Chairman’s remarks
CEO’s Report
Agricultural robots leading the way
Year in brief
A year of progress
Operating and Financial Review
Review of Operations
Outlook
Elders Insiders
Material Business Risks
Innovative digital transformation
Board of Directors
Directors’ Report
Elders and Cowboys support
mental health
Executive Management remarks
Remunerations Report
Annual Financial Report
Shareholder Information
Company Directory
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8
12
14
16
18
24
32
34
36
40
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46
54
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125
Elders’ business model,
based on FY16 statistics
2
Retail Products
Farm Supplies
$1b retail sales
Agency Services
Real Estate Services
Financial Services
Digital and Technical
Services
Feed and Processing
Services
Fertiliser
Livestock
Wool
Grain
Farmland
Residential
Property Management
Franchise
Agri Finance
Insurance
Fee for Service
Auctions Plus (50%)
Elders Weather
Killara Feedlot
Elders Indonesia
Elders China
629k tonnes fertiliser
9.0m head sheep
1.6m head cattle
367k wool bales
0.4m grain tonnes
$889b farmland sales
$568b Residential sales
6,950 properties under
management
134 franchisees
$2.8b loan book
$1.5b deposit book
$44m StockCo book
$610m gross written premium
110 Agronomists
578k head sheep
93k head cattle
64.4m hits
53k head cattle
16k head cattle
$15m sales
3
4
Integrity
Behaving with honesty and integrity
in every interaction
Accountability
Being accountable for results
Teamwork
Using the power of the team, and respecting
the contribution of every person
Customer Focus
Growing valuable customer relationships, and
showing pride and passion in our organisation
Innovation
Delivering innovation and continuous
improvement
5
6
2016 Annual Report — Elders. Live it. Reflecting on the past 12 months to 30 September it is pleasing to see
Elders has again finished the year in a much stronger position than which
it began. A position that clearly demonstrates continued progress made
with clear leadership and the hard work of our employees.
In my mind, we are yet another step closer to our end goal of becoming
Australia’s leading agribusiness.
Safety
The health and wellbeing of our employees and the communities in
which they operate remains the key business priority at Elders.
This is evidenced by the continuous improvements we’ve seen to the
Company’s safety and wellbeing performance over the past 12 months,
including a reduction in Lost Time Injuries from 14 to 4, and a continued
very strong safety engagement rate with employees, where more than
80 percent of our people agree that “nothing is so important that it can
not be done safely”.
Our Chief Executive Officer will further outline our improvements
and goals for a safe and healthy Elders, in his report, including the
implementation of a safety engagement campaign.
Financial results
In the 12 months to 30 September 2016, Elders has made solid financial
progress, recording a $51.6 million statutory profit, which is an
improvement of $13.3 million on the previous year.
Our underlying profit after tax was up $13.2 million on last year,
recording a $41.2 million profit for the 2016 financial year. These results
were largely achieved through improved sales activity in retail and strong
livestock agency performance, supported by a broad based focus on
growth and efficiencies, in line with the Eight Point Plan.
Our financial results are discussed in detail in the Chief Executive
Officer’s report.
Strategic direction
The Board and management made an import trip to China in August
2016. The trip convinced the board and management that the long and
short haul shipping of live cattle had developed into a specialist business
that was not a core competency of Elders and had inherent risk that was
not proportional to returns. Our competency is the sourcing of cattle for
export, supporting the regulatory frameworks to ensure best practice
animal welfare, and developing markets for Australian cattle producers
overseas.
The result of this insight was announced in early September with
the cessation of our long haul live cattle shipping business and the
divestment of the short haul business. Elders also announced it will
continue to support customers by aggregating cattle for export and
continue to develop new markets.
Balance sheet and finance
For the second year in a row, with the help of our financiers (ANZ,
NAB and Rabobank) Elders held its term debt at zero, providing the
business with a platform to continue its focus on value generation for
stakeholders. Net debt was reduced by $50.1 million, due to strong
operating cash inflows and disciplined capital usage, along with
unutilised cash held from the capital raise and hybrid acquisition. In
addition, I was pleased to see our improved supplier trading terms in the
Retail business, as well as reduced inventory in the Live Export business
provide us with a strong operating cash inflow of $48.7 million.
Capital Structure Normalisation
Elders’ capital simplification strategy remained on track over the past 12
months. During the year we successfully completed a $97 million capital
raise, through which Elders’ wholly owned subsidiary, Elders Finance Pty
Ltd acquired 705,585 Elders Hybrid securities for a total of $67 million.
Elders Finance now owns 72% of all Elders Hybrids on issue.
Chairman's Remarks
Investment
With the normalisation of the banking arrangements
and improvement in our balance sheet, Elders has
been pursuing a strategy of investment in synergistic
areas. We have expanded our real estate management
business, expanded our footprint in Tasmania,
repurchased 10% of Elders Insurance from QBE,
and after yearend acquired 30 percent of the
livestock financing company Stockco.
Our focus is disciplined investment in synergistic
or adjacent areas to our existing business.
Board
The past year has been one of consistency and
progress with our leadership, and for the first time
in many years, saw no change at a Board level. Our
experienced Board of Directors has continued to serve
Elders, with a clear focus on agribusiness, and ensuring
the Company is delivering results for you, as our
shareholders.
Corporate governance
Your company is committed to high standards of
corporate governance, including in connection
with its continuous disclosure obligations. Elders’
corporate governance framework and practices,
which are fully compliant with the third edition of
the ASX Corporate Governance Council’s Principles
and Recommendations, are detailed in the Corporate
Governance Statement available on our website
elders.com.au.
Elders continues to make progress against our diversity
objectives and understands that diversity in our
workplace is a critical factor in attracting and retaining
the right people, contributing to our ongoing success.
In what has traditionally been a male-dominated
industry, Elders is taking steps to address the
representation of women at Elders, particularly in
leadership roles. Notably, our objective to maintain
a 25 percent female representation on the Board was
again met this year. We also made significant gains at
Executive level, role modelling a 200 percent increase
of female leaders.
Closing remarks
In closing I would like to express the appreciation of
my fellow directors for the efforts of the Company’s
employees during the year. Your hard work, and high
levels of customer service to the multitude of Elders’
customers, clients and suppliers across the country
and worldwide, has driven another successful year.
Hutch Ranck
Chairman
7
8
2016 Annual Report — Elders. Live it. CEO's Report
Elders is
shaping up to
drive growth
and innovation
towards 2020.
9
As we enter the third year of our Eight
Point Plan, it is evident that the business
and our key stakeholders are responding
well to our strategic priorities, and that
we are well structured to capitalise on
the array of opportunities that lay ahead.
I am pleased to share the positive
progress and results that have occurred
this year, and how we’re shaping up to
drive growth and innovation towards
2020.
Safety performance
Last year we reported continual
improvement in Elders’ safety culture,
and I am pleased that 12 months on, we
are again in a position to share progress
across safety aspects and the health and
wellbeing of our employees.
Notably, in 2016, Elders has reduced
total lost time injuries from 14 to 4, and
reduced the lost time injury frequency
rate (LTIFR) from 3.4 to 1.0. Whilst
these numbers show a significant
improvement, I am conscious that our
people are still returning home injured,
requiring time away from their work
in order to recover, and therefore
our goal of zero lost time injuries
remains crucial.
The continuation of our Company-wide
safety campaign Stand Up Speak Up,
along with our focus on mental health in
rural areas has contributed to a stable
safety engagement rate at 83%. In
2016 Elders entered into a partnership
with the NRL’s North Queensland
Cowboys, to tackle the stigma and
start conversations surrounding mental
wellbeing, particularly within some of
the rural and remote communities in
which we operate.
I am a firm believer that managers who
take safety seriously, show the discipline
and focus required to run a business
well in all respects – and we are instilling
this message throughout our leadership
team on an ongoing basis.
Going forward, in order to reach our
aim of zero lost time injuries, we must
eliminate complacency, and ignite
innovation within the team. Within the
past 12 months, we have designed and
tested a new, online, work, health and
safety reporting system with improved
mobile accessibility and reporting
capabilities, which we plan to implement
next year.
Operational performance
2016 was a year of strong financial performance for Elders,
with year on year improved statutory and underlying profit.
Statutory net profit after tax of $51.6 million compares
with a $38.3 million profit in the previous year. Our
underlying net profit improved $13.2 million on the prior
corresponding period to $41.2 million.
Elders’ $15.7 million improvement at the underlying
earnings before interest and tax (EBIT) level, to $56.2
million, was largely due to improved sales activity in retail
and strong livestock agency performance, supported by a
broad based focus on growth and efficiencies, in line with
our Eight Point Plan.
Positive seasonal conditions lifted winter crop demand and
sales activity, resulting in our Retail product posting a $15.1
million improvement in underlying profit.
High cattle prices have driven higher livestock earnings
and also real estate sales demand for large cattle farming
properties, contributing to a $5.2 million underlying profit
improvement for Agency Services, and a $1.7 million
underlying profit improvement in Real Estate Services.
Our 10% acquisition in Elders Insurance (Underwriting
Agency) Pty Ltd from QBE, as well as an increase in
sales of the StockCo livestock finishing finance product
contributed to a $0.8 million underlying profit improvement
for Financial Services.
High Australian cattle prices adversely impacted margins
within our Feed and Processing product, and resulted in
reduced occupancy at the Killara feedlot.
A strong operating cash inflow of $48.7 million reflected
the improved supplier trading terms in the Retail business,
as well as reduced inventory in the Live Export business.
As the Chairman mentioned, on 12 September 2016, we
announced Elders would undertake a managed exit from
its Live Export business. Operations of Long Haul export
have ceased and a managed divestment of the Short Haul
business as a going concern is currently progressing with
a number of parties. Live Export operating losses of $8.9
million and expected restructuring and exit costs of $6.0
million have been reported as non-underlying profit.
Elders’ capital simplification strategy remains on track,
successfully completing a $97 million capital raise, through
which Elders’ wholly owned subsidiary, Elders Finance Pty
Ltd acquired 705,585 Elders Hybrid securities for a total
of $67 million. Elders Finance now owns 72% of all Elders
Hybrids on issue.
Net debt was reduced by $50.1 million, due to strong
operating cash inflows and disciplined capital usage, along
with unutilised cash held from the capital raise and hybrid
acquisition.
Elders’ return on capital of 28.4% for the financial year
saw a further improvement of 6.5% on FY15, which was
primarily driven by improved EBIT generation, lower
working capital balances in the Retail product, and a clear,
disciplined capital allocation process within the business.
We are focussed
on ensuring new
information is at
the fingertips of our
clients, and assisting
them in making
the best decisions
for their individual
business needs.
Our people
In 2016, Elders employed 1,893 full time equivalent (FTE) persons, compared with 1,838
persons at the end of the previous corresponding period. This 3% increase was primarily
in customer facing roles and is the first time in eight years we have grown the work force
in the support of growth.
Our 2016 employee effectiveness survey conducted by Korn Ferry Hay Group resulted
in our overall engagement and enablement levels continuing to be above other Australian
organisations for both measures at 73% and 72% respectively (+7). High engagement and
enablement is key to building a high performance culture.
This focus on building a high performance culture will continue across the business.
Again, we had significant participation in the 2016 performance review process, with
more than 95% of employees setting and reviewing against objectives. Supporting this,
we continued with incentive plans that align shareholder expectations and employee
performance with reward.
We are proud to continue our investment in the training and development of our people,
with more than 182 leaders participating in our Leadership Development Programs from
future leader level through to our experienced senior leaders; more than 14 trainees
were inducted into the Stock and Station Agency Traineeship Program; and a further 3
agronomy graduates accepted into a new Agronomy Graduate Program, in the 2016 year.
We continue to work towards improving the diversity of our workforce, particularly in
regards to gender diversity in leadership positions. As the Chairman noted in his address,
this year we saw significant gains at Executive level, role modelling a 200% increase of
female leaders, with a shift from 1 to 3 females on the Committee. The representation of
women within Elders’ workforce is 36% which is comparable to the agricultural sector.
Our clients
In the past 12 months we’ve made significant progress towards our client relationships,
particularly within the digital space.
In June this year we launched our new online client community Elders Insiders.
Developed as an Eight Point Plan initiative, Elders Insiders is a real-time voice for Elders’
community, providing us with customer satisfaction and feedback, and a deeper level of
information and answers to key decisions that meet the needs of our clients. In just three
months, the platform has provided instant feedback and insights from our customers
about safety, an Elders Weather App, customer loyalty programs and retail promotions.
In addition, we have also launched a new website and Elders Online client portal,
providing clients with an online solution to access their account information and email
communication preferences. We’ve also launched the Red Notebook App and audio
market report functionality, which allows clients to listen to any market report on
demand, following a sale or event.
We are focussed on ensuring new information is at the fingertips of our clients,
and assisting them in making the best decisions for their individual business needs.
Our communities
This year, we again engaged in regional sponsorship agreements in key focus regions,
ensuring we support and invest back into communities in which we operate.
Key sponsorships included the New South Wales Country Eagles, and the North
Queensland Cowboys which were strategic investments into rural areas with
opportunities for a greater Elders presence and community support.
In 2016, Elders supported a number of charities and non-government organisations,
including the Royal Flying Doctors Service and their work in providing medical assistance
to people living, working and visiting rural and remote Australia. At a corporate level,
Elders is a sponsor of the Little Heroes Foundation, and was recently inducted into the
Real Estate Institute of South Australia’s Hall of Fame for community involvement.
10
2016 Annual Report — Elders. Live it. CEO's Report
Efficiency and growth
Now, more than ever, we are focussed on efficiency and
growth, and ensuring Elders is positioned as Australia’s leading
agribusiness.
As a result, we have expanded our presence in Tasmania,
successfully integrated several acquisitions across real estate,
agency, retail, and financial services and we have launched a new
Elders Grain platform. And our 90 day improvement program
continues to lift branch performance across the network.
Eight Point Plan
The Eight Point Plan is our strategic vision for becoming
an efficient user of capital and a business that produces
acceptable returns for all our stakeholders while servicing
our customers’ needs.
As we progress into our final year of Elders’ Eight Point Plan,
we are now in a position to reset our strategic intent and focus
on our path to 2020 as a profitable agribusiness.
Clear opportunities exist for us to grow our digital and technical
services offering, adding further value and productivity for our
stakeholders.
It is evident from the ideas and initiatives that are being
implemented, that we have an experienced team, and the right
people within the business to take control of our own future.
Closing remarks
We are well aware that until the business is in a position to be
distributing dividends to you as our shareholders, we have not
achieved success. With that said, our capital structure is no
longer an impediment to this, and so it is our goal to start paying
dividends in December 2017.
As shareholders, you can be confident that Elders is now in a
strong position for growth, focussed on the future, and delivering
greater value for our key stakeholders.
On behalf of our hard working team of employees right across
the business, we thank you for your ongoing support and we look
forward to the next 12 months ahead.
Mark Allison
Managing Director
11
Internationally, Elders has a strong, ongoing
focus on supporting the Indonesian villages
in which we operate, with donations to local
mosques and supporting communities with
sporting equipment including upgrades
of facilities. In 2016, Elders Indonesia also
formed a key partnership with the Indonesian
Olympic weightlifting team, supplying 12
kilograms of Australian beef per week in the
lead up to the Rio Olympic Games, which
was a strategic opportunity to showcase
Elders’ Killara Black Angus Beef product, into
a new market.
In China, this year we have partnered with
the Australia-China Youth Association to
host an internship program with Elders
China. The program provides opportunities
for Australian youth who have shown
a commitment to the Australia-China
relationship to develop their skills and
gain experience in a professional work
environment in China.
At a community level in Australia, Elders
branches continue to support a wide range
of local initiatives and charities and many
of our employees participate in community
service activities.
Our suppliers
In the farm supplies and fertiliser space
we have made progress with our supplier
relationships, forming a new agreement
with CSBP in Western Australia for fertiliser
supply, and securing supplier registrations
for Elders home branded products.
We’ve continued to develop and implement
a capital light/return on capital driven
business model, rationalising and refocusing
our relationships with our supply partners to
develop mutually beneficial business models.
Our customers
We continue to focus on new opportunities
for growth and new markets, particularly
in our livestock and feed and processing
businesses. We have successfully launched
the new Killara Black Angus product in
Jakarta and Bali, Indonesia, providing high
end restaurants with high quality, Australian
beef. To support these growth plans in
Indonesia, this year saw the opening of
a new Elders Bali sales office.
We continue to invest in the education of and
compliance of our customers, and we ensure
welfare standards are executed well above
and beyond industry standard.
12
Elders has this year partnered
with SwarmFarm Robotics to help
develop three agricultural robots,
as a viable alternative to heavy
farming machinery.
The technology comprises of small, lightweight robots that have capabilities
to traverse fields 24 hours per day, seven days per week, using sensor
technology to precisely identify weeds and apply pesticides on the move.
The robots are able to ‘talk’ with each other when working in the same area,
which relates to their ‘swarm’ name encompassing advanced technologies
going about their duties on-farm. The smart robots can even work out which
part of a paddock has already been sprayed and take themselves to the
closest fuel tank to re-fuel if supplies are running low.
The innovation is designed to take some of the hard labour out of farming,
giving the jobs of planting, weed control, insect control, fertiliser application,
irrigation and harvesting to robots.
There has been significant talk of disrupters within different industries, and
the agricultural industry has been a key point of conversation surrounding
this. Investing in innovative, forward thinking, progressive technology that
could impact the production of Australian cropping and increase the demand
for Australian produce has the ability to prove as a disrupter – especially with
Asia’s growing appetite for cleaner, greener produce.
Elders’ National Technical Services Manager, Graham Page said robotics
could be the future of agricultural practice across the country but did hold
significant potential for Queensland farmers where SwarmBots are currently
being developed.
“We think it’s going to assist farmers greatly in Queensland, it will help to
reduce the cost of their operations through machinery and labour, and will
support their endeavours to be environmentally friendly,” he said.
“We have had a lot of interest so far and one thing I’ve always been proud
about in agriculture is that farmers are always quick to embrace new
technology,” he said.
Mr Page said robotics technology had the potential to enhance farm
efficiency and take agriculture to the next level, following on from advances
in precision agriculture, minimum tillage and controlled traffic farming.
“Farm management practices are coming under increasing pressure and
compliance issues will become more pressing for farmers in the future.”
“For Elders, the development of robotics has huge implications for agronomy,
so our partnership with SwarmFarm Robotics will enable us to take an early
lead in understanding how this technology works and how we can help our
clients apply it,” he said.
Elders’ partnership with SwarmFarm robotics means clients have insight to
the most up-to-date research, technology and information.
Agricultural robots leading the way
We have had a lot of
interest so far and
one thing I’ve always
been proud about
in agriculture is that
farmers are always
quick to embrace
new technology.
13
14
15
Year ended 30 September20162015Continuing sales revenue$m 1,425.21,307.9Underlying EBITDA$m59.843.6Underlying EBIT$m56.240.5Underlying financing costs$m9.49.4Reported profit after tax$m51.638.3Underlying profit after tax$m43.929.7Net debt$m86.1136.2Shareholders’ equity$m186.5111.6Operating cash flow$m48.7(5.3)Reported earnings per share (basic)cents56.946.4Reported earning per share (diluted)cents48.733.0Underlying earnings per share (basic)cents45.433.9Underlying earnings per share (diluted)cents38.924.1Key RatiosEBIT margin (underlying EBIT to sales)%3.93.1Underlying return on capital%28.421.9Leverage (net debt to underlying EBITDA)time1.43.1Interest cover (underlying EBITDA to net interest)times6.34.7Gearing (net debt to equity)%46122Key Share DataELD share price$3.873.82Market capitalisation$m440.6319.9Number of ordinary shareholders15,75914,515Ordinary shares on issue113,859,44083,734,671ELDPA security price$96.2275.52Number of hybrid holders5431,059Hybrid securities on issue*1,500,0001,500,000* Elders Finance Pty Ltd (wholly owned subsidiary of Elders Ltd) owns 1,080,585 hybrid securities. 16
Safety performance
— Lost time injury rate reduced from 14 to 4
— Lost time injury frequency rate reduced
Key relationships
— Online client community developed
— New agreement with CSBP in WA
from 3.4 to 1.0
for fertiliser supply
— Employee safety engagement stable at 83%
— Expanded digital offerings
Operational performance
— $51.6 million reported profit after tax,
up $13.3 million
— $41.2 million underlying profit after tax,
up $13.2 million
— EBIT margin lifted to 4% from 3%
— Return on capital at 28.4%, up from 21.9%
— Cessation of long haul and managed
divestment of short haul Live Export
Efficiency and growth
— Expanded presence in Tasmania
— 30% acquisition of StockCo
— 10% acquisition of Elders Insurance
— Elders Grain platform launched
— $97m net capital raised to fund
hybrid acquisition
17
18
Elders is focused on creating value
for all of its stakeholders in Australia
and internationally.
We achieve this through approximately 1,900 employees
in more than 440 points of presence across Australia,
China and Indonesia. Our people use their expertise and
knowledge to provide primary producers with the inputs,
advice, marketing options and trading platforms that are
central to get the most out of their own businesses.
In Australia, Elders works closely with primary producers
to provide products, marketing options and specialist
technical advice across retail, agency and financial product
and service categories. Elders is also a leading Australian
rural and residential property agency and management
network. This network includes both company owned and
franchise offices operating throughout Australia in both
major population centres and regional areas. Our feed and
processing business operates a top-tier beef cattle feedlot
in New South Wales, an integrated beef supply chain in
Indonesia and a premium meat distribution model in China.
Elders is an important part of the Australian rural landscape
that draws on its proud history, service and innovation.
19
Profit and Loss
Profit: Reported and Underlying
$ million
Sales
FY16
FY15
Change
1,425.2
1,307.9
117.3
Australian Network
Feed and Processing Services
Corporate Services and unallocated costs
Underlying EBIT
Finance costs
Underlying profit before tax
Tax
Non-controlling interests
Underlying profit to shareholders
Items excluded from underlying profit
Reported profit after tax to shareholders
Chart 1—Underlying EBIT by product ($million)
14.2
(4.7)
6.2
15.7
-
15.7
(1.5)
(1.0)
13.2
0.1
13.3
89.8
3.8
(37.4)
56.2
(9.4)
46.8
(2.9)
(2.7)
41.2
10.4
51.6
75.6
8.5
(43.6)
40.5
(9.4)
31.1
(1.4)
(1.7)
28.0
10.3
38.3
)
1
.
8
4
2
(
)
4
.
1
5
2
(
2
.
1
1
1
3
.
6
2
1
2
.
6
0
1
4
.
1
1
1
5
.
7
2
2
.
9
2
4
.
5
2
2
.
6
2
3
.
8
1
5
.
4
1
5
.
0
4
2
.
6
5
FY16
FY15
Retail
Products
Agency
Services
Real Estate
Services
Financial
Services
Feed and
Processing
Services
Costs
Underlying
EBIT
Chart 2—Underlying EBIT by geography ($million)
7
.
6
2
.
8
0
3
0
.
7
3
3
.
1
4
.
4
8
1
5
.
2
2
0
.
2
)
0
.
1
(
5
.
0
4
2
.
6
5
FY16
FY15
)
6
.
3
4
(
)
4
.
7
3
(
Northern
Australia
Southern
Australia
Western
Australia
International
Corporate and
unallocated costs
Underlying
EBIT
20
2016 Annual Report — Elders. Live it.
Chart 3—Underlying profit movement ($million)
Product margin
1.7
5.2
0.8
(3.8)
(3.3)
(2.5)
41.2
15.1
28.0
FY15
underlying
profit
Retail
Products
Agency
Services
Real Estate
Services
Financial
Services
Feed and
Processing
Services
Costs
Interest, tax
and NCI
FY16
underlying
profit
Key movements in profit resulted from:
— Retail Products: Improved sales activity with favourable seasonal conditions across the
country, especially dryland cotton areas. Increased chickpea plantings in the eastern states
generated increased demand for agricultural chemicals. Geographical expansion, price book
management and ongoing branch improvement plans also supported the improved result.
— Agency Services: Continued high cattle prices and increased footprint drove improved
livestock earnings. Higher grain earnings arose from the launch of the new Elders Grain
platform.
— Real Estate Services: Strong demand for large cattle farming and cropping properties
resulted in higher real estate earnings. Property management earnings increased through
property management acquisitions during the year.
— Financial Services: Significant growth in StockCo livestock funding balances resulted in
higher commission earnings. Insurance earnings were buoyed by dividends received as a
result of Elders’ 10% acquisition of Elders Insurance (Underwriting Agency) from QBE during
the second half of the financial year.
— Feed and Processing Services: Profitability was adversely impacted by the high cost of
Australian cattle which put margins under pressure across all three businesses and reduced
occupancy at the Killara feedlot. The overseas businesses were also impacted by a robust
AUD exchange rate.
— Costs: Increased costs resulted from strategic acquisitions during the year, offset by
continued active cost reduction and management in Corporate areas.
The statutory result included a number of items that are unrelated to operating financial results.
Measurement and analysis of financial results excluding these items is considered to give a
meaningful representation of like-for-like performance from ongoing operations (“underlying
profit”). Underlying profit is a non-IFRS measure and is not audited or reviewed.
Items excluded from underlying profit are:
$ million
FY16 Commentary
Live Export Services
(14.9) Operational losses and exit costs relating to
the Live Export business
Impairment of Elders Financial Planning
(1.0)
Impairment of investment to recoverable value
Tax Asset Adjustment
Other
Items excluded from underlying profit
26.9
Recognition of tax losses based on improved
profitability and tax effect on above items
(0.6)
10.4
Financial Review
Elders’ FY16
underlying
profit improved
by $13.2m
to $41.2m
compared
to last year.
21
Balance Sheet
Key Items
$million as at end:
Inventory
Livestock
Trade and other receivables
Trade and other payables
Working capital
Borrowings: working capital and other facilities
Cash and cash equivalents
Net debt
Provisions
Shareholders’ equity
Underlying return on capital
Sept-16
Sept-15
Change
109.6
36.1
381.3
(335.4)
191.6
(121.3)
35.2
(86.1)
(47.0)
186.5
28.4%
100.3
45.9
349.4
(276.1)
219.5
(136.9)
0.7
(136.2)
(52.3)
111.6
21.9%
9.3
(9.8)
31.9
(59.3)
(27.9)
15.6
34.5
50.1
5.3
74.9
6.5%
Working capital
Working capital as at September 2016 was 12.7% lower than September 2015.
This improvement was as a result of:
— Stable working capital in Retail despite higher sales activity as a result of focus
on return on capital
— Lower Live Export due to wind down of long haul business and reduced shipping
activity in September for short haul due to delays in Indonesian import permits
Average working capital deployed during FY16 was $216.0 million compared to
$215.1 million in FY15.
Provisions
Provisions decreased during the year mainly due to payment of make good costs
relating to the Currie Street office and reduction in onerous leases resulting from the
expected sale of forestry plantation assets, offset by Live Export exit provisions raised
at September 2016.
Net debt
Net debt of $86.1 million as at September 2016 was $50.1 million lower than September
2015. This improvement was driven by positive cash generation through the operating
result, disciplined capital usage and excess cash held from the equity capital raise and
hybrid acquisition. Borrowings as at September 2016 solely relates to working capital
funding for Retail and short haul Live Export.
Shareholders’ equity
Shareholders’ equity increased
by $75 million to $187 million as a
result of a $97 million net equity
capital raise completed in June
2016 and the FY16 net profit, offset
by $67 million hybrid acquisition
in 2016.
As at 30 September 2016, there
remains 419,415 hybrids not owned
by Elders.
Return on capital
Elders’ underlying return on
capital for the FY16 financial
year was 28.4%, an improvement
of 6.5% on prior year. The Live
Export operating results and
working capital are excluded from
underlying return on capital. Key
drivers of the improvement were:
— Stronger EBIT generation,
along with lower average
working capital balances in
Retail
— Continued EBIT improvement
in the Agency business, driven
by livestock and real estate
performance
— Disciplined cost and capital
allocation based on business
case approval
22
2016 Annual Report — Elders. Live it. Cash Flow
$million
Operating cash flow
Investing cash flow
Financing cash flow
Total cash flow
Chart 4—Cash flow ($million)
Working capital movements
13.6
(17.2)
10.8
(10.6)
59.1
3.1
(1.5)
(8.6)
FY16
48.7
(27.3)
13.1
34.5
FY15
Change
(5.3)
(6.0)
(10.5)
(21.8)
54.0
(21.3)
23.6
56.3
48.7
(6.0)
42.7
EBITDA
Retail
Products
Agency
(inc. Real
Estate)
Financial
Services
Feed and
Processing
Services
Live Export
Other
Interest,
tax and
dividends
Operating
cash flow
Capex
Free cash
flow
Highlights from the FY16 cash flow were:
— $59.1 million EBITDA cash flow generation
— Better working capital cash flow usage reflecting:
–Improved supplier trading terms in the Retail business
–Reduced inventory in the long haul Live Export business resulting from the wind down
$million
Retail
Products
Agency
Services
Financial
Services
Feed and
Processing
Services
Live
Export
Other
Total
Adjusted EBITDA
Movement in assets and liabilities
Interest, tax and dividends
41.4
13.6
40.9
(17.2)
10.9
3.1
5.4
(1.5)
(9.5)
10.8
(30.0)
(10.6)
(8.6)
59.1
(1.8)
(8.6)
Operating cash flow
55.0
23.7
14.0
3.9
1.3
(49.2)
48.7
Investing outflow of $27.3 million included acquisition of 10% stake in Elders Insurance (Underwriting Agency)
in April 2016, other bolt-on acquisitions and facility upgrades at Killara.
Financing inflow of $13.1 million mainly resulted from included net proceeds of $97 million relating to the
equity capital raise during June 2016, offset by the hybrid on-market acquisition for $67 million and $16 million
pay down of debt.
Financial Review
23
24
25
Retail margin ($m)
126.3
114.3
102.1
105.9
111.2
FY12
FY13
FY14
FY15
FY16
Margin by product
79%
Farm Supplies
17%
Fertiliser
4%
Other
Margin split by geography
22%
West
40%
South
38%
North
Retail Products
Elders is one of Australia’s leading suppliers of rural
farm inputs including seeds, fertilisers, agricultural
chemicals, animal health products and general
rural merchandise. We also provide professional
production and cropping advice with over 110
agronomists nationwide.
Performance
Retail performance improved by $15.1 million in FY16. Favourable cropping
conditions prevailed during the year, particularly throughout New South
Wales and southern Queensland. All geographies outperformed last year,
especially in northern Australia. Renewed confidence in dryland cotton
areas and a significant uplift in chickpea plantings in New South Wales
drove strong demand for agricultural chemicals. Falling commodity values
stimulated demand for fertiliser products with the lower pricing increasing
grower appetite for multiple fertiliser applications. Working capital efficiency
improved in FY16 through improved supplier arrangements and increasing
usage of consignment stock. This, in addition to higher profitability, led to
an increase in the business’ return on capital to 18%, from 8% in FY15.
Strategy
To improve the business model of our farm supplies and fertiliser products.
Strategy
Achievement
Plan
Capital light, return
on capital driven
business model
— Implementation of
consignment stock
programs with key
suppliers in major branches
— Improvement in supplier
trading agreements;
increased deferred
payment terms, increased
target rebates
— Improve product ranging
within key animal health
and agricultural chemicals
categories
— Continue to focus on
margin improvement
through price book
management
Product focus
— Successful negotiation
of CSBP Fertiliser supply
agreement in Western
Australia
— Increase support of agency
products and consignment
locations
— Introduce Elders home
branded products
— Build on customer loyalty
through provision of
agronomy services
People
— Recruited high performing
staff in Tasmanian and New
South Wales region
— Continue recruitment
of talent in growth areas
— Launch Agronomy Centre
of Excellence
26
2016 Annual Report — Elders. Live it. Agency Services
Elders provides a range of marketing options for
livestock, wool, and grain.
Livestock
The Elders livestock network comprises livestock agents and employees
operating across Australia conducting on-farm sales to third parties,
regular physical and online public livestock auctions and direct sales
into Elders-owned and third-party feedlots and livestock exporters.
Wool
Elders is one of the largest agents for the sale of Australian greasy wool and
operates a brokering service for wool growers. Our team of dedicated wool
specialists assist clients with wool marketing, in-shed wool preparation, ram
selection and sheep classing.
Grain
Elders’ new accumulation model supporting multiple buyers was launched
during FY16, offering a cutting edge commodity origination platform,
maximising choice for growers.
Performance
Livestock
Cattle prices and footprint expansion drove margin improvement of $5.2
million. Cattle and sheep prices remained high throughout the year and rose
on average 27% and 4% respectively. Cattle prices were driven by continued
strong domestic demand, driven further by tightening supply. Wet conditions
in the second half of FY16 limited livestock movements adding further pressure
to supply.
Wool
The national clip was down 8% on last year. Elders was able to maintain margin
and increase market share, improving volumes sold by 3,500 bales.
Grain
Elders’ new grain platform was launched in December 2015, accumulating in
excess of 0.4 million tonnes, broadly in line with FY15.
Strategy
To strengthen and expand our wool, livestock, and grain products.
Strategy
Achievement
Plan
Operating model
— Livestock electronic sale
contracts initiative rolled
out
— Increase agency
opportunity and earnings
through StockCo expansion
— New grain platform
— Continue livestock,
launched in December 2016
— Agency footprint expansion
into southern New South
Wales
People
— Key grain operatives
recruited
wool and grain product
development to improve
and expand offering
— Continue footprint
expansion through targeted
acquisition
— Selective recruitment
of livestock and wool
personnel
Review of Operations
Agency margin ($m)
95.9
90.5
78.8
106.2
111.4
FY12
FY13
FY14
FY15
FY16
Margin by product
85%
Livestock
15%
Wool
Margin split by geography
16%
West
52%
South
32%
North
27
Real Estate Service
Elders’ real estate services include company owned
rural agency services primarily involved in the
marketing of farms, stations and lifestyle estates.
It also includes a network of residential real estate
agencies providing agency and property management
services in both major population centres and regional
areas through company owned and franchise offices.
Other services include water and home loan broking.
Performance
Real estate generated margin of $29.2 million in FY16. The growth in earnings
was primarily driven by strong demand for large cattle farming and broadacre
cropping properties, together with the expansion of the property management
business through property management acquisitions.
Strategy
To strengthen and expand our real estate offering.
Real Estate margin ($m)
26.7
26.2
27.0
27.5
29.2
FY12
FY13
FY14
FY15
FY16
Margin by product
69%
Agency
31%
Property Management
Strategy
Achievement
Plan
Margin split by geography
Operating model
— Expansion achieved
through strategic
acquisitions in Toowoomba,
Darwin and the Riverland
— Increase company owned
presence in major regional
centres
— Ongoing focus on
— New franchise offices
productivity and efficiency
13%
West
36%
South
51%
North
opened
— Management renewal
in Elders Home Loans
business with full
ownership
— Strong pipeline of
acquisitions
— Key management positions
appointed: GM Real Estate
and National Head of
Residential Real Estate
— Sales workforce
strengthened with quality
recruits appointed across
all zones
— Elders real estate profile
enhancement
— Aggressively expand
franchise network
— Recruitment of high
performing sales
representatives in both the
broadacre and residential
agency business
— Recruitment of home loan
brokers
— Increased productivity
through improvement
initiatives and training
People
28
2016 Annual Report — Elders. Live it. Financial Services
Elders distributes a wide range of banking, funding,
insurance and financial planning products through
its Australian network.
We work with a number of third parties to enable us to deliver these products;
Rural Bank and StockCo for banking and livestock funding products and
Elders Insurance (a QBE subsidiary) for insurance. Elders Financial Planning is
facilitated through a joint venture with Millennium 3 (part of the ANZ Group).
Collectively, these relationships enable us to offer a broad spectrum of
products designed to help our customers grow their business (e.g. term loans,
seasonal overdrafts, livestock funding), manage risk (e.g. farm insurance,
vehicle insurance) and create and protect personal wealth (e.g. life insurance
and investment products).
Performance
Banking and livestock funding products: Margin improved by $0.3 million in
FY16, largely driven by increased activity for our livestock finishing funding
product offered through StockCo. Elders acquired 30% equity in StockCo’s
Australian operations in October 2016 which will boost earnings going forward.
Insurance: Margin improved by $0.4 million as it was bolstered by dividends
received as a result of the 10% acquisition Elders Insurance (Underwriting
Agency). Gross written premium was broadly in line with last year.
Strategy
To strengthen and expand our distribution of banking, financing, insurance and
financial planning products.
Strategy
Achievement
Plan
Deeper, more
productive
partnerships
Increased market
awareness and
cross-sell within
Elders
Salesforce
effectiveness
— Acquired 10% of Elders
— Investment in aligned
Insurance
— Acquired 30% of StockCo’s
Australian livestock funding
business, completed in
October 2016
financial service product
providers
— Increase activity through
referrals from other
products
— National television
— Continue advertising
marketing campaign for
Agri Finance
— Internal “Who’s your
banker” referral campaign
generated $250 million in
new banking leads
investment
— Further internal referral
campaigns to drive cross-
sell of Financial Services
products to Elders
customers
— Financial services
— Collaboration with
organisational restructure
Rural Bank to improve
productivity and efficiency
of sales team
Review of Operations
Financial Services margin ($m)
25.8
25.8
26.2
25.4
24.2
FY12
FY13
FY14
FY15
FY16
Margin by product
80%
Banking
19%
Insurance
1%
Financial
Planning
Margin split by geography
25%
West
47%
South
28%
North
29
Feed and Processing margin ($m)
18.3
14.7
13.5
14.5
10.9
FY12
FY13
FY14
FY15
FY16
Margin by product
67%
Killara (Aus)
21%
Indonesia
12%
China
Margin split by geography
12%
China
21%
Indonesia
67%
Australia
Feed and Processing Services
In Australia, Elders operates Killara Feedlot, a
beef cattle feedlot near Tamworth in New South
Wales. In Indonesia, Elders operates an integrated
feedlot, abattoir and meat distribution business.
Elders imports, processes and distributes premium
Australian meat in China.
Performance
High Australian cattle prices impacted input costs for all Feed and Processing
businesses, adversely impacting margins across the board.
Killara Feedlot
The feedlot had a challenging year with margins $1.5 million lower than last
year, due to margin pressures and lower occupancy. Feedlot occupancy
was impacted by supply issues and unfavourable weather conditions which
hindered productivity.
Indonesia
Margin for the Indonesian business was $1.5 million lower than last year. High
input costs in the feedlot, along with pricing pressures created by cheaper
substitute products in the consumer market significantly impacted profitability.
China
The Elders China business posted margins $0.8 million lower than last year.
High input costs coupled with pricing pressures in the market for beef
products in the Chinese market adversely impacted margins. Expansionary
costs and unfavourable foreign exchange movements also impacted
profitability of the business.
Strategy
To improve and expand our feed and processing business.
Strategy
Achievement
Plan
Robust systems
— Implementation of ERP
Return on capital
focus
systems in both Indonesia
and China businesses
— Sales offices established in
new Chinese locations
— Scheduled 2 year capital
upgrade plan at Killara in
progress
— Abattoir capacity
optimised in Indonesia with
introduction of external
custom processing
— Animal health division
exited within the
Indonesian business
— Improve reporting and
transparency allowing
effective decision making
— Improve procurement
strategies through
backgrounding and use of
external facilities for Killara
— Sale of non-core assets
within the Indonesian
business
— Allocation of capital based
on approved business case
discipline
Integrated red
meat supply chain
— Killara branded product
— Increase focus on higher
line launched and
distributed in China and
Indonesia
margin markets
— Expansion of Killara
branded product in Bali
market
30
2016 Annual Report — Elders. Live it. Review of Operations
Live Export Services
During September 2016, Elders announced it
would exit the live export business, with immediate
cessation of the long haul business and a managed
divestment of the short haul business as a going
concern. As such, the operating result for the business
is excluded from underlying profit.
The live export business exports live dairy, feeder, slaughter and breeding
cattle and breeding sheep to well-developed, ESCAS approved, supply chains
in a range of international markets. Livestock are transported by sea or air
freight depending on the market requirements.
Performance
Long haul
The business generated an operating EBIT loss of $6.1 million largely due to the
slowing of dairy breeder cattle imports into China. Consequently, the excess
shipping capacity that resulted was utilised across the long haul and short haul
businesses to offset the fixed shipping charter costs.
Short haul
The business generated an operating EBIT loss of $2.8 million. Key factors that
adversely impacted the business in FY16 were the timing of Indonesian import
allocations, oversupply of the newly opened Vietnamese market driving margin
down, high cost of Australian cattle and low margin contracts fulfilled to offset
fixed shipping charter costs.
In addition, costs relating to the exit from Live Export were $6.0 million.
Strategy
Managed divestment of the short haul business and immediate cessation
of long haul live export trading operations.
Live Export margin ($m)
17.1
11.0
11.4
(18.8)
(2.8)
FY12
FY13
FY14
FY15
FY16
Margin by product
50%
Dairy cattle
11%
Feeder/
slaughter
cattle
12%
Sheep
27%
Other
Margin split by geography
9%
China
31%
Vietnam
8%
Other
52%
Indonesia
31
The future financial performance of
Elders will, as always, be subject to
the influence of seasonal, market and
international trade relation factors that
affect the Australian farm sector.
32
Outlook
At the date of this report, the following
conditions are forecast:
Retail Products:
— Cooler and wetter than average
conditions are likely to prevail for most
of Australia for the remainder of the
2016 calendar year, which is expected
to improve summer crop plantings in
sorghum, rice and cotton.
— Acquisitions during the FY16 year are
expected to deliver further benefits
during FY17. Retail will continue to
pursue further acquisitions in FY17.
— The CSBP fertiliser supply agreement
is expected to boost earnings in
Western Australia.
Agency Services:
— Cattle prices are expected to remain
well above long term averages, driven
by restocker demand and reduced
supply.
— Livestock volumes are expected to
be strong in the first half of FY17 with
good feed availability across most of
Australia.
— Grain activity is expected to be strong
with the new Elders Grain platform
operational for a full harvest season.
New grain product offerings are
expected to deliver additional benefits.
Real Estate Services:
— Positive real estate activity driven by strong demand for
large scale agricultural properties, low interest rates and
recruitment initiatives.
— Property management earnings will benefit from property
management acquisitions completed during FY16, with
potential for additional uplift in earnings arising from the
pipeline of business development opportunities.
Financial Services:
— Banking and livestock funding products will benefit from
Elders’ 30% acquisition of StockCo in October 2016 and
increased demand for the funding to purchase livestock,
assuming continued strong livestock prices and availability
of feed.
— Uplift in Insurance earnings resulting from the full year 10%
ownership of Elders Insurance.
Feed and Processing:
— Killara: Occupancy is expected to improve in FY17
with improved availability of spring cattle and better
feedlot efficiency.
— Indonesia: Performance of our Indonesian feedlot is highly
dependent on the volume of cattle import permits issued
by the Indonesian government.
— China: Improved results are expected to follow FY16
investment in business expansion.
Costs and Capital:
— Continued focus in controlling base costs and improving
productivity measures for the business.
— Investment in strategic and growth initiatives will increase
cost and capital usage in FY17.
33
Elders Insiders is the new voice
for the Elders community.
Developed in line with the Eight Point Plan, the
customer satisfaction and feedback program
has been created to provide a deeper level of
information and answers to key decisions that
meet the needs of Elders’ clients.
34
Elders Insiders
The online community allows clients,
staff and business partners to share
feedback, ideas and suggestions that
are used to shape the business. Elders
can proactively reach out to specific
groups within Elders Insiders with
questions or request feedback on a
potential initiative. In just three months
since it was launched, the community
has proven to be extremely useful in
gaining deeper insights into safety, the
new Elders Weather App, customer
loyalty and retail promotions.
Elders marketing manager Yasmiin
Phillips assisted in setting up Elders
Insiders for the benefit of the business
and the wider Elders community.
“I hope that clients see it as a way to
help shape our business going forward
and at a staff level – it also allows us to
better track employee engagement or
new ideas from within.”
One Elders Insiders member said it is
a valuable tool because any feedback
from the end user is useful.
“Farmers are typically at the end
of the chain and don’t get many
opportunities for feedback.”
Another Elders Insiders member said
it shows that Elders cares about its
services and products and is genuine
in its attempt to do better for its
customers.
“It’s important for me to contribute
to Elders Insiders so the company can
improve its service to customers.”
eldersinsiders.com.au
Elders Insiders Safety
Survery Results:
Level of understanding of safety
obligations within the workplace:
Major health issues in regional
Australia:
Greatest safety risks on farms:
1—quad bikes
2—tractors/machinery
3—working with livestock
Elders Insiders Weather App
Survey Results:
Elders released an exclusive sneak peek
of the new Elders Weather App to the
community members. Elders Insiders had
the chance to help shape the development
of the App and ensure it best suited the
needs of clients and their businesses.
It was great to see that respondents
had no issues with downloading the
apps:
New users (70%)
Apple (71%)
Exisitng users (30%)
Android (29%)
62% said they would upgrade
to the silver subscription.
Over 60% of responses to all
feature questions were
excellent or very good.
Feedback was very positive and
as such, Elders have now launched
the new Elders Weather App to the
market:
Over 40,000 downloads
to date.
35
High-level understandingLow-level understandingMental health(78.85%)Work accidents(60.79%)Personal reluctance to seek help (57.93%)
36
Achievement of our business
objectives could be affected
by a number of risks that might,
individually or collectively,
have an impact.
Set out overleaf is an overview of key risks Elders
faces in seeking to achieve our objectives. The risks
noted are not exhaustive and are in no particular
order. Elders seeks to control, manage and monitor
these risks wherever practicable in order to maximize
opportunities and reduce and prevent losses.
Elders’ risk appetite is set by the Board and
prescribed in the Elders Risk Management Framework
and Policy. The Executive Committee adheres to the
risk management framework and actively monitors,
manages and treats all risks, maintaining a keen
focus on those risks that have a higher rating than
the desired appetite and continually assessing the
operational and strategic environment for new and
emerging risks.
These risks are reported to the Board Audit, Risk
and Compliance Committee on a periodic basis
to ensure the Board is adequately informed of the
current risk environment.
More detail on Elders approach to managing risk is
contained in the Corporate Governance Statement
on Elders’ website at investors.elderslimited.com/
investor-centre/?page=corporate-governance.
37
Material Business Risk
Health and safety
Our strategy
Safety risk is inherent in Elders’ business activities. The safety of Elders’
people, clients and the general community is our number one priority.
Key safety risks include livestock handling, remote driving, manual
handling and chemical handling.
The safety of our people and an effective safety culture within Elders
is a critical and non-negotiable corporate objective. Through the
implementation of a safety management system based on continuous
improvement, we reduce risks which may impact our operations. In
support of the Eight Point Plan and strategic objectives, we have delivered
an innovative engagement safety campaign “Stand Up Speak Up” which
focuses on increasing and normalising safety conversations and provides
relevant tools to manage risks that can affect our people and business
on a daily basis.
Animal welfare
The safety and welfare of livestock is of paramount importance to
Elders and the company has controls in place to ensure the wellbeing
and proper treatment of all animals within our control. Failure to protect
the welfare of livestock in our control might result in stakeholder activity
and reputational damage.
Elders has “zero tolerance” for poor treatment of livestock and our people
are trained in safe livestock handling protocols and methods. Elders
complies with and strives to exceed, all government requirements including
those applicable to the live export of animals. In addition we actively
engage with the industry and stakeholders to improve animal welfare
practices where possible.
Live Export
Elders sources, procures and transports livestock to fulfil live export
contracts and through these processes may be exposed to risk including
pricing, inventory traceability and ship chartering.
Elders manages these risks through documented controls outlined in the
Board-approved Live Export charter, including position limits, forward
purchasing and sales contracts, inventory control systems, processes
and procedures, and the development of inventory programs to minimise
risk associated with availability and pricing movement.
Further, during the financial year, Elders announced a managed exit
from live export which will completely mitigate these risks.
Commodity pricing
Elders has exposure to commodity price fluctuations in its Agency, Retail,
Live Export (discussed above) and Feed and Processing operations where
movements in commodity prices, exchange rates and/or a change in the
volume of Australian rural production could affect margins in the future.
Exposures are managed through diversification of income streams
by product and geography, controlled inventory levels and flexible
remuneration models for the Agency business which allow for cost
base adjustments in response to fluctuations.
Adverse climatic conditions
Adverse climatic conditions and other natural events may reduce the
output of relevant agricultural products and affect the operation of Elders’
business. Natural events, caused or affected by weather, such as frost,
drought, flood and fire can have an impact. Such conditions can influence
the demand for rural products and services provided by Elders, resulting
in varied revenue levels.
Biosecurity threats
To limit the impact of the above risks Elders maintains both a geographical
spread of operations and a diverse product and service range.
Biosecurity threats to agricultural products and livestock may affect Elders’
business. An outbreak of a systemic animal or plant disease can lead to
quarantine conditions in rural Australia and reduce producers’ need for
goods and services or affect their ability to operate.
To manage the impact, Elders has in place employee training and disease
management protocols. In addition, Elders also has a business continuity
framework in place to respond to and recover from the risk of disruption.
38
2016 Annual Report — Elders. Live it. Material Business Risks
Material Business Risk
Food safety
Our strategy
Through our Feed and Processing operations, Elders handles livestock
within the food safety chain prior to and during processing in which risk
of contamination exists.
This risk is managed through HACCP accreditation in meat processing
plants and strict animal health controls within the feedlots.
Fraud and corruption
Elders is exposed to financial fraud, bribery and corruption risks, including
in foreign markets in which it operates.
Counterparty
Elders’ client base is wide and varied. We provide credit to approved
counterparties, both domestically and internationally, and may be exposed
to losses associated with a client’s inability to repay debt.
Elders has numerous controls to counter these risks, including appropriate
segregation of duties, the terms of its Code of Conduct, compliance
policies, fraud policy, anti-bribery and corruption policy, training
throughout the business, financial orientated reconciliation processes,
whistle-blower policy, reporting hot-line, leave management protocols
and an Internal Audit program which is complemented by periodic reviews
conducted by the external auditor.
This risk is managed by individual counterparty risk assessments,
maintaining credit policies and procedures, oversight by the Credit
Committee, debtor monitoring and reporting, trade credit insurance
(for major debtor processors) and high level reviews of significant credit
issues by the CEO and CFO, and if sufficiently material, the Board. To
address counterparty risk through its foreign operations, Elders performs
counterparty risk assessments, undertakes due diligence processes and
seeks to establish long-term strategic relationships with key customers.
Political
Elders operates in a number of foreign jurisdictions where the business
may be affected by changes implemented by foreign governments. In
addition, subsidies given to foreign rural producers may adversely affect
the competitive position of Australian rural outputs.
Elders controls consequential exposure to this risk through contractual
means wherever practicable and seeks to cultivate a diverse range of
international markets to reduce concentration risk. The Board maintains
control and oversight over ventures in new jurisdictions.
Note — In line with ASX Corporate Governance Council recommendation 7.4 Elders has categorised our material business risks
as follows:
Economic sustainability — the ability to continue operating at a particular level of economic production over the long-term.
Environmental sustainability — the ability to continue operating in a manner that does not compromise the health of the
ecosystems in which it operates over the long-term.
Social sustainability — the ability to continue operating in a manner that meets accepted social norms and needs over the
long-term.
39
40
Innovative digital transformation
The new, free app includes
more than 2000 Australian
locations, key international
locations and provides current,
historical and forecast weather
information, including 48 hour
and 7 day forecasts.
41
Elders’ Red Notebook and
Weather Apps reach the
next digital phase.
The iconic Elders Red Notebook is a much loved and highly
valued item used by farmers across Australia, and has been for
many years. The Red Notebook was transformed and brought
into the new digital era in 2015 with the launch of the app version
– which has now been taken to the next level.
The Elders Red Notebook provides those in the agribusiness
sector with key dates, agricultural conversion tables and
measures, first aid information as well as the ability to record
important notes and farm information.
For many years Elders’ livestock team has written or typed
market reports before posting, faxing or emailing them to clients.
By the time an agent left a sale, made it back to the office and
typed it up, the results had already been printed elsewhere.
The need for receiving instant information was rapidly increasing.
Elders Gunnedah’s David Simpson, began recording audio
market reports on his mobile and sending them to clients as voice
memos, which received positive feedback from both colleagues
and clients. They appreciated the immediacy of the information
being received and the ease of listening to the results rather than
reading them.
So, the audio market reports section of the Red Notebook app
was born. Now Elders’ agents can record and publish an audio
report at the end of a sale before even leaving the yards. Staff,
clients and media are able to see all reports across a range of
locations, markets, wool and livestock and get a snapshot of
national sales performance immediately post-sale.
In 2016 Elders launched the new Elders Weather app as an
extension of the Red Notebook. Recognising how important it
is to have accurate weather information updated instantly, the
new version is a more advanced and higher performing weather
app than ever before.
The new, free app includes more than 2000 Australian
locations, key international locations and provides current,
historical and forecast weather information, including 48 hour
and 7 day forecasts.
Agribusiness is often so reliant on Mother Nature, so a silver
subscription version of the Elders weather app was also created.
This upgrade provides extra information, including; rain intensity
and Delta-T information, lightning predictions, extra layers on
the local radar and rain forecasts for the next 28 days and next
12 months.
With more than 40,000 downloads of the Elders Weather app
since the launch in August 2016, the app is expected to far
exceed the previous versions’ downloads.
Elders is committed to providing clients with industry leading
innovative initiatives and leading the way in the digital
agriculture space.
42
43
Mr Ian Wilton
FCCA, FCPA, FAICD, CA
Age 64 – Non-Executive Director
of the Board since April 2014.
He is also Chairman of the Audit,
Risk and Compliance Committee and
a member of the Occupational Health
and Safety Committee, the Nomination
and Prudential Committee and the
Remuneration and Human Resources
Committee. Ian Wilton is an accountant
with extensive experience across
the agricultural sector as both a
Non-Executive Director and Senior
Executive. He has held Chief Financial
Officer positions with the sugar division
of CSR Limited, Ridley Corporation
Limited and GrainCorp Limited and was
President and Chief Executive Officer
of GrainCorp Malt. Mr Wilton is a
Non-Executive Director of Sheep CRC
Limited and One Harvest Holdings Pty
Ltd. Mr Wilton is a resident of New
South Wales.
Mr James Hutchison (Hutch)
Ranck
BS Econ, FAICD
Age 68 – Appointed Chairman in
April 2014. Non-Executive Director
of the Board since June 2008. He is
also Chairman of the Occupational
Health and Safety Committee and the
Nomination and Prudential Committee,
and a member of the Remuneration and
Human Resources Committee, and the
Audit, Risk and Compliance Committee.
Hutch retired as Managing Director of
DuPont (Australia) and Group Managing
Director of DuPont ASEAN in May 2010.
In his 31 years with DuPont Hutch has
led businesses in ANZ and Asia Pacific
in Agriculture, Pharmaceuticals, and
Industrial Chemicals. In the last 10 years
Hutch has served as a director in a
variety of companies and organisations
including, The Business Council of
Australia, an Australian Government
Statutory Authority -APVMA, The
Chemical and Plastics Association
– PACIA, and The Crop Chemical
Association – Crop Life. From 2000 until
2010 Hutch was a member of the Prime
Minister’s Science, Engineering and
Innovation Council – PMSEIC. Currently
Hutch is a director of Iluka Resources
and the CSIRO. Mr Ranck is a resident
of New South Wales.
Ms Robyn Clubb
BEc, CA, F Fin, MAICD
Age 59 – Non-Executive Director of
the Board since 21 September 2015.
She is also a member of the Audit,
Risk and Compliance Committee,
Work Health and Safety Committee,
Remuneration and Human Resources
Committee and Nomination and
Prudential Committee. Robyn is a
Chartered Accountant and Fellow of the
Finance & Securities Institute of Australia,
with Senior Executive experience of over
twenty years in the financial services
industry, working for organisations
including AMP Limited, and Citibank
Limited.
She is currently Chair of the Rice
Marketing Board for the State of NSW,
Deputy Chair of the Australian Wool
Exchange, Treasurer of the Royal
Agricultural Society of NSW and Chair
of the NSW Primary Industries Ministerial
Advisory Council. Robyn is a former
Non-Executive Director of Rural Bank Ltd,
Beef CRC Limited, UrbanGrowth (a NSW
state-owned corporation responsible
for urban land development) and Murray
Irrigation Limited. Ms Clubb is a resident
of New South Wales.
44
2016 Annual Report — Elders. Live it. Board of Directors
Mr James Jackson
B Com, FAICD
Mr Mark Charles Allison
BAgrSc, BEcon, GDM, FAICD
Age 54 – Non-Executive Director
and Deputy Chairman of the Board
since April 2014. He is also Chairman
of the Remuneration and Human
Resources Committee and a member
of the Occupational Health and
Safety Committee, the Audit Risk
and Compliance Committee and the
Nomination and Prudential Committee.
Mr Jackson has more than 25 years’
experience in capital markets and
agribusiness, both in Australia and
overseas. He held a Senior Vice President
role with investment bank SG Warburg
(now part of UBS) in New York and was
a director of MSF Sugar Limited from
2004 to 2012, including being Chairman
from 2008. He is currently Chairman
of Australian Rural Capital Limited. Mr
Jackson owns and operates a beef cattle
enterprise in northern New South Wales
and is a resident of New South Wales.
Mr Jackson brings strong skills and
knowledge in capital markets, agricultural
production and supply chains, corporate
governance, corporate and financial
strategy and hands on experience in
the rural agency business.
Age 56 – Appointed Chief Executive
Officer and Managing Director in May
2014. He has extensive experience
spanning 30 years in the agribusiness
sector. He is a former Managing Director
of Wesfarmers Landmark Limited and
Wesfarmers CSBP Limited and Executive
Director of GrainGrowers Limited. Prior to
his appointment at Wesfarmers in 2001,
Mr Allison held senior positions with Orica
Limited as General Manager of Crop Care
Australasia and with Incitec Limited as
General Manager – Fertilisers. Between
1982 and 1996 Mr Allison performed
a series of senior sales, marketing and
technical roles in the Crop Protection,
Animal Health and Fertiliser industries.
Mr Allison was the Managing Director
of Makhteshim Agan Australasia Pty Ltd
from 2005 to 2007 and Managing Director
and Chief Executive Officer of Jeminex
Limited from 2007 to 2008. Mr Allison
is a resident of South Australia.
Company Secretaries
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.
Ms Sanjeeta Singh
BEd (Primary)
Ms Singh has previously held the role
of Assistant Company Secretary for the
past 6 years, prior to her appointment as
Joint Company Secretary in March 2016.
Ms Singh has extensive experience in all
governance activities having served with
the Company for over 10 years.
45
46
47
The directors present their report for the year ended 30 September 2016. Directors
Current Directors
The directors of the Company in office
during the financial year and until the date
of this report were:
Non-Executive Directors
— James Hutchison Ranck (Chairman)
— James Andrew Jackson (Deputy
Chairman)
— Ian Wilton
— Robyn Clubb
Executive Director
Mark Charles Allison (Managing Director
and Chief Executive Officer)
Company Secretaries
— Peter Gordon Hastings
— Sanjeeta Singh was appointed Joint
Company Secretary on 4 March 2016.
— Nina Margaret Abbey ceased as Joint
Company Secretary on 3 March 2016.
— A summary of the experience,
qualifications and special responsibilities
of each Director and Company Secretary
is provided on pages 44 and 45 of this
annual report.
Principal Activities
The principal activities of Elders during the
year were:
(a) the provision of livestock, real estate
and wool agency services to rural and
regional customers;
(b) the provision of services and farm inputs
to the rural sector;
(c) the provision of financial products and
services to rural and regional customers;
(d) real estate franchisor;
(e) live export operations;
(f) feedlotting of cattle;
(g) grain trading; and
(h) red meat supply chains in Indonesia
and China
48
Results and Review of Operations
The consolidated entity recorded a profit for the year, after tax and
non-controlling interests, of $51.6m (2015: profit of $38.3m). A review
of the operations and results of the consolidated entity and its principal
businesses during the year is contained in pages 18 to 33 and 36 to 39
of this report.
Significant Changes in the State of Affairs
There were no significant changes in the state of affairs of the
consolidated entity during the year not otherwise disclosed elsewhere
in this annual report.
Events Subsequent to Balance Date
On 13 October 2016, Elders acquired a 30% equity interest in StockCo
Holdings Pty Ltd for $10m.
There is no other matter or circumstance that has arisen since 30
September 2016 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 Elders, the results of those
operations or the state of affairs of Elders 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 page 32 and 33 of this report.
Share and Other Equity Issues During the Year
No ordinary shares were issued under the Company’s employee share
plans during the year.
On 22 June 2016, Elders issued 7,350,000 new placement shares to
sophisticated investors pursuant to the Company’s 15% placement
capacity under ASX Listing Rule 7.1.
On 13 July 2016, Elders issued 22,774,769 new shares under a 1 for 4
non renounceable entitlement offer announced by Elders to the ASX on
17 June 2016.
The total number of shares on issue, including the placement shares,
following completion of the entitlement offer is 113,859,440. Proceeds
raised from the placement and entitlement offer (approximately
$102.4m gross proceeds) were used to fund acquisition by Elders
Finance Pty Ltd (a wholly owned subsidiary of the Company) of
705,585 ASX listed Elders Hybrids (ASX: ELDPA) via on-market bid for
$95 per hybrid. Elders Finance Pty Ltd now owns 72.04% of all Elders
Hybrids on issue.
Surplus funds have been used for costs associated with the capital
raising, acquisitions and general working capital.
2016 Annual Report — Elders. Live it. Dividends and Other Equity Distributions
No dividends or hybrid distributions were declared or paid during
the 12 months to 30 September 2016.
Share Options
Share options are issued to company executives under a long
term incentive plan forming part of Elders’ remuneration
structure. Information on this element of the remuneration
structure is provided in the Remuneration Report commencing
on page 62 of this annual report.
The total quantity of options (not including performance rights
disclosed on page 72 of the Remuneration Report) on issue as at
30 September 2016 would represent, if exercised, 1.47% of the
Group’s issued ordinary shares.
Details of options over unissued shares at the date of this report
are as follows:
1. Options on Issue:
All options listed in Table 1 are subject to performance
conditions as described on page 72 of the Remuneration
Report.
2. Options issued since the end of the previous financial year:
No options have been issued since the end of the previous
financial year.
3. Options exercised since the end of the previous financial
year:
No options have been exercised since the end of the previous
financial year.
4. Options lapsed since the end of previous financial year:
Options lapsed since the end of the previous financial year
are disclosed in Table 2. As disclosed in Table 11 appearing
on page 78 of the Remuneration Report, 43,750 performance
rights held by Senior Executives have lapsed since 30
September 2015.
Directors’ Interests
At the date of this report, the relevant interests of the directors
in shares and other equity securities of the Company are detailed
in Table 3.
At the date of this report, there are no options on issue to
directors other than to the Managing Director as set out in
Table 3.
Directors’ Meetings
Detail of the number of meetings held by the Board of Directors
and Board committees and the attendance at those meetings is
provided in Table 4.
Directors' Report
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 or another group
entity 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.
49
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 62. In compiling
this report the Group has met the disclosure requirements prescribed in the Australian
Accounting Standards and the Corporations Act 2001.
Environmental Performance Regulation
A number of Elders’ operations are subject to environmental legislation. Such legislation
is diverse and varies between state, territory and local authorities and various regulators.
Detail of Elders’ performance in relation to the various regulations is as follows.
Feedlots
Elders operates a feedlot in Killara (NSW) which is subject to both state and local
government environmental legislation, as well as animal welfare legislation. Feedlots can
also be subject to quality assurance standards under the National Feedlot Accreditation
Scheme (NFAS) which is independently administered and audited each year by Aus-
Meat. Killara operates under such standards as well conducting its operations according
to the 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 was approved or operates were reported during the year ended 30 September
2016 or to the date of this report.
Saleyards
Saleyards are subject to various State, Territory and local government environmental
legislation and regulations, particularly relating to effluent management, dust and noise.
These obligations vary from state to state and generally only apply to saleyards above a
prescribed size. Elders expects its saleyard operations, irrespective of their size, to abide
by the applicable laws and regulations.
No breaches of environmental regulations affecting saleyards were reported during the
year ended 30 September 2016 or to the date of this report.
Retail Operations
Elders’ retail operations are subject to state environmental regulations relating to the
storage, handling, transport and sale of dangerous goods such as agricultural chemicals,
fertilisers and poisons. Although these regulations are based on nationally recognised
standards, the regulatory environment for the transporting, handling, storage, sale and
use of such dangerous goods, chemicals and scheduled poisons is complex and subject
to regulations imposed by each state and territory.
The majority of Elders’ retail operations are accredited under the co-regulatory
accreditation program operated by Agsafe. The program provides accreditation for
premises and training and accreditation for staff in the safe handling, storage and
transport of agricultural and veterinary chemicals. Agsafe provides assistance to
Elders by providing appropriate training and safety programs including a program of
recognised audits.
A minor spill resulting from a trailer roll-over occurred in January 2016 near Barmera
(SA). The spill was promptly cleaned up. The Environmental Protection Authority was
notified and it advised that no further action was required. In February 2016, a minor
incident near Loxton (SA) involved a spill of Trifluralin (a pre-emergent herbicide)
occurred. The spill was effectively cleaned up and no environmental harm occurred.
Although the Company was not required to do so, the Environmental Protection
Authority was advised.
A letter was received from the Environmental Protection Authority advising that a
complaint regarding storage of treated fence posts had been made against an Elders’
branch. The issue was appropriately dealt with and no further action was required by the
Environmental Protection Authority.
No other breaches of environmental regulations were reported during the year ended 30
September 2016 or to the date of this report.
50
2016 Annual Report — Elders. Live it. Directors' Report
51
Non-Audit Services
Non-audit services provided by the
Company’s auditor, PricewaterhouseCoopers,
to the Group during 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.
PricewaterhouseCoopers received or is due
to receive the following amounts for the
provision of non-audit services:
— Tax services (primarily compliance) $13,120
— Other compliance and assurance services
$10,000
A copy of the auditor’s independence
declaration as required under section 307C of
the Corporations Act 2001 is set out overleaf.
This report has been made in accordance with
a resolution of directors.
Live Export Services
Elders is engaged in the export of livestock to
international markets, namely the supply of feeder and
slaughter cattle to Indonesia and Vietnam as well as
long haul live export of dairy, breeding and feeder and
slaughter cattle to distant markets such as China and
Kazakhstan. Sheep are also exported to a variety of
markets.
All live export operations are subject to Australian
Government regulations and standards including:
— The Australian Standards on the Export of
Livestock (ASEL version 2.3) which provides
detailed standards on the sourcing, preparation,
management and transportation of livestock
throughout the supply chain, until disembarkation.
The ASEL also requires exporters to comply with
state, territory and local government regulations
including animal welfare and environmental
regulations.
— The Exporter Supply Chain Assurance System
(ESCAS) which requires exporters to have control
and traceability throughout the supply chain up to
and including the point of slaughter in the receiving
country.
Apart from minor breaches of ESCAS which Elders
self-reported (for which regulators took no adverse
action against Elders), no breaches of environmental
regulations or legislation were recorded by the live
export business in the year to 30 September 2016 or the
date of this report.
Rounding of Amounts
The parent entity is a Group of the kind specified in
ASIC Corporations (Rounding in Financial/Director’s
Report) Instrument 2016/191 issued by the Australian
Securities and Investments Commission. 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.
Table 1 — Options over unissued shares
Date Options Granted
Number of Options on
issue
Issue Price of each option
Exercise Price of each
option
Option Expiry Date
18/12/2014
1,694,790
nil
$1.70
30/09/2019
Table 2 — Options lapsed since the end of previous financial year
Date Options Granted
Number of Options lapsed
Issue Price of each option
Exercise Price of each
option
Option Expiry Date
18/12/2014
225,210
nil
$1.70
30/09/2019
Table 3 — Directors’ Interests
No. of ordinary shares
No. of hybrids
No. of performance rights and
options
Non-Executive Directors
J H Ranck
I Wilton
J A Jackson
R Clubb
Executive Director
M C Allison
125,000
100,000
37,500
1,200
22,107
-
-
-
-
-
-
-
-
-
860,000
Table 4 — Attendance at meetings by Directors
Attendance by directors at Board and Committee meetings held during the financial year is detailed below.
Committee attendance is only recorded where a director is a member of the relevant committee.
Board of Directors
Work Health and Safety Committee
Audit, Risk and Compliance 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
J H Ranck
J A Jackson1
I Wilton
M C Allison2
R Clubb
19
19
19
18
19
19
19
19
19
19
2
1
2
-
2
2
2
2
-
2
6
5
6
-
6
6
6
6
-
6
Remuneration and Human Resources
Committee
Nomination and Prudential Committee
Attended
No. of meetings
held during
relevant period
Attended
No. of meetings
held during
relevant period
J H Ranck
J A Jackson
I Wilton
M C Allison
R Clubb
7
7
7
-
7
7
7
7
-
7
2
2
2
2
2
2
2
2
2
2
1 Mr Jackson was an apology for certain committee meetings held on the same day due to attending a funeral.
2 Non-attendance at one Board meeting related to Mr Allison’s remuneration requiring him to absent himself for the entire duration of that meeting.
52
2016 Annual Report — Elders. Live it. Directors' Report
53
Elders’ key priority is the safety and
wellbeing of its people, and the
communities in which the business
operates. Launched in 2014, Elders’
Stand Up Speak Up campaign is about
starting the right conversations, and
providing employees and clients with
effective tools to do so.
54
Elders and Cowboys support mental health
Following tough conditions across
many parts of Australia, 2016 saw
a focus on mental health.
Aimed at tackling stigma and starting conversations around mental wellbeing, Elders
teamed up with the NRL North Queensland Cowboy’s – a like-minded, community
owned, not-for-profit organisation.
The Elders network is far reaching across Australia, with more than 200 branches
and 2,000 employees throughout the country, it is a business priority to ensure the
Company’s employees and clients are well cared for. With many working closely in
rural and remote communities, some experiencing difficult times, it is important they
are equipped to know that support is always available and that they are not alone.
Elders’ northern zone general manager, Greg Dunne commented that he was incredibly
impressed with the partnership and its commitment to community.
“Elders is committed to making safety our number one priority for employees
and the communities in which we operate, and this is strengthened by working
with not-for-profit organisation, the Cowboys,” Mr Dunne said.
Mental health has a larger impact in Australia than the road toll, with 1 in 3 women
and 1 in 5 men expected to experience anxiety in their lifetime. With continuing
difficult conditions in Australia, the mental health of both these communities is
of upmost importance to both organisations.
“Mental health has a huge impact on both our personal and work life as well as that
of our clients. With those in rural areas half as likely to access support services as
those from metropolitan areas, it’s important to ensure that we bring this important
topic to the table and support our work colleagues, clients and friends” says Mr Dunne.
The Cowboys have been, and remain, active on promoting and facilitating positive
mental health outcomes, both internally and in the broader community. The club
employs a full-time Welfare and Education manager and two psychologists to provide
support to its players and Cowboys NRL player Michael Morgan is the club’s State of
Mind Ambassador, which is a volunteer role, created to give players’ perspective and
input into the NRL’s community programs in the mental health space.
The club, in conjunction with sponsors, also runs a Community Hub at home games,
with sponsors partnering with a charity to promote healthy living and attempt to wipe
out the stigma surrounding mental illness and raise awareness for suicide prevention.
Elders and the Cowboys produced a 30 second television commercial which ran across
the Imparja network this year. It referenced rough times faced by both teams and
highlighted that times change. The partnership inspired people to look forward and
ensure they have the support of their team, regardless of who that may be; a workmate,
friend or family.
An accompanying Stand Up Speak Up video was also created and featured the
Cowboy’s mental health spokesperson Michael Morgan, Elders’ Kate Knowles and Tom
Kennedy, Townsville QLD. It opened conversation within the network, acknowledged
mental health as an issue and challenged the stigma that surrounds the often taboo
conversations.
In addition, Elders launched a community area on the website to provide employees and
clients with the resources and contacts needed to address any mental health issues for
themselves and their friends or family. Elders’ branches were provided with cards, which
appeared as business cards and included the community website on the reverse.
The partnership and campaign has shifted Elders’ culture surrounding mental health.
It unlocked lines of communication and highlighted the need for supporting each other
and clients through the seasons and challenges of life.
Our teams have
both had their
ups and downs
and we know that
often you can feel
that you are on
your own.
But everyone has
a team, and your
team is there with
you – it’s all about
ensuring you
have the support
you need. Take a
moment to think
about who’s on
your team.
55
56
57
Mark Allison
Managing Director and Chief Executive
Officer
“I was pleased to see stable and
consistent growth of the business this
year, backed by a strong focus on the
communities in which we operate. I’m
looking forward to seeing the business
and our Eight Point Plan continue to
progress, with a clear focus on our
digital and technical offering in 2017.”
Richard Davey
Chief Financial Officer
“It is pleasing to see Elders achieve
another successful year of strong
profitability, improving balance sheet
efficiency and delivering shareholder
value in FY16. We have maintained our
focus to manage and reduce the cost
base across the organisation to create
a sustainable business model for the
future. The CFO team have been critical
in supporting growth initiatives and
continue to drive disciplined cost and
capital deployment in the business.”
Peter Hastings
Company Secretary and General
Counsel
“Over the past 12 months the Corporate
Governance functions further
strengthened a company culture in
which open and honest identification and
management of risk is encouraged, and
safety and wellbeing is a topic of regular
conversation. This year also saw our team
lead a successful capital raise and hybrid
acquisition projects for the business.”
58
2016 Annual Report — Elders. Live it. Executive Management Remarks
Liz Ryan
General Manager — Financial Services
Tom Russo
General Manager — Real Estate
Nick Fazekas
General Manager — Retail
“2016 saw strong progress towards
rebuilding our financial services business
into the profit powerhouse of Elders that
it was in the past. Our successful 10%
acquisition of Elders Insurance, and 30%
acquisition of StockCo, in addition to our
product awareness campaigns are key to
strong EBIT growth in FY17.”
“We’ve had great results for the Retail
business with year on year organic
growth, increased client support on the
back of good seasons over the majority
of Australia and have pleasingly exceeded
$1 billion in Retail sales in a market of
falling commodity prices.
With the help of our key supplier base,
the Retail team has seen an uplift in our
internal metric of ‘capital light’, with the
Retail ROC increasing from 8.3% to 17.9%
in the last 12 months.”
“2016 has been a year of renewed focus
on the Real Estate business. Following
my appointment, we have focused on
growing the brand through marketing and
communications; and establishing a high
quality team, to build the foundations
needed to achieve business improvement
and growth ambitions. In the rural sector,
our market-leading network played a
large role in the high level of activity
we’ve seen across the sector, due to
robust commodity demand and prices,
excellent seasonal conditions, and low
interest rates. Our residential network
has also performed solidly in variable
market conditions across the country.
We have improved the performance
of our property management business
through attractive bolt on acquisitions
and efficiency initiatives.”
59
David Adamson
General Manager — Agency
Karen Ross
General Manager — Business Innovation
James Cornish
Zone General Manager — West
“2016 was one for the record books in
terms of beef price. We were able to
assist both our commercial and stud
clients in taking advantage of these high
prices. 2016 also saw the launch of our
new Elders Grain platform which provides
our grower clients with more options for
marketing their grain.”
“This year was one of digital growth for
Elders, with the launch of our Elders
Insiders community, which allows our
customers, suppliers and employees
to have a voice and provide real-time
feedback on a variety of topics that
are important to our customers and
agribusiness in Australia. In addition,
we’ve also launched a new weather app,
website, and online customer portal –
providing our customers with access to
greater digital services for their business.”
“The high performing and professional
culture within the Western Zone
lifted to new levels this year. We’re
continuing to develop a truly respectful
and accountable environment that is
attracting high quality people to a trusted
brand and business. Consequently, we’ve
seen a renewed sales culture, driving
significant growth and customer service
across the zone.”
60
2016 Annual Report — Elders. Live it. Executive Management Remarks
Malcolm Hunt
Zone General Manager — South
Greg Dunne
Zone General Manager — North
Laura Schonfeldt
General Manager — People and Culture
“Over the past 12 months, we’ve increased
investment in our people and delivered
a strong focus in improving the overall
capability of the Southern Zone. This
high performing culture, coupled with
our renewed focus on customer service
is proving successful with the clients and
communities in which we operate.”
“This year, an increased focus on our
livestock market share, coupled with
investment in our Central and North
Queensland operations, has positively
impacted our bottom line in the North.
This focus, coupled with a decent season
across the Zone, particularly in Farm
Supplies and our B&W business, has put
us in a good position for the next twelve
months and beyond.”
“This financial year, Elders engagement
and enablement levels achieved Korn
Ferry Hay Group’s ‘High Performing
Organisation’ benchmark. This
outstanding result reflects Elders’ focus
on a values and performance culture
and leadership renewal. Importantly,
we have a strong foundation for future
success with a workforce who tell us
they understand the link between their
job and Elders’ strategy; are motivated to
contribute more than is required of them;
are proud of Elders; and are challenged
by, and interested in, their work.”
61
62
The Directors of Elders Limited present
the Remuneration Report for the
consolidated entity for the year ended
30 September 2016. 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
Section 3
Non-Executive Director remuneration
Section 4
Managing Director & CEO and Senior
Executive remuneration
Section 5
Link between Elders’ financial performance
and Executive reward
Section 6
Managing Director & CEO and Senior
Executive contract terms, loans and
transactions
Section 7
Managing Director & CEO and Senior
Executive remuneration details
Section 8
Additional statutory information
66
67
67
69
74
76
77
78
63
A summary of key remuneration outcomes for the 2016 financial
year is set out below:
Fixed Remuneration
As part of an organisational review of fixed remuneration
benchmarks, in August 2015 Korn Ferry Hay Group validated
job evaluation assessments across the business. Job evaluation
and market benchmarks informed the annual review of fixed
remuneration undertaken across the organisation in November
2015. Eligible KMP subsequently received an increase to their
fixed remuneration at an average rate of 2.5%, in line with market
movements for FY16.
Variable Remuneration
Short-Term Incentive Plan
Despite difficult market conditions in Live Export, focused
management of other business units resulted in strong financial
performance. As such, based on these results an organisation-
wide incentive pool will be allocated to eligible participants,
considering individual contribution and targeted towards high
performers.
This performance has been reflected in the short-term incentive
outcomes received by the MD & CEO and Senior Executives for
FY16.
Long-term incentive grant in the year
The MD & CEO and selected senior management were granted
rights under Elders Executive Long-Term Incentive Plan (LTIP)
in FY16. The grant has a 3 year performance period, with key
metrics of Absolute Total Shareholder Return, Earnings per
Share growth and Return on Capital. The LTIP is designed to
focus executives on driving continued sustainable growth and
shareholder return.
Having regard to the dilutive impact of the capital raising
undertaken by the Company during the year, the Board reviewed
the conditions of the 2015 and 2016 LTIPs. As a result the Share
Price Vesting condition in the 2016 plan has been adjusted from
$3.965 to $3.833. This change was made in line with the Plan
Rules and the ASX Listing Rules.
Long-term incentives vesting in the year
Tranche 3 of the 2011 Senior Executive Grant was tested against
the performance hurdle, being Elders Total Shareholder Return
(TSR) over the performance period of 10 November 2011 to 9
November 2015 relative to the TSR over the same period of the
comparator group of entities (comprising the S&P/ASX 200
Accumulation Index, excluding resources and property trusts).
The testing resulted in Elders TSR achieving a percentile ranking
of 60, meaning that 70% of the performance rights vested.
Key Messages
Our remuneration framework is designed
to attract, motivate and retain talented
people by differentiating rewards based
on short and long-term performance and
to create value for all stakeholders.
This Remuneration Report provides
shareholders with an understanding of
Elders remuneration policies and the link
between our remuneration approach and
our performance, in particular regarding
Key Management Personnel (KMP). KMP
include Elders’ Non-Executive Directors
(NEDs), the Managing Director and
Chief Executive Officer (MD & CEO),
Chief Financial Officer (CFO) and those
Executives who are direct reports to the
MD & CEO and who manage a major
revenue generating business unit. KMP
determined in accordance with the
definition under the Accounting Standard
AASB124 Related Party Disclosures
as those persons with authority and
responsibility for planning, directing and
controlling the activities of the Company
during the financial year.
The following principles underpin
Elders’ Remuneration Policy and reward
frameworks, which are approved by the
Board and applied across the business:
— consider risk and reward to
appropriately align with shareholder
interests;
— drive sustainable long-term growth;
— create clear alignment between
performance and individual
remuneration outcomes;
— support gender pay equity;
— be market competitive, and aligned
to impact and accountability;
— have sufficient flexibility to meet
the changing needs of a diverse
workforce; and
— be well-governed and prudentially
sound to protect the long-term
financial interests of the business.
64
2016 Annual Report — Elders. Live it. Remuneration Report
Managing Director and CEO and Senior Executive
remuneration outcomes for 2016
Table 1 below sets out certain items of remuneration paid or payable to the MD & CEO and Senior Executives in respect of the 2016
financial year. The information in Table 1 is unaudited and is different from and additional to that required by Accounting Standards
and statutory requirements.
Table 10 on page 77 provides the audited remuneration disclosures as required under Accounting Standards and statutory
requirements. Elders however believes that the information provided in Table 1 is useful to investors as it provides a simple overview
of the remuneration paid or payable to the MD & CEO and Senior Executives, and is consistent with the Productivity Commission’s
recommendation in its report on Executive Remuneration in Australia.
Table 1 includes information on base salary, short-term incentive (STI) and long-term incentive (LTI), superannuation, other monetary
benefits, other non-monetary benefits and termination benefits identical to that contained in Table 10, but omits the information on
the issue of shares, share rights and options and long-term payments contained in Table 10. Additionally, Table 1 provides information
on LTI based on rights vesting or options exercised during the financial year, which is not provided in Table 10.
Table 1 — Remuneration outcomes for 2016 (unaudited and non-IFRS)
$
Base
Salary
STI1
LTI2
Superannuation
Other
(monetary)
Other (non-
monetary)3
Termination
benefits4
Total
M C Allison MD & CEO
817,989
632,250
-
R I Davey
Chief Financial
Officer
431,566
85,000
7,138
J H Cornish
GM Zone West
332,944
90,000
14,277
G J Dunne
GM Zone North
353,319
100,000
14,277
C C Hall
GM Live Export
329,279
-
M L Hunt
GM Zone South
355,662
100,000
-
-
1 STI that will be paid for performance in the 2016 financial year.
19,359
19,385
19,385
19,385
19,385
19,385
-
-
-
-
-
-
-
-
1,232
4,358
19,454
33,263
-
-
-
-
1,469,598
543,089
457,838
491,339
221,735
589,853
-
508,310
2 Value of any performance rights that vested during the 2016 financial year based on the closing share price on the date of vesting, and options that were exercised during the
2016 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 2016 financial year.
3 Provision of leased car parking and company leased tool of trade vehicle.
4 These benefits comply with Part 2D.2 of the Corporations Act 2001 (Cth).
65
Section 1 — Key Management Personnel
Key Management Personnel for the purposes of this report include the following persons who were Non-Executive Directors,
MD & CEO and Senior Executives during the financial year:
Table 2 — Key Management Personnel
Name
Position held
Period held in 2016 (if not full year)
Non-Executive Directors
J H Ranck
R Clubb
J A Jackson
I Wilton
MD & CEO and Senior Executives
Chairman
Director
Director
Director
M C Allison
R I Davey
J H Cornish
G J Dunne
C C Hall
M L Hunt
Managing Director and CEO
Chief Financial Officer
Zone General Manager West
Zone General Manager North
General Manager Live Export
1 October 2015 to 16 September 2016
Zone General Manager South
66
2016 Annual Report — Elders. Live it. Section 2 — Remuneration Governance
A — Role of the Board and the Remuneration and Human
Resources Committee
The Remuneration and Human Resources Committee (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 Council Principles
and Recommendations. The Board has delegated oversight of the Company’s
remuneration policies and practices to the Committee.
On an annual basis the Board reviews and approves the performance and
remuneration plans and outcomes for the MD & CEO on the recommendation of
the Chairman and the Committee. The plans and outcomes for the MD & CEO’s
direct reports are reviewed and approved annually by the Committee on the
recommendation of the MD & CEO, and the MD & 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 MD &
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 Company.
The role and responsibilities of the Committee are set out in the Corporate
Governance Statement which along with the Committee’s Charter is published on
the Company’s website at elders.com.au
The Committee is comprised entirely of Non-Executive Directors.
B — Key Committee activities
During 2016, the Committee met on five occasions. The Committee has a strong
focus on the relationship between business performance, risk management and
remuneration with the following activities occurring during the year:
— establishing performance objectives for the organisation, and setting KPIs for
the MD & CEO
— determining reward outcomes for the MD & CEO and review of the outcomes
for Executive Committee
— review of short-term and long-term incentive plans
— review of talent and succession plans for the Executive Committee
— review of progress toward diversity objectives
— review of culture and employee effectiveness
— review of capability programs, including leadership and technical development
— monitoring workplace behaviour, and annual review of human resources policies,
processes and guidelines.
C — Independent remuneration advice
The Committee is briefed by management. However, the Committee makes all
decisions free of the influence of management.
Further to the management briefings, to assist in its decision-making, the Committee
may, from time to time, 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 2016, the Committee did not seek or receive
remuneration recommendations from any external party and consequently no
fees were paid during the year for such advice.
Remuneration Report
Section 3 —Non-
Executive Director
Remuneration
A — Remuneration
framework and policy
Non-Executive Directors are remunerated
by way of fees in the form of cash and
superannuation, and in accordance
with Recommendation 8.2 of the ASX
Corporate Governance Council Principles
and Recommendations.
The MD & CEO and Senior Executives
do not receive director 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 published at elders.com.au
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 Board believes Elders’ Non-Executive
Directors should own securities in the
Company to further align their interests
with the interests of other shareholders.
Details of Non-Executive Directors’
shareholdings in the Company can
be found in Table 12 of this Report.
67
B — Non-Executive Director remuneration in 2016
Total fees for the financial year ended 30 September 2016 remain well within the aggregate
fee limit of $1,200,000 per annum, approved by the Board following the Company’s 2013
Annual General Meeting. Statutory superannuation guarantee contributions are excluded
from 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 a total annual composite fee of $240,000 (includes
committee fees). All amounts exclude superannuation, which is paid up to the maximum
contribution base in line with Superannuation Guarantee legislation.
During the financial year ended 30 September 2016, 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 Chairman who was entitled to $30,000 per annum
to reflect the significant workload associated with this position.
— Each member of the Work 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, except for the Committee Chairman who was entitled to $15,000
per annum to reflect the workload associated with the position.
Actual Committee fees paid are provided as “Board Committee 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
Super
annuation
Other
J H Ranck
2016
240,000
240,000
100,000
3,030
100,000
100,000
100,000
100,000
R Clubb
J A
Jackson
I Wilton
Total
20151
2016
20152
2016
20151
2016
20151
2016
2015
-
-
36,000
1,091
41,000
36,000
50,000
50,000
540,000
127,000
443,030
87,091
-
-
-
-
-
-
-
-
-
-
19,385
18,915
12,920
392
13,395
12,920
14,250
14,250
59,950
46,477
-
-
-
-
-
-
-
-
-
-
259,385
258,915
148,920
4,513
154,395
148,920
164,250
164,250
726,950
576,598
1 Figures relate to part year service. J A Jackson and I Wilton commenced as Directors from 13 April 2014.
J H Ranck became Chairman from 1 May 2014.
2 R.Clubb was appointed as Director from 21 September 2015 and the above fees were paid in October 2015.
68
2016 Annual Report — Elders. Live it.
Section 4 — Managing Director & Chief
Executive Officer and Senior Executive
Remuneration
A — Remuneration framework and policy
The remuneration for executives is focused on a range of criteria, including:
— rewarding appropriately to their roles and responsibilities;
— balancing between fixed and at-risk remuneration components with an
appropriate balance between short and long-term incentives within the
at-risk component;
— performance measures reflecting long-term drivers of shareholder value;
— paying for performance, where superior or upper quartile remuneration is
only paid for demonstrable superior performance; and
— remuneration is competitive when compared to both internal and external
relativities.
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) – to provide market competitive salary
including superannuation and non-monetary benefits
— Short-term incentives (STI) – to reward for in-year performance at
Company and business unit level
— Long-term incentives (LTI) – to align with longer term strategy and
shareholder value.
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 and Company targets and objectives, including
maximising returns for shareholders.
Chart 1 — Remuneration structure
CEO
Senior Executives
33%
33%
25%
25%
50%
33%
TFR
STI
LTI
The above assumes the at-risk remuneration components are at their
maximum, and represents the Company’s intended policy in respect of
remuneration structure.
Remuneration Report
B — 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 and Development
Planning (PDP). PDP assesses employee
performance against a number of
agreed key performance indicators,
including measures for safety, operational
performance, key relationships and
efficiency and growth.
69
C — Short-term incentive
The key features of the short-term incentive plan applying to the MD & CEO and Senior Executives during the year are set out in the
table below:
Table 4 — Short-term incentive plan
Maximum STI opportunity
as % of TFR
Performance measure(s)
MD & CEO
100% of TFR
Senior Executives
50% of TFR
65% of the MD & CEO’s STI is based on quantitative financial
performance of Underlying Earnings Before Interest and Tax
(EBIT) and Return on Capital (ROC) targets.
Senior Executives are eligible for an STI if Elders achieves
threshold financial performance hurdles including
Underlying EBIT and ROC.
10% of the STI is based on driving significant progress in
achieving an injury free workplace.
The STI is based on the Company, business unit and
individual performance against KPIs set for:
25% of the STI is based on qualitative performance regarding
creating value through the delivery of key milestones of the
Eight Point Plan.
— Safety
— Operational performance (including EBIT and ROC)
— Key relationships (people and customers)
— Efficiency and growth (Eight Point Plan milestones)
Governance
Assessment of the MD & CEO’s performance against the
relevant KPIs is determined by the Remuneration and Human
Resources Committee (Committee) with recommendation
for STI payment referred to the Board for approval.
Assessment of performance against the above measures
and individual KPIs is determined by the MD & CEO with
recommendation for STI payment referred to the Committee
and then to the Board for approval.
Exercise of discretion
The MD & CEO in conjunction with the Chairman, may recommend discretionary bonus payments to executives (except
himself) for approval by the Committee.
Service condition
Payment
Any STI payable to executives who become eligible to participate in the STI Plan during the course of the year, either
through joining the Company or being promoted within the Company, will be pro-rated accordingly.
Payments are made in cash; Senior Executives may elect to sacrifice to acquire the Company’s shares via the Deferred
Employee Share Plan. In FY16, where an individual STI payment is greater than $250,000 then 20% of the payment will
be paid as shares.
Clawback
Elders may recover payments made where the STI was calculated on financial results due to:
— a material non-compliance with any financial reporting requirement, or
— misconduct of any employees, contractors or advisers; and
as a result the actual metrics and outcomes used to determine the STI were incorrect, and as such a lower payment
would have been made based on the restated results.
Table 5 — STI outcomes for 2016
All STI payments for 2016 performance were paid according to plan performance measures. The following table outlines the KMP
participants who received an STI payment in 2016:
M C Allison
R I Davey
J H Cornish
G J Dunne
M L Hunt
Maximum Opportunity
$
Awarded
%
Forfeited
%
843,000
226,800
177,386
187,436
186,615
75%
37%
51%
53%
53%
25%
63%
49%
47%
47%
Note: C.Hall who left the Company on 16 September 2016 was not eligible for any STI payment in accordance with plan guidelines.
70
2016 Annual Report — Elders. Live it. D — Long-term incentive
The Board considers, in accordance with generally accepted
remuneration practices in Australia, that equity-based long-
term incentives are integral in aligning executive interests and
earnings with Elders’ longer term strategy and the interests of
shareholders.
As such, Elders currently offers long-term incentives to the
MD & CEO and selected senior management. These offers are
made under Elders Executive Incentive Plan (Plan), adopted in
December 2014. Participation remains at the Board’s discretion.
Subject to the ASX Listing Rules, under these Rules the Board
has discretion to make adjustments to one or more of:
— the exercise price of the options;
— the number of options/rights;
— the number of shares received upon exercise of options/
vesting of rights; and
— the performance conditions,
in the event of a corporate restructuring, major transaction
or capital event or to prevent any unintended consequences.
a —Finalised long-term incentive – 2011 grant
Under the previous LTI plan, the final tranche (Tranche 3) of the
2011 Senior Executive grant was tested against the performance
hurdles following the end of the performance period being 9
November 2015. The vesting of these performance rights were
dependent on the Company’s Total Shareholder Return (TSR)
performance over the four year period from 10 November 2011
to 9 November 2015 relative to the ASX/S&P 200 Accumulation
Index as determined by the following schedule
Relative TSR
% of Tranche that Vests
Below 50th percentile
At 50th percentile
50th to 74th percentile
75th percentile and above
Nil
50%
Pro-rata
100%
The testing resulted in Elders TSR achieving a percentile ranking
of 60, meaning 70% (24,500)1 of the rights from Tranche 3 vested,
(10,500 lapsed) with an implied value of $99,936. The value is
based on the number of rights multiplied by closing share price of
$4.079 (as at 10 November 2015).
No further rights/shares/options are outstanding under this grant
as at 30 September 2016 (compared to 40,0002 rights as at 30
September 2015).
1 24,500 rights pertains to all participants
2 An additional 5,000 rights lapsed on termination of participant
Remuneration Report
b —Current long-term incentive –
2015 and 2016 grants
Under the grant of options provided
to the CEO & MD and selected senior
management on 18 December 2014,
participants have now completed two
thirds of the performance period which is
due to be tested following 30 September
2017. Details of this plan are outlined in
Table 6.
At the Company’s AGM held on 17
December 2015 shareholders approved
a grant of performance rights to the CEO
& MD for a three year performance period
commencing in FY16.
Following this grant the Board then
approved a grant of performance rights
to selected senior management on 17
December 2015.
The performance measures of the 2016
grant, are Total Shareholder Return (TSR),
Earnings Per Share (EPS) and Return
on Capital (ROC) being appropriate
measures of shareholder return and
Company financial performance in line
with the Company’s three year strategic
plan.
KMP are not permitted to deal in the
Company’s securities without prior
permission from the Company and are
only permitted to trade during trading
windows and are required to disclose all
dealings on an annual basis. The measures
are designed principally to manage insider
trading risk, and aligns the interests of
KMP with the Company’s security holders
generally.
The current LTIPs and equity participation
plans are summarised overleaf.
71
Table 6 — Long-term incentive plan detail
MD & CEO
100% of TFR
Maximum LTI
opportunity as %
of TFR
As at 30 September 2016
No of options/rights outstanding and no of participants
Senior Executives
50% of TFR
Grant date:
18-Dec-14
17-Dec-15
Performance period
600,000 Options
260,000 Rights
1 participant
1 participant
1,094,790 Options
670,000 Rights
10 participants
14 participants
18-Dec-14
17-Dec-15
Three years – 1 October 2014 to 30 September 2017
Three years – 1 October 2015 to 30 September 2018
Performance conditions
18-Dec-14
The options will be split into three tranches, each carrying a different performance condition
Tranche
Performance Condition
1
2
3
Absolute Total Shareholder Return (TSR)
Underlying Earnings Before Interest and Tax (EBIT)
Return on Capital (ROC)
17-Dec-15
The performance rights will be split into three tranches, each carrying a different performance condition
Tranche
Performance Condition
1
2
3
Absolute Total Shareholder Return (TSR)
Earnings per Share (EPS) growth
Return on Capital (ROC)
Performance measures and vesting
18-Dec-14
Tranche 1 – Absolute TSR Options
% of total grant
50%
25%
25%
% of total grant
50%
25%
25%
50% of options vest subject to an absolute TSR performance condition. The absolute TSR performance condition is tested
based on the Company’s average annual compound TSR over the three year performance period 1 October 2014 ending on
30 September 2017.
The % of TSR options that will vest is determined as follows:
Absolute TSR over performance period
% of Options in tranche that vest
Less than target
Target1
Between target and stretch2
Stretch2 and above
1 Target = 12% average annual compound TSR
2 Stretch = 20% average annual compound TSR
Nil
50%
50-100% on a straight line sliding scale
100%
Absolute TSR will be measured using opening and closing share prices determined as follows:
— the opening share price value will be $1.70; and
— the closing share price value will be based on the 10 trading day Volume Weighted Average Price (VWAP) up to and including
the last day of the performance period.
Tranche 2 – EBIT Options
25% of options vest subject to an Underlying EBIT performance condition.
EBIT options will vest in full if Underlying EBIT is greater than or equal to $60 million for the financial year ending 30 September
2017.
Tranche 3 – ROC Options
25% of options vest subject to a ROC performance condition.
ROC options will vest in full if ROC is greater than or equal to 20% for the financial year ending 30 September 2017.
Vested options become exercisable on the first day on or after vesting that the share price is greater than the Exercise Price.
For this purpose, the relevant share price is the market price at the close of trade.
For each option that vests and is exercised, an exercise price of $1.70 per option is payable by the participant in return for one fully
paid ordinary share in Elders.
Options which have not been exercised by the expiry date of 30 September 2019 will lapse.
72
2016 Annual Report — Elders. Live it. Remuneration Report
MD & CEO
Senior Executives
17-Dec-15
Tranche 1 – Absolute TSR Performance Rights
50% of rights vest subject to an absolute TSR performance condition. The absolute TSR performance condition is tested based on
the Company’s average annual compound TSR over the three year performance period 1 October 2015 ending on 30 September
2018.
The % of TSR options that will vest is determined as follows:
Absolute TSR over performance period
% of Options in tranche that vest
Less than target
Target1
Between target and stretch2
Stretch2 and above
1 Target = 12% average annual compound TSR
2 Stretch = 20% average annual compound TSR
Nil
50%
50-100% on a straight line sliding scale
100%
Absolute TSR will be measured using opening and closing share prices determined as follows:
— the opening share price value will be $3.965, being the 5 trading day VWAP up to and including 30 September 2015; and
— the closing share price value will be based on the 5 trading day VWAP up to and including the last day of the performance
period, 30 September 2018.
Tranche 2 – EPS Growth Performance Rights
25% of rights vest in full if Earnings Per Share Compound Annual Growth Rate is greater than or equal to 15% for the performance
period.
Tranche 3 – ROC Performance Rights
25% of rights vest in full if ROC is greater than or equal to 20% for the financial year ending 30 September 2018.
In addition to the performance conditions above, performance rights will only vest if the share price on the vesting date is greater
than or equal to the 5 trading day VWAP up to and including 30 September 2015 ($3.833).
Upon vesting of performance rights one fully share in Elders will be allocated for each performance right.
Performance
testing
Testing of the performance conditions will occur once the results for the financial year ended (30 September) have been approved
by the Board. There will be no re-testing of performance.
Table 7 — Other equity schemes in which one or more KMP participate
Name of
Plan
Description
Eligibility
Criteria
Number of participants
as at
Number of shares
outstanding as at
Deferred
Employee
Share Plan
(DESP)
This plan enables participants to salary sacrifice remuneration
of up to $5,000 to acquire restricted shares. Tax can be
deferred up to 7 years. Elders makes no contribution to this
plan other than funding the cost of administration.
All
permanent
employees.
Elders Loan
Share Plan
(ELSP)
There are no further performance or service conditions once
shares are purchased.
This plan was designed to provide an equity participation
opportunity for all eligible employees when offered by the
Company. Shares were provided and paid for by way of a
non-recourse, interest-free loan. Dividends are used to repay
the loan. Shares vest three years after issue once loan is fully
repaid.
There are no performance conditions once issued.
No shares were issued under the ELSP during the financial year.
The ELSP
was
suspended in
2009.
30 Sept
2015
30 Sept
2016
30 Sept
2015
30 Sept
2016
98
125
122,832
159,165
614
597
42,741
41,603
Note: No KMP participated in the DESP in 2016. M.Allison and G.Dunne participated in previous DESP offers and currently hold 1,685 and 5,768 shares respectively under this Plan
(with no change to holdings compared to the same time last year, 30 September 2015).
73
Section 5 —Link between Elders’ Financial
Performance and Executive Reward
A — Short-term incentive
STI payments are awarded to executives on achievement of a range of financial and non-
financial performance targets. Table 8 shows the Company’s performance in relation to
a number of financial and operational performance measures over a five-year period.
Table 8 — Company performance
Performance measure
($ millions)
Sales revenue
Underlying EBIT
Statutory profit
2012
2013
2014
2015
2016
1,533.0
1,417.2
1,427.7
1,502.0
1,642.8
(8.0)
(21.5)
(60.6)
(505.3)
22.3
3.0
40.5
38.3
56.2
51.6
Return on Capital based
on underlying earnings
Cashflow from operating activities
n/a
2.5
n/a
11.9%
21.9%
28.4%
(81.6)
15.1
(5.3)
48.7
Note: Details of KMP STI outcomes for 2016 are provided on page 70.
B — Long-term incentive
Under the LTI grants issued 18 December 2014 and 17 December 2015 the performance
conditions as outlined in Table 6 include absolute Total Shareholder Return (TSR),
Earnings Before Interest and Tax (EBIT), Earnings Per Share (EPS) and Return on
Capital (ROC).
Total Shareholder Return (TSR)
Charts 2 and 3 adjacent show Elders’ TSR performance over the last five years against
the ASX/ S&P 200 Accumulation Index.
Chart 2 — Absolute TSR %
%
R
S
T
e
t
u
o
s
b
A
l
150%
100%
50%
0%
-50%
-100%
4.8% 13.2%
2012
2013
2014
2015
2016
Elders
ASX200
74
2016 Annual Report — Elders. Live it.
Chart 3 — Cumulative TSR %
100%
60%
20%
0%
-20%
-60%
%
R
S
T
e
v
i
t
a
u
m
u
C
l
2012
2013
2014
2015
2016
Elders
ASX200
Source: Thomson Reuters
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
No dividends have been declared or paid (interim or final) over the five years from
2012 to 2016.
Chart 4 — Elders five year share price history
7
6
5
4
3
2
1
1
1
‘
1
1
‘
2
1
‘
2
1
‘
2
1
‘
2
1
‘
2
1
‘
2
1
‘
2
1
‘
2
1
‘
3
1
‘
3
1
‘
3
1
‘
3
1
‘
3
1
‘
3
1
‘
3
1
‘
3
1
‘
3
1
‘
4
1
‘
4
1
‘
4
1
‘
4
1
‘
4
1
‘
4
1
‘
4
1
‘
4
1
‘
5
1
‘
5
1
‘
5
1
‘
5
1
‘
5
1
‘
5
1
‘
5
1
‘
5
1
‘
5
1
‘
5
1
‘
6
1
‘
6
1
‘
6
1
’
6
1
‘
6
1
‘
6
1
‘
6
1
‘
6
1
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l
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e
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y
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e
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e
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o
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e
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a
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r
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e
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u
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y
u
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r
e
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m
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r
e
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o
t
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e
b
m
e
c
e
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y
r
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n
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y
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a
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e
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l
i
r
p
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l
y
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g
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r
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e
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e
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m
e
v
o
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r
e
b
m
e
c
e
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h
c
r
a
M
y
r
a
u
n
a
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y
r
a
u
r
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e
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l
i
r
p
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l
y
u
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t
s
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u
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r
e
b
m
e
t
p
e
S
Note: In December 2014 Elders consolidated shares from 10 to 1, therefore for comparison purposes the share price in
the above graph has been consolidated for the full five year period from 10 shares to 1.
Remuneration Report
75
Section 6 — Managing Director and CEO and Senior Executive
Contract Terms, Loans and Transactions
A — Contractual arrangements with KMP
In 2016 the Company had employment contracts with the MD & CEO and Senior Executives. Details of the
employment contracts are set out in the table below.
Table 9 — Contractual arrangements
Component
MD & CEO
Senior Executives
Contract Duration
Ongoing until terminated by either party
Notice (without cause)
initiated by:
Company
Individual
12 months
6 months
6 months
3 months
Payment in lieu of notice may be made equivalent to the remuneration the MD & CEO and Senior
Executive would have received over the notice period.
Payment may be awarded under a short-term or long-term incentive plan in accordance with
plan rules.
Notice for Serious
Misconduct
Elders may terminate immediately. No payment in lieu of notice or other termination payments are
payable under the employment agreement.
Redundancy
Not applicable
Change of Control
Not applicable
Due to genuine redundancy, as defined by the Fair Work Act 2010, the
Senior 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.
In the event of a Change of Control or Disposal of Business resulting in a
material diminution in the roles and responsibility of the Senior Executive,
the Senior Executive may terminate their contact on three months’
notice.
If this occurs the Company will pay the Senior Executive the equivalent of
up to 12 months TFR except for Mr Hunt who will be paid the equivalent
of 3 months base salary.
B — Other transactions with KMP
There are no loans to KMP outstanding in the current or prior year other than those under the ELSP in Table 7
of which G.Dunne, J.Cornish and R.Davey participate holding 595, 338 and 258 shares respectively (with no
change to holdings compared to the same time last year, 30 September 2015).
From time to time, sales and purchases occur during the year between subsidiaries of the Group and entities
that certain directors of the Company have direct or indirect control over. These transactions are conducted
on the same terms and conditions as those entered into by other Company employees or customers on an
arm’s length basis and are trivial or domestic in nature.
76
2016 Annual Report — Elders. Live it. Remuneration Report
Section 7 — Managing Director and CEO and Senior Executive Remuneration
Details
Table 10 — Details of MD & CEO and Senior Executive remuneration for the 2015 and 2016 financial years
Short-term payments
Post-
employment
Share-based
payments
Long-term
payments
Base
salary
STI
Other1
Super
annuation
Options
Share
Rights
Long Service
Leave
Termination
benefits2
M C
Allison
R I
Davey
J H
Cornish
G J
Dunne
2016
2015
2016
2015
2016
2015
2016
2015
817,989
632,2504
801,580
800,000
431,566
85,000
-
-
-
19,359
125,700 296,400
18,915
125,700
-
19,385
31,425
72,101
404,238
110,000
2,596
18,915
31,425
1,342
332,944
90,000
328,572
80,000
1,232
1,351
19,385
25,140
53,003
18,915
25,140
2,824
353,319
100,000
4,358
19,385
27,235
57,803
345,597
90,000
3,640
18,915
27,235
2,790
C C Hall
2016
329,279
-
19,454
19,385
25,140
57,600
M L
Hunt
2015
2016
2015
335,259
70,000
11,501
18,915
25,140
-
355,662
100,000
33,263
19,385
27,235
57,600
347,584
90,000
15,572
18,915
27,235
-
Total
2016
2,620,759
1,007,250
58,307
116,284
261,875 594,507
2015
2,562,830
1,240,000
34,660
113,490 261,875
6,956
3,407
775
22,295
35,873
15,754
9,923
13,260
8,370
(1,170)
217
6,068
1,514
59,614
56,672
Total % Perfor-
mance-
related3
1,895,105
1,746,970
661,772
604,389
537,458
56%
53%
28%
24%
31%
466,725
23%
-
-
-
-
-
-
-
575,360
-
496,547
221,735
671,423
-
-
-
461,032
599,213
500,820
221,735 4,940,330
- 4,276,483
1 Comprising the provision of leased car parking (Cornish, Davey, Dunne, Hall, Hunt), company leased vehicle (Hall and Hunt). C.Hall 2015 figure has been adjusted
to include company leased vehicle which wasn’t reported in 2015.
2 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).
3 Performance related remuneration consists of STI and share rights and options as a percentage of total remuneration. Share options are those disclosed in
Table 11 and share rights includes performance rights disclosed in Table 11.
4 80% of STI to be paid as cash and 20% paid as shares with no further service or performance conditions applicable.
32%
24%
12%
21%
31%
20%
77
Section 8 — Additional Statutory Information
Table 11 — Details of MD & CEO and Senior Executive current long-term incentive grants
Balance
at Start of
Period
Granted
Vesting
date
Vested
Lapsed
Balance
at End of
Period
Expensed
at End of
Period
Fair Value at
grant date1
Rights max-
imum value
yet to vest2
No
No
No
%
No
%
No
$
$
M C Allison
18-Dec-14
600,000
-
30-Sep-17
17-Dec-15
-
260,000
30-Sep-18
600,000
260,000
-
-
-
-
-
-
-
-
-
-
-
-
-
600,000
125,700
377,100
260,000
296,400
889,200
592,800
860,000
422,100
1,266,300
592,800
$
n/a
17-Dec-15
-
75,000
30-Sep-18
R I Davey
23-Dec-11
2,500
18-Dec-14
150,000
-
-
152,500
75,000
J H Cornish
23-Dec-11
5,000
18-Dec-14
120,000
-
-
10-Nov-15
1,750
70%
750
30%
1,750
101
30-Sep-17
150,000
31,425
11,350
94,275
-
n/a
-
-
-
-
1,750
-
-
-
-
750
75,000
72,000
216,000
144,000
226,750
103,526
321,625
144,000
17-Dec-15
-
55,000
30-Sep-18
55,000
52,800
158,400
105,600
30-Sep-17
120,000
25,140
-
-
-
-
-
-
-
-
125,000
55,000
3,500
1,500
178,500
78,143
256,520
105,600
10-Nov-15
3,500
70%
1,500
30%
3,500
203
22,700
75,420
-
n/a
G J Dunne
23-Dec-11
5,000
18-Dec-14
130,000
-
-
17-Dec-15
-
60,000
30-Sep-18
60,000
57,600
172,800
30-Sep-17
130,000
27,235
-
-
-
-
-
-
10-Nov-15
3,500
70%
1,500
30%
3,500
203
22,700
81,705
135,000
60,000
3,500
C C Hall
18-Dec-14
120,000
-
30-Sep-17
17-Dec-15
-
60,000
30-Sep-18
120,000
60,000
M L Hunt
18-Dec-14
130,000
-
30-Sep-17
17-Dec-15
-
60,000
30-Sep-18
-
-
-
-
1,500
193,500
85,038
277,205
40,000
33%
80,000
25,140
75,420
40,000
67%
20,000
57,600
172,800
80,000
100,000
82,740
248,220
-
-
-
-
130,000
27,235
81,705
60,000
57,600
172,800
-
-
-
-
-
-
-
n/a
115,200
115,200
n/a
-
-
n/a
115,200
115,200
130,000
60,000
190,000
84,835
254,505
1 Fair value is used to calculate the value of performance options when granted. The fair value at Grant Date is independently determined using Monte Carlo simulation
techniques which take into account the exercise price, the term of the rights, the share price at grant date and expected price volatility of the underlying share, the expected
dividend yield and the risk free interest rate for the term of the options.
2 The maximum value of the performance rights yet to vest has been determined as the fair value amount at grant date that is yet to be expensed. The minimum value of
deferred shares yet to vest is nil, as the shares will be forfeited if the vesting conditions are not met.
Note: The 18 December 2014 grant were options and the 17 December 2015 grant were performance rights. All options are unvested as at 30 September 2016.
The fair value of the options at grant date for tranche 1 is $0.50 and for tranche 2 and 3 is $0.757. The fair value of the rights at grant date for MD & CEO tranche 1 is $2.260
and for tranche 2 and 3 is $4.580 per tranche.
The fair value of the rights at grant date for Senior Executive tranche 1 is $1.640 and for tranche 2 and 3 is $4.120 per tranche.
78
2016 Annual Report — Elders. Live it.
Remuneration Report
Table 12 — KMP shareholdings
Shares held at start
of year
Shares acquired
during the year as
part of remuneration
Shares acquired
during the year
through the vesting
of LTI
Other shares
acquired (disposed
of) during the year
Balance of shares
held at end of
financial period
Non-Executive Directors
J H Ranck
R Clubb
J A Jackson
I Wilton
2016
2015
2016
2015
2016
2015
2016
2015
MD & CEO and Senior Executives
M C Allison
R I Davey
J H Cornish
G J Dunne
C C Hall1
M L Hunt
Total
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
100,000
74,200
-
-
30,000
24,000
80,000
50,000
17,685
10,000
258
258
26,028
26,032
40,554
34,554
-
4
-
3
294,525
219,051
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,750
-
3,500
-
3,500
-
-
-
-
-
8,750
-
25,000
25,800
1,200
-
7,500
6,000
20,000
30,000
4,422
7,685
-
-
-
(4)
-
6,000
-
(4)
-
(3)
58,122
75,474
1 Mr Hall ceased employment on 16 September 2016, balance is at date of cessation.
Note: No other changes occurred during the year. None of the shares above are held nominally by the Non-Executive Directors or MD & CEO and Senior Executives
125,000
100,000
1,200
-
37,500
30,000
100,000
80,000
22,107
17,685
2,008
258
29,528
26,028
44,054
40,554
-
-
-
-
361,397
294,525
79
For the year ended 30 September 2016
80
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
1 Corporate Information
2 Summary of Significant Accounting Policies
3 Significant Accounting Judgements,
Estimates and Assumptions
4 Revenue and Expenses
5
Income Tax
6 Receivables
7 Biological Assets
8
Inventory
9 Other Financial Assets
10 Equity Accounted Investments
11 Property, Plant and Equipment
12
Intangibles
13 Trade and Other Payables
14 Interest Bearing Loans and Borrowings
15 Provisions
16 Contributed Equity
17 Hybrid Equity
18 Reserves
19 Retained Earnings
20 Dividends
21 Cash Flow Statement Reconciliation
22 Expenditure Commitments
23 Contingent Liabilities
24 Segment Information
25 Auditors Remuneration
26 Investments in Controlled Entities
27 Key Management Personnel
28 Share Based Payment Plans
29 Related Party Disclosures
30 Earnings Per Share
31
Financial Instruments
32 Business Combinations – Changes in the Composition
of the Entity
33 Parent Entity
34 Subsequent Events
Directors’ Declaration
Auditor’s Report
ASX Additional Information
82
83
84
85
86
86
92
93
93
95
96
97
97
97
98
99
100
100
101
101
102
102
103
103
104
104
105
106
107
108
111
111
111
112
113
117
118
118
119
120
122
81
82
2016 Annual Report — Elders. Live it.CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOMEFor the year ended 30 September 2016Note2016 $0002015 $000Sales revenue41,642,8241,502,013Cost of sales(1,338,956)(1,204,155)Gross profit303,868297,858Equity accounted profits10919522Distribution expenses(220,091)(210,049)Administrative expenses(37,423)(43,593)Finance costs 4(9,760)(11,339)Other items of expense4(7,274)(6,460)Profit before income tax expense30,23926,939Income tax benefit 524,00013,116Profit after income tax expense54,23940,055Items that may be reclassified to profit and lossExchange differences on translation of foreign operations(818)564Other comprehensive income/(loss) for the period, net of tax(818)564Total comprehensive income for the period53,42140,619Profit for the period is attributable to:Non-controlling interest2,6701,768Owners of the parent1951,56938,28754,23940,055Total comprehensive income for the period is attributable to:Non-controlling interest2,6701,768Owners of the parent 50,75138,85153,42140,619Reported operationsBasic earnings per share (cents per share)3056.9¢46.4¢Diluted earnings per share (cents per share)3048.7¢33.0¢The accompanying notes form an integral part of this consolidated statement of comprehensive income. Annual Financial Report
83
CONSOLIDATED STATEMENT OF FINANCIAL POSITIONAs at 30 September 2016Note2016 $0002015 $000Current assetsCash and cash equivalents21(b)35,151669Trade and other receivables6381,316349,433Livestock7(a)36,05745,912Inventory8 109,643100,304Current tax assets5 -197Total current assets562,167496,515Non current assetsPlantations7(b)1,3005,969Other financial assets919,3041,269Equity accounted investments103,4124,088Property, plant and equipment 1130,56228,658Intangibles1210,4185,615Deferred tax assets564,12634,800Total non current assets129,12280,399Total assets691,289576,914Current liabilitiesTrade and other payables13331,565276,157Interest bearing loans and borrowings14121,300136,822Current tax payable51,090-Provisions1542,66143,874Total current liabilities496,616456,853Non current liabilitiesOther payables133,820-Provisions154,3498,432Total non current liabilities8,1698,432Total liabilities504,785465,285Net assets186,504111,629EquityContributed equity161,422,3821,323,284Hybrid equity1736,830107,600Reserves18(29,063)(19,307)Retained earnings19(1,246,064)(1,301,213)Total parent entity equity interest184,085110,364Non-controlling interests 2,4191,265Total equity186,504111,629The accompanying notes form an integral part of this consolidated statement of financial position. 84
2016 Annual Report — Elders. Live it.CONSOLIDATED STATEMENT OF CASH FLOWSFor the year ended 30 September 2016Note2016 $0002015 $000Cash flow from operating activitiesReceipts from customers6,434,9155,353,329Payments to suppliers and employees(6,377,688)(5,348,209)Dividends received546508Interest and other costs of finance paid(7,593)(9,866)Income taxes paid(1,504)(1,040)Net operating cash flows21(a)48,676(5,278)Cash flow from investing activitiesPayment for property, plant and equipment (5,986)(6,967)Purchase of other financial assets at cost(18,035)-Payment for intangibles(1,079)-Payment for controlled entities, net of cash acquired(3,659)-Proceeds from sale of equity accounted investments-600Proceeds from sale of property, plant and equipment 560313Proceeds from sale of intangibles907-Net investing cash flows(27,292)(6,054)Cash flow from financing activitiesProceeds from issue of shares 102,42447,095Share issue costs(4,902)(2,376)Repayment of borrowings(15,522)(23,281)Hybrid equity repurchased(67,031)(30,051)Partnership profit distributions/dividends paid(1,871)(1,863)Net financing cash flows13,098(10,476)Net increase/(decrease) in cash held34,482(21,808)Cash at the beginning of the financial year66922,477Cash at the end of the financial year21(b)35,151669The accompanying notes form an integral part of this consolidated statement of cash flows. Annual Financial Report
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CONSOLIDATED STATEMENT OF CHANGES IN EQUITYFor the year ended 30 September 2016$000Issued capitalHybrid equityReservesRetained earningsNon- controlling interestTotal equityAs at 1 October 20151,323,284107,600(19,307)(1,301,213)1,265111,629Profit/(loss) for the period---51,5692,67054,239Other comprehensive income/(loss):Exchange differences on translation of foreign operations--(818)--(818)Total comprehensive income/(loss) for the period--(818)51,5692,67053,421Transactions with owners in their capacity as owners: Shares issued102,424----102,424Transaction costs incurred on share issue, net of tax(3,326)----(3,326)Partnership profit distributions/dividends paid----(1,871)(1,871)Other movements in non-controlling interest----355355Hybrid equity repurchased net of transaction costs-(67,242)---(67,242)Put options provided to non-controlling interests--(10,190)--(10,190)Cost of share based payments--1,304--1,304Reallocation of equity-(3,528)(52)3,580--As at 30 September 20161,422,38236,830(29,063)(1,246,064)2,419186,504As at 1 October 20141,277,813145,151(20,069)(1,347,225)1,36057,030Profit/(loss) for the period---38,2871,76840,055Other comprehensive income/(loss):Exchange differences on translation of foreign operations--564--564Total comprehensive income/(loss) for the period--56438,2871,76840,619Transactions with owners in their capacity as owners: Shares issued47,095----47,095Transaction costs incurred on share issue, net of tax(1,624)----(1,624)Partnership profit distributions/dividends paid----(1,863)(1,863)Hybrid equity repurchased-(30,051)---(30,051)Cost of share based payments--423--423Reallocation of equity-(7,500)(225)7,725--As at 30 September 20151,323,284107,600(19,307)(1,301,213)1,265111,629The accompanying notes form an integral part of this consolidated statement of changes in equity. 86
2016 Annual Report — Elders. Live it.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 2016Note 1 — Corporate InformationThe consolidated financial report of Elders Limited for the year ended 30 September 2016 was authorised for issue in accordance with a resolution of the Directors on 14 November 2016. Elders Limited (the Parent) is a for profit company limited by shares incorporated and domiciled in Australia whose shares are publicly traded on the Australian Securities Exchange. The nature of the operations and principal activities of the Company are described in the Directors’ Report and note 24. References in this consolidated financial report to ‘Elders’ are to Elders Limited and each of its controlled entities unless the context requires otherwise.Note 2 — Summary of Significant Accounting Policiesa — Basis of preparationThe 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 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 under the ASIC Corporations (Rounding in Financial/Director’s Reports) Instrument 2016/191, issued by the Australian Securities and Investments Commission, all values are rounded to the nearest thousand dollars ($000) unless otherwise stated. The financial report has been prepared on a going concern basis. Comparative information which relates to prior periods is restated to be comparable with current year disclosures. b — Compliance with IFRSThe 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 StandardsA number of new amendments to standards and interpretations became operative for the financial year ended 30 September 2016 and have been applied in preparing these consolidated financial statements. None of these have materially impacted Elders and its policies: —AASB 2014-1 Part A – Annual improvements project – 2010-2012 and 2011-2013 cycle —ASX Corporate Governance Principles and RecommendationsThe Company has not elected to early adopt any new standard, interpretation or amendment that has been issued but is not yet effective.(ii) Accounting Standards and Interpretations issued but not yet effectiveCertain new accounting standards and interpretations have been published that are not mandatory for the financial year ended 30 September 2016 but are available for early adoption and have not been applied in preparing this report. The impact of AASB 9 Financial Instruments, AASB 15 Revenue from Contracts with Customers and AASB 16 Leases has not yet been fully assessed. d — Basis of consolidationThe consolidated financial statements comprise the financial statements of Elders Limited and its subsidiaries as at 30 September 2016. Control is achieved when Elders is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, Elders controls an investee if and only if Elders has: —Power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee) —Exposure, or rights, to variable returns from its involvement with the investee, and —The ability to use its power over the investee to affect its returnsWhen Elders has less than a majority of the voting or similar rights of an investee, it considers all relevant facts and circumstances in assessing whether it has power over an investee, including: —The contractual arrangement with the other vote holders of the investee —Rights arising from other contractual arrangements —Elders voting rights and potential voting rights Elders re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when Elders obtains control over the subsidiary and ceases when it loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the statement of comprehensive income from the date Elders gains control until the date Elders ceases to control the subsidiary.Profit or loss and each component of other comprehensive income are attributed to the equity holders of the parent of Elders and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with Elders’ accounting policies. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of Elders are eliminated in full on consolidation. Annual Financial Report
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 2016Note 2 — Summary of Significant Accounting Policiese — Business combinationsBusiness 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, Elders 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 Elders 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 previously held equity interest is remeasured at its acquisition date fair value and any resulting gain or loss is recognised in 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 — Foreign currency translation(i) Functional and presentation currencyBoth 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 26), which have a functional currency other than Australian Dollars, are translated to the presentation currency.(ii) Transactions and balancesTransactions in foreign currencies are initially recorded by subsidiaries at their respective functional currency 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. Differences arising on settlement or translation of monetary items are recognised in profit and loss. 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. (iii) Translation of Subsidiary Companies’ functional currency to presentation currencyThe 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 profit or loss.g — Cash and cash equivalentsCash 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. h — Trade and other receivablesTrade receivables 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 is 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 Company 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.i — InventoryInventories are valued at the lower of cost and net realisable value. Costs are assigned to individual items of inventory predominately on the basis of weighted average cost. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs necessary to make the sale. j — Biological assetsElders holds biological assets in the form of livestock and plantations. Livestock is measured at fair value, which has been determined based upon various assumptions, including livestock prices, less costs to sell. These assumptions reflect the different categories of livestock held. The market value increments or decrements are recorded in profit and loss. Plantations are measured at anticipated fair value less point of sale costs. 88
2016 Annual Report — Elders. Live it.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 2016Note 2 — Summary of Significant Accounting Policiesk — Derivative financial instruments and hedgingElders uses forward currency contracts to hedge risks associated with foreign currency 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. Any gains or losses arising from changes in fair value of derivatives are taken directly to profit and loss.l — Other financial assetsOther financial assets consist of unlisted investments held at historical cost and are classified as available for sale financial assets.m — Equity accounted investments Elders’ equity accounted investments are accounted for using the equity method of accounting in the consolidated financial statements and at cost in the parent. Equity accounted investments are entities over which Elders has significant influence and that are neither subsidiaries nor joint ventures. Elders generally deems it has significant influence if it has 20% of the voting rights.Under the equity method, equity accounted investments are carried in the consolidated financial statements at cost plus post acquisition changes in Elders’ 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 Elders’ share of the results of operations of the equity accounted investments. n — Property, plant and equipmentProperty, plant and equipment are 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, Elders recognises such parts as individual assets with specific useful lives and depreciates them accordingly. 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:LifeMethodBuildings50 yearsStraight lineLeasehold improvementsLease termStraight linePlant and equipment – owned3 to 10 yearsStraight linePlant and equipment – leasedLease termStraight lineNetwork infrastructure5 to 25 yearsStraight lineThe useful lives are consistent with those of the prior period. The assets’ residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate at each financial year end. DerecognitionAn 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. Annual Financial Report
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 2016Note 2 — Summary of Significant Accounting Policieso — LeasesThe 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) Elders as a lesseeFinance leases, which transfer 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.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 Elders 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) Elders as a lessorLeases in which Elders 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.p — Impairment of non financial assets other than goodwill and indefinite life intangiblesNon 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, Elders 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 level 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.q — Intangibles (i) Brand NameThe Brand Name intangible is deemed to have an indefinite useful life and is not amortised. The Brand Name is tested for impairment at each reporting date. Impairment is determined by assessing the recoverable amount of the group of cash-generating units, to which the Brand Name relates. When the recoverable amount of the group of cash-generating units is less than the carrying amount, an impairment loss is recognised. The Brand Name value represents the value attributed to the Elders Brand when acquired through business combinations and is carried at cost less accumulated impairment losses. The Brand Name has been determined to have an indefinite useful life due to there being no foreseeable limit to the period over which it is expected to generate net cash inflows, given the strength and durability of the 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 Elders operates in is such that Brand obsolescence is not common, if appropriately supported by advertising and marketing spend. The Brand Name is not amortised but is subject to impairment testing on an annual basis or whenever there is an indication of impairment.Expenditure incurred in developing, maintaining or enhancing the Brand Name is expensed in the year that it occurred.(ii) GoodwillAfter 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. (iii) Rent RollsRent rolls have been acquired 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. 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. 90
2016 Annual Report — Elders. Live it.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 2016Note 2 — Summary of Significant Accounting Policiesr — Trade and other payablesTrade 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 by Elders prior to the end of the financial year that remain unpaid and arise when Elders 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 guaranteesFinancial guarantee contracts issued by Elders are those contracts that require a payment to be made to reimburse the holder for a loss it incurs because the specific debtor fails to make a payment when due in accordance with the terms of the debt instrument. Financial guarantee contracts are recognised initially at fair value, adjusted for transaction costs that are directly attributable to the issuance of the guarantee. Subsequently, the liability is measured at the higher of the best estimate of the expenditure required to settle the present obligation at the reporting date and the amount recognised less cumulative amortisation.s — Interest bearing loans and borrowingsAll 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 Elders has an unconditional right to defer settlement of the liability for at least 12 months after the reporting date.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. t — Provisions and employee benefitsProvisions are recognised when Elders 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 Elders expects some or all of the provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset, but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the statement of comprehensive income net of any reimbursement.Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the present obligation at the reporting date. The discount rate used to determine the present value reflects current market assessments of the time value of money and the risks specific to the liability. The increase in the provision resulting from the passage of time is recognised in finance costs. Employee benefits(i) Wages, salaries, annual leave and sick leaveLiabilities 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 leaveThe 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 high quality corporate bonds with terms to maturity and currencies that match, as closely as possible, the estimated future cash outflows.Restructuring and redundancyProvisions are only recognised when general recognition criteria provisions are fulfilled. Additionally, Elders 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.Make Good (Restoration)Where Elders 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 contractsA 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, Elders recognises any impairment loss on the assets associated with that contract. Annual Financial Report
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 2016Note 2 — Summary of Significant Accounting Policiesu — Contributed equityOrdinary 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.v — Earnings per shareBasic 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. Hybrids acquired by Elders are not considered dilutive.w — Revenue recognitionRevenue 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 Elders and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised:(i) Sale of goodsRevenue 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 agency services Revenue from the rendering of services is recognised as the service is provided. (iii) Interest incomeRevenue is recognised as it accrues using the effective interest rate method. (iv) Dividend incomeRevenue is recognised when Elders’ right to receive the payment is established. Dividends received from equity accounted investments are accounted for in accordance with the equity method of accounting. x — 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 or equity accounted investments 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 or equity accounted investments, 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. 92
2016 Annual Report — Elders. Live it.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 2016Note 2 — Summary of Significant Accounting PoliciesOther taxesRevenues, 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.Note 3 — Significant Accounting Judgements, Estimates and AssumptionsThe preparation of Elders’ 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 various other 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 has 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 assetsDeferred 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. Impairment of non-financial assets other than Brand Name and goodwillElders assesses impairment of all assets at each reporting date by evaluating conditions specific to the company and to the particular asset that may lead to impairment. These include product 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 Elders’ policy to conduct bi-annual internal reviews of asset values, which are used as sources of information to assess for indicators of impairment. Assets have been tested for impairment in accordance with the accounting policies, including the determination of recoverable amounts of assets using the higher of value in use and fair value less cost to sell.Impairment of Brand Name and goodwillElders assesses impairment of assets at each reporting date by evaluating conditions specific to the company and to the particular asset that may lead to impairment. These include product 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 Elders’ policy to conduct bi-annual internal reviews for indicators of impairment. If indicators exist, assets are tested for impairment through determination of recoverable amounts of assets using the higher of value in use and fair value less cost to sell.Elders determines whether the Brand Name and goodwill are impaired on an annual basis. This requires an estimation of the recoverable amount of the associated cash-generating units, using a value in use discounted cash flow methodology, to which the Brand Name or goodwill is allocated. Estimation of useful lives of assetsThe 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 assets is assessed and considered against the remaining useful life. Adjustments to useful lives are made when considered necessary. Live Export restructuring and exit costsElders has provided for restructuring and exit costs yet to be incurred in regards to the exit from the long haul live export business and the managed divestment as a going concern of the short haul business. The provisions recognised in respect of the exit and divestment have been made by management using certain assumptions and judgements, including the timing of sale of the short haul business and profitability of the short haul business until that sale date. Annual Financial Report
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 2016Note 4 — Revenue and Expenses2016 $0002015 $000Sales revenueSale of goods and biological assets1,389,0731,260,038Debtor interest associated with sales5,0445,391Commission revenue248,707236,5841,642,8241,502,013Other items of expenseLive Export exit costs6,048-Impairment of assets retained1,0492,000Other1774,4607,2746,460Finance costsInterest expense 7,5938,876Unwinding of discounts in regards to liabilities2,1672,4639,76011,339Specific expenses: depreciation and amortisationDepreciation and amortisation3,7063,072Specific expenses: employee benefit expenseSalaries and wages136,787126,690Superannuation and other employee costs26,93625,807Share based payments1,304423165,027152,920Operating lease expenditure60,66257,964Foreign exchange net gains/(losses)2331,435Provision for doubtful debts expense589403Note 5 — Income Taxa — Major components of income tax expense are:Income statementCurrent income tax expense(3,288)(54)Adjustments in respect of current income tax of previous years(673)(1,449)Deferred income tax expense27,96114,619Income tax benefit reported in the statement of comprehensive income24,00013,116Statement of changes in equityDeferred tax recognised directly in equity1,365752 94
2016 Annual Report — Elders. Live it.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 2016Note 5 — Income Taxb — Reconciliation of income tax expense applicable to accounting profit/(loss) before income tax at the statutory income tax rate to income tax expense at Elders’ effective income tax rate is as follows:2016 $0002015 $000Accounting profit before tax30,23926,939Income tax (expense) at 30% (2015: 30%)(9,072)(8,082)Adjustments in respect of current income tax of previous years(673)(1,449)Non-assessable profits/(losses)(1,537)162Recognition of current period tax losses3,3285,129(Recognition) of deferred tax liabilities on intangibles(1,685)-Recognition of previously unrecognised losses35,95218,573Other(2,313)(1,217)Income tax benefit as reported in the statement of comprehensive income 24,00013,116Current tax (payable)/receivable(1,090)197c — Major components of deferred income tax:Statement of Financial PositionMovement2016 $0002015 $0002016 $0002015 $000Deferred income tax assetsLosses available to offset against future taxable income43,2517,29935,9527,299Provision for employee entitlements11,73411,209525728Other provisions3,8635,192(1,329)1,033Capitalised expenses8,2399,928(1,689)(4,710)Derecognition of deferred tax assets---11,275Other1,1141,991(877)(551)Gross deferred income tax assets68,20135,61932,58215,074Deferred income tax liabilitiesProperty, plant and equipment(638)(694)5646Inventory(1,655)-(1,655)-Intangibles(1,685)-(1,685)-Other(97)(125)28251Gross deferred income tax liabilities(4,075)(819)(3,256)297Movement in net deferred tax asset29,32615,371Deferred income tax benefit recognised in the statement of comprehensive income27,96114,619Deferred income tax benefit recognised in equity1,365752Net deferred tax asset64,12634,800Tax lossesElders has tax losses for which no deferred tax asset is recognised in the statement of financial position of $200.8 million (2015: $240.0 million) which are available indefinitely for offset against future taxable profits subject to continuing to meet relevant statutory tests. Tax ConsolidationElders and its 100% owned Australian resident subsidiaries are in a tax consolidated group. Elders Limited is the head entity of the tax consolidated group. Members of the Group have entered into a tax sharing agreement that provides for the allocation of income tax liabilities between the entities should the head entity default on its tax payment obligations. No amounts have been recognised in the financial statements in respect of this agreement on the basis that the possibility of default is remote. Wholly owned Australian subsidiaries are required to make contributions to the head entity for tax liabilities and deferred tax balances arising from external transactions occurring after the implementation of tax consolidations. The contributions are calculated as a percentage of taxable income as if each subsidiary is a stand alone entity. Contributions are payable following payment of the liabilities by Elders. The assets and liabilities arising under the tax funding agreement are recognised as intercompany assets and liabilities with a consequential adjustment to income tax expense or benefit. Annual Financial Report
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 2016Note 6 — Receivables2016 $0002015 $000CurrentTrade debtors 374,898344,023Allowance for doubtful debts(4,499)(5,236)370,399338,787Amounts receivable from equity accounted investments1,065132Prepayments4,8465,765Other receivables5,0064,749Total current receivables381,316349,433Movements in the allowance for doubtful debts – trade debtorsOpening balance of allowance for doubtful debts5,2366,631Trade debts written off(1,326)(1,798)Trade debts provided for during the year589403Closing balance of allowance for doubtful debts4,4995,236Included in trade debtors is $63.7 million (2015: $73.1 million) which is subject to credit insurance with various terms and conditions.Trade receivables are generally on 30 to 90 day terms with the exception of livestock receivables which are on 10 day terms. In some instances deferred terms in excess of 90 days are offered. A provision for impairment loss is recognised when there is objective evidence that an individual trade receivable is impaired. An impairment loss of $0.6 million (2015: $0.4 million) has been recognised by Elders. During the period, no individual amount within the impairment allowance was considered material.The ageing analysis of trade debtors is as follows:Current – within terms307,666268,895Trade debtors past due but not considered impaired1-30 days54,07658,32931-60 days3,2733,60261-90 days1,4452,784+91 days3,9395,177Trade debtors past due and considered impaired+91 days4,4995,236Total trade debtors374,898344,023Related party receivablesFor terms and conditions of related party receivables refer to note 29.Fair value and credit riskDue 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 31.Foreign exchange and interest rate riskDetails regarding the foreign exchange and interest rate risk exposure are disclosed in note 31, including those relating to derivative related balances. 96
2016 Annual Report — Elders. Live it.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 2016Note 7 — Biological Assetsa — Livestock2016 $0002015 $000CurrentFair value at the end of the period36,05745,912All Elders’ cattle are valued at fair value, using Level 3 Price Inputs. Cattle are held for live export and feedlotting purposes, which means that quoted prices in active markets for identical cattle are not available, nor are there other input prices other than quoted prices which are available. Where there are unobservable inputs for an asset or liability, these are classified as Level 3 Price Inputs. At balance date 23,331 head of cattle (2015: 37,960) are included in livestock. This includes: —6,507 cattle held in Australia destined for short haul live export markets; —16,824 cattle held in Australia and Indonesia for feedlotting purposes.Cattle are held for short term trading and feeding purposes, and at period end a fair value increment of $0.5 million was recognised (2015: $1.8 million decrement). In regard to Live Export cattle, as Elders has access to different active markets, Elders has used the most relevant one, being the market that is going to be used, in determining fair value. Fair value has been determined internally by Elders based on the estimated selling price of cattle (allowing for breed and specifications of the cattle), less costs to sell, including associated shipping and transportation costs.Feedlot cattle are valued internally by Elders as there is no observable market for them. The value is based on the estimated exit price per kilogram and the value changes for the weight of each animal as it progresses through the feedlot program. The key factors affecting the value of each animal are price/kg, days on feed and the feed conversion ratio. Significant changes in any of the significant unobservable valuation inputs for feedlot cattle in isolation would result in significantly higher or lower fair value measurement. The group is exposed to a number of risks related to its livestock:Regulatory and environmental risksElders 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.Supply and demand riskElders 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. Elders’ strategy to manage this financial risk is to actively review and manage its working capital requirements. Elders is exposed to risks arising from fluctuations in price and sales volumes and product substitution. Where possible, Elders manages these risks by aligning volumes with market supply and demand.Other risksElders’ livestock are exposed to the risk of damage from disease and other natural forces. Elders has extensive processes in place aimed at monitoring and mitigating those risks, including regular health inspections and industry pest and disease surveys. b — PlantationsNon current1,3005,969Opening balance5,9694,588Costs incurred in respect of forestry plantations183227Fair value increment in period9631,154Allocation of provisions and payables(5,815)-Fair value at the end of the period1,3005,969During the period Elders entered into a contract which assigned all the Forestry lease obligations together with the associated plantations to a purchaser subject to certain conditions being satisfied, including landlord consent, for a consideration of $1.3 million. Prior to this, Elders recognised the value of the plantations and associated lease obligations separately on the statement of financial position. At 30 September 2016 the onerous lease obligations were allocated against the plantation assets and the resulting fair value is representative of the contracted offer price. As a result of this transaction, at balance date Elders recognised a fair value increment of $0.7 million to the plantations. Annual Financial Report
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 2016Note 8 — Inventory 2016 $0002015 $000CurrentRetail99,87187,828Other9,77212,476Total inventory109,643100,304Inventory write-downs recognised as an expense totalled $0.4 million (2015: $2.0 million).Note 9 — Other Financial Assets Non currentElders Insurance (Underwriting Agency) Pty Ltd18,035-Saleyard assets1,2691,26919,3041,269On 1 April 2016, Elders acquired 10% of Elders Insurance (Underwriting Agency) Pty Limited from QBE. The total consideration for this acquisition was $18.0 million.Note 10 — Equity Accounted InvestmentsEquity accounted investments3,4124,088Share of profit919522All equity accounted investments are Australian resident companies. During the period, a $1.0 million (2015: $2.0 million) impairment was recognised against the investment in Elders Financial Planning Pty Ltd. This was recognised in the operating segment titled ‘Other’. 98
2016 Annual Report — Elders. Live it.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 2016Note 11 — Property, Plant and EquipmentReconciliation of carrying amounts at beginning and end of period:Non currentFreehold landBuildings Leasehold improve- ments Plant and equipment (owned)Plant and equipment (leased)Assets under con-structionTotal $000$000$000$000$000$000$0002016Carrying amount at beginning of period5,3627,5006,1688,54273435228,658Additions-1,0549192,0954761,4425,986Additions through entities acquired---200--200Disposals(64)(116)(2)(142)(14)-(338)Depreciation expense-(612)(833)(1,869)(330)-(3,644)Impairment-(83)(11)(330)--(424)Exchange fluctuations5661-7--124Transfers from assets under construction-56-67-(123)-Other ---134(134)--Carrying amount at end of period5,3547,8606,2418,7047321,67130,562Cost5,35415,01412,13625,8721,1281,67161,175Accumulated depreciation and impairment-(7,154)(5,895)(17,168)(396)-(30,613)5,3547,8606,2418,7047321,67130,5622015Carrying amount at beginning of period5,0817,1233,3579,12682523825,750Additions-8673,7931,6403153526,967Disposals(5)(9)(55)(730)--(799)Depreciation expense-(576)(669)(1,616)(211)-(3,072)Impairment--(258)(344)--(602)Exchange fluctuations28695-33--414Transfers from assets under construction---238-(238)-Other---195(195)--Carrying amount at end of period5,3627,5006,1688,54273435228,658Cost5,36214,19811,46126,9741,07635259,423Accumulated depreciation and impairment-(6,698)(5,293)(18,432)(342)-(30,765)5,3627,5006,1688,54273435228,658During the period, $0.3 million of impairments were recognised as a result of exit costs associated with shipping of live animals. This was recognised in the operating segment titled ‘Live Export’. In the prior period, $0.5 million of impairments were recognised as a result of exit costs associated with the head office relocation. This was recognised in the operating segment titled ‘Other’.The carrying amount of Indonesian feedlot assets totalling $3.4 million is supported by a value in use calculation which assumes, among other factors, no adverse changes implemented by government bodies which may affect operations. All Property, plant and equipment is pledged as security, refer to note 14 for interest bearing loans and borrowings. Annual Financial Report
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 2016Note 12 — IntangiblesNon currentGoodwillRent rollsBrand NameTotal$000$000$000$0002016Carrying amount at beginning of period--5,6155,615Additions-1,079-1,079Additions through entities acquired2,0521,734-3,786Amortisation-(62)-(62)Carrying amount at end of period2,0522,7515,61510,418Cost2,0522,81360,40065,265Accumulated amortisation and impairment-(62)(54,785)(54,847)2,0522,7515,61510,418As at 30 September 2015, the only intangible asset was the Brand Name, carried at $5.6 million. The Brand Name is carried net of accumulated impairment of $54.8 million. For impairment testing purposes, goodwill is allocated to the Network CGU, which is also an operating segment.Brand NameFor the purposes of impairment testing, the Brand Name has not been allocated to individual CGU’s but rather assessed against all CGU’s expected to benefit from it. The recoverable amount of the cash generating units to which the Elders’ Brand Name has been allocated to have 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 11.0% pre-tax (2015: 11.0% pre-tax) which has been determined based on a weighted average cost of capital calculation which incorporates the specific risks relating to the cash generating units identified. The calculation of value in use for the cash generating units expected to benefit from the Brand Name was based on the following key assumptions: Gross marginsGross margins are expected to increase from financial year 2016 levels due to: —increased earnings from geographic expansion through acquisitions and footprint growth as implemented in the 2016 Financial Year —increased performance through comprehensive 90 day branch improvement plans and continued price book management —positive real estate activity driven by improved seasonal conditions and sustained low interest ratesSelling, general and administrative expensesOngoing emphasis on cost control will be offset by investment directly linked to margin improvement and control enhancement, including implementation of remuneration models which drive performance and growth.Growth rate estimatesCash flows are based on the 2017 budget. No EBIT growth for years 2 to 5 or perpetuity has been incorporated in the discounted cash flow.Discount ratesDiscount rates reflect management’s estimate of the time value of money and the specific risk not already reflected in the cash flows.Management has determined that there is no impairment loss or reversal in the current year in relation to the Brand Name. 100
2016 Annual Report — Elders. Live it.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 2016Note 13 — Trade and Other Payables2016 $0002015 $000CurrentTrade creditors303,710258,715Other creditors and accruals27,85517,442331,565276,157Non currentPayables3,820-Total trade and other payables335,385276,157Fair ValueDue to the short term nature of these payables, their carrying value is assumed to approximate their fair value.Financial guaranteesInformation regarding financial guarantees is set out in note 23 and 31.Interest rate, foreign risk and liquidity riskInformation regarding interest rate, foreign exchange and liquidity risk exposure is set out in note 31, including those relating to derivative forward contracts.Note 14 — Interest Bearing Loans and Borrowings CurrentSecured loans -15,000Trade receivables funding120,697121,468Lease liabilities 603354121,300136,822The Company also has an ancillary facility in relation to contingent funding, such as bank guarantees. As at 30 September 2016, $1.4 million had been issued (2015: $4.2 million). Assets pledged as security Secured loans are secured by various fixed and floating charges over all the assets of Elders Limited (either directly or indirectly). Lease liabilities are secured by a charge over the leased assets. Fair valueThe carrying value of interest bearing liabilities approximates fair value. Annual Financial Report
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 2016Note 15 — ProvisionsReconciliation of carrying amounts at beginning and end of period:Employee entitlements Restructuring provisions Make goodOnerous contractsOtherTotal$000$000$000$000$000$0002016As at beginning of period38,2319173,6039,44311252,306Arising during year5,5893,076-3,98939013,044Utilised(6,510)(587)(3,452)(3,797)-(14,346)Unused amounts reversed-(230)(151)--(381)Discount rate adjustment1,698--313-2,011Provisions arising from entities acquired334----334Other---(5,958)-(5,958)39,3423,176-3,99050247,010Disclosed as:Current 34,9933,176-3,99050242,661Non current4,349----4,349Total39,3423,176-3,99050247,0102015As at beginning of period35,1646001,7699,32822647,087Arising during year7,2729172,0031,62425212,068Utilised(4,496)(338)(155)(3,555)(295)(8,839)Unused amounts reversed-(262)(140)-(71)(473)Discount rate adjustment291-1262,046-2,46338,2319173,6039,44311252,306Disclosed as:Current 35,0049173,6034,23811243,874Non current3,227--5,205-8,432Total38,2319173,6039,44311252,306Note 16 — Contributed Equity2016 $0002015 $000Issued and paid up capital113,859,440 ordinary shares (September 2015: 83,734,671)1,422,3821,323,284The movement in the dollar balance of share capital is a result of a $102.4 million increase as a result of a capital raise of fully paid ordinary shares consisting of a $25.0 million placement to institutional investors and a $77.4 million 1 for 4 non-renounceable rights issue to existing shareholders. Associated costs net of tax totalled $3.3 million.Capital managementThe Company 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. 102
2016 Annual Report — Elders. Live it.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 2016Note 17 — Hybrid Equity2016 $0002015 $000Hybrid equity36,830107,6001,500,000 perpetual, subordinated, convertible unsecured notes (“Hybrids”) were issued in April 2006 at $100 each. If distributions are resolved, they 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 step up of 250bps in margin. On 30 June 2016, Elders accepted a further step up of 250bps in margin. No distributions were declared or paid during the year.The Hybrids may, on the occurrence of certain events, be converted or resold by Elders 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 Elders’ website.During the period, Elders’ wholly owned subsidiary, Elders Finance Pty Ltd, purchased 705,585 Hybrids at a price of $95 each, being total consideration of $67.0 million. The 705,585 Hybrids acquired by Elders Finance Pty Ltd remain on issue and have not been redeemed. As a result of this transaction, the Hybrid equity balance held on balance sheet declined by $70.8 million being the face value of the Hybrids purchased net of costs. The difference between the face value and the purchase price, totalling $3.5 million, has been transferred to retained earnings. As at 30 September 2016, there remain 419,415 Hybrids not owned by the Elders group. 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. Note 18 — ReservesReconciliation of carrying amounts at beginning and end of period:Business combination reserveEmployee equity benefits reserveForeign currency translation reserveTotal$000$000$000$0002016Carrying amount at beginning of period(16,228)459(3,538)(19,307)Exchange differences on translation of foreign operations--(818)(818)Put options provided to non-controlling interests(10,190)--(10,190)Cost of share based payments-1,304-1,304Transfer to retained earnings-(52)-(52)Carrying amount at end of period(26,418)1,711(4,356)(29,063)2015Carrying amount at beginning of period(16,228)261(4,102)(20,069)Exchange differences on translation of foreign operations--564564Cost of share based payments-423-423Transfer to retained earnings-(225)-(225)Carrying amount at end of period(16,228)459(3,538)(19,307)Nature and purpose of reserves(i) Business combination reserveThe 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. Under agreements entered into with a number of non-controlling interests, the non-controlling shareholders have put options over their interests. These options are exercisable in accordance with the terms of each agreement. The potential liability for Elders under the put options is based on expectations of the exercise price and timing, discounted to present value using Elders’ incremental borrowing rate. The recognition of the put options is reflected in the business combination reserve and as a financial liability within current liabilities.(ii) Employee equity benefits reserveThis reserve is used to record the value of equity benefits provided to employees, including key management personnel as part of their remuneration. (iii) Foreign currency translation reserveThe foreign currency translation reserve is used to record exchange differences arising from the translation of the financial statements of foreign subsidiaries. Annual Financial Report
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 2016Note 19 — Retained Earnings2016 $0002015 $000Retained earnings at the beginning of the financial year(1,301,213)(1,347,225)Net profit attributable to owners of the parent51,56938,287Transfer from employee equity benefits reserve52225Retirement of hybrid equity3,5287,500Retained earnings at the end of the financial year(1,246,064)(1,301,213)Note 20 — DividendsNo dividends are proposed to be paid or were paid during the year (2015;Nil).Subsidiary equity dividends on ordinary shares:Dividends paid to non-controlling interests during the year1,8711,863Franking credits available to the parent for subsequent financial years based on tax rate of 30% (2015: 30%)21,60020,740The 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. 104
2016 Annual Report — Elders. Live it.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 2016Note 21 — Cash Flow Statement Reconciliationa — Reconciliation of net profit/(loss) after tax to net cash flows from operations2016 $0002015 $000Profit/(loss) after income tax expense54,23940,055Adjustments for non cash items:Depreciation and amortisation3,7063,072Unwinding of discount in regards to provisions2,1672,463Equity accounted profits(919)(522)Dividends from equity accounted investments546311Other fair value adjustments(1,018)3,330Impairments1,4732,602Doubtful debts589403Employee entitlements7,2877,521Other provisions7,3876,538Other write downs3971,955Net (profit)/loss on sale of non-current assets(1,129)486Deferred tax asset(32,582)(15,003)Deferred income tax 3,256(297)Provision for tax1,287546Other non cash items2,6692,729 49,35556,189 —(Increase)/decrease in receivables and other assets(17,862)(60,112) —(Increase)/decrease in inventories(9,184)(17,442) —Increase/(decrease) in payables and provisions26,36716,087Net cash flows from operating activities48,676(5,278)b — Cash and cash equivalentsCash at bank and in hand35,151669Note 22 — Expenditure CommitmentsOperating leases commitments – Elders as a lesseeElders’ operating lease commitments relate to property leases associated with the branch network and vehicle and shipping leases. The lease commitments comprise base amounts adjusted where necessary for escalation clauses primarily based on inflation rates. Leases generally provide the right of renewal at the end of the lease term. Operating lease commitments: —Within one year45,08056,815 —After one year but not later than five years58,87282,072 —After more than five years8,2138,591Total minimum lease payments112,165147,478 Annual Financial Report
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 2016Note 23 — Contingent Liabilities2016 $0002015 $000Contingent liabilities at balance date, not otherwise provided for in the financial statements, are as follows:Guarantees issued to third parties arising in the normal course of business1,3644,169There are potential legal matters that occur in the ordinary course of business that are being considered by Elders’ legal advisors. Based on the current information available, the following applies:Unquantifiable contingent liabilities —Elders has contingent obligations in respect of real property let or sub-let by subsidiaries of Elders. —Elders has contingent obligations in respect of real property sub-let to the purchaser of Elders’ former Sandalwood estate. —Benefits are payable under service agreements with executive Directors and other employees of Elders under certain circumstances such as achievement of prescribed performance hurdles, occurrence of certain events or termination of employment for reasons other than serious misconduct. —Subsidiaries of Elders have, from time to time and in the ordinary course, provided parent company guarantees in respect of certain contractual obligations of their subsidiaries. The contingent exposure under those guarantees on a consolidated basis is no greater than the exposure of the subsidiary having the principal contractual obligation. —Subsidiaries of Elders have from time to time provided warranties and indemnities in connection with the disposal of assets. The Directors are not aware at the present time of any material exposures under the warranties or indemnities. —Various legal claims for damages resulting from the use of products or services of Elders, and from contracts entered into or alleged to have been entered into by Elders, are in existence 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 guaranteesAs disclosed in note 26, the parent entity has entered into a Deed of Cross Guarantee with certain controlled entities. The effect of this Deed is that Elders Limited and each of these controlled entities has guaranteed to pay any deficiency of any of the companies party to the Deed in the event of any of those companies being wound up.The parent entity and certain subsidiaries of Elders are parties to various guarantees and indemnities pursuant to bank facilities and operating lease facilities extended to Elders. 106
2016 Annual Report — Elders. Live it.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 2016Note 24 — Segment InformationIdentification of reportable segmentsElders has identified its operating segments to be Network, Feed and Processing, Live Export and Other. This is the basis on which internal reports are reviewed and used by the Chief Executive Officer (the chief operating decision maker) in assessing performance and in determining allocation of resources. Discrete financial information about each of these operating businesses is reported to the Chief Executive Officer on at least a monthly basis. Elders operates predominantly within Australia. All other geographical operations are not material to the financial statements.Type of product and service —Network includes the provision of a range of agricultural retail products through a common distribution channel, including agricultural retail products, agency services and financial services. —Feed and Processing includes the Australian cattle feedlot near Tamworth in New South Wales (Killara Feedlot), the Indonesian cattle feedlot near Lampung (PT Elders Indonesia), and Elders Fine Foods which is involved in the importation and distribution of Australian and New Zealand food products throughout China. —Live Export facilitates principle position trades of dairy, beef feeder, beef slaughter and breeding cattle, and sheep from Australia and New Zealand to international markets by sea or air freight. —The Other segment includes the general investment activities not associated with the other business segments and the administrative corporate office activities, including centrally held costs not allocated to the other segments.Accounting policies and intersegment transactionsThe accounting policies used by the company 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. Changes have been made to the composition of the Other segment to reflect changes in internal reporting. The comparative segment information has been restated to reflect these changes. NetworkFeed and Processing Live ExportOtherTotal$000$000$000$000$0002016Sales revenue1,261,162159,080222,582-1,642,824Equity accounted profits861-58-919Earnings before interest, tax, depreciation & amortisation91,8283,964(14,906)(37,181)43,705Depreciation & amortisation(2,062)(954)-(690)(3,706)Segment result89,7663,010(14,906)(37,871)39,999Corporate net interest expense(9,760)Profit from ordinary activities before tax30,239Segment assets492,02857,59425,122116,545691,289Segment liabilities282,4005,5318,019208,835504,785Net assets209,62852,06317,103(92,290)186,504Carrying value of equity accounted investments3,412---3,412Acquisition of non current assets27,70830110164928,759Non cash income/(expense) other than depreciation and amortisation(2,107)-(424)9,3426,811Profit/(loss) on sale of non current assets1,129---1,129 Annual Financial Report
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 2016Note 24 — Segment InformationNetworkFeed and Processing Live ExportOtherTotal$000$000$000$000$0002015Sales revenue1,162,735141,465197,813-1,502,013Equity accounted profits580-(58)-522Earnings before interest, tax, depreciation & amortisation77,5019,2954,214(49,660)41,350Depreciation & amortisation(1,860)(819)-(393)(3,072)Segment result75,6418,4764,214(50,053)38,278Corporate net interest expense(11,339)Profit/(loss) from ordinary activities before tax26,939Segment assets437,81752,96131,49654,640576,914Segment liabilities246,1072,8582,557213,763465,285Net assets191,71050,10328,939(159,123)111,629Carrying value of equity accounted investments4,088---4,088Acquisition of non current assets1,3601,5341473,9266,967Non cash income/(expense) other than depreciation and amortisation(4,147)-(3,484)(1,982)(9,613)Profit/(loss) on sale of non current assets(486)---(486)Note 25 — Auditors’ RemunerationThe auditor of Elders Limited is PricewaterhouseCoopers. In 2015, the auditor was Ernst & Young. 2016 $2015 $Amounts received or due and receivable by the auditor for: —auditing or review of financial statements565,000581,866 —tax services (primarily compliance)13,120157,538 —other compliance and assurance services 10,000118,014588,120857,418 108
2016 Annual Report — Elders. Live it.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 2016Note 26 — Investment in Controlled Entitiesa — Schedule of controlled entitiesCountry of Incorporation% Held by Group20162015Agsure Pty LtdAustralia(a)100100AI Asia Pacific Operations Holding LimitedHong Kong SAR100100Air International Asia Pacific Operations Pty LtdAustralia(f)100100Air International Vehicle Air Conditioning (Shanghai) Co LtdChina100100APO Administration LimitedHong Kong SAR(e)100100APT Projects Pty LtdAustralia(f)100100Argo Trust No. 2Australia(g)100100Ashwick (Vic) No 102 Pty LtdAustralia(f)100100Australian Plantation Timber Pty Ltd Australia(h)-100B & W Rural Pty LtdAustralia75.575.5BWK Holdings Pty LtdAustralia100100Elders Victorian Feedlot Pty LtdAustralia100100Elders Automotive Group Pty Ltd Australia100100Elders Burnett Moore WA Pty LtdAustralia(f)100100Elders China Trading CompanyChina 100100Elders Communications Pty LtdAustralia(f)100100Elders Conveyancing (WA) Pty Ltd (formerly Acehill Investments Pty Ltd)Australia(f)100100Elders Finance Pty Ltd Australia(a)100100Elders Fine Foods (Shanghai) CompanyChina100100Elders Forestry Finance Pty Ltd Australia100100Elders Forestry Holdings Pty LtdAustralia(h)-100Elders Forestry Management Pty Ltd Australia 100100Elders Forestry Pty Ltd Australia100100Elders Global Wool Holdings Pty LtdAustralia100100Elders Home Loans Pty LtdAustralia(d)10050Elders International Australia Pty Ltd Australia(a)100100Elders Management Services Pty Ltd Australia(f)100100Elders Merchandise Limited New Zealand100100Elders Mortgage Brokers Pty LtdAustralia(h) -100Elders PT IndonesiaIndonesia100100Elders Real Estate (Qld) Pty LtdAustralia(h)-100Elders Real Estate (Tasmania) Pty LtdAustralia(f)100100Elders Real Estate (WA) Pty LtdAustralia(f)100100Elders Real Estate LtdNew Zealand100100Elders Rural Holdings LimitedNew Zealand100100Elders Rural Services Australia Limited Australia100100Elders Rural Services Limited Australia(a)100100Elders Services Company Pty LtdAustralia(f)100100Elders Stock (SI) LtdNew Zealand100100Elders Telecommunications Infrastructure Pty LtdAustralia(f)100100Elders Wool International Pty Ltd Australia100100EVIA Rural Finance LtdNew Zealand100100Family Hospitals Pty LtdAustralia(f)100100Fares Exports Management Mexico, S.A. de C.V.Mexico100100Fares Exports Pty LtdAustralia(f)100100 Annual Financial Report
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 2016Country of Incorporation% Held by Group20162015Fares Exports Trading Mexico, S.A. de C.V.Mexico100100Former EFP Pty LtdAustralia(f)100100Gisborne Farmers LtdNew Zealand100100ITC Timberlands Pty LtdAustralia100100JS Brooksbank & Co Australasia LtdNew Zealand100100JSB New Zealand LimitedNew Zealand100100Keratin Holdings Pty LtdAustralia100100Killara Feedlot Pty LtdAustralia(a) 100100Manor Hill Pty LtdAustralia(f)100100Masterfund (WA) Pty LtdAustralia(h)-100New Ashwick Pty LtdAustralia(f)100100North Australian Cattle Company Pty LtdAustralia(a)100100Prestige Property Holdings Pty LtdAustralia100100Primac Exports Pty Ltd Australia(f)100100Primac Pty Ltd Australia(f)100100PT Indo Mahesa Surya Indonesia100100Redray Enterprises Pty LtdAustralia(f)100100Ultrasound Australia Pty LtdAustralia(a)100100Victorian Producers Co-operative Company Pty Ltd Australia(f)100100 —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 as small proprietary companies relieved from audit requirements are denoted by (f). —Entity denoted by (g) is a controlled special purpose entity related to trade receivable financing program. —Entities denoted by (h) are entities that were disposed of, deregistered or liquidated during the year. Note 26 — Investment in Controlled Entities 110
2016 Annual Report — Elders. Live it.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 2016Note 26 — Investment in Controlled Entitiesb — Deed of cross guaranteePursuant to ASIC Corporations (Wholly-owned Companies) Instrument 2016/785 dated 29 September 2016, 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 14. 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 2016 is set out as follows:2016 $0002015 $000Statement of comprehensive income of the Closed GroupSales revenue327,655248,662Cost of sales(326,013)(229,746)Gross profit1,64218,916Equity accounted profits58(58)Distribution expenses(6,494)(8,027)Administrative expenses(6,324)(5,878)Other items of expense30,35824,553Finance costs(1,525)(3,866)Profit before income tax expense17,71525,640Income tax benefit24,00013,116Profit after income tax expense41,71538,756Consolidated statement of financial position of the Closed GroupCurrent assetsCash and cash equivalents3,6201,396Trade and other receivables19,95511,991Livestock31,94317,859Inventories1,9666,904Total current assets57,48438,150Non current assetsOther financial assets85,80660,079Property, plant and equipment 8,1307,033Deferred tax assets64,12634,800Total non current assets158,062101,912Total assets215,546140,062Current liabilitiesTrade and other payables11,5635,430Interest bearing loans and borrowings8,99619,958Current tax liabilities1,0491,090Provisions7,4341,955Total current liabilities29,04228,433Total liabilities29,04228,433Net assets186,504111,629EquityContributed equity1,422,3821,323,284Hybrid equity36,830107,600Reserves1,711459Retained earnings(1,274,419)(1,319,714)Total equity186,504111,629 Annual Financial Report
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 2016Note 27 — Key Management Personnel Remuneration of Directors and other Key Management PersonnelFor information on the Remuneration Policy, Structure and the relationship between remuneration payment and performance please refer to the Remuneration Report.2016 $2015 $Short term4,353,3164,359,029Long term59,61456,672Post employment176,234159,967Termination benefits221,735-Share based payments856,382268,8315,667,2814,844,499Note 28 — Share Based Payment Plansa — Long Term Incentive OptionsDuring the prior period, 1,920,000 options were granted to eligible executives with a three year performance period and split into three tranches. Each tranche carries a different performance condition being Absolute TSR, Underlying EBIT and Return on Capital. Upon paying the required exercise price of $1.70, each option entitles the holder to one ordinary share. An expense of $0.3 million was recognised in profit and loss during the year in relation to the options (2015: $0.4 million). As at 30 September 2016, 1,694,790 options were outstanding. b — Long Term Incentive Performance RightsDuring the period, 970,000 performance rights were granted to eligible executives with a three year performance period and split into three tranches. Each tranche carries a different performance condition being Absolute TSR, EPS Growth and Return on Capital. Upon vesting of performance rights one fully paid Share in Elders will be allocated for each performance right.An expense of $1.0 million was recognised in profit and loss during the year in relation to the performance rights. As at 30 September 2016, 930,000 rights were outstanding. Note 29 — Related Party DisclosuresThe ultimate controlling entity of the Group is Elders Limited.During the period, Elders Financial Planning repaid an unsecured loan which had a balance of $131,772 at 30 September 2015. As part of sharing office space with branches in the Network segment, Elders incurred costs on behalf of the business and recharged these at arm’s length. $59,463 (2015: $36,893) of equity accounted profits were recognised from this investment. Elders recognised $801,203 (2015: $542,779) in equity accounted profits from its investment in AuctionsPlus and also received $546,316 in dividends (2015: $310,780). Elders loaned amounts to the Elders International New Zealand investment during the year, with a balance of $1,065,417 remaining at 30 September 2016. Equity accounted profits of $58,163 (2015: $58,163 losses) were recognised during the period. Elders also provided shipping services to the business and recharged these at arms length within normal commercial terms. 112
2016 Annual Report — Elders. Live it.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 2016Note 30 — Earnings Per Share2016 2015 Weighted average number of ordinary shares (‘000) used in calculating basic EPS90,69982,530Dilutive share options (‘000)15,09333,358Adjusted weighted average number of ordinary shares used in calculating dilutive EPS (‘000)105,792115,888During the period, Elders conducted a capital raise of $102.4 million. The total number of shares on issue following completion of the capital raise is 113,859,440. The weighted average number of ordinary shares as described above has been adjusted to incorporate the effects of the issue.The following reflects the net profit/(loss) and share data used in the calculations of earnings per share (EPS):2016 $0002015 $000Reported operationsBasic and dilutiveNet profit/(loss) attributable to members (after tax)51,56938,287Reported operations:Basic earnings per share (cents per share) 56.9 ¢ 46.4 ¢Diluted earnings per share (cents per share) 48.7 ¢ 33.0 ¢ Annual Financial Report
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 2016Note 31 — Financial InstrumentsThe Company’s principal financial instruments comprise cash, receivables, payables, interest bearing loans and borrowings, and derivatives.Risk exposures and responsesElders manages its exposure to key financial risks, including interest rate and currency risk in accordance with its financial risk management policy. The objective of the policy is to support the delivery of financial targets while protecting future financial security. The main risks arising from Elders financial instruments are interest rate risk, foreign currency risk, credit risk and liquidity risk. The Company 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 Elders’ exposure to market interest rates relates primarily to short term debt obligations. The level of debt is disclosed in note 14. At September 2016 interest on $70 million (2015: $80 million) of secured loans was hedged under a floating to fixed arrangement, meaning at balance date, Elders had the following mix of financial assets and liabilities exposed to Australian variable interest rate risk:2016 $0002015 $000Financial assetsCash and cash equivalents35,151669Amounts receivable from associated entities1,06513236,216801Financial liabilitiesSecured loans(50,697)(56,468)Net exposure(14,481)(55,667)Elders constantly analyses its interest rate exposure so as to manage its cash flow volatility arising from interest rate changes. Within this analysis consideration is given to potential renewals of existing positions, alternative financing, alternative hedging positions and the mix of fixed and variable interest rates. The following sensitivity analysis is based on the interest rate risk exposures in existence at the balance sheet date. At balance dates, 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:Post Tax Profit/equity — Higher/(Lower)2016 $0002015 $000+ 100 basis points(145)(557)- 100 basis points145557 114
2016 Annual Report — Elders. Live it.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 2016Note 31 — Financial Instrumentsb — Liquidity risk Liquidity risk arises from Elders’ financial liabilities and the subsequent ability to meet our obligations to repay their financial liabilities as and when they fall due. Elders’ 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. Elders manages its liquidity risk by monitoring the total cash inflows and outflows expected on a weekly basis. Elders has established comprehensive risk reporting covering its business units that reflect expectations of management of the expected settlement of financial assets and liabilities.(i) Non derivative financial liabilitiesThe 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 2016. 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 we can be required to pay. When Elders is committed to make amounts available in instalments, each instalment is allocated to the earliest period in which we are 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 amountContractual cash flows 6 months or less6-12 months1-5 years$000$000$000$000$0002016Non derivative financial assets:Cash and cash equivalents35,15135,15135,151--Trade and other receivables385,815385,815385,815--420,966420,966420,966--Non derivative financial liabilities:Interest bearing loans and borrowings(121,300)(121,319)(121,319)--Trade and other payables(331,565)(331,565)(331,565)--Financial guarantees-(1,364)(1,364)--(452,865)(454,248)(454,248)--Net inflow/(outflow)(31,899)(33,282)(33,282)--2015Non derivative financial assets:Cash and cash equivalents669669669--Trade and other receivables354,669354,669354,669--355,338355,338355,338--Non derivative financial liabilities:Interest bearing loans and borrowings(136,822)(136,881)(136,881)--Trade and other payables(276,157)(276,157)(276,157)--Financial guarantees-(4,169)(4,169)--(412,979)(417,207)(417,207)--Net inflow/(outflow)(57,641)(61,869)(61,869)-- Annual Financial Report
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 2016Note 31 — Financial Instruments(ii) Derivative financial instrumentsDue to the unique characteristics and inherent risks to derivative instruments, Elders separately monitors liquidity risk arising from transacting in derivative instruments. The following table details the liquidity risk arising from derivative financial assets and liabilities held by Elders at balance date. Net settled derivatives comprise forward exchange and interest rate hedges, which are recognised within receivables on the statement of financial position.Carrying amountContractual cash flows 6 months or less6-12 months1-5 years$000$000$000$000$0002016Derivative assets – net settled 989898--Total inflow/(outflow)989898--2015Derivative assets – net settled 238238238--Total inflow/(outflow)238238238--c — Credit riskCredit risk arises from Elders’ financial assets, which comprise cash and cash equivalents, trade and other receivables, and derivative instruments. The Company’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 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.Elders minimises concentrations of credit risk by undertaking transactions with a large number of debtors in various locations. 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 maximum exposure to credit risk at the reporting date was:2016 $0002015 $000Cash and cash equivalents35,151669Trade and other receivables385,717354,431Derivative financial assets98238420,966355,338Location of credit riskAustralia409,986346,306Asia10,9809,032Total cash and cash equivalents420,966355,338 116
2016 Annual Report — Elders. Live it.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 2016Note 31 — Financial Instrumentsd — Foreign currency riskElders is exposed to movements in the exchange rates of a number of currencies. The predominant exposure is to movements in the AUD/USD exchange rates. These are primarily generated from the following activities: —Purchase and sale contracts written in foreign currency; —Receivables and payables denominated in foreign currencies; —Commodity cash prices that are partially determined by movements in exchange rates; and —Costs of sale such as transportation and commission denominated in foreign currency.Foreign exchange risk is managed within Board approved limits using forward foreign exchange and foreign currency contracts. Where possible, exposures are netted off against each other to minimise the cost of hedging. Hedge accounting is not applied, with foreign currency contracts fair valued at balance date with gains and losses recognised immediately through the statement of comprehensive income. At 30 September 2016, the Company had the following AUD exposures to foreign currencies that were not designated in cash flow hedges:2016 $0002015 $000Financial assetsCash and cash equivalents – USD1,424900Cash and cash equivalents – CNY706916Cash and cash equivalents – IDR2,2861,146Cash and cash equivalents – other9388Receivables – USD8,0718,339Receivables – NZD1,065-Receivables – CNY3,8393,919Receivables – IDR4,0552,96421,53918,272Financial liabilitiesPayables – USD-(1,435)Payables – CNY(247)(96)Payables – IDR(1,485)(827)Interest bearing loans and borrowings – USD(8,996)(4,958)(10,728)(7,316)Net exposure10,81110,956Given 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:Post Tax Profit — Higher/(Lower)2016 $0002015 $000USD(50)(285)NZD(107)-CNY(430)(474)IDR(486)(328)Other(9)(9)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. Annual Financial Report
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 2016Note 31 — Financial Instrumentse — Fair value of financial assets and liabilitiesElders use 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. All forward exchange derivative contracts were measured at fair value using the level 2 method. Fair value of derivative instruments approximates the carrying value. The fair values of forward currency contracts are calculated by reference to current forward exchange rates for contracts with similar maturity profiles. Any gains or losses arising from changes in fair value of derivatives are taken directly to profit and loss, except for the effective portion of cash flow hedges, which is recognised in other comprehensive income.The fair value of financial instruments as well as the method used to estimate the fair values are summarised in the table below: 20162015Quoted market price (Level 1)Valuation technique – market observable inputs (Level 2)Valuation technique – non market observable inputs (Level 3)Quoted market price (Level 1)Valuation technique – market observable inputs (Level 2)Valuation technique – non market observable inputs (Level 3)$000$000$000$000$000$000Financial assetsDerivatives-98--238--98--238-Note 32 — Business Combinations – Changes in the Composition of the Entitya — AcquisitionsDuring the current period, Elders acquired various real estate and retail businesses for a total consideration net of cash acquired of $3.7m. These transactions resulted in the recognition of $2.1 million of goodwill. No entities or businesses were acquired in the prior period.b — DisposalsDuring the current and prior period no entities or business were disposed of. 118
2016 Annual Report — Elders. Live it.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 2016Note 33 — Parent EntityInformation relating to the parent entity of the Group, Elders Limited:2016 $0002015 $000Results:Net profit/(loss) for the period after income tax expense(25,527)8,705Total comprehensive income/(loss)(25,527)8,705Financial position:Current assets314116Non current assets 191,961112,087Total assets192,275112,203Current liabilities1,696574Non current liabilities4,075-Total liabilities5,771574Net assets186,504111,629Issued capital1,422,3821,323,284Hybrid equity145,151145,151Retained earnings(1,382,740)(1,357,265)Employee equity reserve1,711459Total equity186,504111,629GuaranteesAs disclosed in note 26, the parent entity has entered into a Deed of Cross Guarantee with certain controlled entities. The effect of this Deed is that Elders Limited and each of these controlled entities has guaranteed to pay any deficiency of any of the companies party to the Deed in the event of any of those companies being wound up.The parent entity is a party to various guarantees and indemnities pursuant to bank facilities and operating lease facilities extended to the Group as disclosed in notes 22 and 23.Note 34 —Subsequent Events On 13 October 2016 Elders acquired a 30% equity interest in StockCo Holdings Pty Ltd for $10.0 million. Other than the matter described, there is no other matter or circumstance that has arisen since 30 September 2016 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 Elders, the results of those operations or the state of affairs of Elders in subsequent financial periods. Directors’ Declaration
In accordance with a resolution of the Directors of Elders Limited, the Directors declare:
1. In the opinion of the Directors:
(a) the financial statements and notes of Elders Limited for the financial year ended
30 September 2016 are in accordance with the Corporations Act 2001, including:
(i) Giving a true and fair view of its financial position as at 30 September 2016 and
of its performance for the year ended on that date; and
(ii) Complying with Australian Accounting Standards (including the Australian
Accounting Interpretations) and the Corporations Regulations 2001
(b) the financial statements and notes also comply with International Financial
Reporting Standards as disclosed in note 2(b)
(c) there are reasonable grounds to believe that the Company will be able to pay its
debts as and when they become due and payable.
2. This declaration has been made after receiving the declarations required to be made
to the Directors in accordance with section 295A of the Corporations Act 2001 for
the year ended 30 September 2016.
3. In the opinion of the Directors, as at the date of this declaration, there are reasonable
grounds to believe that the members of the Closed Group identified in note 26 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 H Ranck
Chairman
Adelaide
14 November 2016
M C Allison
Managing Director
Annual Financial Report
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2016 Annual Report — Elders. Live it.PricewaterhouseCoopers, ABN 52 780 433 757Level 11, 70 Franklin Street, ADELAIDE SA 5000, GPO Box 418, ADELAIDE SA 5001 T: +61 8 8218 7000, F: +61 8 8218 7999, www.pwc.com.au Liability limited by a scheme approved under Professional Standards Legislation. Independent auditor’s report to the members of Elders LimitedReport on the financial report We have audited the accompanying financial report of Elders Limited (the company), which comprises the consolidated statement of financial position as at 30 September 2016, the consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year ended on that date, a summary of significant accounting policies, other explanatory notes and the directors’ declaration for Elders Group (the consolidated entity). The consolidated entity comprises the company and the entities it controlled at year’s end or from time to time during the financial year. Directors' responsibility for the financial report The directors of the company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001and for such internal control as the directors determine is necessary to enable the preparation of the financial report that is free from material misstatement, whether due to fraud or error. In Note 2, the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that the financial statements comply with International Financial Reporting Standards. Auditor’s responsibility Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. Those standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the consolidated entity’s preparation and fair presentation of the financial report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. IndependenceIn conducting our audit, we have complied with the independence requirements of the CorporationsAct 2001. Auditor's Report
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Auditor’s opinion In our opinion: (a) the financial report of Elders Limited is in accordance with the Corporations Act 2001,including: (i) giving a true and fair view of the consolidated entity's financial position as at 30 September 2016 and of its performance for the year ended on that date; and (ii) complying with Australian Accounting Standards and the Corporations Regulations 2001.(b) the financial report and notes also comply with International Financial Reporting Standards as disclosed in Note 2. Report on the Remuneration Report We have audited the remuneration report included in pages 62 to 79of the directors’ report for the year ended 30 September 2016. The directors of the company are responsible for the preparation and presentation of the remuneration report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the remuneration report, based on our audit conducted in accordance with Australian Auditing Standards. Auditor’s opinion In our opinion, the remuneration report of Elders Limited for the year ended 30 September 2016 complies with section 300A of the Corporations Act 2001.PricewaterhouseCoopers A G Forman AdelaidePartner14 November 2016 122
2016 Annual Report — Elders. Live it.a — Distribution of Equity Securities as at 25 October 2016No. of Ordinary SharesNo. of Ordinary HoldersNo. of HybridsNo. of Hybrid Holders1 – 1,0003,480,7398,433109,6704861,001 – 5,00012,395,0445,23588,372435,001 – 10,0008,047,7511,10448,920710,001 – 100,00022,143,736887172,4537100,001 – maximum67,792,170581,080,5852Total113,859,44015,7171,500,000545Ordinary SharesHybridsThe number of holders holding less than a marketable parcel5,233418b — Voting rights(i) Ordinary Shares: all ordinary shares carry one vote per share without restriction.(ii) Elders Hybrids: Hybrids do not carry any voting rights under the Company’s Constitution.c — Stock Exchange quotationThe Company’s ordinary shares (ELD) and Elders Hybrids (ELDPA) are listed on the Australian Securities Exchange. The Home Exchange is Sydney.d — Twenty Largest Shareholders as at 25 October 2016The twenty largest holders of Elders Ordinary Shares were as follows:No. of Shares% of SharesJ P MORGAN NOMINEES AUSTRALIA LIMITED16,612,04614.590%HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED11,873,67510.428%NATIONAL NOMINEES LIMITED7,898,1416.937%CITICORP NOMINEES PTY LIMITED5,820,2475.112%RBC INVESTOR SERVICES AUSTRALIA NOMINEES PTY LIMITED 3,520,1273.092%BELL SECURITIES PTY LIMITED2,993,3442.629%BNP PARIBAS NOMS PTY LTD 2,876,1512.526%HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED – A/C 21,831,0741.608%RBC INVESTOR SERVICES AUSTRALIA PTY LIMITED 1,355,7601.191%BRAZIL FARMING PTY LTD1,300,0001.142%VENN MILNER SUPERANNUATION PTY LTD1,000,0000.878%BRISPOT NOMINEES PTY LTD 982,8200.863%RBC INVESTOR SERVICES AUSTRALIA NOMINEES PTY LTD 761,6250.669%MR JAMES GARDINER500,0000.439%RBC INVESTOR SERVICES AUSTRALIA NOMINEES PTY LIMITED 492,7790.433%TINTERN (VIC) PTY LTD 440,6380.387%ELIANAELYSIA PTY LTD 404,2720.355%MR AUSTIN SYDNEY EVAN MILLER372,3090.327%CITICORP NOMINEES PTY LIMITED 359,9880.316%PACIFIC AGRIFOODS INVESTMENTS PTY LTD335,4560.295%Total61,730,45254.216%ASX Additional Information ASX Additional Information
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The twenty largest holders of Elders Hybrids were as follows:No. of Hybrids% of HybridsELDERS FINANCE PTY LTD 705,58547.039%ELDERS FINANCE PTY LTD375,00025.000%MR ROBERT LEE PETERSEN54,3493.623%HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED30,5552.037%AYERSLAND PTY LTD24,8971.660%NATIONAL NOMINEES LIMITED20,3931.360%J P MORGAN NOMINEES AUSTRALIA LIMITED20,2521.350%MR ROBERT LEE PETERSEN11,1070.740%MR GUTHRIE JOHN WILLIAMSON10,9000.727%EQUITAS NOMINEES PTY LIMITED 9,0810.605%CITICORP NOMINEES PTY LIMITED8,4500.563%MR ROBERT PETERSEN6,8000.453%MR ALBERT HUNG & MRS TAMMY HUNG 6,7330.449%RBC INVESTOR SERVICES AUSTRALIA NOMINEES PTY LIMITED 6,4310.429%TAK FUK INVESTMENT PTY LTD 6,2750.418%MR RODNEY PRYOR5,1500.343%MR AUSTIN SYDNEY EVAN MILLER3,8660.258%MR ROY MELVILLE ROBERTSON & MRS DENISE ROBYN ROBERTSON 3,8000.253%MR SUNNY LI SHENG YANG & MRS CONNIE CONG HUAN YANG 3,3250.222%IZARD PTY LIMITED 3,2000.213%Total1,316,14987.743%e — There were no substantial shareholders listed on the Company’s register of substantial shareholders as at 25 October 2016. 124
2016 Annual Report — Elders. Live it.Shareholder InformationShare RegistryBoardroom Pty Limited Level 12, 225 George Street, Sydney, NSW, 2001Telephone: 1300 737 760 Facsimile: +61 (0)2 9279 0664 Email: enquiries@boardroomlimited.com.au Website: boardroomlimited.com.auEnquiriesShareholders with enquiries about their shareholdings should contact the Company’s share registry, Boardroom, on the above contact details.Online shareholder informationShareholders can obtain information about their holdings or view their account instructions online.For identification and security purposes, you will need to know your Reference Number (HIN/SRN), Surname/Company Name and Post/Country Code to access. This service is accessible via the Investor Centre on the Company’s website or direct via the Boardroom website at investorserve.com.au.Tax and dividend/interest paymentsElders is obliged to deduct tax from dividend/interest payments (which are not fully franked) to holders registered in Australia who have not quoted their Tax File Number (TFN) to the Company. Shareholders who have not already quoted their TFN can do so by contacting Boardroom. Change of addressIssuer Sponsored Shareholders who have changed their address should advise Boardroom in writing. Written notification can be emailed, posted or faxed to Boardroom at the address given above and must include both old and new addresses and the Securityholder Reference Number (SRN) of the holding.Alternatively, holders can amend their details on-line via Boardroom’s website. Shareholders who have broker sponsored holdings should contact their broker to update these details.Annual Report mailing listShareholders who wish to vary their annual report mailing arrangements should advise Boardroom online or in writing.Electronic versions of the report are available to all via the Company’s website. Annual Reports will be mailed to all shareholders who have elected to be placed on the mailing list for this document.Investor informationInformation about the Company is available from a number of sources:Website: elders.com.auSubscribe: Shareholders can nominate to receive company information electronically via the Investor Centre on the Company’s website. This service is also hosted by Boardroom and holders can register through InvestorServe on Boardroom’s website.Publications: The annual report is the major printed source of company information. Other publications include the Half-yearly report, company press releases, presentations and Investor Presentations.All publications can be obtained either through the Company’s website or by contacting the Company. Shareholder Information
Company Directory
Directors
Mr James H Ranck — BS Econ, FAICD, Chairman
Mr Mark C Allison — BAgrSC, BEcon, GDM, FAICD
Secretaries
Registered Office
Share Registry
Auditors
Bankers
Mr James A Jackson — BCom, FAICD
Mr Ian Wilton — FCCA, FCPA, FAICD, CA
Ms Robyn Clubb — BEc, CA, F Fin, MAICD
Mr Peter G Hastings — BA LLB GDLP
Ms Sanjeeta Singh — BEd (Primary)
Level 10, 80 Grenfell Street
Adelaide, South Australia, 5000
Telephone:
Facsimile:
Email:
Website:
(08) 8425 4000
(08) 8410 1597
information@elders.com.au
elders.com.au
Boardroom Pty Limited
Level 12, 225 George Street
Sydney, NSW, 2001
Telephone:
Facsimile:
Website:
1300 737 760
+61 (0)2 9279 0664
boardroomlimited.com.au
PricewaterhouseCoopers
Australia & New Zealand Banking Group
National Australia Bank
Stock Exchange Listings
Coöperative Centrale Raiffeisen –Boerenleenbank
(Rabobank Australia)
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
Perpetual Trustee Company Limited
Level 12, 123 Pitt Street
Sydney, NSW 2000
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