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S&W Seed Company2017
Elders
Annual
Report
Elders Limited ABN 34 004 336 636
Contents
Chairman’s Remarks
CEO’s Report
Year in Brief
A Year of Progress
Elders Gives Back
Operating and Financial Review
Material Business Risks
Review of Operations
Outlook
Digital and Technical Services Snapshot
Elders Expands National Footprint
Board of Directors
Executive Management Remarks
Women in Pink
Directors’ Report
Remuneration Report
Annual Financial Report
Shareholder Information
Company Directory
4
6
10
11
12
14
22
26
34
36
38
40
44
50
52
60
78
130
131
Elders is shaping
up to drive growth
and innovation
towards 2020.
One Elders
Values
02
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
One Elders Values
03
Chairman’s Remarks
Financial results
The Company has recorded another year of strong financial
progress, with underlying net profit after tax increasing by
$16.5 million, from $41.2 million last year to $57.7 million in FY17.
Underlying earnings before interest and tax (EBIT) of $70.4 million
was up $14.3 million on last year.
Balanced growth across the portfolio – including Retail Products,
Agency Services, Real Estate Services, Financial Services, and
Feed and Processing Services – contributed to the solid results
which are discussed in greater detail in the Chief Executive
Officer’s report.
Strategic direction
The strategic direction or “Eight Point Plan” has been the
foundation of Elders’ recent success and positioned the business
for ongoing and consistent quality growth.
Elders continues to be disciplined in how it will grow in the
future. There are important agricultural areas in Australia where
Elders is under-represented. These areas are prioritised and
thoroughly evaluated to determine how we should approach
these opportunities. Several investments are listed below that
are a result of this analysis and work continues to profitably
expand Elders’ footprint.
We continue to assess our current operations to ensuring we invest
in only those products, services and geographies that are capable
of generating positive and sustainable returns.
In FY16 we made the decision to divest the Live Export business.
Completion of the sale of that business during the year marked
a successful exit for Elders from Live Export logistics.
This means we are no longer competing with live cattle exporters
in terms of shipping, logistics and supply chains, and this has
facilitated an increase in our ability to supply cattle to exporters
as we are now seen as a partner. We remain committed to the
live export industry and our many clients servicing this industry
with livestock.
Elders is committed to continuing to expand and improve our
products and services for our customers. We believe technology
that provides productivity improvements to Australia’s growers
and producers is key to ongoing profitability and sustainability.
Our plan is to offer access to new technology through improved
digital platforms and through our partnerships with global and
Australian research providers. We believe continuous improvement
in productivity is key for Australia to successfully compete globally
and meet growing demand for food and fibre in Asia.
It is extremely satisfying for the Board and management to
achieve our earnings before interest and tax ($60 million) and
return on capital (20%) goals that were established with the
Eight Point Plan in 2014. This journey commenced in 2013
with the decision of the Elders Board to return Elders to being
a pure play agribusiness, with our aim to “turn the Company
around” and regain the confidence of customers, investors
and employees.
This annual report will give you insights on how this has been
achieved and hopefully the confidence to believe that Elders
will continue to grow and strengthen in the future.
Safety
The success of a Company, such as Elders, is very much
dependent on the health and wellbeing of its employees.
We prioritise the safety of our employees and recognise that
their welfare must be a key consideration in all that we do.
In 2017, we had six lost time injuries (LTIs), which is another
solid step in our journey to achieving our target of zero LTIs.
In FY14, the year before the Eight Point Plan commenced, LTIs
stood, on a like for like basis, at 14. As a result we consider we
are on the right track with our safety strategy.
A safe and healthy Elders is in the interests of everyone: our
employees and their families, our clients and customers, and
our regional communities.
04
2017 Annual Report — Elders Investment
In 2017 Elders made several important investments to support
the Eight Point Plan.
For example, in Bunbury Western Australia, Elders purchased
Southern Districts Estate Agency which is one of the largest
and most diversified real estate groups in the south-west of
Western Australia.
In a fresh approach to the Real Estate offering, a team of water
brokers has been recruited to establish a capital-light water
broking business.
We continued to grow our specialised horticultural footprint
with the acquisition of New South Wales horticultural service
provider and inputs retailer, Ace Ohlsson. An established leader
in the horticulture industry, Ace Ohlsson is a good strategic,
cultural and geographical fit for Elders.
Another important investment in 2017 was the acquisition
of 30% of the livestock financing company StockCo. The
investment has created more financing options for our
customers to acquire livestock and added another important
service to our Financial Services business.
Balance sheet and finance
One of the most significant accomplishments in 2017 was the
simplification of the Elders balance sheet. In April 2017, Elders
realised and cancelled its Hybrid securities which were issued
in 2006 with a face value of $150 million. Realisation of the
Hybrids enables Elders to pay a dividend for 2017, without the
need to first pay distributions on the hybrids. This is, obviously,
of great advantage to you, our shareholders.
I am pleased to report that on the back of the Eight Point
Plan, with three years of strong business results, normalised
banking arrangements, reduced debt levels and improved
cash generation, a final dividend – the first since 2008 – will
be forthcoming in December 2017, together with a special
dividend.
Board
Recently, we announced the appointment of a new non-
executive director, Ms Diana Eilert, who will stand for election
at Elders’ 2017 Annual General Meeting (AGM). We are
particularly excited about the deep digital experience that
Diana brings to Elders as part of our commitment to vastly
improving our digital offering to our clients.
Non-executive director, Mr James Jackson, announced his
plans to retire and therefore will not be seeking re-election at
the 2017 AGM. On behalf of the Board, I would like to express
our thanks and appreciation for the valuable contributions
made to the Company by James.
Corporate governance
The Board strongly believes that
a culture of compliance, and a
commitment to applying the One Elders
Values by our employees in their day-
to-day business activities, is essential
in ensuring the long-term success of
our strategic objectives. To this end,
we continue to uphold high standards
of corporate governance, including
our continuous disclosure obligations.
The Company’s 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 (CGS) available on our
website at elders.com.au.
The CGS also outlines our policy,
objectives, and progress against
those objectives, for achieving gender
diversity in the workplace, which
remains a priority. A concerted effort to
achieve gender balance in the workforce
is progressing and steadily making
inroads into the desired increase in
representation of women in all facets
of the business, from the Board to the
branches.
The Board remains committed to
ensuring Elders stays on its course of
growth and that it continues to deliver
results in accordance with shareholder
expectations.
On behalf of the directors, I take
this opportunity to extend the
Board’s gratitude to Mark Allison,
his management team and all Elders’
employees who continue to represent
Elders with great professionalism, pride
and enthusiasm.
Hutch Ranck
Chairman
Chairman's Remarks
05
CEO’s Report
Although straightforward in concept, the Eight Point Plan
is essential in articulating our vision and ensuring our
operations adhere to the strategic roadmap we have put
in place.
The Plan’s pillars are: values, performance and brand; retail
products; agency services; real estate services; financial
services; digital and technical services; feed and processing
services; and cost, capital and efficiency.
Within each of those eight pillars, we are overwhelmingly
on track in meeting and delivering on intended targets.
Commitment to the Plan means we are already generating
positive results and outcomes on all manner of fronts, and
our valued employees, clients, customers and shareholders
are the beneficiaries. Their loyalty to the Elders brand
and their belief in our values are truly appreciated and
acknowledged.
In terms of the Plan’s strategic financial intent for FY17,
the target set in 2014 was $60 million in earnings before
interest and tax (EBIT) and a 20 percent return on capital
(ROC) through provision of value-creating products and
services in Australia and overseas.
I am pleased to report that those targets were eclipsed.
We achieved $70.4m EBIT and a 26.8% ROC.
Also most satisfying, from a business perspective, is that
for the first time since 2008 we will in December 2017 pay
fully franked dividends, marking the realisation of another
goal set out with the formation of the Eight Point Plan.
The Plan has served to position Elders as a most robust,
resilient, innovative, efficient and dynamic business.
Our goal is to build a business that can withstand seasonal,
market demand and commodity price vagaries and the
impacts of a variable climate and production constraints.
Our focus remains firmly fixed on factors within our
control and extracting the positives out of what others
may see as negative forces and circumstances.
Essentially, we are working to insulate the business
from the agriculture cycle, while remaining focused
solely on agriculture. Non-cyclical, high quality returns
are our objective and we’ve achieved that to date with
the implementation of the Eight Point Plan.
Following are some of the positive outcomes and
developments over the past year I wish to highlight.
Commitment to our
strategic plan and a
resolve to realise our
objective of continuous,
solid, high quality growth
underpinned Elders’
achievements in 2016-17.
Pivotal to the business’
strategic direction is the
Eight Point Plan, which
was introduced in 2014
and will continue to
guide our growth and
development through
to 2020.
06
2017 Annual Report — Elders Chairman's Remarks
07
Operational performance
Continuing on from a strong financial
performance the previous year, FY17
was a period of further underlying profit
growth. Underlying net profit after tax
improved $16.5 million on the prior
corresponding period to $57.7 million.
Underlying EBIT of $70.4 million – up
$14.3 million on last year – resulted
largely from improved profitability
across the product range.
The Retail business benefited from
improved summer cropping conditions
and geographical expansion, posting a
$7.8 million margin improvement, while
Agency Services’ margin increased by
$11 million on the back of strong cattle
and sheep prices and footprint growth.
Real Estate margin improved from
$29.2 million to $31.9 million with
increased farm land and residential
property turnover. Financial Services
earnings were boosted by StockCo and
Elders Insurance acquisitions, rising from
$26.2 million in FY16 to $35.1 million this
reporting period.
Increased utilisation at Killara feedlot
contributed to Feed and Processing
Services recording improved margins
of $1 million.
Higher costs ($269 million compared
with $252.1 million in the previous
corresponding period) were the result
of Eight Point Plan initiatives – including
acquisitions, footprint growth and
variablised increased incentives.
Efficiency and growth
Since introducing the Eight Point Plan
we have constantly reviewed our targets,
objectives and business strategy to
ensure we remain efficient and well
positioned to generate growth and
revenue. Through that review process
we moved to replace one of the original
eight pillars – the live export business –
with technical and digital services.
Exiting from the non-core competency
Live Export business (while maintaining
our important involvement in the trade
through the sourcing of livestock) is
not only driving cost efficiencies but it
has allowed us to invest in areas, such
as technical and digital services, which
are much more aligned with our growth
agenda.
Safety performance
We remain steadfast in our commitment to continual
improvement in terms of the safety, health and wellbeing of
our employees and our broader stakeholders. In 2017, our lost
time injuries (LTIs) were six which is a notable achievement in
our quest for zero LTIs and a considerable improvement on
LTIs of 34 in 2013.
We also maintain a spotlight on the issue of mental health in
rural areas, as emphasised through our ongoing partnership
with the North Queensland Cowboys National Rugby League
team – an initiative aimed at breaking down the stigma
attached to mental health conditions through improved
awareness, understanding and community discussion.
Our people
In 2017, Elders employed 1977 full time equivalent (FTE)
persons, compared with 1893 in FY16.
A key objective under the Eight Point Plan is to increase the
focus on employee behaviour reflecting the One Elders Values
as part of an overall thrust to build a high performance culture.
To that end, our overall engagement and enablement levels, as
measured through the annual employee effectiveness survey,
increased on last year and continue to sit above levels for other
Australian organisations at 74% and 76% respectively.
While we applaud that achievement within our business, more
broadly it has been formally acknowledged nationally and
internationally through the Korn Ferry Employee Engagement
Awards, which have been developed to publicly recognise
organisations that have built superior levels of engagement.
Elders was one of only two Australian companies to receive
an award in 2017, recipients of which came from 21 countries
around the globe. Korn Ferry research confirms employee
engagement is a consistent leading indicator of organisational
health and sustainable performance – a philosophy we share
here at Elders.
More than 97% of employees completed a mid-year
performance review in 2017, reaffirming performance
objectives. Elders recognises outstanding performance
through the likes of the One Elders Awards and through
incentive initiatives which encourage and reward high
performance and achievement.
Elders continues to invest in upskilling and developing our
people. We had 18 future and senior leaders participating in
our Leadership Development Programs in 2016-17, nine people
were inducted into the Stock and Station Agency Traineeship
Program, and the Agronomy Graduate Program welcomed a
further two graduates to its ranks.
Attracting and maintaining a diverse workforce is an ongoing
commitment and in this regard a special emphasis is placed
on increasing the proportion of women holding management
positions. We still have some way to go but we have set some
measureable objectives, including maintaining the pipeline of
female leaders above 25% – that figure currently sits at 28%
which is very encouraging.
Our clients and customers
As mentioned earlier, Elders has increased its focus in the
technical and digital space, primarily for the benefit of our
clients. We are rapidly developing our digital services offering
as farmers increasingly seek business and information services
through online platforms.
During the year we updated the Elders Weather app and the
website to improve user experience. Feedback and input
from the branch network, as well as the Elders Insiders online
community of around 1500 employees, clients and suppliers,
enables our digital team to gauge the effectiveness of these
popular digital tools in real time so adjustments can rapidly
be made if necessary.
Elders Insiders also provides the business with client
satisfaction insights. The latest survey returned strong
positive results and an improvement in satisfaction year on
year. When asked the question, “What do you like most about
Elders?”, it was our people that drew the strongest response,
with respondents citing employees’ “friendly, personalised,
professional, local, helpful approach” as being key attributes,
along with their knowledge and high levels of service.
In an exciting development, the groundwork was undertaken
in FY17 for the creation of a revolutionary new offering for our
clients – Thomas Elder Consulting (TEC).
TEC will be a premium agronomic fee-for-service business that
will operate as an adjunct to the Elders branch retail agronomy
offer. Through TEC, we will provide unrivalled technical
excellence for our clients, as well as the broader industry and
our major multinational research and development partners.
This development will no doubt contribute to Elders remaining
at the forefront of agricultural innovation.
On the livestock front, it is most satisfying to see the continuing
increase of cattle and sheep sales on behalf of our clients
through AuctionsPlus. This year, a total of 731,000 sheep
(578,000 in FY16) and 104,000 head of cattle (93,000 in FY16)
were sold via this cost-efficient online trading system.
Our communities
Elders takes considerable pride in
supporting, nurturing and re-investing
in our rural and regional communities.
We contribute to the fostering of rural
and regional prosperity and wellbeing
through a number of ways, including
Elders Give It, a formal partnership
program with three key not-for-profit
organisations – the Royal Flying Doctor
Service, Landcare and beyondblue.
The program is designed to funnel funds
from payroll donations and fundraising
events into three organisations which
have significant impacts on rural and
remote Australia. Each partner has
been chosen carefully based on their
relationship with the communities in
which Elders’ employees and clients live
and work. The common factor between
our partners of choice is that they all
play an active role in supporting rural
communities. Not only are these areas
where we do business, it’s where our
people live, it’s where their friends are,
where their families are. Ensuring these
locations have long-term support is
important to Elders which firmly has
its roots in rural Australia.
As previously mentioned, we continue to
support the cause of rural mental health
awareness through our partnership with
the North Queensland Cowboys NRL
club. Other key regional sponsorship
agreements include that of the New
South Wales Country Eagles. Many of
our employees, clients and their children
are involved in local rugby, so with the
Eagles playing their home games in rural
areas, it’s a great opportunity for Elders
and our clients to get involved with a
well-respected sporting organisation.
08
2017 Annual Report — Elders Chairman's Remarks
09
Closing remarks
I am encouraged and excited by what we have achieved over
the past year. Our platform for growth and evolution, shaped
by the Eight Point Plan, is firmly entrenched and we are well
placed to continue to make great strides and financial gains
and to provide value to our shareholders.
We anticipate another year of progress and innovation
to elevate the business even further. In FY18 we will be
partnering with university researchers, international
suppliers and government agencies, with a view to improving
Australian agricultural research, development and extension
and ultimately farm productivity and profitability. The
collaborative projects will position Elders at the very heart of
agricultural collaboration in Australia, expediting the delivery
and adoption of new technologies and farming practices.
With the roll-out of such initiatives, we at Elders are certainly
looking forward to the year ahead.
On behalf of the dedicated and hard-working Elders team,
I thank our shareholders and all our stakeholders for their
ongoing support and commitment.
Mark Allison
Managing Director
Elders’ branches continue to support
a wide range of local initiatives and
charities, and many of our employees
volunteer their time and are involved
in community service activities. At a
national level, Elders was recently the
Major Partner for the 25th anniversary
celebration of The Australian Rural
Leadership Foundation, which
supports what we see as the essential
development of leaders in rural, regional
and remote Australia.
Beyond our shores, we are also involved
in supporting those communities in
which we operate. In Indonesia, for
example, we donate 20 kilograms of
beef every month to the Mama Sayang
Orphanage which cares for more than
100 children. Located on the outskirts
of Jakarta, the orphanage is providing
children with a sound education and
guiding them through to university and
into meaningful careers.
Over recent years, we have donated
cows and calves to the local Indonesian
community and provided veterinary
services, we have supplied building
materials for the construction and
renovation of mosques, halls, school
facilities and roads, and have donated
sporting equipment, cattle feed and
manure.
We have also worked with local
government to improve the
environmental impact of the waste
water treatment plant associated
with the abattoir.
We prioritise engagement with local
communities to maintain healthy
relationships and a welcome presence,
and we continue to seek employees
from the same villages that we support
and in which we operate.
Year in Brief
Year ended 30 September
Continuing sales revenue
Underlying EBITDA
Underlying EBIT
Underlying finance costs
Reported profit after tax
Underlying profit after tax
Net debt
Shareholders’ equity
Operating cash flow
Reported earnings per share (basic)
Reported earnings per share (diluted)
Underlying earnings per share (basic)
Underlying earnings per share (diluted)
Final dividend declared (fully franked)
Additional special dividend declared (fully franked)
Interim dividend declared
Key ratios
EBIT margin (EBIT to sales)
Return on capital
Leverage (average net debt to underlying EBITDA)
Interest cover (EBITDA to net interest)
Gearing (average net debt to closing equity)
Key share data
ELD share price
Market capitalisation
Number of ordinary shareholders
Ordinary shares on issue
10
$m
$m
$m
$m
$m
$m
$m
$m
$m
cents
cents
cents
cents
cents
cents
cents
%
%
times
times
%
$
$m
2017
1,603.1
74.6
70.4
7.3
116.0
57.7
95.3
257.7
81.6
101.9
98.9
50.7
49.2
7.5
7.5
-
4.4
26.8
1.8
10.3
52.3
2016
1,519.3
59.8
56.1
9.3
51.6
41.2
86.1
186.5
48.7
56.9
48.7
45.4
38.9
-
-
-
3.7
28.1
2.2
6.4
72.3
4.85
552.2
13,824
3.87
440.6
15,759
113,859,440
113,859,440
2017 Annual Report — Elders A Year of Progress
A Year of Progress
Safety Performance
52% decrease in days lost for FY17
Operational Performance
$70.4m underlying EBIT, up $14.3m on last year
Continued emphasis on employee and community safety health and wellbeing
Underlying ROC at 26.8%, down from 28.1% at September 2016
Leverage ratio improved to 1.8
Interest cover ratio improved from 6.4 to 10.3
Commenced half yearly dividends, with final fully franked dividend declared
at 7.5c per share
Additional special fully franked dividend declared at 7.5c per share
Key Relationships
Strengthened relationships in aligned financial service providers
Continued to work with retail key suppliers, including improved position
in WA fertiliser market
Expanded digital client offerings
Formalised rural charitable partnerships through launch of Elders Give It
Efficiency and Growth
Real Estate footprint expansion in Western Australia
Strategic acquisition of Ace Ohlsson to enhance horticulture capability
Drove organic growth through improving sales force performance and
attracting high performers
Further 10% acquisition of Elders Insurance and 30% of StockCo
Cancellation of all Hybrids resulting in a simplified capital structure
11
Elders
Gives Back
Elders supports charity initiatives at
a national level, but even more so at
a local level in the communities in which
we operate. At our 440 points of presence
throughout Australia, each with unique
requirements, our teams work closely to
provide support to these communities.
12
Image courtesy of the Royal Flying Doctor Service
Elders Gives Back
Elders Give It
“Support those who support you”
To further support our communities, in FY17 Elders
strengthened partnerships with three key not-for-profit
organisations to create the employee contribution program,
Elders Give It. Those three organisations, Royal Flying Doctor
Services (RFDS), Landcare and beyondblue, are a natural fit
for Elders with strong ties to rural Australia.
The program allows employees to donate a nominated pre-
tax amount to one or more of the chosen partners, or support
one or all of the charities through raising awareness within the
community and hosting events.
Elders General Manager People, Innovation and Brand,
Karen Ross says, “The program aligns well with Elders’ values
and our community vision, and has been designed with the
ability to grow.”
“We want the local recognition of the pink shirt to accompany
a reputation for operating with integrity and being a part of the
local community; a company going above and beyond to add
value to our clients.”
“Our clients are the lifeline of our business, so it is always our
focus to assist them in whatever capacity we can – whether
that be in the sale yards, the paddock, the office or through
local community initiatives.”
Royal Flying Doctor Service (RFDS)
The RFDS runs 100 flights a day, with 80% of these trips
providing primary care to people in remote communities
who would otherwise travel hours for basic health care.
The other 20% are emergency service flights, transporting
critically injured and ill patients from remote locations to
large hospitals. Every dollar donated through Elders Give It
to the RFDS helps to keep this lifesaving assistance in the air.
A number of Elders branches held community events in
support of the RFDS, including Elders Port Lincoln and
surrounding Eyre Peninsula branches who made a contribution
of $25,000 alone.
The relationship with the RFDS was further increased with
the announcement of Elders becoming a Major Partner of the
not-for-profit organisation, providing extensive support for the
new flying intensive care unit, as well as to a range of initiatives
throughout the coming financial year.
Elders’ CEO and Managing Director, Mark Allison, and Elders’ General Manager
People, Innovation and Brand, Karen Ross with RFDS’ General Manager, Charlie
Paterson at the Royal Flying Doctor Service Central Operations base in Adelaide.
Landcare
For more than 25 years, Landcare Australia has supported the
protection, restoration and sustained the productivity and value
of Australia’s natural environment. Landcare’s national resource
management program aligns the practice of environmental
management with land productivity.
To support National Landcare week during September, a group
of head office employees volunteered in the Adelaide Hills
collecting local seed, weeding and planting, to improve the
habitat of the Southern Brown Bandicoot, as well as learning
about the important role that Landcare groups across the
country play in conserving and promoting environmental
sustainability.
beyondblue
Mental health has a huge impact on the personal and
work lives of each of our employees, as well as those of
our clients. beyondblue provides information and support to
help everyone in Australia achieve their best possible mental
health, “whatever their age and wherever they live.” With mental
illness an increasing issue in rural Australia, Elders established
a partnership program with the North Queensland Cowboys to
deliver a community program targeting mental health, working
towards greater awareness and support, which has continued
throughout the financial year. Elders also participated in
R U OKAY Day to encourage having conversations about
mental health on a national level, with ‘mateship manuals’
sent to all branches.
13
14
Operating and
Financial Review
15
Operating and Financial Review
Elders is focused on
creating value for all of its
stakeholders in Australia and
internationally. We achieve
this through approximately
2,000 employees across 440
points of presence throughout
Australia, and in China and
Indonesia. Our people use
their expertise and knowledge
to provide the inputs, advice,
marketing options and trading
platforms that help primary
producers to get the most out
of their 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 in both
major population centres and regional
areas. Our feed and processing business
across Australia 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 drawing on its
proud history of service and innovation
in its quest to assist Australia’s primary
producers to be the most productive in
the world.
16
2017 Annual Report — Elders Profit and Loss
Profit: Reported and Underlying
$million
Sales
FY17
FY16
Change
1,603.1
1,519.3
83.8
Australian Network
Feed and Processing Services
Corporate Services and Unallocated Costs
Underlying EBIT
Finance Costs
Underlying profit before tax
Tax
Non-controlling Interests
Underlying profit to shareholders
Items excluded from underlying profit
Reported profit after tax to shareholders
Underlying EBITDA
112.2
4.9
(46.7)
70.4
(7.3)
63.2
(2.9)
(2.6)
57.7
58.3
116.0
74.6
89.8
3.8
(37.4)
56.1
(9.3)
46.8
(2.9)
(2.7)
41.2
10.4
51.6
59.8
22.4
1.1
(9.3)
14.3
2.1
16.4
0.1
0.1
16.5
47.9
64.4
14.7
Chart 1 — Underlying performance by product ($million)
Product margin
8.9
1.0
(0.2)
(16.9)
2.7
11.0
2.2
57.7
7.8
41.2
FY16
Underlying
Profit
Retail
Products
Agency
Services
Real Estate
Services
Financial
Services
Feed and
Processing
Services
Digital and
Technical
Costs
Interest,
tax and
NCI
FY17
Underlying
Profit
Chart 2 — Underlying EBIT by product ($million)
)
.
0
9
6
2
(
)
1
.
2
5
2
(
.
0
4
3
1
2
.
6
2
1
4
.
2
2
1
4
.
1
1
1
9
.
1
3
2
.
9
2
1
.
5
3
2
.
6
2
5
.
5
1
5
.
4
1
.
6
0
.
8
0
.
4
0
7
1
.
6
5
FY17
FY16
Retail
Products
Agency
Services
Real Estate
Services
Financial
Services
Feed and
Processing
Services
Digital
and
Technical
Costs
Underlying
EBIT
Operating and Financial Review
Key movements in profit by product
resulted from:
— Retail benefited from improved
summer cropping conditions and
geographical expansion
— Agency improved with strong cattle
and sheep prices and benefit from
footprint growth
— Real Estate earnings improved with
increased farm land and residential
property turnover
— Financial Services boosted by
StockCo and Elders Insurance
acquisitions
— Feed and Processing earnings
improved with increased utilisation
at Killara feedlot
— Higher costs to drive Eight Point Plan
initiatives, including acquisitions
and footprint growth, and increased
incentives
— Interest expense savings resulting
from lower discount expense related
to provisions and improved working
capital financing terms
17
Key movements in profit by
geography resulted from:
— Northern Australia benefitted from
high cattle prices, improved summer
retail performance, and upside from
geographical expansion
— Southern Australia performance
driven by retail improvements, along
with livestock agency upside from
high sheep prices and footprint
expansion
— Western Australia impacted by a
decline in retail earnings, offset by
increased livestock and real estate
agency earnings
— High input costs continue to
adversely impact the International
margins
— Higher corporate and unallocated
costs from increased short term
incentives resulting from improved
profitability across the business
— Interest expense savings resulting
from lower discount expense related
to provisions and improved working
capital financing terms
Chart 3 — Underlying performance by geography ($million)
11.8
(0.6)
(1.2)
(8.4)
12.7
41.2
2.2
57.7
FY16
Underlying
Profit
Northern
Australia
Southern
Australia
Western
Australia
International Corporate
and
unallocated
costs
Interest, tax
and NCI
FY17
Underlying
Profit
Chart 4 — Underlying EBIT by geography ($million)
8
.
3
4
0
.
1
3
4
.
3
5
6
.
1
4
0
.
2
2
7
.
2
2
.
4
0
7
1
.
6
5
)
2
.
2
(
)
0
.
1
(
.
)
6
6
4
(
)
2
.
8
3
(
FY17
FY16
Northern
Australia
Southern
Australia
Western
Australia
International
Corporate and
unallocated costs
Underlying
EBIT
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
FY17 Commentary
Brand name impairment reversal,
net of tax
Live Export
Fair value adjustment of
investment in Elders Insurance
IT transformation costs
Tax asset adjustment
38.3
Based on delivery of Eight Point Plan
4.5
2.3
(2.1)
15.2
Operating profits and gain on disposal
Revaluation of initial 10% holding
to fair value
Refresh current infrastructure
and services
Recognition of tax losses based
on profitability forecasts
Items excluded from underlying
profit
58.3
18
2017 Annual Report — Elders
Balance Sheet
Key Items
$million as at:
Inventory
Livestock
Trade and other receivables
Sep-17
Sep-16
Change
111.1
44.6
385.6
109.6
36.1
381.3
1.5
8.5
4.3
Trade and other payables
(360.4)
(335.4)
(25.5)
Working capital
180.5
191.6
Borrowings: working capital and other facilities
(130.5)
(121.3)
Cash and cash equivalents
Net debt
Provisions
Shareholders’ equity
Underlying return on capital
Working capital
Working capital balances by product were:
35.2
(95.3)
(53.0)
257.7
26.8%
35.2
(86.1)
(47.0)
186.5
28.1%
(11.1)
(9.2)
0.0
(9.2)
(6.0)
71.3
(1.3%)
$million
Retail Products
Agency Services
Real Estate
Financial Services
Feed and Processing Services
Live Export Services
Other
Working capital (balance date)
Working capital (average)
Sep-17
Sep-16 Change
136.8
19.4
1.6
11.4
50.2
-
(39.0)
180.5
223.1
131.3
40.3
1.1
(3.3)
38.9
4%
52%
45%
n/m
29%
17.1
100%
(33.7)
16%
191.6
216.3
6%
3%
Working capital as at 30 September 2017 was 5.8% lower than 30 September 2016.
Lower working capital balances resulted from:
— Increased activity in Retail
— Variability of livestock activity leading up to balance date
— Investment in Financial Services through provision of shareholder funding
to StockCo
— Higher livestock prices and increase in utilisation at the Killara feedlot
— Lower Live Export balances post exit
Average working capital deployed during FY17 was $223.1 million compared
to $216.3 million in FY16.
Operating and Financial Review
19
Return on capital
Chart 5 — Underlying return on capital
26.8%
28.1%
Sep-17
Sep-16
Slight decline in return on capital:
— Continued strong agency earnings, particularly livestock,
which requires minimal working capital
— Investment in aligned financial services providers which
deliver a lower risk earnings profile
— Stable retail earnings and capital mix
Net debt
Chart 6 — Net debt
137
135
95
86
e
t
a
d
e
c
n
a
a
b
t
A
l
e
g
a
r
e
v
A
Sep-17
Sep-16
Sep-17
Sep-16
Key Ratios
Sep-17 Sep-16 Change
Leverage (average net debt to EBITDA)
Interest cover (EBITDA to net interest)
Gearing (average net debt to closing equity)
1.8
10.3
52%
2.2
6.4
(0.4)
3.9
72%
20%
Net debt of $95.3 million as at
September 2017 was $9.2 million higher
than September 2016:
— Increase in net debt at balance date
reflects strong cash generation,
offset by acquisition related cash
outflows
— Average net debt steady over period
— Leverage, interest cover and gearing
ratio improvement with increased
profitability
Provisions
Provisions increased during the year
driven by an increase in employee
entitlements, offset by the utilisation
and reversal of provisions relating to
the Live Export divestment.
Shareholders’ equity
Shareholders’ equity increased by $71.3
million to $257.7 million as a result of the
FY17 net profit, offset by the $42 million
Hybrid acquisition in the first half of 2017.
20
2017 Annual Report — Elders
Operating and Financial Review
Cash Flow
$million
Operating cash flow
Investing cash flow
Financing cash flow
Total cash flow
FY17
81.6
(42.0)
(39.6)
0.0
FY16
Change
48.7
(27.3)
13.1
34.5
32.9
(14.7)
(52.7)
(34.4)
Chart 7 — Cash flow ($million)
Working capital movements
20.7
(0.8)
(14.7)
85.5
(2.5)
(13.4)
13.6
(1.9)
(5.0)
81.6
(3.5)
78.1
EBITDA
Retail
Products
Agency
Services
Real
Estate
Services
Financial
Services
Feed and
Processing
Services
Live
Export
Other
Interest,
tax and
dividends
Operating
Cash Flow
Capex
Free Cash
Flow
A$m
Retail
Products
Agency
Services
Real
Estate
Financial
Services
Feed and
Process
Live
Export
Other
Total
EBITDA adjusted
Movements in assets and
liabilities
Interest, tax and dividends
49.5
(2.5)
37.2
20.7
13.2
(0.8)
10.4
6.4
0.8 (32.0)
85.5
(14.7)
(13.4)
13.6
(1.9)
1.1
(5.0)
(5.0)
Operating cash flow
47.0
57.9
12.4
(4.3)
(7.0)
14.5 (38.9)
81.6
Highlights from the FY17 cash flow were:
— Strong EBITDA cash conversion
— Working capital movements reflect:
–Variability of livestock activity leading up to balance date
–Investment in Financial Services through provision of shareholder funding to StockCo
–Increased utilisation in the Feed and Processing feedlots
–Reduction in Live Export working capital balance due to reduced shipping activity prior to exit
Investing outflow of $42.0 million included acquisitions of:
— 10% stake in Elders Insurance (Underwriting Agency) in April 2016
— 30% stake in StockCo
— 100% acquisitions of Southern Districts Estate Agency and Ace Ohlsson
— Facility upgrades at Killara
Financing outflow of $39.6 million mainly as a result of the Hybrid realisation completed in the first half.
21
22
Material
Business Risks
23
Material Business Risks
Achievement of our
business objectives could
be affected by a number of
risks that might, individually
or collectively, have an
impact.
Following is an overview of key risks Elders faces in seeking
to achieve its objectives. The risks noted are not exhaustive
and are in no particular order. Elders seeks to identify, analyse,
evaluate, treat and monitor all risks, in order to maximize
opportunities and prevent or reduce losses.
Elders’ risk appetite is set by the Board and recorded in
the Elders Resilience Policy and Framework. The Executive
Committee maintains a keen focus on those risks that have a
higher rating than the desired appetite and continually assesses
the operational and strategic environment for new and
emerging risks.
Risks are reported to the Board Audit, Risk and Compliance
Committee to ensure the Board is adequately informed of the
evolving risk environment.
More detail on Elders’ approach to managing risk is contained
in the Corporate Governance Statement on Elders’ website at
elders.com.au/corporategovernance.
Material Business Risk
Health and safety
Our strategy
Safety risk is inherent in Elders’ business activities. The safety
of our people, clients and the general community with whom
we interact 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 might impact our operations. We recognise and reward
safety initiatives and safe behaviours via our monthly One Elders
Awards program. This initiative values and promotes safety and
ensures our positive safety culture is embedded throughout our
operations.
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.
Our people are trained in safe livestock handling protocols
and methods and we comply with and strive to exceed all
government requirements. In addition we actively engage
with the industry and stakeholders to improve animal welfare
practices where possible.
Commodity pricing
Elders has exposure to commodity price fluctuations in its
Agency, Retail 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.
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 supply
of and demand for rural products and services provided by
Elders, resulting in varied revenue levels.
24
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.
To limit the impact of such risks, Elders maintains both a
geographical spread of operations and a diverse product
and service range.
2017 Annual Report — Elders Material Business Risks
Material Business Risk
Biosecurity threats
Our strategy
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.
Food safety
Through our Feed and Processing operations, Elders handles
livestock within the food 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
in the feedlots.
Fraud and corruption
Elders is exposed to fraud, bribery and corruption risks,
including in foreign markets in which it operates.
Counterparty
Elders’ counterparty universe 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 a number of 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
reconciliation processes, whistle-blower policy and 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 credit risk
assessments, maintaining credit policies and procedures,
oversight by the Credit Committee, debtor monitoring and
reporting, trade credit insurance (major livestock processors
debtor) 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 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.
Cyber threats
Elders operations rely on information technology solutions
which expose us to the threat of cyber disruption and loss
of data.
Elders maintains a strong focus on our information technology
capabilities and we continue to implement and embed stronger
security for our IT infrastructure.
Logistics
Due to the nature of our operations, we work with numerous
logistics suppliers who are working towards compliance with
the amended government regulations.
This operational risk will continue to be a strong focus in
2018 and work with government regulators and other parties
will continue to improve our processes as well as educate and
inform the logistics suppliers we transact with.
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.
25
26
Review of
Operations
27
Key Statistics
Retail Products
Farm Supplies
$1.1b retail sales
Agency Services
Real Estate Services
Fertiliser
Livestock
Wool
Grain
Farmland
Residential
718k tonnes fertiliser
9.0m head sheep
1.5m head cattle
349k wool bales
0.2m grain tonnes
$1.0b farmland sales
$670m residential sales
Property Management
8,291 properties under management
Financial Services
Franchise
Agri Finance
130 franchisees
$2.8b loan book1
$1.6b deposit book1
$78m StockCo book
Insurance
$654m gross written premium2
Digital and Technical Services
Fee for Service
AuctionsPlus (50%)
144 agronomists
731k head sheep
104k head cattle
Elders Weather
182.4m hits
Feed and Processing Services
Killara Feedlot
Elders Indonesia
Elders China
52k head cattle
18k head cattle
$13m sales
1 Products distributed on behalf of Rural Bank Limited 2 Business conducted by Elders Insurance (Underwriting Agency) Pty Ltd which is owned 20% Elders and 80% QBE
28
2017 Annual Report — Elders Review of Operations
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
144 agronomists nationwide.
Performance
Retail margins improved by $7.8 million in FY17. Normalised summer cropping
conditions across northern New South Wales, Victoria and South Australia
generated strong crop protection and fertiliser demand. Conditions in the second
half were challenging in Western Australia, impacting sales activity across the
northern wheat belt.
Geographical expansion, including the recruitment of high performing employees
in Tasmania and New South Wales, and the acquisition of horticultural specialist
business Ace Ohlsson, were earnings accretive. Margins also improved through
continued focus on price book management and increased target rebates earn.
Strategy
To deliver profitable and capital light growth of our retail products portfolio
with an enhanced customer benefit and experience.
Strategy
Achievement
Plan
Capital light,
return on capital
driven business
model
Product focus
— Continued improvement
in supplier trading
agreements, including
increased deferred payment
terms and increased
performance based target
rebates
— Continue to focus on margin
improvement through price
book management
— Successful introduction
of CSBP Fertiliser supply
agreement in Western
Australia
— Increase support of agency
products and consignment
locations
— Access to east coast
Horticultural markets
through acquisition
— Improve product ranging
within key animal health
and agricultural chemicals
categories
— Increased focus on
specialised high value
cropping market, including
in selected geographical
gaps
— Introduce Elders home
branded products
— Build on customer loyalty
through increased provision
of agronomy services
People
— Selective recruitment of
— Identify, select and
high performing staff in key
agricultural areas
recruit proven localised
management to establish
Elders’ presence in selected
geographical gap areas
— Launch Centre of
Excellence
Review of Operations
Retail margin ($m)
102.1
105.9
111.2
126.2
134.0
FY13
FY14
FY15
FY16
FY17
Margin by product
81%
Farm Supplies
19%
Fertiliser
Margin split by geography
18%
West
42%
South
40%
North
29
Agency margin ($m)
106.2
111.4
122.4
90.5
78.8
FY13
FY14
FY15
FY16
FY17
Margin by product
85%
Livestock
15%
Wool
Margin split by geography
17%
West
51%
South
32%
North
Agency Services
Elders provides a range of marketing options
for livestock, wool, and grain.
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 to Elders-owned and third-party feedlots
and livestock exporters.
Elders is one of the largest wool agents for the sale of Australian greasy wool and
operates a brokering service for wool growers. Our team of dedicated wool specialists
assists clients with wool marketing, in-shed wool preparation, ram selection and
sheep classing.
Elders’ grain marketing model provides pricing from multiple buyers and offers a
cutting edge commodity origination platform, maximising choice for growers.
Performance
Livestock prices and footprint expansion drove margin improvement of $10.4 million.
Cattle and sheep prices remained high throughout the year and rose on average 10%
and 22% respectively. Sustained high cattle prices were driven by continued strong
domestic, restocker and export demand.
Elders’ wool earnings improved $0.8 million, despite bales sold being slightly lower
than FY16. The higher wool market prices and corresponding wool earn per bale for
Elders offset the lower activity.
Elders’ grain platform transacted 0.2 million tonnes during the FY17 year.
Strategy
To deliver profitable growth of the agency services portfolio through business
improvement, recruitment and acquisition for our livestock and wool businesses
and through focussed growth of our grain business.
Strategy
Achievement
Plan
Operating
model
People
— Increase agency
opportunity and earnings
through StockCo expansion
— Long-term wool logistics
and distribution agreement
renegotiated
— Transition to variabilised
remuneration structures
which reward
outperformance
— Selective recruitment
of livestock and wool
personnel
— Continue livestock,
wool and grain product
development to improve
and expand offering
— Continue footprint
expansion through targeted
acquisitions
— Continued footprint
expansion through
recruitment of key
operatives with aligned
values and performance
characteristics
30
2017 Annual Report — Elders Review of Operations
Real Estate Services
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 major population centres and
regional areas through company owned and
franchise offices. Other services include
water and home loan broking.
Performance
Favourable market conditions, including low interest rates and high livestock prices
continue to generate demand for large cattle farming and broadacre cropping
properties, with Elders experiencing an increase of $122 million (14%) in turnover
for farmland real estate on last year.
Real Estate margin ($m)
31.9
29.2
27.0
27.5
26.2
FY13
FY14
FY15
FY16
FY17
Margin by product
68%
Agency
32%
Property Management
Despite softening real estate markets in the Northern and Western geographies,
Elders has maintained residential turnover levels and earnings. Acquisitions of agency
and property management businesses contributed to the strong result for the year.
Margin split by geography
Strategy
To deliver profitable growth of the real estate services portfolio through driving
business improvement, recruitment and acquisition for all real estate services.
Strategy
Achievement
Plan
18%
West
34%
South
48%
North
Operating
model
— Expansion achieved through
strategic acquisitions in
Bunbury and south east
South Australia
— Strong pipeline of
acquisitions
People
— Sales workforce
strengthened with quality
recruits appointed across
all zones
— Investment in water broking
capability
— Increase company owned
presence in major regional
centres
— Ongoing focus on
productivity and efficiency
— Elders real estate profile
enhancement
— 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
31
Financial Services margin ($m)
35.1
25.8
25.8
25.4
26.2
FY13
FY14
FY15
FY16
FY17
Margin by product
71%
Banking
29%
Insurance
Margin split by geography
23%
West
45%
South
32%
North
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.
Collectively, these relationships enable us to
offer a broad spectrum of products designed
to help our customers grow their business.
Performance
Financial Services was boosted by acquisitions during the year, being the purchase
of 30% of StockCo (a specialist livestock financier) on 13 October 2016, and an
additional 10% of Elders Insurance on 1 December 2016, raising our share to 20%.
The banking distribution arrangement with Rural Bank yielded strong results with
the performing loan book growing $84 million (3%) on last year. Gross written
premiums in the Insurance business for the year were $654 million, representing
growth of $44 million (7%) on last year.
Strategy
To deliver profitable growth of the financial services portfolio through business
improvement, product development and upstream investment in our services
business.
Strategy
Achievement
Plan
Deeper, more
productive
partnerships
Increased
market
awareness and
cross-sell within
Elders
— Acquired additional 10% of
— Investment in aligned
Elders Insurance
— Acquired 30% of StockCo’s
Australian livestock funding
business
financial service product
providers
— Collaboration with
Rural Bank to improve
productivity and efficiency
of sales team
— National television
— Continue advertising
marketing campaign for
Agri Finance
— Increased digital presence
via website enhancements
and electronic marketing
campaigns
— Internal referral campaigns
facilitating new banking
leads
investment
— Further internal referral
campaigns to drive cross-
sell of Financial Services
products to Elders
customers
32
2017 Annual Report — Elders 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
Earnings for the Killara feedlot increased 17% on last year. The improved performance
came from efficiencies arising from a higher utilisation of 95%, compared to 82% last
year, continued success in paddock procurement strategies and lower repairs and
maintenance expenses following significant capital investment.
High cattle costs and tightening supply continue to adversely impact the overseas
businesses. Indonesian feedlot earnings were adversely impacted by longer days on
feed caused by irregular supply, while the Indonesia retail meat business benefited
from the commencement of importation of Elders’ branded Killara and Marlee
products. Despite increased sales activity and growth in the customer base in the
China business, pricing pressures and the high Australian dollar resulted in lower
earnings.
Strategy
To deliver continuous improvement in EBIT and ROC for all businesses with active
portfolio composition management.
Strategy
Achievement
Plan
Robust systems
— Implementation of ERP
systems in both Indonesia
and China businesses
— Improve reporting and
transparency allowing
effective decision making
Return on
capital focus
— Capital upgrade plan at
Killara allowed increased
utilisation and efficiencies
— Abattoir capacity
— Improve procurement
strategies through
backgrounding and use of
external facilities for Killara
optimised in Indonesia with
introduction of external
custom processing
— 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 line
launched and distributed in
China and Indonesia
— Increase focus on higher
margin markets
— Expansion of Killara
branded product in Bali
market
Review of Operations
Feed and Processing margin ($m)
18.3
13.5
14.7
14.5
15.5
FY13
FY14
FY15
FY16
FY17
Margin by product
77%
Killara (Aus)
17%
Indonesia
6%
China
Margin split by geography
6%
China
17%
Indonesia
77%
Australia
33
Outlook
34
Outlook
35
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. At the date of
this report, the following
conditions are forecast:
Retail Products
— Dry winter conditions are likely to affect crop and
pasture growth with crop production to normalise
to historical averages.
— The full year benefit of acquisitions completed during
FY17 will deliver further benefits during FY18.
— Retail will continue to pursue geographical and crop
segment growth opportunities.
Agency Services
— Cattle prices are predicted to ease during FY18 due
to livestock herd expansion and lower forecast beef
export prices.
— Sheep prices expected to remain strong supported
by exporter and restocker demand.
— Livestock volumes are expected to increase through
continued footprint expansion and additional trading
opportunities.
— Wool earnings growth in FY18 is expected with a strong
pipeline of wool in store, strengthening wool prices and
slow supply growth.
Real Estate Services
— Positive real estate activity driven
by strong demand for large scale
agricultural properties and continued
low interest rates.
— Residential turnover and property
management earnings will benefit
from full year impact of acquisitions
completed during the FY17 year,
mostly in Western Australia.
— Water broking earnings will increase
in line with the recent investment in
employee capabilities.
Financial Services
— Continued momentum and growth
is likely from the banking and
livestock funding products.
— Insurance earnings look to increase
from FY17 levels due to a full year
of 20% ownership.
Feed and Processing
— Investment in infrastructure at Killara
over the last two years will support
sustained utilisation and efficiency
levels as enjoyed in FY17.
— Higher commodity prices, in
particular grain, are expected to
impact profitability at Killara feedlot.
— High input costs will continue to
adversely impact the International
operations.
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 FY18.
Digital and Technical
Services Snapshot
Elders continues to
introduce products and
services to benefit clients
and the productivity of their
businesses. Agriculture has
increasing demands for
digital solutions, and the
rate of change is expected
to increase with succession
to future generations.
A snapshot of Elders’
key digital initiatives
for FY17 include:
Elders Weather App
The Elders Weather App has undergone change to maximise
tools available to users.
149,000
Elders Weather Users
5,399,888
User sessions in FY17
— Advanced push notification
— Customisable layout and interface
— 48 hour forecasts (with hourly breakdown)
— 7 Day synoptic
— Global Forecast System (GFS) 0-7 and 7-14 day
— Observation history
— Minimum and maximum temperature
— Chance of rain and amount
— 28 day rain forecast
— Dew point
— Delta-T
— Rain forecast maps
— Extra radar layers
— Local and national radar maps
— National satellite
— Warnings
— Wind (gusts)
— Tides and moon
— Sunrise/sunset
36
Digital and Technical Services Snapshot
Elders’ Smart Farmer App
will be as trustworthy as
the Country Hour.
Elders Online
The Elders Online client portal is a key initiative for the Eight
Point Plan. Clients can now access their account information
online. Since the launch of the new version in July 2017, more
than 5,000 clients have accessed their Elders Online account –
this figure is growing daily.
Smart Farmer App
Research and phase one development of the Smart
Farmer App occurred in FY17. The app will assist clients in
decision making on-farm by presenting consolidated and
aggregated farm management data from several industry
leading and reputable sources.
The benefits for clients include;
— All historical transactions, dating back up to ten
years can now be viewed.
— Clients can access invoices and have the option
to print or save as a PDF.
— The summary screen shows clients their amounts
overdue, currently due and future items which will
come due (for deferred term purchases).
— The data displayed for clients is real time.
— Clients can download a CSV file of transactional data
for loading into their own accounting package, such
as MYOB or Xero.
eldersrural.com.au/elders-online
Elders Grain App
Elders has increased its digital offering with the introduction
of a new app for grain growers.
Historically, Elders delivered grain price updates to clients
via text messaging – the Elders Grain app delivers price
updates instantly through push notifications. With a wide
range of partner relationships in the international grain
market as well as domestic end users, Elders enables
growers to contract grain for maximum effect in a time
sensitive commodity environment.
Elders Insiders
Elders Insiders enables clients and employees to have their say
and assist in shaping Elders’ development through participation
in surveys. The Elders Insiders community has grown rapidly to
over 3,336 participants, hosting 15 surveys covering a range of
topics from safety to livestock, retail to client satisfaction.
Online Sales and Classifieds
The Sales and Classifieds section is the most visited page
on the Elders website and has undergone some significant
changes during FY17. Clients are able to create personal
alerts to receive notifications when livestock listings, which
match their criteria, are added to the website. Integrating
with AuctionsPlus also enables listings to feed through to
the Elders website.
Thomas Elder Consulting
In FY17 Elders researched and developed a premium
agribusiness consultancy model that provides an independent,
fee-for-service offering to clients, known as Thomas Elder
Consulting or TEC. The consultants are top-tier experts in
their field, with the ability to deliver sustainable, holistic farm
management strategies that increase the productivity and
profitability of their client’s enterprise. TEC is based on science,
leveraged with technology and delivered through expertise.
Trial Sites
Elders aims to bring global technology to regional Australia.
Providing information to producers with the latest and pipeline
innovative technology and testing it under local conditions.
The focus for 2017 was on genetics, herbicides, fungicides
and nutrition, having previously looked into managing risks
like frost and drought.
8
Trial Sites
Over 30 trials
in FY17
37
Elders Expands
National Footprint
Elders has played a significant role
in Australian history throughout the
Company’s 178 year journey, and is
an iconic part of the rural landscape
today. Having experienced many
changes and transformations,
Elders continued its growth
strategy during the financial year
through a targeted approach
directed by the Eight Point Plan.
38
Elders Expands National Footprint
Elders has increased its service offering and presence in
two key areas of growth, the horticulture industry through
the acquisition of Ace Ohlsson, and its real estate business
with the acquisition of Southern Districts Estate Agency.
Chief Executive Officer and Managing Director, Mark Allison
said the acquisitions support Elders’ Eight Point Plan initiatives
to expand the geographical footprint, increasing the business’s
prospects for sustainable long term growth.
Elders is continuing to target profitable growth and expansion
of the business through improvement, recruitment and
acquisition – including 20 new branches by 2020.
“We’re looking to invest in more branches, in the best areas,
with the best people, and the best offer, so we can continue
to grow alongside Australian agriculture,” Mark said.
Ace Ohlsson
Established in 1938, Ace Ohlsson provides horticultural
crop protection, vegetable and flower seeds, fertilisers,
pest control, plant nutrition advisory services and strategic
cropping programs. The central retail operation is strategically
based at the Sydney markets to service local growers in the
early hours of the morning as they deliver their produce for
sale and distribution. Ace Ohlsson also has six stocking points
within a 300km radius of Sydney, each with agronomists
servicing vegetable, fruit, wine grape and turf farmers. Ace
Ohlsson agronomists are constantly on farms inspecting crops,
soil and leaf testing and advising growers the best strategy
for their produce. Additional professional capabilities include
financial assessments, and advice in relation to machinery,
marketing, irrigation and seed technology.
“The Ace Ohlsson business will continue to build on
Elders’ breadth of horticultural and technical specialists,
and increase our market share in New South Wales. As well
established leaders in the horticulture industry, we believe
the Ace Ohlsson business is a good strategic and cultural
fit for Elders,” Mark said.
Southern Districts Estate Agency
Under the leadership of General Manager Tom Russo, Elders
Real Estate has expanded by 12 new locations, taking the total
number of Real Estate offices to 276. The acquisition of well-
known real estate business, Southern Districts Estate Agency
(SDEA), contributed three new offices in Bunbury, Capel and
Collie in Western Australia.
Established more than 40 years ago as a rural real estate and
auctioneering business, SDEA is one of the longest operating
real estate agencies in the South West. Its service offerings
include rural, residential and commercial sales, as well as
residential and commercial property management. SDEA has
become Elders’ first large scale property management business
in the West Zone. The acquisition also saw 60 new real estate
professionals convert to the pink shirt.
Elders’ General Manager Real Estate, Tom Russo says that
Elders is excited about the strategic acquisition and is confident
that the SDEA team will be an excellent asset to the Elders
Real Estate network in achieving its improvement and growth
ambitions.
“Our Board has backed the strategic direction for the Real
Estate business, which is heavily aimed around increased
growth and a greater brand presence, right across Australia,”
he said.
“We are focused on lifting the service offering for our teams,
branches, franchise principals and, most importantly, clients
– ensuring we’ve got innovative solutions and investing in
experienced professionals to achieve operational excellence.”
Elders’ West Zone General Manager James Cornish said;
“the Bunbury branch is a very important part of our business
and has achieved some tremendous growth in recent years,
the branch team is now complemented by SDEA.”
“We are committed to growing the business and our presence
in Western Australia and the acquisition of SDEA presents an
excellent opportunity to further diversify our client offering
across our core products and services.”
39
40
Board of
Directors
41
Board of Directors
Pictured from left: Mr James Jackson, Ms Robyn Clubb, Mr Mark Allison, Mr Hutch Ranck and Mr Ian Wilton
Mr James Jackson
B Com, FAICD
Ms Robyn Clubb
BEc, CA, F Fin, MAICD
Mr Mark Charles Allison
BAgrSc, BEcon, GDM, FAICD
Age 55 – 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 Work
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 60 – 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 a Director of Craig
Mostyn Group Limited, Chair of the
Australian Wool Exchange Limited, Chair
of the Rice Marketing Board for the
State of NSW, Councillor 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.
Age 57 – 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.
42
2017 Annual Report — Elders Board of Directors
Mr Ian Wilton
MSc, FCCA, FCPA, FAICD, CA
Age 65 – 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 Work Health and
Safety Committee, the Nomination
and Prudential Committee and the
Remuneration and Human Resources
Committee. Ian 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 the Sheep CRC
Limited, Australian Innovation Company
Ltd and Tivoli Investments Pty Ltd and
Chair of the advisory board of MacKays
Banana Marketing. Mr Wilton is a
resident of New South Wales.
Company Secretaries
Mr Peter Gordon Hastings
BA, LLB, GDLP, FGIA
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), FGIA
Ms Singh was appointed Joint Company
Secretary in March 2016, after having
been Assistant Company Secretary
for the previous 6 years. Ms Singh has
extensive experience in all governance
activities having served with Elders for
over 10 years.
Mr James Hutchison
(Hutch) Ranck
BS Econ, FAICD
Age 69 – Appointed Chairman in April
2014. Non-executive director of the
Board since June 2008. He is also
Chairman of the Work 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.
43
44
Executive
Management
Remarks
45
Executive Management Remarks
Mark Allison
Managing Director and Chief Executive Officer
2017 is very significant for Elders, as it marks the third year of
the Eight Point Plan. The business has had a strong focus on
safety, growth and innovation, and we have now set a strong
platform which will serve us well to 2020. I’m pleased with the
dedication and hard work of our teams across our Australian,
Chinese and Indonesian businesses and thank our clients for
their support.
Richard Davey
Chief Financial Officer
The 2017 financial year is a testament to the hard work and
dedication seen across the business to continually improve
efficiencies and increase profitability. Elders is in a strong
growth phase with a number of acquisitions completed in
FY17, and many more in the pipeline with a strategic focus
to implement a greater national presence.
Peter Hastings
Company Secretary and General Counsel
This year, the Corporate Governance team led successful
realisation of Elders’ Hybrids, which was fundamental to
simplifying our capital structure. We have also made significant
headway in a program of continuous improvement of Elders’
resilience principles and practices, provided valuable legal
assistance in connection with each of the acquisitions and
divestments undertaken by Elders and provided guidance
and assistance on matters related to the safety of our people.
Overall, I am pleased to report that Elders continues to
adopt high standards of governance and behaviour which
are conducive to shaping the culture of Elders for long-term
success.
46
2017 Annual Report — Elders Executive Management Remarks
Liz Ryan
General Manager — Financial Services
Elders Financial Services delivered profitable growth in FY17,
driven by a healthy mix of organic and in-organic initiatives.
Our equity investments in StockCo (30%) and Elders Insurance
(20%) performed strongly, and enhanced marketing campaigns
generated new business leads across the financial services
offering. Importantly, we also continued to invest in our team to
ensure we have the right people in the right places, equipped
to provide the best financial solutions
to our customers.
Tom Russo
General Manager — Real Estate
This financial year we have continued to invest in the
growth and improvement of the real estate business. We
have delivered upon the promises made in FY16 to invest
in the professionals and technology to support our national
network and drive brand presence in all key markets. Our
farmland agency network performed particularly well, with
unprecedented levels of interest in Australian rural property
driven by positive seasonal conditions, commodity prices,
and the low interest rate environment. The acquisition of
Southern Districts Estate Agency, together with other smaller
acquisitions, drove growth in our residential agency and
property management business. Late in the year we also
recruited a team of water trading professionals to drive
our capital light water markets strategy.
Nick Fazekas
General Manager — Retail
Since 2014 the Retail business has embarked on a capital light
strategy to drive improvement in our return on capital metrics;
the main focus being on improving purchasing margin, longer
payment terms and inventory concessions. We are extremely
pleased with the turnaround of our return on capital results
over the period and delivering improved gross margin year
on year. We have also continued focusing on rationalising our
key suppliers to a core group while delivering a higher level
of service offerings to our loyal customer base. During the
FY17 period we have seen continued organic growth, even
with difficult growing conditions in some key farming areas.
We have also increased our access to east coast horticultural
markets through the acquisition of Ace Ohlsson.
47
Malcolm Hunt
Zone General Manager — South
This year we’ve focused on strategic recruitment which has had
excellent results for the zone. High livestock prices, combined
with retail improvements and footprint expansion have enabled
the South to increase productivity and profitability. We’ve
continued to strengthen relationships with clients and delivered
tools to create better efficiencies throughout their businesses.
Greg Dunne
Zone General Manager — North
Our focus this year has been on our clients, our people
and the communities surrounding our operations. We have
also continued our partnership with the North Queensland
Cowboys to continue raise awareness for mental health. The
Northern areas benefitted from improved summer cropping
and high cattle prices which have remained strong throughout
the year.
James Cornish
Zone General Manager — West
Elders’ market position has continued to strengthen within
the Western Zone throughout FY17. Our presence grew
significantly with a number of Eight Point Plan initiatives,
in particular the acquisition of the Southern Districts Estate
Agency business based in the South West. The high-performing
culture within our business has enabled us to continue to
attract and develop the right people for the right roles. Both
client and supplier relationships have further strengthened
throughout the Zone this year which has seen us achieve
upside across nearly every product and category.
48
2017 Annual Report — Elders Executive Management Remarks
David Adamson
General Manager — Agency
The Agency business continued to perform well, with
continued strong domestic and export demand for both
livestock and wool, providing multiple marketing options for
growers. 2017 saw the business continue to implement digital
tools to add value and create efficiencies across the Agency
business for clients and our team.
Karen Ross
General Manager — People, Innovation & Brand
2017 has been the year that we’ve really focussed on
understanding our clients’ needs and as a result we’ve further
increased our digital and technical services offering with data
driven solutions to enhance the productivity and profitability
of our clients. Our employees have continued to give back
to the communities in which we operate, with the launch of
Elders Give It, our employee contribution program. Elders’
was one of only two Australian companies recognised with
Korn Ferry’s Employee Engagement award, demonstrating
the clear connection our employees have with their own
performance and the performance of the business. We are
also partnering with a number of universities around the
country to better facilitate research, development and
extension activities for the benefit of the Australian
agricultural industry.
49
Women in Pink
With some 2,000 Elders
employees proudly wearing
the pink shirt throughout the
last financial year, 38.3% are
women – which has remained
consistently higher than the
Agriculture, Forestry and
Fishing Industry average.
Elders is dedicated to targeting
a shift in the diversity mindset
across the business.
50
Women in Pink
An increasing number of women are joining Elders through
our Graduate Agronomy and Traineeship Programs, and
the business has continued to ensure leadership programs
are available to women from a diverse range of roles. Elders
completed a pilot program in the West Zone, known as Fast
Track which aimed to bridge the gap between operational
and first line management capabilities, in which women
represented 62% of participants. The program is aimed at
building a talent pipeline through internal upskilling and
promotion and is set to be implemented on a national scale.
Women make a significant contribution to Australian
agriculture and Elders is proud to highlight just a few examples
of trailblazers throughout the network.
Steph Brooker-Jones recruits
the right people
Steph Brooker-Jones, a famous face in the wool industry and
throughout South Australia, as well as industry advocate and
mentor, has supported Elders’ SA wool team to becoming 50%
women. Steph is also chair of Sports Shear Australia, and has
travelled extensively in her various roles within the industry.
Steph works alongside a talented group of district wool
managers stretching from Broken Hill to Ceduna and south
to Mount Gambier. All members of the team are driven by
a combined love of livestock and wool and are committed
to sharing their skills and experiences with their clients and
industry alike.
“I enjoy passing on knowledge and educating people,
and we’re all continually learning and developing. My job is
to train people on a daily basis – from Elders’ trainees, to my
clients and industry members about wool classing, preparation,
and marketing. Schools call on me to help them bring an
outside perspective on sheep and wool, as well as careers
within the industry.”
“People value the knowledge you can share. I feel I have always
been accepted, regardless of my gender, and I think this comes
back to the ability to communicate. It’s fantastic to see that
this is the case more and more often with women involved in
agriculture.”
“The opportunities available in agriculture are now much more
diverse and this opens up so many more roles. Schools and
colleges are including agriculture as part of their offering,
introducing children to the variety of pathways that agriculture
offers,” Steph says.
Elders’ Southern Zone Wool Manager Lachie Brown says
it’s a natural progression and the industry is embracing the
influence and impact women are having throughout the
whole supply chain.
“It’s very positive to see the industry shifting its mindset. Elders
is incredibly supportive and it’s only a matter of time before we
begin to see more women come into our wool marketing team
on a national level.”
The number of women in wool classer and roustabout roles
has overtaken men in the past twenty years.
Passionate pink shirt, Maree Crawford
drives equal opportunities
An agronomy powerhouse from Elders’ North Zone,
women in agriculture advocate and chairwoman of Australian
Summer Grains Conference, Maree Crawford, is well-known
for increasing awareness of women in agriculture and
recognising equal opportunities.
This year’s Australian Summer Grains Conference (ASGC)
was one of the biggest yet, featuring renowned scientists,
marketers, growers and leading industry identities. As
chairwoman and keynote speaker, Maree was responsible for
co-ordinating a team to ensure that the event was a success,
managing to generate a good profit for the five joint venture
partner grain associations – plus presenting women as a
powerful force for growth of the agriculture industry.
“For the industry to see growth and remain economically
sustainable we need to enable women to have greater
involvement in the running of the farm whilst still being
able to meet their share of domestic commitments.”
Maree also believes that the future of the industry is dependent
on well-trained specialists coming through a good mentorship
program. Although from a farming background, Maree
described entering a male dominated industry as daunting and
is a strong advocate of the next generation being trained by
those more experienced in the industry.
“I was taken under the wing of those above me when I first
started and it ignited my passion for agriculture and taught me
skills and knowledge I wouldn’t have otherwise acquired. One
of the most important things we can do as professionals is pass
on our knowledge to build a strong future for the industry.”
“This message ties into women in agriculture too. The more
we lead by example and have strong women in leadership
roles mentoring the up and coming leaders, the greater chance
we have of building a sustainable industry with equal gender
representation.”
Maree has also been a key player in her ‘pink shirts in paddocks’
campaign, as a way of raising the visibility and profiles of
Elders’ employees.
“The Elders brand is iconic and as such the pink shirt stands for
our ability, our resilience, and our contribution to the industry.
There is a lot of pride in being a part of Elders and wearing the
pink shirt shows that pride.”
National Agronomy Technical Services Manager, Graham Page,
says that Maree is a role model in the industry and is continually
going above and beyond for Elders and her clients.
“Maree plays a key role not just in improving the standard of
agronomy services in Elders’ North Zone, but in advocating for
improvements industry-wide. She sets a precedent for other
agronomists and the industry, and their capacity to influence
change,” Graham says.
51
52
Directors’
Report
The directors present their report for
the year ending 30 September 2017.
53
Directors’ Report
Current Directors
The directors of Elders 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
A summary of the experience,
qualifications and special responsibilities
of each Director and Company
Secretary is provided on pages 42
and 43 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;
(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 operations in both rural
and residential markets, including
property management services;
(e) live export operations (sold in the
second half of the year);
(f) feedlotting of cattle;
(g) grain marketing; and
(h) red meat supply chains in Indonesia
and China
Results and Review of Operations
The consolidated entity recorded a profit for the year, after
tax and non-controlling interests, of $116.0m (2016: profit
of $51.6m). A review of the operations and results of the
consolidated entity and its principal businesses during the
year is contained in pages 15 to 33 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.
As announced to ASX on 23 February 2017, the Elders
Hybrids were realised by way of a resale on 30 March 2017.
A further ASX announcement dated 20 April 2017 informed
that Elders Limited had redeemed all Elders Hybrids and
effected termination of the Elders Hybrid Trust Deed.
As a result of these events, the Elders Hybrid security
(ASX: ELDPA) ceased quotation.
Events Subsequent to Balance Date
There is no matter or circumstance that has arisen since
30 September 2017 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 34 and 35 of this report.
Share and Other Equity Issues During
the Year
No ordinary shares were issued during the year.
Dividends and Other Equity Distributions
Subsequent to year end, the Board declared a fully franked final
ordinary dividend of 7.5 cents per share, and a fully franked
special dividend of 7.5 cents per share. The final ordinary
dividend and special dividend will be paid on 15 December 2017
to those shareholders on Elders’ share register on the record
date of 21 November 2017. The Dividend Reinvestment Plan will
operate in respect of both the final and special dividend.
54
2017 Annual Report — Elders Directors' Report
55
Directors’ Interests
At the date of this report, the relevant interests of the Directors
in shares and other equity securities of Elders are detailed in
Table 2 on page 58.
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 2.
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 3 on page 58.
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
Elders 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 Elders will maintain an insurance policy insuring the
officer against any liability incurred by the officer in the
officer’s capacity as an officer of Elders 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.
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 61 of this annual report.
The total quantity of options (not
including performance rights disclosed
on page 71 of the Remuneration Report)
on issue as at 30 September 2017 would
represent, if exercised, 1.49% of the
Group’s issued ordinary shares.
Details of options over unissued shares
at the date of this report are as follows:
(a) Options on Issue:
All options listed in Table 1 are
subject to performance conditions
as described on page 71 of the
Remuneration Report.
(b) Options issued since the end
of the previous financial year:
No options have been issued since
the end of the previous financial year.
(c) Options exercised since the end
of the previous financial year:
No options have been exercised since
the end of the previous financial year.
(d) Options lapsed since the end
of previous financial year:
No options have lapsed since the
end of the previous financial year.
As disclosed in Table 11 appearing
on page 76 of the Remuneration
Report, no performance rights held
by Senior Executives have lapsed
since 30 September 2016.
(e) Options vested since the end
of previous financial year:
1,694,790 options vested on
13 November 2017 as disclosed
on page 70 of the Remuneration
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 accreditation
program operated by Agsafe. The
program provides accreditation for
premises and training and accreditation
for employees 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 letter was received from the
Environmental Protection Authority
advising that a complaint regarding
fertiliser dust 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 breaches of environmental
regulations affecting Elders’ retail
operations were reported during
the year ended 30 September 2017
or to the date of this report.
Remuneration of Directors and Senior
Executives
Details of the remuneration arrangements in place for
Key Management Personnel of Elders are set out in the
Remuneration Report commencing on page 61. In compiling
this report Elders 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 the Killara feedlot in Quirindi, New South
Wales. Killara is subject to both state and local government
environmental legislation.
No breaches of environmental regulations affecting Killara
were reported during the year ended 30 September 2017
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 Elders’
saleyards were reported during the year ended 30 September
2017 or to the date of this report.
56
2017 Annual Report — Elders Live Export Services
Prior to the divestment of its live export business, Elders was
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 were 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.
No breaches of environmental regulations or legislation
were recorded by the live export business in the year to
30 September 2017 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
otherwise stated.
Non-Audit Services
Non-audit services provided by Elders’
auditor, PricewaterhouseCoopers, to
Elders 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 amount
for the provision of non-audit services:
— Other compliance and assurance
services: $33,650
A copy of the auditor’s independence
declaration as required under section
307C of the Corporations Act 2001 is
set out overleaf.
This report, including the Remuneration
Report commencing on page 61 is
made in accordance with a resolution
of Directors.
Directors' Report
57
Table 1 — Options over unissued shares
Date Options Granted
18/12/2014
Number of
Options on issue
1,694,790
Issue Price
of each option
Exercise Price
of each option
nil
$1.57
Option
Expiry Date
30/09/2019
Table 2 — Directors’ Interests
Non-Executive Directors
J H Ranck
I Wilton
J A Jackson
R Clubb
Executive Director
M C Allison
No. of ordinary
shares
No. of performance
rights and options
130,000
105,000
10,000
3,400
-
-
-
-
54,344
1,140,000
Table 3 — 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
14
14
14
14
14
14
14
14
14
14
2
2
2
-
2
2
2
2
-
2
6
6
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
6
6
6
-
6
6
6
6
-
6
5
5
5
5
5
5
5
5
5
5
J H Ranck
J A Jackson
I Wilton
M C Allison
R Clubb
J H Ranck
J A Jackson
I Wilton
M C Allison
R Clubb
Hutch Ranck
Chairman
Mark Allison
Managing Director
58
2017 Annual Report — Elders Directors' Report
Auditor’s Independence Declaration
As lead auditor for the audit of Elders Limited for the year ended 30 September 2017, I declare that to
the best of my knowledge and belief, there have been:
(a)
no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
(b)
no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Elders Limited and the entities it controlled during the period.
A G Forman
Partner
PricewaterhouseCoopers
Adelaide
13 November 2017
PricewaterhouseCoopers, ABN 52 780 433 757
Level 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.
59
60
Remuneration
Report
61
Remuneration Report
The Directors of Elders
Limited present the
Remuneration Report for
the consolidated entity
for the year ended 30
September 2017. 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
62
64
65
66
67
73
74
75
76
2017 Annual Report — Elders Remuneration Report
Key Messages
Our remuneration framework is designed
to attract, motivate and retain talented
people by differentiating rewards based
on 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 includes 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 is 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
Elders 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.
A summary of key remuneration outcomes for the 2017 financial
year is set out below.
Fixed Remuneration
As part of the annual review of fixed remuneration across the
organisation held in November 2016 eligible KMP subsequently
received an increase to their fixed remuneration at an average
rate of 3.04%, in line with market movements for FY17.
In addition, CFO, Mr Davey, received an out of cycle fixed
remuneration increase of 13% in June 2017 as approved by
the Board to reflect an increase in responsibilities taking on
functional oversight of Elders Fine Foods in China, PT Indonesia
and Killara Feedlots and the Internal Audit function. The
CFO fixed remuneration package remains within benchmark
range compared with other companies with similar market
capitalisation.
Variable Remuneration
Short Term Incentive Plan
Elders’ strong financial performance in exceeding its FY17 EBIT
target of $60m and 20% Return on Capital as well as strong
safety, operational and strategic performance resulted in the
delivery of between target and maximum short-term incentive
payments to the MD & CEO and Senior Executives
for FY17.
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 FY17. This grant has a 3-year performance period
ending 30 September 2019, with key metrics of Absolute Total
Shareholder Return, Earnings per Share growth and Return on
Capital. The LTIP is designed to focus executives on continuing
to drive sustainable growth and shareholder return.
Change to Exercise Price in FY15 Options Plan
Having regard to the dilutive impact of the capital raising
undertaken by Elders during 2016, the Board reviewed the
conditions of the 2015 grant under the LTIP and as a result the
exercise price of $1.70 was amended to $1.57. This change has
been calculated in accordance with the formula outlined in the
ASX listing rules and was made in line with the Plan Rules.
Long-term incentives vesting in the year
We believe our remuneration framework remains aligned with
the strategy of the business and promotes long-term alignment
with shareholders. As a result the options granted in FY15 under
the Long Term Incentive Plan had a three year performance
period which concluded 30 September 2017. Testing against
the three performance conditions, being Elders’ Absolute Total
Shareholder Return, Underlying Earnings Before Interest and
Tax and Return on Capital resulted in 100% vesting. Further
details on the vesting are outlined on page 69.
63
Managing Director and CEO and Senior Executive remuneration
outcomes for 2017
Table 1 below sets out certain items of remuneration paid or payable to the MD & CEO and Senior Executives in respect of the 2017
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 75 provides the audited remuneration disclosures as required under Accounting Standards and statutory
requirements. Elders believes 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 and 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 2017 (unaudited and non-IFRS)
$
Base
Salary
STI1
LTI2
Super-
annuation
Other
(monetary)
Other (non-
monetary)3
Termination
benefits4
Total
M C Allison MD & CEO
839,082
864,075
R I Davey
CFO
458,721
150,000
J H Cornish
GM Zone West
343,845
110,000
G J Dunne
GM Zone North
366,338
190,000
M L Hunt
GM Zone South
368,770
190,000
-
-
-
-
-
19,724
19,724
19,724
19,724
19,724
-
-
-
-
-
-
-
1,200
4,486
39,816
-
-
-
-
-
1,722,881
628,445
474,768
580,548
618,310
1 STI that will be paid for performance in the 2017 financial year.
2 Value of any performance rights that vested during the 2017 financial year based on the closing share price on the date of vesting, and options that were exercised during the
2017 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 2017 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).
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
Non-Executive Directors
J H Ranck
R Clubb
J A Jackson
I Wilton
MD & CEO and Senior Executives
M C Allison
R I Davey
J H Cornish
G J Dunne
M L Hunt
64
Position held
Period held in 2017 (if not full year)
Chairman
Director
Director
Director
Managing Director and CEO
Chief Financial Officer
Zone General Manager West
Zone General Manager North
Zone General Manager South
2017 Annual Report — Elders
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
2017, the Committee approved the
engagement of Korn Ferry Hay Group
to provide market remuneration
information for the MD & CEO role.
Total fees paid to Korn Ferry Hay Group
were $11,200 (excluding GST).
Korn Ferry Hay Group has confirmed
that any remuneration recommendations
have been made free from undue
influence by members of the KMP.
The agreement for the provision of
remuneration consulting services was
executed by the Chairman and the
report containing the remuneration
recommendations was provided by
Korn Ferry Hay Group directly to
the chair of the Remuneration and
Human Resources Committee. As a
consequence, the Board is satisfied
that the recommendations were made
free from undue influence from any
members of KMP.
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 Elders
establishes and maintains remuneration strategies and policies
aligned with Elders’ 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 Elders’ 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 Elders.
The Committee also reviews major remuneration policies
and programs applying across Elders.
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 Elders’ website
at elders.com.au.
The Committee is comprised entirely of Non-Executive
Directors.
B. Key Committee activities
During 2017, 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 and approval of short-term and long-term
incentive plans
— review of talent and succession plans for the Executive
Committee
— monitoring 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.
Remuneration Report
65
Section 3 — Non-
Executive Director
Remuneration
A. Remuneration Framework
& 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 directors’ fees.
Non-Executive Directors do not
participate in Elders’ 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 Elders.
Length of tenure is governed by Elders’
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 Elders to further align their
interests with the interests of other
shareholders. Details of Non-Executive
Directors’ shareholdings in Elders can be
found in Table 12 of this Report.
66
B. Non-Executive Director remuneration in 2017
Total fees for the financial year ended 30 September 2017 remain well within the
aggregate fee limit of $1,200,000 per annum, approved by the Board following
Elders’ 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 including committee
fees of $240,000. 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 2017, 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.
— Members of the Nomination and Prudential Committee receive no further fees
for membership of this Committee.
Actual Committee fees paid are provided as “Board Committee Fees” in Table 3
below. The base Board fee has remained unchanged since 2014.
Table 3 — Non-Executive Director remuneration details
Short-term payments
Post
employment
Total
Base Board Fee
Board
Committee Fees
Super-
annuation
J H Ranck
2017
R Clubb
J A
Jackson
I Wilton
Total
2016
2017
2016
2017
2016
2017
2016
2017
2016
240,000
240,000
100,000
100,000
100,000
100,000
100,000
100,000
540,000
540,000
-
-
36,000
36,000
41,000
41,000
50,000
50,000
127,000
127,000
19,724
19,385
12,920
12,920
13,395
13,395
14,250
14,250
60,289
59,950
259,724
259,385
148,920
148,920
154,395
154,395
164,250
164,250
727,289
726,950
2017 Annual Report — Elders
— appropriate reward for their roles
33%
33%
Section 4 — Managing
Director & Chief
Executive Officer
and Senior Executive
Remuneration
A. Remuneration framework
& policy
The remuneration for executives is
focused on a range of criteria, including:
and responsibilities;
— balancing 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
Elders’ overall and business unit level
— Long-term incentives (LTI)
to align with longer term strategy
and shareholder value.
Remuneration Report
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
Elders’ targets and objectives, including maximising returns
for shareholders.
Chart 1 — Remuneration structure
CEO
Senior Executives
25%
25%
50%
33%
TFR
STI
LTI
The above assumes the at-risk remuneration components are at
their maximum, and represents Elders’ intended policy in respect
of remuneration structure.
B. Total fixed remuneration
Total Fixed Remuneration (TFR) is made up of base salary,
superannuation and any other benefits (including Fringe Benefits
Tax on those benefits) that the executive has nominated to receive
as part of his or her package. These benefits may include motor
vehicle leases, car parking and any additional superannuation
contributions beyond the 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, Elders’ overall performance and the executive’s
performance over the previous year, as assessed through
Elders’ Performance and Development Planning (PDP). PDP
assesses employee performance against a number of agreed key
performance indicators, including measures for safety, financial
and operational performance, key relationships and efficiency
and growth.
67
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)
Governance
MD & CEO
100% of TFR
Senior Executives
50% of TFR
45% of the MD & CEO’s STI is based on quantitative
financial performance including Underlying Earnings
Before Interest and Tax (EBIT) and Return on Capital
(ROC) targets.
10% of the STI is based on driving significant
progress in achieving an injury free workplace.
10% of the STI is based on employee effectiveness
and customer satisfaction.
35% of the STI is based on qualitative performance
regarding creating value through the delivery of key
milestones of the Eight Point Plan.
Senior Executives are eligible for an STI if Elders
achieves threshold financial performance hurdles
including Underlying EBIT and ROC.
The STI is based on Elders’ overall, business unit and
individual performance against KPIs set for:
— Safety
— Financial and operational performance
(including EBIT and ROC)
— Key relationships (people and customers)
— Efficiency and growth (Eight Point Plan
milestones).
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 Elders or being promoted within Elders, will be pro-rated accordingly.
Payments are made in cash or elected to be paid as shares; Senior Executives may elect to salary sacrifice
to acquire Elders’ shares via the Deferred Employee Share Plan.
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, of which 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 2017
All STI payments for 2017 performance were paid according to plan performance measures. The following table outlines the KMP
participants who received an STI payment in 2017:
Maximum Opportunity
$
Awarded
%
Forfeited
%
864,075
260,000
183,251
194,896
196,125
100%
58%
60%
97%
97%
0%
42%
40%
3%
3%
M C Allison
R I Davey
J H Cornish
G J Dunne
M L Hunt
68
2017 Annual Report — Elders Remuneration Report
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 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 – 2015 grant
The 3 year performance period of the FY15 options granted under the Long Term Incentive Plan concluded on 30 September 2017.
The options were split into three tranches, each carrying a different performance condition. The testing resulted in 100% of the
options vesting for each tranche with the results as follows:
% of total grant
Performance measures
Tranche 1 – Total Shareholder Return (TSR)
50%
Based on Elders’ average annual compound TSR over the three year performance
period 1 October 2014 ending on 30 September 2017.
TSR Options will be subject to a target goal and a stretch goal. The target and stretch
goal that apply over the performance period are as follows:
Outcome of testing
Elders’ 10 trading day VWAP as
at 30 September was $4.697
being significantly higher than
the stretch hurdle of $2.94
Elders’ Absolute
TSR over the
performance
period
Target
Stretch
12% average annual
compound TSR
20% average annual
compound TSR
The 10 trading day volume
weighted average price
(VWAP) (up to and
including the last day of the
performance period) must be
at least $2.39 at the end of
the performance period.
The 10 trading day VWAP (up
to and including the last day
of the performance period)
must be at least $2.94 at
the end of the performance
period.
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
Nil
50%
Between target and stretch2
50-100% on a straight line sliding scale
Stretch2 and above
100%
1 Target =12% average annual compound TSR 2 Stretch = 20% average annual compound TSR
Absolute TSR will be measured using opening and closing share prices determined
as follows:
— the opening share price value will be $1.70
— 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; and
— dividend paid
69
% of total grant
Performance measures
Tranche 2 – Earnings Before Interest and Tax (EBIT)
25%
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 – Return on Capital (ROC)
25%
ROC options will vest in full if ROC is greater than or equal to 20% for the financial
year ending 30 September 2017.
Outcome of testing
Elders’ reported underlying
EBIT as at 30 September 2017
was $70.4m being higher than
$60m performance condition
Elders’ return on capital as
at 30 September 2017 was
26.8% being higher than 20%
performance condition
The total number of vested options under the 2015 grant is 1,694,790, with 1,210,000 of these vesting to the MD & CEO and
Senior Executives and the remainder to other senior manager participants. Individual vesting amounts are outlined in Table 11.
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 $1.57 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.
b — Current long-term incentive – 2016 and 2017 grants
The CEO & MD and selected senior management were offered grants under the Long Term Incentive Plan in the current
and prior years each with a 3 year performance periods as follows:
— FY16 Rights grant – to be tested following 30 September 2018; and
— FY17 Rights grant – to be tested following 30 September 2019
Details of the actual grant are outlined in Table 11.
The rights granted in the current year to the CEO & MD were approved by shareholders at Elders’ AGM held on 16 December 2016.
Following this the Board then approved a grant of performance rights to selected senior management on 16 December 2016.
The performance measures of the 2017 grant are in accordance with the 2016 grant being Total Shareholder Return (TSR), Earnings
Per Share (EPS) and Return on Capital (ROC) being appropriate measures of shareholder return and Elders’ financial performance
in line with Elders’ three-year strategic plan.
KMP are not permitted to deal in Elders’ securities without prior permission from Elders 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 align the interests of KMP with Elders’ security holders generally.
The current LTIPs and equity participation plans are summarised within the table adjacent.
70
2017 Annual Report — Elders Remuneration Report
Table 6 — Long Term Incentive Plan detail
MD & CEO
100% of TFR
Maximum LTI
opportunity as %
of TFR
As at 30 September 2017
No of rights outstanding and no of participants
Senior Executives
50% of TFR
Grant date:
17-Dec-15
16-Dec-16
Performance period:
260,000 Rights
280,000 Rights
1 participant
1 participant
600,000 Rights
595,000 Rights
12 participants
11 participants
17-Dec-15
Three years – 1 October 2015 to 30 September 2018
16-Dec-16
Three years – 1 October 2016 to 30 September 2019
Performance conditions:
17-Dec-15
The performance rights will be split into three tranches, each carrying a different performance condition
Tranche
Performance Condition
% of total grant
1
2
3
Absolute Total Shareholder Return (TSR)
Earnings per Share (EPS) growth
Return on Capital (ROC)
50%
25%
25%
17-Dec-16
The performance conditions of this grant mirror those of the 17-Dec-15 grant.
Performance measures and vesting
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 Elders’ 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
Nil
50%
Between target and stretch2
50-100% on a straight line sliding scale
Stretch2 and above
100%
1 Target = 12% average annual compound TSR 2 Stretch = 20% average annual compound TSR
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 (EPS CAGR) 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 paid share in Elders will be allocated for each performance right.
71
MD & CEO
Senior Executives
17-Dec-16
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 Elders’ average annual compound TSR over the three-year performance period 1 October 2016 ending
on 30 September 2019.
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
Nil
50%
Between target and stretch2
50-100% on a straight line sliding scale
Stretch2 and above
100%
1 Target = 12% average annual compound TSR 2 Stretch = 20% average annual compound TSR
Absolute TSR will be measured using opening and closing share prices determined as follows:
— the opening share price value will be $3.8426, being the 5 trading day VWAP up to and including
30 September 2016; 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 2019.
Tranche 2 – EPS Growth Performance Rights
25% of rights vest in full if Earnings Per Share Compound Annual Growth Rate (EPS CAGR) 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
2019.
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 2016
($3.8426).
Upon vesting of performance rights one fully paid 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
30 Sept
2016
30 Sept
2017
30 Sept
2016
30 Sept
2017
125
141
159,165
185,851
597
0
41,603
0
Deferred
Employee
Share Plan
(DESP)
This plan enables participants to salary sacrifice
remuneration of up to $5,000 to acquire restricted
shares. Tax can be deferred up to 7 years. Elders makes
no contribution to this plan other than funding the cost of
administration.
All
permanent
employees.
There are no further performance or service conditions
once shares are purchased.
Elders
Loan
Share Plan
(ELSP)
This plan was designed to provide an equity participation
opportunity for all eligible employees when offered by
Elders. Shares were provided and paid for by way of a
non-recourse, interest-free loan. Dividends are used to
repay the loan. Shares vest three years after issue once
loan is fully repaid.
The ELSP
was
suspended in
2009.
There are no performance conditions once issued.
No shares were issued under the ELSP during the financial
year.
In FY17 the Board approved the wind-up of this plan
with all participants agreeing to forfeit and surrender all
interests in their shares under the plan.
Note: No KMP participated in the DESP in 2016 or 2017. M.Allison and G.Dunne participated in previous DESP offers and currently hold 1,685 and 5,768 shares respectively under this
Plan (with no change to holdings compared to the same time last year, 30 September 2016).
72
2017 Annual Report — Elders Remuneration Report
Section 5 — Link Between Elders’ Financial Performance and
Executive Reward
STI payments are awarded to executives on achievement of a range of financial and non-financial
performance targets (see Table 4).
Under the LTI grants issued 18 December 2014, 17 December 2015 and 16 December 2016 the performance
conditions as outlined in Table 6 include absolute Total Shareholder Return (TSR), Earnings Before Interest
and Tax (EBIT), Earnings Per Share (EPS) and Return on Capital (ROC).
The following table shows Elders’ performance in relation to a number of financial and operational
performance measures over a five-year period.
Table 8 — Elders’ performance
Performance measure ($ millions)
2013
2014
2015
2016
2017
Sales revenue
Underlying EBIT
Statutory profit
1,417.2
1,427.7
1,502.0
1,519.3
1,603.1
(21.5)
(505.3)
22.3
3.0
40.5
38.3
56.1
51.6
70.4
116.0
Return on Capital based on underlying earnings
n/a
11.9%
21.9%
28.1%
26.8%
Cashflow from operating activities
(81.6)
15.1
(5.3)
48.7
81.6
Note: Details of KMP STI outcomes for 2017 are provided on page 68.
Chart 2 — Absolute TSR %
The following chart shows Elders’ TSR performance over the last five years against the ASX/S&P 200
Accumulation Index.
%
R
S
T
e
t
u
o
s
b
A
l
150%
100%
50%
0%
-50%
-100%
-56.0%
-0.7%
24.3%
87.2% 5.9%
118.3%
4.8% 13.2%
25.3% 9.2%
2013
2014
2015
2016
2017
Elders
ASX200
Source: Thomson Reuters
Dividend history
No dividends were declared or paid (interim or final) over the five years from 2013 to 2016. A final dividend
and special dividend of 7.5 cents each will be paid for FY17.
Chart 3 — Elders five year share price history
6
5
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Source: Thomson Reuters
Note: In December 2014, Elders consolidated shares from 10 to 1. To enable a proper comparison, the share price in the above graph reflects that
consolidation for the full year period.
73
Section 6 — Managing Director & CEO and Senior Executive Contract Terms,
Loans and Transactions
A. Contractual arrangements with KMP
In 2017 Elders 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 Elders’
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, Elders will pay the Senior Executive the equivalent
of up to 12 months TFR.
B. Other transactions with KMP
There are no loans to KMP outstanding in the current year. In the prior year it was only those loans held under the ELSP in Table 7
of which G.Dunne, J.Cornish and R.Davey participated holding 595, 338 and 258 shares respectively.
From time to time, sales and purchases occur during the year between subsidiaries of the Group and entities that certain directors
of Elders have direct or indirect control over. These transactions are conducted on the same terms and conditions as those entered
into by other Elders employees or customers on an arm’s length basis and are trivial or domestic in nature.
74
2017 Annual Report — Elders Remuneration Report
Section 7 — Managing Director & CEO and Senior Executive Remuneration Details
Table 10 — Details of MD & CEO and Senior Executive remuneration for the 2016 and 2017 financial years
Short-term payments
Base salary
STI
Other1
Post-
employ-
ment
Super-
annuation
Share-based payments
Options
Share
Rights
Long-
term pay-
ments
Long
Service
Leave
2017
839,082
864,075
2016
2017
817,989
632,250
458,721
150,000
2016
431,566
85,000
-
-
-
-
19,724 203,700
558,200
16,999
19,359
125,700
296,400
3,407
19,724
50,925
150,125
33,585
19,385
31,425
72,101
22,295
2017
343,845
110,000
1,200
19,724
40,740
115,300
5,898
2016
332,944
90,000
1,232
19,385
25,140
53,003
15,754
2017
366,338
190,000
4,486
19,724
44,135
120,100
8,993
2016
2017
353,319
100,000
4,358
19,385
27,235
57,803
13,260
-
-
-
-
-
-
-
-
M C
Allison
R I
Davey
J H
Cornish
G J
Dunne
C C
Hall4
M L
Hunt
Termination
benefits2
Total % perfor-
mance-
related3
-
-
-
-
-
-
-
-
-
2,501,780
1,895,105
863,080
661,772
636,707
537,458
753,776
575,360
-
65%
56%
41%
28%
42%
31%
47%
32%
-
12%
45%
31%
2016
329,279
19,454
19,385
25,140
57,600
(1,170)
221,735
671,423
2017
368,770
190,000
39,816
19,724
44,135
120,100
5,004
2016
355,662
100,000
33,263
19,385
27,235
57,600
6,068
-
-
787,549
599,213
Total
2017
2,376,756
1,504,075 45,502
98,620 383,635
1,063,825
70,479
-
5,542,892
2016
2,620,759
1,007,250 58,307
116,284
261,875
594,507
59,614
221,735
4,940,330
1 Comprising the provision of leased car parking (Cornish, Dunne, Hall, Hunt), company leased vehicle (Hall and Hunt).
2 These benefits, which comprise redundancy payments under Elders’ 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 C. Hall ceased employment on 16 September 2016.
75
Section 8 — Additional Statutory Information
Table 11 — Details of MD & CEO and Senior Executive current long-term incentive grants
KMP
Grant
Date
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
No.
No.
No.
% No. %
No.
$
$
M C Allison
18-Dec-14
600,000
-
13-Nov-17
600,000 100%
17-Dec-15
260,000
Nov-18
16-Dec-16
-
280,000
Nov-19
-
-
860,000 280,000
-
600,000
-
-
-
R I Davey
18-Dec-14
150,000
17-Dec-15
75,000
-
-
13-Nov-17
150,000 100%
Nov-18
16-Dec-16
-
75,000
Nov-19
225,000
75,000
150,000
J H Cornish
18-Dec-14
120,000
17-Dec-15
55,000
-
-
13-Nov-17
120,000 100%
Nov-18
16-Dec-16
-
60,000
Nov-19
175,000
60,000
120,000
G J Dunne
18-Dec-14
130,000
17-Dec-15
60,000
-
-
13-Nov-17
130,000 100%
Nov-18
16-Dec-16
-
60,000
Nov-19
190,000
60,000
130,000
C C Hall3
18-Dec-14
80,000
17-Dec-15
20,000
100,000
M L Hunt
18-Dec-14
130,000
17-Dec-15
60,000
-
-
-
-
-
13-Nov-17
80,000 100%
Nov-18
-
Nov-19
80,000
-
-
13-Nov-17
130,000 100%
Nov-18
16-Dec-16
-
60,000
Nov-19
190,000
60,000
130,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Rights
maximum
value yet to
vest2
$
n/a
-
203,700
377,100
260,000
296,400
889,200
296,400
280,000
261,800
785,400
523,600
540,000
761,900
2,051,700
820,000
-
50,925
94,275
n/a
75,000
75,000
72,000
216,000
72,000
78,125
234,375
156,375
150,000
201,050
544,650
228,375
-
40,740
75,420
n/a
55,000
52,800
158,400
52,800
60,000
62,500
187,500
125,000
115,000
156,040
421,320
177,800
-
41,135
81,705
n/a
60,000
57,600
172,800
57,600
60,000
62,500
187,500
125,000
120,000
164,235
442,005
182,600
-
20,000
20,000
-
-
-
75,240
172,800
248,220
-
44,135
81,705
n/a
-
-
n/a
60,000
57,600
172,800
57,600
60,000
62,500
187,500
125,000
120,000
164,235
442,005
182,600
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.
3 C.Hall ceased employment on 16 September 2016 however a percentage of his long-term incentive grants continued on foot.
76
2017 Annual Report — Elders Remuneration Report
Note: The fair value per option and performance right at grant date is as follows, with the grant date differing for the MD & CEO and Senior Executive grant in 2015 and 2016,
resulting in a different fair value.
Options
18 December 2014
Performance Rights
18 December 2015
Performance Rights
18 December 2016
Table 12 — KMP shareholdings
MD & CEO Grant
Senior Executive Grant
Tranche 1
$0.50
Tranche 2 & 3
$0.757
Tranche 1
Tranche 2 & 3
Tranche 1
Tranche 2 & 3
$2.260
$4.580
$1.630
$3.980
Tranche 1
Tranche 2 & 3
Tranche 1
Tranche 2 & 3
$1.640
$4.120
$1.940
$4.310
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
2017
2016
2017
2016
2017
2016
2017
2016
MD & CEO and Senior Executives
M C Allison
R I Davey
J H Cornish
G J Dunne
C C Hall1
M L Hunt
Total
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
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
n/a
-
-
-
361,397
294,525
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
n/a
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,750
-
3,500
-
3,500
n/a
-
-
-
-
8,750
5,000
25,000
2,200
1,200
(27,500)
7,500
5,000
20,000
32,237
4,422
(258)
-
(338)
-
(595)
-
n/a
-
-
-
15,746
58,122
1 C.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
130,000
125,000
3,400
1,200
10,000
37,500
105,000
100,000
54,344
22,107
1,750
2,008
29,190
29,528
43,459
44,054
n/a
-
-
-
377,143
361,397
77
78
Elders Limited Annual
Financial Report
For the year ending 30 September 2017
79
Elders Limited
Annual Financial Report
30 September 2017
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
Cash Flow Statement Reconciliation
Expenditure Commitments
Contingent Liabilities
Segment Information
Auditors Remuneration
Investments in Controlled Entities
Key Management Personnel
Share Based Payment Plans
Related Party Disclosures
Earnings Per Share
Financial Instruments
Business Combinations – Changes in the Composition
of the Entity
Discontinued Operations
Parent Entity
Subsequent Events
Directors’ Declaration
Auditor’s Report
104
105
105
105
107
108
111
111
111
112
113
117
118
119
119
120
121
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
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
Corporate Information
Summary of Significant Accounting Policies
Significant Accounting Judgements,
Estimates and Assumptions
Revenue and Expenses
Income Tax
Receivables
Biological Assets
Inventory
Other Financial Assets
Equity Accounted Investments
Property, Plant and Equipment
Intangibles
Trade and Other Payables
Interest Bearing Loans and Borrowings
Provisions
Contributed Equity
Hybrid Equity
Reserves
Retained Earnings
20
Dividends
80
81
82
83
84
85
85
92
93
94
96
96
97
97
98
99
100
101
101
102
102
102
103
103
104
2017 Annual Report — Elders Continuing operations
Sales revenue
Cost of sales
Gross profit from continuing operations
Equity accounted profits
Distribution expenses
Administrative expenses
Finance costs
Other items of income/(expense)
Profit from continuing operations before income tax expense
Income tax (expense)/benefit
Profit from continuing operations after income tax expense
Net profit/(loss) of discontinued operations, net of tax
Net profit for the period
Items that may be reclassified to profit and loss
Exchange differences on translation of foreign operations
Other comprehensive loss for the period, net of tax
Total comprehensive income for the period
Profit for the period is attributable to:
Non-controlling interest
Owners of the parent
Total comprehensive income for the period is attributable to:
Non-controlling interest
Owners of the parent
Reported operations
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
Continuing operations
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
Discontinued operations
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
Note
4
10
4
4
5
33
19
30
30
30
30
30
30
The accompanying notes form an integral part of this consolidated statement of comprehensive income.
Annual Financial Report
2017
$000
1,603,137
(1,269,080)
334,057
5,411
(221,846)
(47,186)
(7,265)
55,001
118,172
(4,137)
114,035
4,536
118,571
(1,211)
(1,211)
2016
$000
1,519,336
(1,211,970)
307,366
861
(213,142)
(38,954)
(9,343)
(1,226)
45,562
19,403
64,965
(10,726)
54,239
(818)
(818)
117,360
53,421
2,576
115,995
118,571
2,576
114,784
117,360
101.9 ¢
98.9 ¢
97.9 ¢
95.0 ¢
4.0 ¢
3.9 ¢
2,670
51,569
54,239
2,670
50,751
53,421
56.9 ¢
48.7 ¢
68.7 ¢
58.9 ¢
(11.8)¢
(11.8)¢
81
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME For the year ended 30 September 2017
Current assets
Cash and cash equivalents
Trade and other receivables
Livestock
Inventory
Total current assets
Non current assets
Plantations
Other financial assets
Equity accounted investments
Property, plant and equipment
Intangibles
Deferred tax assets
Total non current assets
Note
21(b)
6
7(a)
8
7(b)
9
10
11
12
5
2017
$000
35,186
385,641
44,616
111,101
576,544
-
1,269
53,842
29,885
81,230
59,382
225,608
2016
$000
35,151
381,316
36,057
109,643
562,167
1,300
19,304
3,412
30,562
10,418
64,126
129,122
Total assets
802,152
691,289
Current liabilities
Trade and other payables
Interest bearing loans and borrowings
Current tax payable
Provisions
Total current liabilities
Non current liabilities
Other payables
Provisions
Total non current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Hybrid equity
Reserves
Retained earnings
Total parent entity equity interest
Non-controlling interests
Total equity
13
14
5
15
13
15
16
17
18
19
355,539
130,482
109
49,077
535,207
5,343
3,924
9,267
331,565
121,300
1,090
42,661
496,616
3,820
4,349
8,169
544,474
504,785
257,678
186,504
1,422,255
-
(27,596)
(1,139,118)
255,541
2,137
257,678
1,422,382
36,830
(29,063)
(1,246,064)
184,085
2,419
186,504
The accompanying notes form an integral part of this consolidated statement of financial position.
82
2017 Annual Report — EldersCONSOLIDATED STATEMENT OF FINANCIAL POSITIONAs at 30 September 2017
Annual Financial Report
2017
$000
7,104,407
(7,017,838)
5,592
(7,095)
(3,467)
81,599
(3,481)
-
(30,306)
(590)
(11,828)
198
-
2,696
1,300
2016
$000
6,434,915
(6,377,688)
546
(7,593)
(1,504)
48,676
(5,986)
(18,035)
-
(1,079)
(3,659)
560
907
-
-
(42,011)
(27,292)
-
(127)
8,622
(3,557)
(42,009)
(2,482)
(39,553)
35
35,151
35,186
102,424
(4,902)
(15,522)
-
(67,031)
(1,871)
13,098
34,482
669
35,151
Note
21(a)
21(b)
Cash flow from operating activities
Receipts from customers
Payments to suppliers and employees
Dividends received
Interest and other costs of finance paid
Income taxes paid
Net operating cash flows
Cash flow from investing activities
Payment for property, plant and equipment
Purchase of other financial assets at cost
Purchase of equity accounted investments
Payment for intangibles
Payment for controlled entities, net of cash acquired
Proceeds from sale of property, plant and equipment
Proceeds from sale of intangibles
Proceeds from disposal of controlled entity
Proceeds from sale of plantations
Net investing cash flows
Cash flow from financing activities
Proceeds from issue of shares
Share issue costs
Proceeds/(Repayment) of borrowings
Hybrid equity distributions
Hybrid equity repurchased
Partnership profit distributions/dividends paid
Net financing cash flows
Net increase/(decrease) in cash held
Cash at the beginning of the financial year
Cash at the end of the financial year
The accompanying notes form an integral part of this consolidated statement of cash flows.
83
CONSOLIDATED STATEMENT OF CASH FLOWSFor the year ended 30 September 2017 Issued
capital
Hybrid
equity
Reserves
Retained
earnings
1,422,382
36,830
(29,063)
(1,246,064)
-
115,995
Non-
controlling
interest Total equity
2,419
2,576
186,504
118,571
$000
As at 1 October 2016
Profit for the period
Other comprehensive income/(loss):
Exchange differences on translation of foreign operations
Total comprehensive income/(loss) for the period
Transactions with owners in their capacity as owners:
Partnership profit distributions/dividends paid
Other movements in non-controlling interest
Hybrid equity repurchased net of transaction costs
Hybrid equity distributions
Cost of share based payments
Reallocation of equity
Other
As at 30 September 2017
As at 1 October 2015
Profit for the period
Other comprehensive income/(loss):
Exchange differences on translation of foreign operations
Total comprehensive income/(loss) for the period
Transactions with owners in their capacity as owners:
Shares issued
Transaction costs incurred on share issue, net of tax
Partnership profit distributions/dividends paid
Other movements in non-controlling interest
Hybrid equity repurchased net of transaction costs
Put options provided to non-controlling interests
Cost of share based payments
Reallocation of equity
As at 30 September 2016
-
-
-
-
-
-
-
-
-
(127)
1,422,255
-
-
-
-
-
(42,009)
-
-
5,179
-
-
-
-
-
102,424
(3,326)
-
-
-
-
-
-
-
-
-
-
-
-
-
(67,242)
-
-
(3,528)
(1,211)
(1,211)
-
-
-
-
2,205
-
473
-
-
(1,211)
115,995
2,576
117,360
-
-
-
(3,557)
-
(5,179)
(313)
(2,482)
(2,482)
(376)
(376)
-
-
-
-
-
(42,009)
(3,557)
2,205
-
33
(27,596)
(1,139,118)
2,137
257,678
(818)
(818)
-
-
(818)
51,569
2,670
53,421
-
-
-
-
-
(10,190)
1,304
(52)
-
-
-
-
-
-
-
3,580
-
-
(1,871)
355
-
-
-
-
102,424
(3,326)
(1,871)
355
(67,242)
(10,190)
1,304
-
1,323,284
107,600
(19,307)
(1,301,213)
-
51,569
1,265
2,670
111,629
54,239
1,422,382
36,830
(29,063)
(1,246,064)
2,419
186,504
The accompanying notes form an integral part of this consolidated statement of changes in equity.
84
2017 Annual Report — EldersCONSOLIDATED STATEMENT OF CHANGES IN EQUITYFor the year ended 30 September 2017 Annual Financial Report
Note 1 — Corporate Information
The consolidated financial report of Elders Limited for the year ended 30 September 2017 was authorised for issue in accordance
with a resolution of the Directors on 13 November 2017. 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 Policies
(a) Basis of preparation
The financial report is a general-purpose financial report, which has been prepared in accordance with the requirements
of the Corporations Act 2001, Australian Accounting Standards and other authoritative pronouncements of the Australian
Accounting Standards Board (AASB). The financial report has also been prepared on a historical cost basis, except for
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 IFRS
The financial report also complies with International Financial Reporting Standards (IFRS) as issued by the International
Accounting Standards Board.
(c) New accounting standards and interpretations
(i) New and Revised Accounting Standards
A number of new amendments to standards and interpretations became operative for the financial year ended 30 September
2017 and have been applied in preparing these consolidated financial statements. None of these have materially impacted
Elders and its policies.
Elders 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 effective
Certain new accounting standards and interpretations have been published that are not mandatory for the financial year
ended 30 September 2017 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 consolidation
The consolidated financial statements comprise the financial statements of Elders Limited and its subsidiaries as at 30
September 2017. 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 returns
When 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.
85
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 2017 Note 2 — Summary of Significant Accounting Policies
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.
(e) Business combinations
Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the
aggregate of the consideration transferred, measured at acquisition date fair value and the amount of any non-controlling
interest in the acquiree. For each business combination, 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 currency
Both the functional and presentation currency of Elders Limited and its Australian subsidiaries is Australian Dollars (AUD).
Subsidiaries incorporated in countries other than Australia (see note 26), which have a functional currency other than
Australian Dollars, are translated to the presentation currency.
(ii) Transactions and balances
Transactions 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 currency
The results of subsidiaries incorporated in countries other than Australia, are translated into Australian Dollars (presentation
currency) as at the date of each transaction. Assets and liabilities are translated at exchange rates prevailing at reporting date.
Exchange variations resulting from the translation are recognised in the foreign currency translation reserve in equity.
On consolidation, exchange differences arising from the translation of net investments in overseas subsidiaries are taken to
the foreign currency translation reserve. If such a subsidiary was sold, the proportionate share of exchange differences would
be transferred out of equity and recognised in profit or loss.
(g) Cash and cash equivalents
Cash and cash equivalents in the statement of financial position comprise cash at banks and on hand and short-term deposits
with a maturity of three months or less. For the purposes of the consolidated statement of cash flows, cash and cash
equivalents consist of cash and cash deposits as defined above, net of outstanding bank overdrafts.
(h) Trade and other receivables
Trade 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 Elders 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.
86
2017 Annual Report — EldersNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 2017 Annual Financial Report
Note 2 — Summary of Significant Accounting Policies
(i) Inventory
Inventories 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.
Supplier rebates are recognised as a reduction in the cost of inventory and are recorded as a reduction in cost of sales when
the inventory is sold.
(j) Biological assets
Elders holds biological assets in the form of livestock and plantations (in the prior year). 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.
(k) Derivative financial instruments and hedging
Elders 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) Discontinued operations
A discontinued operation is a component of the entity that has been disposed of that represents a separate major line of
business or geographical area of operations, is part of a single coordinated plan to dispose of such a line of business or area of
operations, or is a subsidiary acquired exclusively with a view to resale. The results of discontinued operations are presented
separately on the face of the statement of comprehensive income and the assets and liabilities are presented separately on
the face of the statement of financial position.
(m) Other financial assets
Other financial assets consist of unlisted investments held at historical cost and are classified as available for sale financial
assets.
(n) 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.
(o) Property, plant and equipment
Property, 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:
Buildings
Leasehold improvements
Plant and equipment – owned
Plant and equipment – leased
Network infrastructure
Life
50 years
Lease term
3 to 10 years
Lease term
5 to 25 years
Method
Straight line
Straight line
Straight line
Straight line
Straight line
87
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 2017 Note 2 — Summary of Significant Accounting Policies
The 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.
Derecognition
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected
from its use or disposal. Gains and losses on disposal are determined by comparing the proceeds with the carrying amount.
These are included in the statement of comprehensive income.
(p) Leases
The determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement at
inception date, whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets or the
arrangement conveys a right to use the asset, even if that right is not explicitly specified in the arrangement.
(i) Elders as a lessee
Finance 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 lessor
Leases 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.
(q) Impairment of non financial assets other than goodwill and indefinite life intangibles
Non financial assets other than goodwill and indefinite life intangibles are tested for impairment whenever events or changes
in circumstances indicate the carrying amount may not be recoverable. At each reporting date, 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.
(r) Intangibles
(i) Brand names
The brand name intangibles are deemed to have an indefinite useful life and are not amortised. The brand names are tested
for impairment at each reporting date or whenever there is indication of impairment. Impairment is determined by assessing
the recoverable amount of the group of cash-generating units, to which the brand names relate. When the recoverable
amount of the group of cash-generating units is less than the carrying amount, an impairment loss is recognised. When the
recoverable amount of the group of cash-generating units is higher than the carrying amount, Elders will assess whether it
is appropriate to reverse any previous impairments.
The brand name value represents the value attributed to brands when acquired through business combinations and is carried
at cost less accumulated impairment losses. The brand names have been determined to have an indefinite useful life due to
there being no foreseeable limit to the period over which they are expected to generate net cash inflows, given the strength
and durability of the brands and the level of marketing support. The brands have 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.
Expenditure incurred in developing, maintaining or enhancing the brand names is expensed in the year that it occurred.
88
2017 Annual Report — EldersNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 2017 Annual Financial Report
Note 2 — Summary of Significant Accounting Policies
(ii) Goodwill
After initial recognition, goodwill acquired in a business combination is measured at cost less any accumulated impairment
losses. Goodwill is not amortised but is subject to impairment testing on an annual basis or whenever there is an indication
of impairment.
(iii) Rent rolls
Rent rolls have been acquired and are carried at cost less accumulated amortisation and impairment losses. These intangible
assets have been determined to have finite useful lives and are amortised over their useful lives of 10 years 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.
(s) Trade and other payables
Trade and other payables are carried at amortised cost and due to their short term nature they are not discounted. They
represent liabilities for goods and services provided to 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 guarantees
Financial 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.
(t) Interest bearing loans and borrowings
All loans and borrowings are initially recognised at the fair value of the consideration received less directly attributable
transaction costs. After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised
cost using the effective interest rate method. Borrowings are classified as current liabilities unless 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.
(u) Provisions and employee benefits
Provisions 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.
89
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 2017 Note 2 — Summary of Significant Accounting Policies
Employee benefits
(i) Wages, salaries, annual leave and sick leave
Liabilities for wages and salaries, including non-monetary benefits and annual leave expected to be settled within 12 months
of the reporting date are recognised in respect of employees’ service up to the reporting date. They are measured at the
amounts expected to be paid when the liabilities are settled. Expenses for non accumulating sick leave are recognised when
the leave is taken and are measured at the rates paid or payable.
(ii) Long service leave
The liability for long service leave is recognised in the provision for employee benefits and measured as the present value
of expected future payments to be made in respect of services provided by employees up to the reporting date using the
projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee
departures, and periods of service. Expected future payments are discounted using market yields at the reporting date on
high quality corporate bonds with terms to maturity and currencies that match, as closely as possible, the estimated future
cash outflows.
Restructuring and redundancy
Provisions 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 into leasing arrangements that require the leased asset to be returned at the end of the lease term
in its original condition, an estimate is made of the costs of restoration or dismantling of any improvements and a provision is
raised.
Onerous contracts
A provision for onerous contracts is recognised when the expected benefits to be derived from a contract are lower than the
unavoidable cost of meeting its obligations under the contract. The provision is measured at the present value of the lower of
the expected cost of terminating the contract and the expected net cost of complying with the contract. Before a provision is
established, Elders recognises any impairment loss on the assets associated with that contract.
(v) Contributed equity
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are
included in equity as a deduction, net of tax, from the proceeds.
(w) Earnings per share
Basic earnings per share amounts are calculated by dividing net profit or loss for the year attributable to ordinary equity
holders of the parent by the weighted average number of ordinary shares outstanding during the period. Diluted earnings per
share are calculated by dividing the net profit attributable to ordinary equity holders of the parent by the weighted average
of ordinary shares outstanding during the period plus the weighted average number of ordinary shares that would be issued
on conversion of all dilutive potential ordinary shares into ordinary shares. Hybrids acquired by Elders are not considered
dilutive.
(x) Revenue recognition
Revenue is recognised and measured at the fair value of the consideration received or receivable to the extent that it is
probable that economic benefits will flow to Elders and the revenue can be reliably measured. The following specific
recognition criteria must also be met before revenue is recognised:
(i) Sale of goods
Revenue from the sale of goods is recognised when there has been a transfer of risks and rewards to the customer (through
the execution of a sales agreement at the time of delivery of the goods to the customer), no further work or processing is
required, the quantity and quality of the goods has been determined, the price is fixed and generally title has passed (for
shipped goods this is the bill of lading).
(ii) Rendering of agency services
Revenue from the rendering of services is recognised as the service is provided.
(iii) Interest income
Revenue is recognised as it accrues using the effective interest rate method.
(iv) Dividend income
Revenue 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.
90
2017 Annual Report — EldersNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 2017 Annual Financial Report
Note 2 — Summary of Significant Accounting Policies
(y) 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. Current income tax relating to items
recognised directly in equity is recognised in equity and not in the income statement.
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 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 tax assets and deferred tax liabilities are offset only if a legally enforceable right exists to set off current tax assets
against current tax liabilities and the deferred tax assets and liabilities relate to the same taxable entity and the same taxation
authority.
Other taxes
Revenues, expenses and assets are recognised net of the amount of GST except:
— where the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case
the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and
— receivables and payables are stated with the amount of GST included.
The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in
the statement of financial position.
Cash flows are included in the statement of cash flows on a gross basis and the GST component of cash flows arising from
investing and financing activities, which is recoverable from, or payable to, the taxation authority are classified as operating
cash flows.
91
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 2017 Note 3 — Significant Accounting Judgements, Estimates and Assumptions
The 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 assets
Deferred tax assets are recognised for deductible temporary differences as management considers that it is probable the future
taxable profit will be available to utilise those temporary differences. Deferred tax assets are recognised for all unused tax losses to
the extent that it is probable that taxable profit will be available against which the losses can be utilised. Significant management
judgement is required to determine the amount of deferred tax assets that can be recognised, based on the likely timing and the
level of future taxable profits together with future tax planning strategies.
Impairment of non-financial assets other than Brand Name and goodwill
Elders 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 goodwill
Elders 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 or whether it is appropriate to reverse any previous
impairments 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.
Accounting for rebates
Elders receives rebates associated with the purchase of retail goods from suppliers. These vary in nature and include price and
volume rebates. Rebates, in line with the relevant contractual arrangements, are recognised as a reduction to cost of sales when
the sale of the particular product occurs.
92
2017 Annual Report — EldersNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 2017 Note 4 — Revenue and Expenses
Sales revenue
Sale of goods and biological assets
Debtor interest associated with sales
Commission revenue
Discontinued operations
Other items of income/(expense)
Insurance equity accounted investment fair value adjustment
Impairment reversal/(impairment) of assets
Other
Discontinued operations
Finance costs
Interest expense
Unwinding of discounts in regards to liabilities
Discontinued operations
Specific expenses: depreciation and amortisation
Depreciation and amortisation
Specific expenses: employee benefit expense
Salaries, wages and incentives
Superannuation and other employee costs
Share based payments
Discontinued operations
Operating lease expenditure
Foreign exchange net gains
Provision for doubtful debts expense
Note
33
33
33
Annual Financial Report
2017
$000
1,267,412
5,579
330,146
1,603,137
99,002
1,702,139
2,270
54,785
(2,054)
55,001
4,538
59,539
6,830
435
7,265
265
7,530
2016
$000
1,166,490
5,044
347,802
1,519,336
222,582
1,741,918
-
(1,049)
(177)
(1,226)
(6,048)
(7,274)
7,176
2,167
9,343
417
9,760
4,134
3,706
145,798
27,681
2,205
175,684
1,084
176,768
43,163
334
2,985
134,189
26,361
1,304
161,854
3,590
165,444
60,662
233
589
93
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 2017 Note 5 — Income Tax
(a) Major components of income tax expense are:
Income statement
Current income tax expense
Adjustments in respect of current income tax of previous years
Deferred income tax (expense)/benefit
Income tax (expense)/benefit reported in the statement of comprehensive income
Statement of changes in equity
Deferred tax recognised directly in equity
2017
$000
(3,019)
66
(2,290)
(5,243)
2016
$000
(3,288)
(673)
27,961
24,000
-
1,365
(b) Reconciliation of income tax expense applicable to accounting profit/(loss) before
income tax at the statutory income tax rate to income tax expense at Elders’ effective
income tax rate is as follows:
Accounting profit/(loss) before tax from:
— Continuing operations
— Discontinued operations
Total accounting profit before tax
Income tax (expense) at 30% (2016: 30%)
Adjustments in respect of current income tax of previous years
Share of equity accounted profits
Non-assessable profits/(losses)
Recognition of deferred tax liabilities on intangibles
Recognition of previously unrecognised losses
Other
Income tax (expense)/benefit as reported in the statement of comprehensive income
Aggregate income tax (expense)/benefit is attributable to:
— Continuing operations
— Discontinued operations
Current tax payable
118,172
5,642
123,814
(37,144)
66
1,623
2,091
-
29,259
(1,138)
(5,243)
(4,137)
(1,106)
(5,243)
109
45,562
(15,323)
30,239
(9,072)
(673)
258
(1,537)
(1,685)
39,280
(2,571)
24,000
19,403
4,597
24,000
1,090
94
2017 Annual Report — EldersNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 2017 Annual Financial Report
Note 5 — Income Tax
(c) Major components of deferred income tax:
Statement of Financial Position
Movement
Deferred income tax assets
Losses available to offset against future taxable income
Provision for employee entitlements
Other provisions
Capitalised expenses
Other
Gross deferred income tax assets
Deferred income tax liabilities
Inventory
Intangibles
Other
Gross deferred income tax liabilities
Movement in net deferred tax asset
Deferred income tax (expense)/benefit recognised in the statement of
comprehensive income
Deferred income tax liabilities recognised for intangibles acquired as part
of business combinations
Deferred income tax benefit recognised in equity
2017
$000
57,437
14,843
3,205
4,831
1,063
81,379
(869)
(20,304)
(824)
(21,997)
2016
$000
43,251
11,734
3,863
8,239
1,114
68,201
(1,655)
(1,685)
(735)
(4,075)
2017
$000
14,186
3,109
(658)
(3,408)
(51)
13,178
786
(18,619)
(89)
(17,922)
(4,744)
2016
$000
35,952
525
(1,329)
(1,689)
(877)
32,582
(1,655)
(1,685)
84
(3,256)
29,326
(2,290)
27,961
(2,454)
-
(4,744)
-
1,365
29,326
Net deferred tax asset
59,382
64,126
Tax losses
Elders has tax losses for which no deferred tax asset is recognised in the statement of financial position of $170.8 million
(2016: $200.8 million) which are available indefinitely for offset against future taxable profits subject to continuing to meet
relevant statutory tests.
Tax Consolidation
Elders and its 100% owned Australian resident subsidiaries are in a tax consolidated group. Elders Limited is the head entity of
the tax consolidated group. Members of the Group have entered into a tax sharing agreement that provides for the allocation of
income tax liabilities between the entities should the head entity default on its tax payment obligations. No amounts have been
recognised in the financial statements in respect of this agreement on the basis that the possibility of default is remote.
95
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 2017 Note 6 — Receivables
Current
Trade debtors
Allowance for doubtful debts
Amounts receivable from equity accounted investments
Prepayments
Other receivables
Total current receivables
Movements in the allowance for doubtful debts – trade debtors
Opening balance of allowance for doubtful debts
Trade debts written off
Trade debts provided for during the year
Closing balance of allowance for doubtful debts
2017
$000
369,938
(6,658)
363,280
16,531
1,852
3,978
385,641
4,499
(826)
2,985
6,658
2016
$000
374,898
(4,499)
370,399
1,065
4,846
5,006
381,316
5,236
(1,326)
589
4,499
Included in trade debtors is $68.0 million (2016: $63.7 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 $3.0 million (2016: $0.6 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 terms
Trade debtors past due but not considered impaired
1-30 days
31-60 days
61-90 days
+91 days
Trade debtors past due and considered impaired
+91 days
Total trade debtors
Related party receivables
For terms and conditions of related party receivables refer to note 29.
305,687
307,666
50,601
3,686
1,539
1,767
6,658
369,938
54,076
3,273
1,445
3,939
4,499
374,898
Fair value and credit risk
Due to the short term nature of trade and other current receivables, their carrying value is assumed to approximate their fair value.
For other receivables the carrying amount is not materially different to their fair values. The maximum exposure to credit risk is the
fair value of each class of receivables. Details regarding credit risk exposure are disclosed in note 31.
Foreign exchange and interest rate risk
Details regarding the foreign exchange and interest rate risk exposure are disclosed in note 31, including those relating to derivative
related balances.
Note 7 — Biological Assets
(a) Livestock
Current
Fair value at the end of the period
44,616
36,057
At balance date 27,040 head of cattle (2016: 23,331) are included in livestock. This represents cattle held in Australia and
Indonesia for short term trading and feedlotting purposes.
96
2017 Annual Report — EldersNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 2017 Annual Financial Report
Note 7 — Biological Assets
All Elders’ cattle are valued at fair value internally as there is no observable market for them. Where there are unobservable inputs
for an asset or liability, these are classified as Level 3 Price Inputs. 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 risks
Elders 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 risk
Elders 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 risks
Elders’ 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) Plantations
Non current
Opening balance
Costs incurred in respect of forestry plantations
Fair value increment in period
Allocation of provisions and payables
Proceeds from sale
Fair value at the end of the period
During the period Elders finalised the sale of its forestry plantation assets.
Note 8 — Inventory
Current
Retail
Other
Total inventory
Inventory write-downs recognised as an expense totalled $2.0 million (2016: $0.4 million).
Note 9 — Other Financial Assets
Non current
Elders Insurance (Underwriting Agency) Pty Ltd
Saleyard assets
2017
$000
-
1,300
-
-
-
(1,300)
-
2016
$000
1,300
5,969
183
963
(5,815)
-
1,300
102,958
8,143
111,101
99,871
9,772
109,643
-
1,269
1,269
18,035
1,269
19,304
On 1 December 2016, Elders acquired another 10% in Elders Insurance (Underwriting Agency) Pty Limited for $20.3 million. As a
result of this transaction, the existing 10% investment was reclassified from other financial assets to equity accounted investments.
A fair value adjustment of $2.3 million was also applied to the original investment based on the purchase price of the acquisition.
97
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 2017 Note 10 — Equity Accounted Investments
Auctions Plus Pty Ltd
Elders Financial Planning Pty Ltd
Elders Insurance (Underwriting Agency) Pty Ltd
StockCo Holdings Pty Ltd
Balance date
Ownership interest
2017
%
2016
%
30-Jun
30-Sep
31-Dec
30-Jun
50
49
20
30
50
49
10
-
Consolidated
entity investment
Contribution to net profit
Dividends received
Auctions Plus Pty Ltd
Elders Financial Planning Pty Ltd
Elders Insurance (Underwriting Agency) Pty Ltd
StockCo Holdings Pty Ltd
Other
2017
$000
1,450
974
41,363
10,055
-
2016
$000
1,213
2,199
-
-
-
Equity accounted investments
53,842
3,412
2017
$000
992
-
4,364
55
-
5,411
2016
$000
801
60
-
-
58
919
Share of profit
Continuing operations
Discontinued operations
2017
$000
755
1,225
3,612
-
-
2016
$000
546
-
-
-
-
5,592
546
5,411
-
861
58
All equity accounted investments are Australian resident companies. On 13 October 2016, Elders acquired 30% in StockCo
Holdings Pty Ltd for $10.0 million. On 1 December 2016, Elders acquired another 10% in Elders Insurance (Underwriting Agency)
Pty Limited for $20.3 million. As a result of this transaction, the existing 10% investment was reclassified from other financial assets
to equity accounted investments. A fair value adjustment of $2.3 million was also applied to the original investment based on the
purchase price of the acquisition.
In 2016 a $1.0 million impairment was recognised against the investment in Elders Financial Planning Pty Ltd. This was recognised
in the operating segment titled ‘Other’.
Summary financial information for equity accounted investees is as follows:
Profit/(loss) after
income tax
$000
Assets
$000
Liabilities
$000
1,984
(157)
21,817
185
23,829
1,602
143
1,745
4,016
4,699
56,938
192,893
258,546
3,337
7,503
10,840
(1,179)
(863)
(51,380)
(193,073)
(246,495)
(912)
(1,298)
(2,210)
2017
Auctions Plus Pty Ltd
Elders Financial Planning Pty Ltd
Elders Insurance (Underwriting Agency) Pty Ltd
StockCo Holdings Pty Ltd
Total
2016
Auctions Plus Pty Ltd
Elders Financial Planning Pty Ltd
Total
98
2017 Annual Report — EldersNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 2017 Annual Financial Report
Total
$000
30,562
3,481
661
(722)
(3,623)
(474)
-
-
29,885
62,148
(32,263)
29,885
28,658
5,986
200
(338)
(3,644)
(424)
124
-
-
1,671
391
-
-
-
(42)
(1,701)
-
319
319
-
319
352
1,442
-
-
-
-
-
(123)
-
-
-
(93)
603
1,031
(428)
603
734
476
-
(14)
(330)
-
-
-
(134)
732
1,128
(396)
732
Note 11 — Property, Plant and Equipment
Reconciliation of carrying amounts at beginning and end of period:
Freehold
land
Buildings
Leasehold
improve-
ments
Plant and
equipment
(owned)
Plant and
equipment
(leased)
Assets
under con-
struction
$000
$000
$000
$000
$000
$000
8,704
1,849
142
(275)
732
391
-
(37)
(1,785)
(390)
2017
Carrying amount at beginning of period
5,354
7,860
6,241
Additions
Additions through entities acquired
Disposals
Depreciation expense
Exchange fluctuations
Transfers from assets under construction
Other
-
-
-
-
(190)
-
-
761
-
(5)
(656)
(91)
427
-
89
519
(405)
(792)
-
-
-
Carrying amount at end of period
5,164
8,296
5,652
Cost
Accumulated depreciation and impairment
2016
Carrying amount at beginning of period
Additions
Additions through entities acquired
Disposals
Depreciation expense
Impairment
Exchange fluctuations
Transfers from assets under construction
Other
5,164
-
5,164
5,362
-
-
(64)
-
-
56
-
-
15,970
(7,674)
8,296
12,224
(6,572)
5,652
7,500
1,054
-
(116)
(612)
(83)
61
56
-
6,168
919
-
(2)
(833)
(11)
-
-
-
(151)
1,274
93
9,851
27,440
(17,589)
9,851
8,542
2,095
200
(142)
(1,869)
(330)
7
67
134
Carrying amount at end of period
5,354
7,860
6,241
8,704
Cost
Accumulated depreciation and impairment
5,354
-
5,354
15,014
(7,154)
7,860
12,136
(5,895)
6,241
25,872
(17,168)
8,704
1,671
30,562
1,671
61,175
-
(30,613)
1,671
30,562
All Property, plant and equipment is pledged as security, refer to note 14 for interest bearing loans and borrowings.
99
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 2017 Note 12 — Intangibles
Non current
2017
Carrying amount at beginning of period
Additions
Additions through entities acquired
Amortisation
Impairment reversal
Carrying amount at end of period
Cost
Accumulated amortisation and impairment
2016
Carrying amount at beginning of period
Additions
Additions through entities acquired
Amortisation
Carrying amount at end of period
Cost
Accumulated amortisation and impairment
Goodwill
Rent rolls
Brand Names
$000
$000
$000
Other
$000
2,052
-
7,164
-
-
9,216
9,216
-
9,216
-
-
2,052
-
2,052
2,052
-
2,052
2,751
590
4,904
(511)
-
7,734
8,307
(573)
7,734
-
1,079
1,734
(62)
2,751
2,813
(62)
2,751
5,615
-
2,579
-
54,785
62,979
62,979
-
62,979
5,615
-
-
-
5,615
60,400
(54,785)
5,615
-
-
1,301
-
-
1,301
1,301
-
1,301
-
-
-
-
-
-
-
-
Total
$000
10,418
590
15,948
(511)
54,785
81,230
81,803
(573)
81,230
5,615
1,079
3,786
(62)
10,418
65,265
(54,847)
10,418
As at 30 September 2016, the Elders Brand Name was carried at $5.6 million, net of accumulated impairment of $54.8 million.
During the period, the previously recognised impairment losses have been reversed. Management has determined in the current
year that there is a reversal of the previously recognised impairment loss in relation to the Brand Name due to sustained positive
results in line with the Eight Point Plan over a number of years, including the removal of profit and loss volatility and other
uncertainty due to the exit of the Live Export segment. For impairment testing purposes, all intangibles except for the Elders’ Brand
Name are allocated to the Network CGU, which is also an operating segment.
Elders Brand Name
For the purposes of impairment testing, the Elders Brand Name has not been allocated to individual CGU’s but rather assessed
against all CGUs 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 10.6% pre-tax (2016: 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 Elders Brand Name was based on the
following key assumptions:
Gross margin
Gross margin is expected to increase from financial year 2017 levels due to:
— Increased earnings from geographical expansion through acquisitions and footprint growth as implemented in the 2017 financial
year
— Higher earnings from continued organic growth focus across our product and service portfolio
— Livestock volume increase due to continued footprint expansion and additional trading opportunities offset by easing of cattle
and sheep prices throughout financial year 2018
Selling, general and administrative expenses
Ongoing 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.
100
2017 Annual Report — EldersNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 2017 Annual Financial Report
Note 12 — Intangibles
Growth rate estimates
Cash flows are based on the 2018 budget. No EBIT growth for years 2 to 5 or perpetuity has been incorporated in the discounted
cash flow.
Discount rates
Discount rates reflect management’s estimate of the time value of money and the specific risk not already reflected in the cash
flows.
Note 13 — Trade and Other Payables
Current
Trade creditors
Other creditors and accruals
Payables to associated companies
Non current
Other creditors and accruals
Total trade and other payables
2017
$000
314,750
37,841
2,948
355,539
5,343
360,882
2016
$000
303,710
27,855
-
331,565
3,820
335,385
Fair Value
Due to the short term nature of these payables, their carrying value is assumed to approximate their fair value.
Financial guarantees
Information regarding financial guarantees is set out in note 23 and 31.
Interest rate, foreign exchange and liquidity risk
Information 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
Current
Trade receivables funding
Lease liabilities
129,874
608
130,482
120,697
603
121,300
Elders also has an ancillary facility in relation to contingent funding, such as bank guarantees. As at 30 September 2017, $5.2 million
had been issued (2016: $1.4 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 value
The carrying value of interest bearing liabilities approximates fair value.
101
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 2017 Note 15 — Provisions
Reconciliation of carrying amounts at beginning and end of period:
Employee
entitlements
Restructuring
provisions
Make good
Onerous
contracts
$000
$000
$000
$000
Other
$000
2017
As at beginning of period
Arising during year
Utilised
Unused amounts reversed
Discount rate adjustment
Provisions arising from entities acquired
Transfer between provisions
Disclosed as:
Current
Non current
Total
2016
As at beginning of period
Arising during year
Utilised
Unused amounts reversed
Discount rate adjustment
Provisions arising from entities acquired
Other
Disclosed as:
Current
Non current
Total
Note 16 — Contributed Equity
39,342
14,575
(5,404)
-
435
807
-
49,755
45,831
3,924
49,755
38,231
5,589
(6,510)
-
1,698
334
-
3,176
344
(3,317)
(152)
-
-
1,064
1,115
1,115
-
1,115
917
3,076
(587)
(230)
-
-
-
39,342
3,176
34,993
4,349
39,342
3,176
-
3,176
-
265
-
-
-
-
-
265
265
-
265
3,603
-
(3,452)
(151)
-
-
-
-
-
-
-
3,990
1,055
(411)
(2,565)
-
-
(1,064)
1,005
1,005
-
1,005
9,443
3,989
(3,797)
-
313
-
(5,958)
3,990
3,990
-
3,990
502
610
(199)
(52)
-
-
-
861
861
-
861
112
390
-
-
-
-
-
502
502
-
502
2017
$000
Total
$000
47,010
16,849
(9,331)
(2,769)
435
807
-
53,001
49,077
3,924
53,001
52,306
13,044
(14,346)
(381)
2,011
334
(5,958)
47,010
42,661
4,349
47,010
2016
$000
Issued and paid up capital
113,859,440 ordinary shares (September 2016: 113,859,440)
1,422,255
1,422,382
Contributed equity declined by $0.1 million as a result of purchase of shares on market for senior executive short term incentive
programs.
Elders 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.
Note 17 — Hybrid Equity
Hybrid equity
-
36,830
During the period, Elders realised all Hybrids at a price of $108.48 each, being total consideration of $45.5 million. As a result of
this transaction, all balances relating to hybrid equity have been derecognised.
102
2017 Annual Report — EldersNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 2017 Note 18 — Reserves
Reconciliation of carrying amounts at beginning and end of period:
Business
combination
reserve
Employee
equity bene-
fits reserve
Foreign cur-
rency transla-
tion reserve
$000
$000
$000
2017
Carrying amount at beginning of period
Exchange differences on translation of foreign operations
Cost of share based payments
Other
Carrying amount at end of period
2016
Carrying amount at beginning of period
Exchange differences on translation of foreign operations
Put options provided to non-controlling interests
Cost of share based payments
Transfer to retained earnings
Carrying amount at end of period
Nature and purpose of reserves
(26,418)
-
-
473
(25,945)
(16,228)
-
(10,190)
-
-
(26,418)
1,711
-
2,205
-
3,916
459
-
-
1,304
(52)
1,711
Annual Financial Report
Total
$000
(29,063)
(1,211)
2,205
473
(4,356)
(1,211)
-
-
(5,567)
(27,596)
(3,538)
(818)
-
-
-
(19,307)
(818)
(10,190)
1,304
(52)
(4,356)
(29,063)
(i) Business combination reserve
The reserve is used to record the differences between the carrying value of non-controlling interests and the consideration
paid/received, where there has been a transaction involving non-controlling interests that do not result in a loss of control.
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 reserve
This 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 reserve
The foreign currency translation reserve is used to record exchange differences arising from the translation of the financial
statements of foreign subsidiaries, including exchange differences arising from loans which are deemed to be net investments
in a foreign operation.
Note 19 — Retained Earnings
Retained earnings at the beginning of the financial year
Net profit attributable to owners of the parent
Transfer from employee equity benefits reserve
Hybrid equity distribution
Reallocation of equity
Other
2017
$000
(1,246,064)
115,995
-
(3,557)
(5,179)
(313)
2016
$000
(1,301,213)
51,569
52
-
3,528
-
Retained earnings at the end of the financial year
(1,139,118)
(1,246,064)
103
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 2017 Note 20 — Dividends
No dividends paid during the year (2016: Nil).
Subsidiary equity dividends on ordinary shares:
Dividends paid to non-controlling interests during the year
Franking credits available to the parent for subsequent financial years
based on tax rate of 30% (2016: 30%)
2017
$000
2,482
2016
$000
1,871
24,900
21,600
Note 21 — Cash Flow Statement Reconciliation
(a) Reconciliation of net profit after tax to net cash flows from operations
Profit after income tax expense
Adjustments for non cash items:
Depreciation and amortisation
Unwinding of discount in regards to provisions
Equity accounted profits
Dividends from equity accounted investments
Fair value adjustments to equity accounted investments
Other fair value adjustments
(Impairment reversal)/impairment
Doubtful debts
Employee entitlements
Other provisions
Other write downs
Net (profit)/loss on sale of non-current assets
Net (profit) on sale of controlled entity
Net tax movements
Other non cash items
— (Increase)/decrease in receivables and other assets
— (Increase)/decrease in inventories
— Increase/(decrease) in payables and provisions
Net cash flows from operating activities
(b) Cash and cash equivalents
Cash at bank and in hand
118,571
54,239
4,134
435
(5,411)
5,592
(2,270)
(396)
(54,785)
2,985
15,010
(495)
2,030
524
(1,955)
1,097
2,205
87,271
(13,143)
(505)
7,976
81,599
3,706
2,167
(919)
546
-
(1,018)
1,473
589
7,287
7,387
397
(1,129)
-
(28,039)
2,669
49,355
(17,862)
(9,184)
26,367
48,676
35,186
35,151
At balance date, Elders held $22.9 million of client monies in trust which are off balance sheet. The funds are held on behalf
of clients in the Real Estate business and Elders is bound by the relevant legislation in each state in relation to controls and
governance over the funds.
104
2017 Annual Report — EldersNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 2017
Annual Financial Report
Note 22 — Expenditure Commitments
Operating lease commitments – Elders as a lessee
Elders’ operating lease commitments relate to property leases associated with the branch network and vehicle 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 year
— After one year but not later than five years
— After more than five years
Total minimum lease payments
Note 23 — Contingent Liabilities
2017
$000
28,929
35,244
5,744
69,917
2016
$000
45,080
58,872
8,213
112,165
Contingent 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 business
5,207
1,364
There 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 the Executive Director 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 guarantees
As 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.
Note 24 — Segment Information
Identification of reportable segments
Elders 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.
105
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 2017 Note 24 — Segment Information
Type of product and service
— Network includes the provision of a range of retail products and services 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 principal 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. Elders has exited the live export business during
the year.
— 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 transactions
The accounting policies used by Elders 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.
2017
Sales revenue
Equity accounted profits
Earnings before interest, tax, depreciation & amortisation
Depreciation & amortisation
Segment result
Corporate net interest expense
Profit from ordinary activities before tax
Segment result
Discontinued operations results
Continuing profit before net borrowing costs
and tax expense
Corporate net interest expense
Continuing profit before tax expense
Segment assets
Segment liabilities
Net assets
Carrying value of equity accounted investments
Acquisition of non current assets
Non cash income/(expense) other than depreciation
and amortisation
Profit/(loss) on sale of non current assets
Network
$000
Feed and
Processing
$000
Live Export
$000
Other
$000
Total
$000
1,425,820
176,716
99,002
5,411
-
-
116,943
(2,511)
114,432
6,037
(1,179)
4,858
5,907
-
5,907
114,432
-
4,858
-
5,907
(5,907)
114,432
4,858
567,599
309,952
257,647
53,842
44,989
(2,530)
(524)
72,202
8,747
63,455
-
1,216
-
-
-
-
-
-
-
-
-
1,955
601
-
6,591
(444)
6,147
6,147
-
6,147
162,351
225,775
(63,424)
-
-
36,533
-
1,702,139
5,411
135,478
(4,134)
131,344
(7,530)
123,814
131,344
(5,907)
125,437
(7,265)
118,172
802,152
544,474
257,678
53,842
46,205
34,003
1,431
106
2017 Annual Report — EldersNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 2017 Note 24 — Segment Information
2016
Sales revenue
Equity accounted profits
Earnings before interest, tax, depreciation & amortisation
Depreciation & amortisation
Segment result
Corporate net interest expense
Profit from ordinary activities before tax
Segment result
Discontinued operations results
Continuing profit before net borrowing costs
and tax expense
Corporate net interest expense
Continuing profit before tax expense
Segment assets
Segment liabilities
Net assets
Carrying value of equity accounted investments
Acquisition of non current assets
Non cash income/(expense) other than depreciation
and amortisation
Profit on sale of non current assets
Note 25 — Auditors’ Remuneration
The auditor of Elders Limited is PricewaterhouseCoopers.
Amounts received or due and receivable by the auditor for:
— auditing or review of financial statements
— tax services (primarily compliance)
— other services
Annual Financial Report
Network
$000
Feed and
Processing
Live Export
$000
$000
Other
$000
Total
$000
1,359,488
159,080
222,582
861
-
58
768
-
1,741,918
919
92,591
(2,062)
90,529
90,529
-
90,529
492,028
282,400
209,628
3,412
27,708
(2,107)
1,129
3,964
(954)
3,010
3,010
-
3,010
57,594
5,531
52,063
-
301
-
-
(14,906)
(37,944)
-
(690)
(14,906)
(38,634)
(14,906)
14,906
(38,634)
-
-
(38,634)
25,122
8,019
17,103
-
101
(424)
-
116,545
208,835
(92,290)
-
649
9,342
-
2017
$
505,000
-
33,650
538,650
43,705
(3,706)
39,999
(9,760)
30,239
39,999
14,906
54,905
(9,343)
45,562
691,289
504,785
186,504
3,412
28,759
6,811
1,129
2016
$
565,000
13,120
10,000
588,120
107
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 2017 Note 26 — Investment in Controlled Entities
(a) Schedule of controlled entities
Ace Ohlsson Pty Limited
Agsure Pty Ltd
AI Asia Pacific Operations Holding Limited
Air International Asia Pacific Operations Pty Ltd
Air International Vehicle Air Conditioning (Shanghai) Co Ltd
APO Administration Limited
APT Projects Pty Ltd
Aqa Oysters Pty Ltd
Argo Trust No. 2
Ashwick (Vic) No 102 Pty Ltd
B & W Rural Pty Ltd
BWK Holdings Pty Ltd
Chemseed Australia Pty Ltd (formerly Elders Conveyancing (WA) Pty Ltd)
Elders Automotive Group Pty Ltd
Elders Burnett Moore WA Pty Ltd
Elders China Trading Company
Elders Communications Pty Ltd
Elders Finance Pty Ltd
Elders Fine Foods (Shanghai) Company
Elders Fine Foods Vietnam Company Limited
Elders Forestry Finance Pty Ltd
Elders Forestry Management Pty Ltd
Elders Forestry Pty Ltd
Elders Global Wool Holdings Pty Ltd
Elders Home Loans Pty Ltd
Elders Management Services Pty Ltd
Elders Merchandise Limited
Elders PT Indonesia
Elders Real Estate (Tasmania) Pty Ltd
Elders Real Estate (WA) Pty Ltd
Elders Real Estate Limited
Elders Rural Holdings Limited
Elders Rural Services Australia Limited
Elders Rural Services Limited
Elders Services Company Pty Ltd
Elders Stock (SI) Ltd
Elders Telecommunications Infrastructure Pty Ltd
Elders Victorian Feedlot Pty Ltd (formerly Charlton Feedlot Pty Ltd)
Elders Wool International Pty Ltd
EVIA Rural Finance Ltd
Family Hospitals Pty Ltd
Fares Exports Management Mexico, S.A. de C.V.
Fares Exports Pty Ltd
Fares Exports Trading Mexico, S.A. de C.V.
Former EFP Pty Ltd
108
Country of
Incorporation
Australia
Australia
Hong Kong SAR
Australia
China
Hong Kong SAR
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
China
Australia
Australia
China
Vietnam
Australia
Australia
Australia
Australia
Australia
Australia
New Zealand
Indonesia
Australia
Australia
New Zealand
New Zealand
Australia
Australia
Australia
New Zealand
Australia
Australia
Australia
New Zealand
Australia
Mexico
Australia
Mexico
Australia
(b), (d)
(a)
(f)
(e)
(f)
(f)
(g)
(f)
(f)
(b)
(f)
(f)
(f)
(a)
(d)
(f)
(f)
(f)
(f)
(f)
(f)
(f)
(f)
(a)
(f)
(f)
(f)
(h)
(f)
(f)
(f)
% Held by Group
2017
2016
100
100
100
100
100
100
100
77
100
100
-
100
100
100
100
100
100
77
100
100
75.5
75.5
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
-
100
100
-
100
-
-
100
100
100
100
100
100
100
100
-
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
2017 Annual Report — EldersNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 2017 Note 26 — Investment in Controlled Entities
Gisborne Farmers Ltd
ITC Timberlands Pty Ltd
JS Brooksbank & Co Australasia Ltd
JSB New Zealand Limited
Keratin Holdings Pty Ltd
Killara Feedlot Pty Ltd
Manor Hill Pty Ltd
New Ashwick Pty Ltd
North Australian Cattle Company Pty Ltd
Prestige Property Holdings Pty Ltd
Primac Exports Pty Ltd
Primac Pty Ltd
PT Indo Mahesa Surya
Redray Enterprises Pty Ltd
SDEA Nominees Pty Ltd
Country of
Incorporation
New Zealand
Australia
New Zealand
New Zealand
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Indonesia
Australia
Australia
Southern Australian Cattle Company Pty Ltd (formerly Elders International Australia Pty Ltd) Australia
Ultrasound Australia Pty Ltd
Victorian Producers Co-operative Company Pty Ltd
Australia
Australia
Annual Financial Report
% Held by Group
2017
2016
100
100
100
100
100
100
100
100
-
100
100
100
-
100
100
-
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
-
100
100
100
(f)
(f)
(a)
(f)
(f)
(c), (h)
(f)
(f)
(f)
(h)
(f)
(b), (d)
(c), (h)
(a)
(f)
— 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.
(b) Deed of Cross Guarantee
Pursuant 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.
109
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 2017 Note 26 — Investment in Controlled Entities
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 Elders 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 2017 is set out as follows:
Statement of comprehensive income of the Closed Group
Sales revenue
Cost of sales
Gross profit
Other revenue
Distribution expenses
Administrative expenses
Other items of income/(expense)
Finance costs
Profit/(loss) before income tax (expense)/benefit
Income tax (expense)/benefit
Profit/(loss) after income tax (expense)/benefit
Consolidated statement of financial position of the Closed Group
Current assets
Cash and cash equivalents
Trade and other receivables
Livestock
Inventory
Total current assets
Non current assets
Other financial assets
Property, plant and equipment
Deferred tax assets
Total non current assets
Total assets
Current liabilities
Trade and other payables
Interest bearing loans and borrowings
Current tax payable
Provisions
Total current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Hybrid equity
Reserves
Retained earnings
Total equity
110
2017
$000
147,141
(130,734)
16,407
40,000
(9,119)
(8,528)
(71,709)
(1,033)
(33,982)
(5,243)
(39,225)
1,910
9,449
36,336
3,546
51,241
147,568
9,124
59,382
216,074
267,315
8,557
-
109
971
9,637
9,637
257,678
2016
$000
327,655
(326,013)
1,642
-
(6,494)
(6,324)
30,416
(1,525)
17,715
24,000
41,715
3,620
19,955
31,943
1,966
57,484
85,806
8,130
64,126
158,062
215,546
11,563
8,996
1,049
7,434
29,042
29,042
186,504
1,422,255
1,422,382
-
3,916
(1,168,493)
257,678
36,830
1,711
(1,274,419)
186,504
2017 Annual Report — EldersNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 2017 Annual Financial Report
Note 27 — Key Management Personnel
Remuneration of Directors and other Key Management Personnel
For information on the Remuneration Policy, Structure and the relationship between remuneration payment and performance
please refer to the Remuneration Report.
Short term
Long term
Post employment
Termination benefits
Share based payments
2017
$
2016
$
4,593,333
4,353,316
70,479
158,909
-
1,447,460
6,270,181
59,614
176,234
221,735
856,382
5,667,281
Note 28 — Share Based Payment Plans
(a) Long Term Incentive Options
In 2015, 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 $1.57, each option entitles the holder to one ordinary share.
An expense of $0.5 million was recognised in profit and loss during the year in relation to the options (2016: $0.3 million).
As at 30 September 2017, 1,694,790 options were outstanding.
(b) Long Term Incentive Performance Rights
In 2016, 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 $0.8 million (2016: $1.0 million) was recognised in profit and loss during the year in relation to these performance
rights. As at 30 September 2017, 860,000 rights were outstanding.
In 2017, 895,000 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 $0.9 million was recognised in profit and loss during the year in relation to these performance rights.
As at 30 September 2017, 875,000 rights were outstanding.
Note 29 — Related Party Disclosures
The ultimate controlling entity of the Group is Elders Limited.
As part of sharing office space with branches in the Network segment, Elders incurred costs on behalf of Elders Financial Planning
Pty Ltd and Elders Insurance (Underwriting Agency) Pty Ltd and recharged these at arm’s length. During the year, Elders provided
an advance of $10.0 million to StockCo Holdings Pty Ltd.
111
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 2017 Note 30 — Earnings Per Share
Weighted average number of ordinary shares (‘000) used in calculating basic EPS
Dilutive share options (‘000)
Adjusted weighted average number of ordinary shares used in calculating dilutive EPS (‘000)
2017
113,859
3,430
117,289
2016
90,699
15,093
105,792
The following reflects the net profit/(loss) and share data used in the calculations of earnings per share (EPS):
Reported operations
Basic and dilutive
Net profit/(loss) attributable to members (after tax)
115,995
51,569
2017
$000
2016
$000
Reported operations:
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
Continuing operations
Basic
Net profit/(loss) attributable to members (after tax)
Less: Net loss/(profit) of discontinued operations (net of tax)
Net profit/(loss) of continuing operations (net of tax)
Continuing operations earnings per share:
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
Discontinued operations
101.9 ¢
98.9 ¢
115,995
(4,536)
111,459
97.9 ¢
95.0 ¢
56.9 ¢
48.7 ¢
51,569
10,726
62,295
68.7 ¢
58.9 ¢
Net profit/(loss) of discontinued operations (net of tax)
4,536
(10,726)
Discontinued operations earnings per share:
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
4.0 ¢
3.9 ¢
(11.8)¢
(11.8)¢
112
2017 Annual Report — EldersNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 2017 Annual Financial Report
Note 31 — Financial Instruments
Elders’ principal financial instruments comprise cash, receivables, payables, interest bearing loans and borrowings,
and derivatives.
Risk exposures and responses
Elders 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. Elders 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 2017 interest on $120.0 million (2016: $70.0 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:
Financial assets
Cash and cash equivalents
Amounts receivable from associated entities
Financial liabilities
Secured loans
Net exposure
2017
$000
35,186
-
35,186
(9,874)
25,312
2016
$000
35,151
1,065
36,216
(50,697)
(14,481)
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:
+ 100 basis points
- 100 basis points
Post Tax Profit/equity — Higher/(Lower)
2017
$000
253
(253)
2016
$000
(145)
145
113
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 2017 Note 31 — Financial Instruments
(b) 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 committed available lines of credit. Elders manages its liquidity risk by monitoring the total cash inflows and outflows
expected on a daily 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 liabilities
The following liquidity risk disclosures reflect all contractually fixed pay-offs, repayments and interest resulting from the
recognised financial liabilities and financial guarantees as of 30 September 2017. 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
amount
Contractual
cash flows
6 months
or less
6-12 months
1-5 years
$000
$000
$000
$000
$000
2017
Non derivative financial assets:
Cash and cash equivalents
Trade and other receivables
Non derivative financial liabilities:
35,186
392,299
427,485
35,186
392,299
427,485
35,186
392,299
427,485
Interest bearing loans and borrowings
(130,162)
(130,162)
(130,162)
-
-
-
-
-
-
-
-
(357,539)
(357,539)
(354,390)
(1,149)
(2,000)
-
(5,207)
(5,207)
(487,701)
(492,908)
(489,759)
(60,216)
(65,423)
(62,274)
-
(1,149)
(1,149)
-
(2,000)
(2,000)
Trade and other payables
Financial guarantees
Net inflow/(outflow)
2016
Non derivative financial assets:
Cash and cash equivalents
Trade and other receivables
Non derivative financial liabilities:
35,151
385,815
420,966
35,151
385,815
420,966
35,151
385,815
420,966
Interest bearing loans and borrowings
(121,300)
(121,319)
(121,319)
Trade and other payables
Financial guarantees
Net inflow/(outflow)
(331,565)
(331,565)
(331,565)
-
(1,364)
(1,364)
(452,865)
(454,248)
(454,248)
(31,899)
(33,282)
(33,282)
114
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2017 Annual Report — EldersNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 2017 Annual Financial Report
Note 31 — Financial Instruments
(ii) Derivative financial instruments
Due 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.
2017
Derivative assets – net settled
Total inflow/(outflow)
2016
Derivative assets – net settled
Total inflow/(outflow)
Carrying
amount
Contractual
cash flows
6 months
or less
6-12 months
1-5 years
$000
$000
$000
$000
$000
83
83
98
98
83
83
98
98
83
83
98
98
-
-
-
-
-
-
-
-
(c) Credit risk
Credit risk arises from Elders’ financial assets, which comprise cash and cash equivalents, trade and other receivables, and
derivative instruments. Elders’ 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, limits and insurance positions. 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:
Cash and cash equivalents
Trade and other receivables
Derivative financial assets
Location of credit risk
Australia
Asia
Total
2017
$000
35,186
392,216
83
427,485
420,699
6,786
427,485
2016
$000
35,151
385,717
98
420,966
409,986
10,980
420,966
115
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 2017 Note 31 — Financial Instruments
(d) Foreign currency risk
Elders is exposed to movements in the exchange rates of a number of currencies. 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 2017, Elders had the following AUD exposures to foreign currencies that were not
designated in cash flow hedges:
Financial assets
Cash and cash equivalents – CNY
Cash and cash equivalents – IDR
Cash and cash equivalents – other
Receivables – CNY
Receivables – IDR
Receivables – other
Financial liabilities
Payables – CNY
Payables – IDR
Interest bearing loans and borrowings – CNY
Interest bearing loans and borrowings – other
Net exposure
2017
$000
945
1,136
82
2,428
2,141
136
6,868
(556)
(3,095)
(320)
-
(3,971)
2,897
2016
$000
706
2,286
1,517
3,839
4,055
9,136
21,539
(247)
(1,485)
-
(8,996)
(10,728)
10,811
Given the foreign currency balances included in the Statement of Financial Position at balance date, if the Australian dollar at that
date strengthened by 10% with all other variables held constant, then the impact on post tax profit/(loss) arising on the balance
sheet exposure would be as follows:
CNY
IDR
Other
Post Tax Profit/equity — Higher/(Lower)
2017
$000
(250)
(18)
(22)
2016
$000
(430)
(486)
(166)
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.
116
2017 Annual Report — EldersNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 2017 Annual Financial Report
Note 31 — Financial Instruments
(e) Fair value of financial assets and liabilities
Elders 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:
Quoted
market price
(Level 1)
$000
-
-
Financial assets
Derivatives
2017
2016
Valuation
technique – market
observable inputs
Valuation technique
– non market
observable inputs
Quoted
market price
Valuation
technique – market
observable inputs
Valuation technique
– non market
observable inputs
(Level 2)
$000
83
83
(Level 3)
(Level 1)
$000
$000
(Level 2)
$000
(Level 3)
$000
-
-
-
-
98
98
-
-
Note 32 — Business Combinations – Changes in the Composition of the Entity
(a) Acquisitions
During the current period, Elders acquired a real estate and retail business for a total consideration net of cash acquired of $16.0
million. These transactions resulted in the recognition of $7.2 million of goodwill. These acquisitions are not material to the group.
Prior period acquisitions
In the prior period, Elders acquired various real estate and retail businesses for a total consideration net of cash acquired
of $3.7 million. These transactions resulted in the recognition of $2.1 million of goodwill.
(b) Disposals
During the current period, Elders exited the live export business and disposed the net assets of the business. The proceeds from
disposal were $2.7 million which resulted in a gain on sale of $1.9 million. There were no disposals in the prior period.
117
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 2017 Note 33 — Discontinued Operations
Elders’ investment in Live Export was sold during the period and has been classified as a discontinued operation.
Cont
$000
2017
Disc
$000
Total
$000
Cont
$000
2016
Disc
$000
Total
$000
1,603,137
99,002
1,702,139
1,519,336
222,582
1,741,918
(1,269,080)
(95,690)
(1,364,770)
(1,211,970)
(225,393)
(1,437,363)
3,312
337,369
307,366
(2,811)
304,555
334,057
5,411
-
5,411
(221,846)
(1,943)
(223,789)
(47,186)
55,001
124,437
(7,265)
118,172
(4,137)
114,035
-
4,538
5,907
(265)
5,642
(1,106)
4,536
(47,186)
59,539
131,344
(7,530)
123,814
(5,243)
118,571
861
(213,142)
(38,954)
(1,226)
54,905
(9,343)
45,562
19,403
64,965
58
919
(6,105)
(219,247)
-
(38,954)
(6,048)
(7,274)
(14,906)
(417)
(15,323)
4,597
(10,726)
39,999
(9,760)
30,239
24,000
54,239
(2,576)
-
(2,576)
(2,670)
-
(2,670)
111,459
4,536
115,995
62,295
(10,726)
51,569
Sales revenue
Cost of sales
Gross profit
Other revenues
Distribution expenses
Administration expenses
Other items of income/(expense)
Profit/(loss) before borrowing costs and
tax expense
Finance costs
Profit/(loss) before tax expense
Income tax benefit/(expense)
Net profit/(loss) for year
Net profit/(loss) attributable to non-
controlling interest
Net profit/(loss) attributable to members
of the parent entity
Revenue and expenses
Sales revenue:
Sale of goods and biological assets
1,267,412
99,002
1,366,414
1,166,490
222,582
1,389,072
Debtor interest associated with sales
Commission and other selling charges
5,579
330,146
-
-
5,579
5,044
330,146
347,802
-
-
1,603,137
99,002
1,702,139
1,519,336
222,582
Other expenses:
Insurance fair value adjustment
Gain on divested assets
Live export exit costs
Impairment reversal/(impairment) of assets
Restructuring, redundancy and other
2,270
-
-
54,785
(2,054)
55,001
-
1,955
2,583
-
-
4,538
2,270
1,955
2,583
54,785
(2,054)
59,539
-
-
-
(1,049)
(177)
(1,226)
-
-
(6,048)
-
-
(6,048)
The net cash flow of the discontinued operations is as follows:
2017
$000
14,494
2,696
-
17,190
Operating activities
Investing activities
Financing activities
Net cash inflow/(outflow)
118
5,044
347,802
1,741,918
-
-
(6,048)
(1,049)
(177)
(7,274)
2016
$000
1,254
-
-
1,254
2017 Annual Report — EldersNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 2017 Note 34 — Parent Entity
Information relating to the parent entity of the Group, Elders Limited:
Results:
Net profit/(loss) for the period after income tax expense
Total comprehensive income/(loss)
Financial position:
Current assets
Non current assets
Total assets
Current liabilities
Total liabilities
Net assets
Issued capital
Hybrid equity
Retained earnings
Profit reserve
Employee equity reserve
Total equity
Annual Financial Report
2017
$000
69,096
69,096
108
258,395
258,503
825
825
257,678
1,422,255
-
2016
$000
(25,527)
(25,527)
314
187,886
188,200
1,696
1,696
186,504
1,422,382
145,151
(1,208,493)
(1,382,740)
40,000
3,916
257,678
-
1,711
186,504
Guarantees
As 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 35 — Subsequent Events
There are no other matters or circumstances that have arisen since 30 September 2017 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.
119
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 2017 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 2017
are in accordance with the Corporations Act 2001, including:
(i) Giving a true and fair view of its financial position as at 30 September 2017 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 2017.
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
M C Allison
Managing Director
Adelaide
13 November 2017
120
2017 Annual Report — Elders Auditor's Report
Independent auditor’s report
To the members of Elders Limited
Report on the audit of the financial report
Our opinion
In our opinion:
The accompanying financial report of Elders Limited (the Company) and its controlled entities
(together Elders or the Group) is in accordance with the Corporations Act 2001, including:
(a)
giving a true and fair view of the Group's financial position as at 30 September 2017 and of its
financial performance for the year then ended
(b)
complying with Australian Accounting Standards and the Corporations Regulations 2001.
What we have audited
The Group financial report comprises:
•
•
•
•
•
•
the consolidated statement of financial position as at 30 September 2017
the consolidated statement of comprehensive income for the year then ended
the consolidated statement of cash flows for the year then ended
the consolidated statement of changes in equity for the year then ended
the notes to the consolidated financial statements, which include a summary of significant
accounting policies
the directors’ declaration.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s responsibilities for the audit of the financial
report section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Independence
We are independent of the Group in accordance with the auditor independence requirements of the
Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical
Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant
to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities
in accordance with the Code.
PricewaterhouseCoopers, ABN 52 780 433 757
Level 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.
121
Our audit approach
An audit is designed to provide reasonable assurance about whether the financial report is free from
material misstatement. Misstatements may arise due to fraud or error. They are considered material if
individually or in aggregate, they could reasonably be expected to influence the economic decisions of
users taken on the basis of the financial report.
We tailored the scope of our audit to ensure that we performed enough work to be able to give an
opinion on the financial report as a whole, taking into account the geographic and management
structure of the Group, its accounting processes and controls and the industry in which it operates.
Elders operates branches throughout Australia and works with primary producers to provide:
• Retail products: Rural farm inputs including seeds, fertilisers, agricultural chemicals, animal
health products and general rural merchandise.
Agency services: A range of marketing options for livestock, wool and grain.
•
• Real estate services: Agency services primarily involved in the marketing of farms, stations
and lifestyle estates and includes a network of residential real estate agencies providing agency
and property management services.
Financial services: Elders distributes a wide range of banking, funding, insurance and
financial planning products.
•
Elders provides feed and processing services both domestically and internationally. In Australia,
Elders operates the Killara feedlot, a beef cattle feedlot near Tamworth in New South Wales. In
Indonesia, the Group operates an integrated feedlot, abattoir and meat distribution business. Elders
has a business in China which imports, processes and distributes premium Australian meat in China.
Materiality
For the purpose of our audit we used overall materiality of $3.1 million, which represents approximately 5% of the
Group’s profit before tax excluding impairment reversals, amounts associated with the disposal of Live Export and
acquisition related fair value gains.
We applied this threshold, together with qualitative considerations, to determine the scope of our audit and the
nature, timing and extent of our audit procedures and to evaluate the effect of misstatements on the financial
report as a whole.
We chose to use the Group’s profit before tax because, in our view, it is the benchmark against which the
122
2017 Annual Report — Elders Auditor's Report
performance of the Group is most commonly measured. We adjusted the Group’s profit before tax for impairment
reversals, amounts associated with the disposal of Live Export and acquisition related fair value gains as they are
unusual or infrequently occurring items which are not expected to recur from year to year or otherwise
significantly affect the underlying trend of performance of the Group.
We used a 5% threshold based on our professional judgement, noting it is within the range of commonly
acceptable benchmarks.
Audit scope
Our audit focused on where the Group made subjective judgements; for example, significant accounting estimates
involving assumptions and inherently uncertain future events.
We decided the nature, timing and extent of work that needed to be performed by us and component auditors
operating under our instruction.
The Group is comprised of three components being Australia, Indonesia and China.
We audited the Australian component financial information given its financial significance. To perform our audit
procedures we attended head office, the Killara feedlot and a sample of branches across the Australian network.
The components in Indonesia and China did not contribute materially to the Group profit before tax. We did
however perform specified risk focussed audit procedures over certain balances in each of these components.
These procedures were performed by us with the exception of work performed by component auditors in
Indonesia over the existence of livestock. For the procedures performed by component auditors in Indonesia, we
decided on the level of involvement required from us to be able to conclude whether sufficient and appropriate
audit evidence had been obtained. Our involvement included discussions and written instructions and reporting
from component auditors.
We performed further audit procedures at a Group level, including over the consolidation of the Group’s reporting
units and the preparation of the financial and remuneration reports.
Key audit matters
Amongst other relevant topics, we communicated the following key audit matters to the Audit, Risk and
Compliance Committee:
•
•
•
Reversal of the Brand Name impairment
Recoverability of deferred tax assets
Accounting for rebates
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of
the financial report for the current period. The key audit matters were addressed in the context of our audit of the
financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on
these matters. Any commentary on the outcomes of a particular audit procedure is made in that context.
123
Key audit matter
How our audit addressed the key audit matter
Reversal of the Brand Name impairment
(Refer to notes 2(r)(i) and 12)
In the financial year ended 30 September 2013, Elders
impaired the Brand Name asset from $60.4 million to $5.6
million, largely as a result of a reduction in expected future
cash flows and an increased allocation of corporate costs to the
business following a Group reorganisation.
The carrying value of the Brand Name is reviewed annually by
Elders using a value in use model (‘the model’).
In the current year, the Group assessed that the sustained
positive results and removal of profit and loss volatility given
the exit from Live Export provide objective evidence that the
conditions leading to the asset impairment were no longer
present and were an indicator that the Group should consider
a reversal of the impairment. Given the above factors and the
model supported a Brand Name recoverable amount of $60.4
million, an impairment reversal of $54.8 million has been
recognised in the consolidated statement of comprehensive
income.
The reversal of the Brand Name impairment was a key audit
matter given the financial significance of the reversal and the
judgemental assumptions included in the model, particularly
the future cash flows, growth rate and discount rate.
We considered the Group’s reassessment of the carrying value
of the Brand Name and its conclusion to recognise an
impairment reversal and performed the following procedures,
amongst others:
•
•
•
•
•
Compared the cash flow forecasts in the model to those in
the latest Board approved budgets, particularly inputs for
growth rate and working capital movements.
Evaluated Elders’ ability to forecast future results within
impairment models by comparing budgets with reported
actual results for the previous financial year.
Tested the mathematical accuracy of the model, and
assessed the completeness of cash flows included within
the model based on our understanding of operations
from the audit.
Evaluated the appropriateness of the discount rate by
assessing the reasonableness of the relevant inputs to the
calculation against industry and market factors. We
performed a sensitivity analysis of the discount rate by
varying critical inputs including the risk free rate, equity
risk market premium and pre-tax cost of debt in the
weighted average cost of capital calculation.
Evaluated the accuracy and adequacy of the disclosures
made in the financial report, including those regarding
the key assumptions in light of the requirements of
Australian Accounting Standards.
124
2017 Annual Report — Elders Auditor's Report
Key audit matter
How our audit addressed the key audit matter
Recoverability of deferred tax assets
(Refer to notes 2(y) and 5)
Elders disclosed unused tax losses of $228.2 million available
for use in future periods.
Elders recognised net deferred tax assets of $59.4 million at
30 September 2017 in the consolidated statement of financial
position, of which $57.4 million arises from tax losses carried
forward.
Australian Accounting Standards require deferred tax assets to
be recognised only to the extent that it is probable that
sufficient future taxable profits will be generated in order for
the benefits of the deferred tax assets to be realised. These
benefits are realised by reducing tax payable on future taxable
profits.
This was a key audit matter due to the quantum of the
accumulated losses available as well as the judgement involved
by the Group in preparing forecasts to demonstrate the future
utilisation of these losses.
We performed the following procedures, amongst others:
•
Assessed the forecast profits over the relevant utilisation
period and evaluated whether the forecasts were
consistent with Board approved budgets, and had been
appropriately adjusted for the differences between
accounting profits and taxable profits.
• With assistance from PwC tax experts, examined the
ability to carry forward the tax losses for future use and
considered the appropriateness of the deductions in the
forecasts.
•
•
•
•
Tested the mathematical accuracy of the forecasts.
Performed a reconciliation of tax losses recognised and
utilised in the consolidated statement of financial
position and note 5.
Recalculated deferred tax asset balances which comprise
a combination of timing differences between tax and
accounting values and tax losses.
Evaluated the adequacy of the disclosures made in light
of the requirements of Australian Accounting Standards.
125
Key audit matter
How our audit addressed the key audit matter
Accounting for rebates
(Refer to notes 2(i) and 3)
Elders receives rebates in connection with the purchase of
retail goods for resale from suppliers. These rebates are varied
in nature and include price and volume rebates.
Elders recognises the rebates as a reduction to the cost of
inventory purchased and a reduction in cost of sales when the
inventory is sold.
In accordance with Australian Accounting Standards, rebates
should only be recognised as a reduction in cost of sales when
the associated performance conditions have been met. This
requires a detailed understanding by the Group of the various
contractual arrangements.
We considered rebates to be a key audit matter because:
•
•
•
Supplier arrangements are complex in nature and vary
between suppliers.
This is a largely manual process.
Judgement is involved by the Group to determine the
amount of rebates that should be recognised in the
consolidated statement of comprehensive income and the
amounts that should be deferred to inventory.
We performed the following procedures, amongst others:
•
For a sample of rebates recognised as a reduction in cost
of sales, we:
−
−
agreed terms and conditions back to individual
supplier agreements and recalculated the amount of
the rebate; and
considered if the rebate amount was only recognised
as a reduction in cost of sales when a sale of relevant
product had occurred.
• We assessed the completeness of rebates being recorded
against inventory on hand at balance date by obtaining a
listing of stock on hand at balance date. For a sample of
stock items, we traced the rebate percentage back to
supplier agreements and recalculated the rebate amount
offset against inventory.
•
•
For a sample of rebates receivable at balance date, we
confirmed these directly with suppliers.
Evaluated the adequacy of the disclosures made in light
of the requirements of Australian Accounting Standards.
126
2017 Annual Report — Elders Auditor's Report
Other information
The directors are responsible for the other information. The other information comprises the
Chairman's Remarks, CEO's Report, Year in Brief, A Year of Progress, Elders Gives Back, Operating
and Financial Review, Material Business Risks, Review of Operations, Outlook, Digital and Technical
Services Snapshot, Elders Expands National Footprint, Board of Directors, Executive Management
Remarks, Women in Pink, Directors' Report, Shareholder Information and Company Directory
included in the Group’s annual report for the year ended 30 September 2017 but does not include the
financial report and our auditor’s report thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not
express any form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information
identified above and, in doing so, consider whether the other information is materially inconsistent
with the financial report or our knowledge obtained in the audit, or otherwise appears to be materially
misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the directors 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 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due to
fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the Group to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial report.
A further description of our responsibilities for the audit of the financial report is located at the
Auditing and Assurance Standards Board website at:
www.auasb.gov.au/auditors_responsibilities/ar1.pdf. This description forms part of our auditor's
report.
127
Report on the remuneration report
Our opinion on the remuneration report
We have audited the remuneration report included in pages 61 to 77 of the directors’ report for the
year ended 30 September 2017.
In our opinion, the remuneration report of Elders Limited for the year ended 30 September 2017
complies with section 300A of the Corporations Act 2001.
Responsibilities
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.
PricewaterhouseCoopers
A G Forman
Partner
Adelaide
13 November 2017
128
2017 Annual Report — Elders ASX Additional Information
ASX Additional Information
(a) Distribution of Ordinary Shares as at 31 October 2017
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 – maximum
Total
The number of holders holding less than a marketable parcel
(b) Voting rights
All ordinary shares carry one vote per share without restriction.
No. of Ordinary Shares
No. of Ordinary Holders
3,132,472
10,695,404
6,359,251
17,548,809
76,123,504
113,859,440
7,487
4,560
867
728
52
13,694
1,210
(c) Stock Exchange quotation
Elders has one class of quoted securities being the ordinary shares (ELD) which is listed on the Australian Securities Exchange. The
Home Exchange is Sydney.
(d) Twenty Largest Shareholders as at 31 October 2017
The twenty largest holders of Elders Ordinary Shares were as follows:
No. of Shares
% of Shares
J P MORGAN NOMINEES AUSTRALIA LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
CITICORP NOMINEES PTY LIMITED
BNP PARIBAS NOMINEES PTY LTD
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