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Limoneira Company2018
ELDERS
ANNUAL
REPORT
Elders Limited ABN 34 004 336 636
Contents
Chairman’s Remarks
CEO’s Report
Elders’ Values
Integrity
Accountability
Customer Focus
Innovation
Teamwork
Year in Brief
A Year of Progress
Operating and Financial Review
Material Business Risks
Review of Operations
Board of Directors
Executive Management
Directors’ Report
Remuneration Report
Annual Financial Report
Shareholder Information
Company Directory
04
06
10
38
40
49
52
08
09
12
20
22
31
34
42
54
74
130
131
Elders’ five values are
at the core of everything
we do today, and everything
we plan for tomorrow.
INTEGRITY
ACCOUNTABILITY
CUSTOMER FOCUS
Behaving with
honesty and integrity
in every interaction
Being accountable
for results
Growing valuable
customer relationships,
and showing pride
and passion in our
organisation
02
2018 Annual Report — Elders Elders' Values
03
INNOVATION
TEAMWORK
Delivering innovation
and continuous
improvement
Using the power of the
team, and respecting
the contribution of
every person
Chairman’s Remarks
In my fifth and final report to shareholders as
Chairman of Elders Limited, I’m proud to announce
that the 2018 financial results reflect our disciplined
approach against the strategic Eight Point Plan. One
of the most significant highlights of the past year is
your Company re-entering the S&P/ASX 200 index,
signifying our persistent approach and commitment
to being a pure-play agribusiness – as outlined in
the inception of the Eight Point Plan in 2014.
04
Safety
Elders is committed to the safety of its
people. The Company believes the only
acceptable safety performance is one which
is injury and incident free. Considerable
measures have been undertaken to
target an injury free workplace, including
broadening our safety and community
programmes to emphasise mental health
which, in rural Australia, is often affected
by difficult seasonal conditions. We are
doing this through the Give It program
and our Employee Assistance Program,
which we extend, in times of real need, to
segments of our client base. 86% of Elders’
employees consider that mental health is
the one of the largest safety risk factors
in regional Australia.
Board
At the conclusion of the Company’s 2018
Annual General Meeting (AGM), I will
retire as a Director and Chairman of your
Board. I will be succeeded as Chairman
by recently appointed Non-Executive
Director, Michael Carroll, subject to
Mr Carroll being elected a director by
shareholders at that AGM.
Following ten years on the Board, five of
these years as your Chairman, it gives me
great pleasure to report that each of your
directors possess skills and experiences,
which result in a balanced, effective and
efficient Board to lead Elders through the
next growth phase and into the future.
The Board this year welcomed two new
Non-Executive Directors who are serving
with dedication in the best interests of the
Company and its shareholders.
2018 Annual Report — Elders Ms Diana Eilert was appointed as Non-
Executive Director in November 2017 and
was subsequently elected by shareholders
at the 2017 AGM. Diana has added
significant value through her extensive
listed company director experience –
particularly in digital technologies, retailing
and real estate. We believe technology that
provides productivity improvements to
Australia’s growers and producers is key
to ongoing profitability and sustainability
of our customers. The Board considers
these skills in the digital area imperative
to fulfilling our digital and technical
objectives.
In September 2018, Elders also appointed
Mr Michael Carroll to the board. Michael
shares a long-standing passion for
agriculture and brings relevant industry
experience which we are confident will
greatly contribute to Elders’ ongoing
performance particularly as the company
continues its growth initiatives.
Michael comes from a multigenerational
farming family and has a deep
understanding of both producer and
customer needs which is a highly valuable
skill set, and one that is shared by some
of his fellow directors. In addition to the
core agricultural experience, Michael also
possesses solid financial skills having
served part of his executive career in the
financial services sector.
Both Michael and Diana’s skill sets are
highly relevant to Elders as we continue
to implement the Eight Point Plan,
including our growth and digital and
technical agendas, through to 2020. The
appointments are in line with our objective
of ensuring the Company’s board of
directors is comprised of highly talented
individuals with a diverse range of skills,
experiences and backgrounds, which result
in a board effectively equipped to guide the
Company’s success.
Corporate Governance
and Risk and Compliance
From a corporate governance perspective,
Elders instils a culture based on our
values which are demonstrated throughout
this report. Our corporate governance
statement has this year been updated
to reflect changes in FY18. We believe in
compliance, transparency, disclosure and
remaining committed to our strategic plan
to lead Elders to 2020.
Our corporate governance and risk and
compliance practices continue to be
very sound and are subject to continual
improvement. We believe that a well
governed company, including one that puts
its compliance obligations and the need to
identify and manage risk at the centre of its
practices, is very likely to be a successful
and sustainable company. This approach
is a hallmark of the way we do business
at Elders, allowing us to capitalise on
opportunities and manage downsides.
Closing Remarks
In closing, I extend my gratitude and
appreciation to all employees wearing
the pink shirt with pride, as well as our
clients, suppliers, business partners
and financiers.
During my 10-year term as a director
of Futuris and then Elders, the Company
experienced challenges and difficulties
brought on by the GFC and high levels
of debt. It has been extremely gratifying
to be part of a team that divested the
automotive and forestry divisions, and that
has been able to return Elders to its roots
in Agriculture and attain a sustainable
financial position.
I take this opportunity to thank you as our
shareholders – it has been a pleasure
serving you since 2008.
Hutch Ranck
Chairman
Chairman's Remarks
05
CEO’s Report
Operational Performance
Elders is focused on delivering value for
all of our stakeholders in Australia and
internationally. We have continued on from
the strong financial performance in FY17,
achieving the 5% – 10% growth year on year
as we set out to do. Underlying net profit
after tax improved $5.3 million on the prior
corresponding period to $63.7 million.
Underlying EBIT of $74.6 million – up
$3.6 million on last year – resulted largely
from growth in the Retail product, despite
a dry winter cropping season, from
acquisition activity in horticulture and
organic growth across Southern Australia.
Overall the Retail business posted a
$14.5 million margin improvement,
while cattle prices had an impact on the
Agency Services margin which was down
$3.4 million – although this was partially
offset by solid wool performance and
increased sheep trading volumes.
Our Real Estate margin improved from
$31.9 million to $33.6 million with the
increase from footprint expansion offset by
subdued activity in key residential markets.
Financial Services earnings were boosted
by full year earn from acquisitions, rising
from $35.1 million in FY17 to $38.3 million
this reporting period.
Costs increased by $13.8 million to
$280.4 million to drive Eight Point Plan
initiatives, including acquisition and
organic footprint growth.
Safety Performance
In 2018, our lost time injuries (LTIs) were
five, down from six last year. We continue to
strive for an injury free workplace through
risk based decision making, training and
development, and a continued emphasis
on employee and community safety, health
and wellbeing. All LTIs are recorded in our
safety reporting, regardless of the cause
of the incident; two of Elders’ LTIs this
year were unfortunate, non-preventable
accidents involving at fault third parties.
The culture of our business is incredibly
important, particularly in relation to safety.
We have improved our safety culture which
is measured through an annual safety
engagement survey – 100% of respondents
demonstrated an understanding of their
personal safety obligations and have a
positive impression of our commitment
to safety.
In FY18 Elders continued its commitment to its
strategic priorities and its resolve to realise the
objective of continuous growth through agricultural,
commodity and seasonal cycles, whilst staying true
to our values; integrity, accountability, customer focus,
innovation and teamwork.
Since 2014, the Eight Point Plan has
provided clear, consistent direction.
It identifies sustainable competitive
advantages as a pure-play agribusiness,
by product and geography, and anchors
our future growth and development on
these advantages.
I’m pleased to report that in FY18 we
achieved underlying Earnings Before
Interest and Tax (EBIT) of $74.6 million
and a 24.2% Return on Capital (ROC),
despite challenging trading and seasonal
conditions. At a local level, it is certainly
very tough for many parts of the country.
From a business viewpoint, the level of
diversification that Elders has from a
product and geography perspective means
the overall impact has been limited. We
believe Elders remains well placed to
achieve our target of 5-10% EBIT growth
through the agricultural cycle to 2020.
06
2018 Annual Report — Elders Efficiency and Growth
The Eight Point Plan continues to guide
our sustainable growth and our business
units are constantly reviewed to ensure
they are generating a consistent return on
capital at a level which creates sustainable
wealth for our shareholders. Through
this review process, which had regard to
high cattle costs and changing Indonesian
governmental policies, we deemed it
appropriate to divest our Indonesian
feedlot and processing assets.
We remain steadfast in our target to achieve
5% - 10% growth year on year, with half
from acquisition and half from organic
growth. Our network has successfully
integrated a number of bolt on businesses
this financial year, notably the acquisition
of Kerr & Co Livestock which increases our
footprint in Western Victoria. In addition,
the purchase of TitanAg will extend Elders’
participation in the retail supply chain for
quality agricultural chemicals, and our 20%
stake in Clear Grain Exchange represents
another opportunity for future growth.
We welcomed our first recruit to Thomas
Elder Consulting (TEC) – our new group
of highly specialised consultants with
expertise to offer whole farm management
advice across all areas of our clients’
operations. We hope to have around 20
specialist TEC consultants by the end of
FY19 to complement our existing annual
investment in agronomy and livestock
production advice activities, which includes
trial sites, projects with industry groups,
and other research and development activity.
Our People
In 2018, Elders’ Employee Effectiveness
Survey, conducted by Korn Ferry,
demonstrated an increase in both
engagement (75%) and enablement
(77%) across the business. 73% of our
people responded to the survey. These
results place Elders above the Australian
benchmarks of 67% and 66% respectively.
Elders prides itself on investing in training
and developing of our people. In FY18,
320 employees from across the network
participated in a formal learning and
development program. We also continued
our support for the Australian Rural
Leadership Foundation, with participants
in the Agribusiness Leadership Program.
Nurturing new talent and our succession
pipeline saw 20 new trainees commence
the Livestock Trainee Program, with an
additional 18 existing employees attending
workshops – seven of whom opted to enrol
in Certificate IV in Agriculture offered
through the program. The trainee program
scope for recruitment and training content
broadened and included additional training
modules at workshops to equip trainees
with strategies for helping clients cope
with drought, as well as increased focus on
livestock production, and using technology.
Elders employed 12 university agronomy
graduates this year, with three completing
the full-time internal agronomy graduate
program. This two-year program has seen
a completion rate of 100% over the last
four years.
Whilst we still have some way to go
in achieving our measurable diversity
objectives by 2021, we continue to increase
the pipeline of female team leaders above
our target of 25%, currently we sit at 30%.
Our Non-Executive Director target is also
being met at 40%.
Our Communities
I’m pleased to say our partnership with the
Royal Flying Doctor Service (RFDS) has
grown this year alongside our community
giving program, Elders Give It. At a local
level, we have multiple initiatives in place
through our branch network in local
communities. This is wonderful work
and really is, and has been, the fabric of
Elders in regional and rural Australia for
the last 179 years. With drought currently
affecting many of our clients, people
and local communities in large sections
of the country, we are also a partner of
beyondblue and believe it is incredibly
important to look out for each other
and our clients’ mental health.
It is evident that our people wear the pink
shirt with pride in each of the communities
in which we operate and I thank each
and every one of our employees for the
dedication to giving back to their local
communities.
CEO's Report
Looking ahead
The National Farmers’ Federation –
representing Australia’s 84,000 farmers,
and Agribusiness Australia – representing
individuals and corporations across
the agri-food chain, recently signed a
Memorandum of Understanding (MOU) in
Canberra. As Chairman of Agribusiness
Australia, I’m pleased to see two peak
agriculture representative organisations
committing to work together towards a
farm gate production value of $100 billion
by 2030. Elders supports the MOU and
our clients in achieving the growth
throughout the supply chain.
In 2019 Elders will support evokeAG
as a platinum partner, AgriFutures
Australia’s international agri-food tech
event. The partnership further signifies
the importance of innovative collaboration
to generate and disseminate new digital
and technical agriculture ideas across
the country.
From a financial viewpoint looking ahead to
the end of the current Eight Point Plan, we
will continue to demonstrate our strength
in portfolio management, geographical
segmenting, our core products, innovation,
our commitment to Australian agribusiness
and our clients. We believe this will enable
us to deliver 5 to 10% growth per annum
over that period through agricultural,
seasonal and commodity cycles and
deliver value to you, our shareholders.
Mark Allison
Managing Director
07
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 (fully franked)
Interim dividend (fully franked)
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
08
$m
$m
$m
$m
$m
$m
$m
$m
$m
cents
cents
cents
cents
cents
cents
cents
%
%
times
times
%
$
$m
FY18
1,613.3
79.0
74.6
6.9
71.6
63.7
173.4
308.5
(12.1)
62.0
60.7
55.1
54.0
9.0
–
9.0
4.6
24.2
2.0
11.5
52.3
FY17
1,582.5
74.8
71.0
7.3
116.0
58.4
95.3
257.7
81.6
101.9
98.9
51.3
49.8
7.5
7.5
–
4.5
28.6
1.8
10.3
53.3
7.09
821.2
12,598
4.85
552.2
13,824
115,818,637
113,859,440
2018 Annual Report — Elders A Year of Progress
A Year of Progress
Safety Performance
Lost time injuries reduced to 5 from 6, target is zero
40% decrease in days lost for FY18
Risk based decision making training developed, implemented and operational
Continued emphasis on employee and community safety health and wellbeing
Operational Performance
$74.6m underlying EBIT, up $3.6m on last year
Underlying ROC at 24.2%, down from 28.6% at September 2017
Leverage ratio declined to 2.0
Interest cover ratio increased from 10.4 to 11.6
Fully franked interim dividend of 9.0c per share
Fully franked final dividend of 9.0c per share declared
Key Relationships
Strengthened the “Elders Give It” program through the announcement of the RFDS partnership
and further community involvement
Continued to engage with key agricultural research bodies
Formal engagement with all Rural Research Centres and government and university institutions
to focus and enhance our agricultural research initiatives
Achieving greater productivity for clients and the industry through the Thomas Elder Institute and
tertiary alliances
Efficiency and Growth
Acquisition of TitanAg to enhance retail capability and exposure to higher value crop segment
Agency footprint expansion through acquisition of Kerr & Co
Investment in Clear Grain Exchange (CGX) to broaden earnings base through a sustainable model
Drive organic growth through improving sales force performance and attracting high performers
Structured review process of capital and cost initiatives
Divestment of Indonesian feedlot and abattoir operations
09
Elders’ Value:
Integrity
Behaving with honesty & integrity in every interaction
Our values bring together all businesses under
the Elders banner into one company with a strong
and unified culture – known as One Elders. We are
focused on our core business, have our sights set on
performance, and we have measures and expectations
in place to achieve a culture that ensures Elders is in
the best position for sustainable success and growth.
Integrity in every interaction of each Elders
person contributes to the Elders culture.
When we work as one team throughout
our national network, strive for common
goals and recognise the contribution that
we all make towards our ultimate business
performance, we create an organisation
that our people feel proud to be part of.
The One Elders program provides a
common set of values and behaviours
to guide the way Elders’ people interact
with each other, how they contribute
to the business and how they interact
with customers, suppliers and other
stakeholders. The values and behaviours
were developed by employees across the
business and the One Elders framework
has been embedded at Elders by aligning
with policies, processes and practices.
To complement the values, Elders has
a One Elders Awards program which
recognises significant achievement in three
key areas; Safety, Sales and Operational
Performance. Our network is encouraged
to nominate their peers to recognise and
reward exemplary demonstrations of the
One Elders values and behaviours.
Monthly winners and their managers are
invited to attend the Annual One Elders
Awards Presentation which recognises
Branch of the Year, Team of the Year,
Employee of the Year, annual Safety, Sales,
Operational Performance awards, and a
new ‘Give It’ award designed to recognise
our team going above and beyond in giving
back to the community.
An integral part of the community, the
Gunnedah team attribute pride in wearing
the pink shirt, the hard-working attitude
and their honest and strong ethos to
achieving the highest network accolade
of Branch of the Year.
In 2016, Gunnedah and Tamworth combined
their retail offering which significantly
increased the district’s capabilities to
deliver premium service to local clients.
The joint approach brought together
expertise in management, stock control
and agronomy, creating business
efficiencies that resulted in a more
comprehensive customer service offering.
As part of this customer service focus, the
team regularly conducts client information
days to help to deliver the latest industry
or producer specific information. They also
aim to assist clients holistically, by offering
relevant service across the various Elders
products – from agronomy to livestock,
wool, grain, real estate and water services,
to farm inputs and to banking, insurance
and wealth planning.
Elders Gunnedah has built a strong
presence in its local community, with each
employee committing time to schools and
charities to support those communities.
As Branch Manager Nik Hannaford said in
accepting the Branch of the Year award on
behalf of Gunnedah, “the team lets respect
shape the way in which we do business.
“It is a great honour and privilege to
win this award for our team who are all
very dedicated to the cause and to each
other. When you take the Elders values
into account in all of your dealings, you
can’t stray far from doing what’s right for
everyone, and I think that shows in what
we’ve achieved.”
10
One Elders Award Winners
Branch of the Year:
Gunnedah, NSW
Team of the Year:
Killara Feedlot, NSW
Employee of the Year:
Brett Smith, District Wool Manager
& Branch Manager, Walgett NSW
Give It:
Jake Smith, Territory Sales Manager,
Gundagai, NSW
Safety:
Andrew Young, Farm Supplies Manager,
Townsville QLD
Sales Performance:
Hayden Lanyon, Branch Manager,
Mortlake VIC
Operational Performance:
Belinda Kilner, Senior HR Business
Partner, West
2018 Annual Report — Elders Elders' Value — Integrity
11
12
2018 Annual Report — Elders Operating and Financial Review
Operating
and Financial
Review
13
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
Australia, China and
Indonesia.
In Australia, Elders works closely with
primary producers to provide products,
marketing options and specialist
technical advice across retail, agency and
financial product and service categories.
Elders is also a leading Australian rural
and residential property agency and
management network. This network
includes both company owned and
franchise offices operating throughout
Australia in both major population
centres and regional areas. Our feed and
processing business operates a top-tier
beef cattle feedlot in New South Wales
and a premium meat distribution model
in China and Indonesia.
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.
Profit and Loss
Profit: Reported and Underlying
$million
Sales
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
FY18
FY17
Change
1,613.3
1,582.5
30.8
114.7
6.8
(46.9)
74.6
(6.9)
67.8
(1.7)
(2.4)
63.7
7.9
71.6
79.0
112.2
5.5
(46.6)
71.0
(7.3)
63.8
(2.8)
(2.6)
58.4
57.6
116.0
74.8
2.5
1.4
(0.3)
3.6
0.4
4.0
1.1
0.2
5.3
(49.8)
(44.4)
4.3
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
FY18 Commentary
Indonesia feedlot and abattoir
operations
(4.8) Operating losses and fair value adjustment
related to disposal
IT infrastructure transition
(3.9) Refresh current infrastructure and services
Major M&A activity
(2.2) Due diligence costs
Tax asset adjustments
18.8 Mainly relates to recognition of tax losses
based on profitability forecasts
Items excluded from underlying
profit
7.9
Non underlying profit in FY17 included brand name impairment reversals of $38.3 million
and tax asset adjustments of $15.2 million.
14
2018 Annual Report — Elders Operating and Financial Review
Key movements in profit by product
resulted from:
– Retail improved on last year, despite
a dry winter cropping season, from
acquisition activity in horticulture
and organic growth across Southern
Australia
– Agency downside attributable to
declining cattle prices, partially offset
by solid wool performance and
increased sheep volumes
– Real Estate increase from footprint
expansion, offset by subdued activity
in key residential markets
– Financial Services boosted by
acquisitions and organic growth in
loan book balances
– Feed and Processing Services upside
across all the business units
– Costs increased to drive Eight Point
Plan initiatives, including acquisitions
and organic footprint growth
Chart 1 — Underlying performance by product ($million)
Product margin
14.5
3.4
1.8
3.2
1.4
0.1
13.8
1.7
63.7
58.4
FY17
Underlying
Profit
Retail
Products
Agency
Services
Real Estate
Services
Financial
Services
Feed and
Processing
Services
Digital and
Technical
Costs
Interest,
tax and
NCI
FY18
Underlying
Profit
Chart 2 — Underlying EBIT by product ($million)
5
.
8
4
1
0
.
4
3
1
3
.
9
1
1
6
.
2
2
1
6
.
3
3
9
.
1
3
3
.
8
3
1
.
5
3
0
.
5
1
5
.
3
1
5
.
0
6
.
0
6
.
4
7
0
.
1
7
FY18
FY17
)
4
.
0
8
2
(
)
6
.
6
6
2
Retail
Products
Agency
Services
Real Estate
Services
Financial
Services
Feed and
Processing
Services
Digital
and
Technical
Costs
Underlying
EBIT
15
Key movements in profit by geography
resulted from:
– Declining cattle prices adversely
impacting Northern Australia, offset by
acquisition growth in horticulture and
continued growth in the Killara feedlot
– Southern Australia outperformed last
year across most products particularly
in Retail and Livestock where increased
sheep volumes provided upside
– Western Australia improvement driven
by strong performance in Retail, offset
by easing Livestock earnings
– International benefitted from improved
procurement and focus on cost control
– Corporate and unallocated costs remain
consistent year on year
Chart 3 — Underlying performance by geography ($million)
58.4
5.3
6.9
1.1
1.0
0.0
1.7
63.7
FY17
Underlying
Profit
Northern
Australia
Southern
Australia
Western
Australia
International Corporate
and
unallocated
costs
Interest, tax
and NCI
FY18
Underlying
Profit
Chart 4 — Underlying EBIT by geography ($million)
7
.
8
3
9
.
3
4
5
.
0
6
6
.
3
5
2
.
3
2
1
.
2
2
6
.
4
7
0
.
1
7
)
6
.
0
(
)
6
.
1
(
)
1
.
7
4
(
)
0
.
7
4
(
FY18
FY17
Northern
Australia
Southern
Australia
Western
Australia
International
Corporate and
unallocated costs
Underlying
EBIT
16
2018 Annual Report — Elders
Balance Sheet
$million as at end
Inventory
Livestock
Trade and other receivables
Trade and other payables
Working Capital
Property, plant and equipment
Investments
Intangibles
Provisions
Capital (net operating assets)
Borrowings: working capital and other
facilities
Cash and cash equivalents
Net debt
Tax assets
Shareholders’ equity
Underlying return on capital
Working Capital
$million
Retail Products
Agency Services
Real Estate Services
Financial Services
Feed and Processing Services
Other
Working capital (balance date)
Working capital (average)
FY17
Change
111.1
44.6
385.6
(360.9)
180.5
29.9
55.1
81.2
(53.0)
293.7
35.2
(95.3)
59.3
257.7
28.6%
36.7
(12.1)
59.2
(23.7)
60.0
(2.6)
4.1
47.8
2.1
111.4
(54.6)
(23.5)
(78.1)
17.6
50.9
(4.4%)
(185.1)
(130.5)
FY18
147.8
32.5
444.8
(384.6)
240.5
27.3
59.2
129.0
(50.9)
405.1
11.6
(173.4)
76.8
308.5
24.2%
FY18
185.2
31.0
1.9
15.8
45.8
(39.3)
240.5
236.9
Operating and Financial Review
Capital (net operating assets)
Capital as at September 2018 was
$405.1 million, 38% higher than September
2017. This is attributable to:
– Higher Retail debtors driven by strong
sales late in the season and delay of
receipts, while dry conditions have
meant that inventory levels increased
in certain areas
– Normalised Livestock activity when
compared to last year
– Increased shareholder funding to
StockCo
– Feed and Processing Services
improvement due to Indonesia cattle
position wound down in light of sale
Average working capital deployed during
FY18 was $236.9 million compared to
$223.1 million in FY17.
Return on capital
Chart 5 — Underlying return on capital
24.2%
28.6%
FY17
Change
FY18
FY17
136.8
19.4
1.6
11.4
50.2
(39.0)
180.5
223.1
48.4
11.6
0.3
4.4
(4.4)
(0.3)
60.0
13.8
Elders’ underlying return on capital for the
year was 24.2%:
– Retail continues to perform strongly
with incremental improvement year
on year
– Livestock impacted by 16% decline in
cattle prices
– Continue to manage portfolio and expect
incremental improvement in FY19 ROC
from the TitanAg acquisition
17
Net debt
Chart 6 — Net debt
173
161
137
e
t
a
d
e
c
n
a
l
a
b
t
A
95
e
g
a
r
e
v
a
D
T
Y
FY18
FY17
FY18
FY17
Key ratios
Leverage (average net debt to EBITDA)
Interest cover (EBITDA to net interest)
Gearing (average net debt to closing equity)
FY18
2.0
11.5
52.3%
FY17
Change
1.8
10.3
53.3%
0.2
1.2
(1.0%)
Net debt at balance date was $173 million compared to $95 million at September 2017, with
increased activity around year end and delayed debtor receipts of $30 million which were
received in the first week of October.
Average net debt rose by $24 million to $161 million at September 2018 in line with both
business growth, and increased investment activity during the year.
Leverage ratio increased on last year, however interest cover and gearing improved
from September 2017.
Provisions
Provisions remained stable year on year and largely reflect employee entitlements.
Shareholders’ equity
Shareholders’ equity increased by $50.9 million to $308.5 million. This movement
represents FY18 net profit of $71.6 million, offset by $25.8 million of dividend distributions
to shareholders.
18
2018 Annual Report — Elders
Cash Flow
$million
Operating cash flow
Investing cash flow
Financing cash flow
Total cash flow
Chart 7 — Cash flow ($million)
81.0
59.4
Working capital movements
FY18
FY17
Change
(12.1)
(38.4)
27.0
(23.5)
81.6
(42.0)
(39.6)
–
(93.7)
3.6
66.6
(23.5)
13.8
1.3
4.4
2.8
18.8
(12.1)
(15.9)
1.0
3.8
EBITDA
Retail
Products
Agency
Services
Real
Estate
Services
Financial
Services
Feed and
Processing
Services
Other
Interest,
tax and
dividends
Operating
Cash Flow
Capex
Free Cash
Flow
$million
Retail
Products
Agency
Services
Real
Estate
Financial
Services
Feed and
Process
Other
Total
EBITDA adjusted
54.8
27.9
(59.4)
(13.8)
Movements in assets
and liabilities
Interest, tax and
dividends
13.5
1.3
14.3
(4.4)
5.0
2.8
(34.4)
81.0
(18.8)
(92.2)
(1.0)
(1.0)
Operating cash flow
(4.6)
14.1
14.7
9.9
7.9
(54.1)
(12.1)
Operating cash outflow of $12.1 million reflected:
– Strong EBITDA
– Higher Retail debtors driven by strong sales late in the season and delay of receipts,
while dry conditions have meant that inventory levels increased in certain areas
– Agency Services returned to normalised year end balances
– Other includes payment of provisions including leave and incentives
Investing outflow of $38.4 million included the acquisitions of:
– 100% of Kerr & Co
– 100% of TitanAg
Financing inflow of $27.0 million represents drawdown on trade receivables funding,
offset by dividends distributed to shareholders.
Operating and Financial Review
19
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, 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 our operational and
strategic environment for new and emerging risks.
Risks are reported four times a year (or escalated immediately if
certain triggers are met) 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
Our strategy
Health and safety
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.
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.
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.
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.
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.
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 natural weather events, Elders maintains both a
geographical spread of operations and a diverse product and service range.
In 2019 we will continue to develop:
– our strategy in relation to measuring on climate change risks and
opportunities; and
– our reporting framework for climate change impacts and opportunities
to ensure our stakeholders have ‘decision useful’ information
as it relates to our performance, prospects and longer term strategic
objectives.
20
2018 Annual Report — Elders Material Business Risks
Material Business Risk
Our strategy
Biosecurity threats
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.
Food safety
Elders handles livestock and red meat in its Feed and
Processing operations which are destined for human
consumption. The risk of contamination to these food
products exists.
Fraud and corruption
Elders is exposed to fraud, bribery and corruption
risks, including in foreign markets in which it operates.
Counterparty
Elders’ deals with numerous counterparties of
different types. 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.
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.
Cyber threats
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.
This risk is managed through HACCP accreditation in meat processing
plants and strict animal health controls in the feedlot.
Elders has several 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.
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.
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
on a continuous improvement basis.
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 continues to be a strong focus in 2019 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 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.
21
Review of
Operations
22
2018 Annual Report — Elders Review of Operations
23
Key Statistics
Retail Products
Farm Supplies
$1.1b retail sales
Agency Services
Real Estate Services
Fertiliser
Livestock
Wool
Grain
Farmland
Residential
716k tonnes fertiliser
9.9m head sheep
1.5m head cattle
371k wool bales
44k grain tonnes
$1.0b farmland sales
$710m residential sales
Property Management
8,287 properties under management
Financial Services
Franchise
Agri Finance
128 franchisees
$3.0b loan book1
$1.6b deposit book1
$71.7m StockCo book
Insurance
$690m gross written premium2
Digital and Technical Services
Fee for Service
Feed and Processing Services
Auctions Plus (50%)
Elders Weather
Killara Feedlot
Elders Indonesia
Elders China
148 agronomists
694k head sheep
78k head cattle
190m hits
56k head cattle
$9m sales
$11m sales
1 Product distributed on behalf of Rural Bank Limited
2 Business conducted by Elders Insurance (Underwriting Agency) Pty Ltd which is owned 20% Elders and 80% QBE
24
2018 Annual Report — Elders Review of Operations
Review of Operations
Retail Products
Elders is one of Australia’s leading suppliers
of rural farm inputs including seeds, fertilisers,
agricultural chemicals, animal health products
and general rural merchandise. We also provide
professional production and cropping advice with
over 148 agronomists nationwide.
Retail Products margin ($m)
148.5
126.2
134.0
105.9
111.2
Performance
Retail margin improved by $14.5 million (11%) on last year despite drought conditions across
Queensland and New South Wales. This was more than offset by organic growth across
Southern Australia, normalised conditions in Western Australia and a full year of earnings
from the horticultural specialist Ace Ohlsson, which was acquired in June 2017.
FY14
FY15
FY16
FY17
FY18
Margin by product
82%
Farm Supplies
18%
Fertiliser
Margin split by geography
20%
West
42%
South
38%
North
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
– Acquisition of TitanAg which
enables enhanced retail
capability and exposure to
higher value crop segment
– Continued development in
supplier trading agreements,
including improvement in
terms and performance based
target rebates
– Continued to focus on margin
improvement through price
book management
– Increased support of agency
products and consignment
locations
– Continued expansion in east
coast horticultural markets
– Introduced Elders home
branded products
– Improve product ranging
within key animal health
and agricultural chemicals
categories
– Increased focus on specialised
high value cropping market,
including in selected
geographical gaps
– Implementation of rebate
deal software to develop and
improve processes
– Build on customer loyalty
through increased provision
of agronomy services
People
– Selective recruitment of
– Identify, select and recruit
high performing staff in key
agricultural areas
– Launch of Thomas Elder
Consulting
– Continued to drive branch
efficiency program
proven localised management
to establish Elders’ presence
in selected geographical gap
areas
25
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 into 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 prices from multiple buyers and offers a cutting
edge commodity origination platform, maximising choice for growers.
Performance
Agency margin declined $3.4 million (3%) on last year. Livestock was adversely impacted
by declining cattle prices across all geographies, and by lower cattle volumes in Northern
and Western Australia. This was partially offset by increased sheep volumes and steady
prices, boosted by the acquisition of the Kerr & Co livestock agency business in western
Victoria in December 2017.
Wool increased as a result of high demand and market prices both contributing to the
improved result.
Strategy
To deliver profitable growth of the agency services portfolio through business improvement,
recruitment and acquisition for our livestock and wool businesses and through focussed
growth of our grain business.
Agency Services margin ($m)
106.3
111.4
90.5
122.6
119.3
FY14
FY15
FY16
FY17
FY18
Margin by product
83%
Livestock
17%
Wool
Margin split by geography
Strategy
Achievement
Plan
15%
West
56%
South
29%
North
– 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
Operating model
– Investment in key gap area in
western Victoria
– Increased agency opportunity
and earnings through StockCo
expansion
– Refresh grain model including
20% investment in Clear Grain
Exchange (CGX)
– Transitioned to variabilised
remuneration structures, with
appropriate systems, which
reward outperformance
– Selective recruitment of
livestock and wool personnel
People
26
2018 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
Real Estate margin improved by $1.8 million (5%) on last year. Southern Australia
contributed $1.3 million of this upside with strong performance in turnover across most
of the real estate portfolio.
Residential and property management margins in Western Australia have exceeded last
year due to acquisitions. This has been offset by easing supply of large cattle farming and
cropping properties, particularly in Northern Australia.
Real Estate Services margin ($m)
27.0
27.5
29.2
31.9
33.6
FY14
FY15
FY16
FY17
FY18
Margin by product
83%
Agency
17%
Property Management
Strategy
To deliver profitable growth of the real estate services portfolio through driving business
improvement, recruitment and acquisition for all real estate services.
Margin split by geography
20%
West
37%
South
43%
North
Strategy
Achievement
Plan
Operating model
– Real Estate brand
enhancement successfully
launched
– Increase company owned
presence in major regional
centres
– Investment in Elders Real
– Ongoing focus on productivity
Estate website
and efficiency
– Maintained momentum in
corporate market
– Strong pipeline of acquisitions
People
– Sales workforce strengthened
with quality recruits appointed
across all zones
– Successful integration and
implementation of water
broking business
– 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
27
Financial Services
Elders distributes a wide range of banking, insurance
and financial planning products through its Australian
network. We work together 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
assist our customers to grow their business.
Performance
Financial Services benefitted from growth in lending products, with the Rural Bank loan
book growing $127 million (4%) on last year, and a modest increase in the total StockCo
loan book balance, despite dry conditions.
Insurance improved $1.8m from a full year of earnings from Elders’ additional 10% equity
interest in Elders Insurance.
Strategy
To deliver profitable growth of the financial services portfolio through business
improvement, product development and upstream investment in our services business.
Strategy
Achievement
Plan
Financial Services margin ($m)
38.3
35.1
25.8
25.4
26.2
FY14
FY15
FY16
FY17
FY18
Margin by product
69%
Agri Finance
31%
Insurance
Margin split by geography
Deeper, more
productive
partnerships
– Strong progress towards
renewal of relationship
agreement with Rural Bank
– Investment in aligned financial
service products
– Collaborate with StockCo to
develop new product offerings
– Elders Insurance metro
expansion
22%
West
47%
South
31%
North
Increased market
awareness and
cross-sell within
Elders
Governance
– Elders Insurance “Our
– Elders Insurance national
way never gets old” brand
campaign
– StockCo online applications
– Elders Financial Planning
awarded team of the year
by Governance Risk and
Compliance Institute
TV campaign
– Joint marketing and sales
campaigns with all product
partners
– Ensure financial services
distribution arrangements
are structured in a way that
takes into account the interim
and final recommendations of
the Banking, Superannuation
and Financial Services Royal
Commission
28
2018 Annual Report — Elders
Review of Operations
Feed and Processing Services
In Australia, Elders operates Killara Feedlot, a beef
cattle feedlot near Tamworth in New South Wales.
Elders imports, processes and distributes premium
Australian meat in China and Indonesia.
Feed and Processing Services margin ($m)
15.0
13.8
13.5
11.5
9.9
Performance
Killara feedlot increased gross margin by $1.0 million (8%) on last year. Declining cattle
prices softened the impact of higher feed costs, while high utilisation levels combined
with reduced mortalities have driven efficiencies in cattle performance.
FY14
FY15
FY16
FY17
FY18
The Indonesian retail business was consistent across both periods, while the China
business benefitted from improved procurement, which contributed to a $0.2 million (27%)
increase in margin.
Margin by product
Strategy
To deliver continuous improvement in EBIT and ROC for all businesses with active portfolio
composition management.
Strategy
Achievement
Plan
Robust systems
Return on capital
focus
– Implementation of inventory
procurement processes and
ERP systems in both Indonesia
and China businesses
– Capital upgrade plan at Killara
allowed increased utilisation
and efficiencies
– Divestment of feedlot and
abattoir operations in
Indonesia
Integrated red
meat supply chain
– Increased Killara branded
product line distribution in
China and Indonesia
– Improve reporting and
transparency allowing
effective decision making
– Improve procurement
strategies through
backgrounding and use of
external facilities for Killara
– Allocation of capital based
on approved business case
discipline
– Increase focus on higher
margin markets
– Expansion of Killara branded
product in Bali market
87%
Killara (Aus)
5%
Indonesia
8%
China
Margin split by geography
8%
China
5%
Indonesia
87%
Australia
29
Outlook
In line with the Eight Point Plan and the three-year
goal to FY20, we are targeting 5-10% p.a. quality
growth through the cycles, while maintaining a return
on capital at or above 20%. This EBIT improvement is
anticipated to be derived from organic and acquisition
growth and continued focus on controlling base costs
to offset inflationary increases.
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 for FY19:
Retail Products
– A reduced summer cropping planting
is anticipated in the first half of FY19
with continued dry conditions impacting
demand for fertiliser and crop protection
products
– Average winter cropping conditions
will provide upside in the second half
– TitanAg acquisition benefit will increase
earnings mainly in the second half
– Retail will continue to pursue
geographical and crop segment
growth opportunities
Agency Services
– Wool is anticipated to maintain growth
with a solid pipeline of wool in store,
decline in wool production and global
demand to support high prices
– Cattle prices expected to ease further
as production increases, with lamb
prices to rise driven by strong export
demand continuing
– Livestock volumes are expected to
increase through continued footprint
expansion and additional trading
opportunities
Real Estate Services
– Supply of farmland property will
continue to be subdued in line with
livestock prices, however gains are
expected from water broking activities
– Residential turnover and property
management earnings will benefit from
completed acquisitions
Financial Services
– Continued momentum and growth is
likely from the banking and livestock
funding products
Feed and Processing
– Killara feedlot earnings to be
maintained despite high feed costs
through continued high utilisation
and improved efficiency
Costs and Capital
– Costs are expected to increase in line
with footprint growth and continued
Eight Point Plan investment
– Increased investment in both digital
and technical area and information
technology to continue into FY19
30
2018 Annual Report — Elders Board of Directors
Board of Directors
Mr Mark Charles Allison
Ms Robyn Clubb
BAgrSc, BEcon, GDM, FAICD, AMP (HBS)
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.
BEc, CA, F Fin, MAICD
Non-Executive Director since September 2015. She is also
Chairman of the Remuneration and Human Resources Commitee
and a member of the Audit, Risk and Compliance Committee,
Work Health and Safety 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, Essential
Energy, Chair of the Australian Wool Exchange Limited, Member
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.
31
Mr James Hutchison (Hutch) Ranck
Mr Michael Carroll
BS Econ, FAICD
Appointed Chairman in April 2014. Non-Executive Director 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 led businesses in ANZ and Asia Pacific in Agriculture,
Pharmaceuticals, and Industrial Chemicals. In the last 20 years
Hutch has served as a director in a variety of companies and
organisations including The CSIRO, 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 Resource. Mr Ranck is a resident of New South Wales.
BAgSc, MBA, FAICD
Non-Executive Director since September 2018. Mr Carroll has
strong Non-Executive Director experience in the Australian
listed company environment including current positions at
Select Harvests Limited and Rural Funds Management Ltd (the
responsible entity for Rural Funds Group) and former positions
with Tassal Group Limited and Warrnambool Cheese & Butter
Factory Company Holdings Limited. Other former board roles
include Queensland Sugar Limited, Rural Finance Corporation
of Victoria, the Australian Farm Institute, the Geoffrey Gardiner
Dairy Foundation, and Meat and Livestock Australia Limited.
Michael is in the process of transitioning off the Sunny Queen
Australia Pty Limited board.
Michael also holds current directorships with non-listed
companies including Paraway Pastoral Company Limited and
Viridis Ag Pty Limited. He is also chair of the Australian Rural
Leadership Foundation.
During his executive career, Michael held senior positions at the
National Australia Bank (NAB) where he was responsible for
establishing and leading NAB’s Agribusiness division. Roles prior
to this include several years as a senior advisor in NAB’s
Investments and Advisory unit. Before joining NAB, he worked
for companies involved in animal health and crop care including
Monsanto Agricultural Products.
Michael comes from a family who has been involved in agriculture
for over 145 years and operates a cattle property in western Victoria.
32
2018 Annual Report — Elders Board of Directors
Ms Diana Eilert
Mr Ian Wilton
BSc (Syd), MCom (UNSW), GAICD, member of Chief Executive Women
Non-Executive Director since November 2017. With an executive
career of more than 25 years, Ms Eilert brings four main skills
to the Elders board – CEO level operational leadership, strategy,
technology and digital disruption and customer experience/
marketing .
Ms Eilert’s career includes roles as Group Executive for Suncorp’s
entire insurance business and subsequently Group Executive for
Technology, People and Marketing. In her 10 years with Citibank,
Diana’s roles included Head of Credit Risk Policy, running the
Mortgage business, and Lending Operations for Australia and
New Zealand. She was also a Partner with IBM.
Diana is currently a Non-Executive Director of ASX listed
companies Domain Holdings Australia Limited, Super Retail
Group Limited and Navitas Limited, and has previously been a
director of realestate.com.au (REA Group), Veda (data and analytics)
and digital start-ups “onthehouse” and “OurDeal”. In her final
executive role as Head of Strategy and Corporate Development
for News Limited, Diana developed a deep understanding of digital
trends, disruption and alternate strategies for a large traditional
business. Ms Eilert is a resident of New South Wales, sharing
her time between Sydney and the family cattle farm on the NSW
South Coast.
MSc, FCCA, FCPA, FAICD, CA
Non-Executive Director 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 and Chair
of both the Sheep CRC Limited and Australian Innovation Company
Ltd and a Non-Executive Director of Tivoli Investments Pty Ltd.
He is also 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, Grad Dip Applied Corporate
Governance, GAICD
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
also held the position of General Counsel since February 2010.
Ms Sanjeeta Singh
BEd (Primary), FGIA, Grad Dip Applied Corporate Governance
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.
33
Executive Management
Mark Allison
Managing Director
& Chief Executive Officer
BAgrSc, BEcon, GDM, FAICD, AMP (HBS)
Appointed Elders’ Managing Director
and Chief Executive Officer in 2014,
Mark joined the business with extensive
experience spanning more than thirty five
years in the agribusiness sector. He is a
former Managing Director of Wesfarmers
Landmark Limited and Wesfarmers
CSBP Limited and current Executive
Director of GrainGrowers Limited and
Chairman of Agribusiness Australia.
Mark introduced and implemented the
Eight Point Plan which returned Elders
to its core business offerings and resulted
in the first shareholder distribution in
nearly a decade. The second Eight Point
Plan is on track to lead the business to
2020, with the goal of building a business
that can withstand seasonal, market
demand and commodity price vagaries
as well as the impacts of a variable
climate and production constraints.
Richard Davey
Chief Financial Officer
Peter Hastings
Company Secretary
& General Counsel
BA, LLB, GDLP, FGIA, Grad Dip Applied
Corporate Governance, GAICD
Peter is a highly experienced corporate
lawyer with over 27 years’ experience,
commencing as Elders Company Secretary
& General Counsel in 2010. Peter is an
integral member of the team that worked
hard to protect shareholder interests
through many years of financial distress
and, subsequently, that has positioned
Elders for growth, and implemented
strategies to achieve this.
Peter has responsibility for the Company’s
legal and compliance, company secretarial
and risk and safety functions.
B.Ec Acc, FCA, AMP (HBS)
Richard has more than 16 years with Elders,
6 years as Chief Financial Officer. In addition
to be being responsible for finance, tax
and treasury, Richard is also accountable
for a significant part of the back office
including information technology, indirect
procurement accounts payable, credit and
property. These areas consist a significant
part of Elders’ head office costs, which
the team has been successful in reducing
by almost 25% since the commencement
of the Eight Point Plan. Richard sits on a
number of the Company’s joint venture
boards, as well as quarterly boards for
operational units, including the overseas
entities. He has also managed operational
responsibility for the feed and processing
area for the past 2 years.
Prior to joining Elders in 2002, Richard spent
7 years with PricewaterhouseCoopers in
both Australia and Canada.
34
2018 Annual Report — Elders Executive Management
Karen Ross
General Manager Innovation,
Digital & Brand
BCom, MAICD
Karen has an industrial relations
background and most recently has moved
into the digital and technical services
field, having been the General Manager
for Innovation, Digital & Brand since 2016.
Karen is a key driver of the Thomas Elder
Institute, providing a vehicle for Elders
to collaborate with industry, suppliers
and tertiary bodies to bring research,
development and extension all into the
one location.
James Cornish
General Manager – West Zone
Malcolm Hunt
General Manager – South Zone
DipBusM, AMP (HBS)
Since 2011 James has overseen the West
Zone branch network as General Manager.
With more than 23 years’ experience in
agribusiness, James has worked across a
range of locations and products throughout
Elders. The West Zone has achieved
significant growth over the past 5 years
having doubled EBIT performance from
FY13 – one of the most recent acquisitions
for the West Zone involved successfully
integrating Southern Districts Estate
Agency in to the network.
GCM, SMDP (AGSM), Wool Classer,
Licensed RE Agent VIC, NSW, TAS, ACT
With close to 40 years under his belt as
a wool broker, stock & station agent and
network manager, Malcolm has operated as
Elders’ General Manager for the South Zone
since 2012. Malcolm has led a key business
unit that has played a significant role in
Elders’ resurgence and has continued to
expand the Elders footprint, whilst assisting
producers increase the productivity and
profitability of their businesses.
35
Olivia Richardson
General Manager People
& Culture
BMgmt(Hons)
Olivia was appointed General Manager
People and Culture in January 2018. Having
been with Elders for 12 years, she is well
acquainted with Elders people, appreciating
that they are loyal and committed to doing
the best for their communities. Olivia’s
priorities includes investment in learning
and development programs, maintaining a
great organisational culture, and building
on the pride in the pink shirt. Prior to
Elders, Olivia has worked across Human
Resources in FMCG, Financial Services and
Telecommunications throughout Australia,
the UK and Europe.
David Adamson
General Manager Agency
Liz Ryan
General Manager
Financial Services
MBus(Acct), BAgBus, GAICD, Cert Pastoral
Production — Longreach Pastoral College
General Manager Agency since 2014, David
is responsible for product strategy and
implementation in the livestock, wool and
grain businesses. David’s background
in agricultural production, agri-finance
and operations has provided the tools for
product development across all parts of the
agency business. An equity stake in both
StockCo and Clear Grain Exchange have
provided clients with more finance and
marketing options for their livestock,
wool and grain.
MBA, BCom/DipArts, GAICD
Liz has significantly increased the financial
services gross margin and equity earnings
since commencing in the role as General
Manager Financial Services in 2016.
Employee engagement and enablement
survey results have materially improved,
which is also reflected in the excellent
customer net promoter scores. Liz is
passionate about helping Australian
primary producers achieve their personal
and business financial goals through
Elders’ financial services offering.
36
2018 Annual Report — Elders Executive Management
Nick Fazekas
General Manager Retail
Kiim Lim
General Manager
Business Development
BCom, CPA
Kiim began her career with
PricewaterhouseCoopers in 2001 in Penang,
Malaysia and Adelaide. She commenced
with Elders in March 2006 in various roles
through the finance team prior to leading
the Business Development function and
becoming General Manager Business
Development in 2018. Kiim has successfully
completed many acquisitions including
StockCo equity, Ace Ohlsson, Kerr & Co
Livestock, TitanAg, and the divestment
of live export and Indonesian feedlot and
abattoir businesses.
BAppSc – Ag
Nick has more than 27 years of experience
in agricultural services. Since taking on the
role of General Manger Retail in 2014, he
has led his team in overseeing the strategy
and procurement functions for the wider
Elders retail business. In this period Nick
and his team have been successful with
the implementation of the Eight Point Plan
Retail strategies. This has seen the Retail
ROC lift from 6.9% in FY14 to 20.4% in FY18.
Nick continues to focus on maintaining a
capital light strategy while working with key
suppliers to deliver greater retail revenue
and margin. Future growth will also come
from increasing the Retail footprint via
strategic acquisitions; we have already seen
success with the recent acquisitions of Ace
Ohlsson and TitanAg which have assisted to
drive improvement in Elders’ ROC metrics.
Tom Russo
General Manager Real Estate
LLB(Hons), BA, Grad Dip LP, Dip Prop
Serv(Agency Mgt)
Tom has previously been the Chief
Executive of a specialist international law
firm and practiced as a corporate lawyer
with a focus on mergers and acquisitions,
corporate finance, complex contractual
projects, corporate governance and
intellectual property. Tom played a pivotal
part in devising and implementing the
turnaround strategy for Elders, including
executing a number of large and complex
divestment initiatives. Since assuming
responsibility for the real estate product
in 2016, Tom’s focus has been firmly on
building the capability of the product team
to deliver outstanding support to the real
estate business to establish a foundation
upon which to grow it. Tom has vastly
improved the marketing, digital strategy
and training capability in order to support
the existing network and drive brand
presence in all key markets.
37
Elders’ Value:
Accountability
Being accountable for results
“As we moved out of the first three
years of the Eight Point Plan and into
the next growth phase, it has been
evident that the business is committed
to its strategic priorities and a resolve
to realise continuous, solid, high quality
growth. Elders seeks to reclaim its
place as the agribusiness delivering the
greatest real value to all its stakeholders
in both Australia and internationally.
Understanding and delivering on the
needs of our clients is key to that goal.”
“We are committed to doing what we said
we would do – we’re holding ourselves
accountable to our shareholders and
achieving consistent growth across the
business through acquisitions, organic
growth and reviewing business units that
are not returning the required return on
capital,” Mr Allison said.
Elders has acquired a number of smaller
bolt-on acquisitions, as well as notable
acquisitions including Kerr & Co Livestock
and TitanAg.
TitanAg
The purchase of TitanAg extends Elders’
participation in the retail supply chain for
quality agricultural chemicals. TitanAg
is an Australian based producer and
supplier of crop protection and animal
health chemicals and fertiliser. TitanAg
sources from China and India and
formulates its products in Australia, via
toll manufacturers. Since commencement
of its business in 2006, TitanAg has sold
these products in Australia under the
TitanAg brand exclusively through Elders.
TitanAg products have achieved good
market recognition and acceptance initially
in Victoria and South Australia, and in
more recent years particularly in Western
Australia and Northern New South Wales.
Based on the historical performance
of TitanAg, Elders expects TitanAg to
generate annualised additional EBIT
between $6.5m and $7.5m in the year
ending 30 September 2019.
Mr Allison said TitanAg extends Elders’
participation in the supply chain for
quality agricultural chemicals.
“TitanAg is a quality brand that has the
potential to significantly grow sales of its
product range. Many Australian primary
producers have already identified TitanAg
products as effective and reliable and
we intend to grow what is already a very
successful business.”
Elders is accountable
to deliver value to its
shareholders and clients
in accordance with the
Eight Point Plan.
The Eight Point Plan was originally
developed in 2014 and is the culmination of
the efforts of all our employees to identify
what Elders exists for, what we excel at,
and how we want to deliver the needs of
our clients. This plan identifies and builds
on our sustainable competitive advantages,
and by product and geography anchors
our future growth and development on
these advantages.
Managing Director and CEO, Mark
Allison, said “the Eight Point Plan marks
a significant step in Elders’ evolution to
an efficient user of capital that produces
acceptable returns for all its stakeholders.
Elders financial results and first
shareholder dividends since 2008 reflected
a milestone in the Company’s progress
under the direction of the first Eight Point
Plan. The Eight Point Plan was re-launched
in FY18 to lead the way to 2020.
“Over its 3 year term, the Eight Point Plan
is accompanied by an aspirational target of
creating sustainable EBIT growth through
agricultural and seasonal cycles of 5% to
10% per annum and 20% ROC by providing
value creating products and services both
in Australia and internationally.”
38
2018 Annual Report — Elders Elders' Value — Accountability
“The Eight Point Plan
marks a significant step
in Elders’ evolution to
being an efficient user
of capital that produces
acceptable returns for
all its stakeholders.”
Indonesia Divestment
Elders prioritises investment in, and
retention and growth of, business units
which generate a consistent return on
capital at a level which creates wealth for
our shareholders. High cattle costs and
changing Indonesian governmental policies
adversely affected the performance of
Elders’ Indonesian business. In FY18,
following a comprehensive performance
review of its feed and processing business
unit, Elders deemed it appropriate to divest
its Indonesian feedlot and abattoir.
“Elders is committed to the red meat
industries in Australia and we continue
to have a presence in Indonesia, China
and Vietnam through our retail meat
distribution businesses in those
countries,” Mr Allison said.
Clear Grain Exchange
In the 2018 financial year, Elders
overhauled its grain marketing business to
provide a highly relevant offering to clients
and position it for growth. The new model,
launched in November 2017, provides a
more holistic and independent transaction
offering to clients – complemented by a
20% stake in Clear Grain Exchange (CGX).
Previously known for accumulating grain
on behalf of buyers, Elders has evolved its
model to now act as an impartial party to
grain transactions. Targeting growth and
innovation, Elders utilises its 440 points
of presence across its national network to
make it easier for both growers and traders
to buy and sell grain in Australia. By doing
so Elders aims to create a more efficient
market and ultimately return value at the
farm-gate, the Australian grain industry
as a whole and to Elders shareholders.
The 20% acquisition of CGX allows
growers to list grain for sale to national
and international buyers at their own
price through a trading platform online.
Elders can act on behalf of the grower,
or they can sign up and set a price for
traders to purchase. CGX traded more
than 1.2 million tonnes in the last season
and averaged $4.40/t above the best
public bid as reported by independent
analyst, Profarmer.
The change to our model has been driven
by client feedback and market research,
with evidence indicating growers can often
be overwhelmed by searching for grain
prices which may result in grain of the
same grade trading at different values
within a region. Elders Grain now has the
benefit of achieving true price discovery
by facilitating grain transactions in a single
market place. Elders’ aim is to make the
process of buying and selling grain in
Australia much easier and more efficient.
Mr Allison says the investment in CGX
combined with the changes to the operating
model fit with Elders’ core philosophy of
creating value at the farm-gate.
“CGX is an important piece of industry
infrastructure and our investment in the
platform, along with the other changes
to our model, will provide clients more
options when it comes to selling their grain.”
Kerr & Co Livestock
Elders identified an opportunity to expand
the agency footprint in Victoria during FY18,
acquiring Kerr & Co Livestock based in
Hamilton. Established in 1983 by Michael
Kerr (and still managed by him and his first
class team), Kerr & Co Livestock is the
largest livestock business in south-west
Victoria, acting as the agent in the sale of
416,000 sheep and 16,000 cattle annually.
39
40
2018 Annual Report — Elders Elders' Value — Customer Focus
Elders’ Value:
Customer Focus
Growing valuable customer relationships and showing pride and passion in our organisation
Our employees wear the pink shirt with passion, pride and meaning. Wearing
the pink shirt for Brett Smith means providing quality of service through client
relationships that is expected from such a well-known and respected brand.
Our employees wear the pink shirt with
passion, pride and with awareness of the
meaning of that shirt in rural communities.
For Brett Smith, the pink shirt means
providing quality service that draws on
relationships with clients that are built over
many years. Brett, and all our employees
are aware that is expected from such a
well-known and respected brand.
Brett Smith, District Wool Manager and
Walgett Branch Manager, was named
Elders’ Employee of the Year in December
2017 and is just one example of our
network providing exceptional service
to clients.
For the last three years Brett has steadily
built a reputation within his district and
within the national wool industry, as
a District Wool Manager who delivers
exceptional service to his clients and
who makes a valuable contribution to
the industry as a whole.
In addition to the excellence of his service,
Brett’s engagement in industry bodies
gives him a strong presence within the
Walgett region and beyond. He is President
of the North West Plains Sustainability
Group, a progressive community driven
group assisting North Western New
South Wales producers with improving
sustainable farming practices. Brett also
runs Lifetime Ewe Management groups
in the Walgett area to help producers
increase profit margins and improve
productivity. Brett was also named the
2017 National Council of Wool Selling
Brokers of Australia’s Wool Broker of the
Year, demonstrating industry recognition
for the passion he brings to his role
and difference he makes to his clients’
operations.
Brett has built extensive rapport with his
clients who claim Brett is the “perfect
package” when it comes to wool brokers.
John Wheaton of Boorooma Pastoral Co
has been a client of Brett’s for three years
and says that the service and expertise
Brett brings to the role is difficult to come
by, particularly for someone so young.
“I refer to Brett as the guy bridging the
divide between technology and tradition,
I am in my sixties and can comfortably say
I have not dealt with a better broker. Brett
shows genuine care and interest and is
actively involved in our local community
which is very important to me,” says
Mr Wheaton.
“Anyone can come in and do your shearing,
but not everyone provides a marketing plan
and can talk to you about the market and
trends. Brett is honest and realistic and I
consider myself very fortunate to have
him looking after my business.”
North Zone Wool Manager Bruce McLeish
credits Brett’s success to his exceptional
communication skills with clients and
also within his branch team.
“Brett’s clients appreciate that he
takes a holistic, honest and big picture
approach to their business, going beyond
seasonal advice by planning for the long-
term, equipped with the latest advances
and changes in the industry. He takes
ownership of his professional development
to ensure that the service he provides to
clients is of the best quality.”
“In just the three or so years that Brett
has been with the branch, he has grown
the wool business from 1000 bales in
2015 to more than 2800 in 2017. He has
contributed to the turn-around of the
branch by taking an interest in the well-
being and development of his co-workers,
and consistently working as a team player
towards the bettering of the branch.”
Brett said he was honoured to receive
the award in front of his peers and that
the opportunity to join Elders had been
a turning point in his life.
“It’s a great team that we have, and the way
the wool industry is going at the moment,
you wouldn’t want to be in any other place.
That’s probably where Elders have really
stuck it out through some hard times and
got behind the wool industry.”
“Elders and the wool industry have a
great historical relationship and I see that
only getting better. I’m honoured to be a
part of it.”
41
42
2018 Annual Report — Elders Directors' Report
Directors’
Report
The Directors present their report for the year ending 30 September 2018
43
Directors’ Report
Results and Review of Operations
The consolidated entity recorded a profit for the year, after tax and non-controlling
interests, of $71.6 million (2017: profit of $116.0 million). A review of the operations and
results of the consolidated entity and its principal businesses during the year is contained
in pages 13 to 29 of this report.
Significant Changes in the State of Affairs
There were no significant changes in the state of affairs of the consolidated entity
during the year not otherwise disclosed elsewhere in this annual report.
Events Subsequent to Balance Date
On 1 October 2018, Elders divested its Indonesian feedlot and processing assets.
The proceeds from disposal of $3.5 million were equal to the carrying amount of
assets held for sale at 30 September 2018.
There is no other matter or circumstance that has arisen since 30 September 2018 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 on
page 30 of this report.
Share and Other Equity Issues During the Year
The following ordinary shares were issued during the year:
Relevant date
No. of ordinary
shares issued
Reason for issue
13 November 2017
1,694,790
15 December 2017
181,120
15 June 2018
83,287
Shares issued in connection with unlisted
Employee Options
Shares issued in accordance with Elders
Dividend Reinvestment Plan for dividends
paid on 15 December 2017.
Shares issued in accordance with Elders
Dividend Reinvestment Plan for dividend
paid on 15 June 2018.
The total number of ordinary shares on issue at the date of this report is 115,818,637.
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
– Ian Wilton
– Robyn Clubb
– Diana Eilert
(appointed 14 November 2017)
– Michael Carroll
(appointed 3 September 2018)
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 31 to 33 of this annual report.
Ceased Director
James Andrew Jackson, a Non-Executive
Director since 13 April 2014, retired on
14 December 2017.
Principal Activities
The principal activities of Elders during
the year were:
– the provision of livestock, real estate
and wool agency services;
– the provision of services and farm
inputs to the rural sector;
– the provision of financial products
and services to rural and regional
customers;
– real estate operations in both rural
and residential markets, including
property management services;
– feedlotting of cattle;
– grain marketing; and
– red meat supply chains in Indonesia
and China
44
2018 Annual Report — Elders Directors' Report
Dividends and Other Equity Distributions
On 12 November 2018 the Directors resolved to pay a final dividend of $0.09 per ordinary share, fully franked, bringing dividends for 2018
to $0.18 per share. In accordance with a determination made by the directors, Elders Dividend Reinvestment Plan remains in operation.
Dividends paid during the year were as follows:
Dividend
Date resolved
Date paid
Dividend
per share
Franking
rate %
Total
Dividend
Special and Final Dividend for Year Ended
30 September 2017
Interim Dividend for Year Ended
30 September 2018
13 November 2017
15 December 2017
Special $0.075
Final $0.075
100
$16.1m
14 May 2018
15 June 2018
$0.09
100
$9.7m
Share Options and Performance Rights
Share options and rights may be granted 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 55
of this annual report, and summarised below.
The following table sets out the details of all options and rights.
Details
Share Options
Share Performance Rights
Number held as at date of this report
Granted since end of previous financial year
Exercised since end of previous financial year
Lapsed since end of previous financial year
Vested since end of previous financial year
0
0
1,694,790
0
0
2,357,200
710,000
0
87,800
857,200
The total quantity of performance rights disclosed on page 62 of the Remuneration Report on issue as at 30 September 2018 would
represent, if vested, 1.30% of the Company’s issued ordinary shares.
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 the
table below.
Non-Executive Directors do not participate in Elders’ cash or equity incentive plans.
No. of ordinary shares
No. of performance rights
No. of options
Non-Executive Directors
J H Ranck
I Wilton
R Clubb
D Eilert
M Carroll
Executive Director
M C Allison
134,317
108,486
3,400
0
0
0
0
0
0
0
654,344
740,000
0
0
0
0
0
0
Elders takes its obligations to prevent insider trading very seriously. In conformity with that approach, directors take a conservative view
of when they can deal in Elders shares (even when trading windows are open), seeking to avoid both the real and perceived trading on inside
information. This approach has, in recent times, limited the opportunities for Non-Executive Directors to acquire Elders’ shares.
45
Attendance at Meetings by Directors
Details of director attendance at meetings in the 12 months to 30 September 2018 are set out below.
Committee attendance is only recorded where a director is a member of the relevant committee. Although Mr Allison is recorded
as a non-member for some committees, he attended all meetings held for each of those committees.
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
19
19
19
19
15
0
19
19
19
19
15
1
2
2
2
-
2
0
2
2
2
-
2
0
5
5
5
-
3
0
5
5
5
-
4
0
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
4
4
4
-
2
0
4
4
4
-
2
0
6
6
6
6
4
0
6
6
6
6
5
0
J H Ranck
R Clubb
I Wilton
M C Allison
D Eilert
M Carroll1
J H Ranck
R Clubb
I Wilton
M C Allison
D Eilert
M Carroll1
1 M Carroll was appointed a director at the conclusion of the 3 September 2018 Board Meeting.
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.
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 55. In compiling this report Elders has met the disclosure requirements prescribed in the Australian Accounting
Standards and the Corporations Act 2001.
46
2018 Annual Report — Elders Directors' Report
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 2018 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 2018
or to the date of this report.
Retail Operations
Elders’ retail operations are subject to
state environmental regulations relating to
the storage, handling, transport and sale
of dangerous goods such as agricultural
chemicals, fertilisers and poisons. Although
these regulations are based on nationally
recognised standards, the regulatory
environment for the transporting, handling,
storage, sale and use of such dangerous
goods, chemicals and scheduled poisons
is complex and subject to regulations
imposed by each state and territory.
The majority of Elders’ retail operations are accredited under the 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.
In August 2018, the Environmental Protection Agency attended the Barmera (SA) branch
and determined that wastewater had been discharged onto neighbouring land. Appropriate
actions were undertaken to ensure that wastewater is disposed of correctly in the future.
Notwithstanding, the Environmental Protection Agency is investigating the discharge of
the wastewater.
Elders is not aware of any other breaches of environmental regulations affecting Elders’
retail operations that were reported during the year ended 30 September 2018 or to the
date of this report. Elders is conducting a review of its environmental licensing.
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: Nil
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 55 is made
in accordance with a resolution of Directors.
J H Ranck
Chairman
Adelaide
12 November 2018
M C Allison
Managing Director
47
Auditor’s Independence Declaration
As lead auditor for the audit of Elders Limited for the year ended 30 September 2018, 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
12 November 2018
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.
48
2018 Annual Report — Elders Elders' Value — Innovation
Elders’ Value:
Innovation
Delivering innovation and continuous improvement
Elders shares a common goal with its clients
and other industry participants of increasing
the productivity and profitability of Australian
agriculture. To achieve this goal, Elders partners
with industry bodies and research institutions and
is a leading member of Agribusiness Australia and
supporter of the National Farmers’ Federation.
Innovation is embedded in the Eight Point
Plan, and in the culture of our business.
Our people are always looking for new ways
of operating to create returns for clients
and our business. Elders is continuing to
push boundaries in digital and technical
services, reflecting the dynamic and rapidly
changing face of Australian agriculture.
Expanded technical services offering
to supercharge agri growth
During this financial year, Elders
announced an expanded and diversified
technical services offering, further
renewing our emphasis on driving
productivity growth for Australia’s
farmers and the agricultural sector.
The initiative features a new commercial
advisory business for clients, Thomas
Elder Consulting, and a flagship research
and development arm known as the
Thomas Elder Institute.
“The new offerings build on and
complement Elders’ extensive and well
established retail network of consultants.
The significant investment, which is
structured around a technology triangle
model, will ensure continued and sustained
growth for our iconic agribusiness and
farming clients,” Mr Allison said.
Thomas Elder Consulting
Elders’ specialist agricultural consulting
business, Thomas Elder Consulting
(TEC) is a group of highly specialised
consultants with expertise to offer whole
farm management advice across all areas
of our clients’ operation.
Elders aims to recruit around 20
specialist consultants to TEC over the
coming financial year. The consultants
will complement the company’s existing
annual investment in agronomy and
livestock production advice activities,
which includes trial sites, projects with
industry groups, and other research
and development activity.
TEC consultants will be strategically
located across Australia, providing a
premium, consultancy model comprising
expertise in the areas of farm business
planning, benchmarking, water scheduling,
precision agriculture, decision agriculture,
livestock production and agronomy.
TEC consultants will add value to our
existing offering by filling the gaps we
have identified in services to primary
producers. Our TEC consultants will
enhance our clients’ returns and
sustainable productivity through the
provision of cutting-edge, data-driven
advice tailored to an individual client’s
needs.
Thomas Elder Institute
The new flagship research and
development arm, Thomas Elder Institute
(TEI) will apply for, secure and facilitate
funding and investment in strategic
research programs that provide returns
to industry and the Elders business.
Through collaboration and cross-sectoral
engagement, it will build on and secure
new partnerships with universities and
research institutions, multinational and
national suppliers, government research
and development agencies, and farming
systems groups.
Mr Allison said, “the Thomas Elder
Institute – which will facilitate the
allocation of an expected $15 million
of investment – will put us at the heart
of agricultural collaboration and will
support research development and
extension through a true interdisciplinary
approach that ensures agronomic
solutions and productivity gains for
Australian farmers. We will also invest
in the development and extension of
new-to-market products with suppliers,
and explore profit-sharing arrangements
post-commercialisation. It is exciting to
think about what we can achieve.”
TEI is being led by Dr John Evans who
brings significant knowledge and
experience of the agricultural research,
development and extension (RD&E) space
to the role. Dr Evans has considerable
experience in facilitating the introduction
of new products and technologies to
the market, and engaging with industry,
university and government RD&E providers
servicing the agriculture sector.
Mr Allison said the expanded and
diversified technical services offering
would cultivate a best-in-class culture
across the Elders business.
“Elders aims to cement its position
as a leader in agricultural innovation,
supporting the sustainable prosperity
of our clients and customers, and
generating consistent, reliable growth
for our business.”
49
50
2018 Annual Report — Elders Elders' Value — Innovation
Elders is continuing to
push boundaries in digital
and technical services.
New Elders Real Estate Website
With the real estate industry always on
the hunt for the next big thing, Elders
Real Estate launched an innovative,
game-changing website this year which
puts property sellers in the driver’s seat.
The website is integrated with CoreLogic
to provide a free property value on
residential property.
The new website forms part of Elders’
digital strategy that is in place to grow
brand awareness and engagement. Elders
Real Estate continues to invest in digital
technology, marketing support and tools
for our network, alongside training and
networking opportunities to position
Elders as a leader in innovation.
Elders Real Estate’s website is designed
with the needs of clients, as well as agents,
top of mind, providing individual sites for
each office. The website is expected to
drive more qualified leads to agents and
allow sellers access to more information
of relevance to them.
MLA and Elders partner to
enhance producer engagement
A new partnership between Meat &
Livestock Australia (MLA) and Elders
will co-develop new ways to gather
feedback about producer needs, ideas
and programs and share targeted
research information with red meat
producers across Queensland to
improve on-farm productivity.
The three-year pilot will utilise Elders’
network of 75 Queensland-based livestock
agents and senior managers to co-develop,
establish and evaluate a new research
adoption and co-innovation model. The
program aims to better identify producer
needs, as well as new research and
development ideas, increase adoption
of programs and better engage with
innovative producers across Queensland.
Elders appointed Livestock Research,
Development and Adoption (RD&A)
Manager, Peter Gordon to oversee the
pilot and assist the flow of information
between producers, MLA and Elders.
The powerful combination of MLA, Elders
and Australia’s red meat producers in
conducting research and developing
innovative ideas will have great benefit
for Australia’s red meat industries.
51
AgIntel
In addition to TEC and TEI, Elders has
partnered with D-CAT to create AgIntel –
a remote imaging and monitoring product
which delivers valuable insights to farmers
by fusing sensor data from satellites to
provide easily accessible crop and land
insights. It allows our clients to remotely
monitor paddock performance using up-
to-the-minute soil, water and crop health
indicators, as well as historical data,
paddock imagery and trends.
Elders’ Head of Technical Services,
Graham Page said there is a growing
demand from farmers for greater
insights into their property in real time.
“Any sort of leverage we can get around
making quicker decisions on farm is
really important, as far as efficiency
and profitability goes. If we can start
identifying disease, nutrient deficiencies
or insect attacks early enough, we can
target where we need to investigate
and treat,” Mr Page said.
Smart Farmer app
Elders launched its Smart Farmer app this
year, providing farm management data
to clients – adding to its existing suite of
apps which includes Elders Red Notebook,
Elders Weather and Elders Grain.
The Smart Farmer app is a digital,
decision-making dashboard tool,
that brings together a number of key
agricultural applications that can be used
to plan on-farm activities. It allows farmers
to easily access commodity prices, spray
forecasts, water levels, Elders Weather
and a document library with access to
product labels and safety data sheets.
Elders’ Value:
Teamwork
Using the power of the team and respecting the contribution of every person
Elders Give It is our community program, that provides a central employee
contribution model which respects and recognises the contribution of every person
in our network who provides support to the communities in which we operate.
Elders has key partnerships with the Royal Flying Doctors Service (RFDS) and
beyondblue. The Give It program enables employee payroll donations, and benefits
from fundraising events, to be directed to those two great organisations which have
significant impacts on rural and remote Australia.
Both our charity partners of choice 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 – so ensuring
these locations have long-term support
is important to Elders.
The RFDS puts doctors in the air to access
the most remote locations in Australia,
bringing emergency relief to patients
located often hundreds of kilometres
from medical help. In recognition of the
partnership, an Elders-branded RFDS
aircraft was unveiled in December 2017.
Managing Director and CEO Mark Allison
said, “Elders and the RFDS share so much
in common in terms of their commitment
to rural and regional Australia, especially
the health, wellbeing and prosperity of the
people who live in these communities. It is
only natural that a company such as Elders
– whose roots are firmly entrenched in the
rural landscape – supports an organisation
such as the RFDS which provides
emergency medical and primary health
care services to those who live, work or
travel in rural and remote Australia. With
Elders on the ground supporting country
communities and the RFDS in the skies
above doing the same, our partnership
is the perfect fit.”
52
Elders’ General Manager Innovation,
Digital and Brand, Karen Ross, says that
the Give It program allows employees to
take part in activities that support their
environment or community, depending
on the time or resources they have at
hand, rather than just making financial
donations from a distance.
“Grass roots activities are now more
accessible to our employees, providing a
way for teams to take action at a local level.
The program is designed for everyone to be
able to give back, no matter their personal
circumstance or their cause – whether
they’re time poor and want to donate, or
they’re able to lend a hand and gather
resources to help with a local project.
This program is essentially about
community support – giving people the
resources they need to access help, or
provide help, wherever they are,” she says.
Recipient of the inaugural One Elders Give
It Award, Jake Smith was commended for
the initiative he took to raise over $250,000
within his local community for a local
family battling cancer.
As a Territory Sales Manager based at
Elders Gundagai, Jake, with the assistance
of locals, Brad Field and Nick Hawthorn,
organised a stock drive, as well as a goods
and services auction which opened the
gates for the generosity of other local
people and businesses to contribute.
“We were just three blokes who wanted
to lend a hand, and once we started it was
apparent that there were so many people
looking for the opportunity to help in any
way,” said Mr Smith.
On acceptance of the award, Jake spoke
of the role that Elders and his community
played in supporting his family during his
father’s illness, setting a precedent for
the way in which he would continue to
help those around him.
“Our business is people. The opportunity
to work with locals who want to support
each other is amazing, but to be part of an
organisation that nurtures and respects
the aspect of community is truly special.”
South Zone General Manager, Malcolm
Hunt, says that the grass roots involvement
that so many Elders’ branches and people
have with their communities across the
country is one of the things that makes
the Elders brand so iconic.
“The pink shirt is a recognised icon of rural
Australia, and I couldn’t be prouder that
the people wearing this shirt are seen as
advocates of support and assistance for
their local communities,” he said.
“Jake could not be more right when he
says that our business is people. Rural
communities are the fabric of our business,
so supporting them and rewarding those
who take initiative is something we need
and are proud to do.”
2018 Annual Report — Elders Elders' Value — Teamwork
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54
2018 Annual Report — Elders Remuneration Report
Remuneration
Report
55
Remuneration Report
The Directors of Elders Limited present the
Remuneration Report for the consolidated entity for
the year ended 30 September 2018. 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
Managing Director & CEO and Senior Executive remuneration
Section 4
Link between Elders’ financial performance and Executive reward
Section 5
Managing Director & CEO and Senior Executive remuneration details
Section 6
Managing Director & CEO and Senior Executive contract terms, loans and transactions
Section 7
Non-Executive Director remuneration
Section 8
Additional statutory information
58
59
60
65
69
70
71
72
56
2018 Annual Report — Elders Remuneration Report
Changes to KMP
The following changes in KMP occurred
in the year ended 30 September 2018:
Senior Executives
– Greg Dunne, General Manager Zone
North ceased employment with Elders
effective 30 September 2018
– Richard Norton was appointed to the
position of General Manager Network
and will commence in January 2019
Non-Executive Directors
– James Jackson resigned as
Non-Executive Director effective
14 December 2017
– Diana Eilert joined Elders as
Non-Executive Director effective
14 November 2017
– Michael Carroll joined Elders as
Non-Executive Director effective
3 September 2018.
Fixed Remuneration
At the start of 2018 financial year, as
part of the annual review of fixed
remuneration across the organisation,
the MD & CEO and Senior Executive KMP
had their fixed remuneration reviewed. As a
result, each Senior Executive KMP received
a fixed remuneration increase ranging from
1.5% to 3.0% and the MD & CEO received
a fixed remuneration increase of 2.3%
effective from 1 January 2018 inline with
market movements.
Variable Remuneration
Short-Term Incentive Plan
Elders STI pool is generated based on
achievement of budgeted EBIT and Return
on Capital, having regard to acceptable
safety and compliance measures, aligning
STI outcomes with Company performance.
The MD & CEO and Senior Executive KMP
STI outcomes ranged from 70% to 100%
of maximum STI. More details on the STI
outcomes has been outlined in section 4.
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 the 2018 financial year.
This grant has a 3-year performance
period ending 30 September 2020, 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.
Details of this grant are outlined in table 4.
Long-term incentives vesting
in the year
Our remuneration framework remains
aligned with the strategy of the business
and promotes long-term alignment with
shareholders. As a result the performance
rights granted in 2016 financial year under
the Long-term Incentive Plan had a three
year performance period which concluded
30 September 2018. Testing against the
three performance conditions, being
Elders’ Absolute Total Shareholder
Return, Earnings per Share growth and
Return on Capital resulted in 100% vesting.
Further details on the vesting are outlined
on page 68.
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 2018 financial year is set out in table 1.
57
Summary of Remuneration outcomes for 2018
Table 1 below sets out certain items of remuneration paid or payable to the MD & CEO and Senior Executive KMP in respect of the 2018
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 9 on page 69 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.
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 9, but omits the information on the issue of shares, share
rights and options and long-term payments contained in Table 9. Additionally, Table 1 provides information on LTI based on rights vesting or
options exercised during the financial year, which is not provided in Table 9.
Table 1 — Remuneration outcomes for 2018 (unaudited and non-IFRS)
$
Base
Salary
STI1
LTI2
Super-
annuation
Other
(monetary)
Other (non-
monetary)3
Termination
benefits4
Total
M C Allison MD & CEO
858,810
835,541
2,418,000
20,169
R I Davey
CFO
505,681
184,800
604,500
20,169
J H Cornish GM Zone West
351,829
130,900
483,600
20,169
G J Dunne
GM Zone North
378,393
140,600
523,900
20,169
M L Hunt
GM Zone South
380,905
202,100
523,900
20,169
-
-
-
-
-
-
-
1,200
4,654
33,770
-
-
-
4,132,520
1,315,150
987,698
538,465
1,606,181
-
1,160,844
1 STI that will be paid for performance in the 2018 financial year.
2 Value of any performance rights that vested during the 2018 financial year based on the closing share price on the date of vesting, and options that were exercised during the 2018
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 granted during
the 2018 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
Position held
Period held in 2018 (if not full year)
Non-Executive Directors
J H Ranck
R Clubb
J A Jackson
I Wilton
D Eilert
M Carroll
MD & CEO and Senior Executives
Chairman
Director
Director
Director
Director
Director
M C Allison
R I Davey
J H Cornish
G J Dunne
M L Hunt
58
Managing Director and CEO
Chief Financial Officer
Zone General Manager West
Zone General Manager North
Zone General Manager South
Commenced
Ceased
14 December 2017
14 November 2017
3 September 2018
30 September 2018
2018 Annual Report — Elders
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 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 2018, 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.
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 2018, no
remuneration consultants were engaged
during the year to provide remuneration
recommendations as defined in section
9B of the Corporations Act 2001. However,
the Committee utilises market data
sourced from Korn Ferry Hay Group
and other market survey providers in
reviewing the MD & CEOs remuneration
on an annual basis.
Remuneration Report
59
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
35%
27%
32%
32%
24%
49%
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.
These charts reflect the actual value of the LTI component being granted to KMP being
110% of Total Fixed Remuneration for the MD & CEO and 55% of Total Fixed Remuneration
for the Senior Executive KMP.
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.
Section 3 —
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:
– appropriate reward for their roles
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.
60
2018 Annual Report — Elders
Remuneration Report
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 3 — Short-term incentive plan
Maximum STI opportunity
as % of TFR
Performance measure(s)
Senior Executives
50% of TFR
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).
MD & CEO
100% of TFR
Safety
Financial and
Operational
Performance
People
and Key
Relationships
Efficiency
and Growth
Weighting
10%
40%
15%
35%
Driving significant
progress in achieving an
injury free workplace.
Achievement of financial
outcomes including
Underlying Earnings
Before Interest and Tax
(EBIT) and Return on
Capital (ROC) targets.
Achievement of targets
relating to employee
effectiveness, diversity
and customer satisfaction.
Achievement of targets
relating to creating value
through the delivery of key
milestones of the Eight
Point Plan.
Governance
Exercise of discretion
Service condition
Payment
Clawback
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.
The MD & CEO may recommend discretionary incentive payments to executives (except himself) for
approval by the Committee.
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.
Elders may recover amounts 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.
61
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, in
conformity with the 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.
Table 4 — Long-Term Incentive Plan detail
MD & CEO
110% of TFR
Maximum LTI
opportunity as
% of TFR
a — Current Long-Term Incentives –
2017 and 2018 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 period as follows:
– 2017 LTI grant (grant date 16-Dec-16)
– to be tested following 30 September
2019; and
– 2018 LTI grant (grant date 14-Dec-17) – to
be tested following 30 September 2020
Details of the actual grant are outlined
in Table 4.
The rights granted in 2018 financial
year to the CEO & MD were approved
by shareholders at Elders’ AGM held
on 14 December 2017. Following this
the Board then approved a grant of
performance rights to selected senior
management on 14 December 2017.
The performance measures of the 2018
financial year grant are in accordance
with the 2016 and 2017 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.
The 2016 LTI grant (grant date 17-Dec-15)
performance period ended 30 September
2018, details on the outcome of the testing
of this grant are outlined in table 8.
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 following
table.
Senior Executives
55% of TFR
As at 30 September 2018 No of rights outstanding and no of participants
Grant date:
16-Dec-16
14-Dec-17
280,000 Rights
200,000 Rights
1 participant
1 participant
555,000 Rights
465,000 Rights
10 participants
13 participants
Performance period:
16-Dec-16
Three years – 1 October 2016 to 30 September 2019
14-Dec-17
Three years – 1 October 2017 to 30 September 2020
Performance conditions:
16-Dec-16
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%
14-Dec-17
The performance conditions of this grant mirror those of the 16-Dec-16 grant.
62
2018 Annual Report — Elders Remuneration Report
MD & CEO
Senior Executives
Performance measures and vesting
16-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 rights that will vest is determined as follows:
Absolute TSR over performance period
% of Rights in tranche that vest
Less than 12% average annual compound TSR
Equals 12% average annual compound TSR
Nil
50%
Greater than 12% but less than 20% average annual compound TSR
50-100% on a straight line sliding scale
Equal to or greater than 20% average annual compound TSR
100%
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.
63
MD & CEO
Senior Executives
14-Dec-17
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 2017 ending
on 30 September 2020.
The % of TSR rights that will vest is determined as follows:
Absolute TSR over performance period
% of Rights in tranche that vest
Less than 12% average annual compound TSR
Equals 12% average annual compound TSR
Nil
50%
Greater than 12% but less than 15% average annual compound TSR
50-100% on a straight line sliding scale
Equal to or greater than 15% average annual compound TSR
100%
Absolute TSR will be measured using opening and closing share prices determined as follows:
– the opening share price value will be $4.8266, being the 5 trading day VWAP up to and including 30 September 2017; 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 2020.
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 10% 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 2020.
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 2017 ($4.8286).
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 5 — Other equity schemes in which one or more KMP participate
Name of Plan
Description
Eligibility
Criteria
Number of
participants as at
Number of shares
outstanding as at
Deferred
Employee Share
Plan (DESP)
This plan enables participants to salary
sacrifice remuneration of up to $5,000 to
acquire restricted shares. Tax can be deferred
up to 7 years. Elders makes no contribution
to this plan other than funding the cost of
administration.
There are no further performance or service
conditions once shares are purchased.
All
permanent
employees.
30 Sept 2017
30 Sept 2018
30 Sept 2017
30 Sept 2018
141
169
185,851
179,623
Note: No KMP participated in the DESP in 2017 or 2018. M C Allison and G J Dunne participated in previous DESP offers and currently hold 1,685 and 5,768 shares respectively under this
Plan (with no change to holdings compared to the same time last year, 30 September 2017).
64
2018 Annual Report — Elders Section 4 — Link Between Elders’
Financial Performance and Executive
Reward
A. Elders performance
Our Executive remuneration is aligned to our strategic and business objectives and
designed to create shareholder wealth.
STI payments are awarded to executives on achievement of a range of financial and
non-financial performance targets (see Table 3).
Under the LTI grants issued, 17 December 2015, 16 December 2016 and 17 December 2017
the performance conditions as outlined in Tables 4 and 8 include absolute Total Shareholder
Return (TSR), Earnings Per Share (EPS) and Return on Capital (ROC).
The following table shows Elders’ performance in relation to a number of financial and
operational performance measures over a five-year period.
Table 6 — Elders’ performance
Performance measure ($ millions)
2014
2015
2016
2017
2018
Sales revenue
Underlying EBIT
Statutory profit
Return on Capital based
on underlying earnings
1,427.7
1,502.0
1,519.3
1,582.5
1,613.3
22.3
3.0
40.5
38.3
56.1
51.6
71.0
116.0
74.6
71.6
11.9%
21.9%
28.1%
28.6%
24.20%
Cashflow from operating activities
15.1
(5.3)
48.7
81.6
(12.1)
Note: The 2017 figures in the table above are restated to reflect continuing operations as at 30 September 2018.
2018 Cashflow from operating activities is affected by higher retail debtors, due to the late season and timing of receipts,
and agency services have returned to normalised year end balances.
Chart 2 — Absolute TSR %
The following chart shows Elders’ TSR performance over the last five years against the
ASX/S&P 200 Accumulation Index.
150%
100%
50%
0%
%
R
S
T
e
t
u
l
o
s
b
A
118.3%
87.2%
5.9%
-0.7%
13.2%
4.8%
25.3%
9.2%
51.2%
14.0%
-50%
2014
2015
2016
2017
2018
Elders
ASX200
Source: Thomson Reuters
Remuneration Report
65
Chart 3 — Elders five year share price history
No dividends were declared or paid (interim or final) from 2014 to 2016 financial year. A final dividend and special dividend of 7.5 cents each
(15 cents total) was paid for 2017 and an interim and final dividend of 9 cents each was declared for the 2018 financial year.
10
9
8
7
6
5
4
3
2
1
Source: Thomson Reuters
3
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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.
Chart 4 — Underlying EPS and NPAT and Executive Remuneration
A summary of the underlying EPS and NPAT and average short term incentives and long-term incentive vesting over the last 5 years is
outlined below.
100%
80%
60%
40%
EPS CAGR over the period 32.5%
39.4
32.6
45.4
43.9
57.7
50.7
63.7
55.1
20%
17.9
0%
8.8
2014
Underlying Basic
Earnings per share
(cents)
2015
Underlying
NPAT ($m)
2016
2017
2018
STI Average KMP
Vesting % of maximum
opportunity
LTI Vesting % of
maximum rights
Note: EPS and NPAT figures are consistent with that disclosed in the relevant financial report for the particular year presented.
For 2015 the 70% LTI vesting represents the vesting of Tranche 3 of the 2011 Grant with Tranche 1 and Tranche 2 lapsing in full. No Long-term incentive grants were due to vest in the
2016 financial year hence the reason of nil vesting in 2016.
66
2018 Annual Report — Elders
Remuneration Report
B. KMP 2018 STI Outcomes
All STI payments for 2018 performance were paid according to plan performance measures. The following table provides a summary
of the KMP performance targets and outcomes for 2018:
Table 7 — STI outcomes and performance against targets for 2018
KMP
Safety
Financial and
Operational
Performance
People and Key
relationships
Efficiency
and Growth
Maximum STI
Opportunity
Awarded
STI %
Forfeited
STI %
Company
Business
Unit
Company
Business
Unit
Company
Business
Unit
Company
Business
Unit
Name
Position Title
M C Allison
MD & CEO
R I Davey
CFO
J H Cornish
Zone GM West
G J Dunne
Zone GM North
M L Hunt
Zone GM South
$
883,948
95%
263,900
70%
186,916
70%
200,743
70%
202,008
100%
5%
30%
30%
30%
0%
Maximum performance achieved
Threshold/Minimum performance achieved
Threshold/Minimum performance not met
67
C. KMP 2018 LTI Outcomes
The 3 year performance period of the 2016 financial year performance rights granted under the Long-Term Incentive Plan concluded
on 30 September 2018.
The rights were split into three tranches, each carrying a different performance condition. The testing resulted in 100% vesting of the
rights for each tranche with the results as follows:
Table 8 — Finalised long-term incentive – 2016 grant
% of total grant
Performance measures
Outcome of testing
Tranche 1 – Total Shareholder Return (TSR)
50%
Based on Elders’ average annual compound TSR over the three year
performance period 1 October 2015 ending on 30 September 2018.
TSR rights were subject to a target goal and a stretch goal.
The % of TSR performance rights that vest were determined as follows:
Absolute TSR over performance period
% of Rights in
tranche that vest
Less than 12% average annual compound TSR
Nil
Equals 12% average annual compound TSR
50%
Greater than 12% but less than 20% average
annual compound TSR
50-100% on a straight
line sliding scale
Equal to or greater than 20% average annual
compound TSR
100%
Absolute TSR was measured using opening and closing share prices
determined as follows:
– the opening share price value of $3.965
– the closing share price value based on the 5 trading day Volume
Weighted Average Price (VWAP) up to and including the last day
of the performance period; and
– dividend paid.
Tranche 2 – Earnings per Share Growth (EPS)
25%
EPS rights vest in full if the EPS Compound Annual Growth Rate (CAGR)
over the performance period was greater than or equal to 15%.
Tranche 3 – Return on Capital (ROC)
25%
ROC rights vest in full if ROC was greater than or equal to 20% for the
financial year ending 30 September 2018.
Elders’ TSR Compound Average Growth
Rate over the performance period was 23.6%
being higher than the stretch hurdle of 20%.
Resulting in 100% vesting of tranche.
Notes in regards to calculation:
The starting price of $3.965 to calculate
the Compound Average Growth Rate was
adjusted for the June 2016 Entitlement Offer
as per Thomson Reuters adjustment value
of 0.96668 to cater for the capital change
and produces an adjusted Starting VWAP
of $3.83.
The TSR for the period also takes into
account the three dividend payments of
7.5c and 7.5c for 2017 and interim dividend
of 9c for 2018.
Elders’ EPS Compound Annual Growth Rate
over the performance period was 24% based
on a starting EPS of 38.9 (as at 30 September
2015) and 74.3 at the end of the performance
period.
Resulting in 100% vesting of tranche.
Notes in regards to calculation:
The number of shares used to calculate
EPS CAGR is the actual number of shares
for each performance period based on
the audited accounts adjusted to exclude
shares issued associated with non-growth
i.e. hybrid buyback.
Elders return on capital as at 30 September
2018 was 24.2% being higher than 20%
performance condition.
Resulting in 100% vesting of tranche.
The total number of vested performance rights under the 2016 grant is 857,200. Individual vesting outcomes are outlined in Table 12.
68
2018 Annual Report — Elders Remuneration Report
Section 5 — Managing Director & CEO and Senior Executive
Remuneration Details
Table 9 — Details of MD & CEO and Senior Executive remuneration for the 2017 and 2018 financial years
Short-term
payments
Base salary
STI
Other1
Post-
employ-
ment
Super-
annuation
Share-based
payments
Long-term
payments
Options
Share
Rights
Long Service
Leave
Termination
benefits2
Total % perfor-
mance-
related3
M C Allison
2018
858,810
835,541
R I Davey
2017
2018
2017
839,082
864,075
505,681
184,800
458,721
220,0004
-
-
-
-
20,169
-
1,018,533
19,724 203,700
558,200
20,169
-
273,225
19,724
50,925
150,125
J H Cornish 2018
351,829
130,900
1,200
20,169
-
207,625
2017
343,845
110,000
1,200
19,724
40,740
115,300
24,740
16,999
11,797
33,585
5,655
5,898
-
-
-
-
-
-
2,757,793
2,501,780
995,672
933,080
717,378
636,707
G J Dunne5
2018
378,393
140,600
4,654
20,169
-
212,425
8,394
538,465
1,303,100
M L Hunt
2017
2018
2017
366,338
190,000
4,486
19,724
44,135
120,100
380,905
202,100
33,770
20,169
-
212,425
368,770
190,000
39,816
19,724
44,135
120,100
8,993
17,328
5,004
-
-
-
753,776
866,697
787,549
Total
2018
2,475,618 1,493,941
39,624 100,845
-
1,924,233
67,914
538,465 6,640,640
2017
2,376,756 1,574,075
45,502
98,620 383,635 1,063,825
70,479
-
5,612,892
67%
65%
46%
45%
47%
42%
27%
47%
48%
45%
1 Comprising the provision of leased car parking (Cornish, Dunne, Hunt), company leased vehicle (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 rights includes performance rights disclosed in
Table 12.
4 R I Davey received an additional $70,000 in relation to his 2017 financial year short term incentive which was previously stated as $150,000 in the 2017 Remuneration Report, to reflect
his contribution and efforts in the 2017 year.
5 G J Dunne ceased employment 30 September 2018.
69
Section 6 — Managing Director & CEO and Senior Executive
Contract Terms, Loans and Transactions
A. Contractual arrangements with KMP
In 2018 Elders had employment contracts with the MD & CEO and Senior Executives. Details of the employment contracts are set out
in the table below.
Table 10 — Contractual arrangements
Component
MD & CEO
Senior Executives
Contract Duration
Ongoing until terminated by either party
Notice (without cause) initiated by:
Elders
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
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.
Change of Control
Not specifically
referenced in contract
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 or prior year.
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.
70
2018 Annual Report — Elders Remuneration Report
Section 7 — Non-
Executive Director
Remuneration
B. Non-Executive Director remuneration in 2018
Total fees for the financial year ended 30 September 2018 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.
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 13 of this
Report.
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 2018, 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 11 below.
The base Board fee has remained unchanged since 2014.
Table 11 — Non-Executive Director remuneration details
Short-term payments
Post employment
Total
Base
Board Fee
Board
Committee Fees
Superannuation
J H Ranck
R Clubb1
J A Jackson2
I Wilton
D Eilert3
M Carroll3
Total
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
240,000
240,000
100,000
100,000
20,635
100,000
100,000
100,000
88,258
n/a
8,333
n/a
557,226
540,000
-
-
39,988
36,000
8,460
41,000
50,000
50,000
28,714
n/a
3,000
n/a
130,162
127,000
20,169
260,169
19,724
259,724
13,299
153,287
12,920
148,920
2,764
31,859
13,395
154,395
14,250
164,250
14,250
164,250
11,112
128,084
n/a
1,077
n/a
n/a
12,410
n/a
62,671
750,059
60,289
727,289
1 R Clubb was appointed Chair of Remuneration and Human Resources Committee effective 14 December 2017
with an increase in her Committee fees from this date to reflect this appointment.
2 J A Jackson ceased as Non-Executive Director 14 December 2017.
3 D Eilert commenced as a Non-Executive Director 14 November 2017 and M Carroll commenced as Non-Executive
Director 3 September 2018.
71
Section 8 — Additional Statutory Information
Table 12 — Details of MD & CEO and Senior Executive current long-term incentive grants
KMP Grant
Date
Balance
at Start
of Period
Granted Vesting
Vested
Lapsed
date
Balance
at End of
Period
Expensed
at End of
Period
Fair Value at
grant date1
Rights
maximum value
yet to vest2
No.
No.
No.
%
No.
%
No.
$
$
-
296,400
889,200
280,000
261,800
785,400
200,000
460,333
1,381,000
261,800
920,667
480,000
1,018,533
3,055,600
1,182,467
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
20,000
30,000
33
66
M C Allison
17-Dec-15
260,000
- 12-Nov-18
260,000
100
16-Dec-16
280,000
-
Nov-19
14-Dec-17
-
200,000
Nov-20
-
-
540,000
200,000
260,000
-
-
-
R I Davey
17-Dec-15
75,000
- 12-Nov-18
75,000
100
16-Dec-16
75,000
-
Nov-19
14-Dec-17
-
60,000
Nov-20
-
-
150,000
60,000
75,000
-
-
-
J H Cornish
17-Dec-15
55,000
- 12-Nov-18
55,000
100
16-Dec-16
60,000
-
Nov-19
14-Dec-17
-
45,000
Nov-20
-
-
115,000
45,000
55,000
-
-
-
G J Dunne3
17-Dec-15
60,000
- 12-Nov-18
60,000
100
16-Dec-16
60,000
-
Nov-19
14-Dec-17
-
45,000
Nov-20
-
-
120,000
45,000
60,000
-
-
-
C C Hall4
17-Dec-15
20,000
- 12-Nov-18
20,000
100
20,000
-
Nov-19
20,000
-
M L Hunt
17-Dec-15
60,000
- 12-Nov-18
60,000
100
16-Dec-16
60,000
-
Nov-19
14-Dec-17
-
45,000
Nov-20
-
-
120,000
45,000
60,000
-
-
-
-
75,000
72,000
78,125
216,000
234,375
60,000
123,100
369,300
135,000
273,225
819,675
-
60,000
45,000
52,800
62,500
92,325
158,400
187,500
276,975
105,000
207,625
622,875
-
40,000
15,000
57,600
62,500
92,325
172,800
187,500
276,975
50,000
100
55,000
212,425
637,275
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
60,000
45,000
-
-
172,800
172,800
57,600
62,500
92,325
172,800
187,500
276,975
105,000
212,425
637,275
$
-
-
78,125
246,200
324,325
-
62,500
184,650
247,150
-
-
-
-
-
-
-
62,500
184,650
247,150
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 G J Dunne ceased employment on 30 September 2018 however as per the LTI Plan Rules a portion of G J Dunne’s rights have continued on foot, based on the percentage of
performance period completed for each grant as at termination date.
4 C C Hall ceased employment on 16 September 2016 however a percentage of his long-term incentive grants continued on foot.
72
2018 Annual Report — Elders Remuneration Report
Note: The fair value per performance right at grant date is as follows, with the grant date under the Accounting Standards differing for the MD & CEO and Senior Executive grants,
resulting in a different fair value.
MD & CEO Grant
Senior Executive Grant
Performance Rights
18 December 2015
Performance Rights
16 December 2016
Performance Rights
14 December 2017
Table 13 — KMP shareholdings
Tranche 1
Tranche 2 & 3
Tranche 1
Tranche 2 & 3
Tranche 1
Tranche 2 & 3
$ 2.26
$ 4.58
$ 1.63
$ 3.98
$ 6.64
$ 7.17
Tranche 1
Tranche 2 & 3
Tranche 1
Tranche 2 & 3
Tranche 1
Tranche 2 & 3
$ 1.64
$ 4.12
$ 1.94
$ 4.31
$ 5.81
$ 6.50
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
2018
2017
2018
2017
J A Jackson1
2018
I Wilton
D Eilert2
M Carroll2
2017
2018
2017
2018
2017
2018
2017
MD & CEO and Senior Executives
M C Allison
R I Davey
J H Cornish
G J Dunne
M L Hunt
Total
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
130,000
125,000
3,400
1,200
10,000
37,500
105,000
100,000
-
n/a
-
n/a
54,344
22,107
1,750
2,008
29,190
29,528
43,459
44,054
-
-
377,143
361,397
-
-
-
-
-
-
-
-
-
n/a
-
n/a
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
n/a
-
n/a
600,000
-
150,000
-
120,000
-
130,000
-
130,000
-
1,130,000
-
4,317
5,000
-
2,200
-
(27,500)
3,486
5,000
-
n/a
-
n/a
-
32,237
(100,000)
(258)
(149,190)
(338)
(148,953)
(595)
(130,000)
-
(520,340)
15,746
134,317
130,000
3,400
3,400
10,000
10,000
108,486
105,000
-
n/a
-
n/a
654,344
54,344
51,750
1,750
-
29,190
-
43,459
-
-
986,803
377,143
1 J A Jackson ceased as a Director on 14 December 2017, balance is at date of cessation.
2 D Eilert commenced as a Director on 14 November 2017 and M Carroll commenced as a Director on 3 September 2018 balance is at date of commencement.
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.
Elders takes its obligations to prevent insider trading very seriously. In conformity with that approach, directors take a conservative view of when they can deal in Elders shares (even
when trading windows are open), seeking to avoid both real and perceived trading on inside information. This approach has, in recent times, limited the opportunities for Non-Executive
Directors to acquire Elders’ shares.
73
Elders Limited
Annual Financial
Report
74
2018 Annual Report — Elders
2018 Annual Report — Elders Elders Limited Annual Financial Report
For the year ending 30 September 2018
7575
Elders Limited Annual Financial Report
30 September 2018
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
About this Report
Group Performance
1
2
3
4
5
Segment Information
Discontinued Operations
Revenue and Expenses
Income Tax
Earnings Per Share
Working Capital
6
7
8
9
Receivables
Biological Assets
Inventory
Trade and Other Payables
Capital Employed
10
11
12
13
Property, Plant and Equipment
Intangibles
Equity Accounted Investments
Provisions
Net Debt
Cash Flow Statement Reconciliation
Interest Bearing Loans and Borrowings
14
15
76
77
78
79
80
81
83
85
87
89
91
92
93
94
95
96
98
100
101
103
104
Risk Management
16
Financial Instruments
Equity
17
18
19
Contributed Equity
Reserves
Retained Earnings
20
Dividends
Group Structure
21
22
23
Investments in Controlled Entities
Parent Entity
Business Combinations – Changes in the
Composition of the Entity
Other Information
24
25
26
27
28
29
30
Expenditure Commitments
Contingent Liabilities
Related Party Disclosures
Share Based Payment Plans
Auditors’ Remuneration
Key Management Personnel
Subsequent Events
Directors’ Declaration
105
110
110
111
111
112
115
116
117
118
118
119
119
119
119
120
2018 Annual Report — Elders Elders Limited Annual Financial Report
Note
2018
$000
2017
$000
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 benefit/(expense)
Income tax benefit/(expense)
Profit from continuing operations after income tax benefit/(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)
3
12
3
3
4
2
19
5
5
5
5
5
5
The accompanying notes form an integral part of this consolidated statement of comprehensive income.
1,613,278
1,582,520
(1,265,201)
(1,250,276)
348,077
7,016
(233,053)
(47,395)
(6,854)
(6,093)
61,698
19,342
81,040
(7,113)
73,927
332,244
5,411
(219,430)
(47,186)
(7,265)
55,001
118,775
(4,109)
114,666
3,905
118,571
(328)
(328)
(1,211)
(1,211)
73,599
117,360
2,359
71,568
73,927
2,359
71,240
73,599
62.0¢
60.7¢
68.1¢
66.7¢
(6.2)¢
(6.2)¢
2,576
115,995
118,571
2,576
114,784
117,360
101.9¢
98.9¢
98.4¢
95.6¢
3.4¢
3.3¢
77
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME For the year ended 30 September 2018
Current assets
Cash and cash equivalents
Trade and other receivables
Livestock
Inventory
Assets classified as held for sale
Total current assets
Non current assets
Other financial assets
Equity accounted investments
Property, plant and equipment
Intangibles
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
Non current liabilities
Other payables
Interest bearing loans and borrowings
Provisions
Total non current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Retained earnings
Total parent entity equity interest
Non-controlling interests
Total equity
Note
14(b)
6
7
8
2(a)
12
10
11
4
9
15
4
13
9
15
13
17
18
19
2018
$000
11,641
444,796
32,528
147,757
3,568
640,290
1,269
54,337
27,318
128,991
78,014
289,929
2017
$000
35,186
385,641
44,616
111,101
-
576,544
1,269
53,842
29,885
81,230
59,382
225,608
930,219
802,152
371,907
184,001
1,166
45,856
602,930
12,668
1,074
4,998
18,740
355,539
130,266
109
49,077
534,991
5,343
216
3,924
9,483
621,670
544,474
308,549
257,678
1,426,835
(26,034)
1,422,255
(27,596)
(1,094,027)
(1,139,118)
306,774
255,541
1,775
308,549
2,137
257,678
The accompanying notes form an integral part of this consolidated statement of financial position.
78
CONSOLIDATED STATEMENT OF FINANCIAL POSITIONAs at 30 September 20182018 Annual Report — Elders
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
Payments for property, plant and equipment
Payments for equity accounted investments
Payments for intangibles
Payments for acquisition through business combinations
Proceeds from sale of property, plant and equipment
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, net of costs
Purchase of shares for incentive schemes
Proceeds of borrowings
Hybrid equity distributions
Hybrid equity repurchased
Dividends paid
Partnership profits
Net financing cash flows
Net (decrease)/increase in cash held
Cash at the beginning of the financial year
Cash at the end of the financial year
Note
14(a)
14(b)
The accompanying notes form an integral part of this consolidated statement of cash flows.
Elders Limited Annual Financial Report
2018
$000
7,122,234
(7,133,344)
7,338
(5,513)
(2,847)
(12,132)
(4,099)
(650)
(1,605)
(32,329)
292
-
-
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
(38,391)
(42,011)
2,651
-
52,867
-
-
(25,819)
(2,721)
26,978
(23,545)
35,186
11,641
-
(127)
8,622
(3,557)
(42,009)
-
(2,482)
(39,553)
35
35,151
35,186
79
CONSOLIDATED STATEMENT OF CASH FLOWSFor the year ended 30 September 2018 $000
As at 1 October 2017
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:
Issued capital
Dividends paid
Dividend reinvestment plan
Partnership profit distributions/dividends paid
Cost of share based payments
Reallocation of equity
As at 30 September 2018
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
Issued
capital
Hybrid
equity
Reserves
Retained
earnings
Non-
controlling
interest
Total equity
1,422,255
-
-
-
2,651
-
1,929
-
-
-
1,426,835
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(127)
1,422,255
-
-
-
-
-
(42,009)
-
-
5,179
-
-
(27,596)
(1,139,118)
-
71,568
2,137
2,359
257,678
73,927
-
-
(328)
71,568
2,359
73,599
-
(25,819)
(1,929)
-
-
-
-
-
2,651
(25,819)
-
(2,721)
(2,721)
-
-
3,161
-
(1,271)
1,271
(26,034)
(1,094,027)
1,775
308,549
(328)
(328)
-
-
-
-
3,161
(1,211)
-
-
(1,211)
(1,211)
115,995
2,576
117,360
-
-
-
-
2,205
-
473
-
-
-
(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
1,422,382
36,830
(29,063)
(1,246,064)
-
115,995
2,419
2,576
186,504
118,571
The accompanying notes form an integral part of this consolidated statement of changes in equity.
80
CONSOLIDATED STATEMENT OF CHANGES IN EQUITYFor the year ended 30 September 20182018 Annual Report — Elders Elders Limited Annual Financial Report
ABOUT THIS REPORT
Corporate information
The consolidated financial report of Elders Limited for the year ended 30 September 2018 was authorised for issue in accordance with a
resolution of the Directors on 12 November 2018. 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 1. References in this
consolidated financial report to ‘Elders’ are to Elders Limited and each of its controlled entities unless the context requires otherwise.
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) and International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).
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.
Both the functional and presentation currency of Elders and its Australian subsidiaries is Australian Dollars (AUD). Subsidiaries
incorporated in countries other than Australia (see note 21), which have a functional currency other than Australian Dollars, are translated
to the presentation currency.
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.
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.
Basis of consolidation
The consolidated financial statements comprise the financial statements of Elders Limited and its subsidiaries as at 30 September 2018.
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. 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.
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. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in
the statement of comprehensive income from the date Elders gains control until the date Elders ceases to control the subsidiary.
Profit or loss and each component of other comprehensive income are attributed to the equity holders of the parent of Elders and to the
non-controlling interests, even if this results in the non-controlling interests having a deficit balance. When necessary, adjustments are
made to the financial statements of subsidiaries to bring their accounting policies into line with Elders’ accounting policies. All intra-group
assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of Elders are eliminated in full
on consolidation.
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.
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. Judgements, estimates and assumptions which are material to the financial report are
found in the following notes:
Note 4
Note 8
Note 10
Note 11
Recovery of deferred tax assets
Accounting for rebates
Impairment of non-financial assets other than brand names and goodwill
Impairment of brand names and goodwill
81
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 2018 ABOUT THIS REPORT
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 2018 and
have been applied in preparing these consolidated financial statements. None of these have materially impacted Elders and its policies.
(ii) Accounting Standards and Interpretations issued but not yet effective
A number of new standards and amendments to standards are effective for future reporting periods. Elders has not early adopted any
standard, interpretation or amendment that has been issued but is not yet effective.
In regard to:
– AASB 15 Revenue from Contracts with Customers (which is effective for Elders beginning 1 October 2018), Elders has completed an
assessment on the impact of the adoption of AASB 15 on the consolidated financial statements. This has included reviewing significant
revenue streams and significant sales contract terms. Elders has assessed that adoption of this standard is not expected to
have a significant impact.
– AASB 9 Financial Instruments (which is effective for Elders beginning 1 October 2018), Elders has assessed that based on the financial
instruments currently held by Elders, the adoption of this standard is expected to have no significant impact.
– AASB 16 Leases (which is effective for Elders beginning 1 October 2019), Elders has commenced an initial assessment of the potential
impact on its reported assets and liabilities on adoption of AASB 16. So far the most significant impact identified is that Elders will
recognise new assets and liabilities for its operating leases related to property and vehicles. In addition, the nature of expenses related
to these leases will change as AASB 16 replaces the straight line operating lease expense with a depreciation charge for right of use
assets and an interest expense on lease liabilities. Elders has not yet determined the financial impact on adoption, or which transition
approach to employ. Details of Elders’ operating leases are disclosed in note 24 of the financial statements.
The notes to the financial statements
The notes include information which is required to understand the financial statements and is material and relevant to the operations,
financial position and performance of Elders. They include the applicable accounting policies applied and significant estimates and
judgements made. Specific accounting policies are disclosed in their respective notes to the financial statements.
The notes are organised into the following sections:
Section
Group performance
Provides additional information regarding financial statement lines that are most relevant to explaining Elders’ performance
during the period.
Working capital
Capital employed
Net debt
Provides additional information regarding financial statement lines that are most relevant to explaining the assets used to
generate Elders’ trading performance during the period and liabilities incurred as a result.
Provides additional information regarding financial statement lines that are most relevant to explaining the capital
investment made that allows Elders to generate its operating result during the period and liabilities incurred as a result.
Provides additional information regarding financial statement lines that are most relevant to explaining Elders’ net debt
position and borrowings for the period.
Risk management
Provides information relating to Elders’ exposure to various financial risks, its impact on the financial position and
performance of Elders and how these risks are managed.
Equity
Provides additional information regarding financial statement lines that are most relevant to explaining the equity position
of Elders at the end of the period, including the dividends declared and/or paid during the period.
Group structure
Summarises how the group structure affects the financial position and performance of Elders as a whole.
Other information
Includes other information that must be disclosed to comply with the accounting standards and other pronouncements,
but that is not immediately related to individual line items in the financial statements.
82
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 20182018 Annual Report — Elders Elders Limited Annual Financial Report
GROUP PERFORMANCE — NOTE 1: SEGMENT INFORMATION
Identification of reportable segments
Elders has identified its operating segments to be Network, Feed and Processing, Live Export (now discontinued) and Other. This is the
basis on which internal reports are reviewed and used by the Chief Executive Officer (the chief operating decision maker) in assessing
performance and in determining allocation of resources. Discrete financial information about each of these operating businesses is
reported to the Chief Executive Officer on at least a monthly basis. Elders operates predominantly within Australia. All other geographical
operations are not material to the financial statements.
Type of product and service
– Network includes the provision of a range of products and services through a common distribution channel, including agricultural retail
products, agency services and financial services.
– Feed and Processing includes Killara feedlot, a beef cattle feedlot near Tamworth in New South Wales. In Indonesia and China, Elders
imports, processes and distributes premium Australian meat. The Indonesian feedlot and abattoir assets have been classified as held
for sale and discontinued due to the impending sale of that business.
– Live Export facilitated 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 exited the live export business in the prior period.
– 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 the financial statements.
Segment results have been determined on a consolidated basis and represent the earnings before corporate net financing costs and
income tax expense.
2018
Sales revenue
Equity accounted profits
Network
Feed and
Processing
Live Export
Other
Total
$000
$000
$000
$000
$000
1,438,644
189,438
7,016
-
Earnings before interest, tax, depreciation and amortisation
117,572
3,293
Depreciation and amortisation
Segment result
Corporate net interest expense
Profit from ordinary activities before tax
Segment result
Discontinued operations results
Continuing profit/(loss) 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 (cash outflow)
Non cash income/(expense) other than depreciation and amortisation
Profit/(loss) on sale of non current assets
(2,907)
(1,283)
114,665
2,010
114,665
-
114,665
2,010
4,835
6,845
705,166
333,753
371,413
54,337
35,546
(1,868)
(122)
66,933
8,282
58,651
-
1,619
(779)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
530
1,628,612
-
7,016
(52,314)
68,551
(644)
(4,834)
(52,958)
63,717
(52,958)
-
(52,958)
(6,818)
56,899
63,717
4,835
68,552
(6,854)
61,698
158,120
930,219
279,635
621,670
(121,515)
308,549
-
1,518
1,471
-
54,337
38,683
(1,176)
(122)
83
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 2018 GROUP PERFORMANCE — NOTE 1: SEGMENT INFORMATION
2017
Sales revenue
Equity accounted profits
Earnings before interest, tax, depreciation and amortisation
Depreciation and amortisation
Segment result
Corporate net interest expense
Profit from ordinary activities before tax
Segment result
Discontinued operations results
Continuing profit/(loss) 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 (cash outflow)
Non cash income/(expense) other than depreciation and amortisation
Profit/(loss) on sale of non current assets
Network
Feed and
Processing
$000
$000
1,426,017
176,716
5,411
-
116,945
(2,512)
114,433
6,035
(1,178)
4,857
114,433
-
114,433
4,857
603
5,460
567,599
309,952
257,647
53,842
44,989
(2,530)
(524)
72,202
8,747
63,455
-
1,216
-
-
Live Export
Other
Total
$000
99,002
-
5,907
-
5,907
5,907
(5,907)
-
-
-
-
-
-
-
1,955
$000
$000
601
1,702,336
-
5,411
6,591
135,478
(444)
(4,134)
6,147
131,344
(7,530)
123,814
6,147
131,344
-
(5,304)
6,147
126,040
(7,265)
118,775
162,351
802,152
225,775
544,474
(63,424)
257,678
-
-
36,533
-
53,842
46,205
34,003
1,431
84
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 20182018 Annual Report — Elders Elders Limited Annual Financial Report
GROUP PERFORMANCE — NOTE 2: DISCONTINUED OPERATIONS
Financial period 30 September 2018
Elders’ investment in the Indonesian feedlot and abattoir operations are classified as held for sale at 30 September 2018. As required by
AASB 5 Non-current Assets Held for Sale and Discontinued Operations, the 2017 comparative discontinued operations disclosed below
has been represented to show the effects of this classification.
Financial period 30 September 2017
Elders’ investment in Live Export was sold during the prior period and was classified as a discontinued operation.
Sales revenue
Cost of sales
Gross profit
Other revenues
Distribution expenses
Administration expenses
Other items of income/(expenses)
Cont
2018
$000
Disc
2018
$000
Total
2018
$000
Cont
2017
$000
Disc
2017
$000
Total
2017
$000
1,613,278
15,334
1,628,612
1,582,520
119,816
1,702,336
(1,265,201)
(15,581)
(1,280,782)
(1,250,276)
(114,494)
(1,364,770)
348,077
(247)
347,830
332,244
5,322
337,566
7,016
-
7,016
5,411
-
5,411
(233,053)
(3,838)
(236,891)
(219,430)
(4,556)
(223,986)
(47,395)
(6,093)
(750)
(6,843)
55,001
-
(47,395)
(47,186)
-
(47,186)
4,538
5,304
59,539
131,344
Profit/(loss) before borrowing costs and tax expense
68,552
(4,835)
63,717
126,040
Finance (costs)/income
Profit/(loss) before tax expense
Income tax benefit/(expense)
Net profit/(loss) for year
Net profit/(loss) attributable to non-controlling interest
(6,854)
36
(6,818)
(7,265)
(265)
(7,530)
61,698
19,342
81,040
(2,359)
(4,799)
56,899
118,775
5,039
123,814
(2,314)
17,028
(4,109)
(1,134)
(5,243)
(7,113)
73,927
114,666
3,905
118,571
-
(2,359)
(2,576)
-
(2,576)
Net profit/(loss) attributable to members of the parent entity
78,681
(7,113)
71,568
112,090
3,905
115,995
Revenue and expenses
Sales revenue:
Sale of goods and biological assets
1,321,601
15,334
1,336,935
1,246,598
119,816
1,366,414
Debtor interest associated with sales
Commission and other selling charges
Other expenses:
Insurance fair value adjustment
Gain on divested assets
Live export exit costs
Impairment reversal/(impairment) of assets
IT infrastructure refresh costs
Merger and acquisition due diligence
5,655
286,022
-
-
5,655
5,579
286,022
330,343
-
-
5,579
330,343
1,613,278
15,334
1,628,612
1,582,520
119,816
1,702,336
-
-
-
-
(3,933)
(2,160)
(6,093)
-
-
-
-
-
-
2,270
-
-
(750)
(750)
54,785
-
-
(3,933)
(2,160)
(2,054)
-
-
1,955
2,583
-
-
-
2,270
1,955
2,583
54,785
(2,054)
-
(750)
(6,843)
55,001
4,538
59,539
85
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 2018 GROUP PERFORMANCE — NOTE 2: DISCONTINUED OPERATIONS
The net cash flow of the discontinued operations is as follows:
Operating activities
Investing activities
Financing activities
Net cash inflow/(outflow)
(a) Assets and liabilities – held for sale operations
Indonesian feedlot and abattoir assets
2018
$000
2,654
(505)
-
2,149
2017
$000
10,399
2,654
-
13,053
3,568
-
Elders recognised fair value decreases of $0.8 million to revalue the Indonesian feedlot and abattoir assets to the lower of their carrying
value or fair value less costs to sell.
Accounting Policy
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.
86
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 20182018 Annual Report — Elders Elders Limited Annual Financial Report
GROUP PERFORMANCE — NOTE 3: REVENUE AND EXPENSES
Note
2018
$000
2017
$000
Sales revenue
Sale of goods and biological assets
Debtor interest associated with sales
Commission revenue
Discontinued operations
Other items of income/(expense)
Insurance fair value adjustment
Impairment reversal of assets
IT infrastructure refresh costs
Merger and acquisition due diligence
Discontinued operations
Finance costs/(income)
Interest expense
Unwinding of discounts in regards to liabilities
Discontinued operations
Specific expenses: depreciation and amortisation
Depreciation and amortisation
Discontinued operations
Specific expenses: employee benefit expense
Salaries, wages and incentives
Superannuation and other employee costs
Share based payments
Discontinued operations
2
2
2
1,321,601
1,246,598
5,655
286,022
1,613,278
15,334
1,628,612
5,579
330,343
1,582,520
119,816
1,702,336
-
-
(3,933)
(2,160)
(6,093)
(750)
(6,843)
5,978
876
6,854
(36)
6,818
4,396
4,396
438
4,834
153,060
28,891
3,161
185,112
1,953
187,065
2,270
54,785
(2,054)
-
55,001
4,538
59,539
6,386
879
7,265
265
7,530
3,723
3,723
411
4,134
144,972
27,708
2,205
174,885
2,083
176,968
Operating lease expenditure
34,445
43,163
87
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 2018 GROUP PERFORMANCE — NOTE 3: REVENUE AND EXPENSES
Accounting Policy
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.
88
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 20182018 Annual Report — Elders Elders Limited Annual Financial Report
GROUP PERFORMANCE — NOTE 4: INCOME TAX
Significant Accounting Judgements, Estimates and Assumptions
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.
(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 benefit/(expense)
Income tax benefit/(expense) reported in the statement of comprehensive income
2018
$000
(3,884)
66
20,846
17,028
2017
$000
(3,019)
66
(2,290)
(5,243)
(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% (2017: 30%)
Adjustments in respect of current income tax of previous years
Share of equity accounted profits
Non-assessable (losses)/profits
Recognition of previously unrecognised losses
Other
Income tax benefit/(expense) as reported in the statement of comprehensive income
Aggregate income tax benefit/(expense) is attributable to:
– Continuing operations
– Discontinued operations
Current tax payable
61,698
(4,799)
56,899
(17,070)
66
2,105
(2,734)
38,957
(4,296)
17,028
19,342
(2,314)
17,028
1,166
118,775
5,039
123,814
(37,144)
66
1,623
1,241
29,259
(288)
(5,243)
(4,109)
(1,134)
(5,243)
109
Tax losses
Elders has tax losses for which no deferred tax asset is recognised in the statement of financial position of $131.5 million (2017: $170.8
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.
89
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 2018 GROUP PERFORMANCE — NOTE 4: INCOME TAX
(c) Major components of deferred income tax:
Deferred income tax assets
Losses available to offset against future taxable income
Provision for employee entitlements
Other provisions
Capitalised expenses
Other
Statement of Financial Position
Movement
2018
$000
2017
$000
82,037
14,875
1,657
2,516
1,152
57,437
14,843
3,205
4,831
1,063
2018
$000
24,600
32
(1,548)
(2,315)
89
20,858
2017
$000
14,186
3,109
(658)
(3,408)
(51)
13,178
Gross deferred income tax assets
102,237
81,379
Deferred income tax liabilities
Inventory
Intangibles
Other
Gross deferred income tax liabilities
Movement in net deferred tax asset
Deferred income tax benefit/(expense) recognised
in the statement of comprehensive income
Deferred income tax liabilities recognised for
intangibles acquired as part of business combinations
(872)
(869)
(3)
786
(22,596)
(20,304)
(2,292)
(18,619)
(755)
(824)
69
(89)
(24,223)
(21,997)
(2,226)
(17,922)
18,632
20,846
(4,744)
(2,290)
(2,214)
(2,454)
18,632
(4,744)
Net deferred tax asset
78,014
59,382
Accounting Policy
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.
Deferred income tax is recognised on temporary differences. Deferred income tax assets are recognised for taxable temporary
differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary
differences.
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.
Other taxes
Revenues, expenses and assets are recognised net of the amount of GST. Receivables and payables are stated inclusive of the amount
of GST receivable or payable. 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.
90
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 20182018 Annual Report — Elders
Elders Limited Annual Financial Report
GROUP PERFORMANCE — NOTE 5: 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)
2018
115,523
2,357
117,880
The following reflects the net profit/(loss) and share data used in the calculations of earnings per share (EPS):
2018
$000
2017
113,859
3,430
117,289
2017
$000
Reported operations
Basic and dilutive
Net profit attributable to members (after tax)
71,568
115,995
Reported operations:
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
Continuing operations
Basic
Net profit attributable to members (after tax)
Less: Net loss/(profit) of discontinued operations (net of tax)
Net profit 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
62.0 ¢
60.7 ¢
101.9 ¢
98.9 ¢
71,568
7,113
78,681
68.1 ¢
66.7 ¢
115,995
(3,905)
112,090
98.4 ¢
95.6 ¢
Net (loss)/profit of discontinued operations (net of tax)
(7,113)
3,905
Discontinued operations earnings per share:
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
(6.2)¢
(6.2)¢
3.4 ¢
3.3 ¢
Accounting Policy
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.
91
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 2018 WORKING CAPITAL — 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
2018
$000
424,094
(3,141)
420,953
17,216
1,318
5,309
444,796
6,658
(3,926)
409
3,141
2017
$000
369,938
(6,658)
363,280
16,531
1,852
3,978
385,641
4,499
(826)
2,985
6,658
Included in trade debtors is $74.7 million (2017: $68.0 million) which is subject to credit insurance with various terms and conditions.
Trade receivables are generally on 30 to 90 day terms with the exception of livestock receivables which are on 10 day terms. In some
instances deferred terms in excess of 90 days are offered. A provision for impairment loss is recognised when there is objective evidence
that an individual trade receivable is impaired. An impairment loss of $0.4 million (2017: $3.0 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
333,243
305,687
70,016
10,753
2,510
4,431
3,141
424,094
50,601
3,686
1,539
1,767
6,658
369,938
Related party receivables
For terms and conditions of related party receivables refer to note 26.
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 16.
Foreign exchange and interest rate risk
Details regarding the foreign exchange and interest rate risk exposure are disclosed in note 16, including those relating to derivative
related balances.
Accounting Policy
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.
92
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 20182018 Annual Report — Elders
WORKING CAPITAL — NOTE 7: BIOLOGICAL ASSETS
Livestock
Current
Fair value at the end of the period
Elders Limited Annual Financial Report
2018
$000
2017
$000
32,528
44,616
At balance date 20,635 head of cattle (2017: 27,040) are included in livestock. This represents cattle held in Australia for feedlotting purposes.
The prior year also included 5,569 head of cattle held in Indonesia.
Elders 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.
Accounting Policy
Elders holds biological assets in the form of livestock. Livestock is measured 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. The market value
increments or decrements are recorded in profit and loss.
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.
93
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 2018
WORKING CAPITAL — NOTE 8: INVENTORY
Significant Accounting Judgements, Estimates and Assumptions
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.
Current
Retail
Other
Total inventory
Inventory write-downs recognised as an expense totalled $1.6 million (2017: $2.0 million).
2018
$000
137,102
10,655
147,757
2017
$000
102,958
8,143
111,101
Accounting Policy
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.
94
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 20182018 Annual Report — Elders
WORKING CAPITAL — NOTE 9: 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
Elders Limited Annual Financial Report
2018
$000
326,405
43,933
1,569
371,907
12,668
384,575
2017
$000
314,750
37,841
2,948
355,539
5,343
360,882
Interest rate, foreign exchange and liquidity risk
Information regarding interest rate, foreign exchange and liquidity risk exposure is set out in note 16, including those relating to derivative
forward contracts.
Accounting Policy
Trade and other payables are carried at amortised cost and due to their short term nature they are not discounted. The carrying
amount of trade and other payables are assumed to be the same as their fair values. 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. Information regarding
financial guarantees is set out in note 15.
95
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 2018
CAPITAL EMPLOYED — NOTE 10: PROPERTY, PLANT AND EQUIPMENT
Significant Accounting Judgements, Estimates and Assumptions
Impairment of non-financial assets other than brand names 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.
Reconciliation of carrying amounts at beginning and end of period:
Freehold
land
Buildings
Leasehold
improvements
Plant and
equipment
(owned)
Plant and
equipment
(leased)
Assets under
construction
Total
$000
$000
$000
$000
$000
$000
$000
2018
Carrying amount at beginning of period
5,164
8,296
5,652
Additions
Additions through business combinations
Disposals
Depreciation expense
Impairment
Transfer to held for sale
Exchange fluctuations
Transfers from assets under construction
-
-
(2)
-
(548)
466
-
(13)
(734)
-
(1,134)
(1,336)
(62)
-
28
135
891
-
(14)
(799)
-
-
(59)
-
9,851
2,480
192
(111)
(1,880)
(202)
(1,078)
68
155
603
1,563
272
(236)
(561)
-
-
-
-
319
262
29,885
5,662
-
-
-
-
464
(376)
(3,974)
(750)
(20)
(3,568)
-
(290)
(25)
-
Carrying amount at end of period
3,418
6,842
5,671
9,475
1,641
271
27,318
Cost
3,418
14,336
12,794
26,799
Accumulated depreciation and impairment
-
3,418
(7,494)
6,842
(7,123)
(17,324)
5,671
9,475
2017
Carrying amount at beginning of period
5,354
Additions
Additions through business combinations
Disposals
Depreciation expense
Exchange fluctuations
Transfers from assets under construction
Other
-
-
-
-
(190)
-
-
7,860
761
-
(5)
(656)
(91)
427
-
6,241
89
519
(405)
(792)
-
-
-
Carrying amount at end of period
5,164
8,296
5,652
8,704
1,849
142
(275)
(1,785)
(151)
1,274
93
9,851
2,545
(904)
1,641
732
391
-
(37)
(390)
-
-
(93)
603
271
60,163
-
(32,845)
271
27,318
1,671
30,562
391
3,481
-
-
-
661
(722)
(3,623)
(42)
(474)
(1,701)
-
-
-
319
29,885
Cost
5,164
15,970
12,224
27,440
1,031
319
62,148
Accumulated depreciation and impairment
-
5,164
(7,674)
8,296
(6,572)
(17,589)
5,652
9,851
(428)
603
-
(32,263)
319
29,885
All property, plant and equipment is pledged as security, refer to note 15 for interest bearing loans and borrowings.
96
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 20182018 Annual Report — Elders Elders Limited Annual Financial Report
CAPITAL EMPLOYED — NOTE 10: PROPERTY, PLANT AND EQUIPMENT
Accounting Policy
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
Method
50 years
Lease term
3 to 10 years
Lease term
5 to 25 years
Straight line
Straight line
Straight line
Straight line
Straight line
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.
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.
97
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 2018 CAPITAL EMPLOYED — NOTE 11: INTANGIBLES
Significant Accounting Judgements, Estimates and Assumptions
Impairment of brand names 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 names 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 names or goodwill is allocated.
Reconciliation of carrying amounts at beginning and end of period:
Non current
2018
Carrying amount at beginning of period
Additions
Additions through business combinations
Disposals
Amortisation
Goodwill
Rent rolls &
loan books
$000
$000
Brand
names
$000
Other
Total
$000
$000
9,216
-
38,702
-
-
7,734
62,979
-
710
(38)
(843)
-
8,169
-
-
1,301
1,078
-
-
(17)
81,230
1,078
47,581
(38)
(860)
Carrying amount at end of period
47,918
7,563
71,148
2,362
128,991
Cost
Accumulated amortisation and impairment
2017
Carrying amount at beginning of period
Additions
Additions through business combinations
Amortisation
Impairment reversal
Carrying amount at end of period
Cost
Accumulated amortisation and impairment
47,918
-
8,945
(1,382)
71,148
2,379
130,390
-
(17)
(1,399)
47,918
7,563
71,148
2,362
128,991
2,052
-
7,164
-
-
9,216
9,216
-
9,216
2,751
590
4,904
(511)
-
7,734
8,307
(573)
7,734
5,615
-
2,579
-
54,785
62,979
-
-
10,418
590
1,301
15,948
-
-
1,301
(511)
54,785
81,230
62,979
1,301
81,803
-
-
(573)
62,979
1,301
81,230
For impairment testing purposes, all intangibles except for the Elders’ Brand Name are allocated to the Network CGU, which is also an
operating segment.
98
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 20182018 Annual Report — Elders Elders Limited Annual Financial Report
CAPITAL EMPLOYED — NOTE 11: INTANGIBLES
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 CGU’s expected to benefit from it. The recoverable amount of the cash generating units to which the Elders Brand Name has been
allocated to have been determined based on a value in use calculation using cash flow projections approved by management that covers a
period of 5 years. Future cash flows are based on budgets and forecasts taking into account current market conditions and known future
business events that will impact cash flows. The discount rate applied to the cash flow projections is 10.6% pre-tax (2017: 10.6% 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 2018 levels due to:
– Increased earnings from geographical expansion through acquisitions and footprint growth as implemented in the 2018 financial year
– Higher earnings from continued organic growth focus across our product and service portfolio
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.
Growth rate estimates
Cash flows are based on the 2019 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.
Accounting Policy
(i) Brand names
The brand name intangibles are deemed to have an indefinite useful life and are not amortised. 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.
(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 and loan books
Rent rolls and loan books 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.
99
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 2018
CAPITAL EMPLOYED — NOTE 12: EQUITY ACCOUNTED INVESTMENTS
Auctions Plus Pty Ltd
Elders Financial Planning Pty Ltd
Elders Insurance (Underwriting Agency) Pty Ltd
StockCo Holdings Pty Ltd
Clear Grain Pty Ltd
Auctions Plus Pty Ltd
Elders Financial Planning Pty Ltd
Elders Insurance (Underwriting Agency) Pty Ltd
StockCo Holdings Pty Ltd
Clear Grain Pty Ltd
Balance
Ownership Interest
2018
%
2017
%
30-Jun
30-Sep
31-Dec
30-Jun
30-Jun
50
49
20
30
20
50
49
20
30
-
Consolidated
entity investment
Contribution to net profit
Dividends received
2018
$000
1,362
729
42,134
9,481
631
2017
$000
1,450
974
41,363
10,055
-
2018
$000
979
-
2017
$000
992
-
6,575
4,364
(574)
36
55
-
2018
$000
1,067
245
5,804
-
55
2017
$000
755
1,225
3,612
-
-
Equity accounted investments
54,337
53,842
7,016
5,411
7,171
5,592
All equity accounted investments are Australian resident companies. On 1 November 2017, Elders acquired 20% in Clear Grain Pty Ltd for
$0.7 million.
Summary financial information for equity accounted investees is as follows:
2018
Auctions Plus Pty Ltd
Elders Financial Planning Pty Ltd
Elders Insurance (Underwriting Agency) Pty Ltd
StockCo Holdings Pty Ltd
Clear Grain Pty Ltd
Total
2017
Auctions Plus Pty Ltd
Elders Financial Planning Pty Ltd
Elders Insurance (Underwriting Agency) Pty Ltd
StockCo Holdings Pty Ltd
Total
Profit/(loss) after income tax
$000
1,958
(144)
32,880
(1,913)
180
32,961
1,984
(157)
21,817
185
23,829
Assets
$000
3,749
3,791
61,077
221,310
911
290,838
4,016
4,699
56,938
192,893
258,546
Liabilities
$000
1,088
470
51,654
223,378
991
277,581
1,179
863
51,380
193,073
246,495
Accounting Policy
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 statement of comprehensive income reflects Elders’ share of the results of operations of the equity accounted investments.
100
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 20182018 Annual Report — Elders Elders Limited Annual Financial Report
CAPITAL EMPLOYED — NOTE 13: 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
2018
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
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
49,755
14,570
(15,167)
-
412
296
-
49,866
44,868
4,998
49,866
39,342
14,575
(5,404)
-
435
807
-
49,755
45,831
3,924
49,755
1,115
-
(915)
-
-
-
(100)
100
100
-
100
3,176
344
(3,317)
(152)
-
-
1,064
1,115
1,115
-
1,115
265
20
(89)
-
-
-
-
196
196
-
196
-
265
-
-
-
-
-
265
265
-
265
1,005
-
(878)
-
-
-
100
227
227
-
227
3,990
1,055
(411)
(2,565)
-
-
(1,064)
1,005
1,005
-
1,005
861
254
(440)
(210)
-
-
-
465
465
-
465
502
610
(199)
(52)
-
-
-
861
861
-
861
Total
$000
53,001
14,844
(17,489)
(210)
412
296
-
50,854
45,856
4,998
50,854
47,010
16,849
(9,331)
(2,769)
435
807
-
53,001
49,077
3,924
53,001
101
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 2018 CAPITAL EMPLOYED — NOTE 13: PROVISIONS
Accounting Policy
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.
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 provisions
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.
102
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 20182018 Annual Report — Elders NET DEBT — NOTE 14: 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 payables
Equity accounted profits
Dividends from equity accounted investments
Fair value adjustments to equity accounted investments
Other fair value adjustments
Impairment/(impairment reversal)
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
(c) Net debt reconciliation
Cash and cash equivalents
Borrowings - repayment within one year
Borrowings - repayment after one year
Net debt
Cash and liquid investments
Gross debt - fixed interest rates
Gross debt - variable interest rates
Net debt
Elders Limited Annual Financial Report
2018
$000
73,927
4,834
876
(7,016)
7,171
-
29
750
409
14,982
64
1,304
122
-
(20,554)
3,161
80,059
(47,823)
(36,893)
(7,475)
(12,132)
2017
$000
118,571
4,134
879
(5,411)
5,592
(2,270)
(396)
(54,785)
2,985
15,010
(495)
2,030
524
(1,955)
1,097
2,205
87,715
(13,143)
(505)
7,532
81,599
11,641
35,186
11,641
(184,001)
(1,074)
(173,434)
11,641
(121,621)
(63,454)
(173,434)
35,186
(130,266)
(216)
(95,296)
35,186
(120,608)
(9,874)
(95,296)
At balance date, Elders held $22.0 million (2017: $21.5 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.
Accounting Policy
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.
103
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 2018
NET DEBT — NOTE 15: INTEREST BEARING LOANS AND BORROWINGS
Current
Trade receivables and other working capital funding
Lease liabilities
Non current
Lease liabilities
2018
$000
183,454
547
184,001
1,074
1,074
2017
$000
129,874
392
130,266
216
216
Total current and non current
185,075
130,482
Elders also has an ancillary facility in relation to contingent funding, such as bank guarantees. As at 30 September 2018, $5.5 million
had been issued (2017: $5.2 million).
Assets pledged as security
Secured loans are secured by various fixed and floating charges over all the assets of Elders Limited (either directly or indirectly).
Lease liabilities are secured by a charge over the leased assets.
Fair value
The carrying value of interest bearing liabilities approximates fair value.
Accounting Policy
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.
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.
104
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 20182018 Annual Report — Elders
Elders Limited Annual Financial Report
RISK MANAGEMENT — NOTE 16: 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 15.
At September 2018 interest on $120.0 million (2017: $120.0 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
Financial liabilities
Trade receivables and other working capital funding
Net exposure
2018
$000
11,641
11,641
(63,454)
(51,813)
2017
$000
35,186
35,186
(9,874)
25,312
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)
(518)
518
253
(253)
105
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 2018 RISK MANAGEMENT — NOTE 16: 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 2018. 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 Elders 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
11,641
11,641
11,641
447,937
447,937
447,937
459,578
459,578
459,578
-
-
-
-
-
-
(185,290)
(185,290)
(183,454)
(631)
(1,205)
(381,710)
(381,710)
(365,049)
(6,990)
(10,497)
-
(5,528)
(5,528)
(567,000)
(572,528)
(554,031)
(107,422)
(112,950)
(94,453)
-
(7,621)
(7,621)
-
(11,702)
(11,702)
35,186
35,186
35,186
392,299
392,299
392,299
427,485
427,485
427,485
-
-
-
-
-
-
(130,162)
(130,162)
(129,554)
(387)
(221)
(357,539)
(357,539)
(354,390)
(1,149)
(2,000)
-
(5,207)
(5,207)
-
(487,701)
(492,908)
(489,151)
(60,216)
(65,423)
(61,666)
(1,536)
(1,536)
-
(2,221)
(2,221)
2018
Non derivative financial assets:
Cash and cash equivalents
Trade and other receivables
Non derivative financial liabilities:
Interest bearing loans and borrowings
Trade and other payables
Financial guarantees
Net inflow/(outflow)
2017
Non derivative financial assets:
Cash and cash equivalents
Trade and other receivables
Non derivative financial liabilities:
Interest bearing loans and borrowings
Trade and other payables
Financial guarantees
Net inflow/(outflow)
106
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 20182018 Annual Report — Elders Elders Limited Annual Financial Report
RISK MANAGEMENT — NOTE 16: 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.
2018
Derivative assets – net settled
Total inflow
2017
Derivative assets – net settled
Total inflow
Carrying
amount
Contractual
cash flows
6 months
or less
6-12 months
1-5 years
$000
$000
$000
$000
$000
312
312
83
83
312
312
83
83
312
312
83
83
-
-
-
-
-
-
-
-
(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
2018
$000
11,641
447,625
312
459,578
452,215
7,363
459,578
2017
$000
35,186
392,216
83
427,485
420,699
6,786
427,485
107
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 2018 RISK MANAGEMENT — NOTE 16: 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; and
– Commodity cash prices that are partially determined by movements in exchange rates.
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 2018, 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
Receivables – CNY
Receivables – IDR
Financial liabilities
Payables – CNY
Payables – IDR
Interest bearing loans and borrowings – CNY
Net exposure
2018
$000
609
1,301
2,733
2,720
7,363
(1,224)
(1,599)
(3,286)
(6,109)
1,254
2017
$000
945
1,136
2,564
2,141
6,786
(556)
(3,095)
(320)
(3,971)
2,815
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
Post tax profit
Higher/(lower)
117
(242)
(250)
(18)
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.
Accounting Policy
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.
108
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 20182018 Annual Report — Elders
Elders Limited Annual Financial Report
RISK MANAGEMENT — NOTE 16: 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:
2018
2017
Quoted market
price (Level 1)
Valuation
technique -
market
observable
inputs (Level 2)
Valuation
technique –
non market
observable
inputs (Level 3)
Quoted market
price (Level 1)
Valuation
technique -
market
observable
inputs (Level 2)
Valuation
technique –
non market
observable
inputs (Level 3)
$000
$000
$000
$000
$000
$000
-
-
312
312
-
-
-
-
83
83
-
-
Financial assets
Derivatives
109
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 2018 EQUITY — NOTE 17: CONTRIBUTED EQUITY
2018
$000
2017
$000
Issued and paid up capital
115,818,637 ordinary shares (September 2017: 113,859,440)
1,426,835
1,422,255
The movement in the dollar balance of share capital is a result of:
– $2.7 million increase due to options issued in connection with the 2015 long term incentive plan; and
– $1.9 million of dividends where the shareholders have participated in the dividend reinvestment plan.
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.
Accounting Policy
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.
EQUITY — NOTE 18: RESERVES
Reconciliation of carrying amounts at beginning and end of period:
Business
combination reserve
Employee equity
benefits reserve
Foreign currency
translation reserve
$000
$000
$000
Total
$000
(27,596)
(328)
3,161
(1,271)
(26,034)
(29,063)
(1,211)
2,205
473
(5,567)
(328)
-
-
(5,895)
(4,356)
(1,211)
-
-
(5,567)
(27,596)
2018
Carrying amount at beginning of period
(25,945)
Exchange differences on translation of foreign operations
Cost of share based payments
Transfer to retained earnings
Carrying amount at end of period
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
-
-
-
(25,945)
(26,418)
-
-
473
(25,945)
3,916
-
3,161
(1,271)
5,806
1,711
-
2,205
-
3,916
110
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 20182018 Annual Report — Elders Elders Limited Annual Financial Report
EQUITY — NOTE 18: RESERVES
Nature and purpose of reserves
(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.
Accounting Policy
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.
EQUITY — NOTE 19: RETAINED EARNINGS
Retained earnings at the beginning of the financial year
Net profit attributable to owners of the parent
Dividends paid
Transfer from employee equity benefits reserve
Hybrid equity distribution
Reallocation of equity
Other
2018
$000
2017
$000
(1,139,118)
(1,246,064)
71,568
(25,819)
1,271
-
(1,929)
-
115,995
-
-
(3,557)
(5,179)
(313)
Retained earnings at the end of the financial year
(1,094,027)
(1,139,118)
EQUITY — NOTE 20: DIVIDENDS
On 15 December 2017, Elders paid a fully franked final dividend of 7.5 cents per share, and a fully franked special dividend of 7.5 cents
per share. These distributions totalled $17.3 million (2017: Nil). The cash outflow was $16.1 million, with the difference reinvested by
shareholders.
On 15 June 2018, Elders paid a fully franked interim dividend of 9 cents per share. This distribution totalled $10.4 million (2017: Nil).
The cash outflow was $9.7 million, with the difference reinvested by shareholders.
Subsidiary equity dividends on ordinary shares:
Dividends paid to non-controlling interests during the year
2,721
2,482
Franking credits available to the parent for subsequent financial years based on tax rate of 30% (2017: 30%)
20,300
24,900
111
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 2018 GROUP STRUCTURE — NOTE 21: INVESTMENTS 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
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
EVIA Rural Finance Ltd
Family Hospitals Pty Ltd
Fares Exports Pty Ltd
Gisborne Farmers Ltd
ITC Timberlands Pty Ltd
JS Brooksbank & Co Australasia Ltd
112
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
New Zealand
Australia
Australia
New Zealand
Australia
New Zealand
% Held by Group
2018
2017
100
100
100
100
100
100
100
77
100
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
(a)
(a)
(f)
(e)
(f)
(f)
(g)
(f)
(f)
(f)
(f)
(f)
(f)
(a)
(f)
(f)
(f)
(f)
(f)
(f)
(h)
(f)
(f)
(h)
(h)
(a)
(f)
(h)
(f)
(f)
(h)
(f)
(f)
(h)
(f)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 20182018 Annual Report — Elders GROUP STRUCTURE — NOTE 21: INVESTMENTS IN CONTROLLED ENTITIES
JSB New Zealand Limited
Keratin Holdings Pty Ltd
Killara Feedlot Pty Ltd
Manor Hill Pty Ltd
New Ashwick Pty Ltd
Prestige Property Holdings Pty Ltd
Primac Exports Pty Ltd
Primac Pty Ltd
PT Agri Integrasi Mandiri
Redray Enterprises Pty Ltd
SDEA Nominees Pty Ltd
Titan Ag Pty Ltd
Ultrasound Australia Pty Ltd
Victorian Producers Co-operative Company Pty Ltd
Elders Limited Annual Financial Report
Country of
Incorporation
New Zealand
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Indonesia
Australia
Australia
(f)
(a)
(f)
(f)
(f)
(f)
(f)
(f)
(a)
Australia
(a), (b), (d)
Australia
Australia
(a)
(f)
% Held by Group
2018
2017
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
– 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.
Accounting Policy
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.
(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.
113
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 2018
GROUP STRUCTURE — NOTE 21: INVESTMENTS 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 15. A consolidated statement of comprehensive income and consolidated statement of financial
position, comprising Elders Limited 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 2018 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 benefit/(expense)
Income tax benefit/(expense)
Profit/(loss) after income tax benefit/(expense)
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
Intangibles
Deferred tax assets
Total non current assets
Total assets
Current liabilities
Trade and other payables
Provisions
Total current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Retained earnings
Total equity
114
2018
$000
196,583
(172,362)
24,221
25,000
(14,309)
(11,116)
5,847
(999)
28,644
17,028
45,672
6,336
17,415
32,528
9,658
65,937
164,134
9,710
1,301
78,104
253,249
319,186
9,404
1,233
10,637
10,637
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
146,158
9,124
1,301
59,382
215,965
267,206
8,557
971
9,528
9,528
308,549
257,678
1,426,835
5,806
1,422,255
3,916
(1,124,092)
(1,168,493)
308,549
257,678
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 20182018 Annual Report — Elders GROUP STRUCTURE — NOTE 22: PARENT ENTITY
Information relating to the parent entity of the Group, Elders Limited:
Results:
Net profit for the period after income tax expense
Total comprehensive income
Financial position:
Current assets
Non current assets
Total assets
Current liabilities
Total liabilities
Net assets
Issued capital
Retained earnings
Profit reserve
Employee equity reserve
Total equity
Elders Limited Annual Financial Report
2018
$000
48,420
48,420
305
308,906
309,211
662
662
2017
$000
69,096
69,096
108
258,395
258,503
825
825
308,549
257,678
1,426,835
1,422,255
(1,161,344)
(1,208,493)
37,252
5,806
308,549
40,000
3,916
257,678
Guarantees
As disclosed in note 21, 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 24 and 25.
115
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 2018 GROUP STRUCTURE — NOTE 23: BUSINESS COMBINATIONS-CHANGES IN THE COMPOSITION OF THE ENTITY
(a) Acquisitions
Current period acquisitions
On 1 December 2017, Elders gained control of the Kerr & Co livestock business, which is located in the Western District of Victoria.
The business was acquired for a total consideration of $8.7 million, including $2.7 million of deferred consideration. The transaction
resulted in the recognition of goodwill and brand name of $8.7 million.
On 1 May 2018, Elders acquired Titan Ag Pty Ltd, which is an Australian based producer and supplier of crop protection chemicals. The
business was acquired for a total consideration of $31.4 million, including $9.7 million of deferred consideration. The transaction resulted
in the recognition of goodwill and brand name of $33.5 million.
During the current period, Elders also acquired other retail and agency businesses for a total consideration of $5.0 million, including
$1.8 million of deferred consideration. These transactions resulted in the recognition of $4.5 million of goodwill. These acquisitions are
not material to the group.
Prior period acquisitions
In the prior 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 were not material to the group.
(b) Disposals
Current period disposals
There were no disposals during the current period.
Prior period disposals
In the prior 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.
Accounting Policy
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.
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.
116
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 20182018 Annual Report — Elders
Elders Limited Annual Financial Report
OTHER INFORMATION — NOTE 24: 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
2018
$000
26,094
32,076
4,024
62,194
2017
$000
28,929
35,244
5,744
69,917
Accounting Policy
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
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.
117
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 2018 OTHER INFORMATION — NOTE 25: CONTINGENT LIABILITIES
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 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 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 of indemnities.
– Various legal claims for damages resulting from the use of products or services of Elders, and from the 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 is likely to be material.
– As announced to the Australian Securities Exchange on 14 May 2018, Elders has been informed by its subsidiary, PT Elders Indonesia
(PTEI), that the regional police in Bengkulu were investigating allegations of corruption in respect of the licensing body in Indonesia which
was responsible for issuing licences to a small palm oil plantation previously operated by PTEI. Elders does not know if that investigation
is proceeding. This matter has been reported by Elders to both the Komisi Pemberantasan Korupsi in Indonesia (which appears to have
advised the matter does not fall within its terms of reference) and the Australian Federal Police in Australia (which is evaluating the
matter). Elders currently considers that this matter is unlikely to have a material impact on Elders.
Other guarantees
As disclosed in note 21, 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.
OTHER INFORMATION — NOTE 26: 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 a loan of
$4.0 million to StockCo (2017: $10.0 million).
118
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 20182018 Annual Report — Elders Elders Limited Annual Financial Report
OTHER INFORMATION — NOTE 27: SHARE BASED PAYMENT PLANS
(a) 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 $0.9 million (2017: $0.8 million)
was recognised in profit and loss during the year in relation to these performance rights. As at 30 September 2018, 857,200 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 $0.8 million (2017: $0.9 million)
was recognised in profit and loss during the year in relation to these performance rights. As at 30 September 2018, 835,000 rights were
outstanding.
In 2018, 710,000 performance rights were granted to eligible executives with a three year performance period and split into three
tranches. Each tranche carries a different performance condition being Absolute TSR, EPS Growth and Return on Capital. Upon vesting of
performance rights one fully paid share in Elders will be allocated for each performance right. An expense of $1.5 million was recognised
in profit and loss during the year in relation to these performance rights. As at 30 September 2018, 665,000 rights were outstanding.
(b) Long Term Incentive Options
Incentive options associated with the 2015 long term incentive plan vested during the period. As a result 1,694,790 shares were issued after
the relevant participant paid the requested exercise price of $1.57. Net proceeds to Elders upon exercise was $2.7 million.
OTHER INFORMATION — NOTE 28: AUDITORS’ REMUNERATION
Amounts received or due and receivable by the auditor PricewaterhouseCoopers for:
– auditing or review of financial statements
– other services
2018
$000
486,000
-
486,000
2017
$000
505,000
33,650
538,650
OTHER INFORMATION — NOTE 29: 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
4,766,571
4,593,333
67,914
163,516
538,465
1,924,233
7,460,699
70,479
158,909
-
1,447,460
6,270,181
OTHER INFORMATION — NOTE 30: SUBSEQUENT EVENTS
On 1 October 2018, Elders divested its Indonesian feedlot and processing assets. The proceeds from disposal of $3.5 million were equal
to the carrying amount of assets held for sale at 30 September 2018.
There is no other matter or circumstance that has arisen since 30 September 2018 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 2018 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 2018 are in accordance with the Corporations Act 2001, including:
(i) Giving a true and fair view of its financial position as at 30 September 2018
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 the basis of preparation
(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 2018.
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 21 will be able
to meet any obligations or liabilities to which they are or may become subject, by virtue of
the deed of cross guarantee.
On behalf of the Board
J H Ranck
Chairman
Adelaide
12 November 2018
M C Allison
Managing Director
120
2018 Annual Report — Elders Elders Limited Annual Financial 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 2018 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 2018
the consolidated statement of comprehensive income for the year then ended
the consolidated statement of changes in equity for the year then ended
the consolidated statement of cash flows 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, insurance and financial
planning products.
Elders provides feed and processing services in Australia and operates the Killara feedlot, a beef cattle
feedlot near Tamworth in New South Wales. Previously, the Group operated an integrated feedlot,
abattoir and meat distribution business in Indonesia, however these operations have been
discontinued in the current year and the related feedlot and abattoir assets classified as held for sale at
balance date. The Group divested its Indonesian feedlot and abattoir assets on 1 October 2018. 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 Group materiality of $3.1 million, which represents approximately
5% of the Group’s profit before tax excluding amounts associated with the exit of the Indonesian feedlot and
abattoir business and acquisition related costs.
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
performance of the Group is most commonly measured. We adjusted the Group’s profit before tax for amounts
122
2018 Annual Report — Elders Elders Limited Annual Financial Report
associated with the planned exit of the Indonesian feedlot and abattoir business and acquisition related costs,
specifically the due diligence costs associated with a potential large acquisition 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 utilised 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.
The Group’s operations are mainly in Australia, Indonesia and China.
Our audit work focused on the Australian operations’ financial information given their financial significance to the
Group as a whole. While the majority of our audit procedures were performed at the head office, we also attended
the Killara feedlot and a sample of branches across the Australian network.
The operations 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 businesses.
We performed further audit procedures at a Group level, including procedures over the consolidation of the
Group’s businesses 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:
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
Recoverability of deferred tax assets
(Refer to note 4)
Elders disclosed unused tax losses of $213.5 million
available for use in future periods.
Elders recognised net deferred tax assets of $78.0
million at 30 September 2018 in the consolidated
statement of financial position, of which $82.0
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 specialists, 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 current year, as detailed in note 4.
Recalculated deferred tax asset balances which
comprise temporary 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.
124
2018 Annual Report — Elders Elders Limited Annual Financial Report
Key audit matter
How our audit addressed the key audit matter
Accounting for rebates
(Refer to note 8)
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.
• Whilst the Group have taken steps in the current
period to further automate elements of the
process, it continues to rely on manual inputs and
processes.
• 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 to
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 the relevant product had occurred.
For a sample of rebates receivable at balance date,
we:
agreed the Group’s calculation of the rebate
receivable to the terms in the relevant
supplier agreement; and
tested the key components of rebates
receivable including rebate accruals and
amounts received over the course of the year.
To assess the completeness of rebates being
recorded against inventory on hand at balance date
we:
obtained a listing of stock on hand at balance
date and for a sample of stock items, we
traced the rebate percentage back to supplier
agreements and recalculated the rebate
amount offset against inventory; and
confirmed, for a sample of rebates receivable,
that when the related inventory was still on
hand at balance date, the rebate amount had
been appropriately deducted from inventory.
Evaluated the adequacy of the disclosures made in
light of the requirements of Australian Accounting
Standards.
125
Other information
The directors are responsible for the other information. The other information comprises the
information included in the annual report for the year ended 30 September 2018, including the
Chairman's Remarks, CEO's Report, Elders’ Values, Year in Brief, A Year of Progress, Operating and
Financial Review, Material Business Risks, Review of Operations, Board of Directors, Executive
Management, Directors' Report, Shareholder Information and Company Directory, 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:
http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf. This description forms part of our
auditor's report.
126
2018 Annual Report — Elders Elders Limited Annual Financial Report
Report on the remuneration report
Our opinion on the remuneration report
We have audited the remuneration report included in pages 55 to 73 of the directors’ report for the
year ended 30 September 2018.
In our opinion, the remuneration report of Elders Limited for the year ended 30 September 2018
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
12 November 2018
127
ASX Additional Information
(a) Distribution of Ordinary Shares as at 1 November 2018
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
2,989,900
9,516,927
5,098,274
13,985,285
84,228,251
115,818,637
7,088
4,098
694
569
55
12,504
921
(c) Stock Exchange quotation
The Company 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 1 November 2018
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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