wool agency also increasing sales over
the previous year.
Features of the sales result by service area included:
− Farm supply sales revenue of $1,023.9 million
up 16% from $882.3 million. The movement is
largely due to rises in the volume sold, and prices,
of agricultural chemicals, higher fertiliser prices
and increased seed sales. Total fertiliser volume
increased marginally compared with the previous
year, with demand for some categories being
diminished due to the favourable conditions for
pasture growth.
15
− Livestock agency revenue rose due to strong price
increases brought by higher demand and reduced
stock availability as growers restocked in the
wake of good rainfall and feed availability in most
pastoral regions. Revenue from livestock agency
of $115.3 million in 2011 was 9% higher than the
previous year’s sales of $106.1 million. Elders sold
8.40 million sheep and 1.78 million cattle in 2011
compared with 9.30 million sheep and 1.96 million
cattle in the previous year. Cattle sales realised
an average price of $764.11 per head in 2011
($644.86 in 2010) while the average sheep price
was $119.79 per head ($95.37 in 2010).
− Wool agency revenue of $55.8 million was 8%
higher than the previous corresponding period due
to higher prices. The average price of wool sold was
$1,248.97 per bale compared with $953.49 per
bale in the 12 months to 30 September 2010.
Bales sold fell from 489,800 to 484,900.
− Real estate sales revenue declined by 8% due
to downturns in residential property and water
rights activity levels. Broadacre turnover rose
by 9%, increasing from $818.8 million to
$891.6 million. Turnover in water rights contracted
from $68.2 million to $28.3 million as strong
rainfalls replenished supplies and availability.
− Financial Services distribution revenue increased
from $24.8 million to $26.2 million.
− Other sales revenue of $3.0 million includes revenue
from the accumulation of grain.
New Zealand
New Zealand network operations recorded improved
financial results in 2011, although the business did not
achieve the better than breakeven result originally
targeted. The operations recorded a contribution of
$(2.8) million compared to $(6.1) million in 2010.
Australian Network sales revenue
$million
1,500
1,200
900
600
300
0
2010
2011
Elders generated sales revenue of $91.3 million from
its New Zealand network operations in 2011, 3%
higher than the previous year’s result of $88.4 million.
The growth is attributable to increased revenue
from wool agency and farm supplies sales. Livestock
operations recorded comparable sales to the
previous year.
Trading
Trading operations include Elders’ livestock and New
Zealand wool trading, feedlot operations and Elders
Fine Food in China which imports and distributes
Australian agricultural produce.
Trading operations generated sales of $471.9 million
and a contribution of $7.1 million in 2011, which
compares respectively with sales of $446.5 million
and a contribution of $14.3 million in the previous
year. The increase in revenue is due to Feedlot
and wool trading operations, the growth from which
more than offset a $43.0 million decline in Live
Export sales.
Elders’ total live export volume of 135,000 head was
35% lower than the 2010 comparative of 207,000
head, having been adversely affected by Indonesian
market restrictions and the Australian government
imposed two-month suspension, and then gradual
re-opening, of live export to Indonesia.
Australian feedlot operations increased revenue
and throughput, an outcome which reflects the
increased utilisation rates at the Killara feedlot since
it became wholly owned by Elders. However,
extremely unseasonal and wet conditions in southern
Australia unfavourably affected efficiency and
throughput at Charlton, which consequently reduced
its contribution.
Network Related Equity Earnings
Network related operations comprise Elders’ financial
services joint ventures and the Australian Wool
Handlers (AWH) logistics operation.
These operations contributed equity accounted
income of $11.3 million, compared with $ 9.7 million
for the twelve months to 30 September 2010.
Contributions from the individual operations are
as follows:
$million 12 months to 30 September:
2010
2011
Elders Insurance
Elders Financial Planning
Australian Wool Handlers
Other
Total Network Related
5.6
0.3
3.2
0.6
9.7
6.2
0.5
4.1
0.5
11.3
$ million, 12 months to 30 September:
Farm supplies
Livestock
Wool
Real Estate
Financial services
Other
Total
16
2010
882.3
106.1
51.8
56.8
24.8
5.2
2011
1,023.9
115.3
55.8
52.3
26.2
3.0
1,127.0
1,276.5
Sustainability
Rural Services operations employed a total of 2,409
FTE as at 30 September, compared with 2,485 FTE at
the beginning of the year. The 3% reduction reflects
attrition resulting from the replacement ‘freeze’
for non-critical positions vacant announced in 2010.
Rural Services operations recorded a lost time injury
frequency rate of 6.30, slightly worse than the
corresponding figure of 5.60 in the twelve months
to 30 September 2010. The increase follows the
adoption of new definitional standards, under which
a safety event is more likely to qualify as a lost
time injury. The increase in LTI frequency rates is
considered to be directly attributable to the adoption
of the more conservative definition.
During the year Rural Services operations moved from
paper-based to online occupational health and safety
reporting systems. The change will improve reporting
and consultation in relation to occupational health
and safety throughout the business.
The management of safety when dealing with livestock
continued to be a key focal point of the Company’s
safety initiatives. A full review of livestock management
working procedures was completed with the resultant
revisions and improvements to be introduced across
Rural Services operations.
Feedlots
The 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).
In January 2011 the Charlton area was subject to
severe flooding. Damage caused by the floodwaters
resulted in an effluent leak at the Charlton feedlot.
Authorities were notified immediately and the feedlot
operation received a Pollution Abatement Notice from
the Victorian Environmental Protection Authority
(EPA). The Notice was subsequently closed by the
EPA after the feedlot fulfilled all requirements imposed
within the time requirements specified.
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 2011 or to the
date of this Report.
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 from state to state
and generally only apply to saleyards above a
prescribed size.
No breaches of these environmental regulations were
reported during the year ended 30 September 2011
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.
The regulatory environment for the transporting,
handling, storage, sale and use of dangerous goods
and chemicals is complex and subject to the various
legislation and regulatory oversight separately applied
in each state or territory. Agsafe provides assistance
through the provision of accredited training and safety
programs. No material incidents were reported
in relation to the handling and storage of dangerous
goods during the year or to the date of this Report.
Live Export
Elders is engaged in the export of cattle to
international markets. Elders’ live export trade
encompasses the supply of ‘feeder’ stock for slaughter
in Indonesia and ‘long-haul’ live export of dairy and
breeding cattle to markets seeking to supplement their
local herd. All live export operations are subject to
Australian Government regulation and standards
including the Australian Standards on the Export of
Livestock (ASEL version 2.3) which provides
comprehensive and detailed standards on the
sourcing, preparation, management and transportation
of livestock through the supply chain to the point of
disembarkation.
A revised Export Control Order issued by the
Australian Commonwealth Government in 2011
brought additional requirements for assurance of
welfare, recording and reporting from disembarkation
to the point of slaughter in respect of feeder cattle
exported to Indonesia.
No breaches of regulatory or legislative requirements
were recorded by Elders’ live export operations in the
year to 30 September 2011 or the date of this report.
Community
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 being
a Foundation Sponsor for the Australian Year of the
Farmer, which aims to highlight the contribution of
farmers during 2012, its partnerships 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 $56,554 between the months of
October 2010 to September 2011 to support the costs
of rural and regional breast care nurses. This money
has helped fund the first full-time McGrath Elders
Breast Care Nurse. The nurse is based at the Royal
Flying Doctor Service base in Broken Hill and travels
by air to support Australian families in rural and
remote areas experiencing breast cancer.
17
Discussion and Analysis of Operations
Automotive
Futuris’ primary operations encompass the design,
manufacturing and supply of automotive seating and
interior solutions in Australia, Thailand, South Africa,
the United States of America and China.
Operations
The business and its joint ventures supply products
and services for automotive seating, interiors, controls
and aftermarket. Current customers include GM
Holden and GM (Thailand), Ford (Australia and
Thailand), Toyota, Chery Automobile, JAC Motors,
GAC GoNow, Brilliance, GreenTech and Mercedes
Benz. Contracts for future supply are held with Tesla
Motors, Fisker Automotive 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 as well as
Toyota) and a design and technical centre at Port
Melbourne Victoria.
Operations in Australia account for over 95% of 2011
product sales as reported in statutory revenue.
Production in Thailand and North America was at
preliminary stages during the year but is expected to
ramp up in 2012 in line with contract commitments.
As Chinese operations are conducted through
non-controlled joint ventures, their results are included
as an equity-accounted share of net profit and
therefore do not feature in statutory sales figures.
Futuris’ vision is to establish itself as a leading global
innovator of quality design and manufacturing
solutions. In the automotive sector, Futuris’ strategy is
to be a tier one interiors supply partner of choice
within the global automotive sector.
Futuris is also developing business outside the
automotive sector through leveraging its capabilities in
the design and delivery of manufacturing solutions.
This includes the supply of cleantech manufacturing
solutions and infrastructure for communications and
transport such as signage, remote communications
stations and telephone kiosks.
18
Conditions and results
Market conditions were softer than expected as
passenger vehicle sales and production trended below
previous years in Australia and lower growth rates
were recorded in China. Manufacture of passenger
vehicles in Australia in the year to 30 September was
10% below that of 2010.
Futuris generated sales of $315.2 million in 2011.
This figure includes sales revenue of $68.6 million
from operations that were previously joint ventures and
consolidated for the first time in 2011. Sales revenue,
excluding the incremental sales attributable to these
operations, declined by 4% in comparison with the
previous year.
Underlying and statutory EBIT for the year of
$15.3 million was marginally higher than the 2010
underlying EBIT of $15.0 million and slightly below
the 2010 statutory EBIT of $15.8 million.
Business Development
Business development activities in 2011 saw the
securing of extensions to existing contracts in Australia
and the winning of new business that will expand
Futuris’ Asia Pacific and North American sales and
presence.
In Australia, extensions were secured for Futuris’
major supply contracts with General Motors Holden
for the MY14 model Commodore range.
In China, new business contracts were secured for the
supply of seating to Brilliance Auto and GAC GoNow
from 2011 onwards. These contracts will be
performed through joint ventures.
In Thailand, the Company completed construction of a
new manufacturing facility to supply product to Ford
and General Motors Thailand commencing in 2012, as
well as product for contracts in Australia and the USA.
In the USA, Futuris secured seating supply contracts
with Tesla Motors and Fisker Automotive for supply
from 2012 and 2013 respectively.
Automotive Financial Results
$million 12 months to 30 September:
Sales
2011
2010
315.2
256.9
Underlying EBITDA
Depreciation & Amortisation
Underlying EBIT
Futuris Automotive
Associates (equity acc)
Underlying EBIT
Non-recurring items
Statutory EBIT
Operating cash flow
Capital expenditure
31.9
16.6
15.3
15.8
(0.5)
15.3
-
15.3
15.4
12.3
29.8
14.8
15.0
15.4
(0.4)
15.0
0.8
15.8
35.6
9.2
Sustainability
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 (LTIFR) of 8.70 per million
hours worked. This was the first year of recording to a
new LTIFR definition. For comparison purposes, the
previous methodology of Accute LTIFR was also
recorded during the year to September, with a result
of 2.90 compared with the preceding year’s rate of
2.67 per million hours worked.
Human Resources
Futuris employed a total of 967 FTE as at
30 September compared with 738 at the same time
in the previous year. The increase is attributable
to increased employees in Australia and Thailand and
the additions from acquired joint ventures.
In addition 318 FTE are employed by Futuris’ offshore
joint ventures (341 as at 30 September 2010).
Top left photo: Ford Territory
second row seat assembly line
at the Futuris Campbellfield
manufacturing facility in Victoria.
Top right: Minister Richard
Dalla-Riva (Victorian State
Government Minister for
Manufacturing, Exports and
Trade) visited Futuris' Port
Melbourne headquarters and
announced a Global Export
Grant award, in September 2011.
Futuris’ automotive seating
and interiors manufacturing
facility in Rayong, Eastern
Seaboard, Thailand, opened in
September 2011.
19
Board of Directors
Mr John Charles Ballard MBA, FAICD (Chairman) – Age 65 – Appointed Chairman and non-executive director of
the Board on 20 September 2010. He is also Chairman of the Nomination and Prudential Committee and a
member of the Remuneration and Human Resources 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 Officer of Southcorp Limited, Managing Director Asia Pacific, United Biscuits Limited and
Managing Director Snack Foods, Coco-Cola Amatil Limited, a Director of Woolworths Limited and Email Limited,
Chairman of Wattyl Limited and Trustee of the Sydney Opera House. 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 Boards at Pacific 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 Malcolm Geoffrey Jackman BSc BCom FAICD – Age 59 – 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 Officer and Managing Director of Coates Hire Limited, an ASX 200 company, from 2003 until
its sale in January 2008. Prior to Coates, Mr Jackman was Chief Executive Officer 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. Prior to entering commerce Malcolm served as an Officer in the Royal New Zealand Navy. Mr Jackman
is a resident of South Australia.
Mr Mark Charles Allison, BAgrSc, BEcon, GDM, FAICD – Age 50 – Non-executive director of the Board since
November 2009. He is also a member of the 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
Officer of Jeminex Limited from 2007 to 2008. Mr Allison is a resident of New South Wales.
Mr Raymond George Grigg, FSAE-I, FAICD – Age 70 – Non-executive director of the Board since February 2004.
He is also Non-executive director of Futuris Automotive Group of companies, and a member of the Audit, Risk and
Compliance Committee and Occupational Health and Safety Committee. 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 Pacific (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 Chairman and President of the Royal Automobile Association of SA Inc, Chairman of
RAA Insurance Ltd, President of the Australian Automobile Association, President – Federation Internationale De
L'Automobile (FIA) – Asia Pacific Region and Deputy Chairman of Bedford Industries Inc. Mr Grigg is a resident of
South Australia.
Mr Ian Graham MacDonald SF, Fin – Age 57 – Non-executive director of the Board since November 2006. He is
a member of the Audit, Risk and Compliance Committee, and Chair of the Remuneration and Human Resources
Committee. He is a director of Elders Forestry Management Ltd and APT Projects Ltd. He was a director of Elders
Financial Services Group Ltd, Elders Insurance Ltd, Elders Insurance Agencies Pty Ltd, and Elders Trustees Ltd.
He 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 Officer. Mr MacDonald is
a director of Arab Bank Australia Ltd, Rural Bank Ltd and Tasmanian Public Finance Corporation. Mr MacDonald
is a resident of Victoria.
Mr James Hutchison (Hutch) Ranck, BS Econ, FAICD – Age 63 – Non-executive director of the Board since June
2008. He is also Chairman of the Occupational Health and Safety Committee and a member of the Nomination
and Prudential Committee and Remuneration and Human Resources Committee. Mr Ranck had a long and
distinguished career with DuPont where he held senior management positions in Australia and overseas in finance,
chemicals, pharmaceuticals and agricultural products. He retired as Managing Director of DuPont Australia &
New Zealand and Group Managing Director for DuPont operations in ASEAN on 31 May 2010. He is currently a
director of the CSIRO and the Australian Bush Heritage Foundation. Mr Ranck is a resident of New South Wales.
Mr Robert Harvey Wylie, FCA – Age 61 – Non-executive director of the Board since November 2009. He is also
Chairman of the Audit, Risk and Compliance Committee and a member of the Nomination and Prudential
Committee. Mr Wylie is 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 Pacific.
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.
Company Secretaries
Mr Peter Gordon Hastings BA LLB GDLP Mr Hastings was appointed Company Secretary in February 2010. He
previously held the position of Group Solicitor with the Elders Group since 1995, and General Counsel since
February 2010.
Ms Sarah Jane Graves BA LLB GDLP ACIS Ms Graves was appointed Joint Company Secretary in August 2011.
She has held the position of one of the Company’s Group Solicitors since May 2010.
20
20
Corporate Governance
Statement
This corporate governance statement summarises
the key elements of the Company’s governance
framework and practices.
This corporate governance statement summarises the
key elements of the Company’s governance framework
and practices.
The 2011 financial year has been a year in which
your Company’s businesses have enjoyed some
measure of success (particularly in the emerging signs
of a turnaround in Elders Rural Services business)
mixed with the challenging circumstances created
by events such as suspension of the live cattle trade
to Indonesia, fewer new motor vehicle builds in
Australia and particularly adverse weather conditions
in Queensland. As has been communicated to
shareholders in the past, the Board remains firmly
of the belief that good corporate governance
contributes long term value to stakeholders and as
a result directors are committed to ensuring the
Company’s present governance framework is
adhered to and that the Company keeps abreast
of, and implements, all generally accepted enhanced
governance arrangements.
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
The Board’s Charter consolidates the principles,
policies and practices of the Company’s governance
framework as reflected in this statement.
• support the achievement of shareholder value within
a framework of appropriate risk assessment and
management.
In developing the Company’s 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 Best Practice
Recommendations as revised in June 2010. Published
on our website at www.elders.com.au is a table
comparing the Company’s governance practices with
the Best Practice Recommendations.
The Board notes that the June 2010 amendments to
the Best Practice Recommendations introduced
recommendations in relation to diversity which do not
apply to the Company until its reporting period
commencing on 1 October 2011. Notwithstanding that
the Company has developed a Diversity Policy (which
has been adopted by the Board), which is an essential
step in setting measurable diversity objectives. The
Company will report on those objectives in its 2012
annual report.
The corporate governance policies and practices are
reinforced by a commitment by the Company to
the highest standards of legislative compliance and
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;
• approve and monitor the progress of all material
acquisitions, divestments, contracts and capital
expenditure;
21
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.
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 ongoing 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 may not be less than 3
and not 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 of depth and 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 regulators. The purpose
of these criteria is to ensure directors are fit and
proper to act as directors of the Company having
regard to, amongst other things, licences held by
the Company and to its distribution arrangements
with Rural Bank Limited. Further detail is set out in
the Fit and Proper Person Policy section below.
• 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 and Human Resources Committee,
Occupational Health and Safety Committee and
Audit, Risk 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
24 to 28.
In addition, a Group Risk Committee comprising
members of the Company’s Executive management
and the National Risk Manager operates under a
Board-endorsed Risk Management Policy and reports
to the Board through the Audit, Risk and Compliance
Committee on a regular basis.
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 comprehensive delegations 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 42 to 44.
Board
of Directors
Audit, Risk and
Compliance Committee
Remuneration and
Human Resources
Committee
Nomination and
Prudential Committee
OH&S
Committee
J Ballard
M Jackman
M Allison
R Grigg
I MacDonald
J Ranck
R Wylie
C
MD
D
D
D
D
D
M
M
C
M
C
M
C
M
M
M
M
M
M
M
C
C = Chair MD = Managing Director D =Director M = Member
22
Fit and Proper Person Policy
The Company has adopted a fitness and propriety
regime given its distribution arrangements with Rural
Bank Limited, a prudentially regulated Authorised
Deposit Taking Institution, and its several Australian
Financial Services Licences which ensures a robust
selection process for directors generally 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 Person 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
governance responsibilities throughout the term of
their appointment.
Director Skills & 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, five 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 20 of this report.
The Company has announced its intention to appoint
two new female directors on completion of fitness
and propriety testing. The Company anticipates that
this testing will be complete soon after the date of
this report.
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 3 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.
Chairman
The Board Charter prescribes that the Chairman
should be an independent director and details his
responsibilities. Mr John Ballard, who was appointed
Chairman on 21 September 2010, is a non-executive
and has been determined by the Board to be
independent.
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 & 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 providing prior
notice to the Chairman.
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.
Directors undertake training and development on an
as needs basis. Directors are also regularly briefed on
the Group’s businesses and industry or technical
23
issues impacting the Group. 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, who in turn
evaluates the performance of all other senior
executives. 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 2011 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 the Board was subject to internal performance
review, which was considered appropriate given the
recent appointment of Mr Ballard as Chairman. 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 then determines whether or
not to recommend the director for re-election.
The Nomination and Prudential Committee assists in
this review process.
Appointment of Directors and re-election
The composition of the Board is reviewed on an
annual basis coinciding with the Annual General
Meeting (AGM) cycle to ensure that the Board has the
appropriate mix of expertise and experience.
At each 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 3 or more years and AGMs
since they were last elected to office are required to
retire and may stand for re-election. The directors
obliged to retire under this rule are Mr Ray Grigg and
Mr Hutch Ranck. Both Messrs Grigg and Ranck have
advised the Chairman that they will offer themselves
for re-election at the forthcoming AGM. The
resolutions to re-elect Messrs Grigg and Ranck have
the support of the Board.
24
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.
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 retirement of
Mr Charles Bright at the Company’s AGM held on
16 December 2010.
3. Board Committees
Relevant policies and charters:
− Nomination and Prudential
Committee Charter
− Remuneration and Human Resources
Committee Charter
− Audit, Risk and Compliance
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 each of the
non-executive directors of the Company.
The Chief Executive Officer has a standing invitation to
attend the Committee meetings and may participate
in discussions on matters concerning the main Board
but has no voting rights with respect to such matters.
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;
• the scope and content of letters of 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
• fulfilment of the Company’s prudential obligations.
Key Activities During the Year
• The Committee monitored the competencies and
composition of the members of the Board during
the reporting period.
• The selection of two new female directors who will
be appointed subject to the completion of fitness
and propriety testing.
Remuneration and Human Resources
Committee
Objective
The Board’s objective is to ensure that the Company
has adopted remuneration and human resources
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 37 to 58.
Membership
The members of the Remuneration Committee at the
date of this Report are:
Mr I MacDonald (Chairman)
Mr J Ballard
Mr H Ranck
The Remuneration and Human Resources Committee
comprises three independent directors and includes
the Chairman of the Board. The Chief Executive 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 and Human Resources Committee
meets the Recommendation 8.2 of the amended 2nd
edition of the ASX Best Practice Recommendations.
Role
The Remuneration and Human Resources 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 objectives of the Committee are to:
• ensure the appropriate policies and procedures
are in place to assess the remuneration levels
of the CEO, executive management, the Company’s
employees generally and the Board itself;
• ensure the appropriate policies and procedures are
in place to attract and retain the Chairperson,
Non-Executive Directors, Executive Directors, CEO
and executive management;
• ensure the Company (which includes all subsidiaries
and, as appropriate, associated companies) adopts,
monitors and applies appropriate remuneration
policies and procedures that align with the creation
of shareholder value;
• engage and motivate directors and senior executives
to pursue the long-term growth and success of
the Company;
• ensure a clear relationship between business
performance and senior executive key performance
indicators and their remuneration;
• align executive incentive awards with the creation
of shareholder value; and
• ensure that the Company’s human resources
strategy, policies and procedures are appropriate to
the Company’s needs and clearly designed
and executed.
25
The Committee meets its objectives by reviewing and
making recommendations to the Board on:
• appropriate policies for compensation arrangements
for the CEO, executive management, the Company’s
employees generally and the Board itself;
• the remuneration package for the CEO;
• KPIs relevant to the remuneration of the CEO and
the performance of the CEO against those KPIs;
• the CEO’s recommendations with respect to the
remuneration of executive management;
• the CEO’s plans for the remuneration of employees
in general;
• the annual remuneration review applying generally
across the Company;
• the competitiveness and appropriateness of the
Company’s remuneration policies and practices;
• remuneration of Company employees by gender;
• human resources policies and procedures to ensure
alignment between remuneration and shareholder
value creation;
• remuneration of Directors;
• employee share, option and rights schemes and
other performance incentive programs;
• recruitment, retention, retirement and termination
policies and benefits;
• Company superannuation arrangements;
• human resources strategy, policies and procedures
(but not occupational health and safety);
• employment contracts for all directors, the CEO and
those executive management contracts which are
outside normal parameters;
• organisational development, including training and
education;
• succession planning for executive management; and
• disclosures in the Company’s annual report on
remuneration matters.
Key Activities During the Year
Audit, Risk and Compliance Committee
Objective
The Board is concerned to ensure the integrity of the
Company’s financial reporting and its regulatory and
policy compliance and has established the Audit, Risk
and Compliance Committee to assist it in achieving
this objective.
Membership
The members of the Audit, Risk 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, Risk 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.
Details of the members’ qualifications can be found on
page 20 of this report.
The Chief Executive, Chief Financial Officer and the
General Manager Risk Assurance all have standing
invitations to attend (and are expected to attend)
meetings of the Committee. In addition, the audit
engagement partner from the Company’s auditors
also has a standing invitation to attend the meetings
of the Committee.
The Committee oversaw the following significant
activities during the reporting period:
Role
• introduction of two new salary sacrifice equity
schemes for employees;
• introduction of a short term incentive scheme
designed to encourage high performance sales
activity by the Company’s sales employees;
• ongoing review of the remuneration arrangements,
policy and structure for the Group. The review
is discussed in the Remuneration Report on
pages 37 to 58.
The Audit, Risk 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 Audit, Risk and Compliance Committee assists
the Board to meet its oversight responsibilities in
relation to:
(a) the Company’s financial statements and financial
reporting;
(b) the Company’s internal risk management
processes, internal accounting and control
systems;
(c) the Company’s internal and external audit
arrangements;
(d) the Company’s compliance with legal and
regulatory requirements; and
(e) the Company’s review of risk management,
internal compliance and control systems.
26
It does this by discharging its responsibilities set out
in its charter, namely:
• monitoring the effectiveness of the Company’s
financial reporting and internal control policies and
its procedures for the identification, assessment,
reporting and management of financial risks;
• approving the appointment of the head of
internal audit;
• approving the terms of reference of the internal
audit department, requiring advice of the planned
programme of audits and the reason for any change
or delay in the programme;
• reviewing the management of financial matters and
the freedom allowed to the internal auditors;
• reviewing reports on the Company from the
internal auditors;
• considering and making recommendations to
the Board about the appointment and retirement of
the Company’s External Auditors, and ensuring
that the audit partner from the firm providing audit
services is rotated from time to time in accordance
with all applicable regulation and Company policy;
• meeting with the External Auditors;
• reviewing any auditor’s letters addressed to
management and management’s responses;
• approving the scope of the audit, the terms of the
annual audit engagement letter and audit fees;
• monitoring the independence, objectivity and
performance of the External Auditors;
• monitoring the nature and quantum of non-audit
services provided by the External Auditor, including
the amount of fees paid for such services;
• reviewing any recommendations made by the
External Auditor;
• co-ordinating internal and External Auditors and
reviewing and approving any integrated audit plans;
• monitoring the consistency of accounting policies;
• reviewing the Company’s statutory half and full year
financial statements;
• monitoring the effectiveness of the Company’s
compliance programme;
• reviewing specific policies, systems and processes
for addressing compliance with applicable laws
and Company policy;
• reviewing the Company’s main corporate governance
policies including the Company’s Delegations
of Authority and the Company’s Treasury Policy;
• receiving reports from management regarding
compliance with laws;
• receiving recommendations from management on
compliance policies, systems and processes relating
to significant legal, compliance or regulatory matters;
• reviewing compliance with Company policies;
• overseeing the Company’s process for dealing with
the reporting of unacceptable conduct;
• assessing the adequacy of the Company’s internal
risk control systems;
• reviewing the Company’s management processes
for identifying and monitoring significant areas of
risk for the Company; and
• regularly reviewing the Company’s risk profile.
Key Activities During the Year
The Committee oversaw the following significant
activities during the reporting period:
• review of the statutory and periodic financial
statements of the Company; and
• assumption of oversight of the Company’s risk
identification, monitoring and profile.
Occupational Health and Safety
Committee
The Board is committed to fulfilling the Company’s
obligation to operate its business in a safe manner and
has established the Occupational Health and Safety
Committee (OH&S Committee) to assist in meeting
this objective.
Membership
The members of the OH&S Committee at the date
of this Report are:
Mr H 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.
The Committee’s objectives are to:
• ensure the appropriate policies and procedures are
in place to ensure the Company meets its statutory
obligations;
• ensure appropriate policies procedures and systems
are in place to effectively manage, measure and
improve OH&S activities; and
• oversee the provision by management of a healthy
and safe working environment and culture for all
employees, contractors, clients and other visitors
to the Company’s work premises, including by
implementation and management of policies and
procedures to make workplace harassment and
bullying unacceptable.
The Committee meets its objectives by discharging the
responsibilities set out in its charter, namely reviewing
and making recommendations to the Board on:
• the plans and targets for OH&S management;
• cultural initiatives designed to build and foster
OH&S leadership and demonstration of appropriate
OH&S behaviours consistently at all levels;
• Company performance in relation to OH&S matters;
• the adequacy, integrity and effectiveness of the
policy, critical systems, internal controls, and
processes and procedures used to manage OH&S
as well as the performance of the Company’s OH&S
function and management;
• the adequacy, integrity and effectiveness of
Company management’s processes for ensuring
and monitoring compliance with OH&S statutory
and reporting obligations;
27
• the internal process for determining and managing
Key Activities During the Year
key OH&S risk areas, particularly on non-compliance
with laws, regulations, standards and best practice
guidelines;
• the impact of changes and emerging issues
in OH&S legislation, community expectations,
research findings and technology;
• reports submitted by Company management on
OH&S performance and issues including reports
on material issues such as serious injury or death
associated with the Company’s operations;
• presentations from business unit general managers
on the OH&S management and performance of
their operations; and
• visits to the Company’s operational sites to
familiarise committee members with the OH&S
issues associated with the operations on those sites
and to assure members that appropriate systems
and controls have been implemented.
The Committee oversaw the following significant
activities during the reporting period:
• establishing corporate OH&S standards for
the Group;
• review of safe livestock handling procedures;
• review of issues connected with driver safety;
• establishing a network of safety committees;
• rollout of a new on-line incident reporting system.
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. 17 formal Board meetings were held
during the current financial period to accommodate
additional meeting requirements associated with
specific or urgent matters. Attendance by directors
at Board and Committee meetings held during the
period ended 30 September 2011 is detailed below.
Board of Directors
Audit, Risk and Compliance
Committee
Nomination and Prudential
Committee
Attended
Held
Attended
Held
Attended
Held
17
17
4
16
17
17
17
17
17
17
4
17
17
17
17
17
-
-
-
7
-
8
-
8
-
-
-
8
-
8
-
8
2
2
-
1
-
2
2
2
2
2
-
2
-
2
2
2
Remuneration and Human
Resources Committee
Occupational Health and
Safety Committee
Other Committees**
Attended
Held
Attended
Held
Attended
Held
8
-
-
-
-
8
8
-
8
-
-
-
-
8
8
-
-
4
-
3
-
-
5
-
-
5
-
5
-
-
5
-
-
-
2
-
-
2
7
5
-
-
3
-
-
4
7
6
J Ballard
M Allison
C E Bright1
R Grigg
M Jackman
I MacDonald
J H Ranck
R Wylie
J Ballard
M Allison
C E Bright1
R Grigg
M Jackman
I MacDonald
J H Ranck
R Wylie
1. Mr Bright retired as a director on 16 December 2010
Where directors are unable to attend meetings either in person or by telephone (e.g. 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.
28
5. External Audit Independence
Policy
Relevant policies and charters:
− Non-Audit Services Policy
The Audit, Risk 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.
The Company has in place a 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,
Risk 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 exits 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, Risk and Compliance Committee
approval;
> the Audit, Risk 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, Risk and Compliance
Committee with details of the amount of non-
audit services undertaken by the external
auditors 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.
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 their
respective businesses. All personnel are responsible
for managing risks in their areas.
The Audit, Risk 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) meets quarterly
and assists the Audit, Risk and Compliance
Committee and the Board in the application of the
Company’s Risk Management Policy and monitoring of
compliance with the Policy.
Membership
The Group Risk Committee comprises the CEO,
Group Executives, Company Secretary, General
Manager Risk Assurance and National Manager -
Risk. Specialist support to the committee is provided
by internal experts as required, including the General
Counsel, General Manager, Taxation, and General
Manager OH&S.
The GRC reports to the Board through the Audit,
Risk and Compliance Committee.
During 2011 the GRC reviewed the Group’s top
20 material business risks and reported to the Board
on the effectiveness of the Company’s management
of those material business risks.
29
Responsibilities
The Committee operates under the Risk Management
Policy and is responsible for:
• oversight of the risk management process;
• reviewing and monitoring the Company’s risk profile;
• 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 adherence to the
Company’s risk management framework;
• receiving, considering and endorsing business
trading charters for submission to the Company’s
Board 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 the Company with
applicable regulatory obligations and significant
related internal policies;
• providing regular advice to the Audit, Risk and
Compliance Committee 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, Risk and
Compliance Committee or Board.
Management Certificates
In accordance with the Board Charter, prior to
approving the financial reports of the Company in
respect of FY2011, 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.
The Company’s treasury function operates within
formal policy arrangements, and compliance with
policy is regularly reported to the Board.
The primary objectives of the Treasury Policy are to
have an appropriate debt maturity profile to fund
on-going 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
− Securities Dealing Policy
− Communications with the Market &
Shareholders
− Fraud Control Policy
− Reporting of Unacceptable Conduct Policy
− Discrimination and Harassment Policy
− Occupational Health & 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 address the issues associated with alleged
improper conduct including reporting, responsibility,
confidentiality and effective investigation.
Securities Dealing Policy
The Board encourages non-executive directors and
employees 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 53 of this Report.
The Company’s Securities Dealing Policy prescribes
trading windows during which directors and
employees may trade in the Company’s securities.
Trading windows run for 6 weeks from announcement
of the Company’s full year results or half year results
and 6 weeks from the Company’s AGM.
Directors or staff must not deal in the Company’s
securities during any periods other than a trading
window or at any time when that staff member or
director is in possession of unpublished information
that, if generally available, might materially affect the
price of the Company’s securities. Prior to dealing,
a director or senior executive must seek clearance
from the Company Secretary, or if the Company
Secretary wishes to trade, the Chairman.
30
The Securities Dealing Policy also prohibits
contractors from trading in the Company’s securities if
they are in possession of price-sensitive information.
The Securities Dealing 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.
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 the
maintenance of a Disclosure Committee comprised
of management to consider disclosure issues
(where circumstances permit, in conjunction with
the Chairman of the Board), the communication of
disclosure requirements and procedures to senior
management together with procedures to facilitate
the timely flow of relevant information to the
Disclosure Committee;
• 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
AGM and full year and half year results briefings
(which are announced in advance to the market
and also archived and available for 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 or audio on the
Company’s website) are generally held by recorded
telephone conference which requires registration so
that attendees’ details can be recorded. The Company
generally allows investors to access the recorded
facility by telephone for a short period after the event
(usually 7 days) and thereafter to obtain a copy of
the transcript or digital audio recording.
The Board is also concerned to ensure that
shareholders 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
AGM 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 ASX Best Practice
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 has adopted a
Diversity Policy and is in the process of establishing
measurable diversity objectives. The Company will
report on these objectives in its 2012 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 will not be tolerated in their relationships
with other employees, potential employees, customers
or people undertaking work for the Company. 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.
31
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 an objective 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 and measuring targets;
• 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.
32
Directors’ Report
The directors present their report for the
year ended 30 September 2011.
Directors
The directors of the Company in office during the
entire financial year and until the date of this report
were as follows:
Non-Executive Directors:
John Charles Ballard (Chairman)
Mark Charles Allison
Raymond George Grigg
Ian Graham MacDonald
James Hutchison Ranck
Robert Harvey Wylie
Mr C Bright did not seek re-election as director at
the last AGM, held on 16 December 2010. He had
been a director since 2002.
Executive Director:
Malcolm Geoffrey Jackman
(Chief Executive Officer and Managing Director)
Company Secretaries:
Peter Gordon Hastings
Sarah Jane Graves
Ms Graves was appointed Joint Company Secretary on
19 August 2011.
A summary of the experience, qualifications and
special responsibilities of each Director and each
Company Secretary is provided on page 20 of this
annual report.
Principal Activities
The principal activities of the Elders Group during the
year were the:
(a) provision of services and inputs to the rural sector;
(b) provision of financial, real estate 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 $395.3m (2010: loss of
$217.6m). A review of the operations and results of
the consolidated entity and its principal businesses
during the year is contained in pages 3 to 19 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 13 of this
report.
Events Subsequent to Balance Date
No matter or circumstance has arisen since
30 September 2011 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 6 to 13 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
• No employee options were exercised during the year.
• No ordinary shares were issued under the
Company’s employee share plans during the year.
• No ordinary shares were issued to any other person
during the year.
33
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
could not be paid until after 31 March 2012 and thereafter only upon satisfaction of several conditions.
On 1 September 2011, the Company refinanced its debt package. The Company’s refinanced facilities require,
amongst other things, that dividends be paid out of operating cash flows and only if the leverage ratio is
not greater than 3.50:1. Given these restrictions, no dividends or hybrid distributions were paid during the
12 months to 30 September 2011.
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 has now
been discontinued. Information on this element of the remuneration structure is provided in the Remuneration
Report commencing on page 37 of this annual report.
The total quantity of options on issue as at 30 September 2011 would represent, if exercised, 0.175% 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
Issue Price
Option Expiry Date
31/08/2007
01/10/2007
01/07/2003
25/11/2008
80,000
200,000
100,000
260,000
640,000
$24.50
$24.50
$13.70
$12.90
18/08/2012
01/10/2012
01/07/2013
25/11/2013
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 the previous financial year
Date Options Granted
Number of Lapsed Options
Issue Price
Option Expiry Date
25/10/2006
31/10/2006
25/11/2008
253,000
135,300
10,000
398,300
$20.20
$21.70
$12.90
25/10/2011
31/10/2011
25/11/2013
34
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
R G Grigg
I G MacDonald
J H Ranck
R H Wylie
Executive Directors
M G Jackman
-
250,000
16,490
52,668
128,334
6,000
107,168
-
-
-
-
-
-
-
-
-
-
-
-
1,000
2,570,425
At the date of this report, there are no options on issue to directors.
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 28.
Indemnification of Officers and Auditors
Insurance arrangements established in previous years concerning officers 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 officer, 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 officer 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 confidentiality.
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 37 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 17 and 19.
Rounding of Amounts
The parent entity is a Group of the kind specified in Australian Securities and Investments Commission class
order 98/0100. In accordance with that class order, amounts in the financial report and Directors’ report have
been rounded to the nearest thousand dollars unless specifically stated to be otherwise.
35
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, Risk 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 2001 for the following reasons:
• all non-audit services have been reviewed by the Audit, Risk 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
$204,795
$45,413
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
14 November 2011
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 period ended 30 September
2011, 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
Mark Phelps
Partner
14 November 2011
36
Elders Limited
Remuneration Report 2011
The Directors of Elders Limited present this Remuneration Report for the
consolidated entity for the year ended 30 September 2011. The information
provided in this report has been audited as required by the Corporations Act
2001 (Cth) and forms part of the Directors’ Report.
Section 1
Board Remuneration and
Human Resources Committee
Section 2
Non-executive directors’ remuneration
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
40
40
42
50
52
53
37
Message from the Board
Your Directors are cognisant of the expectations placed upon ASX-listed companies
in respect of executive remuneration, but believe the Company should exceed those
expectations by ensuring that shareholder interests are prominent in the governance
of the Company’s remuneration policies and practices. The loss of key executive
leadership is as detrimental to shareholder interests as excessive or unjustified
remuneration, hence the need to compete effectively for executive talent is a key
consideration in the Board’s deliberations. This has been especially true in recent
years, during which the attraction, retention and motivation of experienced and
skilled leadership has been particularly important to navigate the Company through
its current business conditions and to return it to growth and acceptable
shareholder return.
The Board of Directors is pleased to present the 2011 Remuneration Report. The
Report has been written with the objective of communicating the Company’s key
2011 remuneration principles and activities clearly, concisely and in full compliance
with all relevant regulatory requirements.
John Ballard
Chairman of the Board
Ian MacDonald
Chairman of the Remuneration and
Human Resources Committee
38
2011 Remuneration Highlights
Key Remuneration Activities in 2011
Remuneration outcomes in the Elders Group were again heavily influenced in 2011 (as they were in the preceding two years)
by unsatisfactory returns to shareholders during the period. The Company’s performance reflected in remuneration outcomes
through:
• modest increases in fixed remuneration (an average of 3% across all employees);
• no Short Term Incentives were paid to key management personnel;
• no increase in non-executive director fees during this period, other than an increase in the fee payable to the Chairman
of the Audit, Risk and Compliance Committee, in recognition of the significant workload associated with the role.
To position for the future, in 2011 the Company progressed the design of a business unit incentive framework, which was
considered in detail by the Remuneration and Human Resources Committee and approved by the Board. In the case of the
rural services business key underlying principles in the development of the framework were:
• clear line of sight and control, i.e. participants must be able to see a strong correlation between their own actions and the
incentives they earn;
• the “bottom up” principle, whereby incentives accumulate from the bottom up instead of cascading from the top down.
This principle recognises that the business will not deliver unless the front-line delivers, and hence no incentives should be
payable at the top of the business unit structure (i.e. the most senior business unit leadership, including key management
personnel) unless incentives are firstly payable at the bottom of that structure; and
• the importance of capital efficiency when measuring business performance for incentive purposes, to ensure that
incentives are earned only on value-accretive sales, and that the incentive program will enhance, rather than erode,
shareholder return.
The automotive framework has been redesigned so that it also removes Group earnings gateways concentrating only on
business unit performance.
Short-term incentives in the Company’s business units will therefore be driven by performance within the business unit
rather than being dependent on overall Elders Group performance. The Board believes this approach, combined with
other initiatives already in place, will result in an improvement in sales performance that will deliver a positive return
to shareholders.
CEO and Senior Executive Remuneration Outcomes for 2011
The table below sets out the cash* benefits received by the Chief Executive, Malcolm Jackman, and the Group’s senior
executives in the 2011 financial year.
M Jackman
M Hosking
M De Wit
V Erasmus
A Dage
S McClure
S Hughes
R Tanti (1)
Notes:
Base Salary
1,069,021
670,625
641,250
576,529
634,656
348,008
451,851
619,746
STI
0
0
266,500(2)
0
0
0
0
0
LTI
Superannuation
0
0
0
0
0
0
0
0
15,343
18,750
25,000
15,343
15,343
21,369
36,148
11,399
Total
1,084,364
689,375
932,750
591,872
649,999
369,377
487,999
631,145
(1) Mr Tanti ceased employment on 30 June 2011. His “base salary” included a payment of 10 months’ salary in lieu of notice
in accordance with his contract. This is disclosed under Termination Benefits at table 5a on page 52 of this report.
(2) Mr De Wit was entitled to receive a payment of $266,500 in the previous financial year pursuant to the terms of the STIP
described on pages 43 and 44 of this report. This entitlement was paid to Mr De Wit in November 2010.
* Cash benefits include cash and cash equivalents paid during the financial year.
This table does not represent total remuneration which is disclosed at table 5a on page 52 of this report.
39
Section 1. Board Remuneration and Human Resources 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 and Human Resources Committee
The Remuneration and Human Resources Committee assists the Board in ensuring that the Company establishes and maintains remuneration
strategies and policies that are aligned with the Company’s overall objectives and accord with the practice set out in the ASX Corporate
Governance Principles and Recommendations (“ASX Corporate Governance Principles”). The role and responsibilities of the Remuneration and
Human Resources Committee are set out in the Corporate Governance Statement on page 21 of this Annual Report and the Committee’s Charter is
published on the Company’s website at www.elders.com.au.
The Remuneration and Human Resources Committee is comprised entirely of non-executive directors. The Committee is briefed by management,
but makes all decisions free of the influence of 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 the Company, 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 and Human Resources 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, 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 do not receive retirement benefits other than
superannuation contributions disclosed in this report.
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, where appropriate and necessary, by advice from external remuneration consultants. The fees paid are, on metrics
other than market capitalisation, slightly below the median of fees to non-executive directors of comparable companies.
Total fees for the financial year ended 30 September 2011 remain well 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 contributions are included in the aggregate
fee limit.
During the financial year ended 30 September 2011, the annual base fee amount paid to each non-executive director, other than the Chairman,
was $90,000 per annum. The Chairman receives an annual composite base fee of $300,000. Additional fees are payable to non-executive
directors who sit on the Board Committees. Members of the Audit, Risk and Compliance Committee were paid $16,000 during the financial year
with the Chairman receiving a pro-rata of $24,000 for the period 1 October 2010 to 31 March 2011 (i.e. $12,000) and a pro-rata of $30,000 for
the period 1 April 2011 to 30 September 2011 (i.e. $15,000). Members of the Occupational Health and Safety Committee, and the Remuneration
and Human Resources Committee receive $10,000 per annum as part compensation for time spent on committee business. It was decided not to
increase base director fees set in 2006 during the 2011 financial year.
The Company maintains independent boards for the responsible entities within the group including Elders Forestry Management Limited and
APT Projects Limited. 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.
40
Additional fees are received by Mr R Grigg who sits as a director on the Futuris Automotive Group Limited Board. This fee is included in the
“Subsidiary Fees and Other Fees” column below. For the period from 1 October 2010 to 31 March 2011 those fees were $50,000 per annum
(i.e. $25,000 for the 6 months) and from 1 April 2011 to 30 September 2011 $25,000 per annum (i.e. $12,500 for the 6 months) to reflect
the reduced workload required by being a member of a subsidiary board.
The Board encourages non-executive Directors to own securities in the Group to further align their interests with the interests of other
shareholders. Details of Directors’ shareholdings in the Group can be found in table 6a of this Report. All shares held by Directors were acquired
by the Directors on market.
Details of non-executive directors’ remuneration for the 2010 and 2011 financial years are set out in the following table:
Table 2a (A$)
Short Term Payments
Post Employment
Total
Base Board
Fee
Board
Committee
Fees
Subsidiary
Fees and
Other Fees
Superannuation
Other
J C Ballard (Chairman)
M C Allison
R H Wylie
R G Grigg(5)
I G MacDonald
J H Ranck
S Gerlach (ex Chairman)
(retired 21 September 2010)(2)
G D Walters
(retired 31 March 2010)
C E Bright
(retired 16 December 2010)
J C Fox (retired 18 December
2009)(2)
A Salim
(resigned 30 October 2009)
Total
Notes:
2011
2010
2011
2010
2011
2010
2011
2010
2011
2010
2011
2010
2011
2010
2011
2010
2011
2010
2011
2010
2011
2010
2011
2010
300,000
60,227
(1)
90,000
80,454
90,000
80,454
90,000
90,000
90,000
90,000
90,000
90,000
0
350,000
0
45,000
22,500
90,000
0
28,068
0
7,500
0
0
(3)
10,000
(3)
6,641
(4)
27,000
(4)
22,719
(5)
26,000
(5)
26,000
(6)
26,000
(6)
22,666
(7)
20,000
(7)
20,000
0
0
0
12,000
(8)
2,500
10,225
0
0
0
0
0
0
0
0
0
0
(5)
37,500
(5)
50,000
50,000
44,886
(6)
(6)
0
0
0
0
0
16,458
0
0
0
0
0
0
16,091
3,051
9,000
7,838
10,530
9,286
13,815
14,760
10,935
14,825
9,900
9,900
0
0
0
0
0
0
0
0
0
0
0
0
0
14,824
0
150,000
0
11,700
2,250
6,750
0
3,301
0
0
0
2,025
0
150,000
0
0
0
0
316,091
63,278
109,000
94,933
127,530
112,459
167,315
180,760
176,935
172,377
119,900
119,900
0
514,824
0
85,158
27,250
109,000
0
181,369
0
7,500
772,500
1,011,703
111,500
120,251
87,500
111,344
72,521
96,235
0
302,025
1,044,021
1,641,558
(1) Mr 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) Each director marked (2) had an entitlement of $150,000 paid on retirement. No retirement benefits are available to any continuing directors.
(3) Mr Allison is a member of the OH&S Committee and received a fee of $10,000 for the financial period ($6,641 pro-rated for the 10 months
to 30 September 2010).
(4) Mr Wylie is Chairman of the Audit, Risk and Compliance Committee and received a fee of $27,000 for the financial period ($22,719 pro-rated
for the 10 months to 30 September 2010).
(5) Mr Grigg has chosen to salary sacrifice some or all of his fees into superannuation. For simplicity we have not split the short term payments
to disclose the salary sacrificed superannuation portion. He is a member of the Audit, Risk and Compliance Committee for which he received
$16,000 and a member of the OH&S Committee receiving $10,000 for the financial period. Mr Grigg is an Elders board representative on the
operating subsidiary board Futuris Automotive Group Ltd and received a subsidiary board fee of $37,500 for the 12 months to 30 September
2011 ($50,000 in 2010).
(6) Mr MacDonald received a fee of $16,000 as a member of the Audit, Risk and Compliance Committee for the financial period ($16,000 for
2010). He also received a fee of $10,000 as Chairman of the Remuneration and Human Resources Committee for the financial period ($6,666
for the 8 months to 30 September 2010). Mr MacDonald is a director of Elders Forestry Management Limited and APT Projects Limited for
which he received subsidiary director fees of $50,000 for the financial period ($44,886 pro-rated for 11 months to 30 September 2010).
(7) Mr Ranck received $20,000 in fees for the financial period as a member of both the Remuneration and Human Resources Committee and
OH&S Committee ($20,000 in 2010).
(8) Mr Bright was a member of the Nomination and Prudential Committee and received a pro rata portion of his fees for the 2 months to
16 December 2010.
41
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
John Ballard
Mark Allison
Ray Grigg
Hutch Ranck
Ian MacDonald
Rob Wylie
Position held
Chairman
Director
Director
Director
Director
Director
Former non-executive Directors
Charles Bright (retired 16 December 2010)
Director
Senior Executives
Malcolm Jackman
Mark Hosking
Mark De Wit
Vince Erasmus
Sam McClure
Shaun Hughes
Anthony Dage
Former Senior Executives
Robert Tanti
A. Board policy
Chief Executive & Managing Director
Chief Financial Officer
Managing Director Futuris Automotive
Managing Director Elders Forestry
Group General Manager Strategy and Business Development
Chief Information Officer
Group General Manager Trading
Group General Manager Human Resources (ceased employment on 30 June 2011)
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 and Human Resources Committee oversight of the Company’s remuneration policies and
practices. Remuneration polices and practices are benchmarked to the market by independent external consultants to ensure that remuneration
for executives meets a range of criteria, including:
• that executives are appropriately rewarded having regard to their roles 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; and
• remuneration is competitive when compared to both internal and external relativities.
On an annual basis the Board reviews and approves the performance and remuneration plans and outcomes for the CEO on the recommendation
of the Chairman and the Remuneration and Human Resources Committee. The plans and outcomes for the CEO’s direct reports are reviewed and
approved annually by the Remuneration and Human Resources 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
and Human Resources Committee reviews the key elements of employment contracts for business unit Managing Directors, 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.
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 elements:
• Total Fixed Remuneration;
• Short-term incentives; and
• Long-term incentives.
A description of each component is set out below. Remuneration packages are 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.
42
Figure 3a. 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%
Long Term
Short Term
Total Fixed
CEO
CFO
BU MDs /
Senior Executive
Executive
Management
The above table assumes the ‘at risk’ remuneration components are at their maximum.
C. Total Fixed Remuneration (TFR)
Total Fixed Remuneration (TFR) is made up of base salary, retirement benefits and any other benefits (including Fringe Benefits Tax) 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 statutory maximum.
The level of TFR 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.
TFR is reviewed annually and is adjusted according to market relativity, company performance and the executive’s performance over the previous
year, as assessed through the Company’s Performance Development Program (PDP). The PDP assesses employee performance against a
number of agreed key performance indicators.
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 applying in the financial period are set out in the table below:
Objective of STIP
STI objectives are to:
• focus participants on achieving financial year performance goals which contribute to sustainable
shareholder value; and
• enable significant differentiation in pay based on performance against challenging commercial personal,
people and safety targets.
What Key Performance
Indicators
(KPIs) are used?
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 set for executives in each
of the business units.
What financial KPIs are used?
The KPIs vary between participant (as set out above), but all schemes include underlying Earnings Before
Interest and Tax (EBIT) and sales. All STIPs require the underlying Elders Group EBIT to be at least 91%
of budget before any STI is paid.
What non-financial KPIs are
used?
Non-financial KPIs may include performance measures relating to Safety, Market, Operations and People.
The current scheme includes a lost time injury frequency rate (LTIFR) target.
How and when is performance
assessed?
Following the end of each financial year each executive’s performance is assessed by his or her immediate
manager against the relevant KPIs and a performance matrix. Recommendations for STI payments are then
referred to the CEO to ensure a consistent approach and to the Remuneration and Human Resources
Committee for review and approval.
43
Exercise of discretion
The CEO, in conjunction with the Chairman, has the ability to recommend to the Remuneration and Human
Resources Committee discretionary bonus payments to executives (except himself) when superior
performance warrants additional reward.
Service Condition
STIP Payment
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 will be eligible to receive pro rata entitlements.
Payments are made in cash in mid December. Participants in the Deferred Employee Share Plan may elect
to acquire shares in the Company.
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 in the 2011 financial year are highlighted below:
STI Opportunity
(% of TFR)
Financial vs
Non-financial KPIs
CEO
CFO
Business Unit MDs
Group Management
Executives
Min 0%
Max 120%
Min 0%
Max 100%
Min 0%
Max 80%
Min 0%
Max 60%
Financial 80%
(budgeted underlying
Group EBIT, budgeted
Group cash flow and
budgeted Group Sales)
Financial 80%
(budgeted underlying
Group EBIT, budgeted
Group cash flow and
budgeted Group Sales)
Financial 80%
(budgeted underlying
Group EBIT, budgeted
Group cash flow and
budgeted Group Sales)
Non-Financial 20%
(Safety)
Non-Financial 20%
(Safety)
Non-Financial 20%
(Safety)
Financial 80%
(budgeted underlying
Group EBIT, where
relevant, budgeted
underlying business unit
EBIT, budgeted business
unit or Group sales)
Non-Financial 20%
(Safety)
STI payments in respect
of 2011 financial year
Discretionary Bonus
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Employees in the categories below those levels set out in the table above (i.e. Senior Management, nominated Line Management, technical
positions and sales support positions) may also be eligible to participate in the STIP to a maximum of 40% of TFR.
E. Long-term incentives
The Company has a number of long term equity participation and incentive programs in place. These plans are summarised below.
E1. Current Equity Schemes
Name
of Plan
Description
Eligibility
Criteria
Number of
Participants as
at 30 September
2010
Number of
Participants as
at 30 September
2011
1
0
CEO
By
invitation
only.
1
24
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.
Elders Long
Term
Incentive
Rights Plan
(ELTIRP)
Notes:
Number of Shares /
Options / Rights
Outstanding as
at 30 September
2010
Number of Shares /
Options / Rights
Outstanding as
at 30 September
2011
2,570,425(1)
2,570,425
0
5,546,587
(1) In the 2010 Remuneration report, the number of rights outstanding in relation to the CEO ELTIRP was 856,808 rights. This represented the
amount of rights issued not the amount of rights granted under accounting standards. As a result the 2010 comparative above has been
restated. Refer to section E5 of the Remuneration Report, ‘Discussion of Long Term incentive Plans’ for further information.
44
E2. Discontinued Equity Schemes
Name
of Plan
Description
Eligibility
Criteria
Number of
Participants as
at 30 September
2010
Number of
Participants as
at 30 September
2011
Number of Shares /
Options / Rights
Outstanding as
at 30 September
2010
Number of Shares /
Options / Rights
Outstanding as
at 30 September
2011
Invitation only.
75
64
1,380,300
953,300
The EESOP
was
suspended
in 2009
and will be
discontinued
once all
options lapse.
Invitation only.
3,276
1,559
2,023,846
981,468
The ELSP was
suspended
in 2009
and will be
discontinued.
All permanent
employees.
53
Operation of
the SAYE was
suspended
in February
2009.
52
34,509
34,331
Elders
Employee
Share
Option Plan
(EESOP)
EESOP is an employee option
scheme. Options to acquire
Elders shares were granted to
selected eligible group
executives at market (or
premium) price, subject to a
minimum of three years
service.
Elders Loan
Share Plan
(ELSP)
Elders ‘Save
as You Earn’
Plan (SAYE)
The ELSP was designed to
provide an equity participation
opportunity for all selected
eligible group employees.
Shares were provided and paid
for by way of a non-recourse,
interest free loan. Dividends are
used to repay the loan. Shares
vest three years after issue.
There are no performance
conditions once issued.
No shares were issued under
the ELSP during the financial
year.
The SAYE plan is a deferred
benefit employee share
scheme, designed to enable
employees to ‘sacrifice’
remuneration on a pre-tax
basis and receive Elders shares
in-lieu. Elders makes no
contribution to this plan other
than funding the costs of
administration.
No shares were issued under
the SAYE Plan during the
financial year.
E3. Current Equity Saving Schemes
Name
of Plan
Description
Eligibility
Criteria
Number of
Participants as
at 30 September
2010
Number of
Participants as
at 30 September
2011
Number of Shares /
Options / Rights
Outstanding as
at 30 September
2010
Number of Shares /
Options / Rights
Outstanding as
at 30 September
2011
Deferred
Employee
Share Plan
(DESP)
Implemented in 2011, this plan
allowed for participants to
salary sacrifice their pay to
acquire restricted shares.
All permanent
employees
N/A
19
N/A
39,980
45
E4. Retention Schemes
Name
of Plan
Description
Eligibility
Criteria
Number of
Participants as
at 30 September
2010
Number of
Participants as
at 30 September
2011
Number of Shares /
Options / Rights
Outstanding as
at 30 September
2010
Number of Shares /
Options / Rights
Outstanding as
at 30 September
2011
By invitation
only.
0
15
0 (1)
5,793,595
Discretionary N/A
Discretionary N/A
6
15
Nil
Nil
$523,238 paid on 15
October 2011
$1,247,161
To retain the services of certain
key employees during the
period of Company “turn-
around”. 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.
Retention cash incentives
for key Forestry employees
who remained employed at
15 October 2011.
Retention cash incentives
for key Forestry employees
who remain employed at
15 October 2012 or who cease
employment before that date
for a reason other than serious
misconduct or resignation.
Retention
Plan
(general)
Retention
Plan
(Forestry
Scheme 1)
Retention
Plan
(Forestry
Scheme 2)
Notes:
(1) In the 2010 Remuneration Report, the retention plan was disclosed on a provisional basis. As a result, a valuation of the service rights had not
been performed and no expense was recognised at September 2010. Upon final accounting and receipt of a valuation, the grant date of the
retention rights was deemed under accounting standards to be 15 October 2010, and as no retention rights were issued in 2010, it was
appropriate that no accounting expense was recorded in relation to retention rights in 2010.
E5. Discussion of Long Term Incentive Plans
(a) General
As disclosed in last year’s Remuneration Report, the EESOP has been replaced by the ELTIRP as the Company’s principal Long Term Incentive
Plan. The ELTIRP is based on the performance rights scheme for the CEO approved by shareholders at the AGM of the Company on 18
December 2009.
The Company envisages that none of the options remaining on issue under the EESOP will become exercisable given the effect of the 2009
consolidation of the Company’s shares on the exercise price of those options.
A number of senior executives (including all key management personnel) have a contractual right to participate in ELTIRP up to certain percentages
of TFR (which differ by employee). However, notwithstanding the right to participate in the ELTIRP, all awards (other than under
the CEO’s Long Term Incentive Plan which was approved by shareholders at the Company’s 2009 AGM) remain at the Board’s discretion.
(b) Dealing in Incentives and Equity
To prevent distortion of the functioning of the Company’s long term incentives, the Company’s Securities Trading Policy prohibits employees from
entering into arrangements to protect the value of unvested awards convertible to equity (for example performance rights under the LTIRP), or
vested awards subject to disposal restrictions.
Further, key management personnel are not permitted to deal in the Company’s securities without prior permission from the Company and only
during trading windows and are required to disclose all dealings on an annual basis. The measures are designed principally to manage insider
trading risk, but also go some way to aligning the interests of Key Management Personnel with the Company’s security holders generally.
46
(c) Performance Hurdles
The Company has adopted a relative Total Shareholder Return (TSR) performance hurdle to align the interests of the CEO 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
10 November 2009
856,808
$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, as at 10 November 2010 and on or about 10 November 2011.
Each performance right, which is issued at no cost to Mr Jackman,
will, if they vest, constitute the right to acquire 1 ordinary share
in the Company. The issue as at 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.
The vesting of these performance rights depend on the Company’s Total
Shareholder Return (TSR) performance relative to the ASX/S&P 200
Accumulation Index, as determined by the following schedule:
Relative TSR % of Tranche that vests
Below 50th percentile Nil
At 50th percentile 50%
50th to 75th percentile Pro-rata
At 75th percentile 100%
10 November 2010
878,852
$1.776
These rights will be tested as set out below.
Tranche 1 (2010 Allocation)
TSR performance is measured over the two years from 10 November
2010 to 10 November 2012.
Tranche 2 (2010 Allocation)
TSR performance is measured over the three years from 10 November
2010 to 10 November 2013.
Tranche 3 (2010 Allocation)
TSR performance is measured over the four years from 10 November
2010 to 10 November 2014.
These performance rights vest according to the same schedule
applying to the 2009 allocation.
47
(c) Performance Hurdles (continued)
Performance Conditions under the CEO and Executive LTIPs
Issue Date
Number of Performance
Rights Granted
Denominator
Hurdle Description
CEO LTIP Grants
10 November 2011
834,765
$1.776
These rights will be tested as set out below:
Tranche 1 (2011 Allocation)
TSR performance is measured over the two years from 10 November
2011 to 10 November 2013.
Tranche 2 (2011 Allocation)
TSR performance is measured over the three years from 10 November
2011 to 10 November 2014.
Tranche 3 (2011 Allocation)
TSR performance is measured over the four years from 10 November
2011 to 10 November 2015.
These performance rights will vest according to the same schedule
applying to the 2009 and 2010 allocations.
The executive performance rights LTIP operates in the same way as the
CEO performance rights LTIP except in relation to the grant formula.
The maximum percentage of total fixed remuneration (TFR) of the
grants varies by employee, the more senior the executive the greater
the percentage.
Key Management Personnel LTIP (Performance Rights) Grant
10 November 2010
5,546,587
$0.646
Relationship between Elders’ Financial Performance and Executive Rewards
Short Term Incentives
STI payments are awarded to executives on achievement of a range of financial and non-financial performance targets. The following table shows
the Company’s performance in relation to a number of financial and operational performance measures over a 5 year period.
Performance Measure
($ millions)
2011
2010
2009
(to 30/9/09)
2009
(to 30/6/09)
2008
2007
Sales Revenue
Underlying EBIT
Statutory Profit
Cashflow from
Operating Activities
2,358.7
2,154.4
3,540.1
2,902.0
3,312.1
3,228.5
33.7
(395.3)
(23.8)
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
As none of the Elders’ business units met their performance targets for the financial period, none of the key management personnel were awarded
STI payments in respect of the period.
Long Term Incentives
Other than general issues of options under the EESOP, LTIs only vest when the Company achieves superior returns for shareholders as measured
by relative TSR.
48
(a) Relative Total Shareholder Return (TSR)
Elders’ TSR has underperformed the ASX/S&P 200 Accumulation Index (All and Industrials) over the most recent financial period and on a
cumulative basis over the period from 2007 to 2011.
Elders’ relative TSR performance against these two comparator groups is as follows:
Absolute TSR %
Cumulative TSR %
80%
40%
0%
(40%)
%
R
S
T
e
t
u
l
o
s
b
A
)
%
(
R
S
T
e
v
i
t
a
l
u
m
u
C
80%
40%
0%
(40%)
(80%)
(120%)
(160%)
(200%)
(80%)
2007
2008
2009
2010
2011
(240%)
2007
2008
2009
2010
2011
Elders
ASX200
ASX200 Industrials
Source: Capital IQ
Notes:
Elders
ASX200
ASX200 Industrials
1. Each period consists of 12 months total shareholder return from, in the years 2007 and 2008, 1 July to 30 June, in 2009 the 15 months from
1 July 2008 to 30 September 2009 (to account for change in Elders financial year end in that year) and in 2010 and 2011, 1 October to 30
September.
Factors contributing to the calculation of TSR include dividends and share price. The history of both for the last 5 years is set out below:
Dividend History
Dividend
2011
2011
2010
2010
2009
2009
2008
2008
2007
2007
Type
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
Franking Rate
-
Nil
-
-
Nil
-
-
Nil
-
-
Nil
-
-
Nil
-
-
28/10/08
1/4/08
24/10/07
5/04/07
Nil
0.0550
0.0400
0.0550
0.0400
-
100.00
100.00
100.00
100.00
Share Price History 2006-2011
$
30.25
25.25
20.25
15.25
10.25
5.25
0.25
6
0
l
i
r
p
A
6
0
y
l
u
J
6
0
y
r
a
u
n
a
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
1
1
y
r
a
u
n
a
J
1
1
l
i
r
p
A
1
1
y
l
u
J
49
(b) Other LTIP Performance Hurdles for Senior Executives
Because no ELTIRP rights reached a testing date in the current financial period, no rights required testing against hurdles in that 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.
Section 4. Nominated Executives’ Contract Terms
Formal employment contracts have been entered into with the Chief Executive and each of the 7 key management personnel. A summary of the
key terms of those employment contracts 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 LTIRP
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 and Human Resources
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(1)
Termination Payments
(only where Termination
by Company)(1)
Short and Long Term Incentives
(refer to sections 3D and 3E above)
M Jackman
Elders Limited
February
2010
12 months
notice
12 months
notice
Payment in lieu of notice
based on Base Salary
Discretion of Board to
pay portion of STI
and LTI
M Hosking
Elders Limited
14 April 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
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
Discretion of Board
to pay portion of STI
and LTI
V Erasmus
Elders Forestry
Pty Ltd
23 March
2006 (as
amended)
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
STI: May earn up to 120% of TFR if
Elders Limited achieves financial and
non-financial KPIs
LTI: May earn up to 150% of TFR in
Performance Rights if Elders Limited
achieves financial and non-financial
KPIs(2)
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 TFR in
Performance Rights if Elders Limited
achieves financial and non-financial KPIs
STI: May earn up to 80% of fixed
remuneration plus superannuation if
business unit achieves budget EBIT
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 Sept 2013
STI: May earn up to 80% of fixed
remuneration if business unit achieves
agreed KPIs and outperforms budget
EBIT
LTI: May earn up to 60% of TFR in
Performance Rights if Elders Limited
achieves financial and non-financial KPIs
50
Name
Employing
Company
Date of
Contract
Termination
by Elders
(without
cause)
Termination
by
Employee(1)
Termination Payments
(only where Termination
by Company)(1)
Short and Long Term Incentives
(refer to sections 3D and 3E above)
S McClure
Elders Limited
7 November
2005
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
S Hughes
Elders Limited
21 July 2008 12 months
notice
6 months
notice
Payment in lieu of notice
based on Base Salary
A Dage
Elders Limited
1 July
2010
12 months
notice
6 months
notice
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(3)
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
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 TFR in
Performance Rights if Elders Limited
achieves financial and non-financial KPIs
STI: May earn up to 80% of fixed
remuneration if the group achieves
agreed KPIs and outperforms budget
EBIT
LTI: May earn up to 60% of TFR in
Performance Rights if Elders Limited
achieves financial and non-financial KPIs
STI: May earn up to 80% of
fixed remuneration if the group achieves
agreed KPIs and outperforms budget
EBIT
LTI: May earn up to 60% of TFR 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 TFR in
Performance Rights if Elders Limited
achieves financial and non-financial KPIs
Notes:
(1) Each of the nominated executives appearing in this table is entitled to terminate their contracts – on 3 months notice – if, following a
shareholder gaining voting power greater than 50% or a sale of substantially all of the Company, there is a material diminution in the roles and
responsibility of the executive. If the executive chooses to exercise that right of termination, the Company will pay the executive the equivalent
of 12 months base salary.
(2) Given the structure of Mr Jackman’s long term incentive scheme, which imposes a floor on the denominator of the issue formula that is
significantly in excess of the current share price, the maximum potential earnings under that scheme is theoretical only.
(3) Mr Tanti ceased employment on 30 June 2011.
51
Section 5. Remuneration Disclosure Tables
Table 5a. Details of executive directors’ and key management personnel remuneration for the 2010 and 2011 financial years
(A$)
Short Term Payments
Value of
Share Based
Incentives
Long Term
Post
Employment
Termination
Benefits
Total
Remuneration
Total
Performance
Related
Base Salary
Bonus
Other
Non
Monetary
Options(1) Performance
Rights (1)
M Jackman
M Hosking
M De Wit
V Erasmus
S McClure
S Hughes
2011
2010
2011
2010
2011
2010
2011
2010
2011
2010
2011
2010
2011
2010
2011
2010
2011
2010
R Tanti
M Guerin (6)
Total
Notes:
1,069,021
1,012,680
670,625
630,533
0
0
0
0
641,250
641,250
0
266,500 (5)
754,091(7)
523,094
348,008
322,571
451,851
371,560
286,236 (4)
370,104
0
482,065
0
0
0
0
0
0
0
0
0
0
0
2,893
2,904
2,893
2,904
0
0
0
6,025
2,893
2,904
2,893
2,904
0
2,178
2,904
0
1,017,083(2)
0
0
0
26,243
5,931
5,931
1,582
11,423
2,372
2,372
0
0
0
0
20,928
13,750
41,473
0
(73,290)
9,885
989,762
A Dage (3)
2011
634,656
126,039
34,841
401,228
0
0
0
0
0
137,752
0
161,520
0
Long
Service
Leave
27,817
15,599
16,524
3,206
18,510
54,057
9,602
12,433
9,106
11,128
10,965
3,453
Superannuation
15,343
14,645
18,750
30,390
25,000
25,000
15,343
13,440
21,369
14,446
36,148
33,440
15,343
11,399
14,645
0
40,850
0
0
0
0
0
0
199,188 (7)
0
0
0
0
0
0
333,510 (4)
0
0
695,975(6)
247,313
15,856
0
0
0
0
0
1,922
0
0
10%
50%
36%
0%
0%
29%
1%
1%
27%
3%
25%
1%
27%
0%
0%
0
-6%
1,241,113
2,097,752
1,110,020
667,033
684,760
1,013,050
984,155
560,923
520,710
362,472
665,749
413,729
913,168
633,323
389,575
0
1,166,528
6,752,998
6,671,062
4,855,738
4,353,857
0
266,500
1,073,852
34,841
108,380
101,798
158,695
186,856
532,698
695,975
(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 is not related
to, nor indicative of the benefit (if any) that may ultimately be realised by each Senior Executive should the options or rights 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) These options were forfeited upon the approval of Mr Jackman’s Performance Rights LTIP at the 2009 AGM. Mr Jackman received no value
for the options which are recorded here for accounting purposes only.
(3) Mr Dage was not key management personnel in 2010.
(4) Mr Tanti ceased employment on 30 June 2011 and received a termination payment of $333,510 in lieu of notice of 10 months in accordance
with his contract of employment.
(5) Payment pursuant to the terms of the STIP described on pages 43 and 44 of this report.
(6) Mr Guerin ceased employment on 1 July 2010 and received a termination payment of $695,975 in lieu of notice of 12 months in accordance
with his contract of employment.
(7) Mr Erasmus received a cash incentive of $177,562 as part of the Retention Plan (Forestry Scheme 1). As this amount was paid in October
2011, it has not been disclosed in the table on page 39 of this report. If made redundant, Mr Erasmus will receive a redundancy payment no
greater than the equivalent of 12 months base salary. Whilst the amount of the payment depends on future events and is therefore not capable
of calculation, the maximum amount of any payment (not being payment in lieu of notice) is set out in the Termination Benefits column.
52
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
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
Non-executive Directors
J C Ballard(1)
J H Ranck(1)
R G Grigg(1)
2011
2010
2011
2010
2011
2010
I G MacDonald(1)
2011
M C Allison
R H Wylie
A Salim(2)
J Fox(3)
G D Walters(4) (1)
S Gerlach(5)
C E Bright(6)
Total
2010
2011
2010
2011
2010
2011
2010
2011
2010
2011
2010
2011
2010
2011
2010
2011
2010
250,000
0
128,334
24,000
16,490
3,156
52,668
26,000
0
0
6,000
0
0
3,354,558
0
2,677
0
16,100
0
60,683
21,479
8,146
474,971
3,495,320
0
250,000
0
104,334
0
13,334
0
26,668
0
0
0
6,000
0
0
0
13,334
0
13,334
0
13,334
0
13,333
0
453,671
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
250,000
250,000
128,334
128,334
16,490
16,490
52,668
52,668
0
0
6,000
6,000
0
250,000
250,000
128,334
128,334
16,490
16,490
52,668
52,668
0
0
6,000
6,000
0
3,354,558
3,354,558
0
16,011
0
29,434
0
74,017
(6)
21,479
21,479
474,971
3,948,991
0
16,011
0
29,434
0
74,017
0
21,479
453,492
3,948,991
53
Table 6a. Share movements non-executive Directors and executives (continued)
Executives
M Jackman (1)(7) 2011
M Hosking
M De Wit
V Erasmus
S McClure
S Hughes
2010
2011
2010
2011
2010
2011
2010
2011
2010
2011
2010
A Dage(8)
2011
2011
2010
2011
2010
2011
2010
R Tanti(9)
M Guerin(10)
Total
Notes:
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
107,168
13,000
0
0
18,537
5,203
1,998
1,998
7,697
1,030
17,087
10,420
90,000
0
0
0
27,070
242,487
58,721
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
0
0
0
13,334
0
0
0
6,667
0
6,667
0
0
0
0
26,667
0
147,503
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
Balance of
shares held
at end of
financial period
Balance of
shares held at
date of signing
Remuneration
Report
107,168
107,168
107,168
107,168
0
0
18,537
18,537
1,998
1,998
7,697
7,697
17,087
17,087
0
0
18,537
18,537
1,998
1,998
7,697
7,697
17,087
17,087
90,000
90,000
0
0
0
0
0
0
53,737
53,737
242,487
206,224
242,487
206,224
(1)
Shares are held in name of spouse, jointly held or family superannuation company in which the director is a beneficiary.
(2) Mr Salim resigned on 30 October 2009. Balance is at the date of resignation.
(3) Mr Fox retired as a director on 18 December 2009. Balance is at the date of retirement.
(4) Mr Walters retired on 31 March 2010. Balance is at the date of retirement.
(5) Mr Gerlach retired as a director on 21 September 2010. Balance is at the date of retirement.
(6) Mr Bright retired as a director on 16 December 2010. Balance is at the date of retirement.
(7)
Mr Jackman also has an interest in 1,000 Elders Hybrid convertible unsecured notes acquired by his family superannuation company
on 11 September 2009.
(8) Mr Dage was not key management personnel in 2010.
(9) Mr Tanti ceased employment on 30 June 2011. Balance is at date of cessation.
(10) Mr Guerin ceased employment on 1 July 2010. Balance is at date of cessation.
54
Table 6b. Aggregate Long Term Incentive Plan opportunities received and changes
EESOP holdings of Directors and Key Management Personnel
2011
Balance at
beginning of period
Options Granted
Options Lapsed,
Surrendered or
Directors
M Jackman
Key Management Personnel
M De Wit
V Erasmus
M Hosking
S McClure
S Hughes
A Dage(2)
R Tanti(3)
Total
0
40,000
150,000
0
22,500
15,000
0
0
227,500
foregone to
30 September 2011(1)
Balance at
30 September 2011
Exercisable
0
0
0
0
0
0
0
0
0
0
0
0
10,000
0
0
0
0
0
0
30,000
150,000
0
22,500
15,000
0
0
30,000
75,000
0
12,500
0
0
0
10,000
217,500
117,500
2010
Balance at
beginning of period
Options Granted
Options Lapsed,
Surrendered or
foregone to
30 September 2010
Balance at
30 September 2010
Exercisable
Directors
M Jackman
Key Management Personnel
M De Wit
V Erasmus
M Guerin(5)
M Hosking
S McClure
S Hughes
R Tanti
Total
Notes:
400,000
50,000
150,000
150,000
0
22,500
15,000
0
787,500
0
0
0
0
0
0
0
0
0
400,000 (4)
0
0
10,000
0
150,000
0
0
0
0
40,000
150,000
0
0
22,500
15,000
0
20,000
75,000
0
0
5,000
0
0
560,000
227,500
100,000
(1) The value of options lapsed, surrendered or foregone was $36,209.
(2) Mr Dage was not key management personnel in 2010.
(3) Mr Tanti ceased employment on 30 June 2011.
(4) Mr Jackman agreed to forego these options upon approval of his Performance Rights LTIP at the 2009 AGM.
(5) Mr Guerin ceased employment on 1 July 2010.
No options were exercised in the financial period.
55
Table 6c. Current Long Term Incentive Plan opportunities (by offer)
EESOP
As disclosed elsewhere in this Report, the EESOP is a suspended, and to be discontinued, plan. No options were issued or vested in the financial
period. Accordingly, the Company is of the view that the EESOP is unlikely to provide any future opportunities to participants.
Performance Rights LTIP
2011
Directors
Granted
Performance
Rights
(Number)
Vested
Performance
Rights
(Number)
Grant Date
Tranche Value at Grant
Date ($) per
right
Last Exercise
and Expiry
Date
Expensed at
30 September
2011 ($)
Performance
Rights as % of
Remuneration
0.11
10 November
2011
0.12
10 November
2012
0.12
10 November
2013
0.11
10 November
2012
0.12
10 November
2013
0.12
10 November
2014
0.11
10 November
2013
0.12
10 November
2014
0.12
10 November
2015
126,039
10%
0.17 to 0.24
10 November
44,252
4%
2012 to
10 November
2014
0.17 to 0.24
10 November
22,421
4%
2012 to
10 November
2014
0.17 to 0.24
10 November
29,714
4%
2012 to
10 November
2014
0.17 to 0.24
10 November
38,352
4%
2012 to
10 November
2014
0
0
0
-
-
-
0
0
0
0
0
0
1
2
3
1
2
3
1
2
3
-
-
-
-
-
-
-
M Jackman
285,603
285,603
285,603
292,951
292,951
292,951
278,255
278,254
278,254
0
0
0
0
0
0
0
0
0
10 November
2009
10 November
2009
10 November
2009
10 November
2009
10 November
2009
10 November
2009
10 November
2009
10 November
2009
10 November
2009
Key Management Personnel
M Hosking
696,325
0
29 June 2011
S McClure
352,809
0
29 June 2011
S Hughes
467,559
0
29 June 2011
A Dage (1)
603,482
0
29 June 2011
M De Wit
V Erasmus
R Tanti(2)
Notes:
0
0
0
0
0
0
-
-
-
(1) Mr Dage was not key management personnel in 2010.
(2) Mr Tanti ceased employment on 30 June 2011.
No Performance Rights exercised or lapsed during the financial year.
56
Table 6c. Current Long Term Incentive Plan opportunities (by offer) (continued)
Performance Rights LTIP
2010
Directors
Granted
Performance
Rights
(Number)
Vested
Performance
Rights
(Number)
Grant Date
Tranche Value at Grant
Date ($) per
right
Last Exercise
and Expiry
Date
Expensed at
30 September
2010 ($)
Performance
Rights as % of
Remuneration
M Jackman
285,603
285,603
285,603
292,951
292,951
292,951
278,255
278,254
278,254
Key Management Personnel
M Hosking
S McClure
S Hughes
M De Wit
V Erasmus
R Tanti
M Guerin (1)
Notes:
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
10 November
2009
10 November
2009
10 November
2009
10 November
2009
10 November
2009
10 November
2009
10 November
2009
10 November
2009
10 November
2009
-
-
-
-
-
-
-
1
2
3
1
2
3
1
2
3
-
-
-
-
-
-
-
(1) Mr Guerin ceased employment on 1 July 2010.
0.11
10 November
2011
0.12
10 November
2012
0.12
10 November
2013
0.11
10 November
2012
0.12
10 November
2013
0.12
10 November
2014
0.11
10 November
2013
0.12
10 November
2014
0.12
10 November
2015
34,841
2%
0
0
0
0
0
0
0
-
-
-
-
-
-
-
0
0
0
0
0
0
0
0
0
0
0
0
0
0
57
Table 6c. Current Long Term Incentive Plan opportunities (by offer) (continued)
Retention Plan
2011
Granted
Service
Rights
(1)
(Number)
Grants
Forfeited
(Number)
Closing
Rights
(Number)
Vested
Service
Rights
(Number)
Equity
Vesting
Date
Value at
Grant Date
($) per
Rights
Expensed at
30 September
2011 ($)
Service Rights
as % of
Remuneration
Executives
M Hosking
1,518,839
S McClure
490,702
S Hughes
560,802
A Dage
889,077
0
0
0
0
1,518,839
490,702
560,802
889,077
390,171
390,171
0
3,849,591
390,171
3,459,420
R Tanti
Totals
Notes:
0
0
0
0
0
0
1 August
2013
1 August
2013
1 August
2013
1 August
2013
-
-
0.61
356,976
0.61
115,331
0.61
131,806
0.61
208,961
-
-
-
813,074
32
22
20
23
-
-
(1) In the 2010 Remuneration Report, the retention plan was disclosed on a provisional basis. As a result a valuation of the service rights had not
been performed and no expense was recognised at September 2010. Upon final accounting and receipt of a valuation, the grant date of
the retention rights was deemed under accounting standards to be 15 October 2010, and as no retention rights were issued in 2010, it was
appropriate that no accounting expense was recorded in relation to retention rights in 2010.
No Retention Rights were exercised during the financial year.
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 arm’s length.
58
Discussion and Analysis
of 2011 Financial Results
Reconciliation of Statutory and
Underlying Profit
The statutory loss of $(395.3) million to shareholders
for the 12 months to 30 September 2011 and the prior
corresponding period (a loss of $(217.6) million) both
included a number of items considered non-recurring
as they are either the result of ‘one-off’ events
and unrelated to operating performance or relate to
discontinued operations.
Calculation of underlying profit by excluding these
items is considered to enable more meaningful
comparison of results between periods by providing
like-for-like figures for continuing operations that
are not impacted by anomalous or one-off events.
Underlying profit for the twelve months to
30 September is calculated as follows:
Statutory and Underlying profit reconcliation
$million 12 months to 30 September:
2011
2010
Reported profit/(loss) after tax
(395.3)
(217.6)
Non-recurring items after tax:
made up of:
Rural Services
Forestry
Automotive
Corporate
Tax impact (Net)
Underlying NPAT to shareholders
(22.1)
12.8
(391.8)
(158.3)
(0.6)
0.8
(38.1)
(53.3)
52.6
4.7
(4.5)
(15.1)
The non-recurring items for the 12 months to
30 September 2011 comprise:
• Rural Services-related items of $(22.1) million
before tax:
− write-off of the carrying value of Elders’
shareholding in HiFert $(10.6) million
− a total charge of $(13.9) million in respect of
the ETG joint venture, recognising Elders’ share
of trading losses and the write-off of capital.
ETG has been divested
− other results from discontinued operations of
$(2.3) million in respect of BWK and EWI wool
tops trading, the Merino Topline JV, NZ real estate
and MV Torrens
− project costs of $(6.4) million attributable to Go-
to-Client and other projects
− costs imposed by the Australian government’s
temporary suspension of live export to Indonesia
and live export onerous contracts $(2.1) million
− redundancy and closure costs relating to wool
trading and international representative offices of
$(2.5) million
− net loss on sale of $(2.6) million on the
divestment of the MV Torrens, BWK assets and
selected residential real estate franchises
− Rural Bank-related items totalling $22.3 million
comprising net gain on sale ($17.7 million) and
dividend ($6.4 million), net of other costs
− other items totalling $(4.0) million including asset
impairment, restructuring and write-off, non-
recurring legal fees and losses
• Forestry related items totalling $(391.8) million
before tax, chiefly arising from the decision to
withdraw from the sector:
− fair value adjustments of $(133.7) million to
investment property made as a result of the
realignment of carrying value from an ongoing
forestry operation to estimated fair value for
realisation following the reclassification of forestry
assets as held for sale
− fair value adjustments of $(43.8) million to other
assets (receivables, own trees, property plant
and equipment, inventory, non-current assets,
pre-payment)
− provisions for onerous contracts of $(47.3) million
− fair value adjustments of $(148.0) million to
estimates of accrued income arising from lower
anticipated prices for woodfibre and reduction to
anticipated yields arising from cyclone damage
in the first half-year
− Other provisions of $(7.4) million including
provisions for make-good and redundancies
− losses of $(7.2) million arising from the sale of
ex-plantation land in Central Queensland
− results of discontinued operations for FY11 of
$(4.4) million.
59
Forestry assets have been classified as
discontinued and as current assets held for sale.
Accordingly, results from these assets will be
treated as non-recurring.
• Automotive related non-recurring items of
$(0.6) million profit before tax in relation to facility
fees. As this is included in borrowing costs, it has
nil impact at the EBIT level.
• Corporate items of $(38.1) million before tax:
− costs of $(29.1) million incurred in completing
successive debt restructurings during the period.
This includes refinancing costs of $(7.2) million;
a further $(15.4) million incurred through fair
value adjustments and write off of the debt
restructure provision associated with USPP
debt repaid during the year and $(6.5) million
in the close-out of USPP swap positions
− interest of $(2.8) million [($13.3) million in
2010] attributable to debt that was compulsorily
cancelled following the completion of the sale
of the Rural Bank shareholding
− impairment of non-core investments of
$(4.1) million
− legal and other project costs of $(2.1) million.
• A tax benefit of $52.6 million is recognised in
connection with non-recurring items. This figure
includes a $14.1 million gain arising from the
decision by the ATO to allow bad debt deductions
previously disallowed in the company’s 2003 tax
return. The tax benefit of other non-recurring items
has been reduced by non-deductible impairments
and fair value adjustments.
− The tax arising in relation to a capital gain on the
sale of Rural Bank of $6.6 million has been
offset by available capital losses, resulting in no
tax liability.
Key Profit and Loss Items
Key profit and loss outcomes for the year include:
• Continuing sales revenue of $2,263.1 million,
up $305.0 million (16%):
− Rural Services up $246.7 million
− Automotive up $58.3 million.
• Discontinuing sales revenue of $95.6 million for
the period relates to Forestry ($57.4 million), wool
tops trading ($25.7 million) and divestment of
MV Torrens ($12.5 million).
• Depreciation and amortisation from continuing
operations was unchanged from the previous year.
• Income from continuing joint ventures and
associates was up $1.6 million to $12.1 million:
− Elders Insurance distribution joint venture up
$0.6 million
− AWH up $0.9 million.
• Discontinued income from associates of
$(8.9) million is attributable to the Company’s
divested shareholding in ETG.
• Reported net borrowing costs of $(55.6) million
includes underlying ($(26.6) million) and non-
recurring borrowing costs ($(29.0) million)
• Non-recurring borrowing costs of $(29.0) million
comprising $(16.4) million relating to the write-
off of debt restructuring provision and fair value
adjustments attributable to the debt paid down
in the refinancing conducted during the year;
costs of $(6.5) million to close out swap positions
on repaid USPP debt, refinancing costs of
$(3.1) million; interest of $(2.8) million attributable
to debt that was compulsorily cancelled following
the completion of the sale of the Rural Bank
shareholding and other net costs of $(0.2) million.
• Underlying net borrowing costs of
$(26.6) million were up $10.3 million higher.
Underlying net borrowing costs have been adjusted
to exclude the interest ($(2.8) million in FY11
and $(13.3) million in FY10) that was attributable
to the Rural Bank shareholding, which has been
reallocated to non-recurring borrowing costs above.
Other borrowing costs largely relate to facility fees.
60
Cash Flow
Operating cash flow for 2011 featured positive
cash generation from Rural Services and Automotive
operations which was offset by larger aggregate
outflows from Forestry and non-operating activities
(principally through interest and borrowing costs)
resulting in an outflow for the Company as a whole.
Features of operating cash flow results include:
• Rural Services’ cash flow from operating activities of
$59.5 million compared with $69.1 million in 2010
• Forestry recorded a cash outflow from operations of
$(28.8) million compared with $(29.3) million
in 2010
• Automotive operations generated a lower
operating cash flow of $15.4 million than the 2010
comparative of $35.6 million
• Investment and other cash flow from operations
includes a $36.3 million increase in working capital
brought by expansion of the trade debtor financing
facility and interest and finance costs.
Investing cashflow of $133.8 million was achieved
through the proceeds of the sale of equity accounted
investments (Rural Bank), forestry investment
properties and property, plant and equipment.
Financing cash flows of $(108.4) million was
essentially comprised of the net repayment of debt
resulting from scheduled pay-downs and refinancing
offset by inflows from new finance facilities.
Balance Sheet and Finance
Significant movements during the 12 months to
30 September include:
• Current receivables rose by $69.6 million due to
increased Rural Services sales and debtor days.
• Current inventories rose by $13.2 million, due
to Rural Services inventories which were higher to
deal with strong ongoing demand, especially for
Ag Chem supplies.
• Assets held for sale rose by $167.8 million reflecting
the addition of Forestry assets pursuant to the
decision to withdraw from the forestry sector and
the writing-down of Elders’ shareholding in HiFert
to nil. The Forestry assets principally comprise
investment property of $114.6 million, accrued
income of $36.9 million plus receivables, property
plant and equipment and equity accounted
investments.
• Other non-current receivables fell by $182.8 million.
The reduction is principally attributable to the
revaluation to estimates of accrued income to reflect
lower woodchip prices and price expectations and
classification of the asset as being held for sale.
• Investments in associates and joint ventures
reduced by $146.8 million reflecting the divestment
of shareholdings in Rural Bank and ETG.
• Investment properties declined from
$265.0 million to $3.0 million as a result of sales
and fair value adjustments to realign fair value of
forestry properties (from that for an ongoing forestry
operation to estimated fair value for realisation)
and the reclassification of the assets as being held
for sale.
• Intangibles of $250.2 million principally comprise
goodwill and intangible value attributed to the Elders
brand and rural services network, Plexicor and
automotive product development costs.
• Total provisions rose by $41.8 million, principally
due to the provisioning made for onerous contracts
necessitated by the decision to withdraw from
forestry operations.
• Net tangible assets declined from $1.50 to $0.55
which is largely attributable to impact on the
balance sheet of forestry asset revaluations.
Indebtedness
Features of net debt movements over the 12 months
to 30 September:
• Net debt reduced by $89.7 million (21%).
• Gross borrowings were reduced by $70.5 million
(14%) to $427.1 million due to the paydown in
bank debt through scheduled repayments and in
refinancings completed in December 2010 and
September 2011.
• Notwithstanding lower debt levels, Gearing rose
from 43% to 57%, essentially due to the reduction
in Shareholders’ Equity brought by the non-
recurring items associated with Forestry.
61
10 Year Summary Financial Results
$ million year ended
unless otherwise indicated
Profitability
Sales revenue
Total revenue
Reported EBIT* by Segment
Rural Services
Financial Services
Forestry
Automotive Systems
Property
Other
Total EBIT
Underlying** EBIT
Underlying** profit before tax
Tax (expense)/benefit
Abnormal & non-recurring items
after tax
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 2011
Sept 2010
2009
2008
2007
June
2006
2005
2004
2003
2002
2,358.7
2,154.4
2,902.0
3,312.1
2,421.0
2,251.0
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
-202.5
-388.5
-47.8
4.2
-
13.7
-
-391.8
-158.6
15.3
-
-16.7
-389.0
33.7
7.1
0.8
-400.0
-3.2
-386.7
4.7
-23.8
604.7
-
-
-
-
-
15.9
-
-50.8
-179.8
2.6
-13.7
3.7
-5.1
-217.6
-15.1
-110.5
1,006.1
-
-
-
-
-
0.29
130.1
0.39^
175.0
-221.4
22.3
-63.4
-59.8
-
-61.7
-384.0
16.8
-35.0
-6.2
20.9
22.4
61.4
26.2
-
-36.9
94.0
171.7
114.8
21.0
-1.9
-415.4
-26.9
9.6
36.4
84.2
56.3
27.2
61.6
9.5
30.4
-16.2
168.8
169.4
129.4
20.2
-1.0
-2.8
105.4
106.4
65.8
26.9
39.9
16.3
16.3
-8.4
156.8
157.1
118.2
-21.4
-0.9
-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
26.8
-
32.2
99.3
-3.3
-11.8
143.2
131.3
106.4
-47.9
-13.2
-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
-12.2
-44.2
-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
-
-
19.3
0.3
-5.5
166.4
84.0
65.0
-38.5
82.4
-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
-13.9
8.0
-2.9
62.4
56.5
113.8
749.1
4.0
4.0
8.0
48.7
-
1.36^
836
Number of shareholders^
34,954
40,075
33,361
32,187
31,956
33,337
35,394
40,028
42,625
45,508
Ordinary shares on issue^
448,598,480 448,598,480 819,165,045 780,545,644 735,640,128 720,911,089 663,243,696 659,138,427 652,293,766 614,870,776
Share issues
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 %
-
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 and
convertible
notes
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
-88.1
-51.1
-51.51
4.82
14.5
13.1
8.9
3.6
16.2
10.2
0.8
-65.4
0.55
57%
-
-1.5
-21.6
1.50
43%
-
2.2
-55.6
0.37
104
-
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
Reported earnings before interest and tax (inclusive of non-recurring and abnormal items).
*
** 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.
62
Elders Limited
Annual Financial Report
30 September 2011
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Cash Flows
Consolidated Statement of Changes in Equity
Notes to the Consolidated Financial Statements
Corporate Information
Summary of Significant Accounting Policies
Significant Accounting Judgements, Estimates and Assumptions
1
2
3
4 Revenue and Expenses
5
Income Tax
6 Receivables
Livestock
7
Forestry
8
9
Inventory
10 Derivative Financial Instruments
11 Other Financial Assets
12 Investments in Associates and Joint Ventures
13 Property, Plant and Equipment
14 Investment Properties
15 Intangibles
16 Other Assets
17 Trade and Other Payables
18 Interest Bearing Loans and Borrowings
19 Provisions
20 Contributed Equity
21 Hybrid Equity
22 Reserves
23 Retained Earnings
24 Dividends
25 Non-controlling Interest
26 Cash Flow Statement Reconciliation
27 Expenditure Commitments
28 Contingent Liabilities
29 Segment Information
30 Supplementary Statement of Net Debt
31 Auditors Remuneration
32 Investments in Controlled Entities
33 Key Management Personnel
34 Share Based Payment Plans
35 Related Party Disclosures
36 Earnings Per Share
37 Financial Instruments
38 Business Combinations - Changes in the Composition of the Entity
39 Discontinued Operations
40 Parent Entity
41 Subsequent Events
Directors’ Declaration
Independent Auditor’s Report
64
65
66
67
68
68
85
86
88
90
92
92
93
94
94
94
96
97
98
101
102
102
105
106
106
107
108
109
109
110
111
112
113
115
117
118
123
126
127
129
130
135
139
142
142
143
144
63
Consolidated Statement of Comprehensive Income
For the Year ended 30 September 2011
Continuing operations
Sales revenue
Cost of sales
Other revenues
Expenses
Share of profit of associates and joint ventures
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
Note
2011
$000
2010
$000
4
4
4
12
4
4
4
5
2,263,116
1,958,068
(1,816,539)
(1,523,186)
20,912
22,852
(525,783)
(513,108)
12,085
10,489
(3,936)
(709)
(50,145)
(45,594)
21,792
25,201
(77,388)
(57,823)
(105,741)
(78,216)
12,074
(31,019)
(93,667)
(109,235)
39
(297,501)
(103,276)
(391,168)
(212,511)
1,381
1,384
1,239
423
(8,639)
733
730
448
4,427
(6,728)
Total comprehensive income/(loss) for the period
(386,741)
(219,239)
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)
4,182
5,117
23
(395,350)
(217,628)
(391,168)
(212,511)
4,236
5,047
(390,977)
(224,286)
(386,741)
(219,239)
36
36
36
36
36
36
(88.1)¢
(88.1)¢
(51.1)¢
(51.1)¢
(21.8)¢
(21.8)¢
(26.9)¢
(26.9)¢
(66.3)¢
(66.3)¢
(24.3)¢
(24.3)¢
The accompanying notes form an integral part of this consolidated statement of comprehensive income.
64
Consolidated Statement of Financial Position
As at 30 September 2011
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 consolidated statement of financial position.
Note
2011
$000
2010
$000
26(b)
81,614
79,985
6
7
8
9
10
39
16
6
8
11
12
13
14
15
5
16
17
10
18
5
19
17
10
18
5
19
20
21
22
23
25
540,825
471,160
53,198
48,654
-
2,144
188,439
175,217
664
-
185,859
18,111
23,626
23,132
1,074,225
818,403
16,930
199,722
-
25,051
17,852
21,980
94,088
240,878
91,337
128,641
2,975
265,022
250,232
259,047
119,483
118,917
22,854
18,919
615,751
1,278,177
1,689,976
2,096,580
433,916
357,283
6,916
3,601
196,041
279,486
40,834
51,558
115,333
72,007
793,040
763,935
2,583
1,186
-
17,703
231,023
218,149
35,558
64,881
23,089
24,633
292,253
326,552
1,085,293
1,090,487
604,683
1,006,093
1,271,493
1,273,863
145,151
145,151
(33,592)
(35,668)
(781,322)
(380,577)
601,730
1,002,769
2,953
3,324
604,683
1,006,093
65
Consolidated Statement of Cash Flows
For the Year ended 30 September 2011
Cash flow 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
Net operating cash flows
Cash flow from investing activities
Payment for property, plant and equipment
Purchase of equity accounted investments
Payment for investment properties
Payment for intangibles
Payment for controlled entities, net of cash acquired
Payment for design and development capitalised
Proceeds from sale of non current assets held for sale
Proceeds from sale of equity accounted investments
Proceeds from sale of property, plant and equipment
Proceeds from sale of investment properties
Proceeds from sale of intangibles
Proceeds from disposal of controlled entity
Payment for 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
Proceeds from sale of reserved shares
Proceeds from borrowings
Repayment of borrowings
Principal repayments of lease liabilities
Partnership profit distributions/dividends paid
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 consolidated statement of cash flows.
66
Note
2011
$000
2010
$000
6,781,813
6,376,313
(6,770,078)
(6,473,637)
14,020
16,151
31,409
22,569
(54,408)
(53,425)
(22,292)
(21,606)
11,034
7,904
26(a)
(23,760)
(110,473)
(12,737)
(18,260)
(1,050)
(15)
(1,333)
(28,155)
(8,756)
1,081
163,910
7,357
14,550
2,745
(1,600)
(6,354)
-
5,311
(4,249)
1,020
-
5,833
4,841
-
-
91,160
(10,005)
(7,796)
(1,307)
(4,450)
3,491
-
4,053
133,829
4,999
(959)
11,630
81,126
-
-
550,000
(19,500)
421
-
64,026
111,215
(169,696)
(896,324)
(349)
(481)
(2,842)
(3,446)
(108,440)
(258,536)
1,629
(287,883)
79,985
367,868
26(b)
81,614
79,985
Consolidated Statement of Changes in Equity
For the Year ended 30 September 2011
Transactions with owners in their capacity as owners:
Tax effect on share issue costs
(2,370)
($000)
As at 1 October 2010
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
Proceeds from sale of reserved shares
Partnership profit distributions/dividends paid
Acquisition of non-controlling interest
Excess paid for purchase of non-controlling interest
Cost of share based payments
Reallocation of equity
As at 30 September 2011
As at 1 October 2009
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/dividends paid
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
Issued
capital
Reserves
Hybrid
equity
Retained
earnings
Non-
controlling
interest
Total
equity
1,273,863
(35,668)
145,151
(380,577)
3,324
1,006,093
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(395,350)
4,182
(391,168)
1,327
1,384
1,239
423
4,373
-
421
-
-
(9,958)
1,845
5,395
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
54
1,381
-
-
-
1,384
1,239
423
(395,350)
4,236
(386,741)
-
-
-
-
-
-
(5,395)
-
-
(2,370)
421
(2,842)
(2,842)
(1,765)
(1,765)
-
-
-
(9,958)
1,845
-
1,271,493
(33,592)
145,151
(781,322)
2,953
604,683
737,513
(30,765)
145,151
(158,012)
7,772
701,659
-
-
-
-
-
-
550,000
(13,650)
-
-
-
-
-
-
-
-
(217,628)
5,117
(212,511)
(8,569)
733
730
448
(6,658)
-
-
-
-
(5,480)
-
2,136
5,099
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(70)
(8,639)
-
-
-
733
730
448
(217,628)
5,047
(219,239)
-
-
-
-
-
162
-
(5,099)
-
-
550,000
(13,650)
(3,446)
(3,446)
(6,049)
(6,049)
-
-
-
-
(5,480)
162
2,136
-
1,273,863
(35,668)
145,151
(380,577)
3,324
1,006,093
The accompanying notes form an integral part of this consolidated statement of changes in equity.
67
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2011
Note 1. Corporate Information
The consolidated financial report of Elders Limited for the year ended 30 September 2011 was authorised for issue in accordance with
a resolution of the Directors on 14 November 2011.
Elders Limited (the Parent) is a company limited by shares incorporated in Australia whose shares are publicly traded on the Australian
Securities Exchange.
The nature of the operations and principal activities of the Group are described in the Directors’ Report and note 29.
Note 2. Summary 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).
The financial report has also been prepared on a historical cost basis, except for investment properties and derivative financial instruments
which have been measured at fair value, and biological assets that are measured at fair value less costs to sell.
The financial report is presented in Australian dollars and all values are rounded to the nearest thousand dollars ($’000) unless otherwise
stated.
(b) Compliance with IFRS
The financial report also complies with International Financial Reporting Standards (IFRS) as issued by the International Accounting
Standards Board.
(c) New Accounting Standards and Interpretations
(i) Changes in accounting policy and disclosures.
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 2010.
Adoption of these Standards and Interpretations did not have any impact on the financial statements or performance of the Group:
• AASB 2009-5 Further Amendments to Australian Accounting Standards arising from the Annual Improvements Project [AASB
5,8,101,107,118,136,139] effective 1 January 2010.
• AASB 2009-8 Amendments to Australian Accounting Standards – Group Cash-settled Share-based Payment Transactions [AASB 2]
effective 1 January 2010.
• AASB 2009-10 Amendments to Australian Accounting Standards – Classification of Rights Issues.
• AASB 2010-3 Amendments to Australian Accounting Standards arising from the Annual Improvements Project [AASB
3,7,121,128,131,132,139] effective 1 July 2010.
• Interpretation 19 Extinguishing Financial Liabilities with Equity Instruments.
In 2010, the Group 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.
The Group has not elected to early adopt any other new standards or amendments that are issued but not yet effective.
(ii) Accounting Standards and Interpretations issued but not yet effective.
Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet effective and have not been
adopted by the Group for the annual reporting period ending 30 September 2011. None of these are expected to have a significant effect on
the consolidated financial statements of the Group, excepting those outlined in the table below:
68
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2011
Note 2. Summary 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
• The definition now identifies a subsidiary and an associate
with the same investor as related parties of each other;
• 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
• 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.
The
amendments
are not
expected
to have any
impact on
the financial
statements.
Application
date for
Group
1 October
2011
AASB
2010-5
AASB
2010-6
AASB
2010-8
AASB
2011-9
Amendments
to Australian
Accounting
Standards
[AASB 1, 3, 4, 5,
101, 107, 112,
118, 119, 121,
132, 133, 134,
137, 139, 140,
1023 & 1038 and
Interpretations
112, 115, 127,
132 & 1042]
Amendments
to Australian
Accounting
Standards
– Disclosures
on Transfers of
Financial Assets
[AASB 1 &
AASB 7]
Amendments to
Australian
Accounting
Standards
– Deferred Tax:
Recovery of
Underlying Assets
[AASB 112]
Amendments
to Australian
Accounting
Standards
– Presentation
of Other
Comprehensive
Income [AASB 101]
This Standard makes numerous editorial amendments to a
range of Australian Accounting Standards and Interpretations,
including amendments to reflect changes made to the text of
IFRS by the IASB.
1 January
2011
These amendments have no major impact on the requirements
of the amended pronouncements.
1 October
2011
The
amendments
are not
expected
to have any
impact on
the financial
statements.
The amendments increase the disclosure requirements for
transactions involving transfers of financial assets. Disclosures
require enhancements to the existing disclosures in IFRS 7
where an asset is transferred but is not derecognised and
introduce new disclosures for assets that are derecognised but
the entity continues to have a continuing exposure to the asset
after the sale.
1 July
2011
These amendments address the determination of deferred tax
on investment property measured at fair value and introduce a
rebuttable presumption that deferred tax on investment
property measured at fair value should be determined on the
basis that the carrying amount will be recoverable through sale.
The amendments also incorporate SIC-21 Income Taxes –
Recovery of Revalued Non-Depreciable Assets into AASB 112.
1 January
2012
This Standard requires entities to group items presented in
other comprehensive income on the basis of whether they are
potentially reclassifiable to profit or loss in subsequent periods
(reclassification adjustments).
1 July
2012
1 October
2011
1 October
2012
1 October
2012
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.
The
amendments
are not
expected
to have any
impact on
the financial
statements.
69
Application
date for
Group
1 October
2013
1 October
2013
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2011
Note 2. Summary 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.
This Standard makes amendments to remove individual
key management personnel disclosure requirements from
AASB 124.
1 July
2013
AASB
2011-4
Amendments
to Australian
Accounting
Standards to
Remove Individual
Key Management
Personnel
Disclosure
Requirements
[AASB 124]
AASB 9
Financial
Instruments
AASB 9 includes requirements for the classification and
measurement of financial assets. It was further amended by
AASB 2010-7 to reflect amendments to the accounting for
financial liabilities.
1 January
2013
These requirements improve and simplify the approach for
classification and measurement of financial assets compared
with the requirements of AASB 139. The main changes are
described below.
(a) Financial assets that are debt instruments will be 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.
(b) 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.
(d) Where the fair value option is used for financial liabilities
the change in fair value is to be accounted for as follows:
• The change attributable to changes in credit risk are
presented in other comprehensive income (OCI)
• The remaining change is presented in profit or loss.
If this approach creates or enlarges an accounting mismatch in
the profit or loss, the effect of the changes in credit risk are
also presented in profit or loss.
Consequential amendments were also made to other standards
as a result of AASB 9, introduced by AASB 2009-11.
AASB 10
Consolidated
Financial
Statements
AASB 10 establishes a new control model that applies to all
entities. It replaces parts of AASB 127 Consolidated and
Separate Financial Statements dealing with the accounting for
consolidated financial statements and UIG-112 Consolidation
– Special Purpose Entities.
1 January
2013
The new control model broadens the situations when an entity
is considered to be controlled by another entity and includes
new guidance for applying the model to specific situations,
including when acting as a manager may give control, the
impact of potential voting rights and when holding less than
a majority voting rights may give control. This is likely to lead
to more entities being consolidated into the group.
1 October
2013
The group
has not yet
determined
the extent
of the
impact of the
amendments,
if any.
70
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2011
Note 2. Summary Of Significant Accounting Policies (continued)
(c) New Accounting Standards and Interpretations (continued)
Reference Title
Summary
AASB 11
Joint Arrangements
AASB 12 Disclosure of
Interests in
Other Entities
AASB 13
Fair Value
Measurement
AASB 11 replaces AASB 131 Interests in Joint Ventures and
UIG-113 Jointly- controlled Entities – Non-monetary
Contributions by Ventures. AASB 11 uses the principle of
control in AASB 10 to define joint control, and therefore the
determination of whether joint control exists may change.
In addition it removes the option to account for jointly
controlled entities (JCEs) using proportionate consolidation.
Instead, accounting for a joint arrangement is dependent on
the nature of the rights and obligations arising from the
arrangement. Joint operations that give the venturers a right to
the underlying assets and obligations themselves is accounted
for by recognising the share of those assets and obligations.
Joint ventures that give the venturers a right to the net assets
is accounted for using the equity method. This may result in
a change in the accounting for the joint arrangements held by
the group.
Consequential amendments were also made to other standards
via AASB 2011-7 and amendments to AASB128.
AASB 12 includes all disclosures relating to an entity’s
interests in subsidiaries, joint arrangements, associates and
structures entities. New disclosures have been introduced
about the judgements made by management to determine
whether control exists, and to require summarised information
about joint arrangements, associates and structured entities
and subsidiaries with non-controlling interests.
AASB 13 establishes a single source of guidance under AASB
for determining the fair value of assets and liabilities. AASB 13
does not change when an entity is required to use fair value,
but rather, provides guidance on how to determine fair value
when fair value is required or permitted. Application of this
definition may result in different fair values being determined
for the relevant assets.
AASB 13 also expands the disclosure requirements for all
assets or liabilities carried at fair value. This includes
information about the assumptions made and the qualitative
impact of those assumptions on the fair value determined.
Consequential amendments were also made to other standards
via AASB 2011-8.
Application
date for
Group
1 October
2013
Application
date of
standard
Impact
on Group
financial
report
1 January
2013
The group
has not yet
determined
the extent
of the
impact of the
amendments,
if any.
1 January
2013
1 January
2013
1 October
2013
1 October
2013
The group
has not yet
determined
the extent
of the
impact of the
amendments,
if any.
The group
has not yet
determined
the extent
of the
impact of the
amendments,
if any.
71
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2011
Note 2. Summary Of Significant Accounting Policies (continued)
(d) Basis of consolidation
The consolidated financial statements comprise the financial statements of 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 (the Group). Interests in associates and joint ventures are
equity accounted and are not part of the consolidated group (see note 12).
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, transactions, unrealised gains and losses resulting
from intra-group transactions and dividends 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 income statement
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.
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.
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.
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.
72
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2011
Note 2. Summary Of Significant Accounting Policies (continued)
(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 as a charge to other comprehensive income. If the contingent consideration is classified as equity, it shall not be
remeasured until it is finally settled within equity.
(f) Operating segments
An operating segment is a component of an entity 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 its
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.
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.
73
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2011
Note 2. Summary Of Significant Accounting Policies (continued)
(g) 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 consolidated 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
The results of subsidiaries incorporated in countries other than Australia, are translated into Australian Dollars (presentation currency) as at
the date of each transaction. Assets and liabilities are translated at exchange rates prevailing at reporting date. Exchange variations resulting
from the translation are recognised in the foreign currency translation reserve in equity.
On consolidation, exchange differences arising from the translation of net investments in overseas subsidiaries are taken to the foreign
currency translation reserve. If such a subsidiary was sold, the proportionate share of exchange differences would be transferred out of equity
and recognised in the statement of comprehensive income.
(h) 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 as 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.
(i) 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.
(j) Inventories
Inventories including raw materials, work in progress and finished goods are valued at the lower of cost and net realisable value. 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.
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 income statement.
74
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2011
Note 2. Summary Of Significant Accounting Policies (continued)
(k) 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 costs to sell. 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.
(l) Forestry
The accounting policy below in relation to forestry is only applicable to the prior period as the disposal groups of the Forestry division are now
classified as non-current assets held for sale (refer note 2(n)).
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 are 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.
(m) 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).
• 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 future foreign currency sales).
• 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 when the forecast
transaction occurs.
75
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2011
Note 2. Summary Of Significant Accounting Policies (continued)
(m) Derivative financial instruments and hedging (continued)
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.
(n) 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.
(o) 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.
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.
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 financial assets 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.
76
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2011
Note 2. Summary Of Significant Accounting Policies (continued)
(o) Investments and other financial assets (continued)
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 and keeping judgemental inputs to a minimum.
(p) Investments in associates and joint ventures
The Group’s investments in its associates and joint ventures (equity accounted investments) are accounted for using the equity method of
accounting in the consolidated financial statements and at cost in the parent.
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.
A joint venture is a contractual arrangement whereby two or more parties undertake an economic activity that is subject to joint control.
Under the equity method, equity accounted investments are carried in the consolidated financial statements at cost plus post acquisition
changes in the group’s share of net assets of the investment. Goodwill relating to the investment 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. Goodwill included in the carrying amount of the investment is not tested
separately; rather the entire carrying amount of the investment is tested for impairment as a single asset. If impairment is recognised,
the amount is not allocated to the goodwill of the investment.
The Group’s share of its equity accounted investment 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 equity accounted investments 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 equity accounted investment equals or exceeds its interest in the investment, 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 equity accounted investment.
The reporting dates of the equity accounted investments are disclosed in note 12 and the equity accounted investment accounting policies
conform to those used by the Group for like transactions and events on similar circumstances.
(q) 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.
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.
77
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2011
Note 2. Summary Of Significant Accounting Policies (continued)
(r ) Investment properties
The accounting policy below in relation to plantation land investment properties is only applicable to the prior period as the disposal groups
of the Forestry division are now classified as non-current assets held for sale (refer note 2(n)).
Investment properties are initially measured at cost, including transaction costs. The carrying amount includes the cost of replacing part
of an existing investment property at the time that cost is incurred if the recognition criteria are met, and excludes 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 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. 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.
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.
(s) Leases
The determination of whether an arrangement is or contains a lease is based on the substance of the arrangement at inception date, whether
the fulfilment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset,
even if that right is not explicitly specified in the arrangement.
(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. Contingent rents are recognised as revenue in the period in which they
are earned.
78
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2011
Note 2. Summary Of Significant Accounting Policies (continued)
(t) 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.
(u) 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. Elders Limited performs its impairment testing every six months 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 15.
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
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(t) 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 bi-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.
79
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2011
Note 2. Summary Of Significant Accounting Policies (continued)
(u) Goodwill and intangibles (continued)
Design and Development
Research costs are expensed as incurred. An intangible asset arising from design and development expenditure on an internal project is
recognised only when the Group can demonstrate the technical feasibility of completing the asset so that it will be available for use or sale,
its intention to complete and its ability to use or sell the asset, how the asset will generate future economic benefits, the availability of
resources to complete the development and the ability to measure reliably the expenditure attributable to the asset during its development.
Following the initial recognition of development expenditure, the cost model is applied requiring the asset to be carried at cost less any
accumulated amortisation and accumulated impairment losses. Any expenditure so capitalised is amortised over the period of expected
benefit from the related project.
The carrying value of an intangible asset arising from development expenditure is tested for impairment annually when the asset is not yet
available for use, or more frequently when an indication of impairment arises during the reporting period. These development costs are
Automotive related and primarily represent engineering costs incurred in developing products under awarded contracts.
Gains and losses arising from the derecognition of an intangible asset are measured as the difference between the net disposal proceeds and
the carrying amount of the asset and are recognised in profit and loss when the asset is derecognised.
Expenditures on advertising and promotional expenses are recognised as a component of marketing expense in the statement of
comprehensive income when the Group has either the right to access the goods or has received the services.
(v) Trade and other payables
Trade and other payables are carried at amortised cost and due to their short term nature they 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 supplier terms.
Financial guarantees
The fair value of financial guarantee contracts discussed in notes 28 and 37 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 37.
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.
(w) 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.
80
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2011
Note 2. Summary Of Significant Accounting Policies (continued)
(x) 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.
Warranty provisions
Provisions for warranty-related costs are recognised when the product is sold or service provided. Initial recognition is based on historical
experience. The initial estimate of warranty-related costs is revised annually.
Restructuring
Restructuring provisions are only recognised when general recognition criteria provisions are fulfilled. Additionally, the Group needs to follow
a detailed formal plan about the business or part of the business concerned, the location and the number of employees affected, a detailed
estimate of the associated costs, and appropriate time line. The people affected have a valid expectation that the restructuring is being
carried out or the implementation has been initiated already.
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 respect of employees’ service 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.
Make Good (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.
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.
81
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2011
Note 2. Summary Of Significant Accounting Policies (continued)
(y) 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).
The cost of equity-settled transactions with employees is measured by reference to the fair value at grant date. 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.
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 reacquired on market and held at the reporting date are classified as reserved shares held within a separate component
of equity – reserved shares reserve (refer note 22).
(z) 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.
(aa) 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 22). No gain or loss is recognised in profit or loss on the
purchase, sale, issue or cancellation of the Group’s own equity instruments.
82
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2011
Note 2. Summary Of Significant Accounting Policies (continued)
(ab) 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.
(ac) 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
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.
(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.
(ad) Income tax and other taxes
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.
Current income tax relating to items recognised directly in equity is recognised in equity and not in the income statement. Management
periodically evaluates positions taken in the tax returns with respect to situations in which the applicable tax regulations are subject to
interpretation and establishes provisions where appropriate.
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.
83
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2011
Note 2. Summary Of Significant Accounting Policies (continued)
(ad) Income tax and other taxes (continued)
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.
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.
84
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2011
Note 3. Significant Accounting Judgements, Estimates and Assumptions
The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the reported
amounts in the financial statements. Management continually evaluates its judgements and estimates in relation to assets, liabilities,
contingent liabilities, revenue and expenses. Management bases its judgements and estimates on historical experience and on other various
factors it believes to be reasonable under the circumstances, the result of which forms the basis of the carrying value of assets and liabilities
that are not readily apparent from other sources.
Management have identified the following critical accounting policies for which significant judgement, estimates and assumptions are made.
Actual results may differ from these estimates under different assumptions and conditions and may materially affect the financial result or
the financial position reported in future periods. Further details of the nature of these assumptions and conditions may be found in the
relevant notes to the financial statements.
Recovery of deferred tax assets
Deferred tax assets are recognised for deductible temporary differences as management considers that it is probable the future taxable profit
will be available to utilise those temporary differences. Significant management judgement is required to determine the amount of deferred
tax assets that can be recognised, based on the likely timing and the level of future taxable profits together with future tax planning
strategies.
Impairment of non-financial assets other than goodwill and indefinite life intangibles
The group assesses impairment of all assets at each reporting date by evaluating conditions specific to the group and to the particular asset
that may lead to impairment. These include product and manufacturing performance, technology, climate, economic and political
environments and future product expectations. If an impairment trigger exists the recoverable amount of the asset is determined.
It is the Group’s policy to conduct bi-annual internal reviews of asset values, which is used as a source of information to assess for any
indicators of impairment.
Classification of assets and liabilities as held for sale
The Group classifies assets and liabilities as held for sale when the carrying amount will be recovered through a sale transaction. The assets
and liabilities must be available for immediate sale and the Group must be committed to selling the asset either through entering into a
contractual sale agreement or the activation and commitment to a program to locate a buyer and dispose of the assets and liabilities.
Impairment of goodwill and intangibles with indefinite useful lives
The group determines whether goodwill and intangibles with indefinite useful lives are impaired on a bi-annual basis. This requires an
estimation of the recoverable amount of the cash-generating units, using a value in use discounted cash flow methodology, to which goodwill
and intangibles with indefinite useful lives are allocated. The assumptions used in this estimation of recoverable amount and the carrying
amount of goodwill and intangibles with indefinite useful lives including a sensitivity analysis are discussed in note 15.
Share based payment transactions
The group measures the cost of equity-settled transactions with employees with reference to the fair value of equity instruments at the date
at which they are granted. The fair value is determined using the Monte Carlo simulation model. The related assumptions are detailed in
note 34. The accounting estimates and assumptions relating to the equity-settled share-based payments would have no impact on the
carrying amounts of assets and liabilities within the next annual reporting period but may impact expenses and equity.
Make good provision
Provisions have been made for the present value of anticipated costs of future restoration of leased property. The provision includes the future
cost estimates associated with the required restorations. The calculation of this provision requires assumptions, and in those assumptions
there is uncertainties which may result in future actual expenditure differing from the amounts currently provided. The provisions are
periodically reviewed and updated on the facts and circumstances available at the time. Changes to the estimated future costs for sites are
recognised in the statement of financial position by adjusting both the expense and provision. The related carrying amount is disclosed in
note 19.
Estimation of useful lives of assets
The estimation of useful lives of assets has been based on historical experience as well as lease terms (for leased assets). In addition, the
condition of the assets is assessed bi-annually and considered against the remaining useful life. Adjustments to useful lives are made when
considered necessary.
85
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2011
Note 4. 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 and other assets
Dividends
Other
Discontinued operations:
Interest revenue:
Associated entities
Other persons
Discontinued operations:
Expenses:
Distribution expenses
Marketing expenses
Occupancy expenses
Administrative expenses
Forestry fair value adjustments and impairments
Impairment of assets retained
Refinancing, redundancy and other write offs
Change in fair value of financial and other assets
Other expenses
Discontinued operations:
Profit/(loss) on sale of non current assets:
Property, plant and equipment
Intangibles
Discontinued operations:
86
Note
2011
$000
2010
$000
1,818,755
1,578,298
204,104
146,181
209,569
202,561
30,688
31,028
2,263,116
1,958,068
39
95,563
196,313
2,358,679
2,154,381
403
5
20,504
20,912
16,191
37,103
1,747
20,045
21,792
292
22,084
956
54
21,842
22,852
13,095
35,947
1,776
23,425
25,201
1,759
26,960
263,829
273,666
7,960
36,999
4,646
39,718
130,088
143,079
54,727
7,252
18,253
-
6,675
525,783
366,080
891,863
(403)
(3,533)
(3,936)
6,472
2,536
15,844
5,095
27,279
1,409
2,372
513,108
192,145
705,253
(709)
-
(709)
(8,861)
(9,570)
39
39
39
39
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2011
Note 4. Revenue and Expenses (continued)
Note
2011
$000
2010
$000
Finance costs:
Interest expense - other entities
Finance lease charges
Other finance costs
Discontinued operations:
39
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)
42,388
47,030
45
34,955
77,388
333
77,721
54
10,739
57,823
1,025
58,848
15,153
16,293
173
4,806
3,570
23,702
3,735
27,437
189
4,578
2,648
23,708
2,280
25,988
228,926
213,146
17,909
3,273
1,845
16,686
2,316
2,136
251,953
234,284
11,098
263,051
85,953
(6,675)
12,944
247,228
86,791
(2,372)
87
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2011
Note 5. 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 the statement of comprehensive income
Statement of changes in equity
Deferred income tax
2011
$000
2010
$000
(10,612)
(16,952)
(25,892)
(53,456)
3,346
89
(2,583)
852
Income tax expense/(benefit) reported in equity
1,947
(6,298)
(b) 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
Income tax expense/(benefit) at 30% (2010: 30%)
Adjustments in respect of current income tax of previous years
Share of associate (profits)/losses
Non assessable (profits)/losses
Non deductible other expenses
Impairment expense
Non assessable dividends
Employee share plan costs
Losses available to offset against future taxable income
(Recognition)/derecognition of prior year tax losses
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
(105,741)
(78,216)
(338,883)
(133,443)
(444,624)
(211,659)
(133,387)
(63,498)
(16,952)
89
(1,625)
(10,213)
2,171
1,719
72,624
(1,979)
-
34,617
(10,000)
(644)
(53,456)
(12,074)
(41,382)
(53,456)
1,491
3,418
17,653
-
670
48,407
-
2,835
852
31,019
(30,167)
852
Current tax payable/(receivable)
40,834
51,558
88
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2011
Note 5. Income Tax (continued)
Statement of
Financial Position
Statement of
Comprehensive Income
Deferred income tax liabilities
Revaluations of investment properties to fair value
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)
Plant and equipment temporary differences
Research and development
Other debtors
Other
2011
$000
-
-
(422)
-
2010
$000
2011
$000
2010
$000
(8,826)
(8,826)
(1,973)
(3,113)
(394)
(1,084)
(17,670)
(36,781)
-
(4,621)
(2,763)
(6,283)
(4,383)
(4,037)
-
(5,605)
(2,566)
(1,891)
(3,113)
28
(1,084)
(19,111)
(4,621)
2,763
678
1,817
2,146
1,911
(3,730)
(1,324)
2,852
(777)
-
81
(759)
(586)
Gross deferred income tax liabilities
(35,558)
(64,881)
(29,323)
(4,305)
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
70,000
12,496
11,432
49
3,219
8,652
6,371
-
7,264
60,030
11,817
18,025
961
5,715
6,765
11,680
871
3,053
119,483
118,917
(9,970)
(679)
6,593
912
2,496
(1,887)
5,309
871
(4,211)
(566)
(29,889)
3,000
(84)
(5,665)
3,329
(3,102)
2,484
(3,386)
2,318
(2,771)
(3,877)
(8,182)
Tax losses
The Group has tax losses for which no deferred tax assets is recognised in the statement of financial position of $94.1 million (2010:
$62.9 million) which are available indefinitely for offset against future taxable profits subject to continuing to meet relevant statutory tests.
Unrecognised temporary differences
At 30 September 2011, there are no unrecognised temporary differences associated with the Group’s investment in subsidiaries, associates
or joint ventures, as the Group would have no additional tax liability.
Tax Consolidation
Elders and its 100% owned Australian resident subsidiaries are in a tax consolidated group. Elders Limited is the head entity of the tax
consolidated group. Members of the Group have entered into a tax sharing agreement that provides for the allocation of income tax liabilities
between the entities should the head entity default on its tax payment obligations. No amounts have been recognised in the financial
statements in respect of this agreement on the basis that the possibility of default is remote.
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.
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 2011 (2010: $nil).
89
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2011
Note 6. 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
Amounts receivable from associated entities
Other receivables
Allowance for non-recovery
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
2011
$000
2010
$000
489,814
417,072
(13,774)
(13,008)
476,040
404,064
23,478
(7,366)
16,112
4,337
(182)
4,155
46,318
(1,800)
44,518
28,116
(10,462)
17,654
9,412
(1,476)
7,936
46,410
(4,904)
41,506
540,825
471,160
7,244
7,244
16,749
16,749
9,686
186,274
-
(3,301)
9,686
182,973
16,930
199,722
13,008
(5,097)
5,863
10,759
(5,066)
7,315
13,774
13,008
Movements in allowance for non-recovery – amounts receivable from associated entities, finance debtors and other receivables
Opening balance of allowance for non-recovery
Amounts written off
Amounts provided for during the year
Closing balance of allowance for non-recovery
20,143
(17,913)
7,118
9,348
1,736
(1,463)
19,870
20,143
(i) Included in trade debtors is $156.4 million (2010: $72.7 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 $5.9 million (2010: $7.3 million) has been recognised by the Group. No individual amount within the impairment
allowance is material.
90
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2011
Note 6. 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
2011
$000
2010
$000
376,759
316,451
64,954
9,891
24,436
99,281
61
34
13,679
13,774
54,117
9,758
23,738
87,613
47
47
12,914
13,008
489,814
417,072
54,541
36,367
285
(245)
10,204
10,244
1,800
7,548
9,348
217
429
8,592
9,238
1,800
3,104
4,904
Total other current receivables
74,133
50,509
Related party receivables
For terms and conditions of related party receivables refer to notes 33 and 35.
Fair value and credit risk
Due to the short term nature of trade and other 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 37.
Foreign exchange and interest rate risk
Details regarding the foreign exchange and interest rate risk exposure are disclosed in note 37.
91
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2011
Note 7. 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
2011
$000
2010
$000
48,654
43,752
316,739
338,899
(312,404)
(332,588)
209
53,198
(1,409)
48,654
At balance date 57,286 head of beef cattle (2010: 43,745) are included in livestock. The fair value methodology for Livestock assets is
detailed in note 2(k).
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.
-
-
-
27,195
-
(113)
1,447
(2,079)
782
(27,232)
-
2,144
25,051
27,195
27,014
2,764
-
-
-
1,116
(3,699)
27,195
Note 8. Forestry
Current
Non current
Fair value at start of the period
Purchases during the year
Transfer to receivables
Costs incurred in respect of forestry plantations
Harvest
Fair value increment in period
Impairment
Fair value at the end of the period
92
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2011
Note 8. Forestry (continued)
The disclosures below in relation to forestry are only applicable to the prior period as the disposal groups of the Forestry division are now
classified as non-current assets held for sale (refer note 39).
Physical quantity of forestry plantation timber at the end of the 2010 year was 490,013 m3.
The fair value methodology for Forestry assets is detailed in note 2(l). The assumptions used in the valuation model to determine fair value
less point of sale costs in the prior period are as follows:
CPI:
Discount rate:
Period to Harvest:
Current woodchip FOB price:
2010: 2.5% to 4%
2010: 9-15%
2010: Between 1-19 years, depending upon year of establishment and current harvest schedule
for the individual property
2010: $207.40 per BDMT (Bone Dry Metric Tonne)
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 9. Inventory
Current
Raw materials and bulk stores – at net realisable value
Work in progress – at cost
Finished goods – at net realisable value
2011
$000
2010
$000
34,736
35,666
141
226
153,562
139,325
188,439
175,217
Inventories recognised as an expense for the year ended 30 September 2011 totalled $1,313.0 million (2010: $1,149.8 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 $1.4 million (2010: $3.9 million) for the Group.
93
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2011
Note 10. Derivative Financial Instruments
Current
Asset
Liability
Non current
Liability
(a) Instruments used by the group
2011
$000
664
6,916
2010
$000
-
3,601
-
17,703
The Group holds 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.
(b) Interest rate and credit risk
For financial risk management policies of the Group, refer to note 37.
Note 11. Other Financial Assets
Non current
Unlisted investments, at cost (i)
17,852
21,980
(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.
Impairment losses of $4.1 million (2010: $nil) relating to these investments have been recorded in the Statement of Comprehensive
Income.
Note 12. Investments in Associates and Joint Ventures
Name of Investment
Rural Bank Limited (i)
Elders Toepfer Grain Pty Ltd
AWH Pty Ltd
Kilcoy Pastoral Company Limited
Elders Financial Planning Pty Ltd
Balance
date
Ownership
interest
Consolidated entity
investment
Contribution to net
profit/(loss)
2011
%
2010
%
2011
$000
2010
$000
2011
$000
2010
$000
145,004
-
22,319
-
-
8,921
(8,921)
46,602
41,399
4,055
30 Jun
30 Jun
30 Sep
-
-
50
20
49
25
70
40
50
50
20
49
25
70
3,935
4,147
5,566
5,083
3,441
3,672
10,312
10,364
1,046
3,175
(15)
278
5,646
446
927
(79)
(211)
484
6,257
(351)
1,233
618
Elders Insurance (Underwriting Agency) Pty Limited
31 Dec
Futuris Automotive Interiors (Anhui) Company Ltd (ii)
31 Dec
Agricultural Land Trust
Other investments
30 Jun
49.7
49.9
17,053
16,420
7,179
5,868
Share of profit of associates and joint ventures is attributable to:
Continuing operations
Discontinued operations
94,088
240,878
3,164
33,743
12,085
10,489
(8,921)
23,254
3,164
33,743
94
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2011
Note 12. Investments in Associates and Joint Ventures (continued)
(i) On 10 December 2010 the Group sold its investment in Rural Bank Limited for a cash consideration of $166.6 million, less transaction
costs of $2.7 million. The profit on sale was $17.7 million before tax. The Group also received $6.4 million to recognise its share of Rural
Bank’s distributable profits from 1 July 2010, which has been treated as dividend income in the Statement of Comprehensive Income.
Results within Rural Bank are classified as discontinued operations.
(ii) 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.
All associates and joint ventures are Australian resident companies, except Futuris Automotive Interiors (Anhui) Company Ltd which is
incorporated in Mauritius.
Impairment losses and impairment reversals relating to the following investments in associates and joint ventures have been taken to account:
• AWH Pty Ltd reversal of previously recorded impairment $1.1 million (2010: $nil)
• Forest Enterprises Australia $nil (2010: $32.4 million)
• Agricultural Land Trust $nil (2010: $0.5 million)
• Kilcoy Pastoral Company $nil (2010: reversal of previously recorded impairment $2.7 million).
(a) Share of Associates and Joint Ventures
Share of associates’ and joint ventures’ statement of financial position
Current assets
Non current assets
Current liabilities
Non current liabilities
Share of net assets of associates
Share of associates’ and joint ventures’ 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
Share of associates’ and joint ventures’ commitments and contingent liabilities
Capital expenditure commitments (contracted)
Operating lease commitments
Contingent liabilities
(b) Fair value of investment in listed entities
2011
$000
2010
$000
53,444
4,256,510
109,028
122,817
162,472
4,379,327
40,608
4,103,036
54,074
85,369
94,682
4,188,405
67,790
190,922
170,398
731,602
8,114
(4,950)
3,164
-
47,099
(13,342)
33,757
(14)
3,164
33,743
143
342
57,767
64,945
-
1,234
Listed entities
Carrying amount
Fair value*
2011
$000
2010
$000
17,053
16,420
2011
$000
8,199
2010
$000
6,003
* Fair value has been determined based on published price quotations. The Group’s listed associates and joint ventures include Forest
Enterprises Australia (FEA) and the Agricultural Land Trust. FEA is in voluntary administration and has both a nil carrying amount and a
nil fair value as at 30 September 2011 and 30 September 2010.
95
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2011
Note 13. Property, Plant and Equipment
Reconciliation of carrying amounts at beginning and end of period:
Non current
2011
Freehold
land Buildings
Leasehold
improve-
ments
Plant and
equipment
(owned)
Plant and
equipment
(leased)
Livestock
carrier
Assets
under
construc-
tion
$000
$000
$000
$000
$000
$000
$000
Total
$000
Carrying amount at beginning of period
10,616
14,237
15,748
77,878
832
3,287
6,043
128,641
Additions
268
459
129
(2,995)
415
1,433
13,028
12,737
Additions through entities acquired
-
-
-
3,699
-
-
Disposals
Depreciation expense
Impairment
Transfer to held for sale
Exchange fluctuations
Transfers from assets under construction
Other transfers
(1,597)
(932)
(798)
(421)
(48)
(3,464)
-
(928)
(2,070)
(14,634)
(173)
(1,256)
(2,254)
(1,040)
-
-
(3,651)
(589)
(732)
(19,198)
144
145
-
-
-
(15)
17
87
15
(249)
7,171
270
-
-
-
-
(174)
852
Carrying amount at end of period
6,137
12,966
8,745
50,932
Cost
6,709
23,337
24,464
214,033
1,375
Accumulated depreciation and impairment
(572)
(10,371)
(15,719) (163,101)
(523)
6,137
12,966
8,745
50,932
852
-
-
-
-
-
3,699
(7,260)
(19,061)
(6,494)
(20,970)
(108)
(7,258)
-
(51)
-
96
11,705
91,337
11,705
281,623
- (190,286)
11,705
91,337
2010
Carrying amount at beginning of period
11,261
10,673
14,026
69,255
1,027
4,519
3,620
114,381
Additions
Additions through entities acquired
-
-
762
2,224
5,609
-
69
28,796
Disposals
(360)
(2,776)
(1,651)
(1,235)
Disposals through entities sold
Allocation of amounts held in provisions
-
-
-
-
Transfer (to)/from investment properties
145
2,700
-
-
-
(70)
(4,550)
-
-
-
-
-
-
-
4,630
5,035
18,260
304
29,169
(540)
(6,562)
-
-
-
-
-
(70)
(4,550)
2,845
(18,762)
(5,862)
Depreciation expense
Impairment
Exchange fluctuations
Transfers from assets under construction
Other transfers
-
(926)
(2,075)
(14,336)
(193)
(1,232)
(519)
89
-
-
-
(927)
(20)
214
(181)
-
2,296
(71)
-
3,875
4,102
(7,920)
-
-
55
(57)
(4,630)
-
-
-
(25)
(208)
(2,351)
-
-
-
Carrying amount at end of period
10,616
14,237
15,748
77,878
832
3,287
6,043
128,641
Cost
10,616
24,054
31,019
242,883
1,395
33,419
6,043
349,429
Accumulated depreciation and impairment
-
(9,817)
(15,271) (165,005)
(563)
(30,132)
- (220,788)
10,616
14,237
15,748
77,878
832
3,287
6,043
128,641
Property, plant and equipment pledged as security for liabilities
Refer to note 18 for interest bearing loans and borrowings secured by property, plant and equipment.
96
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2011
Note 14. Investment Properties
Non current
Investment properties at fair value
Carrying amount at beginning of period
Acquisition of investment properties
Transfer (to)/from other property, plant and equipment
Fair value adjustments prior to classification of Forestry assets as held for sale
Transfer to non current assets held for sale
Disposal of investment properties
Fair value adjustments as a result of classification of Forestry assets as held for sale and impairments
Reverse discount on acquisition
Foreign exchange variation
Other
Carrying amount at end of period
2011
$000
2010
$000
2,975
265,022
265,022
283,797
15
-
7,790
(114,261)
(21,833)
(133,707)
-
(51)
-
6,354
(2,845)
7,564
(1,050)
(4,853)
(34,321)
10,649
-
(273)
2,975
265,022
Investment property pledged as security for liabilities
Refer to note 18 for interest bearing loans and borrowings secured by investment property.
The disclosures below in relation to investment properties are only applicable to the prior period as the disposal groups of the Forestry
division are now classified as non-current assets held for sale (refer note 39).
(a) Amounts recognised in profit and loss for investment properties
Investment properties consist of 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.
(b) Valuation basis
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.
The fair value methodology for plantation land investments is detailed in note 2(r). In the prior period, fair value has been determined by
the independent land valuation expert, Colliers Jardine using a desktop approach.
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.
Plantation Land
The assumptions used for the Plantation Land DCF valuation model in the prior period are as follows:
Future Land Price Index
CPI
Land discount rate (post-tax)
Future land rental income
Lease period
2010: 4.5%
2010: 2.5%
2010: 9.0%
Between 0-30% of final net harvest proceeds
Between 1-20 years depending upon the individual property
97
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2011
Note 15. Intangibles
Reconciliation of carrying amounts at beginning and end of period:
Non current
2011
Patents,
trademarks and
licences
$000
Goodwill
$000
Brand
Names
$000
Development
costs, rent rolls
and other
$000
Total
$000
Carrying amount at beginning of period
505
173,013
60,400
25,129
259,047
Additions
Acquisition of controlled entity
Disposal of controlled entity
Disposals
Amortisation
Impairment
Exchange fluctuations
1,188
1,228
-
-
(182)
-
-
-
1,888
(18)
(6,227)
-
(3,711)
283
-
-
-
-
-
-
-
163
-
-
(51)
(3,388)
-
12
1,351
3,116
(18)
(6,278)
(3,570)
(3,711)
295
Carrying amount at end of period
2,739
165,228
60,400
21,865
250,232
Cost
4,576
174,928
60,400
33,622
273,526
Accumulated amortisation and impairment
(1,837)
(9,700)
-
(11,757)
(23,294)
2,739
165,228
60,400
21,865
250,232
2010
Carrying amount at beginning of period
Additions
Acquisition of controlled entity
Disposal of controlled entity
Disposals
Transfers
Amortisation
Impairment
Exchange fluctuations
146
412
-
-
-
(34)
-
(19)
-
145,487
60,400
22,487
228,520
-
89,774
(9,942)
-
(306)
-
(50,838)
(1,162)
-
-
-
-
-
-
-
-
95
507
11,900
101,674
(5,813)
(15,755)
(461)
-
(461)
(340)
(2,648)
(2,648)
(387)
(44)
(51,244)
(1,206)
Carrying amount at end of period
505
173,013
60,400
25,129
259,047
Cost
3,115
233,772
60,400
33,664
330,951
Accumulated amortisation and impairment
(2,610)
(60,759)
-
(8,535)
(71,904)
505
173,013
60,400
25,129
259,047
98
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2011
Note 15. Intangibles (continued)
A description of each intangible asset is included below. Refer note 2(u) for the accounting policy in relation to goodwill and other
intangible assets.
(a) 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 (b) 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 (b)
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 (b) 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 (b) of this note).
(b) 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 goodwill acquired in the previous financial year as part of the acquisition of MCK Holdings Pty Ltd has been allocated to the GM
Worldwide, Ford Worldwide and Australia Other cash generating units in the Automotive segment.
The carrying amount of goodwill and brand names attributed to each of these cash generating units is as follows:
Rural Services Network
Rural Services New Zealand
MCK Holdings
Other CGU’s
Goodwill
Brand Names
2011
$000
65,681
6,491
87,499
5,557
2010
$000
70,020
9,926
87,499
5,568
2011
$000
2010
$000
60,400
60,400
-
-
-
-
-
-
165,228
173,013
60,400
60,400
99
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2011
Note 15. Intangibles (continued)
(b) Impairment tests for goodwill and intangibles with indefinite useful lives (continued)
(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 14.1% pre-tax (2010: 15.2% 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 and margins are expected to increase in line with improved seasonal conditions on the east coast of Australia.
• Livestock and wool prices are expected to reduce as the record high prices in 2011 are anticipated to come back to historical levels.
• 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.
Selling, general and administrative expenses
• Minimal cost increases have been assumed for support centres while CPI growth in costs has been assumed for the Network itself.
Growth rate estimates
• Year 1 cash flows are based on the Board approved budget for the 2012 financial year.
• Growth for years 2 and 3 are based on a three year forecast model assuming increased earnings from Farm Supplies and Real Estate
combined with minimal cost increases across the network.
• The growth rate for years 4 and 5 are based on a 3% 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 (2010: $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 14.3% pre-tax (2010:15.2% 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 area of seed production.
• 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 2011 financial year.
Growth rate estimates
• Year 1 cash flows are based on the Board approved budget for the 2012 financial year. This includes the impact of cost initiatives
identified above.
• Growth for years 2 – 5 is 5% 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 $3.7 million (2010: $5.0 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 38 for details of the acquisition accounting.
Goodwill of $87.5 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. For the purposes of
impairment testing all goodwill and assets of Plexicor have been allocated to the cash generating units in the Automotive segment expected
to benefit from the acquisition.
100
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2011
Note 15. Intangibles (continued)
(c) 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, there are reasonably possible changes in key
assumptions that could cause the carrying value of the unit to materially exceed its recoverable amount:
• a decrease in expected future cash flows in excess of 5% across all years of the discounted cash flow model could result in an
impairment; and
• an increase in the discount rate by more than 1%, 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.
Note 16. Other Assets
Current
Deferred expenses
Prepayments
Non current
Deferred design and development expenditure
As at beginning of period
Additions through entity acquired
Design and development expenditure capitalised
Impairment
Amortisation
Other
As at period end
2011
$000
2010
$000
559
23,067
23,626
22,854
18,919
171
8,756
-
(4,806)
(186)
22,854
1,432
21,700
23,132
18,919
18,459
96
4,394
548
(4,578)
-
18,919
101
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2011
Note 17. Trade and Other Payables
Current
Trade creditors
Other creditors and accruals
Payables to associated companies
Unearned forestry income
Non current
Payables
Fair Value
Due to the short term nature of these payables, their carrying value is assumed to approximate their fair value.
Financial guarantees
Information regarding financial guarantees is set out in note 37.
Related party payables
For terms and conditions of related party payables refer to note 35.
Interest rate, foreign risk and liquidity risk
Information regarding interest rate, foreign exchange and liquidity risk exposure is set out in note 37.
Note 18. Interest Bearing Loans and Borrowings
Current
Secured loans
Trade receivables funding
Unsecured loans
Lease liabilities
Non current
Secured loans
Secured notes
Unsecured loans
Lease liabilities
Total current and non current
102
2011
$000
2010
$000
359,839
282,267
69,213
68,820
4,749
115
2,994
3,202
433,916
357,283
2,583
2,583
1,186
1,186
56,218
167,422
139,466
111,215
-
357
620
229
196,041
279,486
228,912
122,357
-
94,649
1,828
283
1,016
127
231,023
218,149
427,064
497,635
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2011
Note 18. Interest Bearing Loans and Borrowings (continued)
(a) Financing arrangements
The Group has access to the following financing facilities with a number of financial institutions:
Accessible
$000
Drawn
$000
Unused
$000
2011
Secured Loans
- Facility A non revolving term facility
- Facility B working capital facility
- Facility D bilateral contingent facility
- Trade receivables funding
- Other
Unsecured loans and lease liabilities
Total
2010
Secured Loans
- Tranche A1 term loan
- Tranche D1 revolver
- Trade receivables funding
- Other
Secured notes
Unsecured loans and lease liabilities
Total
180,893
180,893
93,158
37,030
93,158
-
37,030
-
-
265,600
139,466
126,134
19,287
11,079
8,208
595,968
424,596
171,372
2,468
2,468
-
598,436
427,064
171,372
122,357
122,357
-
116,800
75,000
41,800
265,600
111,215
154,385
116,884
92,422
24,462
621,641
400,994
220,647
94,649
94,649
1,992
1,992
-
-
718,282
497,635
220,647
The Group also has an ancillary facility in relation to off balance sheet funding, such as bank guarantees, of $63.2 million. As at 30
September 2011, $37.6 million had been drawn.
(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
in 2010 have been calculated by discounting the expected future cash flows at prevailing market interest rates varying from 7.5% to 8.5%.
Secured notes
2011
2010
Carrying
amount
$000
-
Fair
value
$000
Carrying
amount
$000
Fair
value
$000
-
94,649
98,806
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.
(c) Interest rate, foreign exchange and liquidity risk
Secured notes, which were repaid during the period, were issued in the United States of America financial markets and were denominated
in United States dollars. Details regarding interest rate, foreign exchange and liquidity risk is disclosed in note 37.
103
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2011
Note 18. Interest Bearing Loans and Borrowings (continued)
(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:
2011
$000
2010
$000
50,773
48,870
678,511
498,860
49,015
48,654
-
2,122
167,350
150,894
104,348
24,414
1,049,997
773,814
108,649
-
48,052
22,918
496,680
492,471
55,484
77,449
196,382
106,358
-
265,022
149,675
154,489
100,751
131,164
988,688
1,416,856
2,038,685
2,190,670
Current assets
Floating charge
Cash and cash equivalents
Trade and other receivables
Livestock
Forestry
Inventory
Other
Non current assets
Floating charge
Receivables
Forestry
Other financial assets
Investments in associates and joint ventures
Property, plant and equipment
Investment properties
Intangibles
Other
Total current and non current
104
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2011
Note 19. Provisions
Reconciliation of carrying amounts at beginning and end of period:
Employee
entitle-
ments
Restruc-
turing and
Warranty
redundancy Make good
Onerous
contracts
$000
$000
$000
$000
$000
Other
$000
Total
$000
48,659
25,201
(26,479)
(1,287)
1,000
151
38
1,717
1,096
(709)
(365)
-
-
-
8,641
14,876
18,999
3,748
96,640
7,435
3,488
49,156
1,101
87,477
(5,499)
(1,188)
(5,317)
(1,896)
(41,088)
(427)
(1,838)
(1,014)
(1,194)
(6,125)
-
-
336
228
-
-
-
-
-
-
99
(334)
1,228
151
139
47,283
1,739
10,486
15,566
61,923
1,425
138,422
42,377
580
10,486
10,144
50,321
1,425
115,333
4,906
1,159
-
5,422
11,602
-
23,089
47,283
1,739
10,486
15,566
61,923
1,425
138,422
2011
As at beginning of period
Arising during year
Utilised
Unused amounts reversed
Discount rate adjustment
Provisions arising from entities acquired
Other
Disclosed as:
Current
Non current
Total
2010
As at beginning of period
63,539
2,242
38,179
7,028
3,448
5,967
120,403
Arising during year
15,887
1,064
2,117
7,311
17,716
4,228
48,323
Utilised
(32,849)
(1,182)
(6,115)
(40)
(1,675)
(6,160)
(48,021)
Unused amounts reversed
Discount rate adjustment
Provisions allocated to property,
plant and equipment
Provisions allocated to investment
property
Provisions allocated to other assets
(69)
(89)
-
-
-
(401)
(15,700)
-
-
-
-
-
(4,550)
(2,437)
(2,853)
Provisions arising from entities acquired
2,240
(6)
-
(165)
742
-
-
-
-
(490)
(258)
(17,083)
-
-
-
-
-
-
-
-
653
(4,550)
(2,437)
(29)
(2,882)
-
2,234
48,659
1,717
8,641
14,876
18,999
3,748
96,640
Disclosed as:
Current
Non current
Total
Nature and timing of provisions
43,955
1,717
8,641
7,323
6,623
3,748
72,007
4,704
-
-
7,553
12,376
-
24,633
48,659
1,717
8,641
14,876
18,999
3,748
96,640
(i) Employee entitlements
Refer to note 2(x) 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 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.
105
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2011
Note 19. Provisions (continued)
(iii) Restructure and redundancy
The restructuring provision relates to the Group’s:
• Provisions arising upon classification of the Forestry division being held for sale.
• 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.
• The redundancy provision relates to redundancies communicated to staff during the year.
(iv) 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
The onerous lease provision relates to amounts recognised as part of the Forestry held for sale classification of $47.3 million in the current
year. In 2010, as part of the Forestry asset review an onerous lease provision of $15.0 million was recognised.
(vii) Other
The remaining provision balance in ‘other’ includes legal claims of $0.6 million (2010: $1.6 million).
Note 20. Contributed Equity
Issued and paid up capital
2011
$000
2010
$000
448,598,480 ordinary shares (September 2010: 448,598,480)
1,271,493
1,273,863
The movement in share capital is a result of the unwinding of the tax effect of the equity raising costs incurred in the 2010 financial year.
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.
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 revised financing package (refer note 18) stipulates that the payment of ordinary dividends will be subject to the Company satisfying
a Net Leverage Ratio of less than 3.5x at the last calculation date and satisfaction of an Elders approved dividend policy. No decision has
been made in relation to the payment of dividends. Refer to note 24 for dividend disclosure.
Note 21. Hybrid Equity
Issued and fully paid up
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 was the 3 month bank bill swap rate plus a margin of
2.20% pa. On 30 June 2011, Elders accepted a one-off step up of 250bps in margin.
On future remarketing dates (every five years), 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 in margin or pursue a remarketing process to set a new margin.
Elders revised financing package (refer note 18) does not contain any express restrictions on the payment of distributions on the hybrid securities.
No distributions were declared or paid during the year.
106
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2011
Note 22. Reserves
Reconciliation of carrying amounts at beginning and end of period:
Business
combina-
tion reserve
Employee
equity
benefits
reserve
Foreign
currency
translation
reserve
Net
unrealised
gains
reserve
Share of
reserve for
losses in
associate
Reserved
shares
reserve
$000
$000
$000
$000
$000
$000
Total
$000
2011
Carrying amount at beginning of period
(5,134)
(7,434)
(14,006)
(1,553)
6,163
(13,704)
(35,668)
Foreign currency translation
Non-controlling interest share of
movement
Transfer to statement of
comprehensive income
Net gains/losses in cash flow hedges
Recognition for share of reserve for
losses in associate
Income tax on items taken directly
or transferred to equity
Sale of reserved shares
Excess paid for purchase of
non-controlling interest
Cost of share based payments
Transfer to retained earnings
Transfers to reserved shares reserve
-
-
-
-
-
-
-
(9,958)
-
-
-
-
-
-
-
-
-
-
-
1,845
(1,460)
3,968
1,381
(54)
-
-
-
423
-
-
-
-
-
-
-
1,553
(169)
-
-
-
-
-
-
-
Carrying amount at end of period
(15,092)
(3,081)
(12,256)
(169)
-
-
-
-
1,239
-
-
-
-
-
-
-
-
-
-
421
-
-
(7,402)
14,257
1,381
(54)
1,553
(169)
1,239
423
421
(9,958)
1,845
5,395
-
-
(3,968)
-
(2,994)
(33,592)
2010
Carrying amount at beginning of period
(10,312)
(13,695)
(5,795)
(6,396)
5,433
Foreign currency translation
Non-controlling interest share
of movement
Transfer to statement of
comprehensive income
Net gains/losses in cash flow hedges
Recognition for share of reserve for
losses in associate
Income tax on items taken directly
or transferred to equity
Excess paid for purchase of non-
controlling interest
-
-
-
-
-
-
(5,480)
-
-
-
-
-
-
-
Cost of share based payments
-
2,136
Transfer to retained earnings
10,658
(9,579)
Transfers to reserved shares reserve
-
13,704
(8,639)
70
-
-
-
-
-
2,598
(1,865)
-
-
-
-
-
730
358
90
-
-
-
-
-
-
4,020
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(30,765)
(8,639)
70
2,598
(1,865)
730
448
(5,480)
2,136
5,099
(13,704)
-
Carrying amount at end of period
(5,134)
(7,434)
(14,006)
(1,553)
6,163
(13,704)
(35,668)
107
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2011
Note 22. Reserves (continued)
Nature and purpose of reserves
Business combination reserve
The reserve is used to record the differences between the carrying value of non-controlling interests and the consideration paid/received,
where there has been a transaction involving non-controlling interests that do not result in a loss of control.
Employee equity benefits reserve
This reserve is used to record the value of equity benefits (both options and share loans and other) 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
The reserve contained amounts relating to the Rural Bank investment. Rural Bank has APRA reporting requirements for a general provision
for credit losses to be recognised directly in equity. Prior to the sale of Rural Bank the Group was 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.
Note 23. Retained Earnings
Retained earnings at the beginning of the financial year
Net profit/(loss) attributable to members
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
Transfer from reserved shares reserve
Transfer from share of reserve for losses in associate
Retained earnings at the end of the financial year
2011
$000
2010
$000
(380,577)
(158,012)
(395,350)
(217,628)
-
-
1,460
-
(14,257)
7,402
162
(10,658)
9,579
(4,020)
-
-
(781,322)
(380,577)
108
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2011
Note 24. Dividends
(a) Dividends proposed
No final dividend will be paid (2010: Nil)
(b) Dividends paid during the year
Current year interim
- No interim dividend will be paid (2010: Nil)
Previous year final
- No final dividend paid (2010: Nil)
Subsidiary equity dividends on ordinary shares:
Dividends paid to external parties during the year
- B&W Rural Pty Ltd dividend $2,041 per share fully franked (2010: $2,061 per share fully franked)
- B&W Rural Pty Ltd dividend $2,241 per share fully franked (2010: $1,468 per share fully franked)
2011
$000
2010
$000
-
-
-
-
-
-
1,000
1,196
2,196
1,010
720
1,730
Elders revised financing package (refer note 18) stipulates that the payment of ordinary dividends will be subject to the Company satisfying
a Net Leverage Ratio of less than 3.5x at the last calculation date and satisfaction of an Elders approved dividend policy. No decision has
been made in relation to the payment of dividends.
(c) Franking credit balance
Franking credits available to the parent for subsequent financial years based on tax rate of 30% (2010: 30%)
18,990
19,700
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.
Note 25. Non-controlling Interest
Non-controlling interests comprise interests in the following items:
Contributed equity
Retained earnings
1,688
1,265
2,953
1,275
2,049
3,324
On 31 March 2011, the Group acquired an additional 24.5% interest in the controlled entity, B&W Rural, increasing the Group’s interest to
75.5% for $11.0 million. The transaction resulted in the de-recognition of a non-controlling interest of $1.0 million and the recognition in
equity of $10.0 million, being the excess paid for the purchase of the non-controlling interest.
109
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2011
Note 26. Cash Flow Statement Reconciliation
(a) Reconciliation of net profit/(loss) after tax to net cash flows from operations
Profit/(loss) after income tax expense
Adjustments for non cash items:
Depreciation and amortisation
Share of associates and joint venture (equity accounted earnings)
Dividends from associates
Fair value adjustments to financial assets
Other fair value adjustments
Fair value adjustments and impairments
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
2011
$000
2010
$000
(391,168)
(212,511)
27,437
(3,164)
7,427
(340)
25,988
(33,743)
31,355
(956)
(14,100)
(11,662)
333,186
142,633
12,981
24,914
57,666
1,397
(2,536)
-
1,845
(521)
(29,323)
(10,724)
(4,047)
10,930
27,185
15,729
16,164
3,938
616
8,954
2,136
(2,918)
(5,457)
13,547
2,404
23,402
(85,479)
(80,228)
(14,619)
52,006
65,408
(105,653)
(23,760)
(110,473)
81,614
79,985
Cash includes $3.1 million (2010: $3.0 million) of cash held in trust on behalf of certain controlled entities.
(c) Non cash financing and investing activities
During the financial year, and the previous financial year, there were no non-cash financing and investing transactions.
110
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2011
Note 27. Expenditure Commitments
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 $0.9 million
(2010: $0.8 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.
Finance lease commitments:
- 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
Disclosed in the financial statements as:
- current (note 18)
- non current (note 18)
Operating leases commitments:
- Within one year
- After one year but not later than five years
- After more than five years
Total minimum lease payments
2011
$000
2010
$000
397
324
721
(81)
640
357
283
640
254
134
388
(32)
356
229
127
356
80,013
175,919
127,845
383,777
88,946
192,575
120,411
401,932
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.
Operating lease commitments include the gross contractual obligations in relation to the Group’s leases of forestry plantation land. No
adjustments have been made to the contractual commitment given the decision to hold the disposal groups of the Forestry division for sale.
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
Total property, plant and equipment commitments
24,454
34,800
59,254
720
120
840
111
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2011
Note 28. Contingent Liabilities
Contingent liabilities at balance date, not otherwise provided for in the 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
2011
$000
2010
$000
1,625
19,241
20,866
1,300
23,427
24,727
Unquantifiable contingent liabilities
• The Group has contingent obligations in respect of leased premises, which have been sub-let to associated entities.
• 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.
• There have been a number of events that have recently impacted the Group’s forestry operations, such as a fungal disease outbreak and
a cyclone. To date no claims for damages have been lodged as a result of these events.
• The Forestry write-downs to accrued income and recognition of the current value of onerous lease liabilities in the consolidated financial
statements may result in a breach of the current financial commitments and net tangible assets tests under Elders Forestry Management
Limited’s (“EFML”) AFS licence if adopted by EFML and unless otherwise rectified. At this stage, Elders Limited does not consider that
this risk is likely to impact its ability to execute an orderly winding down and exit from forestry.
Other contingent liabilities
As previously disclosed the Group has received amended income tax assessments from the Australian Taxation Office relating to two
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. An appeal by the Australian Taxation Office was heard by the Full Court on 21 and 22 February
2011. The Full Court has reserved its decision. Management consider 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 losses arising from the funding activities of the Group’s in-house financier. Amended
assessments attributable to the 2003 year were issued by the Australian Taxation Office denying the losses claimed. During the year,
the Group received notification from the Australian Taxation Office that its objection to the amended assessments had been allowed
in full. A provision previously raised against this exposure has been released to statutory profit and therefore it is the Company’s view
that a contingent liability no longer exists.
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 company’s 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 unsecured notes.
112
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2011
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. 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.
• 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, and insulation packages.
• 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.
2011
External sales
Other revenues
Share of profit of associates and joint ventures
Profit/(loss) on sale of non current assets
Interest revenue
Total revenue
Earnings before interest, tax, depreciation
and amortisation
Rural
Services
$000
Forestry
Automotive
Components
Investment &
Other
$000
$000
$000
Total
$000
1,986,121
57,384
315,174
-
2,358,679
9,006
2,382
9,782
10,530
9,608
17,582
-
(7,160)
285
(451)
9
180
907
1,233
(95)
37,103
3,164
2,536
11,089
22,084
2,017,821
60,117
332,494
13,134
2,423,566
12,619
(389,300)
31,823
(16,692)
(361,550)
Depreciation and amortisation
(8,378)
(2,479)
(16,566)
(14)
(27,437)
Segment result
Corporate net interest expense
Profit from ordinary activities before tax
4,241
(391,779)
15,257
(16,706)
(388,987)
(55,637)
(444,624)
Segment result
4,241
(391,779)
15,257
(16,706)
(388,987)
Less discontinued operations results
(1,790)
(337,052)
-
-
(338,842)
Continuing profit/(loss) before net borrowing costs
and tax expense
Corporate net interest expense
Continuing profit/(loss) before tax expense
6,031
(54,727)
15,257
(16,706)
(50,145)
(55,596)
(105,741)
Segment assets
774,238
198,864
286,056
229,721
1,488,879
Unallocated assets (including tax assets)
-
-
-
-
201,097
Total assets
Segment liabilities
774,238
198,864
286,056
229,721
1,689,976
420,238
83,015
71,388
7,196
581,837
Unallocated liabilities (including tax liabilities)
-
-
-
-
503,456
Total liabilities
Net assets
420,238
83,015
71,388
7,196
1,085,293
354,000
115,849
214,668
222,525
604,683
Carrying value of equity investments
Acquisition of non current assets
61,822
11,034
-
117
11,262
13,491
21,004
27,404
94,088
52,046
Non cash income/(expense) other than depreciation
and amortisation
Profit/(loss) on sale of non current assets
and controlled entities
(27,939)
(360,350)
(9,143)
5,156
(392,276)
9,782
(7,160)
9
(95)
2,536
113
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2011
Note 29. Segment Information (continued)
2010
External sales
Other revenues
Share of profit of associates and joint ventures
Profit/(loss) on sale of non current assets
Interest revenue
Total revenue
Earnings before interest, tax, depreciation
and amortisation
Rural Services
Forestry
Automotive
Components
Investment &
Other
Total
$000
$000
$000
$000
$000
1,797,230
100,311
256,840
-
2,154,381
2,764
32,968
(2,537)
7,302
11,082
21,393
-
(7,281)
713
(440)
248
85
708
1,215
-
18,860
35,947
33,743
(9,570)
26,960
1,837,727
104,825
278,126
20,783
2,241,461
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
13,718
(158,552)
15,850
(50,787)
(179,771)
(31,888)
(211,659)
Segment result
13,718
(158,552)
15,850
(50,787)
(179,771)
Less discontinued operations results
28,494
(142,708)
-
(19,963)
(134,177)
Continuing profit/(loss) before net borrowing
costs and tax expense
Corporate net interest expense
Continuing profit/(loss) before tax expense
(14,776)
(15,844)
15,850
(30,824)
(45,594)
(32,622)
(78,216)
Segment assets
882,716
522,785
281,729
210,448
1,897,678
Unallocated assets (including tax assets)
-
-
-
-
198,902
Total assets
Segment liabilities
882,716
522,785
281,729
210,448
2,096,580
301,636
39,778
108,446
26,553
476,413
Unallocated liabilities (including tax liabilities)
-
-
-
-
614,074
Total liabilities
Net assets
301,636
39,778
108,446
26,553
1,090,487
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)
114
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2011
Note 30. Supplementary Statement of Net Debt
(a) Statement of Net Debt
Fair value adjustments and impairments
14,161
314,738
2011
Earnings before interest and 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
Rural
Services
$000
4,241
8,378
(2,382)
6,835
(194)
(209)
Movement in provision for:
- doubtful debts
- employee entitlements
- other provisions
Other writedowns
Profit/(loss) on sale of non-current assets
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
Payment for property, plant and equipment
Purchase of equity accounted investments
Payment for investment properties
Payment for controlled entities, net of cash acquired
Payment for intangibles
Payment for design and development capitalised
Proceeds from sale of non current assets held for sale
Proceeds from sale of equity accounted investments
Proceeds from sale of property, plant and equipment
Proceeds from sale of investment properties
Proceeds from sale of intangibles
4,033
17,805
2,887
1,217
(9,782)
-
9,916
(13,068)
(2,150)
403
42,091
17,421
59,512
(9,113)
-
-
(751)
(1,170)
-
-
-
6,209
500
2,745
Payment for acquisition of non-controlling interest
(10,005)
Loans to associated entities
Repayment of loans by associated entities
Loans repaid by growers
Investing cash flow
Proceeds from sale of reserved shares
Intercompany movement
Partnership profit distributions/dividends paid
Other flows
Total flows
Opening net debt
Total flows
Fair value adjustment to debt
Closing net debt
(1,307)
2,120
-
(10,772)
-
(51,618)
(2,842)
(54,460)
(5,720)
188
(20,840)
Forestry
Automotive
Components
Investment &
Other
$000
Total
$000
(16,706)
(388,987)
$000
15,257
16,566
14
451
(1,233)
-
-
-
93
610
6,958
52
(1,544)
(9)
-
180
592
-
(5,319)
4,194
-
(537)
-
-
95
1,845
5,770
27,437
(3,164)
7,427
(340)
(14,100)
333,186
12,981
24,914
57,666
1,397
(2,536)
1,845
16,151
(4,802)
(36,205)
(54,408)
(83)
2,532
36,261
15,421
(3,522)
(1,050)
-
-
(163)
(8,756)
-
-
9
-
-
-
-
-
-
13,267
(4,201)
(38,424)
(31,459)
(69,883)
-
-
-
11,034
(19,573)
10,930
(34,690)
(23,760)
(12,737)
(1,050)
(15)
(27,404)
(28,155)
-
-
-
(1,333)
(8,756)
1,081
163,910
163,910
51
-
-
-
-
1,371
-
7,357
14,550
2,745
(10,005)
(1,307)
3,491
4,053
$000
(391,779)
2,479
-
-
(146)
(8,572)
8,338
688
54,727
1,724
7,160
-
285
(333)
-
(18,307)
(28,998)
(28,810)
(102)
-
(15)
-
-
-
1,081
-
1,088
14,050
-
-
-
-
4,053
20,155
-
(13,482)
137,928
133,829
-
421
5,157
14,929
31,532
-
5,157
(3,498)
-
14,929
16,868
-
31,953
99,998
421
-
(2,842)
(2,421)
107,648
(435,173)
107,648
(17,925)
(345,450)
115
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2011
Note 30. Supplementary Statement of Net Debt (continued)
(a) Statement of Net Debt (continued)
2010
Earnings before interest and 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 equity accounted investment
Payments for investment properties
Purchase of controlled entity, net of cash acquired
Payment for design and development capitalised
Proceeds from sale of non current assets held for sale
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 from sale of property, plant and equipment
5,037
-
4,547
(7,796)
(3,333)
4,070
-
-
(11,270)
-
-
(43,507)
(3,446)
(46,953)
10,931
Proceeds from sale of investment property
Proceeds from disposal of controlled entity
Payment for acquisition of non-controlling interest
Loans to associated entities
Repayment of loans by associated entities
Loans to growers
Loans repaid by growers
Investing cash flow
Proceeds from issues of shares
Share issue costs
Intercompany movement
Partnership profit distributions
Other flows
Total flows
Opening net debt
Total flows
Fair value adjustments to debt
Consolidation of MCK Holdings (Plexicor)
Closing net debt
116
(109,687)
(133,875)
(185,934)
(110,473)
Automotive
Components
$000
Investment &
Other
$000
Total
$000
(50,787)
(179,771)
134,245
(790)
-
10,856
Forestry
$000
(158,552)
939
-
-
(225)
(9,893)
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)
-
1,020
796
4,841
86,613
-
-
802
(959)
11,630
90,069
-
-
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)
-
-
-
-
-
-
-
-
-
-
(1,117)
127
-
-
15,850
14,753
440
-
-
-
9,481
746
1,716
(248)
-
23
85
-
-
1,867
43,923
(8,351)
35,572
(4,974)
-
-
12,540
(4,249)
-
-
-
-
-
-
-
-
-
-
-
3,317
(990)
550,000
550,000
(59,577)
(25,699)
-
-
(59,577)
(25,699)
659,283
1,227
13,190
472,359
(19,500)
128,783
-
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
(18,260)
(1,600)
(6,354)
5,311
(4,249)
1,020
5,833
4,841
91,160
(7,796)
(4,450)
4,999
(959)
11,630
81,126
(19,500)
-
(3,446)
527,054
497,707
(869,548)
497,707
968
(64,300)
(435,173)
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2011
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
- tax services (primarily compliance)
- 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
2011
$000
2010
$000
81,614
79,985
(427,064)
(497,635)
-
(17,523)
(345,450)
(435,173)
2011
$
2010
$
1,427,871
1,830,037
204,795
420,382
45,413
231,876
1,678,079
2,482,295
13,460
13,460
141,180
141,180
-
-
-
-
-
-
-
-
-
-
117
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2011
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
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
APO Administration Limited
APT Finance Pty Ltd
APT Forestry Pty Ltd
APT Land Pty Ltd
APT Nurseries Pty Ltd
APT Projects Ltd
Argo Trust No. 2
Artreal Pty Ltd
Ashwick (Vic) No 102 Pty Ltd
Austech Ventures Pty Ltd
Australian Combined Meat Processors Pty Ltd
Australian Plantation Timber Pty Ltd
Australian Retirement Managers Pty Ltd
Australian Topmaking Services Pty Ltd
B & W Rural Pty Ltd
Banks Marsden Pty Ltd
BWK Australia Pty Ltd
BWK Eastern Wool Industrial & Trading Joint Stock Corporation
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
Danny F11 Investments Pte Ltd
Dawley 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 Card Ltd
Elders China Trading Company
Elders Communications Pty Ltd
Elders Direct Ltd
118
Country of
Incorporation
Australia
Australia
Australia
Australia
Australia
Hong Kong SAR
Hong Kong SAR
Australia
Australia
Australia
Australia
Australia
Australia
China
Australia
Australia
Australia
Hong Kong SAR
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Turkey
Turkey
Australia
Hong Kong SAR
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Singapore
Australia
Australia
Australia
Germany
Germany
Australia
New Zealand
China
Australia
New Zealand
(f)
(f)
(c)
(f)
(c)
(c)
(f)
(c)
(c)
(c)
(f)
(f)
(e)
(a)
(a)
(a)
(a)
(f)
(h)
(f)
(c)(f)
(c)
(f)
(a)
(c)
(c)
(f)
(f)
(a)
(e)
(f)
(f)
(f)
(f)
(f)
(f)
(a)
(c)
(f)
(f)
(f)
(f)
(g)
(c)
(g)
% Held by Group
2011
2010
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
100
100
100
75.5
100
100
91
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
50
100
100
50
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
100
100
100
51
100
100
91
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
50
100
100
50
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2011
Note 32. Investments in Controlled Entities (continued)
(a) Schedule of controlled entities (continued)
Elders 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
Elders Forestry Holdings Pty Ltd
Elders Forestry Land Holdings
Elders Forestry Management Ltd
Elders Forestry Pty Ltd
Elders Global Wool Holdings Pty Ltd
Elders Hycube Pty Ltd
Elders Insurance Limited
Elders International Australia Pty Ltd
Elders Management Services Pty Ltd (formerly FGSF Pty Ltd)
Elders Meat Processing Pty Ltd
Elders Merchandise Limited
Elders Mortgage Brokers Pty Ltd
Elders Primary Wool Limited
Elders Project Management Pty Ltd
Elders Property Management Pty Ltd
Elders PT Indonesia
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 Real Estate Ltd
Elders Rural Holdings Limited
Elders Rural Services Australia Limited
Elders Rural Services Limited
Elders Services Company Pty Ltd
Elders Stock (SI) Ltd
Elders Tasmanian Fibre Pty Ltd
Elders Telecommunications Infrastructure Pty Ltd
Elders Trustees Pty Ltd
Elders Underwriting Agency Pty Ltd
Elders Wairarapa Vet Service Ltd
Elders Webster Pty Ltd
Elders Wool International Pty Ltd
Elderstock Limited
EREF Pty Ltd
EVIA Rural Finance Ltd
EWI 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
Futuris Agencies Pty Ltd
Futuris Automotive Group Ltd
Futuris Automotive Interiors (Australia) Pty Ltd
Futuris Automotive Interiors (Barbados) Inc
Futuris Automotive Interiors (Hong Kong) Inc
Futuris Automotive Interiors (Mauritius) Inc
Futuris Automotive Interiors Trading (Shanghai) Co Ltd
Futuris Automotive Interiors (US) Inc
Country of
Incorporation
Australia
Australia
Australia
Australia
China
Australia
Australia
Australia
Australia
Australia
Australia
Australia
New Zealand
Australia
Australia
Australia
New Zealand
Australia
New Zealand
Australia
Australia
Indonesia
Australia
Australia
Australia
Australia
Australia
New Zealand
New Zealand
Australia
Australia
Australia
New Zealand
Australia
Australia
Australia
Australia
New Zealand
Australia
Australia
New Zealand
Australia
New Zealand
Australia
Australia
Mexico
Australia
Mexico
Australia
Australia
Australia
Australia
Barbados
Hong Kong SAR
Mauritius
China
USA
(f)
(a)
(c)
(f)
(a)
(f)
(f)
(a)
(a)
(f)
(g)
(a)
(f)
(f)
(g)
(f)
(g)
(f)
(f)
(f)
(f)
(f)
(f)
(f)
(g)
(g)
(a)
(f)
(g)
(a)
(f)
(c)
(f)
(g)
(f)
(a)
(g)
(f)
(g)
(f)
(f)
(c)
(e)(i)
(f)
(a)
(a)
(d)
% Held by Group
2011
2010
100
100
100
100
100
100
100
100
100
100
100
100
50
100
100
100
50
100
25
100
100
100
100
100
100
100
100
50
50
100
100
100
35
100
100
100
100
50
100
100
35
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
50
100
100
100
50
100
25
100
100
100
100
100
100
100
100
50
50
100
100
100
35
100
100
100
100
50
100
100
35
100
50
100
100
100
100
100
100
100
100
100
100
-
100
100
100
119
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2011
Note 32. Investments in Controlled Entities (continued)
(a) Schedule of controlled entities (continued)
Futuris Automotive Interiors Holdings Pty Ltd
Futuris Automotive Thailand Co Ltd
Futuris Huaxiang Automotive Component (Mianyang) Co Ltd
Futuris Pty Ltd (formerly Futuris Automotive Pty Ltd)
Futuris Rural Pty Ltd
Futuris Ventures Pty Ltd
Futuris/Tamper Joint Venture Unit Trust
Geelong Wool Combing Pty Ltd
George Moss (Qld) Pty Ltd
George Moss Pty Limited
Gisborne Farmers Ltd
Grouville Pty Ltd
Hallette Pty Ltd
Hollymont Pty Ltd
Hose & Pipe Pty Ltd
IMA Investment Management Australia (ADF) Pty Ltd
IMA Investment Management Australia Pty Ltd
Innerhadden Pty Ltd
ITC Portland Woodchip Terminal Pty Ltd
ITC Timerlands Pty Ltd
J.A. Gilmour & Sons (NSW) Pty Ltd
J.S. Brooksbank Pty Ltd
Jetoleaf Pty Ltd
JS Brooksbank & Co Australasia Ltd
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
Marybrook Development Company Pty Ltd
Marybrook Investment Pty Ltd
Masterfund (WA) Pty Ltd
MCK Group Pty Ltd
MCK Holdings (Australia) Pty Ltd
MCK Holdings Pty Ltd
MCK Pacific Pty Ltd
Milltoc Pty Ltd
Mutual Benefit Consulting Pty Ltd
New Ashwick Pty Ltd
North Australian Cattle Company Pty Ltd
Pitt Son & Keene Pty Ltd
Plantation Pulpwood Terminals Pty Ltd
Plexicor Pty Ltd (formerly Domeni 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 Travel Pty Ltd
Rachid Fares Enterprises of Australia Pty Ltd
Redray Enterprises Pty Ltd
Relatran Pty Ltd
SA Bid Co Pty Ltd
120
Country of
Incorporation
Australia
Thailand
China
Australia
Australia
Australia
Australia
Australia
Australia
Australia
New Zealand
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
New Zealand
New Zealand
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
(a)
(d)
(a)
(c)(i)
(f)
(e)
(c)
(f)
(f)
(g)
(f)
(f)
(c)
(c)
(c)
(c)
(c)
(f)
(a)
(f)
(f)
(f)
(f)
(a)
(a)
(f)
(f)
(c)(i)
(f)
(f)
(f)
(f)
(a)(b)
(a)(b)
(a)(b)
(a)(b)
(c)
(f)
(f)
(a)
(f)
(f)
(f)
(a)
(f)
(c)
(c)
(f)
(c)
(f)
(f)
(c)
(f)
(f)
% Held by Group
2011
2010
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
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
50
50
50
50
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2011
Note 32. Investments in Controlled Entities (continued)
(a) Schedule of controlled entities (continued)
Seed Production Limited
Steeden Holdings Pty Ltd
Steering Systems Australia Pty Ltd
Sycamore Enterprises Pty Ltd
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
Ultrasound Australia Pty Ltd
Ultrasound International Pty Ltd
Ultrasound Technical Services Pty Ltd
United Alliance Group Pty 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
Wollkontor (London) Ltd
Wool Exchange (WA) Pty Ltd
Wool Marketing Enterprises Pty Ltd
Yenley Pty Ltd
Country of
Incorporation
New Zealand
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Singapore
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
United Kingdom
Australia
New Zealand
Australia
(g)
(f)
(c)
(c)(i)
(f)
(f)
(c)
(f)
(f)
(f)
(c)
(a)
(f)
(f)
(f)
(f)
(c)
(c)
(f)
(c)
(f)
(f)
(f)
(g)
(f)
% Held by Group
2011
2010
50
100
100
-
66
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
67
25
100
50
100
100
100
66
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
50
100
67
25
100
• 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 (c).
• Entities acquired or registered during the period are denoted by (d).
• Entities exempted from audit requirements due to overseas legislation or non-corporate status are denoted by (e).
• Entities classified by the Corporations Act 2001 as small proprietary companies relieved from audit requirements are denoted by (f).
• Entities denoted by (g) are controlled entities, as the Group has the capacity to control via a dominance of financial, management and
technological control.
• Entity denoted by (h) is a controlled special purpose entity related to trade receivable financing program.
• Entities denoted by (i) are entities that were disposed of, deregistered or liquidated during the year.
(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.
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 18 and in connection with the unsecured and convertible notes disclosed at note 20. 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.
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:
121
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2011
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 39)
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
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
Derivative financial instruments
Non current asset classified as held for sale
Other assets
Total current assets
Non current assets
Receivables
Forestry
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
122
2011
$000
2010
$000
(149,375)
(106,488)
(9,896)
(28,140)
(159,271)
(134,628)
(241,230)
(1,378)
(400,501)
(136,006)
2,301
447
(398,200)
(135,559)
(285,996)
(213,142)
214
(8,795)
-
-
48,607
14,545
(695,078)
(285,996)
7,230
1,805
537,822
446,407
24,293
-
43,928
482
83,573
13,867
12,416
2,122
47,346
-
1,347
13,278
711,195
524,721
18,413
-
48,052
22,918
147,083
373,097
81,719
47,429
218,788
76,854
-
261,496
178,700
106,926
24,237
133,703
85,018
19,077
604,507
1,239,003
1,315,702
1,763,724
123,581
917
45,313
84,299
79,168
81,961
19,882
23,129
123,441
23,375
333,278
271,788
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2011
Note 32. Investments in Controlled Entities (continued)
(b) Deed of cross guarantee (continued)
Non current liabilities
Payables
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 equity
2011
$000
2010
$000
496
-
229,025
292,007
16,746
14,318
17,897
14,216
260,585
324,120
593,863
595,908
721,839
1,167,816
1,271,493
1,273,863
145,151
145,151
273
34,798
(695,078)
(285,996)
721,839
1,167,816
Note 33. Key Management Personnel
(a) Details of Key Management Personnel
Directors
JC Ballard
CE Bright
RG Grigg
IG MacDonald
JH Ranck
RH Wylie
MC Allison
M Jackman
Chairman
Non Executive Director (resigned 16 December 2010)
Non Executive Director
Non Executive Director
Non Executive Director
Non Executive Director
Non Executive Director
Managing Director and Chief Executive Officer
Other Key Management Personnel
M De Wit
V Erasmus
M Hosking
S McClure
R Tanti
S Hughes
A Dage
Managing Director – Futuris Automotive Group Ltd
Chief Operating Officer and Managing Director – Elders Forestry
Chief Financial Officer
Group General Manager Strategy and Development
Group General Manager Human Resources (resigned 30 June 2011)
Chief Information Officer
Group General Manager Trading
(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
2011
$
2010
$
5,840,988
5,905,128
108,380
231,216
532,698
1,083,737
7,797,019
101,798
585,116
695,975
1,024,603
8,312,620
123
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2011
Note 33. Key Management Personnel (continued)
(c) Option holdings of Directors and other Key Management Personnel
(Number)
2011
M De Wit
V Erasmus
S McClure
S Hughes
Total
2010
M Jackman
M De Wit
M Guerin
V Erasmus
S McClure
S Hughes
Total
Balance at
beginning of
period
Options
exercised
Options
granted
Options
lapsed /
forfeited
Balance
at end of
period
Vested and
exercisable at
end of period
40,000
150,000
22,500
15,000
227,500
400,000
50,000
150,000
150,000
22,500
15,000
787,500
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(10,000)
30,000
-
-
-
150,000
22,500
15,000
30,000
75,000
12,500
-
(10,000)
217,500
117,500
(400,000)
-
-
(10,000)
40,000
20,000
(150,000)
-
-
-
-
150,000
22,500
15,000
-
75,000
5,000
-
(560,000)
227,500
100,000
As at balance date there are $nil options (2010: $nil) which have vested but are unexercisable.
(d) Retention Rights of Directors and other Key Management Personnel
(Number)
2011
M Hosking
S McClure
S Hughes
A Dage
R Tanti
Total
Balance at
beginning of
period
Rights
exercised
Rights
granted
-
-
-
-
-
-
-
-
-
-
-
-
1,518,839
490,702
560,802
889,077
390,171
Rights
lapsed /
forfeited
-
-
-
-
(390,171)
Balance
at end of
period
1,518,839
490,702
560,802
889,077
-
3,849,591
(390,171)
3,459,420
Vested at
end of
period
-
-
-
-
-
-
(e) Long Term Incentive Rights held by Directors and other Key Management Personnel
Balance at
beginning of
period
2,570,425
-
-
-
-
2,570,425
-
-
Rights
exercised
Rights
granted
Rights
lapsed /
forfeited
Balance at end
of period
Vested at
end of
period
-
-
-
-
-
-
-
-
-
696,325
352,809
467,559
603,482
2,120,175
2,570,425
2,570,425
-
-
-
-
-
-
-
-
2,570,425
696,325
352,809
467,559
603,482
4,690,600
2,570,425
2,570,425
-
-
-
-
-
-
-
-
(Number)
2011
M Jackman
M Hosking
S McClure
S Hughes
A Dage
Total
2010
M Jackman
Total
124
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2011
Note 33. Key Management Personnel (continued)
(f ) Shareholdings of Directors and other Key Management Personnel
(Ordinary shares)
2011
JC Ballard
CE Bright*
RG Grigg
IG MacDonald
JH Ranck
RH Wylie
M Jackman
M De Wit
V Erasmus
S McClure
S Hughes
A Dage
Total
2010
S Gerlach*
JC Ballard
CE Bright
JC Fox*
RG Grigg
A Salim*
GD Walters*
IG MacDonald
JH Ranck
RH Wylie
M Jackman
M de Wit
M Guerin*
V Erasmus
S McClure
S Hughes
Total
(Hybrid equity)
2011
M Jackman
2010
M Jackman
Balance at
beginning of period
On exercise
of options
Granted as
remuneration
Net change
other
Balance at
end of period*
250,000
21,479
16,490
52,668
128,334
6,000
107,168
18,537
1,998
7,697
17,087
90,000
717,458
60,683
-
8,146
2,677
3,156
3,354,558
16,100
26,000
24,000
-
13,000
5,203
27,070
1,998
1,030
10,420
3,554,041
1,000
1,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
13,334
250,000
13,333
13,334
13,334
250,000
21,479
16,490
52,668
128,334
6,000
107,168
18,537
1,998
7,697
17,087
90,000
717,458
74,017
250,000
21,479
16,011
16,490
-
3,354,558
13,334
26,668
104,334
6,000
94,168
13,334
26,667
-
6,667
6,667
29,434
52,668
128,334
6,000
107,168
18,537
53,737
1,998
7,697
17,087
601,174
4,155,215
-
-
1,000
1,000
* Balance at period end represents balance at date of cessation of services.
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.
(g) Loans to and transactions with Directors and other Key Management Personnel
As at 30 September 2011, a loan balance of $7,000 (2010: $7,000) was owing by V Erasmus.
During the 2011 financial year, JC Ballard purchased $16,408 worth of livestock and merchandise products from the Group, and sold
$33,251 of livestock to the Group. During the 2010 financial year, CE Bright purchased $5,000 worth of merchandise from the Group.
All transaction between Directors and Key Management Personnel are made at arm’s length.
Other than those disclosed above, no other loans were granted to, and no other transactions were entered into, with Directors and other
Key Management Personnel in either the 2010 or 2011 financial years.
125
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2011
Note 34. 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
Lapsed during the year
Outstanding at the end of the year
2011
No. (‘000)
1,380
(427)
953
2011
WAEP
$
19.27
20.34
18.79
2010
No. (‘000)
2,440
(1,060)
1,380
2010
WAEP
$
17.80
15.85
19.27
The range of exercise prices for options outstanding at the end of the year was $12.90 - $24.50. The weighted average remaining
contractual life for the share options outstanding as at 30 September 2011 is 1.08 years (2010: 1.53 years).
(b) Retention Plan (General)
The parent entity issues from time to time rights over ordinary shares to senior employees of the Group. The rights are issued at the sole
discretion of the Directors as part of the employee’s remuneration packages.
The Plan is designed 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.
As there are no vesting conditions other than continued employment, the fair value of the rights is equal to the share price on the day of
issue, less any expected future dividends between the issue date and the vesting date. As at 30 September 2011 5,793,595 rights were
outstanding, all with a maturity date of 1 August 2013. An expense of $1.4 million was recognised in profit and loss during the year in
relation to the issue of service rights.
(c) Elders Long Term Incentive Rights Plans
The parent entity issues from time to time rights over ordinary shares to senior employees of the Group. The rights are issued at the sole
discretion of the Directors as part of the employee’s remuneration packages. Each right will convert to one ordinary share automatically
on the vesting date assuming satisfaction of certain performance conditions as determined by the Board at the time of grant, continued
employment (or earlier termination of employment for reason other than resignation or dismissal for poor performance or misconduct),
and may vest earlier in the event of a takeover.
(i) CEO Long Term Incentive Plan
As at 30 September 2011 2,570,425 CEO rights were outstanding, with maturity dates between 10 November 2011 and 10 November 2015.
An expense of $0.1 million was recognised in profit and loss during the year in relation to the rights issue.
(ii) Executive Long Term Incentive Plan
As at 30 September 2011 5,546,587 executive rights were outstanding, with maturity dates between 10 November 2012 and 10 November
2014. An expense of $0.4 million was recognised in profit and loss during the year in relation to the rights issue.
The fair value of the equity settled share rights was measured using the Monte Carlo simulation model, taking into account the terms and
conditions upon which the instruments were granted.
126
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2011
Note 34. Share Based Payment Plans (continued)
(d) 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) 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
(ii) 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 (2010: 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.
Note 35. Related Party Disclosures
(a) Ultimate controlling entity
The ultimate controlling entity of the Group is Elders Limited.
(b) Transactions between Elders Limited (Parent Entity) and related parties in the wholly owned group
Transactions with related parties in the wholly owned group:
Intercompany loan movements
Interest recharged
Recharges – other
Balances with related parties in the wholly owned group:
Owing to the Parent Entity
Owing from the Parent Entity
2011
$000
2010
$000
865,741
(596,326)
(34,322)
(22,940)
(4,500)
(3,500)
527,680
1,556,261
(389,080)
(590,742)
138,600
965,519
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.
127
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2011
Note 35. Related Party Disclosures (continued)
(c) Transactions between controlled entities wholly owned and controlled entities not wholly owned
Details of entities not wholly owned are set out in note 32.
Transactions with controlled entities not wholly owned:
Intercompany loan movements
Dividends received
Sale of inventory
Loans advanced
Other
Balances with controlled entities not wholly owned:
Owing to the Group
Owing from the Group
2011
$000
10,401
2,286
-
(27)
-
334
(893)
(559)
2010
$000
1,633
1,799
80
-
(66)
13,006
(905)
12,101
Transactions with controlled entities not wholly owned are made in arms length transactions both at normal market prices and on normal
commercial terms.
(d) Transactions between controlled entities and partly owned entities (associates and joint ventures)
Details of associates and joint ventures are set out in note 12.
Transactions with partly owned entity
Loan received
Loan repayments received
Interest received or receivable
Dividends received
Distribution fees received
Reimbursement of expense
Sale of inventory
Other services and recharges
Loans advanced
Capital contributions
Purchases
Entity no longer partly owned
Balances with partly owned entities:
Owing to the Group
Owing from the Group
1,754
5,830
1,747
-
-
-
-
-
(967)
-
-
-
4,999
2,646
30,781
22,593
26,732
5,383
10,405
(4,450)
(1,600)
(64,726)
7,932
689
23,356
(4,749)
18,607
29,584
(2,000)
27,584
Loans made to partly owned entities are priced on an arms length basis. 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.
128
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2011
Note 36. Earnings Per Share
Weighted average number of ordinary shares (‘000) used in calculating basic EPS
Dilutive share options (‘000)
Adjusted weighted average number of ordinary shares used in calculating dilutive EPS (‘000)
2011
2010
448,598
425,675
471,306
230,001
919,904
655,676
Hybrid notes have been included in the calculation of dilutive EPS, as they are believed to be dilutive when a statutory profit is made.
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)
(395,350)
(217,628)
Dilutive
Net profit/(loss) attributable to members (after tax)
(395,350)
(217,628)
2011
$000
2010
$000
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
(88.1)¢
(88.1)¢
(51.1)¢
(51.1)¢
(395,350)
(217,628)
297,501
103,276
(97,849)
(114,352)
Net profit/(loss) of continuing operations (net of tax)
(97,849)
(114,352)
Continuing operations earnings per share:
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
Discontinued operations
(21.8)¢
(21.8)¢
(26.9)¢
(26.9)¢
Net profit/(loss) of discontinued operations (net of tax)
(297,501)
(103,276)
Discontinued operations earnings per share:
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
(66.3)¢
(66.3)¢
(24.3)¢
(24.3)¢
129
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2011
Note 37. Financial Instruments
The Group’s principle financial instruments comprise receivables, payables, loans, finance leases, cash and other short term deposits
and derivatives.
Risk exposures and responses
The Group manages its exposure to key financial risks, including interest rate and currency risk in accordance with the Group’s financial
risk management policy. The objective of the policy is to support the delivery of the Group’s financial targets while protecting future
financial security.
The group enters into derivative transactions, principally interest rate swap and forward currency contracts. The purpose is to manage the
interest rate and currency risks arising from the Group’s operations and its sources of finance. The main risks arising from the Group’s
financial instruments are interest rate risk, foreign currency risk, credit risk and liquidity risk. The Group uses different methods to measure
and manage different types of risks to which it is exposed. These include monitoring levels of exposure to interest rate and foreign exchange
risk and assessments of market forecasts for interest rate and foreign exchange prices. Ageing analyses and monitoring of specific credit
allowances are undertaken to manage credit risk. Liquidity risk is monitored through the development of future rolling cash flow forecasts.
The Board reviews and agrees policies for managing each of these risks as summarised below.
(a) Interest rate risk
The Group’s exposure to market interest rates relates primarily to the Groups short term and long term debt obligations. The level of debt is
disclosed in note 18.
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:
Financial assets
Cash and cash equivalents
Amounts receivable from associated entities
Financial liabilities
Secured loans
Unsecured loans
Net exposure
2011
$000
2010
$000
81,614
10,060
91,674
79,985
14,213
94,198
(424,596)
(400,994)
(1,828)
(1,636)
(426,424)
(402,630)
(334,750)
(308,432)
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 2011,
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:
+ 100 basis points
- 100 basis points
The impact on equity incorporates the impact on profit and is therefore of the same magnitude.
Post Tax Profit/Equity
Higher/(Lower)
2011
$000
(3,348)
3,348
2010
$000
(3,084)
3,084
130
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2011
Note 37. Financial Instruments (continued)
(b) 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.
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 2011. For the other obligations the respective undiscounted cash flows for the
respective upcoming fiscal years are presented. The timing of cash flows for liabilities is 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.
Carrying
amount
$000
Contractual
cash flows
6 months
or less
6-12 months
1-5 years
> 5 years
$000
$000
$000
$000
$000
2011
Non derivative financial assets:
Cash and cash equivalents
81,614
81,614
81,614
Trade and other receivables
580,877
587,719
566,189
662,491
669,333
647,803
-
1,924
1,924
-
19,606
19,606
Non derivative financial liabilities:
Secured loans
Unsecured loans
Finance leases
(424,596)
(473,514)
(173,513)
(52,007)
(247,994)
(1,828)
(640)
(2,216)
(721)
-
(199)
-
(198)
-
-
(2,216)
(324)
(2,583)
-
Trade and other payables
(436,499)
(436,499)
(433,916)
Financial guarantees
(19,241)
(19,241)
(19,241)
Net inflow/(outflow)
(220,313)
(262,858)
20,934
(50,281)
(233,511)
(882,804)
(932,191)
(626,869)
(52,205)
(253,117)
2010
Non derivative financial assets:
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
(358,469)
(358,469)
(357,283)
Financial guarantees
(19,030)
(19,030)
(19,030)
-
1,679
1,679
(4,735)
(4,735)
(335)
(127)
-
-
-
99,189
99,189
(131,827)
(149,015)
(1,018)
(134)
(1,186)
-
(896,809)
(968,581)
(675,469)
(9,932)
(283,180)
-
-
-
-
-
-
-
-
-
-
-
284,512
284,512
-
-
-
-
-
-
-
Net inflow/(outflow)
(112,791)
2,789
(89,479)
(8,253)
(183,991)
284,512
131
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2011
Note 37. Financial Instruments (continued)
(b) 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
664
(6,916)
(6,252)
2011
Derivative assets – net settled
Derivative liabilities – net settled
Total inflow/(outflow)
2010
Derivative liabilities – net settled
(21,304)
Total inflow/(outflow)
(21,304)
(c) Credit risk
Contractual
cash flows
6 months
or less
6-12 months
1-5 years
> 5 years
$000
$000
$000
$000
$000
664
(6,916)
(6,252)
(21,304)
(21,304)
664
(6,916)
(6,252)
(3,601)
(3,601)
-
-
-
-
-
-
-
-
(17,703)
(17,703)
-
-
-
-
-
Credit risk arises from the financial assets of the Group, which comprise cash and cash equivalents, trade and other receivables, and
derivative instruments. The Group’s exposures to credit risk arise from potential default of the counterparty, with the maximum exposure
equal to the carrying amount of the financial assets.
The ageing of the Groups’ trade and other receivables at balance date is reported at note 6. 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. 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
North America
Other
Total gross receivables
132
2011
$000
81,614
580,877
664
663,155
494,207
47,629
8,553
25,326
1,130
1,765
2,267
2010
$000
79,985
704,033
-
784,018
637,799
47,765
5,467
6,528
2,727
-
3,747
580,877
704,033
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2011
Note 37. Financial Instruments (continued)
(c) Credit risk (continued)
Industry classification
Rural
Forestry
Automotive
Investment and other
Total gross receivables
(d) Foreign currency risk
2011
$000
302,944
16,058
67,193
194,682
580,877
2010
$000
273,860
194,351
63,148
172,674
704,033
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 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.
At 30 September 2011, 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
5,594
3,906
5,101
1,747
5,746
1,701
21,334
50,821
3,173
1,444
8,752
109,319
7,285
15,218
2,623
1,364
517
2,891
3,205
49,340
3,973
1,622
2,093
90,131
133
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2011
Note 37. Financial Instruments (continued)
(d) Foreign Currency Risk (continued)
Financial liabilities
Payables – EUR
Payables – USD
Payables – NZD
Payables – CNY
Payables – ZAR
Payables – Other
Interest bearing loans and borrowings – USD
Interest bearing loans and borrowings – NZD
Interest bearing loans and borrowings – CNY
Interest bearing loans and borrowings – ZAR
Net exposure
2011
$000
2010
$000
(8,445)
(5,293)
(6,082)
(7,283)
(24,489)
(22,672)
(1,478)
(2,531)
(6,587)
(2,146)
-
(1,173)
-
(108,637)
(10,642)
(1,320)
(945)
(13,159)
(2,551)
-
(61,730)
(163,703)
47,589
(73,572)
Given the foreign currency balances included in the Statement of Financial Position 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:
EUR
USD
NZD
CNY
ZAR
Other
Post Tax Profit/Equity
Higher/(Lower)
2011
$000
115
(1,995)
(2,079)
(212)
203
(791)
2010
$000
(409)
9,750
(1,613)
(64)
(162)
(144)
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.
134
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2011
Note 37. Financial Instruments (continued)
(e) 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:
2011
2010
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
-
-
-
664
(6,916)
(6,252)
-
-
-
-
-
-
-
(21,304)
(21,304)
-
-
-
Financial assets
Derivatives
Financial liabilities
Derivatives
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 38. Business Combinations – Changes in the Composition of the Entity
(a) Controlled entities acquired
During the period there were immaterial business combinations that resulted in $1.8 million of goodwill being recognised.
Prior Period acquisitions
During the prior year the Group obtained control of the following material entities:
• Plantation Pulpwood Terminals Pty Ltd
• MCK Holdings Pty Ltd.
The accounting for both business combinations was provisional in the 2010 financial report on the basis that formal valuations of all assets
and liabilities acquired were not finalised as at 30 September 2010. In accordance with AASB 3 Business Combinations, the Group has
obtained formal valuations in respect to each entity.
No adjustments to the provisional accounting for Plantation Pulpwood Terminals Pty Ltd have been required however adjustments, including
recognition of separately identifiable intangible assets, to the provisional accounting for MCK Holdings Pty Ltd have been made. These
adjustments have been recorded retrospectively to the 2010 position.
135
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2011
Note 38. Business Combinations – Changes in the Composition of the Entity (continued)
(a) Controlled entities acquired (continued)
Final accounting for Plantation Pulpwood Terminals Pty Ltd (PPT) acquisition
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 prior period:
Date
Control
Acquired
Proportion
of Shares
Acquired
Provisional
2010
$000
Final
2010
$000
30 Aug 2010
50%
Purchase consideration
Value of initial investment
Fair value adjustment on 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
Property, plant and equipment
Other assets
Trade and other payables
Provisions
Net identifiable assets acquired
7,641
7,641
-
-
7,641
12,641
(5,000)
-
-
7,641
12,641
(5,000)
Acquiree’s
carrying amount
$000
Provisional
fair value
$000
Final
fair value
$000
412
15,320
583
(8,542)
(132)
7,641
412
412
20,320
20,320
583
583
(8,542)
(8,542)
(132)
(132)
12,641
12,641
Final accounting for MCK Holdings Pty Ltd (Plexicor) acquisition
The Group previously held a 50% interest in Plexicor which had been classified as an equity accounted investment. As at 30 September
2010 the Group determined that due to the influence Elders had over the operating and financial policies of Plexicor that control of that
business existed.
At 30 September 2010, the external 50% shareholders had a put option for the remaining 50% of Plexicor. Due to the certainty of the
option being exercised this amount was 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.
During the current year management have received independent valuations of the property, plant and equipment and separately identifiable
intangible assets acquired in the business combination. This has resulted in adjustments to the acquisition accounting detailed below.
The material separately identifiable intangible assets acquired consist of customer contracts and relationships. These intangible assets
have been amortised in the current year with the financial impact recorded in the Statement of Comprehensive Income.
136
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2011
Note 38. Business Combinations – Changes in the Composition of the Entity (continued)
(a) Controlled Entities Acquired (continued)
Equity and consideration paid in prior period:
Purchase consideration
Value of initial investment
Fair value adjustment on initial investment
Total consideration
Fair value of identifiable net assets acquired (see below)
Goodwill/(discount) on acquisition
Date Control
Acquired
Proportion
of Shares
Acquired
Provisional
2010
$000
30 Sep 2010
50%
27,100
20,941
-
Final
2010
$000
27,404
20,941
-
48,041
48,345
(50,044)
(39,154)
98,085
87,499
The aggregate amounts of assets and liabilities acquired by major class:
Cash and cash equivalents
Trade and other receivables
Inventories
Property, plant and equipment
Intangibles
Goodwill
Other assets
Tax assets and liabilities
Derivatives
Trade and other payables
Provisions
Interest bearing loans and liabilities
Net identifiable assets acquired
Acquiree’s
carrying amount
$000
Provisional
fair value
$000
Final
fair value
$000
12,540
12,540
12,540
9,927
6,829
9,859
-
12,022
142
2,914
(75)
(22,543)
(2,234)
(64,300)
(34,919)
9,927
6,829
9,859
-
-
142
(189)
(75)
9,927
6,829
8,849
11,900
-
142
(189)
(75)
(22,543)
(22,543)
(2,234)
(2,234)
(64,300)
(64,300)
(50,044)
(39,154)
During the prior period there were other immaterial business combinations that resulted in $2.3m of goodwill being recognised.
137
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2011
Note 38. Business Combinations – Changes in the Composition of the Entity (continued)
(b) Controlled entities disposed
There were no controlled entities disposed of in the 2011 financial year.
Proceeds received on disposal of assets/shares
Cash
Share capital (i)
Cash balance disposed
Less costs of disposal
The carrying amounts of assets and liabilities disposed of by major class are:
Trade and other receivables
Other assets
Property, plant and equipment
Intangibles
Tax assets and liabilities
Trade and other payables
Provisions
Net assets/(liabilities) of entity sold
Profit/(loss) on disposal (before tax)
Additional loss on timber sale
Total profit/(loss) on disposal of controlled entities
2011
$000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2010
$000
4,934
4,804
(336)
(51)
9,351
870
148
70
15,755
(32)
(5,648)
(232)
10,931
(1,580)
(7,374)
(8,954)
(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 net assets in Elders Trustees Ltd and Tomkin 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 an 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.
138
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2011
Note 39. Discontinued Operations
Financial period 30 September 2011
As announced on 3 October 2011 the Board of Directors have resolved that the operations of the Group’s Forestry division, a division which
has interests in forestry plantations, will be held for sale. Refer to (a) below for further details.
Additionally results from the Group’s investment in Elders Toepfer Grain Pty Ltd (“ETG”), Rural Bank Limited, Elf Pty Ltd (Hi-Fert) and the
Torrens were classified as discontinued during the current year. These operations form part of the Rural Services segment. As required by
AASB 5 Non-current Assets Held for Sale and Discontinued Operations the 2010 comparative discontinued operations disclosed below have
been re-presented to show the effects of these classifications.
The Group’s investment in ETG was sold during the period to Toepfer International. This resulted in a loss on sale of $5.0 million. In addition
equity accounted losses of $8.9 million were recognised in the year.
The Rural Bank Limited investment was sold to Bendigo and Adelaide Bank Limited on 10 December 2010. Proceeds on sale were $166.6
million less transaction costs of $2.7 million. The profit on sale was $17.7 million.
The Group’s shipping operation, the MV Torrens, was disposed on 30 September 2011. The Group has entered into a charter arrangement
with the purchaser to continue to utilise the vessel for its live export operations.
During the year the Group entered into an arrangement to divest its shareholding in Hi-Fert under a call option agreement with Agrium Inc,
its other shareholder. Agrium declined to exercise this option and Hi-Fert was subsequently placed in administration. An impairment of
$10.6 million was recorded in the current year reducing the carrying value of the investment to nil.
Financial period 30 September 2010
Operations within Wool Processing, Seed Processing, Financial Planning, New Zealand Real Estate, Automotive Air Conditioning and results
of Forest Enterprises Australia and Smartfibre Limited were classified as discontinued operations, or were disposed of during the period
ended 30 September 2010 and reported as discontinued operations.
These items, with the exception of Automotive Air Conditioning and the investment in Forest Enterprises Australia, continue to be classified
as discontinued operations in the current financial year.
139
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2011
Note 39. Discontinued Operations (continued)
Sales revenue
Cost of sales
Other revenues
Other expenses
Continuing
2011
$000
Discontinued
2011
$000
Total
2011
$000
Continuing
2010
$000
Discontinued
2010
$000
Total
2010
$000
2,263,116
95,563
2,358,679
1,958,068
196,313
2,154,381
(1,816,539)
(82,067)
(1,898,606)
(1,523,186)
(165,833)
(1,689,019)
20,912
16,191
37,103
22,852
13,095
35,947
(525,783)
(366,080)
(891,863)
(513,108)
(192,145)
(705,253)
Share of profit of associates and joint ventures
12,085
(8,921)
3,164
10,489
23,254
33,743
Profit/(loss) on sale of non current assets
(3,936)
6,472
2,536
(709)
(8,861)
(9,570)
Profit/(loss) before net borrowing costs and
tax expense
Interest revenue
Finance costs
(50,145)
(338,842)
(388,987)
(45,594)
(134,177)
(179,771)
21,792
(77,388)
292
22,084
25,201
1,759
26,960
(333)
(77,721)
(57,823)
(1,025)
(58,848)
Profit/(loss) before tax expense
(105,741)
(338,883)
(444,624)
(78,216)
(133,443)
(211,659)
Income tax benefit/(expense)
12,074
41,382
53,456
(31,019)
30,167
(852)
Net profit/(loss) for year
(93,667)
(297,501)
(391,168)
(109,235)
(103,276)
(212,511)
Net profit/(loss) attributable to
non-controlling interest
Net profit/(loss) attributable to members of the
parent entity
Revenue and expenses
Sales revenue:
Sale of goods
4,182
-
4,182
5,117
-
5,117
(97,849)
(297,501)
(395,350)
(114,352)
(103,276)
(217,628)
1,818,755
75,637
1,894,392
1,578,298
167,610
1,745,908
Sale of biological assets
204,104
-
204,104
146,181
-
146,181
Commission and other selling charges
209,569
2,100
211,669
202,561
3,064
205,625
Other sales related income
30,688
17,826
48,514
31,028
25,639
56,667
2,263,116
95,563
2,358,679
1,958,068
196,313
2,154,381
Other expenses:
Distribution expenses
Marketing expenses
Occupancy expenses
263,829
9,423
273,252
273,666
9,182
282,848
7,960
36,999
818
980
8,778
4,646
1,968
6,614
37,979
39,718
1,385
41,103
Administrative expenses
130,088
18,699
148,787
143,079
22,748
165,827
Forestry fair value adjustments
54,727
325,583
380,310
15,844
143,838
159,682
Write down of assets to be divested or discontinued
-
10,577
10,577
-
13,024
13,024
Impairment of assets retained
7,252
Restructuring, redundancy and refinancing costs
18,253
Change in fair value of financial and other assets
Other expenses
-
6,675
-
-
-
-
7,252
5,095
18,253
27,279
-
6,675
1,409
2,372
-
-
-
-
5,095
27,279
1,409
2,372
525,783
366,080
891,863
513,108
192,145
705,253
Profit/(loss) on sale of non current assets
Other financial assets
Non current assets held for sale
Equity accounted investments
Property, plant and equipment
Investment property
Intangibles
Controlled entities
140
-
-
-
-
588
-
588
12,667
12,667
-
-
-
(403)
500
97
(709)
-
(7,283)
(7,283)
(3,533)
-
-
-
(3,533)
-
-
-
-
125
125
-
-
(20)
(12)
-
-
-
(729)
(12)
-
(8,954)
(8,954)
(3,936)
6,472
2,536
(709)
(8,861)
(9,570)
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2011
Note 39. Discontinued Operations (continued)
The net cash flow of the discontinued operations are as follows:
Operating activities
Investing activities
Financing activities
Net cash inflow / (outflow)
(a) Assets and liabilities – held for sale operations
Forestry assets (i)
Receivables
Investments in associates and joint ventures
Property, plant and equipment
Investment property
Other (ii)
Fair value less costs to sell at the end of the period
(i) Forestry assets
2011
$000
2010
$000
(23,476)
(28,681)
24,035
5,157
5,716
90,069
(64,620)
(3,232)
44,031
1,726
21,030
114,561
181,348
4,511
185,859
-
1,676
-
1,347
3,023
15,088
18,111
As announced by the Company on 3 October 2011 the Board of Directors have resolved that all operations of the Group’s Forestry division
would be held for sale, effective 30 September 2011. This decision has been made following the receipt of credible, non-binding offers for
various pulpwood plantation assets and the continued progress of divestment of forestry land situated in central Queensland. It is
considered that shareholder value is better served by withdrawal from the Forestry sector to release and redirect capital to debt reduction
and reinvestment in other operations.
The Forestry division comprises a number of separate disposal groups. The disposal groups are Pulpwood, Sandalwood, Red Mahogany,
Teak, Central Queensland land, the investment in Smartfibre and the Grower loan book. The major classes of assets within the disposal
groups are receivables, accrued income, investment properties and property, plant and equipment. There may be factors beyond the Group’s
control that impact the timing of the ultimate sale of these disposal groups however at present it is expected all disposal groups will be sold
within twelve months of balance date.
Liabilities have also been recognised as a result of classifying the Forestry division as held for sale. Where it is expected that these liabilities
will be settled and not sold to third parties they have been treated as part of continuing operations as they do not meet the accounting
standard requirements of held for sale.
All disposal groups are reported in the Forestry segment as detailed in Note 29 of the financial report.
On transfer to the non current asset classified as held for sale category a number of fair value adjustments have been recognised to revalue
these assets to the lower of their carrying value or fair value less costs to sell. These impairments arise from the following asset categories:
141
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2011
Note 39. Discontinued Operations (continued)
(i) Forestry assets (continued)
Forestry assets – adjustments to carrying amounts on transfer to held for sale
Receivables
Forestry
Inventory
Property, plant and equipment
Investment properties
2011
$000
2010
$000
149,713
25,462
3,494
6,300
139,157
324,126
-
-
-
-
-
-
In addition, provisions for onerous leases and other obligations of $52.9 million have been recognised given the decision to hold the various
disposal groups within the Forestry division for sale.
(ii) Other assets
The Group’s investments in Hi-Fert and Seafood Delicacies Ltd are held for sale and have been classified in the statement of financial
position as ‘Non current assets held for sale’ totalling $4.5 million (2010: $15.1 million).
Note 40. 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
529,242
1,565,025
568,732
546,680
1,097,974
2,111,705
373,506
610,620
-
99,863
373,506
710,483
724,468
1,401,222
1,271,493
1,273,863
145,151
145,151
(700,527)
11,345
-
(15,571)
11,132
351
(2,994)
(13,704)
724,468
1,401,222
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 company’s 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 unsecured notes.
Note 41. Subsequent Events
There is no matter or circumstance that has arisen since 30 September 2011 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.
142
Directors’ Declaration
In accordance with a resolution of the Directors of Elders Limited, I state that:
1. In the opinion of the Directors:
(a)
the financial statements and notes of Elders Limited for the financial year ended 30 September 2011 are in accordance with the
Corporations Act 2001, including:
(i) Giving a true and fair view of its financial position as at 30 September 2011 and of its performance for the year ended on that
date; and
(ii) Complying with Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001
(b) the financial statements and notes also comply with International Financial Reporting Standards as disclosed in note 2(b)
(c)
there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.
2. 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 2011.
3. In the opinion of the Directors, 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
14 November 2011
143
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
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
144
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
145
ASX Additional Information
(a) Distribution of Equity Securities as at 31 October 2011
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
5,637,986
20,011,327
23,330,586
115,176,839
284,441,742
448,598,480
The number of holders holding less than a marketable parcel
19,428
7,560
2,995
4,601
303
556,698
301,004
119,450
352,789
170,059
34,887
1,500,000
Ordinary Shares
21,451
2,207
142
16
13
1
2,379
Hybrids
12
(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 31 October 2011
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
National Nominees Limited
HSBC Custody Nominees (Australia) Limited
J P Morgan Nominees Australia Limited
HSBC Custody Nominees (Australia) Limited - A/C 2
Citicorp Nominees Pty Limited
J P Morgan Nominees Australia Limited
Mr Adam Leon Ehrlich
Pacific Agrifoods Investments Pty Ltd
Mr Vasilios Votsaris
Heytesbury Pty Ltd
Pan Australian Nominees Pty Limited
Queensland Investment Corporation
Netherhill Pty Ltd
Suncorp Custodian Services Pty Limited
M F Custodians Ltd
Mr Kevin David Pfeiffer
Choice Petfoods Pty Ltd
Ocean View Nominees Pty Ltd
Total
Total held by twenty largest ordinary shareholders as a percentage of this class is 48.55%
The twenty largest holders of Elders Hybrids were as follows:
J P Morgan Nominees Australia Limited
The Australian National University
Sandhurst Trustees Ltd
Cogent Nominees Pty Limited
Rotarn Pty Ltd
J P Morgan Nominees Australia Limited
Gwynvill Trading Pty Limited
M F Custodians Ltd
National Nominees Limited
Brazil Farming Pty Ltd
Masfen Securities Limited
Bond Street Custodians Limited
Luton Pty Ltd
RBC Dexia Investor Services Australia Nominees Pty Limited
Di Iulio Homes Pty Limited
Mr Guthrie John Williamson
Pan Australian Nominees Pty Limited
Equitas Nominees Pty Limited
3rd Pulitano Incorporation Pty Ltd
Apollo Holdings Limited
Total
Total held by twenty largest hybrid holders as a percentage of this class is 38.51%
(e) The number of shares held by the substantial shareholders listed on the Company’s
register of substantial shareholders as at 31 October 2011 were:
Shareholder
Mathews Capital Partners Pty Ltd – The Sabre Fund
Mathews Capital Partners Pty Ltd – Focus Asset Management Pty Ltd (“Mathews”)
QBE Insurance Group Limited
DFA Group
146
Number of shares
48,938,821
44,882,132
22,454,288
53,446,288
45,722,471
24,453,116
17,586,531
14,450,913
14,276,247
13,473,232
7,618,130
3,500,000
3,354,557
2,858,320
2,833,055
2,408,969
2,173,327
2,000,000
1,891,584
1,594,259
1,500,330
1,500,000
1,150,000
11.91
10.19
5.45
3.92
3.22
3.18
3.00
1.70
0.78
0.75
0.64
0.63
0.54
0.48
0.45
0.42
0.36
0.33
0.33
0.26
217,791,329
48.55
Hybrids % of Hybrids
170,059
50,000
47,267
37,416
27,218
26,735
25,711
24,858
24,263
19,900
19,827
19,674
19,000
10,920
10,000
10,000
9,567
9,081
8,361
7,786
577,643
11.34
3.33
3.15
2.49
1.81
1.78
1.71
1.66
1.62
1.33
1.32
1.31
1.27
0.73
0.67
0.67
0.64
0.61
0.56
0.52
38.51
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 online, 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.
147
Notes
148
Company Directory
Directors
Mr John C Ballard MBA, FAICD, Chairman
Mr Malcolm G Jackman BSc Bcom, Managing Director
Mr Mark C Allison, BAgrSC, BEcon, GDM, FAICD
Mr Raymond G Grigg FSAE-I, FAICD
Mr Ian G MacDonald SF, Fin
Mr James H Ranck BS Econ FAICD
Mr Rob H Wylie, FCA
Secretaries
Mr Peter G Hastings BA LLB GDLP
Ms Sarah J Graves BA LLB GDLP ACIS
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
Commonwealth Bank of Australia
National Australia Bank
Rural Bank Limited
Coöperative Centrale Raiffeisen – Boerenleenbank
(Rabobank Australia)
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
The Trust Company (Australia) Limited (formerly
known as Permanent Trustee Company Limited)
Level 3, 530 Collins Street
Melbourne, Victoria, 3000
2011
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