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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 Ian G MacDonald SF, Fin
Mr James H Ranck BS Econ FAICD
Ms Josephine M Rozman BEc, CA, GAICD
Secretary
Mr Peter G Hastings BA LLB GDLP
Registered Office
Level 3, 27 Currie Street
Adelaide, South Australia, 5000
Telephone: (08) 8425 4999
Facsimile: (08) 8410 1597
Email: information@elders.com.au
Website: www.elderslimited.com
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
Elders is an Australian company with
leading businesses in Rural Services and
Automotive components supply.
Elders’ rural services operations provide
Australian and New Zealand primary
producers with the physical, financial
and service inputs to achieve the most
successful production and sales from
their efforts.
International Trading operations in cattle,
beef and wool provide opportunities
to match demand in world markets with
local supply.
Automotive operations are conducted
through Futuris, Australia’s leading
automotive components supplier and
an emerging tier one supplier to the
Asia Pacific automotive industry.
List of photographers
Front cover: Pam Gill, Richmond, QLD
Top row left: Mick Sonneman, Sinclair, WA
Top row right: Reinhard Von Samorzewski, Grindelwald, TAS
Third row left: Sam Chisholm, Alice Springs, NT
Bottom row middle: Meg Kennett, Harden, NSW
Bottom row right: Sue Streit, Brighton, TAS
Elders’ Four Strategic Cornerstones
Elders is building its business 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 clients 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
Elders Rural Services
Network Operations
Sales Revenue: $1,356 million
Employees: 2,134*
International Trading
Sales Revenue: $447 million
Employees: 262*
Network Operations
Supply of product 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
213 rural branches
99 real estate and
insurance stores
145 real estate
franchises
New Zealand
13 rural branches
2 insurance stores
International Trading
International trading platforms
link offshore markets with
primary producers, delivering
a range of livestock, food and
fibre solutions.
Feedlots
Australian (2)
Indonesia (1)
Live Export
Long-haul breeding stock
Short-haul feeder cattle
Wool
China
Elders Fine Foods
importation to
Chinese markets
Sales Revenue: $345 million
Employees: 2,052*
Automotive
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
* Full time equivalent employees at 30 September 2012
Forestry and Corporate activities employed a further 48 and 8 FTE respectively at year end.
Australia
Supplier to Australian
OEM passenger vehicle
producers
International
Local manufacture and
supply contracts with
vehicle producers in:
• China
• Thailand
• North America
• South Africa
3
2012 The Year in Brief
Key Financial Results
Year ended 30 September
2012
2011
Statutory profit/(loss) to shareholders
$ million unless indicated otherwise
Sales revenue from continuing operations
2,157.9
2,263.1
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
38.8
(20.7)
18.1
(1.7)
(3.2)
13.2
(73.8)
(60.6)
2.5
385.8
295.3
551.8
2.9
1.2
(13.5)
(13.5)
53.5%
32.4
(18.5)
13.9
(1.6)
(3.3)
9.0
(404.4)
(395.4)
(23.8)
427.0
345.4
604.7
2.0
1.0
(88.1)
(88.1)
57.1%
$million
2010
2011
2012
(60.6)
(217.6)
(395.4)
0
-100
-200
-300
-400
-500
Underlying profit/(loss) to shareholders
$million
Net Debt
$million
13.2
9.0
(15.1)
2010
2011
2012
435.2
345.4
295.3
2010
2011
2012
20
10
0
-10
-20
500
400
300
200
100
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 “2012” or “2012 financial year”
refer to the 12 months ended 30 September
2012 unless otherwise stated. References to
“2011” 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 2012
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.elderslimited.com.
The 2012 Annual General Meeting of
Elders Limited will be held on Thursday,
20 December 2012, 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.elderslimited.com.
Elders Limited ABN 34 004 336 636
4
Safety
Lost Time Injury Frequency Rate reduced from 7.1 to 6.4
Medical Treatment Injury Frequency Rate reduced from 19.4 to 14.7
Profit and loss
Statutory loss after tax of $(60.6) million compared with
loss of $(395.4) million in 2011
Items excluded from underlying profit totalling $(73.8) million after tax:
• Tax items of $34.5 million
• Forestry related items totalling $(75.3) million
• Rural Services items totalling $(10.9) million
• Automotive items totalling $(14.1) million
• Corporate items totalling $(8.0) million
Underlying profit after tax of $13.2 million compared with $9.0 million in 2011
Balance sheet and finance
Net debt of $295.3 million
Borrowings reduced from $427.0 million to $385.8 million
Gearing reduced from 57.1% to 53.5%
Rural Services
Sales from continuing operations down 9% to $1,813.2 million
Statutory EBIT of $18.7 million, up from $4.2 million
Underlying EBIT of $29.5 million, up from $24.9 million
Automotive
Sales up 9% to $344.7 million due to consolidation of joint venture and
increased Thailand sales
Statutory EBIT of $4.4 million, down from $16.8 million
Underlying EBIT of $18.5 million, up from $16.8 million
5
Chairman’s Review
John Ballard
Dear Shareholder,
This report’s primary focus is,
as required, to formally advise
on your Company’s position
at 30 September 2012 and its
financial statements and
performance for the preceding
12 months.
However, initiatives taken by your directors since
balance date have set the Company on a new path,
which we believe will accelerate value realisation for
its stakeholders from the rising corporate interest
in Elders’ Rural Services operations and the Australian
agriculture sector generally.
As announced to the ASX on October 29, Elders has
commenced a sales process for its rural services
business. The rationale for this decision is simple
and compelling: that, in the current climate, the value
generated by a competitive sales process is forecast
to be superior to that than can be delivered by
other options.
These options include retention of the business
as an agriculture pure play, which would not enable
crystallisation of the value that is believed to be
available through a competitive sales process in
current markets. Moreover, Directors anticipate that
keeping the rural services business embedded
within the current listed entity and capital structure
is unlikely to generate a share price that reflects
the inherent value of the rural services business due
to the Company’s debt levels, and the associated
service requirements, which remain too high.
The global interest in, and enthusiasm for, agriculture
businesses has been evidenced by a number of recent
transactions and proposals. Your directors, guided by
their advisors, are planning to maximise security-holder
exposure to this interest through a formal competitive
sales process, which is likely to result in a more valuable
outcome than exclusive dealings with a single party.
The decision to realise value from the Rural Services
business followed an earlier decision announced to
the ASX to proceed with sale of the Company’s
automotive business, Futuris.
The divestment of Futuris was proposed originally
with the initiation of the Agenda for Change transition
strategy in 2008, but had been deferred indefinitely,
for a number of reasons, including the global
financial crisis and the expectation that superior
sales outcomes would result from a sale timed to
capture the value of expansion contracts won
in Thailand, China and North America and scheduled
to begin from 2012.
By August 2012, Futuris had successfully commenced
supply of the Asian and American contracts and
secured additional work that filled its order books
for the medium term.
This position, together with the renewed market
appreciation of the value of agricultural assets,
presented a clear case for moving to effect the sale
and reducing debt further.
The merits of realising value from the automotive
interests are unaffected by the subsequent decision
to divest rural services operations.
Futuris is now well advanced in its strategy of
transforming from a local supplier to the Australian
vehicle industry to being an established international
automotive systems supplier. As such, the sale of
the business to a natural owner in this sector is
expected to yield greater value for the Company’s
stakeholders than retention.
Of course, while these sale initiatives will provide an
avenue for accelerated realisation of value, they also
raise questions of when completion of the transactions
can be expected and, most fundamentally, what these
initiatives mean for the Company’s security-holders.
It is not possible to answer either question with
certainty at this stage. In regards to timing, it is
directors’ expectation that the transactions should
be completed within the current financial year. The
priority on achieving the best result for shareholders
is being addressed through a structured sales process
that balances the diverse considerations involved;
such as engagement with the worldwide pool of
potential acquirers, minimal disruption to the business,
the encouragement of competition and completion
within reasonable time.
6
Directors will be in a position to advise security-
holders of the implications for the Company from the
sale of the Rural Services business once an appropriate
transaction has been determined for proposal.
Due to the significance of the Rural Services business
to the Company, your directors wish to present any
proposed transaction for approval by shareholders.
At that juncture, Directors will be in a position to advise
on the implications of the transaction for the future
of the Company, and its security-holders, prior to
a shareholders' vote on the proposed transaction.
2012 performance and position
The statutory loss of $(60.6) million for 2012 compares
with the previous year’s statutory loss of $(395.4)
million. The major factor in the year-on-year movement
in statutory profit was the impact of significant items
on the 2011 result, most particularly those arising
from the decision to withdraw from Forestry.
The 2012 statutory result comprises an increased
underlying profit of $13.2 million and non-recurring
items totalling $(73.8) million.
Profit from operations has increased, with both
Rural Services and Automotive lifting their underlying
earnings contribution.
The completion of a rigorous ‘right-sizing’ of head
count and expenses in August 2012 has substantially
reconfigured overhead costs to that more appropriate
for the business going forward.
This is the third successive rise in underlying profit
since the company began its recovery process in
2009, and significantly, this latest increase has been
registered against the backdrop of less supportive
seasonal and market conditions. Clearly, improvements
are being made in the business and opportunity
exists for further, and substantial, improvement. But
notwithstanding this, the results are unsatisfactory.
Furthermore, the realisation of shareholder value from
ongoing improvement is most likely to be realised
within a lower debt capital structure.
Net borrowing costs absorbed more than half of
the earnings before interest and tax generated by
the Company in 2012. Debt levels and the associated
interest expense remains the most significant factor
in the Company’s unsatisfactory underlying returns.
Balance sheet and finance
Debt levels were reduced for the fourth successive year,
with net debt at 30 September of $295.3 million
being $50.1 million lower than at the 2011 year-end.
Assessment of Elders’ indebtedness requires
acknowledgement of the distinction between Elders’
core debt and other self-liquidating interest bearing
liabilities.
Core debt accounts for less than half of Elders’ total
gross debt at 30 September. The balance is accounted
for by securitised debtor finance facilities, which, in
turn, are backed by farm supplies and automotive
receivables.
Superior
capital
management
Throughout 2012 Elders continued
its focus on capital management
initiatives in order to create a capital
structure that is appropriate
for the market in which it operates.
Net debt was reduced by $50.1 million
in 2012, following the $89.8 million
reduction in the previous year.
Gearing was also reduced to 53.5%
at 30 September 2012.
Core net debt at Elders now accounts
for 33% of net debt. Term debt
was reduced by $92.8 million to
$88.1 million, down from 42% to
23% of gross borrowings.
This debt reduction has largely
been achieved due to the redirection
of capital following proceeds of
forestry assets that had been
divested and tax proceeds following
the successfully contested tax
assessment.
Operationally, there has been a focus
on our staff proactively following
up overdue debtors as well as
an emphasis on a reduction in farm
supplies inventories.
Capital management will continue to
be a focus for the Company in 2013
as it works to accelerate the return of
value to its stakeholders.
7
Corporate governance
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 22 of
this report and include a revised diversity policy
which was adopted and promulgated during the year.
The establishment of appropriate diversity at every
level of the Company is regarded as a prerequisite
to Elders being able to avail itself of the optimal
blend of talent and skill from its board and workforce.
The Corporate Governance Statement of this report
details the measureable objectives set by the board
for improved diversity, which will be reported upon
in future annual reports.
In closing, I would like to express the appreciation
of the directors for the efforts of employees during
the year. Thank you for your contribution.
John Ballard
Chairman
Forestry divestment program
The forestry divestment program announced in
October 2011 has been advanced substantially, with
sale of the large majority of the Company’s freehold
land having been completed.
The remaining assets and operations largely comprise
immature pulpwood, eucalyptus plantations located
in Esperance and Sandalwood and Teak plantations.
These residual assets and operations will require
more time to divest and exit due to the deterioration
of the Australian hardwood woodchip export market,
timber immaturity, location or the specialised nature
of some varieties. The Company has reviewed,
and where appropriate increased, provisions it has
made for the anticipated balance sheet impact
of completing withdrawal from forestry operations.
Board
Director numbers were reduced during the year, with
the board comprising six members at 30 September,
compared with nine members after last year’s Annual
General Meeting. Two non-executive Directors,
Ms Anna Buduls and Mr Ray Grigg, elected to retire as
part of the response by the board to support
the very substantial reduction in head count made
by management to the head office structure.
Subsequently, Mr Robert Wylie, a non-executive
Director and Chair of the Audit, Risk and Compliance
Committee also elected to retire. Mr Wylie has been
succeeded as Chair of the Audit, Risk and Compliance
Committee by Ms Josephine Rozman, who was
appointed to the board in November 2011.
On behalf of shareholders, I would like to express our
thanks and appreciation for the contributions made to
the Company by Ms Buduls, Mr Grigg and Mr Wylie.
The current size of the Board is considered to be
suitable for the Company at present.
8
Report by the Chief Executive
Malcolm Jackman
In 2012 Elders recorded
increased underlying profit,
improved contribution from
both its operating businesses,
stronger cash flow, further
strengthened its balance sheet,
and re-set its cost structure.
However, Elders’ statutory result
was a loss of ($60.6) million
due to significant non-recurring items chiefly arising
from the forestry divestment program. This compares
to the previous year’s statutory loss of $(395.4) million.
Full details of the non-recurring items are provided
in the Discussion and Analysis of the Financial Results
on page 56 of this report.
Underlying profit after tax was $13.2 million, 47%
higher than the corresponding result of $9.0 million
in 2011.
Underlying earnings before interest and tax (EBIT) of
$38.8 million, was up 20% on the previous year’s
$32.4 million as both Rural Services and Automotive
operations lifted their contribution.
Total borrowing costs were lower than in the previous
year, reflecting the reductions in indebtedness
and non-recurring interest income arising from the
successful objection to an amended taxation
assessment. However, once non-recurring income
and interest attributable to the forestry related finance
is recognised, net underlying borrowing costs in
2012 of $20.7 million were higher than the previous
year’s comparative of $18.5 million.
Review of operations
Detailed discussion of the performance of the
Company’s operating businesses, and their statutory
results is provided in the Review of Operations that
commences on page 15.
Rural Services
Contribution from Rural Services operations rose, despite
unsupportive seasonal and market conditions, due
to a strong improvement from Trading operations and a
favourable balance date mark-to-market adjustment.
After the promising start brought by widespread
and good rains, most agricultural regions in Australia,
with the exception of the far north, experienced
unfavourable weather with rainfall classified as
below-average to very-much-below-average for the
six months to September. Western Australia was the
most significantly affected, with widespread and
significant rainfall shortages.
The seasonal conditions were reflected in weaker
demand for cropping inputs, concern about feed
availability for livestock in southern pastoral regions
and subdued broadacre real estate markets. Prices for
key farm supply inputs such as fertiliser and agricultural
chemicals were lower, as were sheep and wool prices.
Market demand for livestock was strong in international
markets, although the competitiveness of Australian
exports was hindered by the high AUD exchange rates.
Underlying EBIT generated by Elders Rural Services was
$29.5 million, 18% higher than the previous year’s
corresponding result of $24.9 million. The highlight of
the result was the performance of Trading operations,
which partially offset the lower network earnings
brought by seasonal conditions, lower prices and more
subdued activity levels in Elders’ agency markets of
livestock, wool and real estate.
Underlying EBIT by continuing operations
$million
50
40
30
20
10
0
-10
-20
2010
2011
2012
$million 12 months to 30 September:
2010
2011
2012
Rural Services
Automotive
Corporate & other
Total
0.5
24.9
29.5
15.0
15.3
18.5
(12.9)
2.6
(7.8)
32.4
(9.2)
38.8
9
The lower agency income, principally livestock,
accounted for virtually all of the movement in network
earnings compared with the previous year. Farm
supplies sales were increased, and contribution
maintained, despite lower demand for cropping inputs
and lower fertiliser prices.
The contribution from Trading operations is particularly
noteworthy, as it was achieved despite the challenges
presented by the high exchange rate and tight
livestock markets and after the significant disruption
to Australia’s short-haul export trade during the
previous two years.
The improved Trading earnings can be attributed to
the strategy implemented to deliver better returns,
and growth from global markets and from Elders’
leading position in live export and livestock generally.
The business has been reoriented from an Australian-
supply-centric model to a focus on global demand and
customer needs under the name of Elders International
Trading. Under the strategy, Elders International Trading
has diversified supply and demand sources and risk,
developed new markets and improved capital and cost
efficiency and planning capability through a shipping
alliance. The benefits of the strategy in 2012 are
evident in the $16.9 million contribution from the live
export business, a significant increase over the
previous year; 25% growth in volume shipped and a
broader, more diversified sales base.
Automotive
Futuris completed a demanding year with increased
sales and earnings and an expanded business.
Underlying EBIT generated by Futuris for the
12 months to September was $18.5 million,
up 10% on the 2011 comparative of $16.8 million.
Motor vehicle production in Australia by Futuris
customers was in-line with the previous year,
which represents an improvement on the decline
of 10% in 2011.
In Thailand, Futuris completed its first year of
production from new manufacturing facilities, from
which it is supplying contracts to General Motors,
Ford and Auto Alliance Thailand. Chinese operations
continued to mature, winning new work under
existing supplier relationships, and successfully
implementing a new market development strategy
which concentrates on the larger local manufacturers.
The strategy was rewarded with Futuris’ first contract
with a major Chinese auto manufacturer, Shanghai
Automotive Industry Corporation (SAIC).
In North America, Futuris began supply of seats to
Tesla, a manufacturer of premium electric vehicles.
Futuris’ successful initiation of operations in Thailand
and the USA, and new business won, has substantially
advanced its strategy of transformation from a
local supplier to Australian manufacturers to being a
significant and successful niche player in the Asia
Pacific automotive industry.
Forestry divestment program
The forestry asset divestment program initiated in
October 2011 generated proceeds of $101.4 million
during the 2012 financial year through the sale of land,
timber and associated assets on which a net gain
against book value of $27.3 million was recorded.
The remaining forestry assets have a book value of
$67.0 million as at 30 September 2012 and are subject
to ongoing divestment initiatives. As noted in the
2011 Annual Report, the forestry asset base is diverse,
containing a variety of different timber types, (ranging
from pulpwood to specialty timbers), maturities
and locations. Furthermore, the ability to market some
assets is subject to encumbrances such as grower
agreements or the considerations brought by tree
maturity profiles.
For this reason, Elders anticipates that disposal of the
remaining forestry assets will occur progressively as the
requirements for divestment of the different assets can
be satisfied and terms agreed.
Elders has made, and continues to review, its provision
for the anticipated costs of discontinuing forestry
operations. Further charges totalling $80.1 million
have been made in the 2012 financial statements for
asset impairments, to provide for exit costs and
onerous contracts. The charges have been required
to recognise lower than anticipated realisable value for
specialty timbers and revisions to forecast costs of
exiting some operations.
Corporate and overheads
Elders has maintained firm control on costs for several
years, an outcome which is noteworthy given the
prevailing backdrop of rural and regional wage inflation
and rising fuel prices.
Elders’ total underlying costs in 2012 (ie excluding
discontinued operations) were 4% lower than
the previous year. In August, the Company
implemented a cost re-set of its corporate and
back-office functions which resulted in a 25%
reduction to the head-count in those areas and will
deliver ongoing earnings benefits from 2013. The cost
re-set has been accompanied by a review of all
discretionary expenditure.
10
Financial position
Elders’ capital management since 2009 has featured
ongoing debt reduction and restructuring of its
finance facilities to reduce its use of term debt. This
approach has been maintained in 2012. Net debt at
30 September was $295.3 million, down 15% from
the previous corresponding result.
As the Chairman has highlighted, it is relevant to
appreciate the composition of Elders’ debt.
Core debt of $186.6 million accounts for just under
half of gross borrowings of $385.8 million as at
30 September, having been reduced by 35% over the
course of the year.
Virtually all of the balance of gross debt is accounted
for by self-liquidating working capital facilities such as
debtor securitisation, which is backed by accounts
receivable for completed farm supplies and automotive
sales that typically fall due within 30 days.
These facilities offer a lower cost and capital-effective
cash management tool more suited to the nature of
Elders’ business than a term debt facility. Elders’
securitisation facilities can be expected to turn over
$1,019 million during the course of a year through
the cycle of sales, cash advance and closure of the
accounts receivable.
These facilities fall within accounting definition of debt
and are recorded as such in the Company’s balance
sheet. However, the simple distinction that debtor
securitisation is backed by a receivable typically due in
30 days, warrants consideration when assessing the
company’s indebtedness.
Further reductions in bank debt are anticipated in 2013
through proceeds generated from the sale of assets.
Net debt
$million
500
435.2
400
300
200
100
345.5
295.3
256.9
205.9
96.1
0
2010
2011
2012
$million as at 30 September:
2010
2011
2012
Total Net Debt
435.2
345.5
295.3
Core Net Debt1
256.9
205.9
96.1
1 Core Net Debt = Total Net Debt less self-liquidating facilities
High
performance
sales
capability
A high performance sales capability
is considered by Elders to be
integral to delivering results for
its clients and shareholders.
The change program introduced
in 2010 to transform Elders’
operations away from service-
orientation and towards a client-
centric model is becoming part of
the Company’s organisational
philosophy.
2012 saw the continuation and
bedding down of the Elders-specific
sales training and coaching
program, SalesPlus+. 50 additional
members of Elders’ network sales
force completed this training –
a total of 1,500 training hours. This
takes the total number of sales staff
who have completed SalesPlus+
training to 1,357.
Central to the SalesPlus+ program
is the bottom-to-top weekly sales
discussion from customer-facing
roles right through the management
chain, ensuring the right activities
are being implemented, and any
problems preventing successful
sales activities are quickly
identified and resolved.
Ongoing review and analysis of
the effectiveness of SalesPlus+ in
2012 reveals that SalesPlus+ is
helping salespeople to perform
better, even in the tough market
conditions our salespeople
encountered in 2012.
The focus for 2013 will see the
Company continue to utilise
SalesPlus+ and the client-centric
model as part of its sales culture.
A high performance sales capability
is also evident in the Company’s
trading operations through the
strong relationships the trading
team continues to build with
customers in destination markets,
and cattle suppliers both in
Australia and overseas.
11
Elders is seeking to lift the diversity of its talent pool,
particularly in regards to the gender diversity
of its management, senior executive team and board of
directors. While the representation of women within
Elders’ workforce (33%) is comparable to the sector in
which it operates, it is nevertheless below the general
population level. Moreover, the representation of
women at senior management, senior executive and
board levels (15%, 9% and 17% respectively) is
disproportionately low.
The Company is working to improve diversity in its
human resources through the pursuit of the measurable
targets set out in the Corporate Governance Statement.
Elders invests in the training and development of its
workforce and young people in the rural regions
where it operates. The Elders’ traineeship initiative
entered its third year, with the recruitment of
19 trainees to complete the 18 month program of
employment, on-the-job training and tertiary study of
a Certificate IV in Agriculture at TAFE. Elders has now
provided a total of 90 traineeships since the program
began in 2009, all in rural and regional locations.
Recent years have seen Elders’ training and
development initiatives focus on lifting the
organisation’s sales capability through the SalesPlus+
program. While sales effectiveness training and
management is ongoing, the point of emphasis shifted
in 2012 to leadership capability at ‘the front line’.
The Branch Manager Training Program was initiated
during the year to build managerial and leadership
capability amongst those responsible for the individual
performance of the branches that comprise the
Elders network.
The focus on branch performance has been supported
by initiatives such as the Branchise long term incentive
program which aligns branch manager incentives
with shareholder value creation. The Branchise
initiative has been introduced as part of a broader
remuneration framework implemented during the year
that provides structure across the Company,
incentivises superior performance and improved
governance and administration.
Safety
The provision of a safe environment for all who come
into contact with Elders’ operations is the Company’s
foremost priority. Safety management and promotion in
2012 continued the focus on safe work practices and
on systems that promote reporting, effective analysis
and management.
Safety outcomes, as measured by workplace health
and safety key performance indicators, improved. The
12 month rolling Lost Time Injury Frequency Rate (LTIFR)
reduced from 7.1 in 2011 to 6.4 in 2012 and the rolling
Medical Treatment Frequency Rate was reduced from
19.4 to 14.7. Automotive, New Zealand Rural Services
and Forestry all recorded significant improvement in
LTIFR. The Australian Rural Services Network recorded
a marginal increase in LTIFR.
The Corporate Workplace Health and Safety Policy was
updated, incorporating the Elders vision and policy
statement and reaffirming the business’ commitment
to integrating a continuous improvement safety
management system across all levels. Focus includes
the continual development of the safety management
system based on risk management principles and the
identification, elimination and control of hazards.
A Gap Analysis between the Elders Safety Management
System and the national Model Workplace Health and
Safety Act, Regulations and Model Codes of Practice
was undertaken. The results indicated the Company is
compliant with the requirements of the legislation.
Human Resources
Elders’ employment at 30 September stood at 4,504
full time equivalent (FTE) persons compared with the
previous corresponding figure of 3,794 FTE.
The year-end employment figure includes 2,911 FTE
located in Australia (2011 comparative: 2,910)
and 1,593 located abroad (884 in 2011). The
increase in employment outside Australia is due to
the additional staffing requirements of new Futuris
contracts in Thailand, North America and China.
The effectiveness and enterprise of our workforce is a
critical factor in its performance. To this end, Elders has
3 core aims in the management of its human resources:
1) making sure Elders has, and keeps, the ‘best
right talent’;
2) giving employees the training, management and
opportunity that will enable them to make their
greatest contribution to the Company; and
3) providing remuneration and incentive structures that
appropriately motivate and reward employees to
deliver superior performance.
12
Outlook
This is my fourth annual report to shareholders since
I joined the Company and outlined an ‘Agenda
for Change’, to transition what was the industrial
conglomerate Futuris Corporation, carrying $1.2 billion
of bank debt, to a focussed agribusiness offering
investors exposure to the Australian farm sector and
the capacity of the Elders Network. The progress
made in 2012, and the decision to proceed with the
divestment of Futuris Automotive, means that Elders
has approached the final stages of that strategy.
It is a journey which has taken longer than anticipated,
as the timeline, and strategy required, and has been
recast by events such as the demise of the MIS-funded
forestry industry and the effects of the global financial
crisis. For Elders, this meant significantly reduced
earnings, a slower market for asset sales and a more
constrained balance sheet.
While core debt has been reduced to $186.6 million,
the associated interest expense and the costs of the
forestry divestment program are, as the 2012 results
show, weighing heavily on the Company’s financial
performance and sharemarket appeal.
Yet the investment case for agriculture is reinforced
every day as the world’s population, living standards
and demand for food and fibre continue to rise.
Australia, as a net exporter of food and commodities,
is clearly a beneficiary of this outlook. The rising
international interest, and corporate activity, in the
Australian agriculture sector during the year further
evidences the favourable outlook for the local industry.
I believe it to be beyond doubt that Elders is unrivalled
as a single network addressing the full spectrum of
Australian agriculture throughout the country –
whether that be in Albany, Katherine, Bairnsdale or
King Island. Elders’ traditional core remains its
greatest strength: the network of 213 branches and
over 1,800 staff that share a passion for serving
the Australian rural sector. Outside Australia, Elders
International Trading has established a reputation
as a professional and leading supplier of quality feeder
and breeder cattle that understands, and meets the
needs of, customers in diverse world markets.
The features that underpinned the Agenda for Change
strategy: the value of the Elders Network and rising
market valuations for agribusinesses; have now
encouraged corporate interest in Elders and the
decision to accelerate the value realisation phase of
the strategy through a competitively-bid transaction.
While this represents a significant change, it offers
the opportunity to capitalise on the strongest market
for Australian agricultural businesses for some time.
Cost and
service-
effective
technology
Elders has made significant
investment in, and delivered
improvements to, its information
technology infrastructure over the
past several years which has
assisted in the delivery of the sales
performance, capital management
and supply chain excellence
objectives.
In 2012 Elders implemented the
first release of Project Connect, the
enterprise-wide technology and
process renewal program. In
partnership with Accenture, Elders
deployed the Core Finance, Human
Resources and Indirect Procurement
phases in March 2012 as planned.
The Company and its Directors have
been pleased with the project’s
progress to date but in light of the
sales process has suspended the
project in the short term, until the
needs of a new owner are known.
Key resources who were working
on the project have been redeployed
into the business to help facilitate
a restart of the program at a
later stage.
In 2012 Elders launched the www.
agsure.com.au website becoming
the first major Australian
agribusiness to offer farm supplies
direct to farmers via such a platform.
During the year Elders continued
its partnerships with HP and Telstra
for information technology service
delivery and telecommunication
services respectively. Elders
also renewed its Microsoft licence,
the primary platform for all
Elders information technology
infrastructure.
13
The progress hard won by the Company in 2012, and
the preceding three years, on matters such as costs,
sales, supply chain and building international trading
markets will add to the attractiveness of the rural
services business and its anticipated returns.
Seasonal and market variations are an inherent feature
of agricultural business and, while the Rural Services
results in 2012 show the effects of market cycles, our
agency businesses in livestock, wool and real estate
are amongst the largest in the Australian sector and are
therefore well exposed to positive movements in the
market cycle.
I would like to record my appreciation for the
commitment of shareholders and for the ongoing
efforts made by our team of employees.
Thank you for your support.
Malcolm Jackman
Chief Executive Officer
Supply
chain
excellence
Excellence in supply chain
management is a critical element
in Elders’ strategy.
In 2012 Elders continued to build on
the improvements it has made
on core ranging, procurement and
planning, supply chain management
and pricing.
The Company’s three third-party
distribution centres in Melbourne,
Brisbane and Perth are now also
managing the products for Elders’
new online farm supplies business,
Agsure, which allows farmers to
order farm supplies products via
the Agsure website and have them
delivered straight to their farm.
A key feature in the year was the
creation of a specialised Farm
Supplies team encompassing the
Company’s strategic procurement
functions, pricing, planning and
purchasing, and logistics and
distribution.
The emphasis for the coming year
will be to continue to build strong
relationships with our suppliers.
During previous years, and in
the last 12 months in particular,
Elders International Trading has
invested significantly in developing
its global supply chains. This
strategy was realised in the 2012
year with the significant growth in
live export volume and the
diversification of sources of supply
from one being focussed on
Australia, to one focussing on
global sources of supply.
The investments made in
developing this supply chain will
assist the Company’s trading
operations to withstand the
inherent volatility of this sector.
14
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, technical and advisory inputs
for successful farming via its network of 226 branches and
approximately 327 points of presence.
Description of Operations
Australian Network
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.
• Banking: Elders distributes banking products through
the Network under a distribution agreement with
Rural Bank.
• Financial Planning: Elders provides financial planning
solutions through a network of advisors under the
Elders Financial Planning brand (outlined under
‘Network Related’ below).
New Zealand Network
Network operations in New Zealand provide
wool and livestock agency services, farm supplies
and financial services distribution.
Trading
Elders conducts global trading operations under the
Elders International Trading banner which has well-
developed supply chains in international markets.
Live export: Conducted through North Australian
Cattle Company and Universal Live Exports, which
facilitate the trade of feeder and breeding cattle
respectively from Australia, New Zealand, and
North and South America to international markets.
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 in Victoria and Killara in 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 and New
Zealand food and beverage 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.
15
Rural Services Results
$million 12 months to 30 September:
Sales – continuing operations
Sales – total
Depreciation & amortisation
Gross margin:
Australian Network
New Zealand
Trading
Costs:
Australian Network
New Zealand
Trading
Support centres & other
Mark-to-market
Network-related equity earnings
Underlying EBIT
Items excluded from underlying EBIT
Statutory EBIT
Operating cash flow
2012
6.4
314.2
257.7
16.9
39.6
2011
1,813.2 1,947.9
1,813.2 1,986.1
8.4
322.7
276.8
18.1
27.8
(304.4) (301.9)
(217.8)
(220.6)
(21.0)
(18.4)
(20.7)
(22.0)
(42.4)
(43.4)
(7.2)
5.6
11.3
14.1
24.9
29.5
(20.7)
(10.8)
4.2
18.7
59.5
49.4
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.
Strategy
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.
2012 saw Elders develop a direct-to-farm farm supplies
offering, Agsure, which sees the Company now able to
sell selected farm supplies products direct to primary
producers via a website and call centre, complementing
the existing rural services network. The focus in 2013
will be on growing this business.
Results
Rural services contribution rose despite dry seasonal
and soft market conditions.
Rural services operations recorded a statutory EBIT of
$18.7 million in 2012 which compares with $4.2 million
in 2011. The items excluded from the underlying
EBIT are detailed in the Discussion and Analysis of the
Statement of Profit and Loss on page 56.
Underlying EBIT in 2012 was $29.5 million compared
to $24.9 million in the previous year. The movement
in underlying EBIT can largely be attributed to
the significant increase in the performance of the
Company’s trading operations and a favourable
mark-to-market adjustment, which has offset the
lower network earnings which arose from seasonal
conditions in the last quarter, lower prices for livestock
and lower activity levels across agency operations.
The principal factors in the underlying EBIT result were:
• Lower levels in agency operations due to significantly
below average rainfall in second half of the year;
• Significantly increased live export volumes and
improved margins in trading operations;
• Reduced contribution from the New Zealand network;
• A favourable mark-to-market adjustment of
$5.6 million; and
• A 25% increase in equity earnings.
Australian Network
During 2012 Australian Network operations were
affected by unfavourable seasonal conditions which
particularly impacted the agency operations of
livestock and wool due to a decline in both volumes
and in prices. Real Estate sales were also lower
due to reduced activity.
Network contribution in 2012 was $37.1 million,
compared to $59.0 million in 2011.
The Australian Network generated sales of
$1,275.3 million in 2012 which is consistent with the
previous year’s sales of $1,276.5 million.
Features of the sales result by service area included:
• Farm supply sales revenue of $1,045.0 million was
up 2% from $1,023.9 million in 2011. Demand was
weaker, particularly for crop inputs, due to low rainfall
levels but margin was maintained.
• Livestock agency revenue fell due to lower volumes
and prices of both sheep and cattle. Revenue from
livestock agency of $103.1 million in 2012 was 11%
lower than the previous year’s sales of $115.3 million.
Elders sold 8.16 million sheep and 1.63 million
cattle in 2012 compared with 8.40 million sheep and
1.78 million cattle in the previous year. Cattle sales
realised an average price of $775 per head in 2012
($764 in 2011) while the average sheep price was
$104 per head ($120 in 2011).
16
• Wool agency revenue of $50.6 million was 9% lower
than the previous corresponding period due to lower
bale volumes. The average price of wool sold was
$1,240 per bale compared with $1,249 per bale in
the 12 months to 30 September 2011. Bales sold fell
from 484,900 to 417,300
• Real estate sales revenue declined by 6% due to
subdued activity in the broadacre markets. Broadacre
turnover fell by 16%, decreasing from $892 million to
$752 million. Offsetting the broadacre deficit are cost
savings and other favourable results in residential
real estate.
• Banking distribution revenue decreased from
$21.2 million to $20.5 million.
• Other sales revenue of $7.1 million includes revenue
from the accumulation of grain.
Australian Network sales revenue
$million
1,400
1,200
1,000
800
600
400
200
0
2010
2011
2012
The increase in revenue is predominantly due to
increased live export sales in both long-haul dairy
and breeding cattle exports, and short-haul feeder
cattle exports.
Elders’ total live export volume of 167,383 head was
25% higher than the 2011 comparative of 133,608
head, due to the strength of the core dairy and
breeding cattle markets of China and Russia
respectively, and trading margins in the Indonesian
feeder cattle market were maximised.
A focus on disciplined cost management in Australian
feedlot operations lead to increased profitability overall
despite occupancy being back on last year.
Equity Earnings
Equity earnings are recognised for Elders’ joint
ventures, which include the financial services joint
ventures (Elders Insurance and Elders Financial
Planning), the Australian Wool Handlers (AWH) logistics
operation and other equity positions in agriculture
including Kilcoy abattoir and Auctions Plus. These
operations contributed equity accounted income of
$14.1 million, compared with $11.3 million for the
twelve months to 30 September 2011.
Contributions from the individual operations are
as follows:
$million 12 months to 30 September:
2011
2012
Elders Insurance
Elders Financial Planning
Australian Wool Handlers
Kilcoy Pastoral Co
Other
6.3
0.5
4.1
(0.2)
0.6
6.5
(0.2)
5.3
1.7
0.8
$million 12 months to 30 September:
2010
2011
2012
Total Network Related
11.3
14.1
Farm Supplies
882.3 1,023.9 1,045.0
Livestock
Wool
Real Estate
106.1
115.3
103.1
51.8
55.8
50.6
56.8
52.3
49.1
Banking Distribution
21.4
21.2
20.5
Other
Total
8.7
8.0
7.0
1,127.0
1,276.5 1,275.3
New Zealand
New Zealand operations recorded improved results in
livestock and farm supplies but they were more than
offset by a weaker result in wool where weak demand
and lower prices affected volumes and margins.
The operations recorded a margin contribution of
$16.9 million compared to $18.2 million in 2011.
Trading
Trading operations include Elders’ cattle export
operations, New Zealand wool trading, feedlot
operations and Elders Fine Food in China which
imports and distributes premium Australian
agricultural produce.
Trading operations generated sales of $446.7 million
and a margin contribution of $39.6 million in 2012,
which compares respectively with sales of
$471.9 million and a contribution of $27.8 million
in the previous year.
Sustainability
Rural Services operations employed a total of 2,396 FTE
as at 30 September, compared with 2,409 FTE at the
beginning of the year. Increased sales staff was offset
by reduced support staff, reflecting the head office
restructure announced on 30 July 2012.
Rural Services operations recorded a Lost Time Injury
Frequency Rate of 6.30, the same as the previous
reporting period.
During the year Rural Services operations consolidated
the previous year’s move from paper-based to online
occupational health and safety reporting systems.
The change delivered improvements to reporting and
consultation processes in relation to occupational
health and safety throughout the business.
The management of safety when dealing with livestock,
manual handling and regional driving continued to
be a key focal point of the Company’s safety initiatives.
Updated livestock management working procedures
and driver safety risk management plans were
implemented across Rural Services operations.
17
Feedlots
Elders’ feedlots, Charlton (Victoria) and Killara
(New South Wales), are 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 Model Code of
Practice for the Welfare of Animals - Cattle (2004).
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 2012 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 2012 or
to the date of this Report.
In December 2011 Elders received correspondence
from the New South Wales Government Transport
Roads and Maritime Services department to provide
information with regards to the operation of several
saleyards in NSW. The notices requested information
regarding the management of saleyards and practices
carried out in those saleyards, in relation to Chain
of Responsibility legislation, in the Tamworth, Wagga
Wagga, Forbes, Dubbo and Carcoar council areas.
Elders provided a comprehensive response addressing
the issues raised.
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
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.
The Environment Protection Authority actively assists
organisations and also investigates matters relating to
environmental issues and on occasions contacts Elders.
In August 2012 the EPA approached Elders requesting
information regarding the sale of a particular
chemical in the Windsor area in New South Wales.
18
The information was duly supplied within the required
timeframes, and related to the potential off-label use
by the purchasers of the chemical involved.
Live Export
Elders is engaged in the export of cattle to international
markets, namely 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.
Elders’ livestock export operations are also subject to
the Exporter Supply Chain Assurance System (ESCAS)
which requires exporters to demonstrate they have
control of and traceability throughout the supply chain
to the point of slaughter in the destination country.
On 18 May 2012 the federal Department of Agriculture,
Fisheries and Forestry (DAFF) released an investigation
report into alleged breaches of animal welfare in
Indonesia in January 2012. The report found that an
independent abattoir falling within an ESCAS-approved
supply chain supplied by Elders’ North Australian Cattle
Company (NACC) did not satisfactorily perform against
5 out of 130 ESCAS performance criteria in processing
four cattle.
The 14 instances of non-compliances against these
5 ESCAS criteria did not concern animal cruelty and
were addressed by Elders through additional reviews,
audits and training and the supply chain was
subsequently re-approved by DAFF.
No other breaches of regulatory or legislative
requirements were recorded by Elders’ live export
operations in the year to 30 September 2012 or to
the date of this report.
Community
As a rural service organisation, Elders is committed to
supporting the communities which it serves. Elders is a
major employer throughout rural and regional Australia
and Elders’ branches support local initiatives and
charities and staff members participate in community
service organisations.
At a corporate level, Elders’ supported a number of
charities and a number of non-government
organisations and initiatives of relevance to its client
base. Elders’ major commitments include:
- being a Foundation Sponsor for the Australian Year of
the Farmer, which aims to highlight the contribution
of farmers during 2012;
- partnering with the Australian Land Management
Group to promote environmental sustainability on
Australian farms;
- staff regularly raise funds for the McGrath Foundation
and raised over $54,000 between the months of
October 2011 and September 2012 to support the
costs of rural and regional breast care nurses.
Elders is also a member of a number of industry
organisations and works with them to further advance
issues of importance to Australian agriculture.
Discussion and Analysis of Operations
Automotive
Futuris’ primary operations encompass the design,
manufacture and supply of automotive seating
and interior solutions in Australia, Thailand, China,
the United States of America and South Africa.
Operations
The business and its joint ventures supply products
and services for automotive seating, interiors, control
systems and aftermarket. Current customers include
GM Holden, GM (Thailand), Ford (Australia and
Thailand), Toyota, Auto Alliance Thailand, Chery,
JAC Motors, Brilliance, GreenTech, Tesla and Mercedes
Benz. Further contracts have been secured during
2012 with existing customers and new customers
such as Shanghai Automotive Industry Corporation
(SAIC) in China.
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 85% of 2012
product sales as reported in statutory revenue.
Production in Thailand and North America ramped
up in 2012 with the commencement of contract
commitments secured in previous years and China
continued to provide strong growth opportunities.
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 telephone kiosks, rail seating
and tram interiors.
Futuris is well placed to remain Australia’s largest
component manufacturer and is now well placed to
maximise global growth opportunities with operations
in China, Thailand and the USA.
Conditions and results
Global automotive markets continue to demonstrate
strong growth with 2012 sales estimated to reach
78.7 million units, up 4.1% on 2011. The major growth
markets include the BRIC (Brazil, Russia, India and
China) nations and the broader Asian region. Australian
new car sales remain stable at circa 1.1 million units
with growth forecast to 2014 of 3%.
Vehicle production in Australia also remains largely
stable at between 200,000-250,000 units each year
and this is expected to continue with new models from
GM Holden due to launch in early 2013 combined with
new models launched by Toyota in 2012. In addition,
GM Holden recently committed to the manufacture
of two models in Australia until 2022.
Futuris generated sales of $344.7 million in 2012.
This increase of 9% is due to the consolidation of the
Anhui joint venture in China and also the first full year
of sales in Thailand.
Underlying EBIT for the year of $18.5 million was
higher than the 2011 underlying EBIT of $15.3 million.
The items excluded from the underlying EBIT
are detailed in the Discussion and Analysis of the
Statement of Profit and Loss on page 56.
19
Automotive Financial Results
$million 12 months to 30 September:
Sales
Underlying EBITDA
Depreciation and Amortisation
Underlying EBIT
Items excluded from
underlying EBIT
Statutory EBIT
Operating cash flow
Capital expenditure
2012
2011
344.7
315.2
33.1
14.6
18.5
(14.1)
4.4
24.3
32.3
31.9
16.6
15.3
-
15.3
15.4
12.3
Business Development
Activities in 2012 saw the commencement of
production for contracts secured in previous years,
the award of new business in China and the
introduction of a strategy for India.
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.
In Australia, production of the MicroHeat water heating
system commenced, part of the Company’s cleantech
manufacturing operations and the service contract
with Telstra for payphone booths was extended. The
new model Toyota Camry also commenced production
in early 2012 and Futuris is preparing for the start of
production on the new model Commodore range,
scheduled to commence in early 2013.
In China, Futuris was awarded its first seating contract
with a major Chinese original equipment manufacturer,
SAIC. SAIC is a tier one automotive manufacturer and
the contract will lead to Futuris building a new wholly-
owned manufacturing facility in Wuxi within the next
12-18 months.
In Thailand, the Company commenced construction
on a new facility alongside its existing manufacturing
plant to support the increase in production volume and
new business with Ford and General Motors Thailand.
In 2012, Futuris’ Thai production workforce grew to
nearly 700 people, up from approximately 150 in the
previous year.
In the US, Futuris commenced production with Tesla
Motors for the seating within the high profile Model S
all-electric car.
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 6.79 per million
hours worked compared with 8.70 per million hours
worked in 2011.
Human Resources
Futuris employed a total of 2,052 FTE as at
30 September compared with 1,285 at the same time
in the previous year. The increase is attributable
to significant growth in Thailand and China.
20
Board of Directors
Mr John Charles Ballard MBA, FAICD (Chairman) - Age 66 - Appointed Chairman and non-executive
director of the Board on 20 September 2010. He is 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, Email Limited and Fonterra Co-operative Group Limited, Chairman of Wattyl
Limited and Trustee of the Sydney Opera House. He is currently 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 60 - 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 51 - Non-executive director of the Board
since November 2009. He is a member of the Audit, Risk and Compliance Committee, the Nomination
and Prudential Committee and the Occupational Health and Safety Committee. He has extensive
experience spanning over 28 years in the agribusiness sector and is currently CEO of Graingrowers
Limited and a director of Grain & Legumes Nutrition Council. He is a former Managing Director of
Wesfarmers Landmark Limited and Wesfarmers CSBP Limited and former chairman of Australian Pesticides and
Veterinary Medicines Authority. 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 Ian Graham MacDonald SF, Fin - Age 58 - Non-executive director of the Board since November 2006.
He is a member of the Audit, Risk and Compliance Committee, the Nomination and Prudential Committee
and Chair of the Remuneration and Human Resources Committee. He was a director of Elders Financial
Services Group Ltd, Elders Insurance Ltd, Elders Insurance Agencies Pty Ltd, and Elders Trustees Ltd,
Elders Forestry Management Ltd and APT Projects 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, Tasmanian
Public Finance Corporation and in March 2012 he became a non-executive director of Genworth Financial Mortgage
Insurance Pty Ltd. Mr MacDonald is a resident of Victoria.
Mr James Hutchison (Hutch) Ranck, BS Econ, FAICD - Age 64 - Non-executive director of the Board since
June 2008. He is 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. Mr Ranck is a resident of New South Wales.
Ms Josephine Mary Rozman, BEc, CA, GAICD - Age 53 - Non-executive director of the Board since
November 2011. She is Chairman of the Audit, Risk and Compliance Committee and a member of the
Occupational Health and Safety Committee and the Nomination and Prudential Committee. Ms Rozman
has over 20 years sales, marketing, management and CEO experience across a diverse range of
industries globally including working in the USA and Asia. After working for PriceWaterhouse in Sydney
and San Francisco, she worked in the successful establishment of several businesses in the USA including a wine
import and distribution company and a biotechnology company servicing the beverage and food industries. She
has previously worked as Asia Pacific Marketing Director for a multinational FMCG company, as Financial Controller
of a commodity trading company and CEO of a Victorian wine company. She is a Chartered Accountant, holding
a Bachelor of Economics from the University of Sydney, and a graduate of the Australian Institute of Company
Directors. She is currently a director of Wine Australia Corporation where she chairs both the Audit and Finance
Committee and the Wine Sector Intelligence Advisory Committee. Ms Rozman is a resident of New South Wales.
Company Secretary
Mr Peter Gordon Hastings BA LLB GDLP Mr Hastings was appointed Company Secretary in February 2010. He held
the position of Group Solicitor with the Elders Group between 1995 and 1999 and again between 2003 and 2010,
and has held the position of General Counsel since February 2010.
21
Corporate Governance
Statement
This corporate governance statement summarises
the key elements of the Company’s governance
framework and practices.
The Board of Elders is committed to good corporate
governance, being of the view that good governance
practices preserve and enhance long term shareholder
value. This commitment is supported by an
organisation wide objective of the highest standards of
compliance with applicable laws (including statutory
reporting obligations), the Company’s governance
framework and Company policies.
The Board is also committed to ensuring the Company
keeps abreast of, and implements, all generally
accepted enhanced governance arrangements.
In developing the Company’s governance framework
the Board has taken into account the current
version of 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. Published on the
Company’s website (www.elderslimited.com) is a table
comparing the Company’s governance practices with
the Best Practice Recommendations.
1. Operation of the Board
Relevant policies and charters:
– Board Charter
− Company Constitution
Role of the Board
The Board is ultimately responsible for the governance
of the Company. It has implemented governance
policies and practices that are designed to:
• provide clear accountability;
• protect the rights and interests of shareholders and
other stakeholders;
• provide for proper management of the Company’s
assets;
• support the achievement of the Company’s fiduciary,
environmental, safety, social and other obligations;
• preserve and enhance the Company’s reputation and
standing in the community; and
• support the achievement of shareholder value within
a framework of appropriate risk assessment and
management.
The corporate governance policies and practices are
reinforced by a commitment by the Company to the
highest standards of legislative compliance, financial
integrity and ethical behaviour.
Management and oversight
The Board has a formal written Charter that defines
those duties reserved for the Board and its Committees
and those that are delegated to the Chief Executive
Officer (CEO).
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;
• 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 CEO 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 CEO 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.
22
The role and responsibilities of these Committees are
detailed in formal charters. The responsibilities and
composition of the Board Committees are detailed on
pages 25 to 29.
In addition, a number of management committees
comprising members of the Company’s executive
management operate under formal policies, charters
or frameworks and report to the relevant senior
management or Board Committee as appropriate. The
material committees are discussed in this statement.
Delegation of Responsibility to
Management
The Board delegates responsibility for the day-to-day
operation and administration of the Company to
the CEO, Mr Malcolm Jackman. The Board monitors
the CEO’s performance on an ongoing basis
through regular management reporting and through
the reporting of the various Board Committees.
The Company has in place comprehensive delegations
of authority under which the CEO and 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 48.
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. All Directors have unfettered
access to the Company Secretary.
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 and depth of skills, experience and
knowledge; and
• directors (and prospective directors) must satisfy
prudential criteria approved by the Nomination
and Prudential Committee having regard to
guidelines and policies adopted by 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.
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.elderslimited.com.
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, four other independent non-executive
directors and a managing director/CEO. The
qualifications, experience, special responsibilities and
period of office of each director can be found on
page 21 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.
23
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.
Directors undertake training and development on
an “as needs” basis. Directors are also regularly briefed
on the Group’s businesses and industry or technical
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.
Each of the current non-executive directors is
considered by the Board to be independent.
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 of the
Board, should be an independent director and details
his responsibilities. Mr John Ballard 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 CEO.
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.
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 CEO, 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 2012 financial year.
In 2012 the Board was subject to internal performance
review, which was considered appropriate in light of the
changes occurring on the Board and notwithstanding
the intention of the Board at the beginning of the
financial year. In 2013, 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
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 CEO.
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.
Directors have access to the Company’s management
and Company information through the CEO 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 CEO 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:
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 director
obliged to retire under this rule in 2012 is Mr Allison
who has advised the Chairman that he will offer himself
for re-election at the forthcoming AGM. The resolution
to re-elect Mr Allison has the support of the Board.
• 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.
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
24
expertise and experience for consideration by the full
Board. The Committee also takes into account the
prudential criteria (described on page 23 of this report)
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.
Board meetings
During the financial year, Directors held 17 Board
meetings. The attendance of Directors at Board
meetings is set out in the table on page 26.
Where directors are unable to attend meetings either in
person or by telephone (e.g. if they are overseas) the
Chairman or the CEO endeavours to canvass their
views on key matters prior to the meeting in order to
represent their views at the meeting.
The CFO, the Group General Manager, Australian
Network, Elders Rural Services, Group General Manager
Trading and the Managing Director, Futuris Automotive
have a standing invitation to attend all Board meetings
with relevant senior executives and management invited
on occasion to give presentations and inform the Board
of important issues and developments within their area
of responsibility.
The Chairman sets the agenda for each meeting, in
conjunction with the Company Secretary and CEO. All
directors are welcome to suggest to the Chairman that
particular items of business be included in the agenda.
Standing items at all full Board meetings include
Non-Executive Director only and Non-Executive Director
and CEO only sessions. Papers are distributed to all
Directors in advance of the meetings.
Committee membership
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
Each of these charters is available on the
Company’s website at www.elderslimited.com
Purpose
To increase the effectiveness of the Board’s functioning
and to allow the Board to spend additional and more
focused time on specific issues, the Board has four
principal standing committees, being the Nomination
and Prudential Committee, the Remuneration and
Human Resources Committee, the Audit, Risk and
Compliance Committee and the Occupational Health
and Safety Committee.
Membership and attendance
Each of the Board Committees, other than the
Nomination and Prudential Committee (which includes
the CEO as a member), is comprised solely of
independent Non-Executive Directors. The CEO has a
standing invitation to attend all Board Committee
meetings – except where the relevant Committee is
discussing the CEO’s employment arrangements –
and may participate in discussions on matters
concerning the main Board but has no voting rights
with respect to such matters. Other senior executives
are regularly invited to attend Board Committee
meetings where the Committee Chairman believes that
person’s attendance would be useful and relevant.
The members of each Board Committee during the
financial year are set out below.
Audit, Risk and
Compliance Committee
Remuneration and Human
Resources Committee
Nomination and
Prudential Committee
OH&S
Committee
J Ballard
M Jackman1
I MacDonald
M Allison
J Ranck
J Rozman
R Grigg4
A Buduls5
R Wylie6
-
-
Member
Member2
-
Chairman3
-
-
-
Member
-
Chairman
-
Member
-
-
-
-
Chairman
Member
Member
Member
Member
Member
-
-
-
-
-
-
Member
Chairman
Member
-
-
-
1 Non-voting on Board matters
2 Mr Allison was appointed a member of the Audit, Risk and Compliance Committee on 15 August 2012.
3 Ms Rozman was appointed Chairman of the Audit, Risk and Compliance Committee on 15 August 2012.
4 Mr Grigg retired from the Board on 30 July 2012. He was a member of the Audit, Risk and Compliance Committee,
the OH&S Committee and the Nomination and Prudential Committee.
5 Ms Buduls retired from the Board on 30 July 2012. She was a member of the Remuneration and
Human Resources Committee, the OH&S Committee and of the Nomination and Prudential Committee.
6 Mr Wylie retired from the Board on 15 August 2012. He was Chairman of the Audit, Risk and
Compliance Committee and a member of the Nomination and Prudential Committee.
Each Board Committee has a formal Charter which details the Committee’s role and responsibilities.
The main responsibilities of each Board Committee are detailed further in this report, commencing on page 27.
25
Board Committee meetings
Attendance at meetings by Directors
Attendance by directors at Board and Committee
meetings held during the year ended 30 September
2012 is detailed below. Attendance in the table is only
recorded where a director is a member.
Board Committee meetings are held at scheduled
intervals during the year, with additional meetings
being convened as required. The number of meetings
and attendance at those meetings is set out below.
With the exception of the Nomination and Prudential
Committee (which is comprised by the whole Board),
following each Board Committee meeting, the
Committee Chairs update the Board on the
deliberations, outcomes, and recommendations
of that Committee. Minutes of each Board Committee
meeting are included in the papers provided to the
subsequent Board meeting.
Board of Directors
Audit, Risk and
Compliance Committee
Nomination and
Prudential Committee
Attended
No. of meetings
held during
relevant period
Attended
No. of meetings
held during
relevant period
Attended
No. of meetings
held during
relevant period
17
17
17
17
14
162
13
11
15
17
17
17
17
14
17
14
11
15
-
1
6
-
5
-
5
-
5
-
1
6
-
5
-
5
-
5
1
1
1
1
1
1
0
0
0
1
1
1
1
1
1
0
0
0
Remuneration and Human
Resources Committee
OH&S Committee
Other Committees**
Attended
No. of meetings
held during
relevant period
Attended
No. of meetings
held during
relevant period
7
-
7
7
-
-
-
5
-
7
-
7
7
-
-
-
5
-
-
4
-
4
4
-
3
-
-
-
4
-
4
4
-
3
-
-
J Ballard
M Allison
I MacDonald
J H Ranck
J Rozman1
M Jackman
R Grigg3
A Buduls4
R Wylie5
J Ballard
M Allison
I MacDonald
J H Ranck
J Rozman
M Jackman
R Grigg3
A Buduls4
R Wylie5
1 Ms Rozman was appointed on 15 November 2011.
2 Mr Jackman was unable to attend one board meeting due to an emergency hospitalisation.
3 Mr Grigg retired on 30 July 2012.
4 Ms Buduls was appointed on 15 November 2011 and retired on 30 July 2012.
5 Mr Wylie retired on 15 August 2012.
Each Chairman of each of the Company’s permanent Board Committees has extended a standing invitation
to each other director to attend Committee meetings. Except in the case of unavoidable conflict, all Directors are
choosing to attend all Committee meetings.
Other ad hoc committees are convened as and when required to consider matters of special importance or to
aid the efficient functioning of the Board.
26
Nomination and Prudential Committee
Objective
The Board’s objective in relation to Board nomination
and review is to ensure that:
The Company notes that the composition of the
Remuneration and Human Resources Committee meets
the requirements of Recommendation 8.2 of the
amended 2nd edition of the Best Practice
Recommendations.
• the Company has adopted selection, appointment
Role
and review practices that result in a board:
> with an effective composition, size, mix of skills
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 the Company’s selection,
appointment and review practices.
Responsibilities
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;
• ensure the appropriate policies and procedures are
in place to attract and retain the Chairman, 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
The Committee’s principal responsibilities are to
regularly review and make recommendations to the
Board on:
to pursue the long-term growth and success of
the Company;
• ensure a clear relationship between business
• the necessary and desirable competencies of
members of the Board of the Company and its
committees;
• appropriate processes for the review of the
performance of the Board of the Company and
its committees;
• appropriate policies with respect to the maximum
period of service and retirement age for directors;
• appropriate succession plans for directors and
the CEO;
• 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;
• the scope and content of letters of appointment of
non-executive directors; skills development and
continuing education programs for directors of the
Company; and
• 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.
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 38 to 55.
The CEO has a standing invitation to attend Committee
meetings but must leave the meeting during those
periods in which consideration is being given to his
employment arrangements.
performance and the key performance indicators and
remuneration of the CEO and executive management;
• align executive incentive awards with the creation of
shareholder value;
• ensure that the Company’s human resources strategy,
policies and procedures are appropriate to the
Company’s needs and clearly designed and executed;
and
• to achieve diversity in the Company’s workplaces
and on the Board and to achieve equal treatment of
employees and Directors regardless of sex, race,
age, disability, religion, sexual orientation or family
responsibilities.
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);
27
• 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;
• policies regarding diversity, including measurable
objectives for achieving diversity;
• policies regarding equal treatment of employees;
• policies regarding workplace behaviour expected of
employees; and
• disclosures in the Company’s annual report on
remuneration matters.
Key Activities During the Year
The Committee oversaw the following significant
activities during the reporting period:
• setting of measurable diversity objectives; and
• ongoing review of the remuneration arrangements,
policy and structure for the Group.
Audit, Risk and Compliance Committee
Objective
The Board is concerned to ensure the integrity of the
Company’s financial reporting, its management of risk
and its regulatory and policy compliance. The Audit,
Risk and Compliance Committee assists the Board in
achieving this objective.
At least one member of the Committee is required by
the Committee Charter to be a qualified accountant or
other financial professional with experience of
accounting and financial matters. Ms J Rozman was
appointed Committee Chairman on 15 August 2012
upon the retirement of Mr R Wylie. Ms Rozman is highly
qualified in accounting and financial matters having
both domestic and international experience as a
chartered accountant and is currently Chairman of the
Audit and Finance Committee at Wine Australia
Corporation.
Details of the members’ qualifications can be found on
page 21 of this report.
The CEO, Chief Financial Officer and the Head of Risk
and Compliance 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.
Responsibilities
The Audit, Risk and Compliance Committee assists
the Board to meet its oversight responsibilities in
relation to:
• the Company’s financial statements and financial
reporting;
• the Company’s financial risk management processes,
accounting and control systems;
• the Company’s internal and external audit
arrangements;
• the Company’s compliance with legal, regulatory and
internal policy requirements; and
• the Company’s risk management programmes.
28
The Committee 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 (including in the
absence of management);
• 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 and application 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 material corporate
governance policies including the Delegations of
Authority and the Financial Risk Management 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;
• overseeing the Company’s process for dealing with
the reporting of unacceptable conduct;
• overseeing the Company’s policies, processes and
frameworks for identifying, analysing and addressing
complaints and reviewing material complaints;
• 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;
• reviewing and assessing management information
systems and internal control systems; and
• regularly reviewing the Company’s risk profile.
Key Activities During the Year
Key Activities During the Year
The Committee oversaw the following significant
activities during the reporting period:
The Committee oversaw the following significant
activities during the reporting period:
• review of the statutory and periodic financial
• analysis of the Company’s obligations under
statements of the Company; and
harmonised OH&S laws; and
• continued provision of appropriate internal audit, risk
and compliance functions following restructure of the
Company’s “back office” functions.
Occupational Health and Safety Committee
The Board is committed to the Company’s vision
that nothing is so important it cannot be done safely.
The Occupational Health and Safety Committee
(OH&S Committee) exists to assist the Board in
meeting this vision.
Role
The Committee’s objectives are to:
• ensure the appropriate policies and procedures are
in place to assist the Company to meet its statutory
obligations and the Board’s commitment to health
and safety;
• 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.
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
management 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;
• the internal process for determining and managing
key OH&S risk areas, particularly 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 by Company management on OH&S
performance and issues including reports on
material OH&S issues associated with the Company’s
operations;
• presentations from business unit general managers
on the OH&S management and performance of their
operations; and
• OH&S issues associated with the operations on
Company controlled sites (including, if feasible, visits
to those sites).
• continued focus on high risk activities undertaken
throughout the group.
4. External Audit
Independence Policy
Relevant policies and charters:
− Non-Audit Services Policy
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
auditor’s 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
in connection with prospectuses.
29
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.
5. 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
has primary responsibility for identification and
management of significant risks within the Group’s
businesses and is 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 risks
(other than OH&S) and compliance obligations. 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 GRC comprises the CEO, the Company’s senior
executives, Company Secretary and senior risk
personnel. Specialist support to the committee is
provided by internal experts as required, including the
General Counsel and the Head of Tax.
The GRC reports to the Board through the Audit, Risk
and Compliance Committee. Minutes of each GRC
meeting are also included in the papers to the Audit,
Risk and Compliance Committee.
30
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.
During 2012 the GRC reviewed the Group’s top 20
material business risks and reported to the Audit, Risk
and Compliance Committee and the Board on the
effectiveness of the Company’s management of those
material business risks.
Management Certificates
In accordance with the Board Charter, prior to
approving the financial reports of the Company for the
financial year ended 30 September 2012, the Board
received from the CEO 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.
Financial Risk Management Policy
The Company has a formal Financial Risk Management
Policy for management of liquidity and funding,
commodity, currency, interest rate and basis risks.
Compliance with policy is regularly reported to the
Board, including on an immediate basis in the case of
material breaches.
The purpose of the Financial Risk Management Policy is
to provide a prudential framework and operational
guidelines under which financial risk management
activities are undertaken for Elders. The primary
objective of this Policy is to manage the risk of financial
loss to Elders measured in terms of impact on earnings
arising from unfavourable movements in the financial
and commodity markets.
6. Conduct and Ethics
Relevant policies:
− Code of Conduct
− Securities Dealing Policy
− Communications with the Market and
Shareholders
− Fraud Policy
− Bribery, Financial Inducements and
Facilitation Payments Policy
− Reporting of Unacceptable Conduct Policy
− Equal Opportunity, Bullying and
Harassment Policy
− Workplace Health & Safety Policy
Copies of each of these documents may be found
on the Company’s website, www.elderslimited.com
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, 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
conflicts of interest, honesty, professionalism and
confidentiality, compliance with Company policy, ethical
behaviour, use of alcohol and illegal drugs, safety,
treatment of livestock, environmental considerations,
dealing with the media and share trading.
The Board has also adopted a Reporting 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 50 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
in a window, a director or senior executive must seek
clearance from the Company Secretary, or if the
Company Secretary wishes to trade, the Chairman.
The Securities Dealing Policy also prohibits contractors
from trading in the Company’s securities if they are in
possession of price-sensitive information.
Continuous Disclosure and Communication
with Shareholders
The Board is committed to timely disclosure of
information and communicating effectively with its
shareholders. The External Disclosure and Market
Communications Policy is designed to implement
effective communication strategies to enable timely
disclosure of both market sensitive information and
other information enabling both shareholders and
prospective new investors to make informed
investment decisions. The policy includes processes to
ensure that Directors and management are aware of,
and fulfil, their obligations.
The Company communicates with its shareholders and
the investment markets through a number of channels,
including the ASX announcements platform and its
website. During the year, the Company revamped its
website in an effort to simplify shareholder access to
information. The website includes:
• briefings on Company developments and events;
• information released to the ASX by way of an
announcement;
• a limited set of historical market announcements,
annual reports and briefings of half and full year
results; and
• the ability for any person to elect to receive ASX and
media announcements electronically as they are
posted on the Company’s website.
Further engagement with the investment community
occurs by way of:
• interaction by senior management 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
• provision of background and technical
information to institutional investors, market
analysts and the financial and business media to
support announcements made to the ASX and
announcements made about the Company’s on-going
business activities.
Each of the above means of engagement takes place
in the context of the Company’s External Disclosure and
Market Communications Policy described below.
External Disclosure and Market
Communications Policy
Under this 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 senior 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;
31
• 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, audio or audio-visual 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 viewing or
listening on the Company’s website).
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 has a Diversity Policy and has established
the following measurable diversity objectives.
Progress against these objectives will be reported on
in subsequent Annual Reports:
Objective 1:
Increase the representation of women in management positions as follows:
Actual Sept 12
FY13 Target
FY14 Target
FY15 Target
FY16 Target
Senior Executives
Senior Managers
Middle Managers
Managers
9%
15%1
7%
7%
11%
14%
8%
10%
11%
15%
10%
12%
14%
15%
12%
13%
15%
17%
15%
15%
Structural changes in the Elders business impacted
the percentage of women in management positions
following establishment of targets. Emphasis continues
to be on building the pipeline of female managers in
the ‘manager’ and ‘middle manager’ categories, which
is where the greatest opportunity for improvement lies.
1 Futuris Automotive has high female representation at the
Senior Manager level. The targets for this level were set
with the divestment of the Futuris business in mind.
Objective 2:
Strengthen the talent pipeline by increasing
women’s participation in development and mentoring
programs and target 50/50 gender balance in the
trainee intake.
In 2012 Elders engaged 19 people on traineeships.
Of these, 32% were female – a proportion that is
representative of the female participation rates in the
‘Agriculture, Forestry and Fishing’ industry as defined
by the ABS.
Recruitment of women to trainee roles will remain a
focus in the coming year with the aim of 50/50 gender
balance in future intakes.
Objective 3:
Maintain the number of female non-executive
Board directors at a minimum 25% through to 2016.
The current non-executive board composition is 4 males
(80%) and one female (20%) following an overall
reduction in the number of board members in 2012.
32
Fair Treatment
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.
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:
• establishing a safe work environment that manages
risks and hazards according to the organisation’s risk
management process;
• establishing clear targets and objectives to improve
health and safety in the workplace;
• assigning accountability and responsibilities
throughout the organisation to achieve health and
safety targets and objectives;
• allocating resources to assist in meeting set
objectives;
• providing safe plant and equipment;
• consulting with employees, contractors and visitors
on health and safety matters to promote involvement;
• ensuring contractors and joint ventures within Elders’
operating control are applying corporate policies;
• providing training to develop awareness, skills
and knowledge to promote collective responsibility
to health and safety;
• providing supervision to ensure tasks are completed
safely and without risk to employees, contractors
and visitors;
• effectively disseminating health and safety
information to employees, contractors and visitors;
and
• having a systematic approach to ensure compliance
with the various health and safety and related laws
within our various operating jurisdictions.
Disclosure of governance information
Supporting information concerning the Company’s
governance framework and practices, principles and
policies is posted on the Company’s website
at www.elderslimited.com in the section marked:
About Us: Corporate Governance.
33
Directors’ Report
The directors present their report for the
year ended 30 September 2012.
Directors
The directors of the Company in office during the
financial year and until the date of this report were:
Non-Executive Directors:
John Charles Ballard (Chairman)
Mark Charles Allison
Ian Graham MacDonald
James Hutchison Ranck
Josephine Mary Rozman
(appointed 15 November 2011)
Executive Director:
Malcolm Geoffrey Jackman
(Chief Executive Officer and Managing Director)
The following Non-Executive directors retired during
the financial year:
Raymond George Grigg, a director since 12 February
2004, retired on 30 July 2012
Anna Buduls, a director since 15 November 2011,
retired on 30 July 2012
Robert Harvey Wylie, a director since 10 November
2009, retired on 15 August 2012.
Company Secretary:
Peter Gordon Hastings
Sarah Jane Graves ceased as Joint Company Secretary
on 17 February 2012.
A summary of the experience, qualifications and special
responsibilities of each Director and Company
Secretary is provided on page 21 of this annual report.
Principal Activities
The principal activities of the Elders Group during the
year were:
(a) the provision of services and inputs to the
rural sector;
(b) the provision of financial and real estate services
to rural and regional customers;
(c) real estate franchisor;
(d) trading operations, principally in live cattle
and wool; and
(e) supply of automotive components.
34
During the year the Company announced:
• its intention to undertake a staged total divestment of
its forestry assets. That process is part complete; and
• that it would become a pure play rural services
business and would divest its automotive
components business in the foreseeable future.
Results and Review of Operations
The Group recorded a loss for the year, after tax and
non-controlling interest, of $60.6m (2011: loss of
$395.4m). A review of the operations and results of the
consolidated entity and its principal businesses during
the year is contained in pages 4 to 20 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
The Group announced on 29 October 2012 that it
would commence a process to sell its Rural Services
business. This is in addition to the withdrawal from
the Forestry sector announced in October 2011 and the
intended sale of Futuris Automotive announced on
15 August 2012.
As a result of these announcements, and as set out in
Note 2(a) to the Annual Financial Report, the group is
presently renegotiating its finance facilities so as to
provide sufficient funding through to the sale of these
assets. At the date of this report, the Group has
received an in principle funding agreement from its
financiers, subject to credit approvals, which provides
for the continuation of funding and the provision of
incremental facilities through to anticipated sale dates.
As a result, it is expected that finance facilities will now
be timed to mature in line with the Forestry, Futuris
Automotive and Rural Services divestments planned
before 30 June 2013, inclusive of $81.0m of debt
recorded as non-current at 30 September 2012.
Should divestment transactions proceed for the
sale of the remainder of Forestry operations, Futuris
Automotive and Elders Rural Services, this will
significantly affect the state of affairs of the Group.
As the Directors do not know what form or quantum
any sales transaction will take, the Directors are unable
at the date of this report to assess the impact of the
divestments proposed on the affairs of the Group.
There is no other matter or circumstance that has arisen since 30 September 2012 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.
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.
Dividends and Other Equity Distributions
The Company’s finance 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, and the intention of the Directors
to reduce the Company’s debt, no dividends or hybrid distributions were declared or paid during the 12 months
to 30 September 2012.
Share Options
Operation of the Elders Employee Share Option Plan (EESOP) was suspended in 2009. During the financial year,
all remaining holders were invited to surrender their options in order to remove the administrative cost burden
of maintaining discontinued plans. This has resulted in the cancellation of the majority of options on issue.
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
01/07/2003
Total
100,000
100,000
$13.70
01/07/2013
The total quantity of options on issue as at 30 September 2012 would represent, if exercised, 0.022% of the
Group’s issued ordinary shares.
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 or surrendered since the end of the previous financial year
Date Options Granted
Number of Lapsed Options
Issue Price
Option Expiry Date
31/08/2007
01/10/2007
25/11/2008
Total
80,000
200,000
260,000
540,000
$24.50
$24.50
$12.90
18/08/2012
01/10/2012
25/11/2013
35
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
I G MacDonald
J H Ranck
J M Rozman
Executive Directors
M G Jackman
100,000
1,000,000
52,668
430,000
20,000
-
-
-
-
-
-
-
-
-
-
190,220
1,000
2,284,822
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 26.
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 and other officer has entered into a Deed of Access, Insurance and Indemnity which provides:
• that the Company will maintain an insurance policy insuring the officer against any liability incurred by the officer
in the officer’s capacity as an officer of the Company to the maximum extent allowed by law;
• for indemnity against liability as an officer, 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 38. 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 18 and 20.
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.
36
Non-Audit Services
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)
$213,407.00.
Other compliance and assurance services $462,167.00.
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
19 November 2012
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 2012,
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
Adelaide
19 November 2012
37
Elders Limited
Remuneration Report 2012
The Directors of Elders Limited present the Remuneration Report
for the consolidated entity for the year ended 30 September 2012.
The information provided in this report has been audited, unless
otherwise indicated, as required by the Corporations Act 2001 (Cth)
and forms part of the Directors’ Report.
Section 1
Key Management Personnel
Section 2
Remuneration governance
and strategy
Section 3
Non-executive Director remuneration
Section 4
Executive Director and Senior Executive
remuneration
Section 5
Senior Executive contract terms
Section 6
Senior Executive remuneration details
Section 7
Equity instruments in relation to
directors and executives
40
40
41
42
48
49
50
38
Chief Executive Officer and Senior Executive remuneration
outcomes for 2012
Figure 1 below sets out certain items of remuneration paid or payable to the Group’s Chief Executive Officer (CEO) and Senior
Executives in respect of the 2012 financial year. The information in Figure 1 is unaudited and is different from and additional
to that required by Accounting Standards and statutory requirements.
Table 6 on page 49 provides the audited remuneration disclosures as required under Accounting Standards and statutory
requirements. Elders however believes that the information provided in Figure 1 is useful to investors, and is consistent with
the Productivity Commission’s recommendation in its Report on Executive Remuneration in Australia.
Figure 1 includes information on base salary, STI, superannuation, other monetary benefits, other non-monetary benefits and
termination benefits identical to that contained in Table 6, but omits the information on the issue of shares, share rights
and options and long-term payments contained in Table 6. Additionally, Figure 1 provides information on LTI based on rights
vesting or options exercised during the financial year, which is not provided in Table 6.
Figure 1. Remuneration outcomes for 2012 (unaudited and non-IFRS)
$
Base
Salary
STI2 LTI3 Superannuation
Other
(monetary)4
Other
(non-monetary)5
Termination
benefits6
Total
Malcolm Jackman 1,129,609
0
Tony Dage
644,051 141,000
Mark De Wit
644,344
Vince Erasmus1
367,078
0
0
David Goodfellow1
417,768 44,000
Mark Hosking
688,880
Shaun Hughes1
372,857
Sam McClure1
262,925
0
0
0
0
0
0
0
0
0
0
0
15,949
15,949
25,360
0
0
0
2,520
2,226
0
0
0
0
1,148,078
803,226
669,704
11,831
503,092
1,483
576,098
1,459,582
12,005
20,795
18,701
0
1,260
2,520
0
0
495,828
710,101
22,867
33,623
2,520
457,130
888,997
11,831
0
2,100
192,115
468,971
1 Figures relate to part-year service (see Section 1 below). Retention payment for Mr Erasmus includes $177,562
which is disclosed in Table 6 as base salary for the 2011 financial year.
2 STI that will be paid for performance in the 2012 financial year.
3 Value of any performance or service rights that vested during the 2012 financial year based on the closing share price
on the date of vesting, and options that were exercised during the 2012 financial year based on the difference between
the exercise price and the closing share price on the date of exercise. This figure does not represent the value of rights or
options granted during the 2012 financial year. Note that no performance or service rights vested and no options were
exercised during the 2012 financial year.
4 Comprising retention payments (Erasmus), travel allowance (Goodfellow) and higher duties allowance (Hughes).
5 Provision of leased car parking.
6 These benefits comply with Part 2D.2 of the Corporations Act 2001 (Cth).
39
Section 1. Key Management Personnel
The disclosure in this Remuneration Report relates to the remuneration of Key Management Personnel (KMP) 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
J C Ballard
M C Allison
A Buduls
R G Grigg
I G MacDonald
J H Ranck
J M Rozman
R H Wylie
Executive Director and Senior Executives
M G Jackman
A T Dage
M G De Wit
V Erasmus
D W Goodfellow
M G Hosking
S C Hughes
S J D McClure
Position held
Period held in 2012 (if not full year)
Chairman
Director
Director
Director
Director
Director
Director
Director
15 November 2011 - 30 July 2012
1 October 2011 - 30 July 2012
15 November 2011 - 30 September 2012
1 October 2011 - 15 August 2012
Chief Executive and Managing Director
Group General Manager Trading
Managing Director Futuris Automotive
Managing Director Elders Forestry
1 October 2011 - 18 May 2012
Group General Manager Australian Network
23 January 2012 - 30 September 2012
Chief Financial Officer
Chief Information Officer
Group General Manager Strategy and
Business Development
1 October 2011 - 2 August 2012
1 October 2011 - 15 June 2012
Section 2. Remuneration governance and strategy
A. 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 aligned with the Company’s overall objectives and in accordance with the practice set out in the ASX Corporate Governance
Principles and Recommendations. The role and responsibilities of the Remuneration and Human Resources Committee are set out in the
Corporate Governance Statement on page 27 of this Annual Report and the Committee’s Charter is published on the Company’s website at
www.elderslimited.com.
The Committee is comprised entirely of Non-executive Directors.
B. Independent remuneration advice
The Remuneration and Human Resources Committee is briefed by management, but makes all decisions free of the influence of management.
To assist in its decision-making, the Committee may seek independent advice from remuneration consultants, and in so doing will directly engage
with the consultant without management involvement.
In the year ending 30 September 2012, the Committee obtained remuneration recommendations from Egan Associates in relation to the CEO’s
remuneration. The Chair of the Remuneration and Human Resources Committee engaged and dealt with Egan Associates directly in obtaining
the recommendations. All advice, whether written or oral, was provided by Egan Associates directly to the Committee Chair without any
management involvement. Because there was no management involvement in obtaining the recommendation and all interaction in obtaining
the recommendation was between the Committee Chair and Egan Associates, the Board is satisfied that the recommendations were free from
undue influence from the KMP to whom the recommendation relates.
A total of $13,051 in fees was paid to Egan Associates in the 2012 financial year. Egan Associates did not perform any other work for the Company
during this period.
C. 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.
40
Section 3. Non-executive Director 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 in the manner set out in
the Corporate Governance Statement on page 24 of this Annual Report.
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 companies of comparable size.
The Board encourages Elders Non-executive Directors to own securities in the Group to further align their interests with the interests of other
shareholders. Details of Non-executive Directors’ shareholdings in the Group can be found in table 7a(i) of this Report. All shares held by
Non-executive Directors were acquired on market.
B. Non-executive Director remuneration in 2012
Total fees for the financial year ended 30 September 2012 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.
Each Non-executive Director was entitled to an annual base fee of $100,000, except the Chairman who was entitled to an annual composite base
fee of $300,000.
During the financial year ended 30 September 2012, as compensation for time spent on committee business, the following fees applied:
• Each member of the Audit, Risk and Compliance Committee was entitled to $16,000 per annum; except for the Committee Chair who was
entitled to $30,000 per annum to reflect the significant workload associated with this position.
• Each member of the Occupational Health and Safety Committee was entitled to $10,000 per annum.
• Each member of the Remuneration and Human Resources Committee was entitled to $10,000 per annum.
Actual Committee fees paid are provided as “Board Committee Fees” in Table 3 below.
The Company maintains independent boards for the responsible entities within the group and the following directors of the Company served as
directors of those entities:
• Mr. I MacDonald was a director on the Elders Forestry Management Limited and APT Projects Limited until 19 December 2011.
• Mr. R Grigg was a director on the Futuris Automotive Group Limited Board until his resignation on 30 July 2012.
These fees paid to Mr. MacDonald and Mr. Grigg are provided as “Subsidiary and Other Fees” in Table 3 below.
Table 3: Non-executive Director remuneration details
Short Term Payments
Post Employment
Total
Base Board Fee
Board
Committee Fees
Subsidiary Fees
and Other Fees
Superannuation
Other
J C Ballard
M C Allison
A Buduls
R G Grigg
I G MacDonald
J H Ranck
J M Rozman
R H Wylie
C E Bright
(retired 16 December 2010)
Total
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
300,000
300,000
100,000
90,000
71,410
n/a
83,333
90,000
100,000
90,000
100,000
90,000
88,077
n/a
87,500
90,000
n/a
22,500
930,320
772,500
0
0
12,028
10,000
7,141
n/a
21,667
26,000
26,000
26,000
20,000
20,000
24,675
n/a
26,250
27,000
n/a
2,500
137,761
111,500
0
0
0
0
0
n/a
20,833
37,500
10,192
50,000
0
0
0
n/a
0
0
n/a
0
31,025
87,500
15,949
16,091
10,083
9,000
7,070
n/a
11,325
13,815
12,449
10,935
10,800
9,900
10,148
n/a
10,725
10,530
n/a
2,250
88,549
72,521
0
0
0
0
0
n/a
0
0
0
0
0
0
0
n/a
0
0
n/a
0
0
0
315,949
316,091
122,111
109,000
85,621
n/a
137,158
167,315
148,641
176,935
130,800
119,900
122,900
n/a
124,475
127,530
n/a
27,250
1,187,655
1,044,021
41
Section 4. Executive Director and Senior Executive remuneration
A. Board policy
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 oversight of the Company’s remuneration policies and practices to the Remuneration and Human Resources Committee.
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, that there
is an appropriate balance between short and long-term incentives;
• that 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
• that 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 Committee on the recommendation of the CEO, and the CEO approves the plans and outcomes for positions reporting
to his direct reports. The Committee reviews the key elements of Senior Executive employment contracts as well as the CEO’s recommendations
for equity incentives to Senior Executives and other senior managers in the Company. The Committee also reviews major remuneration policies
and programs applying to the wider group.
B. Remuneration structure
The remuneration structure has been designed to support the Board’s remuneration policy. Executive remuneration is made up of three elements:
• Total Fixed Remuneration (TFR);
• Short-term incentives (STI); and
• Long-term incentives (LTI).
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 increases with seniority.
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%
LTI
STI
TFR
CEO
CFO
Business Unit
Head
Other Senior
Executive
The above table assumes the at-risk remuneration components are at their maximum.
42
C. Total Fixed Remuneration
Total Fixed Remuneration (TFR) is made up of base salary, superannuation 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 incentive
All executives participate in either an Elders’ Group or a business unit Short-term Incentive (STI) plan. The key features of the STI plans applying to
KMPs during the year are set out in the table below:
KMP participants1 and
maximum STI
opportunity as % of TFR
Corporate
Australian Network
Trading
Futuris Automotive
M G Jackman (120%)
D W Goodfellow (80%)
A T Dage (80%)
M G De Wit (80%)
Plan
M G Hosking (80%)
S C Hughes (80%)
S J D McClure (60%)
Performance measure(s)
Underlying profit
Summary
Return on Funds Employed
Net debt/EBITDA
Gross Margin
The Company’s
performance against the
above measures generates
an STI pool which is
distributed among
participants according to
their performance against
individual Key Performance
Indicators (KPI).
CODI (Total Contribution2
/Debtors + Inventory)
EBT
Direct Contribution3
EBIT
Operating cash flow
A percentage of any
overperformance against
the Trading business’s
budgeted EBT is set aside
to form an STI pool which
is distributed among
participants according to
performance against
individual KPIs.
An STI pool is generated
when Futuris Automotive
meets at least 90% of its
EBIT budget. The pool is
distributed among
participants according to
EBIT, cash, safety and
personal KPIs.
If a branch meets its
CODI and/or Direct
Contribution targets,
a percentage of the
branch’s Direct
Contribution is set aside
for national network
management. The sum
of all these amounts
generated by individual
branches forms the
national network
management pool, which
is distributed to
participants according to
their performance against
individual KPIs.
Exercise of discretion
The CEO, in conjunction with the Chairman, may recommend discretionary bonus payments to executives
(except himself) for approval by the Remuneration and Human Resources Committee.
Service condition
Payment
Any STI payable to executives who become eligible to participate in STI during the course of the year, either
through joining the Group or being promoted within the Group, will be pro-rated accordingly.
Payments are made in cash which participants may elect to sacrifice to acquire the Company’s shares via the
Deferred Employee Share Plan.
1 V Erasmus did not participate in an STI plan during the year.
2 Total Contribution = Direct Earnings + Indirect Earnings – Direct Costs – Net Interest
3 Direct Contribution = Direct Earnings + Indirect Earnings – Direct Costs
STI outcomes for 2012
All STI payments for 2012 performance were according to plan.
Of the KMPs participating in the business unit STI plans in 2012:
• D W Goodfellow received an STI payment of 12% of maximum for the Australian Network business unit’s performance;
• A T Dage received an STI payment of 27% of maximum for the Trading business unit’s performance; and
• M G De Wit did not receive an STI payment.
The STI outcome was nil for KMPs who participated in the Corporate STI plan in 2012.
43
E. Long-term incentive
The Company has a number of Long-term Incentive (LTI) and equity participation plans in place. These plans are summarised below.
E1. Current Equity Schemes
Name
of Plan
Description
Eligibility
Criteria
Number of
participants as
at 30 September
2011
Number of
participants as
at 30 September
2012
Number of shares /
options / rights
outstanding as at
30 September 2011
Number of shares /
options / rights
outstanding as at
30 September 2012
Elders
Long Term
Incentive
Rights Plan
(ELTIRP)
CEO
1
24
Senior
Executives
by invitation.
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 replaced the EESOP
and the ELSP described below.
1
19
2,570,425
2,284,822
5,546,587
7,409,031
E2. Discontinued Equity Schemes
Name
of Plan
Description
Eligibility
Criteria
Number of
participants as
at 30 September
2011
Number of
participants as
at 30 September
2012
Number of shares /
options / rights
outstanding as
at 30 September
2011
Number of shares /
options / rights
outstanding as
at 30 September
2012
By invitation.
64
2
953,300
115,000
The EESOP
was suspended
in 2009
and will be
discontinued
once all
options lapse.
By invitation.
1,559
1,262
981,468
791,535
The ELSP was
suspended
in 2009
and will be
discontinued.
All permanent
employees.
52
Operation of
the SAYE plan
was suspended
in February
2009.
46
34,331
19,308
Elders
Employee
Share
Option Plan
(EESOP)
EESOP is an employee
option scheme. Options
to acquire Elders shares
were granted to selected
eligible executives at
market (or premium) price,
subject to a minimum of
three years’ service.
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.
Elders Loan
Share Plan
(ELSP)
Elders ‘Save
as You Earn’
Plan (SAYE)
44
E3. Current equity saving schemes in which one or more KMP participates
Name
of Plan
Description
Eligibility
Criteria
Number of
participants as
at 30 September
2011
Number of
participants as
at 30 September
2012
Number of shares
/ options / rights
outstanding as
at 30 September
2011
Number of shares /
options / rights
outstanding as
at 30 September
2012
Deferred
Employee
Share Plan
(DESP)
This plan enables participants
to salary sacrifice remuneration
to acquire restricted shares.
All permanent
employees.
19
57
39,980
332,844
E4. Retention schemes
Name
of Plan
Description
Eligibility
Criteria
Number of
participants as
at 30 September
2011
Number of
participants as
at 30 September
2012
Number of shares
/ options / rights
or dollar amount
outstanding as at
30 September
2011
Number of shares /
options / rights or
dollar amount
outstanding as at
30 September 2012
By invitation.
15
13
5,793,595
6,572,589
By invitation.
6
By invitation.
15
Nil
9
$523,238
Nil
$1,247,161
$473,747
Retention
Plan
(general)
Retention
Plan
(Forestry
Scheme 1)
Retention
Plan
(Forestry
Scheme 2)
To retain the services of key
employees during the period of
Company “turn-around”.
This scheme provides for the
issue of service rights to
selected executives in three
tranches in August 2010,
August 2011 and August 2012,
for vesting on 1 August 2013.
Shares will 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
resignation or dismissal for
poor performance or
misconduct.
E5. Discussion of long-term incentive plans
(a) General
The ELTIRP is 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.
A number of Senior Executives (including all KMPs) 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 LTI plan which was approved
by shareholders at the Company’s 2009 AGM) remain at the Board’s discretion.
(b) Dealing in securities
Further, KMPs 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 KMPs with the Company’s security holders generally.
45
(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.
Summaries of LTIP grants are provided below.
Issue Date
CEO grants
Number of performance
rights granted
Denominator
Hurdle description
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. This tranche has been tested (see below).
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
Below 50th percentile
At 50th percentile
50th to 74th percentile
75th percentile and above
% of Tranche that vests
Nil
50%
Pro-rata
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.
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.
46
(c) Performance Hurdles (continued)
Issue Date
Number of performance
rights granted
Denominator
Hurdle description
Senior Executive grants
10 November 2010
5,546,587
10 November 2011
4,525,000
$0.646
$0.269
Performance rights granted to Senior Executives as at 10 November 2010
operate the same way as the CEO’s 2010 Allocation.
Performance rights granted to Senior Executives as at 10 November 2011
operate the same way as the CEO’s 2011 Allocation.
Performance testing of Tranche 1 CEO’s 2009 Allocation
Following completion of its measurement period, Tranche 1 of the CEO’s 2009 Allocation was tested against its performance hurdle, resulting in nil
vesting and lapsing of 285,603 performance rights valued at $74,257.
E6. Relationship between Elders’ financial performance and executive reward
(a) Short-term incentive
STI payments are awarded to executives on achievement of a range of financial and non-financial performance targets. The following table shows
the Company’s performance in relation to a number of financial and operational performance measures over a five-year period.
Performance measure
($ millions)
2012
2011
2010
2009
(to 30/9/09)
2009
(to 30/6/09)
2008
Sales revenue
Underlying EBIT
Statutory profit
Cashflow from operating activities
2,157.9
2,358.7
2,154.4
3,540.1
2,902.0
3,312.1
38.8
(60.6)
2.5
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)
Details of KMP STI outcomes for 2012 are provided on page 43.
(b) Long-term incentive
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.
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 2008 to 2012.
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
o
s
b
A
l
)
%
(
R
S
T
e
v
i
t
a
u
m
u
C
l
0%
40%
80%
(120%)
(160%)
(200%)
(240%)
(280%)
(80%)
2008
2009
2010
2011
2012
(320%)
2008
2009
2010
2011
2012
Elders
ASX200
ASX200 Industrials
Source: Capital IQ, Bloomberg
Elders
ASX200
ASX200 Industrials
Note: TSR was calculated for the following periods:
2008
2009
2010 onwards
1 July 2007 to 30 June 2008
1 July 2008 to 30 September 2009 (due to the change in Elders’ financial year end in that year)
1 October to 30 September
47
Factors contributing to the calculation of TSR include dividends and share price. The history of both for the last five years is set out below:
Dividend history
Dividend
2012
2012
2011
2011
2010
2010
2009
2009
2008
2008
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
-
-
Nil
-
-
Nil
-
-
28/10/08
1/4/08
Nil
0.0550
0.0400
-
100.00
100.00
Elders Share price history 2007-2012
$
30
25
20
15
10
5
0
7
0
l
i
r
p
A
7
0
y
l
u
J
7
0
y
r
a
u
n
a
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
1
1
r
e
b
o
t
c
O
2
1
y
r
a
u
n
a
J
2
1
l
i
r
p
A
2
1
y
l
u
J
2
1
r
e
b
o
t
c
O
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. Awards under this plan vest either at the end of the
plan period or on the sale of the business.
Section 5. Senior Executive contract terms
Elders Limited has entered into employment agreements with the Senior Executives, except for Mr. De Wit who is employed by Futuris
Automotive Group Limited and Mr. Erasmus who was employed by Elders Forestry Pty. Ltd. The employment agreements are ongoing until
terminated by either party.
In a company-initiated termination:
• the company is required to give the Senior Executive 12 months’ notice, except for Mr. De Wit who is entitled to receive six months’ notice;
• the company may make a payment in lieu of notice equivalent to the remuneration the executive would have received over the notice period;
• for serious misconduct, the company may terminate immediately whereupon no payment in lieu of notice or other termination payments are
payable under the employment agreement;
• due to genuine redundancy, as defined by the Fair Work Act 2010, the executive is entitled to a retrenchment payment in accordance with
company policy. This payment is also subject to the rules and limitations specified in the Corporations Act 2001 and Corporations Regulations;
• the executive may be entitled to a payment under a short-term or long-term incentive plan in accordance with plan rules.
If the Senior Executive initiates the termination, he is required to give the company six months’ notice, except for Mr. Jackman who is required
to provide 12 months’ notice.
In the event of a Change of Control or Disposal of Business (i.e. a shareholder gains voting power greater than 50% or a sale of substantially
all of the Company occurs) resulting in a material diminution in the roles and responsibility of the Senior Executive, the Senior Executive
may terminate his contact on three months’ notice. If the Senior Executive exercises that right of termination, the Company will pay the
equivalent of 12 months’ base salary.
48
Section 6. Senior Executive remuneration details
Table 6. Details of Executive Director and Senior Executive remuneration for the 2011 and 2012 financial years
Short-term payments
Post
employment
Share-
based
payments
Long-term
payments
Base salary
STI
Other2
Super-
annuation
Options
Share
Rights
Long
Service
Leave
Other Termination
benefits4
Total
%
performance
- related6
65,017
22,975
126,039
27,817
394,144
3,130
247,313
15,856
0
0
0
0
26,764 238,3813
0
0
18,510
M G Jackman
2012 1,129,609
2011 1,069,021
0
0
2,520
2,893
A T Dage
2012
644,051 141,000
2,226
2011
634,656
M G De Wit
2012 644,344
2011
641,250
0
0
0
0
0
0
15,949
15,343
15,949
15,343
25,360
25,000
V Erasmus1
2012 367,078
0 327,013
11,831
0
0
0
0
0
0
0
2011
754,091
0
0
15,343
5,931
D W Goodfellow1 2012
417,768
44,000 22,055
12,005
2011
n/a
n/a
n/a
n/a
M G Hosking
2012 688,880
0
2,520
18,701
18,750
2,893
36,143
22,867
0 (46,630)
0
0
9,602
0
n/a
n/a
633,471
8,559
401,228
16,524
301,910
(11,744)
0
n/a
0
0
0
2011
670,625
S C Hughes1
2012
372,857
2011
451,851
S J D McClure1
2012 262,925
2011
348,008
0
0
0
0
0
R J Tanti
2012
n/a
n/a
(ceased employment
30 June 2011)
2011
286,236
0
2,893
36,148
2,372
161,520
10,965
2,100
2,893
n/a
2,178
11,831
0 (137,752)
(28,865)
21,369
1,582
137,752
9,106
n/a
11,399
n/a
0
n/a
0
n/a
0
0 1,236,070
0
1,241,113
0 1,200,500
0
0
0
913,168
934,849
684,760
376,9105 1,036,202
199,1885
784,967
0
495,828
n/a
n/a
0
0
1,352,131
1,110,020
457,130
1,179,163
0
665,749
5%
10%
45%
27%
0%
0%
0%
1%
9%
n/a
47%
36%
26%
25%
192,115
302,354
(46%)
0
520,710
n/a
n/a
333,510
633,323
27%
n/a
0%
0
0
0
0
0
0
0
0
0
0
0
0
0
Total
2012 4,527,512 185,000 394,577
134,493
0 1,256,790
(25,811) 238,381
1,026,155 7,737,097
2011 4,855,738
0
13,750
158,695
9,885 1,073,852 108,380
0
532,698 6,553,810
1 Figures relate to part-year service (see Section 1).
2 Comprising the provision of leased car parking (Jackman, Dage, Erasmus, Goodfellow, Hosking, Hughes and McClure), retention payments
(Erasmus), travel allowance (Goodfellow) and higher duties allowance (Hughes).
3 Expense relating to participation in the Futuris Automotive Exit Incentive Plan (see page 48).
4 These benefits, which comprise redundancy payments under the Company’s redundancy policy and payments in lieu of notice, comply with
Part 2D.2 of the Corporations Act 2001 (Cth).
5 The combined termination benefits disclosed in the 2011 and 2012 financial years were paid as a lump sum to Mr Erasmus on termination
in May 2012.
6 Performance related remuneration consists of STI and Share Rights as a percentage of total remuneration. Share Rights includes
Performance Rights disclosed in Table 7c(i) and Service Rights disclosed in Table 7c(ii).
49
Section 7. Equity instruments in relation to directors and executives
Table 7a(i). Non-executive Director share movements
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 (see Note)
J C Ballard
M C Allison
A Buduls
R G Grigg
I G MacDonald
J H Ranck
J M Rozman
R H Wylie
C E Bright
Total
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
250,000
250,000
0
0
0
n/a
16,490
16,490
52,668
52,668
128,334
128,334
0
n/a
6,000
6,000
n/a
21,479
453,492
474,971
750,000
0
100,000
0
0
n/a
45,200
0
0
0
301,666
0
20,000
n/a
0
0
n/a
0
1,216,866
0
0
0
0
0
0
n/a
0
0
0
0
0
0
0
n/a
0
0
n/a
0
0
0
1,000,000
1,000,000
250,000
100,000
0
0
n/a
61,690
16,490
52,668
52,668
430,000
128,334
20,000
n/a
6,000
6,000
n/a
21,479
250,000
100,000
0
0
n/a
61,690
16,490
52,668
52,668
430,000
128,334
20,000
n/a
6,000
6,000
n/a
0
1,670,358
474,971
1,670,358
453,492
Note: Cessation dates were used for Non-executive Directors who retired or resigned before the date the
Remuneration Report was signed, as follows:
A Buduls
R G Grigg
R H Wylie
C E Bright
30 July 2012
30 July 2012
15 August 2012
16 December 2010
50
Table 7a(ii). Senior Executive share movements
Shares held at
start of year
Shares
acquired
during
the year as
part of
remuneration
Shares
acquired
during the
year through
the vesting
of LTIP
Other shares
acquired
(disposed of)
during
the year
Other
changes
during the
year
Balance of
shares held
at end of
financial
period
Balance of
shares held at
date of signing
Remuneration
Report
0
104,842
0
188,676
M G Jackman
A T Dage
M G De Wit
V Erasmus
D W Goodfellow
M G Hosking
S C Hughes
S J D McClure
R J Tanti
(ceased employment
30 June 2011)
Total
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
83,8341
107,168
90,000
90,000
18,537
18,537
1,998
1,998
173,356
n/a
0
0
17,087
17,087
7,697
7,697
n/a
0
392,509
242,487
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
107,168
90,000
90,000
18,537
18,537
1,998
1,998
190,220
107,168
90,000
90,000
18,537
18,537
1,998
1,998
173,356
173,356
n/a
n/a
n/a
n/a
n/a
n/a
0
0
0
0
0
0
0
0
0
0
0
0
n/a
n/a
0
0
0
0
0
0
0
0
0
0
0
0
n/a
0
104,842
0
0
0
0
0
0
0
n/a
0
0
0
0
0
17,087
17,087
7,697
7,697
n/a
0
0
0
17,087
17,087
7,697
7,697
n/a
0
497,351
242,487
498,895
242,487
1 This number of shares differs from the 2011 number as it only reflects the shares in which Mr Jackman holds a relevant interest.
Notes:
• No shares were issued on exercise of options or performance rights during the 2012 financial year.
• Cessation dates were used for Senior Executives who ceased employment with Elders before the date the Remuneration Report
was signed, as follows:
V Erasmus
S C Hughes
S J D McClure
18 May 2012
2 August 2012
15 June 2012
51
Table 7b. CEO and Senior Executive LTI movements - EESOP
2012
Balance at
beginning of period
Options granted
Options lapsed,
surrendered or
foregone to
30 September 2012
Balance at
30 September 2012
Exercisable
M G Jackman
A T Dage
M G De Wit
V Erasmus
D W Goodfellow
M G Hosking
S C Hughes
0
0
30,000
150,000
0
0
15,000
S J D McClure
22,500
Total
2011
M G Jackman
A T Dage
M G De Wit
V Erasmus
M G Hosking
S C Hughes
217,500
Balance at
beginning of period
0
0
40,000
150,000
0
15,000
S J D McClure
22,500
R J Tanti
Total
0
227,500
0
0
0
0
0
0
0
0
0
0
0
(30,000)
(150,000)
0
0
(15,000)
(22,500)
(217,500)
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
Options granted
Options lapsed,
surrendered or
foregone to
30 September 2011
Balance at
30 September 2011
Exercisable
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
(10,000)
30,000
30,000
0
0
0
0
0
150,000
75,000
0
15,000
0
0
22,500
12,500
0
0
(10,000)
217,500
117,500
52
Table 7c(i). Current long-term Incentive plan opportunities (by offer) – Performance Rights
2012
Granted
Performance
Rights
(number)
Vested
Performance
Rights
(number)
Grant date Tranche(s)
Value at
grant date
per right ($)
Last exercise
and
expiry date
Expensed at 30
September 2012
($)
Performance
Rights % of
remuneration
M G Jackman
285,603
285,603
292,951
292,951
292,951
278,255
278,255
278,255
A T Dage
600,000
0 10 November
2009
0 10 November
2009
0 10 November
2009
0 10 November
2009
0 10 November
2009
0 10 November
2009
0 10 November
2009
0 10 November
2009
0 23 December
2011
2
3
1
2
3
1
2
3
0.12
0.12
0.11
0.12
0.12
0.11
0.12
0.12
1,2,3
0.15 to 0.16
603,482
0
29 June 2011
1,2,3
0.17 to 0.24
M G De Wit
V Erasmus
D W Goodfellow
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
M G Hosking
700,000
0 23 December
2011
1,2,3
0.15 to 0.16
696,325
0
29 June 2011
1,2,3
0.17 to 0.24
10 November
2012
10 November
2013
10 November
2012
10 November
2013
10 November
2014
10 November
2013
10 November
2014
10 November
2015
9 November
2013 to
9 November
2015
10 November
2012 to
10 November
2014
0
0
0
9 November
2013 to 9
November 2015
10 November
2012 to 10
November 2014
65,017
5%
72,559
6%
0
0
0
84,096
0%
0%
0%
6%
S C Hughes
450,000
0 23 December
2011
1,2,3
0.15 to 0.16
(see note)
(29,714)
0%
467,559
0
29 June 2011
1,2,3
0.17 to 0.24
S J D McClure
350,000
0 23 December
2011
1,2,3
0.15 to 0.16
(see note)
(22,421)
0%
352,809
0
29 June 2011
1,2,3
0.17 to 0.24
53
Table 7c(i). Current long-term Incentive plan opportunities (by offer) – Performance Rights (continued)
2011
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 % of
remuneration
M G Jackman
285,603
285,603
285,603
292,951
292,951
292,951
278,255
278,255
278,255
0 10 November
2009
0 10 November
2009
0 10 November
2009
0 10 November
2009
0 10 November
2009
0 10 November
2009
0 10 November
2009
0 10 November
2009
0 10 November
2009
1
2
3
1
2
3
1
2
3
0.11
0.12
0.12
0.11
0.12
0.12
0.11
0.12
0.12
A T Dage
603,482
0
29 June 2011
1,2,3
0.17 to 0.24
M G Hosking
696,325
0
29 June 2011
1,2,3
0.17 to 0.24
S C Hughes
467,559
0
29 June 2011
1,2,3
0.17 to 0.24
S J D McClure
352,809
0
29 June 2011
1,2,3
0.17 to 0.24
10 November
2011
10 November
2012
10 November
2013
10 November
2012
10 November
2013
10 November
2014
10 November
2013
10 November
2014
10 November
2015
10 November
2012 to 10
November 2014
10 November
2012 to 10
November 2014
10 November
2012 to 10
November 2014
10 November
2012 to 10
November 2014
126,039
10%
38,352
44,252
29,714
22,421
4%
4%
4%
4%
Notes:
• Details of the performance rights in Tranche 1 of the CEO’s 2009 Allocation that lapsed are provided in Section 4.E5(c). No other performance
rights lapsed and no performance rights were exercised during the 2012 financial year.
• All unvested Performance Rights held by Mr. Hughes and Mr. McClure lapsed when they ceased employment with Elders.
54
Table 7c(ii). Current Long-term Incentive plan opportunities (by offer) – Service Rights
2012
Number
granted
Number
forfeited
Closing
number
Number
vested
Vesting date
Value at
grant date
($ per right)
Expensed at
30 September
2012 ($)
Service
Rights % of
remuneration
A T Dage
325,314
M G Hosking
555,746
S C Hughes
205,199
0
0
0
1,214,391
2,074,585
766,001
S J D McClure
179,549
(670,251)
0
1,265,808
(670,251)
4,054,977
0
0
0
0
0
1 August 2013
1 August 2013
1 August 2013
1 August 2013
0.61
0.61
0.61
0.61
321,586
549,375
331,624
27%
41%
28%
(115,331)
(38%)
-
-
1,087,254
Number
granted
Number
forfeited
Closing
number
Number
vested
Vesting date
Value at
grant date
($ per right)
Expensed at
30 September
2011 ($)
Service
Rights % of
remuneration
Total
2011
A T Dage
889,077
M G Hosking
1,518,839
S C Hughes
560,802
S J D McClure
490,702
0
0
0
0
889,077
1,518,839
560,802
490,702
390,171
390,171
0
3,849,591
390,171
3,459,420
R J Tanti
Total
Note:
0
0
0
0
0
0
1 August 2013
1 August 2013
1 August 2013
1 August 2013
-
-
0.61
0.61
0.61
0.61
0.61
-
208,961
356,976
131,806
115,331
0
813,074
23%
32%
20%
22%
0%
-
• No service rights were exercised or lapsed during the 2012 financial year.
55
Discussion and Analysis
of 2012 Financial Results
• Corporate items of $(8.0m) before tax, which
principally comprise:
> asset impairments $(19.6m) relating to investments
in Aspen, AFC and Agricultural Land Management.
> interest received from ATO of $19.2m as a result
of the successful objection to an amended tax
assessment, partly offset by finance costs $(5.6m)
relating to funding for designated forestry assets.
• Forestry items of $(75.3m) before tax includes
gain on disposal of assets $27.3m, asset impairments
$(44.1m), provisions for exit costs, and for onerous
contracts $(36.0m), equity accounted loss
from Agricultural Land Trust $(5.3m) and results
from discontinued forestry operations for the
period $(17.2m).
• Tax items excluded from underlying profit $34.5m,
which relates to:
> gain of $55.5m from the reversal of provisioning
and amounts received in respect of the amended
tax assessment successfully contested.
> reduction in deferred tax assets $(26.7m) from
utilisation and de-recognition of tax losses.
> $5.7m tax effect of other items, which are excluded
from underlying profit before tax.
Underlying profit before tax rose by $4.2m in
comparison with pcp due to:
• Increase in underlying EBIT by $6.4m:
> Rural Services EBIT up $4.6m due to increased
earnings generated from Trading operations,
New Zealand and associates, and favourable
mark-to-market movements that partly offset
reduced earnings from Network operations.
> Automotive EBIT up $1.7m with reduced costs
offsetting lower margins.
> Corporate and other EBIT improved by $0.1m.
• Net underlying finance costs up $2.2m as detailed
on page 57.
Reconciliation of Statutory and
Underlying Profit
The statutory loss after tax attributable to owners of the
parent (shareholders) of $(60.6m) for the 12 months
ended 30 September 2012 (2011: $(395.4m)) includes
a number of items considered either unrelated to
ongoing operating performance or relating 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 ongoing operations.
Underlying profit is calculated as follows:
Statutory and Underlying profit reconcliation
$million 12 months to 30 September:
2012
2011
Reported profit/(loss) after tax
to shareholders
(60.6)
(395.4)
Items excluded from
underlying profit:
Rural Services
Automotive
Corporate & other
Forestry
Tax (Net)
Items excluded from
underlying profit
Underlying profit after tax
to shareholders
(10.9)
(22.1)
(14.1)
(0.6)
(8.0)
(46.1)
(75.3)
(390.6)
34.5
55.0
(73.8)
(404.4)
13.2
9.0
Items excluded from Statutory Profit to determine
underlying profit for the 12 months ended
30 September 2012 comprise:
• Rural Services related items of $(10.9m) before tax
includes the results from discontinued operations
(BWK and Seedmark) $(2.2m), asset impairments
$(3.8m) and the back-office restructure $(3.0m) to
reset the cost base for ongoing benefits from 2013.
• Automotive related items of $(14.1m) before tax
includes redundancies and restructure of some
Victorian facilities $(3.7m), onerous contracts $(6.0m)
and asset impairments $(10.1m), which were partly
offset by a fair value adjustment of $5.7m arising from
consolidation of the Anhui joint venture in China.
56
> The $12.2m excluded from underlying finance
cost, primarily relates to:
- Interest of $19.2m received from the ATO as a
result of the successful objection to an amended
tax assessment.
- Interest expense related to finance designated
for assets being divested (2012: Forestry $(5.6m);
2011: Rural Bank $(2.8m), Forestry $(8.0m)).
- $(26.0m) costs in 2011 relating to repayment of
USPP debt and refinancing.
Cash Flow
Operating cash flow
Positive cash generation from Rural Services and
Automotive more than offset the cash outflow
from Forestry.
Rural Services, Automotive and Corporate generated
cash inflows of $110.6m prior to working capital
movements of $(52.1m). Features of operating cash
flow include:
• Rural Services’ recorded cash inflow from operating
activities of $52.4m prior to working capital
movements of $(3.0m). This was driven by strong
performance from Live Export Trading.
• Automotive operations generated an operating
cash inflow of $48.4m before working capital
movements of $(24.1m).
• Corporate recorded a cash inflow of $9.8m before
working capital movements, mainly due to receipt of
$46.8m from the ATO for refund of tax and interest
following the successful objection to an amended tax
assessment, partly offset by finance costs. Working
capital movements of $(25.0m) relates primarily to
the Rural Services debtor finance program.
Forestry recorded cash outflow of $(14.8m) before
asset related payments. Working capital movement
$(41.2m) comprises payments associated with
maintaining assets held for sale, in particular
lease obligation prior to sale.
Key Profit and Loss Items
Key profit and loss items for the year include:
• Continuing sales of $2,157.9m, which were down
5% or $(105.2m):
> Rural Services sales were down $(134.7m), of which
$(97.7m) related to operations that were wound
down in 2012 (wool indent trading).
Strong performance from live cattle exports and
increased sales of farm supplies were offset by the
impact of reduced prices on sales in wool, livestock,
feedlots and broadacre real estate.
> Automotive sales were up $29.5m. Sales increased
$11.4m in Thailand with the first full year of
operations, which were offset by the impact of
lower Australian vehicle build volumes $(11.4m).
The consolidation of the Anhui joint venture
increased sales by $29.5m in 2012.
• Discontinued sales revenue of $14.7m for the year
relates to Forestry.
• Depreciation and amortisation from continuing
operations declined $2.7m as a result of lower
charges in both Rural Services and Automotive.
• Income from continuing joint ventures and associates
was down $(3.7m), principally due to Agricultural
Land Trust $(6.5m), which offset increased
contributions from Kilcoy abattoir (up $2.0m) and
AWH logistics operations (up $1.3m).
• Discontinued income from associates of $(0.5m)
relates to the Seedmark joint venture that was
divested in April 2012.
• Reported net finance costs of $(8.5m) includes:
> Underlying net finance costs of $(20.7m)
comprising:
- Underlying interest on core debt (2012:
$(16.9m); 2011: $(16.3m)) that excludes interest
to finance specifically designated assets being
divested (detailed below). Total interest on
core debt of $(22.5m) was $4.6m lower than
pcp due to reduced core debt levels and decline
in interest rates.
- Interest on self-liquidating facilities was up on
pcp as a result of higher amounts securitised,
partly offset by lower interest rates.
- Other finance costs and interest income largely
relate to facility fees, and interest income on
overdue debtors and from advances to
associates.
57
• Assets held for sale of $71.5m relates predominantly
to Forestry. The decrease of $114.4m was
driven by forestry asset sales $74.1m and asset
impairments $44.1m.
• Investments in property, associates and joint ventures
reduced by $16.6m largely due to the consolidation
of the Anhui automotive joint venture in China, equity
accounted loss from the Agricultural Land Trust,
and sale of the BWK property in Bremen.
• Intangibles increased by $27.1m largely as a result
of $10.8m goodwill on consolidation of the Anhui JV
and $18.3m expenditure to modernise IT capability
through a SAP based ERP system (project on
hold in the short term, in light of the pending sale
of the Rural Services business).
• Provisions increased by $7.6m as a result of
resetting of provisions related to the forestry
divestment program.
Indebtedness
Net debt reduced by $50.1m in 2012, with gearing
lower at 53.5%. Borrowings include:
• Self-liquidating finance facilities of $199.2m (2011:
$139.5m), which are securitised by farm supplies and
automotive receivables.
• Core net debt of $96.1m, which reduced from
$205.9m in 2011, and now accounts for 33% (pcp
60%) of net debt. The reduction was reflected
principally in Term debt that reduced from $180.9m
to $88.1m. Proceeds from Forestry asset sales and
ATO receipt were applied to repay core debt.
At the date of this report, the Group has received in
principle funding agreement from its financiers, subject
to credit approvals, which provide for the continuation
of funding and the provision of incremental facilities
through to the anticipated withdrawal from Forestry
and intended sale of Automotive and Rural Services.
Investing cash flow
Investing cash flow of $51.8m in 2012 includes receipts
of $101.4m from Forestry asset sales. This was offset
by capital expenditure of $(32.3m) by Automotive
on design and development for new contracts and
expansion in Thailand and USA, and $(18.3m) by Rural
Services to modernise IT capability through a SAP
based ERP system (project on hold in the short term, in
light of the sale process).
Investing cash inflow of $133.8m in 2011 included
$163.9m proceeds from the sale of equity accounted
investment in Rural Bank.
Financing cash flow
Financing cash flow of $(44.0m) is mainly the result of
term debt net repayment of $100.4m with the proceeds
from Forestry asset sales and receipt from the ATO,
partly offset by an increase of $59.7m in the usage of
the self-liquidating facilities secured by farm supplies
and automotive receivables.
Financing cash flow of $(108.4m) in 2011 was primarily
the result of net repayment of debt from scheduled
pay-downs and refinancing, which offset inflows from
new facilities.
Balance Sheet and Finance
Assets and liabilities
Significant movements during the 12 months to
30 September 2012 include:
• Working capital was $2.7m lower, as a result of
reductions in inventory $7.2m, receivables $42.8m
and payables $47.3m.
> Inventory and livestock were reduced by $7.2m,
primarily in Rural Services, due to management
focus on reducing farm supplies inventories and
reduction in wool stocks from the wind down
of wool indent trading, which were partly offset by
higher cattle numbers at balance date following
an increase in live export shipments.
> Receivables were $42.8m lower, mainly in Rural
Services, as a result of reduced livestock agency
turnover $35.1m and timing of live export
shipments $20.1m. This was partly offset by higher
receivables in Automotive from consolidating the
Anhui JV.
> Payables declined by $47.3m as a result of lower
livestock turnover.
58
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
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^
Number of shareholders^
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 %
Sept 2012
Sept 2011
Sept 2010
June 2009
June 2008
June 2007
June 2006
June 2005
June 2004
June 2003
2,358.7
2,154.4
2,902.0
3,312.1
3,228.5
3,355.8
3,174.7
2,707.3
2,464.3
2,421.0
2,251.0
3,049.3
3,496.1
3,366.9
3,422.6
3,232.0
2,791.0
2,844.8
2,172.6
2,247.3
18.7
-
4.4
-
(30.7)
(81.7)
38.8
18.1
(1.7)
(73.8)
(3.2)
(60.6)
13.2
2.5
551.8
-
-
-
-
-
0.25
112.1
32,741
4.2
-
15.3
-
(17.9)
(3.2)
(395.4)
9.0
(23.8)
604.7
-
-
-
-
-
(74.1)
(390.6)
(158.6)
13.7
(221.4)
-
15.9
-
22.3
(63.4)
(59.8)
-
20.9
22.4
61.4
26.2
-
(50.8)
(61.7)
(36.9)
(389.0)
(179.8)
(384.0)
32.4
13.8
(1.6)
2.6
(13.7)
3.7
16.8
(35.0)
(6.2)
94.0
171.7
114.8
21.0
(404.4)
(202.5)
(388.5)
(47.8)
(5.1)
(217.6)
(15.1)
(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
(110.5)
(370.8)
(14.1)
85.0
127.4
1,006.1
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
0.29
130.1
0.39^
175.0
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
152.3
-
-
19.3
0.3
(5.5)
166.4
84.0
65.0
(12.2)
(38.5)
(44.2)
(5.9)
23.8
62.8
121.1
961.2
4.0
4.0
8.0
52.3
-
1.58^
1,041
82.4
(6.9)
102.0
48.0
(55.6)
843.6
4.0
4.0
8.0
50.6
-
1.68^
1,096
34,954
40,075
33,361
32,187
31,956
33,337
35,394
40,028
42,625
Ordinary shares on issue^
448,598,480 448,598,480 448,598,480 819,165,04 780,545,644 735,640,128 720,911,089 663,243,696 659,138,427 652,293,766
Share issues
-
-
Share
placement
Share
purchase plan,
10:1 share
consolidation
Dividend
reinvestment
plan, (fully
underwritten)
Dividend
reinvestment
plan, (fully
underwritten),
conversion
of options and
convertible
notes
Dividend
reinvestment
plan,
conversion of
options 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
(13.5)
(88.1)
(51.1)
(51.5)
4.8
14.5
13.1
8.9
3.6
16.2
2.4
(11.0)
0.40
54%
-
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
Reported earnings before interest and tax (inclusive of items excluded from underlying profit).
*
** Underlying profit and earnings results exclude items unrelated to ongoing operating performance or relating to
discontinued operations.
In respect of dividends declared for the financial year.
#
^ As at period end. Comparison to 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.
5.7
12.1
0.88
0
49
59
60
Elders Limited
Annual Financial Report
30 September 2012
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
Revenue and Expenses
Income Tax
Receivables
Livestock
Inventory
Derivative Financial Instruments
1
2
3
4
5
6
7
8
9
10 Other Financial Assets
11 Investments in Associates and Joint Ventures
12 Property, Plant and Equipment
13 Investment Properties
14 Intangibles
15 Other Assets
16 Trade and Other Payables
17 Interest Bearing Loans and Borrowings
18 Provisions
19 Contributed Equity
20 Hybrid Equity
21 Reserves
22 Retained Earnings
23 Dividends
24 Non-controlling Interest
25 Cash Flow Statement Reconciliation
26 Expenditure Commitments
27 Contingent Liabilities
28 Segment Information
29 Supplementary Statement of Net Debt
30 Auditors Remuneration
31 Investments in Controlled Entities
32 Key Management Personnel
33 Share Based Payment Plans
34 Related Party Disclosures
35 Earnings Per Share
36 Financial Instruments
37 Business Combinations – Changes in the Composition of the Entity
38 Discontinued Operations
39 Parent Entity
40 Subsequent Events
Directors’ Declaration
Independent Auditor’s Report
62
63
64
65
66
66
78
79
81
83
85
85
86
86
86
88
89
90
93
93
94
96
97
97
98
99
99
99
100
101
102
102
105
107
108
113
117
118
120
121
126
127
130
130
131
132
61
Consolidated Statement of Comprehensive Income
For the Year ended 30 September 2012
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
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
2012
$000
2011
$000
4
4
4
11
4
4
4
5
2,157,947
2,263,116
(1,724,359)
(1,816,539)
34,033
20,912
(522,854)
(525,783)
8,266
179
31,767
12,046
(3,936)
21,792
(38,961)
(77, 388)
(53,982)
(105,780)
32,850
12,074
(21,132)
(93,706)
38
(36,241)
(297, 462)
(57,373)
(391,168)
4,398
(1,755)
-
283
2,926
1,381
1,384
1,239
423
4,427
Total comprehensive income/(loss) for the period
(54,447)
(386,741)
Profit/(loss) for the period is attributable to:
Non-controlling interest
Owners of the parent
Total comprehensive income/(loss) for the period is attributable to:
Non-controlling interest
Owners of the parent
Reported operations
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
Continuing operations
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
Discontinued operations
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
The accompanying notes form an integral part of this consolidated statement of comprehensive income.
3,227
4,182
22
(60,600)
(395,350)
(57,373)
(391,168)
3,076
4,236
(57,523)
(390,977)
(54,447)
(386,741)
35
35
35
35
35
35
(13.5)¢
(13.5)¢
(5.4)¢
(5.4)¢
(8.1)¢
(8.1)¢
(88.1)¢
(88.1)¢
(21.8)¢
(21.8)¢
(66.3)¢
(66.3)¢
62
Consolidated Statement of Financial Position
As at 30 September 2012
Current assets
Cash and cash equivalents
Trade and other receivables
Livestock
Inventory
Derivative financial instruments
Non current assets classified as held for sale
Other
Total current assets
Non current assets
Receivables
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
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
2012
$000
2011
$000
25(b)
91,969
81,614
6
7
8
9
38
15
6
10
11
12
13
14
5
15
16
9
17
5
18
16
17
5
18
19
20
21
22
498,015
540,825
67,382
53,198
166,975
188,439
1,593
71,474
17,704
664
185,859
23,626
915,112
1,074,225
18,522
1,330
80,539
95,684
-
16,930
17, 852
94,088
91,337
2,975
277,257
250,232
89,575
31,883
119,483
22,854
594,790
615,751
1,509,902
1,689,976
386,606
433,916
2,010
6,916
302,987
196,041
1,566
40,834
121,065
115,333
814,234
793,040
1,413
82,842
34,722
24,909
2,583
231,023
35,558
23,089
143,886
292,253
958,120
1,085,293
551,782
604,683
1,270,323
1,271,493
145,151
145,151
(27,310)
(33,592)
(844,029)
(781,322)
544,135
601,730
24
7,647
2,953
551,782
604,683
63
Note
2012
$000
2011
$000
6,148,572
6,781,813
(6,157,859)
(6,770,078)
9,069
32,053
(36,631)
(16,531)
23,855
14,020
16,151
(54,408)
(22,292)
11,034
25(a)
2,528
(23,760)
(19,611)
(12,737)
-
-
(1,050)
(15)
(18,314)
(1,333)
219
(28,155)
(15,862)
73,240
925
684
2,730
-
28,168
(8,756)
1,081
163,910
7, 357
14,550
2,745
-
(3,232)
(10,005)
-
-
2,875
(1,307)
3,491
4,053
51,822
133,829
36
421
101,665
64,026
(142,420)
(169,696)
(480)
(2,796)
(349)
(2,842)
(43,995)
(108,440)
10,355
81,614
91,969
1,629
79,985
81,614
25(b)
Consolidated Statement of Cash Flows
For the Year ended 30 September 2012
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 repaid by growers
Net investing cash flows
Cash flow from financing activities
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 at the beginning of the financial year
Cash at the end of the financial year
The accompanying notes form an integral part of this consolidated statement of cash flows.
64
Consolidated Statement of Changes in Equity
For the Year ended 30 September 2012
Transactions with owners in their capacity as owners:
Tax effect on share issue costs
(1,170)
$000
As at 1 October 2011
Profit/(loss) for the period
Other comprehensive income/(loss):
Foreign currency translation
Net gains/(losses) on cash flow hedges
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
Acquisition of subsidiary
Excess paid for purchase of non-controlling interest
Cost of share based payments
Reallocation of equity
As at 30 September 2012
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
Issued
capital
Reserves
Hybrid
equity
Retained
earnings
Non-
controlling
interest
Total
equity
1,271,493
(33,592)
145,151
(781,322)
2,953
604,683
1,270,323
(27,310)
145,151
(844,029)
7,647
551,782
1,273,863
(35,668)
145,151
(380,577)
3,324
1,006,093
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
4,549
(1,755)
283
3,077
-
36
-
-
-
(1,077)
2,139
2,107
-
-
-
-
-
-
-
-
-
-
-
-
-
(60,600)
3,227
(57,373)
-
-
-
(151)
-
-
4,398
(1,755)
283
(60,600)
3,076
(54,447)
-
-
-
-
-
-
-
(2,107)
-
-
(1,170)
36
(2,796)
(2,796)
2,198
2,216
-
-
-
2,198
2,216
(1,077)
2,139
-
-
-
(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)
-
-
(2,842)
(1,765)
-
-
-
(2,370)
421
(2,842)
(1,765)
(9,958)
1,845
-
Transactions with owners in their capacity as owners:
Tax effect on share issue costs
(2,370)
1,271,493
(33,592)
145,151
(781,322)
2,953
604,683
The accompanying notes form an integral part of this consolidated statement of changes in equity.
65
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2012
Note 1. Corporate Information
The consolidated financial report of Elders Limited for the year ended 30 September 2012 was authorised for issue in accordance with a resolution
of the Directors on 19 November 2012.
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 28.
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.
The Group is a for-profit entity.
In preparing the financial report, the Directors have made an assessment of the ability of the Group to continue as a going concern. In doing so,
the Directors have considered the cash flow requirements of business operations, availability of funding, realisation of assets and expected
settlement of liabilities.
In order for the Group to achieve its operational and debt obligations it will require the Group to meet forecast trading results and cash flows, to
complete the sale of certain assets, and to finalise the proposed new funding arrangements with its financiers. The forecasts assume that planned
costs savings and other operational improvements are achieved.
The Group uses best estimate assumptions in the development of trading and cash flow forecasts. These assumptions are subject to influences and
events outside the control of the Group. The current domestic and international trading environments present challenges in terms of forecasting sales
prices, volumes, margins and operating cash flows. Whilst the Directors have instituted measures to minimise the cash demands of the business, this
environment creates material uncertainties over the future trading results and cash flows.
The Group is engaged in a program of sale of key components of the Group’s business. In addition to the withdrawal from the Forestry sector
announced in 2011 and the intended sale of Futuris Automotive announced on 15 August 2012, the Group announced the commencement of a
process to sell Elders Rural Services on 29 October 2012.
As a result of these announcements, the Group is presently renegotiating its finance facilities so as to provide sufficient funding through to the sale
of these assets. At the date of this report, the Group has received an in principle funding agreement from its financiers, subject to credit approvals,
which provides for the continuation of funding and the provision of incremental facilities through to anticipated sale dates. As a result, it is expected
that finance facilities will now be timed to mature in line with the Forestry, Futuris Automotive and Rural Services divestments planned before
30 June 2013, inclusive of $81.0 million of debt recorded as non-current at 30 September 2012.
At the date of this report, the following material uncertainties arise in relation to the preparation of this financial report: a) whether there will be a
successful completion of negotiations relating to financing; b) whether each of the Group’s businesses will continue to trade within expectations;
c) whether the divestments of Forestry, Futuris Automotive and Elders Rural Services will complete within expected timeframes, for sufficient quantum
of proceeds and having received shareholder approval, if required; d) whether there will be a successful rationalisation and completion of obligations
following the sale of the Forestry, Futuris Automotive and Elders Rural Services businesses. Resolution of these material uncertainties is fundamental
to the ability of the Group to pay debts as and when they become due and payable and to continue as a going concern.
Further, the in principle funding agreement includes certain obligations which are required to be met by the company within specified timeframes.
Any significant deterioration from current expectations of the Directors as to the performance of the Group’s businesses may compromise compliance
with these obligations.
Subject to the material uncertainties set out above, the Directors believe at the date of the signing of the financial report there are reasonable
grounds to believe that the Group will meet each of the anticipated outcomes a), b), c) and d) described above and therefore will meet its debts as
and when they become due and payable.
Should the Group not achieve anticipated asset realisation outcomes, related deleveraging and appropriate operating performance, or continue to
receive the ongoing support of its financiers, there is material uncertainty whether the Group will continue as a going concern and therefore whether
it will realise its assets and extinguish its liabilities in the normal course of business and at amounts stated in the financial report. The financial report
does not include any adjustments relating to the recoverability and classification of recorded asset amounts or to the amounts and classification of
liabilities that may be necessary should the Group not continue as a going concern.
66
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2012
Note 2. Summary of Significant Accounting Policies (continued)
(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) New and Revised Accounting Standards
A number of new amendments to standards and interpretations became operative for the financial year ended 30 September 2012 and have been
applied in preparing these consolidated financial statements. None of these have materially impacted the Group and its policies. The Group has not
elected to early adopt any new standard, interpretation or amendments that has been issued but is not yet effective.
(ii) Accounting Standards and Interpretations issued but not yet effective
Certain new accounting standards and interpretations have been published that are not mandatory for the financial year ended 30 September 2012
but are available for early adoption and have not been applied in preparing this report. None of these are expected to have a significant effect on the
Group and its policies, other than the following standards where the potential effect is yet to be determined:
• AASB 9 Financial Instruments and AASB 2009-11 Amendments to Australian Accounting Standards Arising from AASB 9. These standards address
the classification, measurement and derecognition of financial assets and financial liabilities.
• AASB 10 Consolidated Financial Statements introduces a new definition of control and addresses whether an entity should be included in the
consolidated financial statements of the parent company.
• AASB 12 Disclosure of Interests in Other Entities relates to disclosure requirements for all forms of interests in other entities, including subsidiaries,
joint arrangements, associates and unconsolidated structured entities.
• AASB 13 Fair Value Measurement and AASB 2011-8 Amendments to Australian Accounting Standards arising from AASB 13 introduce new
guidance on fair value measurement and disclosure requirements when fair value is permitted by accounting standards.
• The amendments to AASB 119 Employee Benefits and AASB 2011-10 Amendments to Australian Accounting Standards arising from AASB 119
introduces changes to the presentation of employee benefits.
The standards above become mandatory for the September 2014 financial year, with the exception of AASB 9, which becomes mandatory for the
September 2015 financial year.
(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 31) 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 11).
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.
67
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2012
Note 2. Summary of Significant Accounting Policies (continued)
(d) Basis of consolidation (continued)
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. Total comprehensive income within a
subsidiary is 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 or retained earnings,
as appropriate.
(e) Business combinations
Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration
transferred, measured at acquisition date fair value and the amount of any non-controlling interest in the acquiree. For each business combination,
the Group elects whether it 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 costs incurred are expensed and included in administrative expenses.
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 circumstances and 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. In instances where the contingent consideration does not fall within the scope of AASB 139, it is measured in accordance with
the appropriate AASB standard.
(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.
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.
(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 31), which have a functional currency other than Australian Dollars, are translated to the presentation
currency (see below for consolidated reporting).
68
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2012
Note 2. Summary of Significant Accounting Policies (continued)
(g) Foreign currency translation (continued)
(ii) Transactions and balances
Transactions in foreign currencies are initially recorded by the Group entities at their respective functional currency spot rates at the date the
transaction first qualifies for recognition. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange
ruling at the reporting date.
All differences arising on settlement or translation of monetary items are taken to the income statement with the exception of monetary items that are
designated as part of the hedge of the Group’s net investment of a foreign operation. These are recognised in other comprehensive income until the
net investment is disposed, at which time, the cumulative amount is reclassified to the income statement. Tax charges and credits attributable to
exchange differences on those monetary items are also recorded in other comprehensive income.
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. The gain or loss arising on the retranslation of non-monetary items is treated in line with the recognition of gain or loss on
change in fair value of the item (i.e., translation differences on items whose fair value gain or loss is recognised in other comprehensive income or
profit or loss is also recognised in other comprehensive income or profit or loss, respectively).
(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 banks and on hand and short-term deposits with a maturity of three
months or less. For the purposes of the consolidated statement of cash flows, cash and cash equivalents consist of cash and cash deposits 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) Inventory
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.
69
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2012
Note 2. Summary of Significant Accounting Policies (continued)
(k) Livestock
The Group holds biological assets in the form of livestock. 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) 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
financial assets when their fair value is positive and as financial 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 are taken
directly to the income statement, except for the effective portion of cash flow hedges, which is recognised in other comprehensive income.
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 highly probable forecasted transaction or the foreign currency risk in an unrecognised firm commitment (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.
At the inception of a hedge relationship, the Group formally designates and documents the hedge relationship to which the Group wishes to apply
hedge accounting and the risk management objective and strategy for undertaking the hedge. The documentation includes identification of the
hedging instrument, the hedged item or transaction, the nature of the risk being hedged and how the entity will assess the effectiveness of changes in
the hedging instrument’s fair value in offsetting the exposure to changes in the hedged item’s fair value or cash flows attributable to the hedged risk.
Such hedges are expected to be highly effective in achieving offsetting changes in fair value or cash flows and are assessed on an ongoing basis to
determine that they actually have been highly effective throughout the financial reporting periods for which they were designated.
Hedges that meet the strict criteria for hedge accounting are accounted for as follows:
Cash flow hedges
The effective portion of the gain or loss on the hedging instrument is recognised directly in other comprehensive income in the cash flow hedge
reserve, while any ineffective portion is recognised immediately in the income statement in other operating expenses.
Amounts recognised as other comprehensive income are transferred to the income statement when the hedged transaction affects profit or loss, such
as when the hedged financial income or financial expense is recognised or when a forecast sale occurs. When the hedged item is the cost of a
non-financial asset or non-financial liability, the amounts recognised as other comprehensive income are transferred to the initial carrying amount of
the non-financial asset or liability.
If the forecast transaction is no longer expected to occur, the cumulative gain or loss previously recognised in equity is transferred to the income
statement. If the hedging instrument expires or is sold, terminated or exercised without replacement or rollover, or if its designation as a hedge is
revoked, any cumulative gain or loss previously recognised in other comprehensive income remains in other comprehensive income until the forecast
transaction or firm commitment affects profit and loss.
(m) 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. Non current assets and disposal groups are classified as held for sale if their carrying amount will be recovered principally through a sale
transaction instead of use. This condition is regarded as met when the sale is highly probable and the asset or disposal group is available for
immediate sale in its present condition.
Property, plant and equipment and intangible assets once classified as held for sale are not depreciated or amortised.
An impairment loss is recognised for any initial or subsequent write-down of the asset (or disposal group). 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.
70
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2012
Note 2. Summary of Significant Accounting Policies (continued)
(m) Non current assets and disposal groups held for sale and discontinued operations (continued)
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.
(n) Investments and other financial assets
Investments and financial assets in the scope of AASB 139 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.
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.
(o) 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
neither amortised nor individually tested for impairment.
The income statement reflects the Group’s share of the results of operations of the associate. When there has been a change recognised directly in
the equity of the associate, the Group recognises its share of any changes and discloses this, when applicable, in the statement of changes in equity.
Unrealised gains and losses resulting from transactions between the Group and the associate are eliminated to the extent of the interest in the
associate. The Group’s share of profit of an associate is shown on the face of the income statement. This is the profit attributable to equity holders of
the associate and, therefore, is profit after tax and non-controlling interests in the subsidiaries of the associate.
After application of the equity method, the Group determines whether it is necessary to recognise any impairment loss with respect to an additional
impairment loss on its net investment in its associate. The Group determines at each reporting date whether there is any objective evidence that the
investment in the associate is impaired. If this is the case, the Group calculates the amount of impairment as the difference between the recoverable
amount of the associate and its carrying value and recognises the amount in the “share of profit of an associate” in the income statement.
71
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2012
Note 2. Summary of Significant Accounting Policies (continued)
(o) Investments in associates and joint ventures (continued)
Upon loss of significant influence over the associate, the Group measures and recognises any retaining investment at its fair value. Any difference
between the carrying amount of the associate upon loss of significant influence and the fair value of the retained investment and proceeds from
disposal is recognised in profit and loss.
The reporting dates of the equity accounted investments are disclosed in note 11 and the equity accounted investment accounting policies conform
to those used by the Group for like transactions and events on similar circumstances.
(p) 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 part of the property, plant and equipment and borrowing costs for long-term construction projects if the recognition criteria are
met. When significant parts of property, plant and equipment are required to be replaced at intervals, the Group recognises such parts as individual
assets with specific useful lives and depreciates them accordingly. Likewise, when a 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.
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.
Gains and losses on disposal are determined by comparing the proceeds with the carrying amount. These are included in the statement of
comprehensive income.
(q) Investment properties
Investment properties are initially measured at cost, including transaction costs. 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.
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.
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.
(r) 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 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.
72
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2012
Note 2. Summary of Significant Accounting Policies (continued)
(r) Leases (continued)
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.
(s) 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.
At each reporting date, the Group conducts an 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.
(t) Goodwill and intangibles
Goodwill
Goodwill acquired in a business combination is initially measured at cost, 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.
The Group performs its impairment testing every reporting date using discounted cash flows under the fair value less costs to sell methodology and
the value in use methodology, and independent valuations. Further details on methodology and assumptions used are outlined in note 14.
When the recoverable amount of the cash-generating unit (group of cash-generating units) is less than the carrying amount, an impairment loss is
recognised. When goodwill forms part of a cash-generating unit (group of cash-generating units) and an operation within that unit is 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(s) 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 assets.
73
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2012
Note 2. Summary of Significant Accounting Policies (continued)
(t) Goodwill and intangibles (continued)
Intangible assets with indefinite useful lives are tested for impairment at each reporting date 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.
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 at each reporting date.
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.
(u) 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 27 and 36 have been assessed using a probability weighted discounted cash flow
approach. In order to estimate the fair value under this approach the following assumptions are made:
• Probability of Default (PD): This represents the likelihood of the guaranteed party defaulting in a one year period and is assessed based on
historical default rates of companies rated by Standard & Poors.
• Loss Given Default (LGD): This represents the proportion of the exposure that is not expected to be recovered in the event of a default by the
guaranteed party and is based on the result of studies into the recovery rate for unsecured debt obligations.
• Exposure at Default (EAD): This represents the maximum loss that Elders Limited is exposed to if the guaranteed party were to default. The model
assumes the guaranteed loan/facility/contract is at maximum possible exposure at the time of the default and hence, equates to the values
disclosed in notes 27 and 36.
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.
(v) 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.
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.
(w) 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
74
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2012
Note 2. Summary of Significant Accounting Policies (continued)
(w) Provisions and employee benefits (continued)
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 at each reporting date.
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.
(x) 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
75
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2012
Note 2. Summary of Significant Accounting Policies (continued)
(x) Share based payments (continued)
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 21).
(y) 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.
(z) Contributed equity
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are included in equity as a
deduction, net of tax, from the proceeds.
Reserved shares
The Group’s own equity instruments, which are reacquired for later use in employee share-based payment arrangements (reserved shares), are held
as a separate component of equity (reserved shares reserve – refer note 21). No gain or loss is recognised in profit or loss on the purchase, sale,
issue or cancellation of the Group’s own equity instruments.
(aa) Earnings per share
Basic earnings per share amounts are calculated by dividing net profit or loss for the year attributable to ordinary equity holders of the parent by the
weighted average number of ordinary shares outstanding during the period.
Diluted earnings per share are calculated by dividing the net profit attributable to ordinary equity holders of the parent by the weighted average of
ordinary shares outstanding during the period plus the weighted average number of ordinary shares that would be issued on conversion of all dilutive
potential ordinary shares into ordinary shares.
(ab) 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.
76
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2012
Note 2. Summary of Significant Accounting Policies (continued)
(ab) Revenue recognition (continued)
(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.
(ac) Government grants
Government grants are recognised when there is reasonable assurance that the grant will be received and all attached conditions will be complied
with. When a grant relates to an expense item, it is recognised as income over the period necessary to match the grant on a systematic basis to the
costs that it is intended to compensate. When the grant relates to an asset, it is recognised as deferred income and released to income in equal
amounts over the expected useful life of the related asset.
(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.
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.
77
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2012
Note 3. Significant Accounting Judgements, Estimates and Assumptions
The preparation of the Group’s consolidated 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. Deferred tax assets are recognised for all unused tax losses to the extent that it is probable that
taxable profit will be available against which the losses can be utilised. 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. The realisation of the deferred tax assets on tax losses has been made at balance date having regard to the continuation of Elders Rural
Services business as a going concern. Following the announcement of the divestment of the Elders Rural Services business after year end, there is
heightened risk as to the realisation of this asset. Realisation is now subject to the nature of transaction proposed for the business.
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. Assets have been tested for impairment in accordance with the accounting policies described in note 14, including the determination of
recoverable amounts of assets using the higher of value in use and fair value less cost to sell. Following the announced divestment of the three core
divisions of Elders Limited, there is material uncertainty the ultimate realisable values will recover the amounts reflected in the financial statements.
No adjustments have been made to the carrying values of assets or liabilities to reflect the risks related to the divestment process.
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. As at balance date, the board
have determined the process relating to the proposed divestment of Automotive and Rural Services business is not sufficiently advanced to require
classification as “held for sale” at balance date.
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 14. Following the announced divestment of the three core
divisions of Elders Limited, there is material uncertainty the ultimate realisable values will recover the amounts reflected in the financial statements.
No adjustments have been made to the carrying values of assets or liabilities to reflect the risks related to the divestment process.
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 33.
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 are
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 18.
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.
78
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2012
Note 4. Revenue and Expenses
Sales revenue:
Sale of goods
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
Restructuring, redundancy and other write offs
Change in fair value of financial and other assets
Discontinued operations:
Profit/(loss) on sale of non current assets:
Property, plant and equipment
Intangibles
Discontinued operations:
Finance costs:
Interest expense - other entities
Finance lease charges
Other finance costs
Discontinued operations:
Note
2012
$000
2011
$000
1,938,260
2,022,859
190,540
209,569
29,147
30,688
2,157,947
2,263,116
38
14,611
95,563
2,172,558
2,358,679
38
38
38
38
38
11,344
41
22,648
34,033
1,127
35,160
1,500
30,267
31,767
286
32,053
403
5
20,504
20,912
16,191
37, 103
1,747
20,045
21,792
292
22,084
263,170
263,829
9,446
36,397
7, 960
36,999
131,544
130,088
36,025
21,794
22,549
1,929
522,854
57,224
580,078
179
-
179
26,956
27,135
54,727
7,252
18,253
6,675
525,783
366,080
891,863
(403)
(3,533)
(3,936)
6,472
2,536
31,291
42,388
36
7,634
38,961
1,581
40,542
45
34,955
77, 388
333
77, 721
79
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2012
Note 4. Revenue and Expenses (continued)
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)
2012
$000
2011
$000
14,051
15,153
248
3,868
2,850
21,017
-
21,017
246,341
18,484
4,325
2,139
271,289
8,005
279,294
97,673
(9,627)
173
4,806
3,570
23,702
3,735
27, 437
228,926
17, 909
3,273
1,845
251,953
11,098
263,051
85,953
(6,675)
Provision for doubtful debts and bad debts written off
3,343
12,981
80
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2012
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
Income tax expense/(benefit) reported in equity
2012
$000
2011
$000
10,414
(60,321)
17,057
(32,850)
(10,612)
(16,952)
(25,892)
(53,456)
887
1,947
(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% (2011: 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
Capitalised research and development
Losses available to offset against future taxable income
(Recognition)/derecognition of prior year tax losses
Other
(53,982)
(36,241)
(90,223)
(27,067)
(61,001)
(1,692)
(5,187)
1,404
19,728
(11)
4,537
17,914
18,000
525
(105,780)
(338,844)
(444,624)
(133,387)
(16,952)
(1,625)
2,171
1,719
72,624
(1,979)
-
34,617
(10,000)
(644)
Income tax expense/(benefit) as reported in the statement of comprehensive income
(32,850)
(53,456)
Aggregate Income tax expense/(benefit) is attributable to:
- Continuing Operations
- Discontinued Operations
Current tax payable/(receivable)
(32,850)
-
(32,850)
1,566
(12,074)
(41,382)
(53,456)
40,834
81
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2012
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
2012
$000
(1,256)
-
(829)
(444)
2011
$000
-
-
(422)
-
(14,042)
(17, 670)
(580)
(1,463)
(8,597)
(5,658)
(1,853)
-
(2,763)
(6,283)
(4,383)
(4,037)
Gross deferred income tax liabilities
(34,722)
(35,558)
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
52,000
15,652
12,088
-
1,835
4,995
2,512
-
493
70,000
12,496
11,432
49
3,219
8,652
6,371
-
7, 264
89,575
119,483
2012
$000
1,256
-
407
444
(3,628)
580
(1,300)
2,314
1,275
(2,184)
(836)
18,000
(3,156)
(656)
49
1,384
3,657
3,859
-
6,771
29,908
29,072
2011
$000
(8,826)
(3,113)
28
(1,084)
(19,111)
(4,621)
2,763
678
1,817
2,146
(29,323)
(9,970)
(679)
6,593
912
2,496
(1,887)
5,309
871
(4,211)
(566)
(29,889)
As previously disclosed the Group has received amended income tax assessments from the Australian Taxation Office in connection with an alleged
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, while also paying 50% of the tax, penalties and interest claimed by the ATO on a without prejudice basis.
On 31 August 2010 the Federal Court upheld the Group’s appeal against the amended assessments and on 19 March 2012 the Full Federal Court
dismissed the appeal of the ATO against the first instance decision of the Federal Court. The effect of the Full Federal Court judgement is that the
objections of Elders against the amended taxation assessments have been upheld.
As a result of the Full Federal Court decision, the Group received cash of $46.8 million, comprising of a refund of pre-paid tax, penalties and interest
of $27.6 million, and interest on that pre-payment of $19.2 million. The Group has recognised a profit of $71.5 million after tax in relation to this
matter, through the reversal of provisions and the reimbursements. These amounts do not include amounts arising through the awarding of costs.
Tax losses
The Group has tax losses for which no deferred tax assets is recognised in the statement of financial position of $145.1 million (2011: $94.1 million)
which are available indefinitely for offset against future taxable profits subject to continuing to meet relevant statutory tests. The realisation of the
deferred tax assets on tax losses has been made at balance date having regard to the continuation of Elders Rural Services business as a going
concern. As detailed in note 2(a) and note 40, the financial report does not include any adjustments relating to the recoverability of recorded deferred
tax asset amounts following the announced sale of the three divisions of Elders Limited. The divestments of these assets are at an early stage and
there is uncertainty as to the form and nature of any transaction relating to the divestment. Whether or not stated book values of the deferred tax
asset on losses will be realised through the sales process is uncertain.
Unrecognised temporary differences
At 30 September 2012, 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.
82
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2012
Note 5. Income Tax (continued)
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.
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
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
2012
$000
2011
$000
456,301
489,814
(12,710)
(13,774)
443,591
476,040
11,353
-
11,353
1,802
(110)
1,692
43,179
(1,800)
41,379
23,478
(7, 366)
16,112
4,337
(182)
4,155
46,318
(1,800)
44,518
498,015
540,825
7,109
11,413
18,522
13,774
(4,479)
3,415
12,710
7, 244
9,686
16,930
13,008
(5,097)
5,863
13,774
20,143
(17, 913)
7, 118
9,348
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
9,348
(7,366)
(72)
1,910
(i) Included in trade debtors is $92.7 million (2011: $56.2 million) which is subject to credit insurance with various terms and conditions.
Trade receivables are non interest bearing and are generally on 30 to 90 day terms with the exception of livestock receivables which are on 10 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 $3.4 million (2011: $5.9 million) has been recognised by the Group. No individual amount within the impairment allowance is material.
83
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2012
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
2012
$000
2011
$000
393,422
376,759
20,829
6,107
23,233
50,169
1,348
56
11,306
12,710
64,954
9,891
24,436
99,281
61
34
13,679
13,774
456,301
489,814
49,258
54,541
-
-
5,166
5,166
-
1,910
1,910
285
(245)
10,204
10,244
1,800
7, 548
9,348
Total other current receivables
56,334
74,133
Related party receivables
For terms and conditions of related party receivables refer to notes 32 and 34.
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 36.
Foreign exchange and interest rate risk
Details regarding the foreign exchange and interest rate risk exposure are disclosed in note 36.
84
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2012
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
2012
$000
2011
$000
53,198
48,654
307,214
316,739
(298,296)
(312,404)
5,266
67,382
209
53,198
At balance date 62,706 head of beef cattle (2011: 57, 286) 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.
Note 8. Inventory
Current
Raw materials and bulk stores – at net realisable value
Work in progress – at cost
Finished goods – at net realisable value
38,982
240
127,753
166,975
34,736
141
153,562
188,439
Inventories recognised as an expense for the year ended 30 September 2012 totalled $1,297.7 million (2011: $1,313.0 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 $2.7 million
(2011: $1.4 million) for the Group.
85
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2012
Note 9. Derivative Financial Instruments
Current
Asset
Liability
(a) Instruments used by the group
2012
$000
1,593
2,010
2011
$000
664
6,916
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 36.
Note 10. Other Financial Assets
Non current
Unlisted investments, at cost (i)
1,330
17, 852
(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 $16.5 million (2011: $4.1 million) relating to these investments have been recorded in the Statement of Comprehensive Income.
Note 11. Investments in Associates and Joint Ventures
Name of Investment
Balance
date
Ownership
interest
Consolidated entity
investment
Contribution to net
profit/(loss)
Elders Toepfer Grain Pty Ltd
AWH Pty Ltd
Kilcoy Pastoral Company Limited
Elders Financial Planning Pty Ltd
Elders Insurance (Underwriting Agency) Pty Limited
Futuris Automotive Interiors (Anhui) Company Ltd (i)
Agricultural Land Trust
Other investments
Share of profit of associates and joint ventures is attributable to:
Continuing operations
Discontinued operations
2012
%
2011
%
-
50
20
49
25
70
-
50
20
49
25
70
2012
$000
-
2011
$000
-
49,731
46,602
5,685
5,343
3,693
3,935
5,566
3,441
-
10,312
30 Jun
30 Jun
30 Sep
31 Dec
31 Dec
2012
$000
-
5,341
1,749
(224)
6,504
-
30 Jun
49.7
49.7
12,185
17, 053
(5,263)
3,902
7, 179
80,539
94,088
(335)
7,772
8,266
(494)
7,772
2011
$000
(8,921)
4,055
(211)
484
6,257
(351)
1,233
618
3,164
12,046
(8,882)
3,164
(i) Previously Futuris Automotive Interiors (Anhui) Company Ltd was considered to be a jointly controlled entity due to the control provided in the
shareholders’ agreement to the minority parties. As at 1 October 2011, it was determined that the relationship between the Group and the minority
shareholders had changed to an extent that it was appropriate to account for the investment as a controlled entity rather than as a jointly controlled
entity. Refer to note 37 for further details.
86
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2012
Note 11. Investments in Associates and Joint Ventures (continued)
All associates and joint ventures are Australian resident companies.
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 $nil (2011: $1.1 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
Share of net results of associates
Share of associates’ and joint ventures’ commitments and contingent liabilities
Capital expenditure commitments (contracted)
Operating lease commitments
(b) Fair value of investment in listed entities
2012
$000
2011
$000
78,148
36,921
115,069
58,764
8,491
67,255
47,814
53,444
109,028
162,472
40,608
54,074
94,682
67,790
166,496
170,398
12,467
(4,695)
7,772
7,772
1,411
57,686
8,114
(4,950)
3,164
3,164
143
57,767
Listed entities
Carrying amount
Fair value*
2012
$000
12,185
2011
$000
17, 053
2012
$000
6,708
2011
$000
8,199
* Fair value has been determined based on published price quotations. The Group’s listed associates and joint ventures include Agricultural Land Trust.
87
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2012
Note 12. Property, Plant and Equipment
Reconciliation of carrying amounts at beginning and end of period:
Non current
2012
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
6,137
12,966
8,745
50,932
Additions
Additions through entities acquired
Disposals
Depreciation expense
Impairment
Exchange fluctuations
Transfers from assets under construction
Other
-
-
(3)
-
572
(37)
-
-
852
728
-
(23)
196
1,035
1,926
2,764
(173)
-
3,840
(26)
(280)
(834)
(1,794)
(11,423)
(248)
(30)
(238)
71
-
(157)
(2,397)
-
(546)
208
7,978
2,917
197
-
-
286
(183)
Carrying amount at end of period
6,669
14,722
10,928
50,227
1,412
Cost
6,669
29,333
27,281
223,714
2,273
Accumulated depreciation and impairment
-
(14,611)
(16,353) (173,487)
(861)
6,669
14,722
10,928
50,227
1,412
2011
Carrying amount at beginning of period
10,616
14,237
15,748
77, 878
Additions
268
459
129
(2,995)
Additions through entities acquired
-
-
-
3,699
832
415
-
Disposals
Depreciation expense
Impairment
Transfer to held for sale
Exchange fluctuations
Transfers from assets under construction
Other
(1,597)
(932)
(798)
(421)
(48)
(3,464)
-
(928)
(2,070)
(14,634)
(173)
(1,256)
(2,254)
(1,040)
144
-
-
-
-
145
-
(15)
(3,651)
(589)
(732)
(19,198)
17
87
15
(249)
7, 171
270
-
-
-
-
(174)
852
Carrying amount at end of period
6,137
12,966
8,745
50,932
-
-
-
-
-
-
-
-
-
-
-
-
-
11,705
91,337
15,726
19,611
129
6,733
-
-
-
(505)
(14,299)
(2,012)
137
(684)
(8,543)
-
(7,428)
(4,497)
11,726
95,684
11,726
300,996
-
(205,312)
11,726
95,684
3,287
6,043
128,641
1,433
13,028
12,737
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
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
Cost
6,709
23,337
24,464
214,033
1,375
Accumulated depreciation and impairment
(572)
(10,371)
(15,719)
(163,101)
6,137
12,966
8,745
50,932
(523)
852
Property, plant and equipment pledged as security for liabilities
Refer to note 17 for interest bearing loans and borrowings secured by property, plant and equipment.
88
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2012
Note 13. Investment Properties
Non current
Investment properties at fair value
Carrying amount at beginning of period
Acquisition of investment properties
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
Foreign exchange variation
Carrying amount at end of period
2012
$000
2011
$000
-
2,975
2,975
265,022
-
-
-
(2,730)
15
7, 790
(114,261)
(21,833)
-
(133,707)
(245)
-
(51)
2,975
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 38).
Investment property pledged as security for liabilities
Refer to note 17 for interest bearing loans and borrowings secured by investment property.
(a) Amounts recognised in profit and loss for investment properties
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.
89
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2012
Note 14. Intangibles
Reconciliation of carrying amounts at beginning and end of period:
Non current
2012
IT
development
and software
Patents,
trademarks
and licences
Goodwill
Brand
Names
Development
costs, rent
rolls and other
$000
$000
$000
$000
$000
Total
$000
Carrying amount at beginning of period
-
2,739
165,228
60,400
21,865
250,232
Additions
Acquisition of controlled entity
Transfers
Amortisation
Impairment
Exchange fluctuations
18,070
-
7,414
-
-
-
744
938
163
(248)
(1,090)
(36)
-
10,814
-
-
(4,318)
183
-
-
-
-
-
-
100
-
(163)
(2,602)
(2,950)
6
18,914
11,752
7,414
(2,850)
(8,358)
153
Carrying amount at end of period
25,484
3,210
171,907
60,400
16,256
277,257
Cost
25,484
6,425
185,925
60,400
26,266
304,500
Accumulated amortisation and impairment
-
(3,215)
(14,018)
-
(10,010)
(27,243)
25,484
3,210
171,907
60,400
16,256
277,257
2011
Carrying amount at beginning of period
Additions
Acquisition of controlled entity
Disposal of controlled entity
Disposals
Amortisation
Impairment
Exchange fluctuations
Carrying amount at end of period
Cost
Accumulated amortisation and impairment
-
-
-
-
-
-
-
-
-
-
-
-
505
173,013
60,400
25,129
259,047
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
2,739
165,228
60,400
21,865
250,232
4,576
174,928
60,400
33,622
273,526
(1,837)
(9,700)
-
(11,757)
(23,294)
2,739
165,228
60,400
21,865
250,232
90
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2012
Note 14. Intangibles (continued)
A description of each intangible asset is included below. Refer note 2(t) for the accounting policy in relation to goodwill and other intangible assets.
(a) Description of the Group’s intangible assets and goodwill
(i) IT Development and software
Costs incurred in developing products or systems and costs incurred in acquiring software that will contribute to future period financial benefits
through revenue generation and/or cost reduction are capitalised to IT development and software. Costs capitalised include external direct costs of
materials and service and direct payroll and payroll related cost of employees time spent on the project. 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).
The amount of borrowing costs capitalised during the year ended 30 September 2012 was $1.2 million (2011: $nil). The rate used to determine the
amount of borrowing costs eligible for capitalisation was 8%, which was the effective interest rate of the specific borrowing.
(ii) 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).
(iii) 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).
(iv) 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.
(v) 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 carrying amount of goodwill and brand names attributed to each of these cash generating units is as follows:
Rural Services Network
MCK Holdings
Other CGU’s
Goodwill
Brand Names
2012
$000
65,681
87,499
18,727
2011
$000
65,681
87, 499
12,048
2012
$000
2011
$000
60,400
60,400
-
-
-
-
171,907
165,228
60,400
60,400
(i) Rural Services Network CGU
The recoverable amount of Goodwill and Brand Names for Rural Services Network CGU has been determined based on a value in use calculation
using cash flow projections approved by management that covers a period of 5 years. Future cash flows are based on budgets and forecasts taking
into account current market conditions and known future business events that will impact cash flows. The discount rate applied to the cash flow
projections is 13.9% pre-tax (2011: 14.1% pre-tax) which has been determined based on a weighted average cost of capital calculation.
91
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2012
Note 14. Intangibles (continued)
(b) Impairment tests for goodwill and intangibles with indefinite useful lives (continued)
The calculation of value in use for the Rural Services Network CGU was based on the following key assumptions:
Gross margins
• Gross margins are expected to increase as a result of the return to normal seasonal conditions and strong international grain prices supporting crop
planting and demand for farm inputs, improvement in livestock prices, stabilisation of commodity prices and continuation of the gradual recovery
in property markets.
• Recent significant investment in frontline staff is expected to continue to deliver increased returns in banking, livestock and agronomy.
Selling, general and administrative expenses
• Substantial support centre cost savings as a result of redundancies which occurred in 2012, and targeted material reductions in discretionary
spending. 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 2013 financial year.
• Growth for years 2 and 3 are based on a three year forecast model.
• 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 (2011: $nil).
(ii) MCK Holdings
For the purposes of impairment testing all goodwill and assets of MCK Holdings (“Plexicor”) have been allocated to the cash generating units in the
automotive segment expected to benefit from the acquisition.
The recoverable amount of the Plexicor 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 16.66% pre-tax (2011: 16.84%
pre-tax) which has been determined based on a weighted average cost of capital calculation.
The calculation of value in use for the Plexicor CGU was based on the following key assumptions:
Gross margins
• Increased volumes and subsequent earnings from continued maturation of GM and Ford Thailand operations.
• Increased earnings from supply contracts to the rail industry.
• Increased earnings from automotive diversification projects in Australia and abroad.
Selling, general and administrative expenses
• Other than volume related increases, CPI growth in costs has been assumed.
Growth rate estimates
• Year 1 cash flows are based on the Board approved budget for the 2013 financial year.
• Growth for years 2 through to year 5 are based on a five year forecast model which includes a conservative overlay for specific new business
opportunities for which there is a high level confidence of securing.
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 Plexicor CGU (2011: $nil).
(c) Sensitivity to change in assumptions
Assets have been tested for impairment in accordance with the accounting policies described, including the determination of recoverable amounts
of assets using the higher of value in use and fair value less cost to sell. As detailed in note 40, the financial report does not include any adjustments
relating to the recoverability and classification of recorded asset amounts, or to the amounts and classification of liabilities that may be necessary
relating to the proposed divestment of assets, or to any of the judgements, estimates and assumptions contained in this note.
(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 15% across all years of the discounted cash flow model could result in an impairment; and
• an increase in the discount rate by more than 2.5%, could result in an impairment.
(ii) MCK Holdings CGU
With regard to the assessment of the value in use of the MCK Holdings 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 25% across all years of the discounted cash flow model could result in an impairment; and
• an increase in the discount rate by more than 5%, could result in an impairment.
92
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2012
Note 15. 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
Note 16. 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 36 and 27.
Related party payables
For terms and conditions of related party payables refer to note 34.
Interest rate, foreign risk and liquidity risk
Information regarding interest rate, foreign exchange and liquidity risk exposure is set out in note 36.
2012
$000
2011
$000
667
17,037
17,704
31,883
22,854
1,297
15,862
(4,224)
(3,868)
(38)
31,883
559
23,067
23,626
22,854
18,919
171
8,756
-
(4,806)
(186)
22,854
346,422
359,839
35,883
4,301
-
69,213
4,749
115
386,606
433,916
1,413
1,413
2,583
2,583
93
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2012
Note 17. Interest Bearing Loans and Borrowings
Current
Secured loans
Trade receivables funding
Lease liabilities
Non current
Secured loans
Unsecured loans
Lease liabilities
Total current and non current
(a) Financing arrangements
The Group has access to the following financing facilities with a number of financial institutions:
2012
Secured Loans
- Facility A non revolving term facility
- Facility B working capital facility
- Trade receivables funding
- Other
Unsecured loans and lease liabilities
Total
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
2012
$000
2011
$000
103,354
199,196
437
56,218
139,466
357
302,987
196,041
80,983
228,912
1,555
304
82,842
385,829
1,828
283
231,023
427, 064
Accessible
$000
Drawn
$000
Unused
$000
88,111
93,158
88,111
93,158
227,600
199,196
17,992
3,068
426,861
383,533
2,296
2,296
-
-
28,404
14,924
43,328
-
429,157
385,829
43,328
-
-
180,893
180,893
93,158
93,158
37, 030
-
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
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 2012,
$35.5 million had been drawn.
The parent entity and certain controlled entities have potential financial liabilities which may arise from certain contingencies disclosed in note 27.
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 Directors 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.
94
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2012
Note 17. Interest Bearing Loans and Borrowings (continued)
(b) Assets pledged as security
Secured loans 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:
Current assets
Floating charge
Cash and cash equivalents
Trade and other receivables
Livestock
Inventory
Other
Non current assets
Floating charge
Receivables
Other financial assets
Investments in associates and joint ventures
Property, plant and equipment
Intangibles
Other
2012
$000
2011
$000
38,659
50,773
1,043,432
678,511
54,679
144,224
67,045
49,015
167, 350
104,348
1,348,039
1,049,997
17,962
418,055
79,586
94,580
143,157
187,336
940,676
108,649
496,680
55,484
77, 449
149,675
100,751
988,688
Total current and non current
2,288,715
2,038,685
95
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2012
Note 18. 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
2012
As at beginning of period
Arising during year
Utilised
Unused amounts reversed
Discount rate adjustment
Provisions arising from entities acquired
Disposals of controlled entities
Other
Disclosed as:
Current
Non current
Total
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
Nature and timing of provisions
1,739
10,486
15,566
61,923
1,425
138,422
47,283
35,919
734
25,228
3,311
24,937
(31,862)
(608)
(15,133)
(4,975)
(29,668)
(174)
1,747
-
-
(75)
-
-
260
-
52
(651)
(2,800)
-
-
-
684
-
-
(2,228)
1,314
(279)
1,480
-
(117)
936
520
(493)
(582)
-
-
-
75
90,649
(82,739)
(4,486)
3,911
260
(117)
74
52,838
2,177
17,702
13,100
59,212
945
145,974
49,142
3,696
52,838
48,659
25,201
(26,479)
(1,287)
1,000
151
38
1,036
1,141
2,177
1,717
1,096
(709)
(365)
-
-
-
17,702
-
9,620
3,480
42,620
16,592
945
121,065
-
24,909
17,702
13,100
59,212
945
145,974
8,641
7, 435
(5,499)
(427)
-
-
336
14,876
18,999
3,488
49,156
3,748
1,101
96,640
87, 477
(1,188)
(1,838)
228
-
-
(5,317)
(1,014)
(1,896)
(41,088)
(1,194)
(6,125)
-
-
99
-
-
(334)
1,228
151
139
47, 283
1,739
10,486
15,566
61,923
1,425
138,422
42,377
4,906
47, 283
580
10,486
10,144
50,321
1,425
115,333
1,159
1,739
-
5,422
11,602
-
23,089
10,486
15,566
61,923
1,425
138,422
(i) Employee entitlements
Refer to note 2(w) 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.
96
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2012
Note 18. 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.
• 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.
(v) Onerous leases
The onerous lease provision relates to amounts recognised as part of the Forestry divestment process.
(vi) Other
The remaining provision balance in ‘other’ includes legal claims of $0.3 million (2011: $0.6 million).
Note 19. Contributed Equity
Issued and paid up capital
2012
$000
2011
$000
448,598,480 ordinary shares (September 2011: 448,598,480)
1,270,323
1,271,493
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
The Group considers both capital and net debt as relevant components of funding, hence, part of its capital management. When managing capital
and net debt, 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.
Elders financing package (refer note 17) 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. Refer to note 23 for dividend disclosure.
Note 20. 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.
Elders financing package (refer note 17) does not contain any express restrictions on the payment of distributions on the hybrid securities.
No distributions were declared or paid during the year.
The Hybrids may, on the occurrence of certain events, be converted or resold by the Company at its election or pursuant to a request of holders.
The terms of such conversion or resale can be found in the Futuris Hybrids Prospectus dated 28 February 2006, which is available on the
Company’s website.
Hybrid holders rank after all creditors but before ordinary shareholders on a winding up to the face value of the Hybrids plus unpaid Hybrid
distributions for the prior 12 months.
97
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2012
Note 21. 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
2012
Carrying amount at beginning of period
(15,092)
(3,081)
(12,256)
(169)
Foreign currency translation
Non-controlling interest share of
movement
Transfer to statement of comprehensive
income
Net gains/losses in cash flow hedges
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
-
-
-
-
-
-
(1,077)
-
-
-
-
-
-
-
-
-
-
2,139
(1,978)
3,317
4,398
151
-
-
-
-
-
-
-
-
-
-
(477)
(1,278)
283
-
-
-
-
-
Carrying amount at end of period
(16,169)
397
(7,707)
(1,641)
2011
-
-
-
-
-
-
-
-
-
-
-
-
(2,994)
(33,592)
-
-
-
-
-
36
-
-
4,085
(3,317)
4,398
151
(477)
(1,278)
283
36
(1,077)
2,139
2,107
-
(2,190)
(27,310)
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)
Nature and purpose of reserves
-
-
-
-
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)
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.
98
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2012
Note 21. Reserves (continued)
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 22. Retained Earnings
Retained earnings at the beginning of the financial year
Net profit/(loss) attributable to owners of the parent
Transfer from employee equity benefits reserve
Transfer from reserved shares reserve
Transfer from share of reserve for losses in associate
Retained earnings at the end of the financial year
Note 23. Dividends
(a) Dividends proposed
No final dividend will be paid (2011: Nil)
(b) Dividends paid during the year
Current year interim
- No interim dividend will be paid (2011: Nil)
Previous year final
- No final dividend paid (2011: Nil)
Subsidiary equity dividends on ordinary shares:
Dividends paid to external parties during the year
2012
$000
(781,322)
(60,600)
1,978
(4,085)
-
2011
$000
(380,577)
(395,350)
1,460
(14,257)
7, 402
(844,029)
(781,322)
-
-
-
-
-
-
2,796
2,196
Elders financing package (refer note 17) 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.
(c) Franking credit balance
Franking credits available to the parent for subsequent financial years based on tax rate of 30% (2011: 30%)
9,410
18,990
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 24. Non-controlling Interest
Non-controlling interests comprise interests in the following items:
Contributed equity
Retained earnings
7,009
638
7,647
1,688
1,265
2,953
99
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2012
Note 25. 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
Cash includes $3.9 million (2011: $3.1 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.
2012
$000
2011
$000
(57,373)
(391,168)
21,017
(7,772)
9,028
(6,192)
(5,266)
75,663
3,343
37,492
52,582
2,659
(16,506)
(10,629)
2,139
29,874
208
(39,268)
3,955
94,954
39,480
20,181
(152,087)
2,528
27, 437
(3,164)
7, 427
(340)
(14,100)
333,186
12,981
24,914
57, 666
1,397
(2,536)
-
1,845
(521)
(29,323)
(10,724)
(4,047)
10,930
(85,479)
(14,619)
65,408
(23,760)
91,969
81,614
100
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2012
Note 26. 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 $1.4 million
(2011: $0.9 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 leases 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 17)
- non current (note 17)
Operating leases commitments:
- Within one year
- After one year but not later than five years
- After more than five years
Total minimum lease payments
2012
$000
2011
$000
495
345
840
(99)
741
437
304
741
397
324
721
(81)
640
357
283
640
81,524
193,974
92,634
368,132
80,013
175,919
127, 845
383,777
Operating leases commitments – Group as a lessee
The Group leases the majority of its branch networks and capital city properties under operating leases. The lease commitments comprise base
amounts adjusted where necessary for escalation clauses primarily based on inflation rates. Leases generally provide the Group with a right of
renewal at the end of the lease term. The extent of lease commitments is a factor that is considered in the calculation of certain borrowing covenants.
Property, plant and equipment commitments
Capital expenditure contracted for but not otherwise provided for in these accounts:
- Within one year
- After one year but not later than five years
Total property, plant and equipment commitments
11,213
7,230
18,443
24,454
34,800
59,254
101
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2012
Note 27. 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
2012
$000
525
35,520
36,045
2011
$000
1,625
19,241
20,866
Unquantifiable contingent liabilities
• The Group has contingent obligations in respect of real property let or sub-let by entities within the Group.
• 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 certain 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.
• A member of the Group is party to a put option, exercisable from August 2013, in connection with a third party’s holding in B&W Rural Pty Ltd,
an incorporated joint venture in which the Group is the 75% shareholder. If exercised, the Group will own all the issued capital in B&W Rural Pty Ltd.
It is not known whether the third party will exercise its rights pursuant to that put option, nor is it presently ascertainable what the consideration
for the option shares might be.
• Members of the Group have, from time to time and in the ordinary course, provided parent company guarantees in respect of certain contractual
obligations of their subsidiaries.
• 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 or 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.
Other guarantees
As disclosed in note 31, 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.
Note 28. 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.
• Forestry includes the Group’s interests in forestry plantations and forestry related investments.
• 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.
102
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2012
Note 28. Segment Information (continued)
2012
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
Depreciation and amortisation
Segment result
Corporate net interest expense
Profit from ordinary activities before tax
Segment result
Less discontinued operations results
Rural
Services
$000
Forestry
$000
Automotive
Components
$000
Investment &
Other
$000
Total
$000
1,813,205
14,611
344,742
-
2,172,558
13,338
13,603
(114)
10,038
1,127
(5,263)
27,249
286
19,565
1,130
(568)
-
188
-
-
21,541
35,160
7,772
27,135
32,053
1,850,070
38,010
363,927
22,671
2,274,678
25,095
(6,439)
18,656
(74,014)
-
18,915
(14,571)
(30,713)
(7)
(74,014)
4,344
(30,720)
18,656
(2,220)
(74,014)
(32,726)
4,344
(30,720)
-
-
(60,717)
(21,017)
(81,734)
(8,489)
(90,223)
(81,734)
(34,946)
Continuing profit/(loss) before net borrowing costs and
tax expense
Corporate net interest expense
Continuing profit/(loss) before tax expense
20,876
(41,288)
4,344
(30,720)
(46,788)
(7,194)
(53,982)
Segment assets
692,071
77,821
327,736
230,730
1,328,358
Unallocated assets (including tax assets)
Total assets
Segment liabilities
Unallocated liabilities (including tax liabilities)
Total liabilities
Net assets
Carrying value of equity investments
Acquisition of non current assets
Non cash income/(expense) other than depreciation
and amortisation
Profit/(loss) on sale of non current assets and
controlled entities
-
181,544
230,730
1,509,902
-
692,071
345,481
-
345,481
346,590
65,542
23,099
-
77,821
81,130
-
81,130
(3,309)
-
327,736
101,394
-
101,394
226,342
7,998
-
7,998
222,732
-
-
438
14,559
30,469
-
536,003
422,117
958,120
551,782
80,539
53,568
(14,777)
(86,309)
(29,154)
(24,261)
(154,501)
(114)
27,249
-
-
27,135
103
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2012
Note 28. Segment Information (continued)
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
Depreciation and amortisation
Segment result
Corporate net interest expense
Profit from ordinary activities before tax
Rural
Services
$000
Forestry
$000
Automotive
Components
$000
Investment &
Other
$000
Total
$000
1,986,121
57, 384
315,174
-
2,358,679
9,006
2,382
9,782
10,530
9,608
1,233
(7, 160)
285
17, 582
(451)
9
180
2,017, 821
61,350
332,494
907
-
(95)
11,089
11,901
37, 103
3,164
2,536
22,084
2,423,566
12,619
(388,067)
(8,378)
4,241
(2,479)
(390,546)
31,823
(16,566)
15,257
(17, 925)
(361,550)
(14)
(27, 437)
(17, 939)
(388,987)
(55,637)
(444,624)
Segment result
Less discontinued operations results
4,241
(1,751)
(390,546)
(337, 052)
15,257
(17, 939)
(388,987)
-
-
(338,803)
Continuing profit/(loss) before net borrowing costs
and tax expense
Corporate net interest expense
Continuing profit/(loss) before tax expense
5,992
(53,494)
15,257
(17, 939)
(50,184)
(55,596)
(105,780)
Segment assets
774,238
198,864
286,056
229,721
1,488,879
Unallocated assets (including tax assets)
Total assets
Segment liabilities
Unallocated liabilities (including tax liabilities)
Total liabilities
Net assets
Carrying value of equity investments
Acquisition of non current assets
Non cash income/(expense) other than depreciation and
amortisation
Profit/(loss) on sale of non current assets
and controlled entities
-
774,238
420,238
-
420,238
354,000
61,822
11,034
-
-
-
201,097
198,864
286,056
229,721
1,689,976
83,015
71,388
-
-
7, 196
-
581,837
503,456
83,015
71,388
7, 196
1,085,293
115,849
214,668
222,525
604,683
-
117
11,262
13,491
21,004
27, 404
94,088
52,046
(27, 939)
(360,350)
(9,143)
5,156
(392,276)
9,782
(7, 160)
9
(95)
2,536
104
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2012
Note 29. Supplementary Statement of Net Debt
(a) Statement of Net Debt
This Supplementary Statement of Net Debt has been prepared to provide additional disclosure of segmental cash flows and the resultant impact on
net debt for the period. This non-IFRS disclosure is provided as a supplementary disclosure to IFRS reporting contained in the Consolidated Statement
of Cash Flows to provide illumination of cash performance of individual segments within the Consolidated Statement. The Directors consider this to be
particularly useful given the diverse nature of the Group’s operating segments. The Supplementary Statement of Net Debt should not be used as
replacement for the Consolidated Statement of Cash Flows which appears in this report but should be read in conjunction with.
Rural
Services
$000
18,656
6,439
(13,603)
9,028
(6,078)
(5,266)
3,704
2,311
21,961
2,894
2,771
114
-
-
10,038
(2,002)
(4,188)
6,083
52,862
(3,491)
49,371
(3,213)
(18,314)
(1,572)
-
-
925
684
2,730
Forestry
$000
(74,014)
-
5,263
-
(114)
-
Automotive
Components
$000
4,344
14,571
568
-
-
-
Investment &
Other
$000
(30,720)
7
-
-
-
-
43,363
9,360
19,236
1,177
559
36,854
-
(16,620)
(10,629)
-
286
(101)
44
(793)
(14,725)
(41,212)
(55,937)
-
-
-
-
73,240
-
-
-
(145)
13,669
10,036
(112)
-
-
-
188
(139)
252
(4,222)
48,370
(24,073)
24,297
(16,398)
-
1,791
(15,862)
-
-
-
-
-
-
-
-
1,303
2,798
-
-
-
2,139
21,541
(34,389)
27,747
(1,215)
8,447
(23,650)
(15,203)
-
-
-
-
-
-
-
-
-
-
-
-
-
28,168
(3,232)
-
-
2,875
(21,992)
104,283
(30,469)
-
(26,662)
(2,796)
(29,458)
(2,079)
-
-
36
(44,783)
11,764
59,681
-
(44,783)
3,563
-
11,764
5,592
-
59,717
44,514
2012
Earnings before interest & tax
Depreciation and amortisation
Share of associates and joint venture (profit)
Dividends received from associates
Fair value adjustments on financial assets
Other fair value adjustments
Impairment of assets
Movement in provision for:
- doubtful debts
- employee entitlements
- other provisions
Other writedowns
Profit/(loss) on sale of non-current assets
Profit/(loss) on sale of controlled entity
Cost of share based payments
Interest received
Interest and other costs of finance paid
Tax (paid)/refund
Other non cash items
Movement in working capital
Operating cash flow
Payment for property, plant and equipment
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 disposal of controlled entity
Payment for acquisition of non-controlling interest
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
Derivatives recognised in relation to net debt
Closing net debt
Total
$000
(81,734)
21,017
(7,772)
9,028
(6,192)
(5,266)
75,663
3,343
37,492
52,582
2,659
(16,506)
(10,629)
2,139
32,053
(36,631)
23,855
(147)
94,954
(92,426)
2,528
(19,611)
(18,314)
219
(15,862)
73,240
925
684
2,730
28,168
(3,232)
2,875
51,822
36
-
(2,796)
(2,760)
51,590
(345,450)
51,590
(1,505)
(295,365)
105
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2012
Note 29. Supplementary Statement of Net Debt (continued)
(a) Statement of Net Debt (continued)
Rural
Services
$000
4,241
8,378
(2,382)
6,835
(194)
(209)
14,161
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
(10,005)
(1,307)
2,120
-
(10,772)
-
(51,618)
(2,842)
(54,460)
(5,720)
Forestry
$000
(390,546)
2,479
(1,233)
592
(146)
(8,572)
314,738
8,338
688
54,727
1,724
7, 160
-
285
(333)
-
(18,307)
(28,406)
188
(28,218)
(102)
-
(15)
-
-
-
1,081
-
1,088
14,050
-
-
-
-
4,053
20,155
-
4,565
-
4,565
(3,498)
Automotive
Components
$000
15,257
16,566
451
-
-
-
93
610
6,958
52
(1,544)
(9)
-
180
(4,802)
(83)
2,532
36,261
(20,840)
15,421
(3,522)
(1,050)
-
-
(163)
(8,756)
-
-
9
-
-
-
-
-
-
Investment &
Other
$000
Total
$000
(17, 939)
(388,987)
14
-
-
-
(5,319)
4,194
-
(537)
-
-
95
1,845
5,770
(36,205)
13,267
(4,201)
(39,016)
(31,459)
(70,475)
-
-
-
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
(54,408)
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
(13,482)
137, 928
133,829
-
14,929
-
14,929
16,868
421
32,124
-
32,545
99,998
421
-
(2,842)
(2,421)
107, 648
(435,173)
107, 648
(17, 925)
(345,450)
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
Impairment of assets
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
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 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 property
Proceeds from sale of intangibles
Payment for acquisition of non-controlling interest
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
106
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2012
Note 29. 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 30. 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
- other services
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
2012
$000
2011
$000
91,969
81,614
(385,829)
(427, 064)
(1,505)
-
(295,365)
(345,450)
2012
$
2011
$
1,494,063
1,427, 871
213,407
432,492
204,795
45,413
2,139,962
1,678,079
298,600
29,675
328,275
13,460
-
13,460
-
-
-
-
-
-
-
-
-
-
107
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2012
Note 31. Investments in Controlled Entities (continued)
(a) Schedule of controlled entities (continued)
A Top Pty Ltd
Abbino Pty Ltd
Acehill Investments Pty Ltd
ACN 073 323 038 Pty Ltd
Active Leisure (Sports) Pty Ltd
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 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
Agsure Pty Ltd (formerly 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
Elders Esperance Woodchip Terminal Pty Ltd
Elders Finance Pty Ltd
108
Country of
Incorporation
Australia
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
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
Australia
Australia
(i)
(i)
(f)
(i)
(i)
(i)
(i)
(i)
(i)
(i)
(i)
(f)
(f)
(i)
(e)
(a)
(a)
(a)
(a)
(f)
(h)
(i)
(f)
(i)
(i)
(a)
(f)
(f)
(i)
(f)
(a)
(i)
(f)
(i)
(i)
(i)
(i)
(i)
(a)
(i)
(a)(b)
(f)
(i)
(f)
(g)
(f)
(g)
(f)
(a)
% Held by Group
2012
-
-
100
-
-
100
100
-
-
-
-
-
-
100
100
66
-
100
100
100
100
100
100
100
100
-
100
-
-
100
100
100
75.5
-
100
100
-
100
-
-
-
-
-
100
-
100
100
100
-
100
90
100
50
100
100
50
100
100
2011
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
66
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
75.5
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
90
100
50
100
100
50
100
100
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2012
Note 31. Investments in Controlled Entities (continued)
(a) Schedule of controlled entities (continued)
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.
Futuris Agencies Pty Ltd
Futuris Automotive (CA) LLC
Futuris Automotive (DE) LLC
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
Futuris Automotive Interiors Holdings Pty Ltd
Country of
Incorporation
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
USA
USA
Australia
Australia
Barbados
Hong Kong SAR
Mauritius
China
USA
Australia
(f)
(i)
(a)
(a)(b)
(f)
(a)
(a)
(i)
(g)
(a)
(f)
(f)
(g)
(f)
(g)
(i)
(i)
(f)
(f)
(f)
(f)
(f)
(g)
(g)
(a)
(f)
(g)
(a)
(f)
(f)
(i)
(i)
(f)
(a)
(g)
(i)
(g)
(f)
(f)
(f)
(i)
(e)
(e)
(a)
(a)
(a)
% Held by Group
2012
100
-
100
100
100
100
100
100
100
-
50
100
100
100
50
100
25
-
-
100
100
100
100
100
100
50
50
100
100
100
35
100
100
100
-
-
100
100
35
-
50
100
100
100
100
100
-
100
100
100
100
100
100
100
100
100
100
2011
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
109
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2012
Note 31. Investments in Controlled Entities (continued)
(a) Schedule of controlled entities (continued)
Futuris Automotive Thailand Co Ltd
Futuris Feltex (proprietary) Limited
Futuris Huaxiang Automotive Component (Mianyang) Co Ltd
Futuris Pty Ltd (formerly Futuris Automotive 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
Manor Hill Pty Ltd
Marybrook Development Company Pty Ltd
Marybrook Investment 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
Seed Production Limited
Steeden Holdings Pty Ltd
110
Country of
Incorporation
Thailand
South Africa
China
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
New Zealand
Australia
(a)
(i)
(i)
(f)
(i)
(i)
(g)
(i)
(i)
(f)
(i)
(i)
(i)
(i)
(f)
(a)
(i)
(f)
(i)
(i)
(a)
(a)
(i)
(i)
(f)
(f)
(i)
(f)
(a)
(a)
(a)
(a)
(f)
(f)
(f)
(a)
(f)
(i)
(f)
(a)
(i)
(f)
(f)
(i)
(f)
(f)
(f)
(f)
(i)
(f)
(g)
(i)
% Held by Group
2012
100
50
60
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
50
-
2011
100
50
60
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
50
100
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2012
Note 31. Investments in Controlled Entities (continued)
(a) Schedule of controlled entities (continued)
Steering Systems Australia 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
Wool Exchange (WA) Pty Ltd
Wool Marketing Enterprises Pty Ltd
Yenley Pty Ltd
Country of
Incorporation
Australia
Australia
Australia
Australia
Australia
Australia
Singapore
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
New Zealand
Australia
(i)
(f)
(i)
(i)
(i)
(i)
(f)
(c)(i)
(a)
(i)
(i)
(i)
(i)
(i)
(f)
(f)
(f)
(f)
(i)
(f)
(g)
(i)
% Held by Group
2012
-
53
-
-
-
-
100
100
-
100
-
-
-
-
-
100
100
100
100
-
67
25
-
2011
100
53
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
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 17.
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:
111
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2012
Note 31. 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 38)
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
Inventories
Derivative financial instruments
Non current asset classified as held for sale
Other assets
Total current assets
Non current assets
Receivables
Other financial assets
Investments in associates and joint ventures
Property, plant and equipment
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
112
2012
$000
2011
$000
(279,365)
(149,375)
36,785
(242,580)
(10,582)
(253,162)
(9,896)
(159,271)
(241,230)
(400,501)
(683)
2,301
(253,845)
(695,078)
-
-
(9,907)
(398,200)
(285,996)
214
(8,795)
-
(958,147)
(695,078)
14,115
7, 230
1,550,899
537, 822
27,268
32,255
53
54,927
2,936
24,293
43,928
482
83,573
13,867
1,682,453
711,195
10,319
318,343
79,463
48,881
117,995
99,687
95,880
770,568
18,413
147, 083
81,719
47, 429
178,700
106,926
24,237
604,507
2,453,021
1,315,702
1,719,449
123,581
2,010
129,061
4,502
48,915
917
45,313
84,299
79,168
1,903,937
333,278
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2012
Note 31. 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
Note 32. Key Management Personnel
(a) Details of Key Management Personnel
2012
$000
2011
$000
-
496
81,078
229,025
9,941
4,788
95,807
1,999,744
453,277
16,746
14,318
260,585
593,863
721,839
1,270,323
1,271,493
145,151
145,151
(4,050)
273
(958,147)
(695,078)
453,277
721,839
Directors
JC Ballard
MG Jackman
MC Allison
A Buduls
RG Grigg
IG MacDonald
JH Ranck
JM Rozman
RH Wylie
Chairman
Managing Director and Chief Executive Officer
Non Executive Director
Non Executive Director (appointed 15 November 2011, retired 30 July 2012)
Non Executive Director (retired 30 July 2012)
Non Executive Director
Non Executive Director
Non Executive Director (appointed 15 November 2011)
Non Executive Director (retired 15 August 2012)
Other Key Management Personnel
M De Wit
V Erasmus
M Hosking
S McClure
S Hughes
A Dage
D Goodfellow
Managing Director – Futuris Automotive Group Ltd
Chief Operating Officer and Managing Director – Elders Forestry (redundancy 18 May 2012)
Chief Financial Officer
Group General Manager Strategy and Development (redundancy 15 June 2012)
Chief Information Officer (redundancy 2 August 2012)
Group General Manager Trading
Group General Manger Australian Network
(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
2012
$
2011
$
6,206,195
5,840,988
212,570
223,042
1,026,155
108,380
231,216
532,698
1,256,790
1,083,737
8,924,752
7, 797, 019
113
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2012
Note 32. Key Management Personnel (continued)
(c) Option holdings of Directors and other Key Management Personnel
(Number)
2012
M De Wit
V Erasmus
S McClure
S Hughes
Total
2011
M De Wit
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
30,000
150,000
22,500
15,000
217,500
40,000
150,000
22,500
15,000
227, 500
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(30,000)
(150,000)
(22,500)
(15,000)
(217,500)
(10,000)
-
-
-
-
-
-
-
-
-
-
-
-
-
30,000
150,000
22,500
15,000
30,000
75,000
12,500
-
(10,000)
217, 500
117, 500
As at balance date there are $nil options (2011: $nil) which have vested but are unexercisable.
(d) Retention Rights of Directors and other Key Management Personnel
Balance at
beginning of
period
1,518,839
490,702
560,802
889,077
3,459,420
-
-
-
-
-
-
Rights
exercised
Rights
granted
Rights
lapsed /
forfeited
Balance
at end of
period
Vested at
end of
period
-
-
-
-
-
-
-
-
-
-
-
555,746
179,549
205,199
325,314
-
2,074,585
(670,251)
-
-
-
766,001
1,214,391
1,265,808
(670,251)
4,054,977
1,518,839
490,702
560,802
889,077
390,171
3,849,591
-
-
-
-
(390,171)
(390,171)
1,518,839
490,702
560,802
889,077
-
3,459,420
-
-
-
-
-
-
-
-
-
-
-
(Number)
2012
M Hosking
S McClure
S Hughes
A Dage
Total
2011
M Hosking
S McClure
S Hughes
A Dage
R Tanti
Total
114
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2012
Note 32. Key Management Personnel (continued)
(e) Long Term Incentive Rights held by Directors and other Key Management Personnel
(Number)
2012
MG Jackman
M Hosking
S McClure
S Hughes
A Dage
Total
2011
MG Jackman
M Hosking
S McClure
S Hughes
A Dage
Total
Balance at
beginning of
period
2,570,425
696,325
352,809
467,559
603,482
4,690,600
2,570,425
-
-
-
-
2,570,425
Rights
exercised
Rights
granted
Rights
lapsed /
forfeited
Balance at end
of period
Vested at
end of
period
-
-
-
-
-
-
-
-
-
-
-
-
-
(285,603)
2,284,822
700,000
350,000
450,000
600,000
-
1,396,325
(702,809)
(917,559)
-
-
-
1,203,482
2,100,000
(1,905,971)
4,884,629
-
696,325
352,809
467, 559
603,482
2,120,175
-
-
-
-
-
-
2,570,425
696,325
352,809
467, 559
603,482
4,690,600
-
-
-
-
-
-
-
-
-
-
-
-
(f) Shareholdings of Directors and other Key Management Personnel
(Ordinary shares)
2012
JC Ballard
MG Jackman
MC Allison
RG Grigg*
IG MacDonald
JH Ranck
JM Rozman
RH Wylie*
M De Wit
V Erasmus*
S McClure*
S Hughes*
A Dage
D Goodfellow
Total
Balance at
beginning of
period
250,000
107,168
-
16,490
52,668
128,334
-
6,000
18,537
1,998
7,697
17,087
90,000
173,356
869,335
On exercise
of options
Granted as
remuneration
Net change
other
Balance at
end of period*
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
750,000
81,508
100,000
45,200
-
301,666
20,000
-
-
-
-
-
-
-
1,000,000
188,676
100,000
61,690
52,668
430,000
20,000
6,000
18,537
1,998
7,697
17,087
90,000
173,356
1,298,374
2,167,709
115
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2012
Note 32. Key Management Personnel (continued)
(f) Shareholdings of Directors and other Key Management Personnel (continued)
(Ordinary shares)
2011
JC Ballard
MG Jackman
CE Bright*
RG Grigg
IG MacDonald
JH Ranck
RH Wylie
M De Wit
V Erasmus
S McClure
S Hughes
A Dage
Total
(Hybrid equity)
2012
MG Jackman
2011
MG Jackman
Balance at
beginning of
period
On exercise
of options
Granted as
remuneration
Net change
other
Balance at
end of period*
250,000
107, 168
21,479
16,490
52,668
128,334
6,000
18,537
1,998
7, 697
17, 087
90,000
717, 458
1,000
1,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
250,000
107, 168
21,479
16,490
52,668
128,334
6,000
18,537
1,998
7, 697
17, 087
90,000
717, 458
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 2012, a loan balance of $nil (2011: $7,000) was owing by V Erasmus.
During the 2011 and 2012 financial years, JC Ballard purchased immaterial amounts of livestock and merchandise products from the Group, and
sold immaterial amounts of livestock to 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 2011 or 2012 financial years.
116
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2012
Note 33. 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
2012
No. (‘000)
953
(838)
115
2012
WAEP
$
18.79
19.30
15.11
2011
No. (‘000)
1,380
(427)
953
2011
WAEP
$
19.27
20.34
18.79
The range of exercise prices for options outstanding at the end of the year was $13.70 - $25.40. The weighted average remaining contractual life for
the share options outstanding as at 30 September 2012 is 0.65 years (2011: 1.08 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 2012 6,572,589 rights were outstanding, all with a
maturity date of 1 August 2013. An expense of $1.7 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 2012 2,284,822 CEO rights were outstanding, with maturity dates between 10 November 2012 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 2012 7, 409,031 executive rights were outstanding, with maturity dates between 10 November 2012 and 10 November 2015.
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.
117
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2012
Note 33. 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)
(ii)
General Employee Scheme under which permanent employees may acquire shares in the parent company with a market value ranging from
$3,000 to $17, 500 per year per employee; and
Incentive Scheme under which selected employees will be eligible to acquire shares in the parent company on such terms as the Directors
decide are appropriate in the circumstances of the employee.
During the financial year no ordinary shares (2011: 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 34. 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
Impairment of intercompany loans
Balances with related parties in the wholly owned group:
Owing to the Parent Entity
Owing from the Parent Entity
2012
$000
2011
$000
104,230
(865,741)
1,357
3,000
(532,674)
34,322
4,500
-
401,379
527, 680
(686,866)
(389,080)
(285,487)
138,600
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.
118
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2012
Note 34. 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 31.
Transactions with controlled entities not wholly owned:
Intercompany loan movements
Dividends received
Amounts converted to loan balances upon consolidation
Balances with controlled entities not wholly owned:
Owing to the Group
Owing from the Group
2012
$000
2011
$000
(14,067)
(14,946)
4,836
760
2,779
(11,809)
(9,030)
2,286
-
334
(893)
(559)
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 11.
Transactions with partly owned entities:
Loan movements
Interest charged
Dividends received
Entity no longer partly owned
Balances with partly owned entities:
Owing to the Group
Owing from the Group
(1,468)
1,524
9,028
(4,502)
18,462
(4,301)
14,161
(2,792)
1,747
7, 427
(7, 932)
23,356
(4,749)
18,607
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.
119
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2012
Note 35. Earnings Per Share
Weighted average number of ordinary shares (‘000) used in calculating basic EPS
Dilutive share options (‘000)
2012
448,598
628,343
Adjusted weighted average number of ordinary shares used in calculating dilutive EPS (‘000)
1,076,941
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):
2011
448,598
471,306
919,904
Reported operations
Basic
Net profit/(loss) attributable to members (after tax)
(60,600)
(395,350)
Dilutive
Net profit/(loss) attributable to members (after tax)
(60,600)
(395,350)
2012
$000
2011
$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
(13.5)¢
(13.5)¢
(88.1)¢
(88.1)¢
(60,600)
36,241
(24,359)
(395,350)
297, 462
(97, 888)
Net profit/(loss) of continuing operations (net of tax)
(24,359)
(97, 888)
Continuing operations earnings per share:
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
Discontinued operations
(5.4)¢
(5.4)¢
(21.8)¢
(21.8)¢
Net profit/(loss) of discontinued operations (net of tax)
(36,241)
(297, 462)
Discontinued operations earnings per share:
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
(8.1)¢
(8.1)¢
(66.3)¢
(66.3)¢
120
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2012
Note 36. 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 analysis 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 17.
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
2012
$000
91,969
9,510
101,479
2011
$000
81,614
10,060
91,674
(263,533)
(424,596)
(1,555)
(1,828)
(265,088)
(426,424)
(163,609)
(334,750)
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.
To manage this, the Group enters into interest rate swaps, in which the group agrees to exchange, at specified intervals, the difference between fixed
and variable rate interest amounts calculated by reference to an agreed-upon notional principal amount. These swaps are designated to hedge
underlying debt obligations.
The following sensitivity analysis is based on the interest rate risk exposures in existence at the balance sheet date. At 30 September 2012, 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
Post Tax Profit/equity
Higher/(Lower)
(1,636)
(3,348)
1,636
3,348
121
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2012
Note 36. 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 2012. 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
$000
6 months
or less
$000
6-12 months
1-5 years
> 5 years
$000
$000
$000
2012
Non derivative financial assets:
Cash and cash equivalents
Trade and other receivables
Non derivative financial liabilities:
Secured loans
Unsecured loans
Finance leases
2011
Non derivative financial assets:
Cash and cash equivalents
Trade and other receivables
Non derivative financial liabilities:
Secured loans
Unsecured loans
Finance leases
91,969
531,157
623,126
91,969
533,362
625,331
91,969
513,435
605,404
-
281
281
-
19,646
19,646
(383,533)
(402,239)
(312,691)
(3,582)
(85,966)
(1,555)
(741)
(1,867)
(840)
(78)
(247)
(78)
(248)
-
-
(3,908)
(3,627)
(1,711)
(345)
(1,413)
-
(89,435)
(69,789)
Trade and other payables
(388,019)
(388,019)
(386,606)
Financial guarantees
-
(35,520)
(35,520)
Net inflow/(outflow)
(150,722)
(203,154)
(129,738)
(773,848)
(828,485)
(735,142)
81,614
580,877
662,491
81,614
587, 719
669,333
81,614
566,189
647, 803
-
1,924
1,924
-
19,606
19,606
(424,596)
(473,514)
(173,513)
(52,007)
(247, 994)
(1,828)
(640)
(2,216)
(721)
-
(199)
-
(198)
-
-
(2,216)
(324)
(2,583)
-
(52,205)
(50,281)
(253,117)
(233,511)
Trade and other payables
(436,499)
(436,499)
(433,916)
Financial guarantees
-
(19,241)
(19,241)
(863,563)
(932,191)
(626,869)
Net inflow/(outflow)
(201,072)
(262,858)
20,934
122
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2012
Note 36. 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
Contractual
cash flows
$000
6 months
or less
$000
6-12 months
1-5 years
> 5 years
$000
$000
$000
1,593
(2,010)
(417)
664
(6,916)
(6,252)
1,593
(2,010)
(417)
664
(6,916)
(6,252)
1,593
(2,010)
(417)
664
(6,916)
(6,252)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2012
Derivative assets – net settled
Derivative liabilities – net settled
Total inflow/(outflow)
2011
Derivative assets – net settled
Derivative liabilities – net settled
Total inflow/(outflow)
(c) Credit risk
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
2012
$000
91,969
531,157
1,593
624,719
2011
$000
81,614
580,877
664
663,155
459,436
494,207
43,096
12,891
11,566
352
2,511
1,305
47, 629
8,553
25,326
1,130
1,765
2,267
531,157
580,877
123
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2012
Note 36. Financial Instruments (continued)
(c) Credit risk (continued)
Industry classification
Rural
Forestry
Automotive
Investment and other
Total gross receivables
(d) Foreign currency risk
2012
$000
416,692
13,401
87,139
13,925
531,157
2011
$000
476,891
16,058
67,193
20,735
580,877
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, AUD/CNY 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 2012, the Group had the following AUD exposures to foreign currencies that were not designated in cash flow hedges:
Financial assets
Cash and cash equivalents – EUR
Cash and cash equivalents – USD
Cash and cash equivalents – NZD
Cash and cash equivalents – CNY
Cash and cash equivalents – Other
Receivables – EUR
Receivables – USD
Receivables – NZD
Receivables – CNY
Receivables – ZAR
Receivables – Other
Financial liabilities
Payables – EUR
Payables – USD
Payables – NZD
Payables – CNY
Payables – ZAR
Payables – Other
Interest bearing loans and borrowings – NZD
Interest bearing loans and borrowings – CNY
Interest bearing loans and borrowings – ZAR
Interest bearing loans and borrowings – other
Net exposure
124
8,242
17,185
9,361
9,943
9,090
454
6,156
39,239
11,454
1,330
12,528
5,594
3,906
5,101
1,747
5,746
1,701
21,334
50,821
3,173
1,444
8,752
124,982
109,319
(4,319)
(8,657)
(19,867)
(24,428)
(5,297)
(16,024)
(4,172)
-
(221)
(230)
(83,215)
41,767
(8,445)
(5,293)
(24,489)
(1,478)
(2,531)
(6,587)
(10,642)
(1,320)
(945)
-
(61,730)
47, 589
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2012
Note 36. Financial Instruments (continued)
(d) Foreign currency risk (continued)
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) arising on the balance sheet exposure would be as follows:
EUR
USD
NZD
CNY
ZAR
Other
Post Tax Profit/Equity
Higher/(Lower)
2012
$000
(438)
(1,468)
(2,456)
303
419
(536)
2011
$000
115
(1,995)
(2,079)
(212)
203
(791)
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.
(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:
2012
2011
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
-
-
-
1,593
(2,010)
(417)
-
-
-
-
-
-
$000
664
(6,916)
(6,252)
$000
-
-
-
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.
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.
125
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2012
Note 37. Business Combinations – Changes in the Composition of the Entity
(a) Controlled entities acquired
The Group holds a 70% interest in Futuris Automotive Interiors (Anhui) Company Ltd, which in prior reporting periods was considered to be a jointly
controlled entity due to the control provided in the shareholders’ agreement to the minority parties. As at 1 October 2011 it was determined that the
relationship between the Group and the minority shareholders had changed to an extent that it was appropriate to account for the investment as a
controlled entity rather than as a jointly controlled entity. The business combination resulted in the recognition of $10.8 million of goodwill. During the
2012 financial year the Anhui entity contributed $29.5 million of sales revenue and $1.4 million of profit before tax to the Group’s continuing results.
Fair value of initial investment
Non-controlling interest - share of fair value of net assets
Total consideration
Fair value of identifiable net assets acquired (see below)
Goodwill on acquisition
The aggregate amounts of assets and liabilities acquired by major class:
Cash and cash equivalents
Trade and other receivables
Inventories
Property, plant and equipment
Intangibles
Other assets
Trade and other payables
Provisions
Net identifiable assets acquired
Outflow of cash to acquire the entities, net of cash acquired:
Cash balance acquired
Net Inflow/(outflow) of cash
Date
Control
Acquired
1 Oct 2011
Acquiree’s
carrying
amount
$000
1,791
7, 439
1,376
6,733
938
8,001
(11,928)
(260)
14,090
2012
$000
15,984
2,216
18,200
7,386
10,814
Fair
value
$000
1,791
7,439
1,376
6,733
938
1,297
(11,928)
(260)
7,386
1,791
1,791
Prior Period acquisitions
During the prior period there were immaterial business combinations that resulted in $1.8 million of goodwill being recognised.
126
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2012
Note 37. Business Combinations – Changes in the Composition of the Entity (continued)
(b) Controlled entities disposed
The Group disposed of Plantation Pulpwood Terminals Pty Ltd on 18 July 2012 to a fund managed by Global Forest Partners.
Proceeds received on disposal of assets/shares:
Cash
The carrying amounts of assets and liabilities disposed of by major class are:
Property, plant and equipment
Tax assets and liabilities
Provisions
Net assets/(liabilities) of entity sold
Total profit/(loss) on disposal of controlled entities
Prior period disposals
There were no controlled entities disposed of in prior period.
Note 38. Discontinued Operations
2012
$000
2011
$000
28,168
18,666
(1,010)
(117)
17,539
10,629
-
-
-
-
-
-
Financial period 30 September 2012
The Group’s investment in Seed Technology and Marketing Pty Ltd (‘Seedmark’), which forms part of the Rural Services segment, was disposed of
during the period.
As required by AASB 5 Non-current Assets Held for Sale and Discontinued Operations the 2011 comparative discontinued operations disclosed
below have been re-presented to show the effects of this classification.
Financial period 30 September 2011
Operations within the Group’s Forestry division, the Torrens, Wool Processing, New Zealand Real Estate, and the Group’s investments in Rural Bank
Limited, Elders Toepfer Grain Pty Ltd (‘ETG’) and ELF Pty Ltd (Hi-Fert), were classified as discontinued operations, or were disposed of during the
period ended 30 September 2011 and reported as discontinued operations.
The Group’s Forestry division continues to be classified as discontinued operations in the current financial year.
127
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2012
Note 38. Discontinued Operations (continued)
Sales revenue
Cost of sales
Other revenues
Other expenses
Continuing
2012
$000
Discontinued
2012
$000
Total
2012
$000
Continuing
2011
$000
Discontinued
2011
$000
Total
2011
$000
2,157,947
14,611
2,172,558
2,263,116
95,563
2,358,679
(1,724,359)
(19,922)
(1,744,281)
(1,816,539)
(82,067)
(1,898,606)
34,033
1,127
35,160
20,912
16,191
37, 103
(522,854)
(57,224)
(580,078)
(525,783)
(366,080)
(891,863)
Share of profit of associates and joint ventures
8,266
(494)
7,772
Profit/(loss) on sale of non current assets
179
26,956
27,135
12,046
(3,936)
(8,882)
6,472
3,164
2,536
Profit/(loss) before net borrowing costs and
tax expense
Interest revenue
Finance costs
(46,788)
(34,946)
(81,734)
(50,184)
(338,803)
(388,987)
31,767
286
32,053
21,792
(38,961)
(1,581)
(40,542)
(77, 388)
292
(333)
22,084
(77, 721)
Profit/(loss) before tax expense
(53,982)
(36,241)
(90,223)
(105,780)
(338,844)
(444,624)
Income tax benefit/(expense)
Net profit/(loss) for year
Net profit/(loss) attributable to
non-controlling interest
Net profit/(loss) attributable to members of
the parent entity
Revenue and expenses
Sales revenue:
32,850
-
32,850
12,074
41,382
53,456
(21,132)
(36,241)
(57,373)
(93,706)
(297, 462)
(391,168)
3,227
-
3,227
4,182
-
4,182
(24,359)
(36,241)
(60,600)
(97, 888)
(297, 462)
(395,350)
Sale of goods and biological assets
1,938,260
11,656
1,949,916
2,022,859
75,637
2,098,496
Commission and other selling charges
190,540
1,658
192,198
209,569
2,100
211,669
Other sales related income
29,147
1,297
30,444
30,688
17, 826
48,514
2,157,947
14,611
2,172,558
2,263,116
95,563
2,358,679
Other expenses:
Distribution expenses
Marketing expenses
Occupancy expenses
263,170
9,446
36,397
-
263,170
263,829
9,423
273,252
388
945
9,834
7, 960
37,342
36,999
818
980
8,778
37, 979
Administrative expenses
131,544
10,408
141,952
130,088
18,699
148,787
Forestry fair value adjustments
36,025
44,050
80,075
54,727
325,583
380,310
Write down of assets to be divested or discontinued
-
1,433
Impairment of assets retained
Restructuring, redundancy and other writeoffs
Change in fair value of financial and other assets
21,794
22,549
1,929
-
-
-
1,433
21,794
22,549
1,929
-
10,577
10,577
7,252
18,253
6,675
-
-
-
7, 252
18,253
6,675
522,854
57,224
580,078
525,783
366,080
891,863
Profit/(loss) on sale of non current assets
Non current assets held for sale
Equity accounted investments
Property, plant and equipment
Investment property
Intangibles
Controlled entities
-
-
179
-
-
-
179
16,620
16,620
(293)
-
-
-
(293)
179
-
-
10,629
26,956
10,629
27,135
-
-
588
588
12,667
12,667
(403)
500
-
(7, 283)
(3,533)
-
-
-
97
(7, 283)
(3,533)
-
(3,936)
6,472
2,536
128
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2012
Note 38. 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
2012
$000
(55,937)
107,013
(44,783)
6,293
2011
$000
(23,476)
24,035
5,157
5,716
12,260
1,726
340
52,637
66,963
4,511
71,474
44,031
1,726
21,030
114,561
181,348
4,511
185,859
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. 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 remaining disposal groups are Pulpwood Esperance, 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 and investment properties. 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.
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 28 of the financial report.
During the 12 months ended 30 September 2012, the Group received proceeds of $101.4 million from asset and controlled entity disposals
which had a carrying amount of $74.2 million. The Group also recognised fair value losses of $43.4 million to revalue remaining assets to the
lower of their carrying value or fair value less costs to sell. In addition, further provisions of $37.1 million for onerous leases and other obligations
have been raised during the period.
(ii) Other assets
The Group’s investments in Seafood Delicacies Ltd is held for sale and has been classified in the statement of financial position as a ‘Non current
assets held for sale’ totalling $4.5 million.
129
Notes to the Consolidated Financial Statements
For the Year ended 30 September 2012
Note 39. Parent Entity
Information relating to the parent entity of the Group, Elders Limited:
Results:
Net profit/(loss) for the period after income tax expense
Total comprehensive income/(loss)
Financial position:
Current assets
Non current assets
Total assets
Current liabilities
Total liabilities
Net assets
Issued capital
Hybrid equity
Retained earnings
Employee equity reserve
Reserved shares reserve
Total equity
2012
$000
2011
$000
(509,986)
(509,986)
(679,561)
(679,561)
402,763
354,077
529,242
568,732
756,840
1,097, 974
555,777
555,777
201,063
373,506
373,506
724,468
1,270,323
1,271,493
145,151
145,151
(1,212,620)
(700,527)
399
(2,190)
11,345
(2,994)
201,063
724,468
Guarantees
As disclosed in note 31, 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 40. Subsequent Events
The Group announced on 29 October 2012 that it would commence a process to sell its Rural Services business. This is in addition to the withdrawal
from the Forestry sector announced in 2011 and the intended sale of Futuris Automotive announced on 15 August 2012.
As a result of these announcements, and as set out in Note 2(a), the group is presently renegotiating its finance facilities so as to provide sufficient
funding through to the sale of these assets. At the date of this report, the Group has received an in principle funding agreement from its financiers,
subject to credit approvals, which provides for the continuation of funding and the provision of incremental facilities through to anticipated
sale dates. As a result it is expected that finance facilities will now be timed to mature in line with the Forestry, Futuris Automotive and Rural Services
divestments planned before 30 June 2013, inclusive of $81.0 million of debt recorded as non-current at 30 September 2012.
Should divestment transactions proceed for the sale of the remainder of Forestry operations, Futuris Automotive and Elders Rural Services,
this will significantly affect the state of affairs of the Group. As the Directors do not know what form or quantum any sales transaction will take,
the Directors are unable at the date of this report to assess the impact of the divestments proposed on the affairs of the Group.
There is no other matter or circumstance that has arisen since 30 September 2012 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.
130
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 2012 are in accordance with the Corporations
Act 2001, including:
(i) Giving a true and fair view of its financial position as at 30 September 2012 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) subject to the material uncertainties set out in note 2(a), 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 2012.
3.
In the opinion of the Directors, as at the date of this declaration but subject to the material uncertainties set out in note 2(a), there are reasonable
grounds to believe that the members of the Closed Group identified in note 31 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
19 November 2012
131
132
133
ASX Additional Information
(a) Distribution of Equity Securities as at 31 October 2012
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
4,948,214
18,055,172
21,810,468
119,439,686
284,344,940
448,598,480
The number of holders holding less than a marketable parcel
(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.
17,959
6,815
2,812
4,479
372
513,131
284,775
110,234
408,883
182,977
32,437
1,500,000
Ordinary Shares
22,572
1,966
136
15
16
1
2,134
Hybrids
9
(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 2012
The twenty largest holders of Elders Ordinary Shares were as follows:
No. of Shares % of Shares
Ruralco Holdings Limited
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